The Myth of Perpetual Growth

The Dream

“Are you better off than your parents were? Will your children be better off than you?”

The politician shouts into the microphone, his face carefully arranged in an expression of outraged inquiry. Before you have time to think of the answer to these questions – and the answer for most of us in real terms is no, despite the proliferation of toys we’ve amassed – the politician gives you the solution.

“We need to concentrate on economic growth for our economy to achieve its full potential, putting our country back on the right track and giving every American family the chance to achieve the American dream."

There it is; that elusive goal – the American dream. What is it?

Each generation is expected to surpass the previous, improving in standard of living, income, physical well-being, security, life (span), liberty (are we more free?) and the pursuit of happiness (whatever that meaningless phrase conjures up for you.)

Bigger houses and better cars; everyone with a college degree; a chicken in every pot will become filet mignon in every pan; an SUV, a boat and an RV in every driveway; the latest electronic gadget in every hand; money in every savings account: more, more, more for each generation until – what? When is enough enough? What are we striving for? What is the goal? Where does it end?

As we ponder the politician’s words, the American reality hits us in the face.

  • 13.5 million people officially listed as unemployed (a debatable statistic and one considered to be far too low, not inclusive of those having exhausted unemployment benefits, the homeless, the chronic unemployable, those living off the radar.)
  • 9.4 million involuntarily working only part-time.
  • 44.6 million people living below the poverty threshold.
  • 52 million people without medical insurance.
  • 1.2 million homes foreclosed in 2010 (for a total of how many since this mess began? Statistics on that are impossible to find. And another spike in foreclosures expected.)
  • A national debt of 14.2 trillion as of April 2, 2011 (see debt clock) equal to 96% of the GDP (Gross Domestic Product of 15.3 trillion.) Or, close to $50,000 per every man, woman and child in the country.
  • Cumulative private debt of $159 trillion
  • Deteriorating education and access to health care
  • Crumbling national infra-structure
  • And so on and so forth….

We have been living high on a whole herd of borrowed hogs, well beyond our means for a long, long time, and as always happens when a body abuses debt, the rate of growth of that debt is escalating, compounding and we are borrowing to pay the interest on debt already spent, transferring interest to principle. (Which anyone who has ever borrowed from one credit card to make a payment on another knows, only hastens the end, especially if the rate of income available to pay the debt declines instead of increases.)

It is clear the American dream has become the American myth, empty rhetoric in electoral propaganda. Still, you hear the promises every day.

"My plan gives Americans tax cuts that will help our economy to grow."

"These tax cuts will not undermine our economy. They will speed economic growth."

"That is the right way to cut taxes -- pro-family, pro-education, pro-economic growth."

Indeed, such words fall from the lips of our legislators and would-be legislators like rain from the heavens. One cannot fault them for spouting these vacuous pledges; they are supported by some of our leading specialists in economics.

"The key is productivity. If productivity growth in the United States were to recover to something like its rates of the 1950s and 1960s, practically everything would fall into place; it would make many, but not all, of the problems we face fade away." – Paul Krugman, The Age of Diminished Expectations

For now, let’s do away with all the reasons we can’t travel back in time to the last golden age, or how different today’s world is from the mid-twentieth century, or the fact the world’s population has more than doubled since 1960, from 3 billion to 7 billion. Let’s look at the underlying premise.

The vast majority of economists agree that higher rates of growth would solve all our economic woes: frozen wages, poverty, the trade deficit, tax income shortfall, the national debt, unemployment… They are right. Our economy is structured to thrive only when it grows. The foundation of our economy is such that it will stagnate and even deteriorate when growth is not possible.

Ah – therein lies the problem.

The world is finite. Its resources are finite. And Americans are not the only people on the face of the planet.

It is a fact that a consumption-based economy cannot continue to grow forever in a world of limited resources. It is only a matter of time before trouble strikes. In fact, it already has – something we prefer to sweep under the rug and ignore, preferring instead to cling to our old myth of perpetual growth.

Where are we headed?

That’s the subject of this article.

Where we are

We are in a time of great change, and as always, change creates anxiety. For such an adaptive species, we fight change with an astonishing might. Witness the clamor of those demanding we go back, back to a better time, a more affluent time, a time of more purity of purpose (or so they believe,) back to a time that truly never existed. We wax nostalgic over the past, forgetting the past has been glorified, Disneyfied and become little more than legend. Even if this were not so, we simply cannot go back; the past is gone, non-existent and what may have once served us as we were then, will not do so now.

This attachment to the past and fear of the future freezes us in our tracks at a time when action and direction is critical. Like ostriches, we bury our heads in the sands of time so as not to see the abyss opening at our feet. We waste our energy arguing over empty political rhetoric, our resources in meaningless distraction. We stand divided as though we have any number of choices. We deny the undeniable. We worry and fret over a meaningless list of figures as though the world's accounting system is our biggest worry.

