Wealth Creation and Wealth Destruction

By Artie Lees

When Adam Smith wrote ‘The Wealth of Nations’ he laid the foundations of modern economic theory by exploring the relationship between wealth and money. Over the years this theory has developed but it has almost exclusively concentrated on money at the expense of wealth. This is a pity as the concept of wealth fills some of the spaces a pure money centric theory leaves out.
‘Wealth Creation and Wealth Destruction’ returns to the concept of wealth and its relationship to money. In doing so the book presents a number of new concepts central of which is defining wealth in the form of time, the time to create on the one hand and its useful life on the other By defining wealth in these terms provides a constant which along with other tools provides a fresh look at the dynamics of an economy. These tools include an alternative driver for money supply growth- interest rates dividing the economy into two- the real and that based on assets and redefining the human driver in economics from best price to compromise.
The result is a theory that accommodates Keynesian, Monetarist and other established economic theories but provides its own unique insights including a previously unconsidered form of inflation that offers an understanding and mechanism for hyperinflation, the policy of price stability, the Fisher Effect and an explanation for growth.
Within this framework the economic consequences of value, risk, the savings industry, international trade, booms and bubbles and the markets in a wealth context are considered. Finally ‘Wealth Creation and Wealth Destruction’ considers the future of western societies from this perspective and suggests that without significant changes, these economies face a bleak future.

• Language: English
• Publisher: Artie Lees
• Release date: Jul 12, 2013
• ISBN: 9781301545322

Artie Lees

Artie Lees is an engineer who spent several years working in the Asia Pacific region. He now lives near London with his family. Comments on this work can be sent via the website www.wealthcreationandwealthdestruction.com

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Wealth Creation and Wealth Destruction

-A holistic way in which to view economics

By Artie Lees

©Copyright Artie Lees 2013

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Table of Contents

Forward

Introduction

Chapter 1 -Wealth

Wealth Creation

A Short History of Wealth Creation

The Essence of Wealth

Wealth Destruction

Chapter 2 -Work and Wealth

Chapter 3 -Money and Wealth

Trading wealth

The consequences of money

Value

Money and Land

Currency

Chapter 4 -The Market Theory

Compromise

Chapter 5 -Money and the Economy

Wealth and the Velocity of Money

The Need for Money Creation

The Quantitative Nature of Money

Chapter 6 -Money Creation

Chapter 7 -Growth and Inflation

Growth

Inflation

The Wealth Balance and Inflation

The Governments Role in Inflation

Ways of Addressing Inflation

Chapter 8 -Assets

Assets as Collateral

Assets and the Money Supply

Chapter 9 -The Financial Industry

The Markets and Players

Chapter 10 -The Trading of Assets

Money as a Commodity

Banking and Financial Innovation

The Markets

Risk

Chapter 11 -Savings and the Shelf Life of Money

Savings

Wealth and Lending

The Money Industry and Savings

Chapter 12 -The International Economy

Currency Systems

Money Supply and Foreign Currency

Dominant Currencies

Chapter 13 -Economy Types

Different Types of Economies

The Asset Economy

Chapter 14 -Wealth and Economies

Sustainability

Employment and Wealth

The Role of Debt in the Economy

Chapter 15 -The Economic Cycle

Recession and Depression

The Role of Government

Chapter 16 -Economic Theory

What is economics?

Economic Theories

Politics and Economic Rules

Chapter 17 -Limitations of Market Theory

Chapter 18 -Alternatives to Markets

Competition of Economic Models

Chapter 19 -Society and the Economy

Governments, Politics and Wealth

Other Government Responsibilities

Taxation

The Morality of Money

Chapter 20 -The Relative Society

A Hierarchy of Bills

Chapter 21 -Measuring and Controlling the Economy

The Tyranny of Numbers

Controlling the Economy

The Special Case of Liquidity Crunches

Chapter 22 -The Future

A Sustainable Economy

A Sustainable Future?

