Wealth Creation Pt2

WEALTH CREATION PT2

How wealth creation came into being.

In part 2 I am developing the ideas from part 1.

11th Century English Agriculture
Agriculture in the 11th Century

A point to keep in mind is that those very first farmers, had no idea they had money. To them it would have been just a surplus product, there is no evidence they would have had any concept of money as we perceive it, merely they would have extra food with which to exchange goods or services.

With no real concept of money, there would be no word for it, nor to start with any ideas of worth.
In historical terms, farming is what predominantly marks out the Neolithic period, yes there are also improved designs to stone tools, but these also occur in the Mesolithic period, and are not in economic terms revolutionary, farming most definitely is.

You only have to look at Australia

Until this first farmer, any drought, or increase in population above what the land could support, led immediately to starvation. You only have to look at Australia, it was occupied for 30,000 years when the British first set up their colony at Botany Bay. Britain had been occupied continuously only since the last Ice age had ended, about 8,000 BC. The Australian Aborigine population was between 250,000 and 400,000, it was Palaeolithic or old stone age, and strictly hunter gatherer. The population in Britain was 14.1 million, and had already past the Agricultural stage and was into the Industrial era.

This highlights the difference, pre farming people starved when the food ran out, whether through a rise in population, or a shortage of food through a natural downturn ii the weather or perhaps even a disease in the staple food of the area in which a community lived.

Stonehenge
Stonehenge

Palaeolithic peoples didn’t even have domesticated animals, like cows, goats, sheep or the like, by the time of the Mesolithic period domestication had started, however, the animals were still dependent, like their human companions, on what the land could provide.

this leads to ownership

Farming changed everything. That it came into being is no real surprise, people lived so close to the land, it is easy for some bright spark to see that there were some areas that had better food supplies than others, the leap of imagination was realising that if one planted the grain, it grew.
The first farmer has found some suitable area of land, cleared the existing plants, and sowed his seed. He has tended his crops, and this leads to ownership, it also leads to wealth creation. After all, he is the one who has done the work. So along comes Ug who asks if he can help, and reap some of the rewards.

This immediately leads to challenging questions, is Ug given a share of the food, does Ug have his own piece of land, if not what is his relationship to the first farmer, is he a worker and paid or a slave and becomes part of the famer’s tools. Remember there is no word for money, no concept of money, and the idea of ownership may well have come into being, before these other concepts have words.

Indeed, it is money in the form of tokens, that dislocates commodity money from fiat currency. Once the idea of abstract value becomes grasped, then there is value of things. Until this point, people, products, services have no value, not because they are valueless, but because there is nothing that acts as an independent token with which to measure the value.

It is the independent token (=Money) being dislocated from actual services or goods, that makes money such a vital measure, so no money, means or equates to, no value.

he can give value to items or services

It is advancing technology that has given items and services value. Once the farmer has surplus product, he can give value to items or services he wishes to acquire.

Whilst the axe head maker was making ‘things’ of value. Those axe heads had no value, until there was the money there, with which to exchange a good or service.

This idea also has great consequences for modern Economies. During the ninth and tenth centuries in England, there was particularly in the reign of Eathelraed the Unready, a draining of fiat currency from England abroad, in the form of what was called the Danegeld. These were extortion payments made to the raiding ‘Vikings’ or ‘Danes’ in an attempt to keep the peace.

But here is a conundrum, while the last payment was so huge it took two years taxes to raise, this left the Vikings super rich. But had it made the people of England have any less value, no. OK they had less money and less disposable wealth, but all the knowledge and ability to create wealth through technology was still in place, so they were only poorer in what they could purchase with cash. If there was no famine, they were still as rich as the years before.

