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.
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.
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’.
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.
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.
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.
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.