Our inability to accept what may come to be our future -- or to deal with the present effectively -- is predicated on a number of myths, basic lies we’ve come to accept as truths.

  • Myth #1 – Wealth can be generated

Just as something cannot be made from nothing, wealth is not generated. It is amassed. It merely changes hands. To arrive in one man’s bank account means it left another’s – figuratively speaking.

If we start at the bottom of the production chain, we need two things: raw materials and energy. Both of these resources are taken from the earth, one way or another, requiring human labor along the way. Those laborers acquire a modicum of wealth for their sweat and efforts. The producer changes the raw materials into products through the use of energy (and again human labor to a much smaller degree than in the past) which he then sells for more than the cost to make it. The consumers buy the product, exchanging a portion of their wealth to the producer in the process. That’s it in a nutshell.

A simplistic explanation, to be sure, but the point remains that wealth can never be generated, only transferred and acquired.

The image of the ‘self-made’ wealthy man forgets that his wealth came to him from others. Certainly, the  wealth a man acquires allows him to acquire more. But never forget; every penny came into his hands from other hands. It is not created, but exchanged.

All wealth has as its base the resources of the earth.

Wealth is finite because the resources of the world are finite.

Our attempts to enlarge the pie to ensure that even the smallest slice is enough to 'get by' are laughable. There is only so much pie.

  • Myth #2 -- Technology will find a way

The idea that technology, the offspring of our inventive, innovative abilities will save us from the reality of nature’s limitations is one of the most dangerous of global myths. Read the following quotation.

“There are no limits to the carrying capacity of earth that are likely to bind any time in the foreseeable future . . . . The idea that we should put limits on growth because of some natural limit is a profound error [with] staggering social costs.“ – Lawrence Summers, 1991.

Summers was president of the World Bank when he made this statement. Today he is President Obama’s chief economic advisor, the chair of the US president’s Council of Economic Advisors. The idea that such a highly placed intellect could hold to such an impossible theory is beyond frightening. But he is not alone.

“Technology exists now to produce in virtually inexhaustible quantities just about all the products made by nature. . . . We have in our hands now the technology to feed, clothe, and supply energy to an ever-growing population for the next 7 billion years. “ -- Julian Simon (1995) Professor, University of Maryland School of Business

If ever there was a case of wishful thinking, this is surely the great-great grandmother of them all. If such technology exists, why is it not in use? We have the ability to produce fresh water, fresh air, more fossil fuels, renew our forests, our land, grow more food… We do?

Of course we do not. If we did we would have done so.

In fact, our use of technology is reducing our ability to feed the planet. Following the so-called "green revolution" of the 1970's, the world's production of staple food products, cereal crops, increased dramatically. Forty years later we see the long-term effects of industrialized intense agriculture. The very soil on which our food stuff is dependent, once a living medium is fast depleting, becoming sterile and void of those nutrients we require.

Check the map of the world shown below. Look at the vast stretches of very degraded and degraded land. What is most shocking is that many of these sections of now exhausted and sterile soils were not that long ago the richest farmlands in the world.

To combat the effects of our abuse of the land, we use huge amounts of chemicals which only exacerbate the problem. Our heirloom cultivars no longer thrive and we grow dependent on genetically engineered, patented replacements – expensive.

There is an escalating use of fossil fuels in agriculture: fertilizers, energy for production, harvest and distribution. Each calorie of food requires 35 calories of energy to produce -- and rising. 

Worse, no longer satisfied to vary our diet and eat seasonally, as were our ancestors, we import delicate foodstuffs from around the globe, often from nations more in need of the sustenance than are we are. Why does this happen? Because we have colonized the globe with corporate entities and placed their governments in deep hock until the pressure to repay debt means a full treasury of foreign currency is a greater priority than food for their own people. Food follows the money.

Inefficient, expensive and inhumane.

World-wide production has leveled off, and is expected to decline. In fact, some sources state it already has.

Food stuff
Period of Growth
% Growth
Period of Decline
Percent Decline
Grain
1950-1988
+40
1989-2009
-9
Seafood
1950-1988
+126
1988-2009
-18
Beef, mutton, pork
1950-1972
+36
1973-2009
-13

Can technology solve these issues?