Summary and Conclusions

Appendixes

Appendix A -Past and Present Bubbles and the Strategies to deal with them

Appendix B -Summary

Appendix C -Comparisons for Government Borrowing and Economic Growth

Appendix D -Economic Equations

Appendix E -Source Material

Acknowledgments

Notes

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Forward

This book is not your traditional book on economic theory. It started when I wanted to understand the issues behind the housing bubble of the Noughties and the events that led up to it. Economics as a subject is well served on television, the radio, in magazines, books and of course the internet but much of the popular writing is either very partisan or shallow and anyway threw little light on my own questions. Text books on the other hand have too much information. Not wanting to do a formal economics course nor laboriously follow a text book I went back to the beginning and asked what wealth creation was and if we can create it how do we destroy it? From these first questions I have come to a holistic understanding of wealth, money, and value which sheds further light on inflation and sustainability. Wealth Creation and Wealth Destruction is the result of these initial questions. It is a narrative account of economics that takes a different view from the normal.

The process of writing first and then researching later will inevitably be a case of reinventing the wheel and thus unknowingly I drew a number of conclusions that are similar to earlier writers, particularity Adam Smith, John Maynard Keynes and Milton Friedman with echoes of Francois Quesnay, Carl Menger and Thorstein Veblen. In fact many of the ideas I first thought were novel can be attributed to someone else and whilst it may seem that my efforts have been wasted it has provided a freedom and an opportunity to come to new conclusions. Also since I started, some excellent books have been published that address my original question but none, as I see, present the whole subject in this way; yet there is nothing new under the sun and I continue to research. Notwithstanding any claim to novelty I hope I have produced a book that complements the popular titles in this field.

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Introduction

There is a general mystique about economics, yet we apply it quite happily on a daily basis through our housekeeping or other financial dealing. This dichotomy may lie in the language of the high priests of money, the economists and bankers, which removes it from our own experiences. It all has the air of alchemy when money supply, growth and inflation are discussed and our own instincts are subverted by the media messages that bombard us. Alongside the adverts for cost conscious supermarkets are those for pensions that suggest a prosperous old age can be had by all, perhaps by the pennies that we will save in those same supermarkets. This impression is strengthened by people all around us getting rich by doing as little as possible by owning shares or property or even working in the mysterious world of the City. Money begets money. When the going is good we all enjoy the ride but as inevitable as the summer turns to winter, boom will turn to bust and we all act surprised including the high priests. Why is this?

Our generation has become detached from the economic basics although this was not always the case as reference to many history books from the not so distant past will illustrate. One of the reasons may be because many of us work in jobs where it is hard to define what value if any we bring to the world; regardless of how well or badly we do there is a regular income at the end of the month. Failing that there is always the credit card. Another reason may lie in that apparent alchemy; it must be clever stuff as taught in universities where the complexity is reinforced by the graphs and formulas that populate the text books. Or perhaps economics has fallen victim to the claims and counter claims of politicians. Whatever, does it need to be so removed or incomprehensible? Much is developed from the basis we all understand and while there may be a few arguments that are counter intuitive, many of the concepts are relatively straight forward even those vexing issues of inflation and governments printing money.

Despite our ambivalence to it, economics is an important subject. It is one of those along with history that we use to predict the future. Making the right choices will determine if we are prosperous or subjected to a life of hardship. Joseph Kennedy, father of the late President JF Kennedy, famously converted all his stocks to cash just days before the Wall Street Crash to live a life of extreme luxury whereas those who bought them were condemned to at least a decade of poverty. The political and monetary decisions following that crash amplified the pain whereas it could just as well have alleviated it. Today we find ourselves confronted with similar choices but will we make the same mistakes?

