What is Wealth?
This three part explanation of Wealth Inequality will explain how Wealth Inequality causes low wages and high house prices, as well as a number of the other economic problems we are experiencing.
But before we can understand how Wealth Inequality kills the economy, we first need to understand what Wealth is.
The first, and most important thing to understand is this:
WEALTH AND INCOME ARE DIFFERENT
And of course this means that
WEALTH INEQUALITY IS DIFFERENT FROM INCOME INEQUALITY!
In order to understand the crucial role that Wealth Inequality plays in creating a bad economy, it is going to be really important to understand the difference between income and wealth, and between income inequality and Wealth Inequality.
Income is primarily about work! Maybe one person is a nurse, and earns £23,000 every year, or a schoolteacher earns £25,000. Maybe one person is a doctor and earns £50,000 per year, or a high-flying trader in the city, who earns £1,000,000 a year! This kind of income inequality is about work and wages. When income inequality becomes very high, it can be the sign of a problem, or it can even be a problem in itself. But it is not Wealth Inequality. Wealth and Income are completely different.
Wealth is about ownership. Wealth Inequality is about who owns what.
There are huge amounts of Wealth that exist in the world. The most obvious example is houses. We (almost) all live in some form of house, and every single one of those houses are owned by someone. The total number and value of houses in the world is enormous, and every one of these houses are owned by someone. But there are also many different forms of Wealth in the world.
Other than houses, there are also many other types of buildings – office buildings, huge skyscrapers, schools and hospitals, and shopping malls and factories and religious buildings. Because very few of us own a shopping mall, or a skyscraper, or factory, we often forget, or even don’t realise that, just like houses, these buildings are all owned as well. A lot of these buildings are all owned by corporations, but these corporations are owned by people as well. Ultimately, every one of these buildings is owned by somebody or some group of people. Altogether, these buildings are worth an enormous amount of money.
There are also many other types of wealth, that are all owned. Land is a huge form of wealth. Although not many of us own large amounts of land, there is a huge amount of land on the earth, and some of it is very valuable. The total amount of land per person currently on the planet is just over 20,000 square metres per person. Of course, a lot of this is uninhabitable mountain or desert, which isn’t worth very much, but it gives a sense of how much land there is in the world.
Natural Resources are another huge form of wealth. Not many of us own a forest, or a gold mine, or a copper mine, or an oil rig. But many of these things exists, and they are very valuable. All of these natural resources are owned by someone.
Technology is another huge form of wealth. Think of the amazing equipment being used in enormous car or electronics factories. Nowadays, more and more of the work in the world is being done by machines and computers. These machines and computers are able to do enormous amounts of work very cheaply and efficiently. Not many of us own a supercomputer or the machinery used to make a car, but a lot of it exists in the world, and it is all owned.
Stocks and shares are another well known form of wealth. This means owning a small part of a company, like Microsoft or Google or McDonalds or Walmart. Each individual company will probably own some property or some land or some technology or natural resources. So, in a way, owning stocks or shares in a company, is like owning a little part of a basket containing lots of different types of wealth.
Debt. Many people think of debt as a bad thing. But that is only if you owe the debt. Every time one person owes a debt, there is another person who is owed the debt. If you owe a debt, this is like a negative bit of wealth. If you are owed, then you have a positive wealth. The total amount of debt in the world is very large, much of it is in the form of mortgages on houses, or government debt.
The key thing to understand here is that the world is full of wealth. There are lots of different types of wealth and they are all owned. When one person owns these things they have the exclusive right to decide who gets to use them, and usually they charge people a price to use them. Wealth inequality is about who owns these things.
Now that we have spoken clearly about what Wealth is and what Wealth Inequality is, I would like to emphasise one more time that Wealth Inequality is very different from Income Inequality. Income Inequality is about the different kinds of work that different people do, and Wealth Inequality is about who owns the valuable and productive things that exist in the world.
This is the end of the explanation of What is Wealth. I hope you have understood that Wealth Inequality is about who owns the valuable and productive things in the world, and is not about people’s salaries or what they make from work at the end of the month.