Wealth

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Wealth is an abundance of valuable material possessions or resources. The word is derived from the old English wela, which is from an Indo-European word stem. ^[1] An individual, community, region or country that has an abundance of such possessions or resources is called wealthy.

The concept of wealth is of great importance in economics, especially development economics, yet the definition of wealth is not straightforward and there is no universally agreed-upon definition. Different definitions and concepts of wealth have been put forth by different authors and in different contexts.^[2] The choice of a definition of wealth can be normative and have ethical implications, since wealth maximization is often seen as a goal or put forth as a normative principle of its own.^[3]

Contents 1 Definition 2 Sociological view 2.1 The upper class 2.2 The middle class 2.3 The working class 2.4 The welfare class 3 Distribution 4 Wealth in the form of land 5 See also 6 References 7 External links

[edit] Definition

For definitions of "wealth," see also Adam Smith, The Wealth of Nations and Max Weber, The Protestant Ethic and the Spirit of Capitalism.

Adam Smith, in his seminal work The Wealth of Nations, described wealth as "the annual produce of the land and labour of the society". This "produce" is, at its simplest, that which satisfies human needs and wants of utility. In popular usage, wealth can be described as an abundance of items of economic value, or the state of controlling or possessing such items, usually in the form of money, real estate and personal property. An individual who is considered wealthy, affluent, or rich is someone who has accumulated substantial wealth relative to others in their society or reference group. In economics, net wealth refers to the value of assets owned minus the value of liabilities owed at a point in time.^{[citation needed]} Wealth can be categorized into three principal categories: personal property, including homes or automobiles; monetary savings, such as the accumulation of past income; and the capital wealth of income producing assets, including real estate, stocks, and bonds.^{[citation needed]} All these delineations make wealth an especially important part of social stratification. Wealth provides a type of safety net of protection against an unforeseen decline in one’s living standard in the event of job loss or other emergency and can be transformed into home ownership, business ownership, or even a college education.^{[4][not in citation given]}

'Wealth' refers to some accumulation of resources, whether abundant or not. 'Richness' refers to an abundance of such resources. A wealthy (or rich) individual, community, or nation thus has more resources than a poor one. Richness can also refer to at least basic needs being met with abundance widely shared. The opposite of wealth is destitution. The opposite of richness is poverty.

The term implies a social contract on establishing and maintaining ownership in relation to such items which can be invoked with little or no effort and expense on the part of the owner (see means of protection). The concept of wealth is relative and not only varies between societies, but will often vary between different sections or regions in the same society. A personal net worth of US $10,000 in most parts of the United States would certainly not place a person among the wealthiest citizens of that locale. However, such an amount would constitute an extraordinary amount of wealth in impoverished developing countries.

Concepts of wealth also vary across time. Modern labor-saving inventions and the development of the sciences have enabled the poorest sectors of today's society to enjoy a standard of living equivalent if not superior to the wealthy of the not-too-distant past. This comparative wealth across time is also applicable to the future; given this trend of human advancement, it is likely that the standard of living that the wealthiest today enjoy will be considered rude poverty by future generations.

Some of the wealthiest countries in the world are the United States, the United Kingdom, the Republic of Ireland, Norway, Japan, Kuwait, United Arab Emirates, South Korea, Austria, Germany, The Netherlands, Belgium, France, Israel, Taiwan, Australia, Singapore, Canada, Finland, Greece, Spain, Portugal, Sweden, Italy, Denmark, New Zealand, Iceland, Monaco, Luxembourg, Liechenstein and Switzerland, the larger of which are in the G8. All of the above countries, except United Arab Emirates and Kuwait, are considered developed countries.

Industrialization emphasized the role of technology. Many jobs were automated. Machines replaced some workers while other workers became more specialized. Labour specialization became critical to economic success. However, physical capital, as it came to be known, consisting of both the natural capital (raw materials from nature) and the infrastructural capital (facilitating technology), became the focus of the analysis of wealth.

Adam Smith saw wealth creation as the combination of materials, labour, land, and technology in such a way as to capture a profit (excess above the cost of production).^[5] The theories of David Ricardo, John Locke, John Stuart Mill, in the 18th century and 19th century built on these views of wealth that we now call classical economics.

Marxian economics (see labor theory of value) distinguishes in the Grundrisse between material wealth and human wealth, defining human wealth as "wealth in human relations"; land and labour were the source of all material wealth.