A lot of work has been done to understand the lessons of the Great Depression but all the same we have again arrived at a similar point so can we rely on politicians and economists to make the right decisions? As a democracy we are a part of the process by choosing those politicians and their arguments. As there are divergent views on the way forward our economic future lies with us but how do we develop an understanding to make the correct choice? There are a number of popular books aimed at explaining economics from the point of view of the individual and these make general statements but the focus is always on money which is only part of the story. Newspapers and other media commentary are another source and talk in great depth of specific issues such as inflation or growth but they are often dealt with in ways that are unconnected with the greater economic story. There appears to be a lack of popular books that deal with economics as a whole and where they do, the text again concentrates on money. Looking at economics through wealth and its larger meaning fills this gap and hopefully presents it in a simple, holistic and readily understandable way. As the title suggests this is through the relationship of wealth creation to its destruction. Some readers may view this as rehashing the economic theories of demand, supply and consumption and this may be true but it is so much more.

For those readers who wish to know the structure of this book the section titles will provide an indication and there is a summary of the key points in Appendix B. In more general terms the first six chapters lay the foundation for this reinterpretation of economics by defining the basics; what is wealth, what is money and how is it created; value, growth, inflation and human motivation. Whilst those with an understanding of economics may be tempted to skip this section I would urge them not to as this contains some of the assumptions for arguments made later. The next chapters deal with assets and the role they play in the economy along with that of the financial industry. With these definitions the second half of the book looks at the structure of economies and explores both the phenomena of boom and bust and the economic relationships within the society they are set in. Finally it looks at a number of economic futures and the possible tools to avoid or achieve them.

So let’s start with a return to the basics.

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Chapter 1 -Wealth

What exactly is wealth? For many of us it will conjure up an image of millionaires and a playboy lifestyle, essentially one of abundance. If we are lucky enough we may consider our own which will invariably be tied up in our homes and cars; in essence money. However there are other definitions, the Oxford Compact English Dictionary sums it up as ‘the stock of assets held by individuals or organisations that can be used to yield a stream of income for the future’ i.e. savings, shares, or investments, which will also be the view of many economists and then there will be a minority who will be more philosophical and refer to a country’s resources or an individual experience. This covers most of the interpretations but none gives a truly satisfactory answer.

The key to understanding the question lies in its creation; this is the act of making things and from this flow the wealth of abundance, jewels, gold and experience. If wealth creation is making things then real wealth is that from the humble nut to the car it forms a part of and from this we can say that it is the product of our endeavours. It covers the tangible and the intangible; computer games, movies, knowledge and skills and it does not matter if that effort was a few minutes ago or several years back. The concept of wealth creation as a driver for economic prosperity is one that we are all familiar with but it is only half the story, an understanding of its destruction is just as important if not more so for a successful economy.

So what of wealth destruction? War, vandalism and natural events such as earthquakes are obvious examples but there are other ways in which it is destroyed. Consumption is the biggest cause, we eat, drink and wear out our cars and other goods; it is the exact opposite of creation. Take for example a pint of beer or a glass of wine, the growing and preparation of all the ingredients will be just a memory once it is drunk, we start with nothing and end with nothing.

The balance between wealth creation and wealth destruction

A requirement for wealth is that it is needed, if it is not it is unlikely to be made. Therefore in most economies there is a rough balance between its creation and its destruction; we consume what we produce but generally an economy has to produce more than it uses to be successful otherwise there will be trouble. This is a home truth: spend more than you earn and eventually it will catch up with you. That extra production that we do not consume is covered by another home truth of saving for a rainy day to protect against times of shortage. Just as the body stores fat individuals save money and governments keep stockpiles of food, oil, vaccinations and medicines for catastrophes that may never happen. Thus there is a natural tendency to create more than is immediately needed. There are other ways in which wealth is destroyed, one being those things that have become redundant before the end of their useful life, an example would be power tools that replace the hand operated equivalent. Some of this surplus will be thrown away and others will collect dust becoming a curiosity perhaps as an antique or museum exhibit. Museums are not just collections of artefacts but testament to previous societies’ economic successes and failures.