To quote a far greater mind than mine:

“The laws of thermodynamics rule the economic production process, and they tell us that, regardless of technology, all production requires high-quality inputs and generates lower-quality outputs. Thermodynamic laws also tell us that we cannot achieve 100% efficiency. When the limits to efficiency have been reached, the only remaining way to grow the economy is by using more natural capital (including energy), which is limited in quantity. The application (or misapplication) of technology also plays a role – if technology isn’t aimed specifically at reducing the overall use of materials and energy, it won’t make any headway on that front.” – John Kenneth Galbraith

The bare truth is we cannot continue to gobble our renewable resources at the current rate, let alone increase our rape of the earth to care for a geometrically increasing population. Over the long term, spending cannot exceed income, water use cannot exceed the hydrolic cycle, soil erosion cannot exceed soil formation; forest destruction cannot exceed forest regeneration; carbon emissions cannot exceed carbon fixation; fish catches cannot exceed the regenerative capacity of fisheries; and certainly, the exponential growth of humanity cannot continue into infinity.

In other words, perpetual growth is impossible.

The link below takes you to a wonderful analogy: the myth of the expanding island.

Imagine the population of the world is on an airplane that crashes into the ocean, near an island. What would happen?

  • Myth #3 -- Population growth is beneficial

An interesting quote caught my eye not too long ago, though I can't attribute the source, nor recall it word for word.

"Those who speak of over-population haven't driven across the Dakotas, or Montana, or Texas. We have plenty of room."

If we're speaking of simply space, certainly there is room to stand with your arms stretched out, build a house -- and then what?

There is one resource without which life is impossible: water. Great stretches of the North American continent are arid, or semi-arid. There are certain states already facing difficulty in providing enough water for their residents: California, Texas, Oklahoma, South Dakota and -- surprise, surprise -- Florida to name but a few.

Water for agricultural irrigation empties our aquifers faster than the hydrolic cycle can replenish them. Industry and oil exploration use unimaginable amounts, rendering them unusable, toxic, leaving them sitting in slurry ponds waiting for nature's cycle to re-purify the soup, and leaking into our ground waters in the process. Levels of noxious chemicals and heavy minerals in almost all water sources are constantly rising.

Water purification processes require energy.

In our world, we take water for granted, use potable water to flush our toilets, launder our clothes, irrigate our lawns, turn a tap in an automatic reflex and it gushes forth in quantity. We use it and waste it without once thinking of this precious life-sustaining resource. Not so in other places where people walk for miles to the nearest safe supply.

And probably not so here in the future. Not if we are so set on growth.

Population growth in the United States, one of the few places where such growth is due to immigration rather than birth rate means one million new Americans each year. At the current rate of immigration, the population of the United States will be 600 million within a few decades. Will California be able to provide water for double the current population of that state? Will many others?

And no offense intended to the Dakotas or Montana, but immigrants, like everyone else are free to live where they choose, and that is rarely the empty plains. No, immigrants tend to flock to the cities, as several studies have shown.

Water is forecast to be the next shrinking resource. Without water there is no life. We can't make it.

"But," said someone the other day, "rainfalls are expected to increase." Yes, rainfalls in some areas are forecast to become greater, but that means less will fall somewhere else. There is only X amount of water.

"Immigration is good for the economy. That's the wonderful thing about America. Whenever we begin to stagnate, a new wave of immigrants comes into revitalize us. The bring economic growth."-- Bill O'Reilly, Fox News

This kind of thinking may work in a country like Canada which is, we're told, underpopulated at 33 million people, but not so in the United States with ten times that number. How exactly will waves of new immigrants grow our economy other than to compete for finite resources such as jobs, education, food, water? (Setting aside the idea that those who've lived in America for a generation or more have become so innervated, sluggish and lazy, only an injection of a new populace can get the ball rolling.)

Do all immigrants enter the country with money to build a new house, invest in business or start one? And even so, once that initial spurt of input is exhausted, we are back where we started but with yet more bodies and mouths to provide for.

The pie is to be sliced even thinner.


People Year Time Span

1 billion 1804   200,000 years

2 billion 1927   123

3 billion 1960    33

4 billion 1974    14

5 billion 1987    13

6 billion 1998    11

7 billion 2009    11

8 billion 2021    12

9 billion 2035    14

10 billion 2054  19

11 billion 2070   16

  • At the current rate, we are adding the population of China to this planet every decade.
  • Essentially, we add a city of 1 million people to the earth every three and half days.

Now take this same scenario global. 7 billion humans on the planet, soon to be 8 billion, all needing water, food, shelter -- but there is nowhere to go, no supposed golden land where life will be better.

In fact, those 'golden lands' are now at or beyond their maximum supportable levels.

Ask the European nations if they were better off once populations reached maximum self-supportable levels... or surpassed them, like the British Isles, who must import over half of all foodstuff. Ask China how they are dealing with their population -- a mandatory negative birth rate.

Even if the world were to adopt a zero population growth program today, the number of people would not begin to decrease for another 60 years, at which point we will be approaching 12 billion.

We are already seeing the strain on our resources. How can we continue to believe growth is good? It's a mindset left over from the age of expansion of a century or two ago, an insidious fantasy-thinking that would have us believe there are no limits.