Note to confuse the issue there were a couple of famines, but this only meant the Danes or Vikings choose your own name, stayed away from the coast of England, until they had the spare food, so as to travel, and to raid the English again?

a modest three or four fold increase would bring astounding benefits

In the mean-time let us return to the idea of the first farmer. The result of just clearing an area of land, probably just unwooded land, and digging with perhaps an antler horn, or a sharpened length of wood, to plough a rough furrow, plant and weed the area would increase the crop yield anything between five and ten fold. Even a modest three or four fold increase would bring astounding benefits, however such a low figure is unlikely. Once you have proved that the idea works, the first thing would be to ensure you had enough for the next year plus some, and a natural eye to security would mean, that the maximum amount of land was cultivated, the amount of grain needed to grow from it would be kept.

In other words, the farmer’s own self-interest and that of his family or community would ensure there was excess food to that which was essential.

All the evidence of Mesolithic people in what is now eastern Europe, down turkey Iraq and out towards India, shows that the movement of tribes of hunter gatherers was not extensive, they tended to build a shelter and use it as a base for the surrounding area, only once the resources were used up di the tribe relocate, they would then return or do a circular tour, but all the time having a dwelling place to work from.

This is vital to understanding what happens next. Initially the extra food would be probably saved, a society that is forever on the brink of starvation could be expected to be cautious over how it used a resource.

Now comes the next step, at some point goods were exchanged, for what reason can only be guessed at, and the actual need is not important, it is the transaction that is. Perhaps the farmer needs an axe head, or some useful animal skin or extra spearheads.

thus increasing the amount of land he can farm

Wealth creation stems from both efficiency, the farmer realising, he can get cattle to pull the plough, thus increasing the amount of land he can farm, or technological advance, adding a wheel to the plough or indeed having two wheels on a cart and moving more goods, which is both a technological advance and efficiency gains.

Once you have a farmer, they are going to stop anyone from stealing their goods, this is a concept that is alien to hunter gatherers. Here language intervenes, and the concept of ownership, and with it land ownership, and with that comes the Laws relating to ownership.

With Laws come Lawyers, or at least people who understand the Law, or ensure the Law is enforced, this usually is some kind of rulers, whether head of the family, King, elected representative, or other person in charge. This has just increased the number of jobs.

But just stop a moment, let’s go over to the Economic correspondent of the ‘Neolithic Times’ and ask his opinion of the effect of farming.

Empty shop Closing down
Things are always changing, as jobs are lost more jobs are created.

Neolithic expert on Economics, “well in the future, now farming has arrived you will see hunters going out of business, as their jobs will no longer be needed, that will put the axe head makers and spear makers, out of work. In the future I see a lot of people with no work, and mass redundancies”
And if you think that sounds familiar, next time you see some person banging on about Robots taking our jobs, and making mass unemployment, ask who is paying this idiot. The Luddites, could not foresee you getting a flat tyre and calling out a breakdown company.

The future is bright the future is technologically driven, and wealth creation through efficiency will only increase.

Wealth creation

WEALTH CREATION

Wealth creation, a beginner’s guide.

This article is partly prompted by a, line in a ‘Twitter’ post, ~NHS, put people before profit~. So in other words forget Wealth creation, run the NHS as inefficiently as possible, and spend more money than the entire economy has.
That is basically what the person who thought up the line said.
The person didn’t mean that of course, but then, in UK the majority of people have no idea where profit stems from, or indeed many don’t know what the word means, and that wealth creation and profit are intertwined.

Mesolithic tools
Illustration from 1 of my favourite books, ‘Hunters, Fishers and Farmers of Eastern Europe 6000 – 3000 B.C. If you think I’m joking it rates alongside, J R Green’s Short History of English People, Principles of Log measurement, by C.F. Laver & 500 years of Printing by S.H. Steinberg ??

Let’s start at the beginning, Palaeolithic Man, these were hunter gatherers, which means, that when the locally available food was exhausted, as the population rose, they died through starvation. They had discovered fire, which meant they could cook food, which releases more nutrition, which in turn helped to raise the population above that possible before fire. This, along with some minor food processing, such as grinding cereal, led to a higher calorific value available but was limited by what nature provided.

