Wealth Research Paper

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Throughout their history, human beings have been trying to improve the conditions of their existence. Ever since their early days, they sought to understand nature and dominate it. They discovered tools, salt, and fire, all of which made life better and easier. Possession of these “things” became a necessity. Wealth then meant all the things that are useful for satisfying needs and ensuring the well-being of their holder. This way of understanding wealth has not changed very much, for even today the Merriam-Webster Collegiate Dictionary defines wealth as “the stock of useful goods having economic value in existence at any one time,” or to be more precise: “All property that has a money value or an exchangeable value.” The modern definition reflects the popular understanding that wealth is synonymous with the acquisition and accumulation of real (physical) and financial assets. Material wealth, it seems, has always been important in the lives of individuals, from ancient to modern societies.

However, history of economic thought tells us that early civilizations in Mesopotamia, Egypt, and Greece had a positive attitude to knowledge, and many philosophers regarded it as the basis for wealth and empowerment. All the achievements in terms of progress (technical and other) were the result of the skills acquired through knowledge. The “light of fire” was a reflection of the “light of thought.” Modern economic theory also recognizes what we call “human capital” (health, education, and knowledge in general) is an important element of wealth. The subtlety of the modern view is that wealth is not only created—it is also inherited. Because wealth can often be transferred from parents to heirs without impediments, some rich people may not be particularly knowledgeable and some great minds may not be particularly rich. People naturally reject poverty and have a desire to get rich and live comfortably. Therefore, not only will they question the unequal distribution of wealth, they will also try—by whatever means available—to change the status quo. Poverty makes people feel oppressed, disobedient, difficult to govern, and ready for revolt. The extremists would claim that a life of deprivation is not worth living. Tensions over the distribution of wealth existed even in ancient societies. Class struggle, according to Karl Marx ([1867-1910] 1956), is a dynamic force of change in all class societies.

Origin And Evolution Of The Concept

In ancient societies, when human needs were basic and wealth meant getting the goods from nature to satisfy their “natural” needs, there were no quarrels about being or wanting to be rich. Increased wealth simply translated into increased consumption and improved well-being. Wealth was necessary and everyone approved of it. Social values encouraged the ability to gather and/or produce more goods. The consensus came to an end when the distinction could be made between what was necessary (natural) and what had become luxurious or superfluous (artificial). Luxurious consumption, which could be afforded by only some people, was condemned on moral and religious grounds as waste, ostentation, or vanity. The desire for luxury, it was argued, has no limits and requires excessive riches. In turn, the pursuit of excessive wealth makes people selfish, greedy, dishonest, and morally corrupt. The rise of private property is justified by the need to ensure continuous control over the flow of resources or goods that satisfy these needs, whether natural or artificial. Greek philosophers such as Plato and Aristotle opposed both extreme poverty and excessive wealth. Poverty was considered by most as a debilitating state, whereas the desire for excessive wealth led to a state of unhappiness. To avoid these extremes, many philosophers recommended moderation. The ideal state of well-being is that where the individual learns how to control and limit his or her desires and needs. Wealth therefore became associated with wisdom and virtue. The same idea was later integrated into religious thought as “the wealth of the soul”; an inner dimension that can be achieved through moderate use of material wealth. (For an excellent review of the ancient thought on the subject, see Perrotta 2003.)

However, as pointed out by Cosimo Perrotta, even though many ancient thinkers praised modesty and the simple, natural lifestyle, most would still prefer wealth and reject poverty. Material wealth, after all, “contributes to the life according to nature” (Perrotta 2003, p. 210). The rejection of poverty is also found in ancient eastern civilizations. For instance, ancient Indian thinkers believed that life on earth was only a transitory state, but they still wanted it to be a good life; an opportunity to “perform good deeds” and achieve “prosperity on earth.” According to Balbir Sihag, “[a]ncient thinkers in India put heavy emphasis on keeping a proper balance between spiritual health and material health” (2005, p. 2). Chanakya Kautilya, one of India’s ancient thinkers and a contemporary of Aristotle, “considered poverty as a living death and concentrated on devising economic policies to achieve salvation from poverty without compromising with ethical values” (Sihag 2005, p. 1).

Islamic thought did not consecrate poverty either. It advocated the circulation of wealth through voluntary alms giving, sadaqa, and required giving, zakat, from the rich to the poor. In fact, Arabs, both before and after Islam, believed that wealth included a part that must be given away. In Islam, the poor and the needy have a claim on, a recognized right to, a portion of the property of the rich. The Qur’an refers to the community of the believers as “those upon whose wealth there is a recognized right for the beggar and the deprived” (surat 70: 24—25). Based on this philosophy, the Muslims sought to build a “community that regulates its flow of money and goods in the right direction … that practices generosity as reciprocation for God’s bounty, that observes the haqq [i.e., the recognized right] inhering in the good things of this world, that purifies and maintains its wealth by giving up a portion of it in alms, and that takes ample account of the kinsman as well as . the poor stranger” (Bonner 2005, p. 404). The final goal is to achieve a virtuous life on earth— the moral well-being that the ancient Indian thinkers talked about.