  • Myth #4 – Fossil fuel (oil) is constantly being made by the planet, therefore the supply is endless

This theory is currently in vogue, though the attributed sources appear to be nebulous. As such information is well beyond my scope of knowledge, I contacted a geology expert, one working for an oil company in Canada and asked. Here is his response, verbatim:

“Oil forms due to burial and heating of organic sediment, eg coal. The organic sediment breaks down, initially to oil. The 'oil window' refers to the temperature and pressure conditions at which oil forms. While geothermal gradients vary, the typical depth of the oil window is 4-6 kms. If heated to temperatures above the oil window the chemical reaction continues, forming natural gas and so on until there is nothing useful left.

Oil and natural gas, once formed, are more bouyant than the encompassing host rock and will rise due to buoyancy. Therefore, to 'trap' oil there must be a suitable structure above the buried sediment such as an anticline with a suitable reservoir rock such as a sandstone, and suitable capping rock such as a shale. Sandstone is generally porous and therefore oil can accumulate within this rock, while shale is considered an aquiclude; a rock type which prevents fluid from passing through it.

Therefore, from the discussion above, it can be seen that the process of oil formation requires the accumulation of large amounts of organic sediment, there burial to depths greater than 4 km BUT not greater than 6, and further requires suitable structures to trap the oil. If these structures are not in place the oil will simply escape to the surface and evaporate over geologically short timescales.

To allow significant accumulations of organic material subsidence is generally required, this continuously lowers base level allowing sediment to continue to accumulate. Furthermore a low energy environment is needed as foreign sediments, eg silicates, will contaminate the organic sediment. Subsequent burial to the depths occurs over the timescale of 10's of millions of years, and deformation of overlying rocks to form suitable trapping structures generally requires orogenic (mountain building) events, which also occur over a similar time scale.

In conclusion, both the timescale, and the specific events required, make oil formation, and equally important; oil accumulation, very rare events. Currently there are locations in the world which are accumulating significant organic sediments, eg Bangladesh, however it will only be a matter of luck if they are exposed to the conditions suitable for oil formation in the future. And of course this won't be for millions of years.” -- D. Clark, geologist, Encana

By the way, the same is true for coal formation. So, the optimistic idea that the earth is continually creating new sources of fossil fuels and our supply is endless, is hereby debunked.

  • Myth #5 -- Everything will be fine if only we get the government to do the right thing.

This is perhaps the most insidious, misleading and dangerous myth of all. If only we vote for the right leader, the right party, spend more, spend less, tax less, tax more, veer right, veer left, if only… Everything will be fixed.

The messiah complex: Someone has the answers to our problems. If only we could find him.

We are a contradictory mass of people. We demand smaller government, less taxes, less regulation, then turn and demand the government fix the problems, spawning a mass of bureaucracies that grow like a cancer that refuses to die – ever. We elect, grow disenchanted, elect again, grow discouraged, elect again, only to be disappointed, ad infinitum, ad nauseum.

The truth is, if only we would face it, the government can’t fix anything. No government of any stripe can. Why?

For three reasons:

  • The government is not in charge. The government has no control over the powers that are.
  • The government is a reactionary force, not a driving one. By the time a problem is recognized, by the time the various factions form an agreement to act, by the time legislation is approved, by the time it is enacted, the crisis has changed. The intervention comes at a point where the problem is either self-fixing, or the effects of the problem have created entirely new problems.  The well-intentioned intervention causes unintended consequences, like the sub-prime mortgage debacle, the threatened collapse of the financial industry and they resultant massive spending to try and recover – which we have not.  Nor is recovery likely. Government reaction, creating more policies to correct for the unintended results of the last round of policies only makes the situation worse. Intervention is directly responsible for the boom/bust cycle we suffer.

Just for a smile

  • The government does not understand the economy. No one does. Trust me on this; I studied it long enough. Economics is misnamed as a science. It is not. Science is restricted to that which follows natural laws. Economics follows no natural law, nor any artificial one.  Every single theory of economics is disproved by reality, whether entirely free enterprise (which does not exist,) planned economy (which does not work,) Keynesian, supply and demand, trickle down (which seems to be trickle up in practice, bless those lying black hearts,) Marxism, Galbraith’s theories, Hayek, you name it. The economy is like a wild river. Throw in a boulder and it redirects, but no one knows which course it will take, or how it will affect flow. The economy just is, like the weather.

However, no matter what the label we apply to our attempts to manage our economies, there is one theme consistent throughout them all: The economy must grow. More, more, more!

On a national level, this skewed vision may make some sense, provided we view that one nation as an isolated group of people on a land entirely divorced from the globe – which often seems to describe the American view, despite our insatiable hunger for the resources of other lands, and the gadgets and cheap trinkets produced elsewhere. As long as we’re okay, who cares?

