Creating wealth: who benefits?

Tweet

 

Two of the many points of agreement between Labour and the Tories are that both economic growth and wealth creation are generally good things to encourage. On that, at least, they’re more or less right, although they often seem to miss out the important caveat that both things must happen within such limits of resource usage as are necessary to ensure that resources remain available for future generations, and that the ability of the planet to sustain life is not impaired (and that caveat is more far-reaching than it might appear). They even seem to agree, in general terms, that the route to achieving those things has to do with freeing wealth creators to do their thing by minimizing government intervention or control, and that government spending is some sort of drain on wealth – and on those points, they’re both completely misguided. I wonder if they even understand what ‘national’ wealth, as opposed to private wealth, actually is.

For sure, Starmer knows a wealthy man when he sees one (as did his predecessor but two, on a grand scale). But becoming wealthy isn’t the same as creating wealth, and nor is creating wealth the same thing as becoming wealthy. It’s perfectly possible for someone to redirect wealth in his or her own direction without adding to the total wealth of the country; and equally possible for a wealth creator to add to the sum total of wealth in the UK whilst ending up bankrupt. Becoming wealthy can simply be the result of redistributing existing wealth, something which a ‘trickle-up’ economy like the UK tends to facilitate. Creating wealth isn’t the same thing as making a profit either: it’s perfectly possible to turn a decent profit by simply redistributing existing wealth. There’s another myth as well – that somehow the public sector uses or even destroys wealth rather than creating it. But building a new hospital or school, for instance, adds to the country’s stock of capital, and thus wealth. And not all wealth can be measured in cash terms anyway, even though that’s what politicians seem to want to do. A healthy population also adds to the ‘wealth’ of a country, as well as increasing the potential for future wealth creation.

The real issue is not about the creation of wealth, but its use and distribution. An increase in total wealth which flows into the same few hands might look like a positive result at the macro level, but it won’t feel like one at the level of those struggling to get by. The argument that growing the size of the pie means there’s more for everyone without needing to take any away from the owners of the biggest slices only works if everybody’s slice gets bigger in practice, rather than merely in theory. If all the extra merely makes the biggest slices even bigger, then the ‘growth’ about which the government keeps banging on merely increases inequality.

Confusing total ‘national’ wealth with private wealth looks to be deliberate; and it’s no surprise given that the ‘wealthy’ have a disproportionate influence on government and opposition politicians alike. Even if there’s no direct or obvious quid pro quo, does anyone really believe that the generosity of wealthy donors is completely unrelated to their desire to continue to apply that adjective to themselves? People may not need to create wealth to become wealthy, but neither do they stay wealthy by donating part of their wealth to governments which might want to redistribute part of the remainder. But if increased wealth isn’t put to use for the benefit of the population as a whole, what is the point of it? It’s a question to which the government doesn’t seem to have an answer.