"Wealth Creators"
Discussion
The thread on what "progressive" actually means has me thinking of another one: What is the origin of the term "wealth creator" as often used these days when talking about the very richest? And does it have any foundation in economic academia or is it a media/political invention?
From what I've read on the birth of consumerism, it is really the enriched lower and middle classes that really produce the explosion in wealth that our country (and later the rest of the west) has enjoyed for the last few centuries.
The term "wealth creators", which I started hearing in the US media in the Bush Era seems to mean super-rich guys like Buffet or Trump, who could never consume enough to create wealth by themselves, just as the monarchs couldn't back in the day.
From what I've read on the birth of consumerism, it is really the enriched lower and middle classes that really produce the explosion in wealth that our country (and later the rest of the west) has enjoyed for the last few centuries.
The term "wealth creators", which I started hearing in the US media in the Bush Era seems to mean super-rich guys like Buffet or Trump, who could never consume enough to create wealth by themselves, just as the monarchs couldn't back in the day.
Ideas, innovation and entrepreneurship on any level can 'create' wealth.
This being PH, easiest way to think of it is to consider what you would pay for approximately 1.5 tonnes of mixed metal, plastic and rubber waste? Unless you're tapped out, probably about the same as for half a tonne of scrap.
But take the same materials, that have benefited from investment in design, production (both in terms of time or craftsmanship and also investment in machinery and tools) and you'd pay, say perhaps £20k for a decent mid range car. Take the investment (and risk) still further and you might reasonably pay anything up to £200k. All for, essentially, the same 'stuff'.
It is harder to explain innovation in other fields quite so simply, but it exists nonetheless.
This being PH, easiest way to think of it is to consider what you would pay for approximately 1.5 tonnes of mixed metal, plastic and rubber waste? Unless you're tapped out, probably about the same as for half a tonne of scrap.
But take the same materials, that have benefited from investment in design, production (both in terms of time or craftsmanship and also investment in machinery and tools) and you'd pay, say perhaps £20k for a decent mid range car. Take the investment (and risk) still further and you might reasonably pay anything up to £200k. All for, essentially, the same 'stuff'.
It is harder to explain innovation in other fields quite so simply, but it exists nonetheless.
I understand the basics of value creation as per classical capitalism. But what I'm getting at is the actual term "wealth creators" and it's origin: when and where it appeared.
It may be my age, but I'd swear I never heard the term used before Prez Bush, and it seemed an Americanism back then. Also it always seems to be used to describe people who are wealthy already, not small plumbing businesses or the firm behind the local call centre in a business park.
It may be my age, but I'd swear I never heard the term used before Prez Bush, and it seemed an Americanism back then. Also it always seems to be used to describe people who are wealthy already, not small plumbing businesses or the firm behind the local call centre in a business park.
Edited by glazbagun on Friday 21st August 11:08
Magog said:
I had no idea Google could do that!Magog said:
What is that graph showing exactly apart from lines that are close to damn-it zero% ?Digga said:
So it appears to be another good, old Victorian invention.
Unless you search the British English section, which gives you this graph:link
Searching Google's "American English" section gives a graph much closer to the one posted above:
https://books.google.com/ngrams/graph?content=weal...
And I can't find out wether the sample is of serious academic journals studying the economy, or the published letters of the robber barons of old. So it's interesting, but doesn't really give an answer as to where it comes from.
Edited by glazbagun on Friday 21st August 12:22
glazbagun said:
The thread on what "progressive" actually means has me thinking of another one: What is the origin of the term "wealth creator" as often used these days when talking about the very richest? And does it have any foundation in economic academia or is it a media/political invention?
From what I've read on the birth of consumerism, it is really the enriched lower and middle classes that really produce the explosion in wealth that our country (and later the rest of the west) has enjoyed for the last few centuries.
The term "wealth creators", which I started hearing in the US media in the Bush Era seems to mean super-rich guys like Buffet or Trump, who could never consume enough to create wealth by themselves, just as the monarchs couldn't back in the day.
