Wealth derives from the old English word "weal", which means "well-being". The term was originally an adjective to describe the possession of great qualities.
"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. In many countries wealth is also measured by reference to access to essential services such as health
care, or the possession of crops and livestock. An individual who is wealthy, affluent, or rich is someone who has accumulated substantial
wealth relative to others in their society or reference group. In economics, wealth refers to the value of assets owned minus the value of
liabilities owed at a point in time. Wealth can be categorized into three principal categories: personal property, including homes or
automobiles; monetary savings, such as the accumulation of past income; and business assets, including, real estate, stocks, and bonds.
In some forms, stocks and bonds for example, wealth becomes capital and ultimately a new source of income. All these intricacies 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.
'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 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 $1,000,000 in most parts of the United States would certainly place
a person among the wealthiest citizens. However, such amounts would constitute an extraordinary amount of wealth in impoverished developing countries.
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 (especially Dubai), South Korea, 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.
Control of arable land:
The rise of irrigation and urbanization, especially in ancient Sumer and later Egypt, unified the ideas of wealth and control
of land and agriculture.[citation needed] To feed a large stable population, it was possible and necessary to achieve universal
cultivation and city-state protection. The notion of the state and the notion of war are said to have emerged at this time.
Tribal cultures were formalized into what we would call feudal systems, and many rights and obligations were assumed by the
monarchy and related aristocracy. Protection of infrastructural capital built up over generations became critical: city walls,
irrigation systems, sewage systems, aqueducts, buildings, all impossible to replace within a single generation, and thus a
matter of social survival to maintain. The social capital of entire societies was often defined in terms of its relation to
infrastructural capital (e.g. castles or forts or an allied monastery, cathedral or temple), and natural capital, (i.e. the
land that supplied locally grown food). Agricultural economics continues these traditions in the analyses of modern
agricultural policy and related ideas of wealth, e.g. the ark of taste model of agricultural wealth.
The capitalist notion:
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). The theories of David Ricardo, John Locke, John Stuart Mill,
and later, Karl Marx, in the 18th century and 19th century built on these views of wealth that we now call
classical economics and Marxian economics (see labor theory of value). Marx 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.
Sociological view:
“Wealth provides an important mechanism of the intergenerational transmission of inequality.” 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.
As a result of different conditions of life, members of different social classes view the world in much different ways.
This allows them to develop different “conceptions of social reality, different aspirations and hopes and fears, different
conceptions of the desirable.” 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. 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.
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.
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 other’s 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.
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 is comprised of
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.
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
as their parents, children who lack assets are less likely to plan for the future.
Sustainable wealth:
According to the author of Wealth Odyssey, Larry R. Frank Sr, wealth is what sustains you when you are not
working. It is net worth, not income, which is important when you retire or are unable to work (premature
loss of income due to injury or illness is actually a risk management issue). The key question is how
long would a certain wealth last? Ongoing withdrawal research has sustainable withdrawal rates anywhere
between approximately 3 percent and 8 percent, depending on the research’s assumptions. Time, how long
wealth might last, then becomes a function of how many times does the percentage withdrawal rate go
into all the assets. Example: withdrawing 3 percent a year into 100 percent equals 33.3 years; 4
percent equals 25 years; 8 percent equals 12.5 years, etc. This ignores any growth, which presumably
would be used to offset the effects of inflation. Growth greater than the withdrawal rate would
extend the time assets may last, while negative growth would reduce the time assets may last.
Clearly a lower withdrawal rate is more conservative. Knowing this helps you determine how much
wealth you need also. Example: you know you will need $40,000 a year and use a 4 percent withdrawal
rate, then you need to use 5 percent and therefore need $800,000, etc. This simple “wealth rule”
helps you estimate both the time and the amount.
The limits to wealth creation:
There is a debate in economic literature, usually referred to as the limits to growth debate in which the ecological
impact of growth and wealth creation is considered. Many of the wealth creating activities mentioned above (cutting
down trees, hunting, farming) have an impact on the environment around us. Sometimes the impact is positive (for
example, hunting when herd populations are high) and sometimes the impact is negative (for example, hunting when herd populations are low).
Most researchers feel that sustained environmental impacts can have an effect on the whole ecosystem. They claim
that the accumulated impacts on the ecosystem put a theoretical limit on the amount of wealth that can be created.
