Social Implications of Wealth Creation
At the base of almost every ethical system in the world is the idea that the pursuit and worship of unrighteous mammon is unfulfilling, and there is much truth to this. While idolizing material wealth is likely to be a path to spiritual and moral poverty, it is important to remember some of the reasons why people get rich in a market economy as well as some of the implications of their efforts.
1. You get wealthy by producing value. Generally, there are two roads to wealth. You can make something and trade it to people who want it, or you can use force to take things that don’t belong to you. For most of history, the most socially acceptable–or easiest–way to get rich was simply to take things from other people; indeed, in ancient China and at the height of the Roman Empire, “commerce” was looked down upon. If you made all your money as a government administrator, through military conquest, or by extracting tribute, you were admired. Suffice it to say, though, that simply “taking stuff” doesn’t actually produce anything. Over the last five hundred years or so, the legal institutions that encourage trade and commerce have developed. The histories of the European economies in which modern market economies developed is by no means spotless: soeme of the crimes committed by colonial powers in Africa and Latin America rank among history’s greatest attrocities. One thing, however, that the process of global integration and the spread of the market economy did was spread the means to prosperity all over the world. The planet can today support far more peopel than it could formerly, and the potential exists for everyone to be rich.
2. Other people get rich if you get rich by producing, and they can get rich if you save. Your restraint produces capital and new technology for others, who can use the funds you don’t consume to produce new goods and new technologies. Moreover, if you are a successful entrepreneur your ideas and innovations geneate benefits for everyone–ironically, the bulk of the benefit is likely to accrue to people other than you.
3. “Giving Something Back” might be misleading. Bill Gates became the richest man in the world by producing an operating system and software package that made us all much, much, much more productive. The great irony, as some (including leading development expert William Easterly) have pointed out, is that Gates’s attempts to save the world through his charitable endeavors may prove to be a drop in the international bucket when compared to the contributions to human well-being that he has made through Microsoft. Should we scorn Gates, then? Absolutely not–it’s his money to dispose of as he wishes. However, if we really want to help those around us, we would all do well to take a good, hard look at what we do well and think about whether this is a more productive use of our time and resources than some of our charitable endeavors.
Perhaps unexpectedly, it is unnecessary to mean to do well for others in order to actually do well for others, and one of the lessons of economics is that the unintended consequences of well-intentioned actions and endeavors might actually produce more harm than good. Production makes us better off, and even allegedly “selfish” endeavors might do more for the world than our charitable activities.
WRITER'S BIOGRAPHY
Art Carden
Art Carden is Assistant Professor of Economics and Business at Rhodes College in Memphis, Tennessee and an Adjunct Fellow with the Oakland, California-based Independent Institute. His research papers have been published or are forthcoming in Public Choice, Contemporary Economic Policy, the International Journal of Social Economics, the Business and Society Review, the Journal of Interdisciplinary Studies, the Review of Austrian Economics, and other outlets, and they can be found on his SSRN Author Page. His commentaries appear regularly atwww.mises.org and in newspapers around the country, and he is a regular contributor to Division of Labour. He and his wife, Shannon, had their first child in July, 2008.
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Comments
Vincent says on December 17th, 2008 at 11:32 pm
Hi artcaden,
Most people get rich by producing value to others and it is almost a definite way to get rich as long as you provide enough value. :)
Cheers
Vincent
Personal Development Blogger
Bill M. says on December 18th, 2008 at 12:43 am
You build wealth by saving & investing consistently, and spending less than you make. There is no magic bullet..
timgray says on December 18th, 2008 at 10:26 am
The example with gates is misleading.
Gates took ideas from IBM and Apple and Xerox and marketed them as his own to create windows. He more fits the Roman and China empire leaders making money by taking.
Now Apple computer gave us the first personal computer, this was not stolen from anyone else but a real creation of an idea. That would have been a better example.
TheQuickBrownFox says on December 18th, 2008 at 3:16 pm
This explanation is oversimplified and only applies in some cases in industry (particularly entrepreneurship). The truth is that many wealthy people gained their wealth by trading, but where the trade has not increased the efficiency of the market. i.e. When the exchange of goods exists only to make profits not to make sure that the right goods reach the right customers. These people do not produce value, they merely concentrate wealth and leech off society. But even in industry wealth is not always justified as companies often become too powerful and frequently bend or break the law to increase profit. They even sometimes control the law by derailing political processes to produce outcomes that are not optimal for everyone in a society but certain groups, e.g. deregulation of harmful substances to reduce waste disposal costs. I agree with you that Gates’ current philanthropy is not the best thing he could do. The best thing he could’ve done for the world is to stop all of Microsoft’s morally/legally dubious practices. It’s true that they have produced some useful value but they also do a lot of damage to the software industry with anti-competitive practices.
Also, the claim that everyone in the world can be rich is a shaky one. If you mean that everyone in the world can enjoy a standard of living that is enjoyed by the rich people in developed countries then you are completely wrong and completely out of touch with reality. Not only are there not enough resources on the planet for this to be true, it ignores the fact that our lifestyles require that we outsource the unpleasant/dangerous/unhealthy labour to poor people who have no choice but to do it. It also requires we have enough abundant and cheap energy to transport the fruits of their labour to our doorstep. With the likely imminent onset of peak oil, this seems unlikely to be possible for much longer than a decade.
Given the size of the problems I’ve mentioned above, what you are saying in the article feels like an excuse to be rich without feeling guilty about it, even if you work in a company that engages in these practices. While it contains a grain of truth, it’s another attempt to attempt to explain the world with economics, without fully considering the social, environmental and political contexts that are just as important.
elbert says on December 22nd, 2008 at 2:27 am
Most get rich by putting their money in circles.But you work hard in any business and go in a strait way.success will be yours.
http://www.quranreading.com/
martin says on January 9th, 2009 at 6:12 am
“Creating things of value..”,can be vey subjective and misleading, take the arms industry for instance, dioxin was of great value to Monsanto and what it did to the Vietnamese jungle may have given some short lived satisfaction to military commanders but what of it’s victims?,how valuable was dioxin to them?. We have become so desperate to justify greed we even pervert religion to feel better about it, not coincidentally these same religions are often militaristic. Our economic models are so often dressed up as polite, rational science when infact they are more philosophies that justify greed and all the damage and suffering it causes. Just look at the economic mess we are in now if you want proof.
homequran says on June 22nd, 2009 at 4:49 am
You should work with great care and devotion and u will succeed