Modern Views

The idea that wealth must be shared equitably was also expressed later by modern thinkers such as Adam Smith, Marx, and John Maynard Keynes. Smith, for instance, considered the unequal distribution of wealth as “the great and most universal cause of the corruption of our moral sentiments” ([1776] 1976b, p. 61). Smith defined wealth in terms of production of goods and services for the purpose of satisfying the needs of society as a whole. He argued that because workers are the main factor of production, they should have their fair share: “[n]o society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have a share of the produce of their own labor as to be themselves tolerably well fed, cloathed and lodged” ([1776] 1976b, p. 96).

Keynes also was in favor of spreading wealth and against its concentration in the hands of the capitalist class. He considered scarcity, which is artificially created by the capitalist, to be “one of the chief social justifications of great inequality of wealth.” (Keynes 1936, p.373). Therefore, he sought to eliminate “the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital” because, he argued, “interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scare just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital” (1936, p. 376).

The artificial scarcity preoccupied Marx as well, who argued that “[i]t is quite simply the private ownership of land, mines, water, etc. by certain people, which enables them to snatch, intercept and seize the excess surplus-value over and above profit . contained in the commodities of these particular spheres of production . ” ([1867-1910] 1968, p. 37) In other spheres of production such as manufacturing, Marx rose against the exploitation of the working class and called for a community based on social justice.

Whereas Smith and early thinkers defined wealth either as production (of goods and services) or as consumption, Marx considered it as the creation of value and distinguished between use value (goods and services produced for own needs) and exchange value (goods and services produced for sale). Marx wrote:

A commodity, such as iron, corn, or a diamond, is therefore … a use value, something useful. This property of a commodity is independent of the amount of labor required to appropriate its useful qualities. … Use values become a reality only by use or consumption: they also constitute the substance of all wealth, whatever may be the social form of that wealth. In the form of society we are about to consider, they are, in addition, the material depositories of exchange value. ([1867-1894] 1992, p. 44)

Exchange value, in contrast, exists only when the product is sold. As Marx put it, “a thing can be useful, and the product of human labor, without being a commodity. Whoever directly satisfies his wants with the produce of his own labor, creates, indeed, use values, but not commodities. In order to produce the latter, he must not only produce use values, but use values for others, social use values” ([1867-1894] 1992, p. 48).

If some authors have argued that all members of society should enjoy the benefits of increased wealth, others wanted to exclude the lower classes. In ancient times, the opposition to increased consumption was part of the general criticism of luxury, the desire to get rich, and selfishness. In modern times, the justification has been that consumption by lower classes takes away resources from investment—the key to accumulation. However, one must remember that consumption is what sets apart the different members of society. After all, as the popular adage says, “you are what you eat (consume),” that is, consumption sets your social status. Therefore, we should understand that “[t]he authors hostile to increased consumption … nearly always conceal (or reveal) a social motive: they are opposed to the rise of the lower classes and fear that their subordination may come to an end. They appear to be concerned about the destiny of the world, but are often concerned merely about the loss of their own privileges” (Perrotta 2003, p. 179).

Thorstein Veblen (1899) saw in the exclusion of the lower classes a means of guaranteeing the power and maintaining the social status of what he called the “leisure class,” for it is through this power relationship that wealth is truly valorized. Preventing the poor from having access to increased consumption is important in the process of valorizing wealth. The logical step therefore is to prevent them from having access to increased wealth, that is, to keep wealth scarce and concentrated in the hands of the leisure class. This is done through what Veblen (1899) called “conspicuous consumption” and “industrial sabotage.” Technology speeds up the production process and increases the total amount of goods and services, thus contributing to eliminate scarcity by gradually shifting luxury consumer goods from being exclusively consumed by the leisure class to being widely available to the lower classes. As pointed out by Charles Clarke, this tendency must be kept in check, and it is done so by the process Veblen labeled industrial sabotage. Industrial concentration and monopoly are necessary in order to keep profits high.. Thus at the micro level industrial concentration generates scarcity, while at the macro-economic level this is done by keeping the value of money higher than it need be, i.e., keeping interest rates too high. (2002, p. 419)

Internationalization Of Wealth And Poverty

Advocates of globalization, including the World Trade Organization (WTO), have been arguing that inequality will fall as economies become more integrated and flows of capital and commodities more liberalized. The conclusions of the globalization-equality thesis are based on the neoclassical economic theory according to which free trade (one aspect of globalization) will bring about convergence in commodity prices, whereas factor mobility (another aspect of globalization) will equalize factor incomes by raising the income of the abundant factor and lowering that of the scarce factor. In the context of trade between developed and developing countries, one should expect that incomes of the working poor (the abundant factor) will rise and that returns to capital or even the incomes of highly skilled workers (the scarce factor) will fall. Globalization, therefore, will reduce inequality.