Provided we keep growing, everything must be all right. Take heart, didn’t the news just announce the economy showed signs of growth, albeit a sliver of a percentage point? Relax, don’t worry. We’re growing again so things will be fine.

Viewed globally, this obsession with growth becomes entirely destructive. Like the rainfall, an increase here means a shortfall there. As mentioned, all production begins with material taken from our earth. From space, we must look like termites, chewing away on our own home and spitting out waste to accumulate with no thought for the future.

Remember, there is only so much pie and indications are it is shrinking. The planet is limited in resources and the slices for some are so thin one can see through them. Others get no pie at all. Some sit down to a double helping, topped with whipped cream.

A dangerous situation, there’s no doubt about it. History is replete with stories of those not content to quietly starve, who rise up and attack the tables where those who can, eat their pie with gusto and satisfaction.  But we know that.  Why else would a financially beleaguered nation devote so many resources to military might?

To protect the pie.

"Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children...This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron." --Dwight D. Eisenhower

Is there a better way? There must be. There is an economic philosophy of sustainability, but an adaptation of a sustainable economy requires so many mind-shifts, so great a change in human nature, an end to our sense of entitlement and superiority, I suspect it will never come to pass. As long as we cling to the idea of perpetual growth, we doom ourselves to a bleak future of deadly competition for the basics of life.

“Prosperity consists in our ability to flourish as human beings – within the ecological limits of a finite planet. The challenge for our society is to create the conditions under which this is possible. It is the most urgent task of our times.” – T. Jackson

“The monetary system employed around the world could be described as four things, compound interest, fractional reserve banking, infinite growth and fiat money. The perfect description of a pyramid scheme which feeds on the myth that there is such a thing as infinite growth built with the mythical resources of infinite energy.” – unattributed

About the author --

Better known as a writer of all kinds of things here, a child protection worker and advocate, and an author and editor, lmmartin -- Lynda M Martin is a graduate of the University of Montreal, HEC -- Haute Ecole des Etudes Commercials, with a major in economics. In 1980, she was chosen to take part in an economic study in West Africa and spent five months in three countries on the Gulf of Benin. She worked under contract for the Province of Manitoba, Department of Finance for two years, and later decided finance and economics were not her favorite thing to do. However, her interest in the subject continued even though it no longer paid the bills.She has traveled the world extensively, and speaks of international conditions from a first hand view. (Just so you know this wasn't written by Joe the plumber.)

A partial bibliography and internet sources:

Alexandratos, Nikos. (ed.). 1995. World Agriculture: Towards 2010, An FAO Study. New York: John Wiley and Sons for the FAO.

Brown, Lester R., and Hal Kane. 2004. Full House: Reassessing the Earth=s Population Carrying Capacity. The Earthwatch Environmental Alert Series. New York: W.W. Norton and Company.

Brown, L.R. 1995. Who Will Feed China? Wake-up Call for a Small Planet. Worldwatch Institute. Washington, DC.

International Food Policy Research Institute (IFPRI). 2005. A 2020 Vision for Food, Agriculture, and the Environment. Washington, DC.

Mitchell, Donald O., and Merlinda D. Ingco. 2003. AThe World Food Outlook.@ Draft paper. International Economics Department. The World Bank, Washington, DC.

McCalla, Alex F. 1994. AAgriculture and Food Needs to 2025: Why We Should Be Concerned.@ Sir John Crawford Memorial Lecture. Consultative Group on International Agricultural Research, CGIAR Secretariat. The World Bank, Washington, DC.

Brown, Lester Flavin Christopher, French, Hilary, State of the World 2000, 1999,WW Norton &Co., NY.

Brown, Lester, Gardner, Gary, Halweil,.Brian, Beyond Malthus, 1999, WW Norton &Co., NY.

James Gwartney and Richard Stroup, “The Creation of Economic Chaos: Inflation, Unemployment, and the Keynesian Revolution,” The Intercollegiate Review (Fall/Winter, 1990), p. 3.

Hans F. Sennholz, “Standards of Living Are Falling,” The Freeman (February, 1991), p. 8.

Jude Wanniski, The Way The World Works (New York: Simon and Schuster, 1998), p. 84.

Public Employment and Training Assistance: Alternative Federal Approaches (Washington, D.C.’ Congressional Budget Office, 2007).

Ludwig von Mises, Bureaucracy (New Re-chelle, New York: Arlington House, 1969 (Re print of 1944 edition), pp. 122-123. .

Friedrich A. Hayek, The Road to Serfdom (Chicago: The University of Chicago Press, 1965), p. 240.