Wealth Creation

To appreciate the essence of wealth, let’s consider a simple example, vegetable seeds. A plant such as a cabbage will naturally bolt at the end of its life and produce hundreds of viable seeds but left to its own devices the spread of these would remain in the vicinity of the original plant leading to overcrowding and a rather pathetic offspring. Just by collecting the seeds we have the potential to grow hundreds of useful plants although it is only realised once they are sown and harvested. The wealth potential for these seeds does not end there; like all natural things they have a lifespan and some will need to be planted almost immediately and others with the right preparation can be stored either to save time and energy or as a guarantee against a poor harvest. There again they also provide a commercial opportunity where they can be divided up, put in envelopes and sold on. The buyer can do one of two things, plant and harvest the crop and therefore benefit from the time and expertise invested in it or they could be put to one side never to be used where all the effort that went into it is wasted. This shows many of the key points of wealth and its creation. We are harnessing a natural event to improve our lives. The collection and preparation of the seeds give the potential for a much greater harvest than would be provided by nature itself and this is with or without money. There are two elements that created this wealth, human effort and the knowledge of how to do it. In the creation of wealth they are of equal importance; you cannot have one without the other but when it comes to the quantity of wealth, knowledge is by and far the most important as a quick historical overview will show.

A Short History of Wealth Creation

During the early history of humans, when an existence was irked out by hunting and gathering, a tribe’s wealth would have been limited to perhaps some tools and stored seeds; much of their needs would have been met immediately with little surplus. In such times human society would have been fairly egalitarian and focused on gathering food. This was to change with two significant developments about eight to nine thousand years ago; the first was the cultivation of plants and the second was the domestication of animals for food and later work. These developments resulted in surplus which in turn allowed the population to grow releasing some from the chore of its production. After time enough surpluses would develop to support a ruling elite, religious orders, artisans and even a standing army although in essence they were predominately agricultural societies¹. There should be no surprise that the first civilisations were located in the warm fertile lands of the Mediterranean, the Middle East and China but away from the Mediterranean climate the same processes were in play. Agricultural experiments show yields of 1.4 tonnes per hectare² from the first cultivated grains but by the time of the Roman Empire new strains had almost doubled this³. Not much by modern standards but an increase of two thirds at the time. As can be seen it was the invention of agriculture that was the first step in transforming an essentially nomadic and wealthless people into the societies we have today. Subsequent developments have also led to greater wealth, the Enclosures Acts made a contribution to Britain’s Industrial Revolution; the Green Revolution has transformed the economies of the Third World and the liberalisation of agriculture has been central to China’s reforms in the 1980s.

Some of the visible wealth of the early civilisations can be attributed to a benign climate making human effort so much more productive but transport has also been important. One of the features that marked the great ancient empires was their locality to relatively tranquil water routes that allowed for the transfer of bulky items such as grains; initially with rafts being carried on the current it was to take off with sail. Babylon had the Tigress, the Chinese the Yellow River, the Egyptians the Nile and then the Mediterranean which were followed by numerous civilisations including the Greeks and Romans. Even in 18th Century Britain before the network of canals or railways had been developed it was easier for port cities to trade with the Americas than with much of their own hinterland. To appreciate the advantages that navigable water brings one needs only to compare the capacity of a horse drawn canal barge with that of a cart which is some 80 times greater⁴.