I'm not being patronising when I say that that is a very interesting question.From what I've read on the birth of consumerism, it is really the enriched lower and middle classes that really produce the explosion in wealth that our country (and later the rest of the west) has enjoyed for the last few centuries.
The term "wealth creators", which I started hearing in the US media in the Bush Era seems to mean super-rich guys like Buffet or Trump, who could never consume enough to create wealth by themselves, just as the monarchs couldn't back in the day.
The subject came up, more or less, in a book on the industrial revolution, the suggestion being that the general plebs' life style became considerably worse for some years. Life expectancy dropped despite the advances that were being experienced in health care. There was a recent article, from the LSE if memory serves, on the myth of cascading wealth. It was quite fascinating. The vast majority just goes offshore to tax havens.
So if the money that is generated goes elsewhere, the normally understood meaning of wealth creation is a misnomer as it is personal. Many people do things for their own benefit and work hard to ensure no one else gets a share.
What made the lower classes better off was their 'empowerment'. A fine example is the end of serfdom (as such) after one of the black deaths rampaged through England/Wales. All at once they were in short supply. Whilst the ruling classes, as they do, removed some of the benefits, it was a rearguard action. It had little to do with wealth creators.
There was some research, years ago when it was possible, to discover the benefits that dealing in slavery brought to the working class in this country. The conclusion was very little and, in some ways, it made 'us' worse off.
In general, the plebs have enjoyed a better life style for reasons other than 'wealth creators', or rather those who are normally described by that term.
Even well into the last century, the infant death rate for those at the bottom of the pile was horrendous. Compared to 100 years before and the difference between what Cobbett described and some areas of both the rural and industrialised UK was generally only marginally different. Some had benefited, many others had not.
The major change was after WWII. Health improved, mainly because of the NHS and better lifestyles. The money for that came from the USA, borrowed and from the Marshall Plan, and as such it was difficult for the rich to sequester the majority and 'invest' it in tax havens.
To decide who are the wealth creators one needs to define how one decides on the wealth. If the majority of the population gains no benefit from extra 'money' coming in, such as during the industrial revolution and the time of slavery, then can it be wealth creation? Should one suggest the lowering of infant mortality and an increase in life expectancy as a measure? Better education? Freedom from concerns about the essentials of life, such as food, health, housing, heat gets my vote as one.
The question from the OP is a fascinating one. It is patently not all about money.
It is about money, but the OP is putting the cart (consumption) before the horse (innovation, investment, enterprise, graft). There certainly was trickle-down although, the ultra-rch always seem to do better in any society (this was even the same in Soviet Russia) than the proles.
What came first though was industrial revolution and profit. No doubt the parallel developments in worker's rights and power were instrumental, but first came the hard bit. This is what the left don't really understand or like to admit; it's always better to bake a bigger cake, if at all possible, than to waste time dividing up a smaller one.
Workers can enjoy not only the benefits of labour, but also the innovations that they help to create and produce. In order for western workers to be more productive someone - state or private sector - needs to invest in education, training and capital equipment; roads, buildings, machinery, technology.
What came first though was industrial revolution and profit. No doubt the parallel developments in worker's rights and power were instrumental, but first came the hard bit. This is what the left don't really understand or like to admit; it's always better to bake a bigger cake, if at all possible, than to waste time dividing up a smaller one.
Workers can enjoy not only the benefits of labour, but also the innovations that they help to create and produce. In order for western workers to be more productive someone - state or private sector - needs to invest in education, training and capital equipment; roads, buildings, machinery, technology.
Edited by Digga on Friday 21st August 16:09
Digga said:
It is about money, but the OP is putting the cart (consumption) before the horse (innovation, investment, enterprise, graft). There certainly was trickle-down although, the ultra-rch always seem to do better in any society (this was even the same in Soviet Russia) than the proles.
What came first though was industrial revolution and profit. No doubt the parallel developments in worker's rights and power were instrumental, but first came the hard bit. This is what the left don't really understand or like to admit; it's always better to bake a bigger cake, if at all possible, than to waste time dividing up a smaller one.