Agromedia from Mcgill University http://infosys.agrenv.mcgill.ca/~qfa/highway/english/energy/index.html

United Nations Food and Agriculture Organization - probably the best single source of data and general articles http://www.fao.org/

International Rice Research Institute http://www.cgiar.org/irri/Aboutirri.htm

The Institute for Agriculture and Trade Policy http://www.iatp.org/

Agrarian Reforms in Asia http://www.angoc.ngo.ph/ar-asia.htm

U.S.D.A.  Report with 2009 usda.mannlib.cornell.edu/data-sets/baseline

But

“But,” you say, ”look at China. When I was a child my mother used to urge me to eat, telling me there are starving people in China who’d be grateful for that. Now they are the world’s second strongest economy.” (And moving up to first place quite rapidly.)

“We need to start thinking like the Chinese.” – Glenn Beck

“The explosive growth of China is due to will and a steady source of energy.” – Bill O’Reilly, who went on to suggest such would be the case here, if only…. (We returned to our foundations, blah, blah, blah)

"We see in China things we used to see in ourselves: can-do, get it done, hard work, sacrifice, 'own the future'. That used to be us, and now we see it in them." -- Paul Cavuto

"What's most unsettling about China to Americans is not their communism, it's the capitalism What we're losing is much more than just a product that can be found in a store. We're losing a culture and a way of life, a culture of hard work. We're ..." – BBC News

Okay – we’ll look at China, but in a new hub, The Cost of Economic Growth -- China, a case study.

More by this Author


Comments 72 comments

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

Excellent Hub!

I beg to differ on one point; all wealth is generated as a product of labor. For instance, if I take iron out of the ground and create a car, I have created wealth. If I cut down a few trees, mill the lumber, and build a house, I have created wealth.

Yes, I can amass wealth by owning two or three of the example cars or houses, but that wealth first had to be created.

Money is a medium of exchange, and in reality, today's un-backed paper dollar is worth only what a buyer and seller agree it is worth. If either one believes it has no worth, that dollar will fail. Money is wealth only so long as people believe it has value. If we lose faith in the dollar, a million of them might not be enough to buy a loaf of bread.

And that may well happen.


PegCole17 profile image

PegCole17 5 years ago from Dallas, Texas

I like your tongue in cheek writing style on this hub with phrases like "living high on a whole herd of borrowed hogs". I'm bookmarking this one for futher study, having slept through economics in college, I'll need to read it again. Looks like you really did a lot of research.


Darlene Sabella profile image

Darlene Sabella 5 years ago from Hello, my name is Toast and Jam, I live in the forest with my dog named Sam ...

I am so impressed, OMG this is excellent, you are awesome. I learned so much and you have given so much, thank you for this hub....I rate you up up up, come visit my hub sometime...Love & peace darski


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Will Starr, you have not created wealth,only transformed it. Your iron is taken from the ground and you transfer wealth to the labor to do it; you car is produced and you transfer wealth to the labor to do it; it is sold and someone gives you a portion of their wealth for the car. You have not "created" wealth, only transferred some of your own to your labor, and accepted a transfer of wealth from your customer. To create suggests to make something from nothing -- which is impossible. Stop and think about it for a minute. One of the first rules of economics is the disabuse of this notion of "generated" wealth. Would Bill Gates be a wealthy man if billions of people did not transfer a portion of their wealth to buy his products? No. So he did not generate wealth, only initiated a transfer of wealth from billions of customers to him. That's the way things work. Thanks so much for commenting here.

Thanks PegCole. Yes, I did research. Not like a hub like this can be whipped off from the top of my head. Thanks again, dear friend.

Hi Darlene. I visit your hubs quite often, but don't always leave a comment. Glad you found interesting information here. Lynda


drbj profile image

drbj 5 years ago from south Florida

I am impressed with this admirable hub, Lynda, and promise to come back and study it. This is a side of you I have not seen before. Thanks for taking the time to educate us.


Quilligrapher profile image

Quilligrapher 5 years ago from New York

Where else, Lynda, can a peon like me get to discuss global realities with a professional economist. I must concede that your degree trumps my chutzpah. Still, I found the scope of your macrocosm impressive, and I thoroughly enjoyed your myth busting.

I wonder if population growth has somewhat different dynamics. Some see a future in which world resources are straining to keep up with unchecked population growth. On the other hand, population trends may be responding to available world resources. Like Thomas Malthus, I see a different cause and effect relationship in this area. When the world is unable to provide necessary resources like water, grain, or fuel then population growth will wane.

As you already know, Malthus warned that the demand for food inevitably becomes much greater than the supply. He argued that population growth would come to a standstill as a result. His predictions, of course, proved false because he failed to foresee the Industrial Revolution, longer life spans, and the social shift away from agriculture. In many ways, these events lend support to the Technology Myth. There may very well be an unforeseen “technology revolution” in the future that will reshape the world envisioned by modern economists.