The ease of transportation also impacts on how big cities can grow and by inference how many artisans they can support which in turn is a reflection of the environment for innovation. It is not a coincidence that there was a flurry of significant wealth creating inventions around BC 3500 when the first cities were starting to reach maturity; the invention of the wheel, the sail, the potter’s wheel and the start of writing all go back to this time. It was these artisans that were responsible for the cultural artefacts found in archaeological remains but they were also the drivers for new technology and greater wealth. The still standing domes, aqueducts and bridges along with statues and decorated building from the Greek and Roman period bear testimony to this. As technology increased so the hinterland could expand giving rise to a snowballing effect of ever increasing productivity supporting a larger population which in turn led to yet more artisans. Thus the history of civilisations and empires is one of ever increasing size. In the Middle and Near East the early empires of Mesopotamia were followed by the larger Assyrian Empire, the Greeks and Romans and similar growth in India and China. The European expansion of the 19th century was fuelled by a similar process; up to 1830 the British Isles were pretty much self-sufficient in food production except for poor harvests, but by 1895 three quarters of the wheat was being imported along with 30% of the meat consumed⁵that was accompanied by a more than doubling⁶ of the population. The process of the ever expanding hinterland has continued to this day through economic trading blocs such as the European Union.

Innovation and the growth of wealth mirror each other, it even predates agriculture, and for much of history it has been slow and steady but in the 18th century it exploded with the start of the industrial revolution. Much is owed to the innovative use of coal where it first replaced charcoal in the iron making process. Charcoal was limited to the availability of local woodland, a scarce resource, and the change to an almost unlimited form of energy removed the brake on production and very quickly the industry moved from small craft operations to centralised foundries with all the resulting economies of scale and associated improvements to productivity. Another factor was the improvements to steam engines. The power of steam was known to the Romans and useful engines had been developed by the late 17th and early 18th Century but these were very inefficient and limited to pumping water out of mines. This changed with two developments; the first was a doubling of the efficiency of these engines making it viable for many more to operate. Secondly but more importantly was a mechanism to change the linear motion of the piston into rotary motion of the wheel which was later adopted for transport like Stevenson’s Rocket. These developments allowed for widespread mechanisation of all industries especially that of textiles. As with iron the pre-industrial revolution production of linen and wool yarn was small scale, local and undertaken by the families of agricultural workers. In parallel to the development of the steam engine so too were machines for carding and spinning and eventually weaving moving textile production from the cottages to factories. This revolution in clothing production was completed in 1814 with the world’s first sewing machine. To comprehend the leap this represented one need only compare the time, perhaps minutes, needed to make a shirt or a suit with machinery, even antiquated ones of the day, and the effort of sewing everything by hand. No wonder these industries shed thousands of jobs at the time condemning many to poverty.

At this point it is worth reflecting on the giant leap that coal facilitated and without it the Industrial Revolution may not have even happened. Even if it had, growth would have flattened off regardless of technological development as a finite limit would have been reached as defined by agricultural productivity⁷. It was the sheer concentration of energy that allowed for so much more as latterly with oil. In the space of less than 50 years the forces that drove the Industrial Revolution had truly revolutionised production but the economy also changed from one based on the staples of life to all sorts of new wealth. The 19th Century also marks the point when mass transport started to change society with the advent of the canal network and later the railway. Ocean transport changed from wooden clippers to iron steam ships, each advance in transport increasing the volume that could be moved and faster usually with fewer men. The first steam powered bulk carrier the SS John Bowes launched in 1851was a modest affair even by the standards of the day but the independence from tide and wind combined with a revolutionary ballast system allowed it to do the work of ten collier brigs. The Crystal Palace was the world’s first Expo offering a new way of displaying the achievements. Even the structure was fairly revolutionary, the prefabricated portal frame which is the form of construction for much of today’s factories and warehouses. The end of the century saw the commercial use of electricity and the basic internal combustion engine, the foundation of much of today’s wealth with the expansion of motorised transport heralded by improvements to the road system and the advent of mass production epitomised by Henry T Ford and the Ford Model T. Another component in this story of expanding wealth has been the advent of long distant communications such as radio and other telecommunications and more latterly the internet for both business and leisure. Perhaps the unsung hero of the last 60 years has been the plastic injection machine that allows the most complex shape to be made in seconds where once it would have required a skilled artisan hours if not days.