Workers can enjoy not only the benefits of labour, but also the innovations that they help to create and produce. In order for western workers to be more productive someone - state or private sector - needs to invest in education, training and capital equipment; roads, buildings, machinery, technology.
You suggest, in fact emphasise, that you believe there is a trickle down of wealth. I assume by your use of trickle that you agree there is no cascade. There is recent research which suggests there is hardly a trickle and for some, they get poorer in actual and relative terms. What came first though was industrial revolution and profit. No doubt the parallel developments in worker's rights and power were instrumental, but first came the hard bit. This is what the left don't really understand or like to admit; it's always better to bake a bigger cake, if at all possible, than to waste time dividing up a smaller one.
Workers can enjoy not only the benefits of labour, but also the innovations that they help to create and produce. In order for western workers to be more productive someone - state or private sector - needs to invest in education, training and capital equipment; roads, buildings, machinery, technology.
Edited by Digga on Friday 21st August 16:09
You suggest that profit came first in the industrial revolution, which I agree with, and then state that worker's rights ran parallel. I'm not sure that is entirely correct. If we accept the suggestion that the IR started in 1760 (arguable but the date I was taught) then there's a fair old gap before we get to the age of child labour being raised to 10. Even then, the dreadful working conditions which caused many an early death were allowed to remain.
You suggest it is better to bake a bigger cake rather than divide a smaller one. I'm not sure that it correct if you are the starving baker in the former case. Of course that it wrong.
You suggest that the state needs to invest in roads and such. This is rather left wing thinking, is it not? Roads are built mainly for industrial purposes. Lorries and things. Why can't the businesses that depend on them pay for them rather than me?
I was taught that the industrial revolution was the best thing that ever happened to the hoi poloi. Yet a little reading shows that the lifestyles of the poor deteriorated considerably over the first 150 years at least. The workers rights were always on catch up.
But can I ask you to read the research on the cascading wealth myth? I can't find the one I referred to, but there are others out there.
History shows that the post 1760 improvement in lifestyles of the poor started with the workers' movements, be it petitions or direct action. The vote, which was kept from the poor until less than 100 years ago, was the catalyst, and if the government of the time had been financially competent, they might well have enjoyed some of the benefits before WWII. However, as I said, the increase in disposable income and improvements in health care were paid for not by the 'wealth creators' of this country, but by loans and Marshal Aid from the USA. Sensible investment, unlike after WWI, ensured investment in infrastructure.
There is no simple answer to the question posed by the OP, and the rich and powerful have had a largely negative effect on the lives of the poor. The money that came into this country from the slave trade did not trickle down. It gave the rich even more power. Why should they give it to anyone else? Indeed, they kept prices high. Corn laws are an instance of this, and far from the only one. The IR was well under way and yet the poor were starving.
Read Cobbett. Much is made, and quite rightly, about the potato famine but the poor were starving to death in other parts of Great Britain at the time but this time as a result of government policy.
Wealth creators must be about improvements to the life style of everyone, and not of just a few.
Edited by Derek Smith on Friday 21st August 16:49
My knowledge of consumption largely comes from studying the consumer revolution in the 1600's whilst at uni, Fable of the Bees, etc.
I think it still holds today that wealth is created by the workers (or rather their labour), spending the chunk of the labour value they get paid on luxuries which employ other workers. "Rich people", however you define the term, hold on to the vast majority of their money so would seem to be more wealth vaccums rather than wealth creators.
Is, say, Elon Musk a wealth creator?
A/ Would he have been a wealth creator in 06-09 when things looked at their bleakest? Had Tesla and SpaceX failed (which they both could have in the recession), he'd have given the megamillions he'd previously made to a bunch of engineers who in turn would have spent a large proportion of that in consumption, aiding the economy, but bankrupting himself.
B/ If (say) things go great, he puts his feet up, quits buisiness and lives a frugal life despite massive dividends, doing the odd spot of angel investing. Is he still a wealth creator or just a rich individual?
To my mind, "wealth creator" means "consumer", but as I often see the term used, it seems to be a euphemism for "rich (only rich) potential investor".