[edit] Sociological view

“Wealth provides an important mechanism of the intergenerational transmission of inequality.”^[6] Approximately half of the wealthiest people in America inherited family fortunes. But the effect of inherited wealth can be seen on a more modest level as well. For example, a couple that buys a house with the financial help from their parents or a student that has his or her college education paid for, are benefiting directly from the accumulated wealth of previous generations. ^[7]

As a result of different conditions of life, members of different social classes view the world in many different ways. This allows them to develop different “conceptions of social reality, different aspirations and hopes and fears, different conceptions of the desirable.” ^[8] The way different classes in society view wealth vary and these diverse characteristics are a fundamental dividing line among the classes. Today there is an extremely skewed concentration of wealth in America, more so than even income. ^[9] In 1996 the Fed survey reported that the net worth of the top 1 percent was approximately equal to that of the bottom 90 percent. ^[10]

[edit] The upper class

Inheritance establishes different starting lines. The majority of those in the upper class have inherited their wealth and place a greater emphasis on wealth than on income. Upper class children are taught about investments and accumulation. They are trained and conditioned, technically and philosophically, to handle the wealth that they will inherit and how to earn more later in life. Wealth and being a member of the upper class requires significant prior preparation and familiarization. If not trained correctly children may easily squander immense wealth, though this rarely happens. They use the power and freedom that comes with wealth to leverage opportunities. This allows them more flexibility in their lives and as a result have fewer worries.^[11]

The accumulation of wealth fosters a growth of power, which in turn creates privileges conducive to more wealth. Children of the upper class are socialized on how to manage this power and channel this privilege in many different forms such as gaining access to others' capital and to critical information. It is by accessing various edifices of information, associates, procedures and auspicious rules that the upper class are able to maintain their wealth and pass it along, and not necessarily because of an extreme work ethic. ^[12]

[edit] The middle class

There is a distinct difference in views about wealth among the middle class compared to those of the upper class. Where the upper class beliefs focus on wealth, the middle class places a greater emphasis on income. The middle class views wealth as something for emergencies and it is seen as more of a cushion. This class comprises people that were raised with families that typically owned their own home, planned ahead and stressed the importance of education and achievement. They earn a significant amount of income and also have significant amounts of consumption. However there is very limited savings (deferred consumption) or investments, besides retirement pensions and homeownership. They have been socialized to accumulate wealth through structured, institutionalized arrangements. Without this set structure, asset accumulation would likely not occur. ^[12]

[edit] The working class

The working class has fewer options for advancement and wealth accumulation than the upper and middle classes. This can be characterized as having limited income, unstable employment and an insignificant retirement pension account. Access to structured asset accumulation programs, such as retirement pensions, are not readily available to those in this class and as a result little of their earnings are actually saved or invested. Consequently, there is a limited financial cushion available in times of hardship such as a divorce or major illness. Just like their parents, children who lack assets are less likely to plan for the future. ^[12]

[edit] The welfare class

Those with the least amount of wealth are the welfare poor. Wealth accumulation for this class is to some extent prohibited. People that receive AFDC transfers cannot own more than a trivial amount of assets, in order to be eligible and remain qualified for income transfers. Most of the institutions that the welfare poor encounter discourage any accumulation of assets. ^[12]

[edit] Distribution

[edit] Wealth in the form of land

Many indigenous cultures, being either nomadic or communitarian in nature, rejected the notion of the private ownership of land wealth. In the western tradition, the concepts of owning land and accumulating wealth in the form of land were engendered in the rise of the first states, for a primary service and power of government was, and is to this day, the awarding and adjudication of land use rights.

Land ownership was also justified according to John Locke. He claimed that because we admix our labour with the land, we thereby deserve the right to control the use of the land and benefit from the product of that land (but subject to his Lockean proviso of "at least where there is enough, and as good left in common for others.").

Additionally, in our post-agricultural society this argument has many critics (including those influenced by Georgist and geolibertarian ideas) who argue that since land, by definition, is not a product of human labor, any claim of private property in it is a form of theft; as David Lloyd George observed, "to prove a legal title to land one must trace it back to the man who stole it."

Many older ideas have resurfaced in the modern notions of ecological stewardship, bioregionalism, natural capital, and ecological economics.

[edit] See also

• Affluence in the United States
• Capital accumulation
• Distribution of wealth
• Household income in the United States
• Income in the United Kingdom
• Lists of billionaires
• Personal income in the United States
• Poverty
• Private banking
• Surplus product
• Value added
• Wealth (economics)
• Wealth condensation
• Wealth and religion

[edit] References

[edit] External links

• Article in Dow Jones Insight magazine on wealth