In addition to the fundamentals of wealth, knowledge and effort we have also identified agriculture, transport, energy production and innovation as being key to the quantity of wealth we enjoy today but there is a fifth component, that is equally important, that of organisation. For some this may be the political system but the reality is much more ordinary, it will be the railway timetables of the 19th century, the order book of the Egyptian farmer of today or in the age of the pharaohs; or the means to pass on a collective knowledge. But there is considerable wealth in even more mundane forms of information; who holds the key in a company or the telephone number of a local doctor? Much of it is information we would rarely give a second thought to until we lose it.

Each invention and development has had the potential to make us wealthier which in turn leads to yet more subsequent developments contributing to ever rising living standards. However history has also witnessed declines in wealth. Wars always result in destruction of one form or another but the consequences are not necessarily long lasting especially if the peace leads to sustainable growth as with the aftermath of Second World War. The loss of organisation is a much more significant cause of which the most notable is the Dark Ages following the sacking of Rome. Any violent revolution where people are displaced will have a similar effect and the longer it lasts the greater the impact. Even on a more parochial level similar but lesser outcomes for a community can be seen with the loss of a factory or industry.

The Essence of Wealth

We have established that wealth is the product of human effort and the amount a society is capable of creating is dependent on its technological development as well as the available energy. In doing so we have focused on its more obvious forms but the intangible is just as important, not just the computer program or the information in a book. Intangible wealth will also include life’s more mundane tasks, the likes of tidying up or cooking. Food production is a particularly good example as it highlights a number of key points, aside from being a fundamental for life, a meal will sustain an individual to go on to do other things, be it work or leisure. Food preparation illustrates another point and that is wealth can come in many forms; for a meal this could be one bought ready prepared from a supermarket, from a canteen or restaurant or even one made in the home. In these three cases the form maybe different; money may or may not have changed hands, the shop bought meal will come with packaging but the nutritional or wealth benefit of the meal will be similar regardless of its source.

The benefits of the meals will only last a few hours until the next one and from this we can deduce another important feature of wealth; that it has a life; alternatively the life of a car will be the number of miles left before it becomes uneconomical to maintain. The life of wealth is unrelated to tangible or intangible, an idea can carry on until it is forgotten, a chair with little use could have a similar long life but fuel such as oil or coal will be used up instantaneously. Thus we have two types of wealth, long and short term; the long term includes most physical items like cars and furniture and the short term covers among other things fuel and food. This concept of long and short term wealth is an important one and we will return to it later.

Productivity and Wealth

The same argument can be applied to wealth’s production often referred to as productivity. To illustrate, let’s consider a product that can be made either by a small craft worker or in a modern factory. This could be tailoring or bread making but we will consider the potter. The factory may be using the latest technology to make thousands of plates a day whereas the small craft producer will be a much smaller operation often using antiquated technology or techniques that are typically labour intensive, resulting in a much smaller production rate. In the minds of many, the output of the factory will be considered wealth creation where the craft worker is more of a hobby. However there is little difference in the functionality between the two. The wealth of a plate is its value for serving food hygienically. It matters not for its functionality if it was made with loving care or mass produced and assuming that its useful life will be the same the only difference will be the collective time to create it as both are adding to the wealth base.

Measures of Wealth

The above example illustrates the extreme but what of differences between similar factories, how does one compare them? Typically this is in monetary terms but money as a measure of wealth is not a very effective way. It is distorted by subjective value which may have more to do with shortages than usefulness and then there is inflation. The monetary value can also be quite flexible, prices can vary within a single establishment and for hostelries within the space of a few hours with ‘happy hours’; and of course money cannot distinguish between wealth creation and wealth destruction. As a measure it is akin to a rubber band so we need to introduce an alternative. Since wealth has a life it can be measured in units of time as can the human effort involved in its creation and the balance between the two is the profit from the process, wealth by another name. The concept of a ‘wealth-hour’ not only allows us to compare the productivity of different factories but process across time and over continents. It even allows apparently dissimilar comparisons such as the benefits of home making to that of a computer.