In the film Avatar, they live in a world without money, they are hunter gatherers, however what they don’t show in that film, is what happens when the population reaches saturation point, people die, infants are still born and more mothers die in childbirth.

Period, end of.

Bloated stomachs excruciating slow death

Bloated stomachs excruciating slow death, it is why the population of Australia was so low, around 250,000 when Europeans arrived, (The UK in 1841 was 17 millions) and the larger Australian mammals like the giant Kangaroo had been wiped out for food.

Neolithic Storage Pit Yugoslavia
Pic showing a storage pit, in what was N.E. Yugoslavia, once people had grasped the need for planning, storage was essential.

After Palaeolithic times was a fascinating era, called the Mesolithic period, between 12,000 and 8,000 years ago, or 9,600 BC and nearer, depending whereabouts in the world you are looking, 1800 AD in some parts of Africa? This was a transitional time before Neolithic man. The Mesolithic period saw the introduction of semi domesticated animals, as these lived on food sources humans didn’t, they could extend the calorie intake of a group, when drought or other changes in weather occurred.

However the big change came with the Neolithic period, and it introduced ‘profit’ otherwise known as ‘wealth creation’ and ‘value’ these all result from ‘efficiency’, this was due to the biggest revolution to date, namely ‘Farming’.

FIRST FARMERS

The example I like to give is these first farmers, realised the hunter gatherer way of life isn’t efficient, so they stop and live in one place and mark out their fields, sow their seed and gather their grain and voila, find they have more food than their immediate needs for the year, the following year as there may well be a drought, so they save what they can for the next year. But as it turns out, no drought occurs, so the next year one of them decides he wants a new axe head, but not any old axe head, he wants the best to flaunt in front of his pals.

So he goes off to the top axe head maker and says, I want a super deluxe axe head, can you make one and I’ll give you 3 months grain for your whole family in exchange for it. At this point I will note, the very first recorded money, was the Shekel a measure of grain, it was in the Fertile Crescent of Mesopotamia, and is long after this story happened. The axe head maker agrees, thinking to himself I’ve got a good deal here and it will only take me a week to fashion the axe head.

Marx and the Socialists cannot accept this reality

Now there are some points worth noting, no one is poorer, in fact because one person found a more efficient way to work, more people are richer, Marx and the Socialists cannot accept this reality, but then Marx like most Socialists was a parasite who after less than a year’s work, around the age of 25 never did another day’s paid work in his life.

Once you had farmers with a fairly regular surplus of food, they could support Cities. Today we would probably label them Towns, they supported at most a few thousand people, some only hundreds. The Sumerian City of Ur in Mesopotamia is one of the most famous. However with Cities you had a class of people able to employ others due to wealth creation and to do menial tasks, this led to leisure time.

Part of this is due to more efficiencies, that come with Cities, people in close linked contact, able to exchange views and also efficiently exchange goods and services, this all adds to wealth creation.
Profits result from efficiency, so saying “people above profits” is just a silly uneducated statement.

Sumer Boats
River Transport in Mesopotamia

Also because of the geography of Mesopotamia, there were the two rivers the Tigris and Euphrates, traders could make money within a few days travel from one to the other, plus water can carry huge amounts of goods compared to land travel, which leads to more efficiency and wealth creation, hence increased profits. Trade also led to Writing and Arithmetic.
The Sumerians or Mesopotamians (it depends on which era you look at), arose because of a number of factors that were right. But the geography led to good infrastructure, namely rivers to transport goods, and decent road connections due again to geography, between Cities. These all help efficiency, which results in increased profits.

Sumerian numbers
Sumerians or Babylonians to you, used base 60 for their counting, we use base 10 denary or base 2, binary and base 8 octal for computing.

With farming came money, as pointed out the first recorded money was the Shekel a measure of grain, this was in Mesopotamia. However prior to this, money would exist, without there being either a concept of money, nor a word for it.