They draw on archeology to cite examples of cultures that they claim have disappeared because they grew beyond the
ability of their ecosystems to support them.
Others are more optimistic (or, as the first group might claim, more naïve). They claim that although unrestrained
wealth-creating activities may have localized environmental impact, large scale ecological effects are either minor or
non-existent; or that even if global scale ecological effects exist, human ingenuity will always find ways of adapting
to them, so that there is no ecological limit to the amount of growth or wealth that this planet will sustain.
More fundamentally, the limited surface of Earth places limits on the space, population and natural resources
available to the human race, at least until such time as large-scale space travel is a realistic proposition.
The difference between income and wealth:
Wealth is a stock that can be represented in an accounting balance sheet, meaning that it is a total accumulation over time,
that can be seen in a snapshot. Income is a flow, meaning it is a rate of change, as represented in an Income/Expense or
Cashflow Statement. Income represents the increase in wealth (as can be quantified on a Cashflow statement), expenses
the decrease in wealth. If you limit wealth to net worth, then mathematically net income (income minus expenses) can
be thought of as the first derivative of wealth, representing the change in wealth over a period of time.
Wealth as measured by time:
Wealth has also been defined as "the amount of time an individual can maintain his current lifestyle for, without
any new income". For example if a person has $1000, and their lifestyle dictates $1000 per week of expenses,
then their wealth is measured as 1 week. Under this definition, a person with $10,000 of savings and expenses
of $1000 per week (10 weeks of wealth) would be considered wealthier than a person with $20,000 of savings
and expenses of $5000 per week (4 weeks of wealth).
Wealth in the form of land:
Many indigenous cultures reject the notion of land wealth. In western tradition, the concepts of owning land and
accumulating wealth in the form of land, are derived from Biblical tradition, where God told the Israelites to
go in and take possession of the promised land of Caanan.
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, subject to the 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) that argue that since people did not create land, they
have no right of property over it. Still, many older ideas have resurfaced in the modern notions of
ecological stewardship, bioregionalism, natural capital, and ecological economics. But in Oriental
philosophy, wealth which does not ensure peace of mind, or wealth which is not shared with the needy,
or undeserved wealth is no better than poverty.
Home, Distribution of Wealth,
Capital Accumulation (Part 1),
Capital Accumulation (Part 2),
References:
- Amory, Frederic."Euclides da Cunha and Brazilian Positivism"
- Luso-Brazilian Review > Vol. 36, No. 1 (Summer, 1999), pp. 87-94
- Gilbert, Dennis. The American Class Structure in an Age of Growing Inequality . N.p.: Wadsworth Publishing;, 2002.
- Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations
- Gilbert, Dennis. The American Class Structure in an Age of Growing Inequality . N.p.: Wadsworth Publishing;, 2002.
- Gilbert, Dennis. The American Class Structure in an Age of Growing Inequality . N.p.: Wadsworth Publishing;, 2002.
- Aspects of Poverty. Ed. Ben B Seligman. New York: Thomas Y. Crowell Company, 1968.
- Ropers, Richard H, Ph.D. Persistent Poverty: The American Dream Turned Nightmare. New York: Insight Books, 1991.
- Gilbert, Dennis. The American Class Structure in an Age of Growing Inequality . N.p.: Wadsworth Publishing;, 2002.
- Smith, Roy C. The Wealth Creators: The Rise of Today's Rich and Super-Rich. New York: Truman Talley Books, 2001.
- Sherraden, Michael. Assets and the Poor: A New American Welfare Policy. Armonk: M.E. Sharpe, Inc., 1991.
- Sherraden, Michael. Assets and the Poor: A New American Welfare Policy. Armonk: M.E. Sharpe, Inc., 1991.
- Sherraden, Michael. Assets and the Poor: A New American Welfare Policy. Armonk: M.E. Sharpe, Inc., 1991.
- Sherraden, Michael. Assets and the Poor: A New American Welfare Policy. Armonk: M.E. Sharpe, Inc., 1991.
- Fuller, R. Buckminster (1981). Critical Path. New York: St. Martin's Press, p. 125. ISBN 0312174888.
- Wikipedia.org