In Situation B I'd say Musk isn't creating wealth. Situation A would be like the British government or a company blowing a fortune on a moon-shoot, which looks like a destruction of wealth. In the middle (of situation B) is a sucessful Tesla (or well run public service), who do create net value, but I think would be less likely to be seen as a wealth creator than Musk in todays media.
I think it still holds today that wealth is created by the workers (or rather their labour), spending the chunk of the labour value they get paid on luxuries which employ other workers. "Rich people", however you define the term, hold on to the vast majority of their money so would seem to be more wealth vaccums rather than wealth creators.
Is, say, Elon Musk a wealth creator?
A/ Would he have been a wealth creator in 06-09 when things looked at their bleakest? Had Tesla and SpaceX failed (which they both could have in the recession), he'd have given the megamillions he'd previously made to a bunch of engineers who in turn would have spent a large proportion of that in consumption, aiding the economy, but bankrupting himself.
B/ If (say) things go great, he puts his feet up, quits buisiness and lives a frugal life despite massive dividends, doing the odd spot of angel investing. Is he still a wealth creator or just a rich individual?
To my mind, "wealth creator" means "consumer", but as I often see the term used, it seems to be a euphemism for "rich (only rich) potential investor".
In Situation B I'd say Musk isn't creating wealth. Situation A would be like the British government or a company blowing a fortune on a moon-shoot, which looks like a destruction of wealth. In the middle (of situation B) is a sucessful Tesla (or well run public service), who do create net value, but I think would be less likely to be seen as a wealth creator than Musk in todays media.
Edited by glazbagun on Friday 21st August 16:53
glazbagun said:
My knowledge of consumption largely comes from studying the consumer revolution in the 1600's whilst at uni, Fable of the Bees, etc.
I think it still holds today that wealth is created by the workers (or rather their labour), spending the chunk of the labour value they get paid on luxuries which employ other workers. "Rich people", however you define the term, hold on to the vast majority of their money so would seem to be more wealth vaccums rather than wealth creators.
Is, say, Elon Musk a wealth creator?
A/ Would he have been a wealth creator in 06-09 when things looked at their bleakest? Had Tesla and SpaceX failed (which they both could have in the recession), he'd have given the megamillions he'd previously made to a bunch of engineers who in turn would have spent a large proportion of that in consumption, aiding the economy, but bankrupting himself.
B/ If (say) things go great, he puts his feet up, quits buisiness and lives a frugal life despite massive dividends, doing the odd spot of angel investing. Is he still a wealth creator or just a rich individual?
To my mind, "wealth creator" means "consumer", but as I often see the term used, it seems to be a euphemism for "rich (only rich) potential investor".
A 'wealth vacuum'. Great phrase.I think it still holds today that wealth is created by the workers (or rather their labour), spending the chunk of the labour value they get paid on luxuries which employ other workers. "Rich people", however you define the term, hold on to the vast majority of their money so would seem to be more wealth vaccums rather than wealth creators.
Is, say, Elon Musk a wealth creator?
A/ Would he have been a wealth creator in 06-09 when things looked at their bleakest? Had Tesla and SpaceX failed (which they both could have in the recession), he'd have given the megamillions he'd previously made to a bunch of engineers who in turn would have spent a large proportion of that in consumption, aiding the economy, but bankrupting himself.
B/ If (say) things go great, he puts his feet up, quits buisiness and lives a frugal life despite massive dividends, doing the odd spot of angel investing. Is he still a wealth creator or just a rich individual?
To my mind, "wealth creator" means "consumer", but as I often see the term used, it seems to be a euphemism for "rich (only rich) potential investor".
Derek Smith said:
...There was a recent article, from the LSE if memory serves, on the myth of cascading wealth. It was quite fascinating. The vast majority just goes offshore to tax havens.