In fact farming was definitely revolutionary in the economic sense, because it increased productivity multiple times, in one leap. Even the simple act of ensuring there is seed planted, weeds removed, and making sure the area is adequately watered, will have boosted productivity by five to ten fold, don’t believe me, go out and do a little gardening one day?

Such a jump in the amount of food production, would ensure that the current family were well fed, and that in itself would increase the likelihood of any children surviving, thus boosting the population but also leading to more leisure time, and thus more time to think and contemplate.

I realised this was not covered in any Economics books I’ve come across, and indeed the introduction and why money exists is not adequately covered?

Going back to the very first farmers, they merely produced more food than they could use, due to technological advances, some of this would just be wasted, but why waste something so precious, as food, one would save as much as possible to try and prevent a shortage in future years. But in the mean time one has a surplus of a resource, you might as well use it.

fairly miffed, if some lazy hunter gatherer came along

Also worth considering is the idea of ownership would come into existence, a farmer who had worked his/her knuckles to the bone, ensuring their crops were well tended and ready to produce a good harvest, I’m sure would be fairly miffed, if some lazy hunter gatherer came along, and started taking their hard worked grain, and using it for themselves.

But also remember no idea of the concept of money has emerged, so any surplus would be exchanged, and bargained over without there being a regular exchange agreed, or even any word for money.
This idea seems to emerge with the Cities, where you get a number of people, comparing trades. And hence measurement comes into being, in other words more technological improvements, and once you have a measurement of corn, you have an exchange of that measurement with other items.

Actually the Sumerians left lots of info because they wrote on clay tablets, another technological advance, so we have all sorts of Historic artefacts, that lead to how ideas progressed, not least Arithmetic, and even the first recorded joke?

One Sumerian to another.
1st Sumerian, “I say, I say, I say, what’s guaranteed, when a beautiful woman sits on your lap?”
2nd Sumerian, “I don’t know, what is guaranteed when a beautiful woman sits on your lap?”
1st Sumerian, “She farts!”
I thank you, lol. PS if anyone says about another joke “It’s the oldest joke in the book”, you can now be a pub bore, and tell them what is the oldest joke in the book? Babylon Circa 1900 BC.

Back to the plot, efficiency and technological advance is of course what Adam Smith noted was happening, when he related the story of the pin makers and division of labour. But by his time we had various ways of measuring, efficiency, and multiple ways of relating one item in ‘value’ to another. Value of course is not always related to cost, so two items can be the same price, but have different values, and the similar items can have different prices but the same value. These can of course differ from person to person.

Colgate
Colgate brand items, courtesy Colgate Palmolive.

A tube of toothpaste purchased for £1 in a Pound shop, can have multiple values to multiple people buying it. To the poorest it might be bought at that shop because it gives the best value, to another it may be ease of location of the shop, and the actual value of no consequence.

consider the science and technology

But pause and consider the science and technology that is required to make that toothpaste, most of these advances were nothing to do with making a product to clean your teeth. Many efficiencies were the by product of other manufactures, but they all lead to an increase in dental hygiene?

These concepts are way outside any Socialist dogma, because Socialism deals in fantasy worlds, where there are only two types, the rich and the poor, balderdash of course, but it persists.

Efficiency creates wealth, and wealth results from profits, I note that President elect Trump, is going to emphasize infrastructure improvements by increasing the road building and other communications services. This in itself will result in increased employment, nad wealth creation, but done correctly will increase the USA’s GDP per head. Merely by increasing efficiency, he will increase profits and so boost wealth creation.

Technological and scientific advances lead to wealth creation, along with lowly ideas on how to increase an individuals output. I was on a production line, and noted instantly, that the most efficient people, with the largest output, did the least movement, and appeared to be the ones doing the least work?

That was people with mundane jobs, no degrees, but making improvements in their own working environment, just like those first farmers, they applied the technology they had to hand, in the most efficient way possible.

As a result they will still be in employment next year, even if the price of imported pistachio nuts has risen, the price in Tesco will probably be unchanged, wealth creation at work.