However, this is in sharp contrast with what is observed on the ground. At the national level, available evidence indicates that inequality between the rich and the poor—whether measured by income or by wealth— has been rising in most cases. The United Nations Development Program (UNDP) found that “a study of 77 countries with 82% of the world’s people shows that between 1950s and 1990s inequality rose in 45 of the countries and fell in 16.. In the remaining 16 countries either no clear trend emerged or income inequality initially declined, then levelled off” (2001, p. 17). At the international level, according to the UNDP, the average GDP per capita from various regions as a ratio to that of high-income OECD countries declined between 1960 and 1998, and “in sub-Saharan Africa the situation has worsened dramatically: Per capita income, around 1/9 of that in high-income OECD countries in 1960, deteriorated to around 1/18 by 1998” (UNDP 2001, p. 16). The UNDP summarized its results on world inequality by stating that the ratio of the income of the world’s richest 10 percent to that of the poorest 10 percent has increased from 51:1 to 127:1 between 1970 and 1997.

A study by the World Institute for Development Economics and Research reported that [t]he figures for wealth shares show that the top 10 percent of adults own 85 percent of global household wealth, … [The corresponding figure for the top 1 percent of adults is 40 percent of global wealth]. This compares with the bottom half of the distribution which collectively owns barely 1 percent of global wealth. Thus the top 1 percent own almost forty times as much as the bottom 50 percent. The contrast with the bottom decile of wealth holders is even starker. The average member of the top decile has nearly 3,000 times the mean wealth of the bottom decile, and the average member of the top percentile is more than 13,000 times richer. (Davies et al. 2006, p. 26)

The unequal distribution of wealth between nations via trade flows was the main argument of the dependency theory in the 1950s. Raul Prebisch (1950) and others have documented this inequality as a transfer of wealth from developing to developed countries in the form of declining terms of trade. Others have argued that underdevelopment (and therefore poverty) is a by-product of the development of Europe and other industrial countries. James Galbraith (2002), on the other hand, showed that the rise in inequality that began in the early 1980s coincided with a sharp increase in real interest rates, an event that had dramatic effects on poor countries, which were forced to adopt austere policies that resulted in more poverty.

Wealth and poverty are not mutually exclusive. They coexist in a dialectical manner; they are both the result of one thing: the unequal distribution of value created in all the stages of production. The mechanisms underlying this unequal distribution have to do with the power relationships leading to the appropriation of profits made from the production and sale of commodities, whether at the national or the global level. The market mechanism cannot bring about social justice. To achieve some form of democratic wealth, redistribution through public intervention is necessary.


  1. Bonner, Michael. 2005. Poverty and Economics in the Qur$an. Journal of Interdisciplinary History 35 (3): 391–406.
  2. Clarke, Charles M. A. 2002. Wealth and Poverty: On the Social Creation of Scarcity. Journal of Economic Issues 36 (2): 415–421.
  3. Darity, William, Jr. 1992. A Model of “Original Sin”: Rise of the West and Lag of the Rest. American Economic Review 82 (2): 162–167.
  4. Davies, James B., Susanna Sandstrom, Anthony Shorrocks, and Edward N. Wolff. 2006. The World Distribution of Household Wealth. Helsinki: World Institute for Development Economics and Research.
  5. Galbraith, James K. 2002. A Perfect Crime: Inequality in the Age of Globalization. Daedalus (Winter): 11–25.
  6. Keynes, John Maynard. 1936. The General Theory of Employment, Interest, and Money. London: Macmillan.
  7. Marx, Karl. [1867–1910] 1968. Capital. Vol. IV. Moscow: Progress Publishers.
  8. Marx, Karl. [1867–1910] 1992. Capital. Vol. I. New York: International Publishers.
  9. Perrotta, Cosimo. 2003. The Legacy of the Past: Ancient Economic Thought on Wealth and Development. European Journal of History of Economic Thought 10 (2): 177–229.
  10. Prebisch, Raul. 1950. The Economic Development of Latin America and Its Principal Problem. Santiago: United Nations Economic Commission for Latin America.
  11. Rodney, Walter. 1972. How Europe Underdeveloped Africa. London: Bogle-L’Ouverture.
  12. Sihag, Balbir S. 2005. Kautilya on Ethics and Economics. Humanomics 21 (3–4): 1–28.
  13. Smith, Adam. [1759] 1976a. The Theory of Moral Sentiments. Oxford: Oxford University Press.
  14. Smith, Adam. [1776] 1976b. An Inquiry into the Nature and Causes of the Wealth of Nations. Oxford: Oxford University Press.
  15. United Nations Development Program (UNDP). 2001. Human Development Report. Oxford: Oxford University Press.
  16. Veblen, Thorstein. 1899. The Theory of the Leisure Class. New York: Macmillan.

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