LSE you say? I hardly know where to begin. Money 'deposited' offshore in 'tax havens' doesn't stay offshore, except some physical cash. It's not the 1970's. The banking system doesn't work like that. Almost every us dollar you deposit offshore will be back in NY within a few hours with the offshore banks $ correspondent, ie major US clearing bank, likewise GBP will be back in London and Yen in Tokyo etc... When you read about trillions of dollars being stashed offshore it's complete nonsense written by people with the most tenous grasp on global finance. And yes that includes 'economists'. Have you ever been to somewhere like Grand Cayman? There's nothing there. No money is deposited or invested there, you'd have to be mad to deposit any serious money in the rinky dink banks there, it's just the legal domicile of companies and other legal vehicles through which entities invest back on shore. The super rich don't put their money on deposit in a current account at a bank and moan on PH about how little interest they get, they invest it and that money often goes through tax efficient structures offshore but it doesn't stay offshore.Derek Smith said:
So if the money that is generated goes elsewhere...
As above, it doesn't.Derek Smith said:
...difficult for the rich to sequester the majority and 'invest' it in tax havens.
...
And again, whilst I have no desire to defend 'trickle down' economics your logic as to why it doesn't work is seriously flawed....
Derek Smith said:
You suggest that the state needs to invest in roads and such. This is rather left wing thinking, is it not? Roads are built mainly for industrial purposes. Lorries and things. Why can't the businesses that depend on them pay for them rather than me?
Huh? Do you live in a bubble? Where do businesses get money from?Edited by anonymous-user on Friday 21st August 18:19
fblm said:
LSE you say? I hardly know where to begin. Money 'deposited' offshore in 'tax havens' doesn't stay offshore, except some physical cash. It's not the 1970's. The banking system doesn't work like that. Almost every us dollar you deposit offshore will be back in NY within a few hours with the offshore banks $ correspondent, ie major US clearing bank, likewise GBP will be back in London and Yen in Tokyo etc... When you read about trillions of dollars being stashed offshore it's complete nonsense written by people with the most tenous grasp on global finance. And yes that includes 'economists'. Have you ever been to somewhere like Grand Cayman? There's nothing there. No money is deposited or invested there, you'd have to be mad to deposit any serious money in the rinky dink banks there, it's just the legal domicile of companies and other legal vehicles through which entities invest back on shore. The super rich don't put their money on deposit in a current account at a bank and moan on PH about how little interest they get, they invest it and that money often goes through tax efficient structures offshore but it doesn't stay offshore.
A very interesting read. To cover your diversion from the topic, I wonder if you might clarify for me, sorry if it is included in your comments, why, if the money comes back into this country, why the super rich bother to send it overseas in the first place. And does this immense wealth benefit the bod at the lathe? And how do these super rich, who enjoy the facilities of this country, pay for the privilege of having the security of a living here where they can enjoy the proceeds of their 'wealth creation.'However, you miss the point of the argument. Are those with lots of money wealth creators? How do the super rich benefit those 'below' them? If their money merely makes them more, how does this benefit people?
I have a cousin whom I've mentioned a few times on PH. He is a genius by my reckoning. He invents things. His inventions keep jobs in this country. His inventions bring jobs into this country. His devices ensure that for certain products, the UK is the place to come. His hydraulic designs are all around the western world. His money comes into this country. My idea of a wealth creator is my cousin. He makes things initially and then allows other to make them for a consideration. With the money that is earned by those working in the firms that make these things, supervise their installation, repair and promote them, the various local economies flower. That's wealth creation. Making out you are a non-dom, putting money into a film you know will be a flop, and other, similar behaviour, supports nothing. It has a negative effect on this country.
Derek Smith said:
fblm said:
LSE you say? I hardly know where to begin. Money 'deposited' offshore in 'tax havens' doesn't stay offshore, except some physical cash. It's not the 1970's. The banking system doesn't work like that. Almost every us dollar you deposit offshore will be back in NY within a few hours with the offshore banks $ correspondent, ie major US clearing bank, likewise GBP will be back in London and Yen in Tokyo etc... When you read about trillions of dollars being stashed offshore it's complete nonsense written by people with the most tenous grasp on global finance. And yes that includes 'economists'. Have you ever been to somewhere like Grand Cayman? There's nothing there. No money is deposited or invested there, you'd have to be mad to deposit any serious money in the rinky dink banks there, it's just the legal domicile of companies and other legal vehicles through which entities invest back on shore. The super rich don't put their money on deposit in a current account at a bank and moan on PH about how little interest they get, they invest it and that money often goes through tax efficient structures offshore but it doesn't stay offshore.