Thanks for your perspective. Q.


Amanda Severn profile image

Amanda Severn 5 years ago from UK

Hi Lynda, this is an amazing article. So many of the things that I think about, and occassionally write about, have been picked up and stitched together so perfectly that you can scarcely see the seams. Of course our resources are finite. Of course mankind is in trouble. This isn't doom-mongering. This is just reading the map, and understanding the territory.

Here in Europe, many countries are seeing a serious decline in the birth-rate over the last decade or so. Far from welcoming this period of balancing out, political panic has instead set in. Who will be available to work to support the top-heavy population of seniors if there are fewer young people? The answer, inevitably, is immigration. Entice the young, well-trained, innovative, hard-working young people from foreign shores to bolster up our crumbling, fading, denuded empires. I wonder where it will all end?


BobbiRant profile image

BobbiRant 5 years ago from New York

The Baby Boom parents were possibly the Only group who really experienced the short lived myth of the American Dream. The American Dream, was like so many goods 'sold' to our society, an illusion, smoke and mirrors that didn't last very long. Each generation has become greedier and needs more and more. Sad, but true. Great hub.


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas

Excellent subject, and the work you put into this Hub, is as usual professional and well laid out. Thank you for sharing.


kafsoa profile image

kafsoa 5 years ago

This is a real great hub. How can a person like me evaluate such amazing thing. I believe you've made a big effort finding resources and used them perfectly. The excelent thing too is using real data.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hi drbj -- so you haven't read my hubs on world debt, the national debt, or America's creditors, the rape of the Federal trust funds.... Oh well. At least you read this one. Thanks so much for commenting here. Lynda

Quilligrapher -- Malthus' theories are quite correct but his timing was skewed by historic events. However, humans have divorced themselves from the natural world that perhaps they no longer respond to it. Whereas birth rates have fallen in the industrial world where we do have the resources (for now) to feed our children, they have increased in the undeveloped world -- kind of an upside-down state of affairs. Or perhaps in places where infant mortality is so high, nature is the one pushing to create more. At any rate, most experts agree we will outstrip our ability to provide the basics of life to our populations in the near future. As an added pressure, some ecologists predict the world's ability to produce those basics is shrinking. One study I read suggested that within several decades the planet will only be able to sustain 2.2 billion. Interesting, but as I couldn't validate their findings from other sources, I chose to ignore them. Your view of a technological revolution that will fix everything is the one I addressed, a wide-spread wishful thinking. We are seeing the results of our technology on the planet at this point, and there are no indicators the destruction of our soil, air and water is likely to change anytime soon -- or at least not soon enough. But I do understand the need for optimism, provided we don't count on a miracle to the point where we do nothing to shift the current trend. Thanks so much for commenting here. And I'm a closet economist, not a practicing one.... Lynda

Hi Amanda, The panic you speak of goes beyond this perceived need we have to care for the aging -- the if the governments of the world hadn't squandered the money we citizens paid into the various programs designed to help support us in our old age (now dubbed entitlements by the GOP) perhaps we wouldn't have to worry quite so much. What it boils down to is this obsession with growth we live under. Not growing? Oh no, something is wrong. Also I suspect there is a racial element to the dismay. The old white race will be a minority... Oh my! I certainly see much of this attitude in the US where white leaders view the growing Latino population with suspicion and fear. In truth, zero population growth should be an encouraged goal for all people, but look at what is going on here, where a war is being waged on women and reproductive rights. Strange how we agree to the idea of globalization when it comes to finance and resources but fear it when it comes to populations. I often think what a different place the world would be if all the resources dedicated to arms went into providing for the people of the world. It is a proven fact that well fed, housed and educated people have fewer children. Think of the possibilities if we strove to bring every person up to that level of life instead of wasting so much on protecting ourselves from that threat. Thanks for your thoughtful comment. Lynda

Hi Bobbirant -- certainly the American Dream sold well, and even though it is tattered, soiled and abused, is still being marketed through political propaganda. I've often wondered if a big house is any more comfortable than a small one, if a luxury car gets you there faster than a compact, if designer clothes cover you better than those from Goodwill... We've been sold a bill of goods all right -- the idea of rampant consumerism. What is the most popular recreation these days? A trip to the mall. We need to change our mindset. Thanks so much for you interesting comment. Lynda

Thank you, LillyGrillzit.

Hi Kafsoa. I'm sure you are perfectly capable of evaluating such things. Thanks for your comment. Lynda


WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"Will Starr, you have not created wealth,only transformed it."

Of course I have created wealth.

If I take a stack of lumber worth 'X', and and use my labor to build a house, I have taken the value 'X' and multipled it many times by virtue of my labor.