Time as a measure of wealth may seem a little odd at first but it is not so alien. A number of industries have adopted it in one form or another; time and motion studies are one; man hours are commonly used to quantify the work on a building project and we are often paid or charged by the hour. Even the concept is not particularly new, Adam Smith⁸ and David Ricardo⁹, the early economists, originally tried to define wealth in the number of hours worked to produce an item and later this was picked up by Karl Marx. However there is a key difference and that is these writers were trying to develop alternative ways for remuneration rather than provide an independent value of the wealth created.

Hopefully the concept of the wealth-hour is easy to comprehend but for it to have any meaning we need to fix a common point or baseline technology. As technologies differ in their wealth creation abilities it would be wrong to fix it at some arbitrary point such as the year 2,000 or so. We really need to measure from the point of no technology when everything was done by hand or foot. This allows us to include the benefits of primitive technologies such as a bag or a spear. For an example of the calculation let’s consider a 20 mile journey which would take say one day on foot and now can be done in 30 minutes by car. This amounts to a net saving of some 6 hours. If we change the purpose of the journey to carrying goods the wealth created or savings achieved are 26,400 wealth-hours assuming that a human can comfortably carry about 10kg without the aid of slings or bags and the lorry carries 44 tonnes. This simple calculation hints at the potential wealth creation our society is capable of.

By comparing the time invested in an object or activity to its benefit will define it as either one of wealth creation or destruction. An example of wealth creation would be a chair: it may take a few hours to make but may have a life in excess of 10 years. And an example of wealth destruction would be a fireworks extravaganza for a select few; the effort to create it would far exceed its benefit. However if the public were allowed to join in, the collective experience may change it to a positive. With today’s productivity being so high it is difficult to come up with direct examples of wealth destruction but it takes on a wider meaning when applied to the aggregate. This is the economic term referring to the sum in an economy and in the case of wealth it is adding up the remaining life of every single item; houses, cars, roads, furniture even kitchen utensils including the humble cheese grater. Nor is it limited to that new off the production line, used, second hand and even discarded or forgotten items are included. Added up this would be a very large number but its size is not that critical, it is the change that is important; is the aggregate growing or shrinking?

Wealth or Richesse

The concept of wealth as defined by time is one that runs throughout this book and in order to minimise confusion with its more established meaning and to reduce repetition I have adopted the word richesse, the French for wealth, to be used as a substitute where clarity is needed.

Wealth Destruction

So what of the richesse destruction and the activities associated with it. We have already mentioned the obvious; wars, natural disasters and consumption. To this we can add wearing out, breakage and waste but there are two other important forms that need consideration and these can be summed up as fashion and doing nothing.

Fashion is the phenomena of throwing away something before the end of its useful life. This is epitomised by clothes but include many consumer goods such as TV’s or computers or homes themselves with the house makeovers; skips are full of functional items that have been thrown because of their looks rather than function. Much of the wealth will be lost if the products end up in a landfill although recycling or charity shops are ways in which it can be recovered. To some, fashion is just another form of waste but what sets it apart is that it is deliberate as opposed to accidental and this is important when considering the aggregate as it will generally have a neutral effect; new replacing old.

In isolation ‘Doing nothing’ can be viewed purely as consumption but it impacts on the aggregate when the wealth is not being replaced. Those who fall into this category include both the retired and unemployed and whilst some would argue that there is a moral difference between the two this is not recognised in wealth terms. Doing nothing is not wrong per se, provided a surplus is being generated by others.

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Chapter 2 -Work and Wealth

With human effort forming the basis of anything of worth we can look through the prism of richesse to understand the wider economy i.e. the balance of useful hours a job or activity takes or puts into the economy.

An economy of growing wealth is based on creating more with less and that more lasting longer or going further. Food production lies at the heart of it. Prior to the industrial revolution 65%¹⁰ of the British population was involved in agriculture. By the end of the Second World War