A very interesting read. To cover your diversion from the topic, I wonder if you might clarify for me, sorry if it is included in your comments, why, if the money comes back into this country, why the super rich bother to send it overseas in the first place. And does this immense wealth benefit the bod at the lathe? And how do these super rich, who enjoy the facilities of this country, pay for the privilege of having the security of a living here where they can enjoy the proceeds of their 'wealth creation.'"it's just the legal domicile of companies and other legal vehicles through which entities invest back on shore." Why? 'cause it's tax efficient.
To turn the question around, just why would the 'super rich' send their money overseas just to leave it there doing nothing? As said, little to invest in in the Caymans.
Derek Smith said:
...why, if the money comes back into this country, why the super rich bother to send it overseas in the first place.
Obviously it makes little sense for say a US based billionaire to invest through the Cayman Islands back into the US but he has little alternative because almost every hedge fund, private equity fund and investment structure is designed to illicit the highest number of investors from around the world not just from within the country they intend to invest. If you ,as a Brit, were to invest in an American hedge fund what you're really buying is a share in a miriad of investments in shares, bonds, private equity transactions, private partnerships, real estate, illiquid derivatives and god knows what else scattered across dozens of countries. If you were to invest in each investment directly can you even begin to fathom how complex filing tax returns in every country would be? No offense but given the nature of your question I doubt it. Consider a single investment in which you have a share in a partnership in an onshore rig in Nigeria. Now start filing all the correct paperwork! Instead you invest in, say, the UK based feeder fund for a cayman based shell that holds all those investments, managed by some bloke in Bridgeport,CT. The only thing that happens in Cayman is some corporate filings to register the company. You file one tax return, based on your gain, in the UK, to HMRC. Do you know where, hands down, the biggest 'offshore' corporate tax haven is? The US State of Delaware. Derek Smith said:
And does this immense wealth benefit the bod at the lathe?
In the same way as direct investment in stocks, bonds, loans, angel investment, private equity etc.. extend credit to the economy to fuel growth and investment in new technologies, drugs etc... then yes. In the same way that direct investments in high frequency algo driven derivatives trading funds, then no. It depends on the nature of the investment. Derek Smith said:
And how do these super rich, who enjoy the facilities of this country, pay for the privilege of having the security of a living here where they can enjoy the proceeds of their 'wealth creation.'
Taxation of the super rich is a whole other thread, possibly forum, but with regard a UK or US resident and domiciled investor any income or gain from investments made through a 'tax haven' are taxed in the usual manner. Contrary to popular opinion. Derek Smith said:
However, you miss the point of the argument.
I don't think so.Derek Smith said:
Are those with lots of money wealth creators?
Not necessarily but those who genuinely create wealth tend to have lots of money themselves, unsurprisingly.Derek Smith said:
How do the super rich benefit those 'below' them? If their money merely makes them more, how does this benefit people?
It's not a fixed pot.Derek Smith said:
I have a cousin whom I've mentioned a few times on PH. He is a genius by my reckoning. He invents things. His inventions keep jobs in this country. His inventions bring jobs into this country. His devices ensure that for certain products, the UK is the place to come. His hydraulic designs are all around the western world. His money comes into this country. My idea of a wealth creator is my cousin.
I completely agreeDerek Smith said:
He makes things initially and then allows other to make them for a consideration. With the money that is earned by those working in the firms that make these things, supervise their installation, repair and promote them, the various local economies flower. That's wealth creation. Making out you are a non-dom, putting money into a film you know will be a flop, and other, similar behaviour, supports nothing. It has a negative effect on this country.
I agreeAnyway IMO the use of the phrase wealth creators appears to be little more than a nice phrase for politicians to refer to their donors instead of the 1%, as opposed to how most of us understand it.
Edited by anonymous-user on Saturday 22 August 02:34
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