Money, Greed, and God--Part V

A Pie That Can Limitlessly Expand

In this series of posts on Money, Greed and God, we come to the fourth Myth. We suspect this myth is probably the most pervasive of all. Its widespread currency explains why so many people are guilty about being well-off and why they believe the government should redistribute wealth to help the poor. Richards calls this the Materialist Myth—that wealth is finite, uncreated, and can only be transferred between people. It can neither be increased nor diminished. In other words, like matter, wealth can neither be created nor destroyed—hence its denomination as the Materialist Myth.

Now a moment's critical reflection will expose how stupid this myth actually is. Consider an agricultural subsistence society which lives from hand to mouth. For simplicity's sake, let's assume this society has only ten families. Only two families are able to produce sufficient food so that they can feed themselves comfortably throughout the whole year, even in the winter. Eight families are going hungry in the winter.

The Materialist Myth assumes that all the food which could possibly be produced has already been produced at all times. Therefore, those who have a comfortable amount of food have too much; their food needs to be redistributed so that the rest of the eight families get more and escape starvation in the winter. We may also call this the Fixed Pie Size Myth.

But if you don't fall into the error of the Materialist Myth your first response—and the only sustainable response—would be to help the other eight families to produce more food than they are currently doing. Clearly, this can be done. More crops can be grown, more animals can be farmed, because like humans both animals and crops multiply. The resource is not finite, but can be creatively expanded. The earth can be tended in such a ways that it buds and brings forth. Richards tells the story this way:

From the Middle Ages until the present, stone and wood implements were gradually replaced by metal plows and wheeled carts pulled by oxen and then horses. Technology such as seed drills, reapers, steam power, tractors, and combines transformed farming, so that fewer people could produce more with less land. Everything from pest control to better cultivation made farms even more fecund. Farms sprang up in areas that were previously arid. And yet, as recently as 1900, four fifths of the world's population still lived on farms.

By the 1970's, though, only half the world's population was farming. That's the worldwide average, however. In much of the world, people still engage in primitive subsistence farming, as they have for centuries. That means they grow just enough to feed themselves, if they're lucky. In the United States and other societies with solid private-property laws and high technology, however, a much smaller percentage of people make their livelihood by farming. One 1.9 percent of the American population now lives on farms, and yet they produce enough not only to feed the American population but to export abroad. In principle, the state of California could now grow enough to feed the planet. We have reached a unique moment in history. (Richards,p. 99)

A negative example, where wealth has been destroyed in our lifetimes, is Zimbabwe. That country's farms once feed most of Africa. But under dictator Mugabe, property laws have been eroded, and farms confiscated. The upshot: Zimbabweans could not survive now without millions and millions of tons of wheat and corn being given in aid.

The myth that wealth is neither created, nor destroyed, but is finite (and therefore poverty needs to be tackled by redistribution from the wealthy to the poor) is usually connected to the pie metaphor. Wealth is seen as a pie of fixed, finite dimensions which is divided up amongst the people of the world. If someone takes a big piece, less is available for others.

Think of the pie. It's a physical object; it has a pieish size and shape. It can't shrink much, and it certainly can't grow. We don't know where it came from. It's just there on the kitchen counter getting cold. All we can do is divvy it up and eat it.

But that's not how wealth works in a market economy. Wealth isn't just three: it's not a physical object. No one can simply divide it up at will; and above all, the total amount of wealth can grow over time. It hasn't stayed he same. (Richards, p.86).

And we may also add, the total amount of wealth can shrink over time (as the case of Zimbabwe demonstrates).

The key thing to understand is that wealth, although it involves matter and materials (such as gold, silver, diamonds, corn) it is itself immaterial. After all, since value is subjective, the entire worth of all that we own is only what someone else is prepared to pay for it, should we decide to sell it. Consider the case of a business—an unprofitable business—with no employees, but owning a patent on a design for a revolutionary alternative fuel motor vehicle. It's fixed assets consist of a couple of sheets of paper, detailing the design. Its intangible assets include a legally enforceable patent on the design. The owner of the business, lacking capital to take it any further, decides to sell. Toyota buys the business and its patent for $5 billion dollars. (Note, this value and this transaction could not be reified without strong, enforceable personal property rights.)

Now, the question is this: Is the business owner less or more wealthy after the sale? Did he become wealthy overnight? No and no. Assuming the price was at fair value, the business owner's wealth stayed the same after the sale as it was before. It is just that the form of his wealth changed. Even after the sale, his wealth remained as immaterial as before—it just consisted of a rather long number in a bank account balance. Richards summarizes:

For centuries, economists thought the economic value of a good or service was something we can touch or see—either something in the matter itself or in the amount of labor it took to produce it. Instead, economic value is about how we value goods and services. In a competitive market, prices are packages that contain information about how much a good or service is valued, and how scarce it is. At the very heart of economics, then, is a reality that exists not in material objectives but in our individual and collective minds. (Richards, p.94)

Wealth, then, is something that exists first in the mind and heart of human beings. It's a judgment of value and worth. That's why Jesus parable about the kingdom has meaning. “The kingdom of heaven is like a treasure hidden in the field; which a man found and hid; and from joy over it he goes and sells all that he has, and buys that field.” (Matthew 13: 44)

Richards has an excellent couple of sections in this chapter linking these obvious realities through to the divine revelation of Creation. In creating the world, God reveals Himself from the outset as having a work-week. After He had created man, He delegated the task of further creation and development to him.

God is king over the heavens and the earth, and appoints us to have dominion as kings and queens over his creation. He creates simply by calling things into existence. He then commands us to create according to our power, to “be fruitful and multiply and fill the earth and subdue it.” . . . (T)he key point is that our creativity comes from God. It doesn't compete with him. As Creator, God has made us with the awesome power and responsibility to create.

These chapters of Genesis aren't economic texts, but they still cast light on the most important truth of economics: not only do we create wealth, but, in the right circumstances, we create more and more wealth. Wealth, rightly applied, begets more wealth. (Richards, p.97,98)

The problem, then, is not the extreme disparity between the wealthy and the millions in abject poverty. The problem is poverty, period. The challenge is to work out how the millions and millions of people that live in abject poverty can be enabled to become wealth creators in their own right. In other words, to deal with the problem of poverty in the world, we need to see more wealth generated—by the poor themselves.