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Social Implications of Wealth Creation

Social Implications of Wealth Creation

The 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.

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    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.

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    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.

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    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.

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    Last Updated on March 4, 2019

    How to Use Credit Cards While Staying Out of Debt

    How to Use Credit Cards While Staying Out of Debt

    Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

    I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

    Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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    Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

    Do Not Treat Credit Cards as Your Funding Sources

    Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

    I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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    I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

    If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

    Make Sure to Always Pay Off Balances in Full Each Month

    The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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    Using Credit Cards with Rewards

    Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

    You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

    I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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    So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

    What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

    Featured photo credit: Artem Bali via unsplash.com

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