Of course materials all pre-exist, but which is worth more...iron ore still in the ground or iron ore dug up, smelted, and turned into steel beams by virtue of labor?


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

In the end run, Will, the wealth you receive was transferred from the wealth of the person who bought it from you, minus the wealth you transferred to acquire the raw materials (whose value transferred wealth to those who harvested it, whose wealth is in turn transferred to those who provide the resources to keep them alive) No wealth comes from nothing. What did you live on while you built this house? Wealth of some sort was transferred to you from elsewhere during this process.

I understand your point, but it is predicated on the idea that labor is cost-free. It is not. It required calories that came from somewhere else -- energy, which is never free.

You are not alone in misunderstanding this fundamental idea that wealth cannot spring from nothing. It does not mean there is not a value-added component of all production of goods via labor (which in itself requires a transfer of wealth via energy), but the end result -- the house -- still requires another transfer of wealth from someone else before you realize that wealth yourself. If no one buys the house, ever, then there was no wealth realized.

All accumulation of wealth involves a transfer, not a creation.


WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"You are not alone in misunderstanding this fundamental idea that wealth cannot spring from nothing."

Nor did I say that. I said that if I take material worth 'X', and transform that material via my labor into something worth '10X', I have then created '9X' worth of wealth that did not exist before my labor. Therefore, I have created wealth. Surely you don't think a pile of housing material sufficient to build a house is worth as much as the completed house?

That's how we continually create new wealth.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

@ Will. Once last effort. I live in a house here in Florida that is currently worth less than the materials that went into the building of it. In every neighborhood you will see houses vacant and moldering in the humidity. Do they represent wealth? No, because no one is willing to transfer their wealth to acquire them. Did the builders create wealth? No, because the materials and labor representing a transfer of their wealth into the production process are larger than the potential of a new transfer of wealth to purchase them.

Your house is only wealth when you realize the transfer of wealth from someone else to acquire it. Otherwise, it is only a pile of materials put together by labor which consumed energy. You will lose wealth unless that transfer takes place.

All production requires raw materials and energy (labor) in a transfer, and wealth is only realized when another transfer of wealth takes place from one hand to another. No new wealth has been generated, or can be. Only transferred.

I hope this makes my point clear. I do understand what you're saying -- but you've discounted the fact that energy (in this case labor) is never from nothing and forgotten the final transfer which reduces one wealth to add to another. The house itself is worthless unless that final transfer takes place or has the potential to take place.


WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

Looks like we will have to agree to disagree. :-)


Mr. Happy profile image

Mr. Happy 5 years ago from Toronto, Canada

I love it when I have to pick-up a pen when reading an article. It does not always happen. I usually take notes on articles that are really bad and I have to dissect them like a surgeon, in order to bring the truth out. The other time when I find myself taking notes while reading, is when an article raises many important questions which I think need to be discussed. This article is of the latter kind. Awesome! Words fail me when trying to tell you how important your writing is. You know that though. Now let's see ...

To begin with, the idea or question of whether we are better off than our parents or ancestors is in the eye of the beholder. I cannot go too much into this because I can go on forever but I will say this: I would be perfectly happy in a forest with my tent(s) for the rest of my life. I do not like the concrete jungle which I live in but if I were to pack my bags and try to hide-out from the "civilized" world, I know it wouldn't let me be. Sooner or later my peace would be cut-short by loggers, poachers or some $#%& like that.

Thus, I remain in the city (to fight for peace & forests) but this is not better off in my mind in comparison to how people lived here a thousand or two thousand years ago ... I would have rather lived then. Ohh well, ... "better-off" is a topic of discussion that has no clear answer or a perfect one anyway.

"... the American reality hits us in the face" - I like that sentence although, I think it has not hit enough people or perhaps it hasn't hit hard enough. The accumulative effect will work though and that makes me smile.

The Canadian reality hit me in the face last November when I first heard how there are over fifty Native Reserves in Canada where kids do not have actual school buildings where to attend classes and get some sort of a decent education. I felt like I was teleported to Zimbabwe or something. It is so shameful to see that even in what are considered first-world countries, many kids go without proper education, many people live on the streets, underneath bridges without any means of health care and so on ... brutal.

Lawrence Summer ... what scum of a man he is! He should pray that he never meets my spirit or someone that shares my love for this world and for Life. He's just a "greedy pig-fucker" (one of Hunter S. Thompson's favorite descriptions of politicians such as Summers). For anyone who cares to understand why I am of this opinion, start with watching "The Obama Deception" (http://www.youtube.com/watch?v=eAaQNACwaLw).

Now, on the issues of whether there is a possibility in feeding everyone on this planet: I am not sure if we can feed every single person but what if we did not spend the hundreds of billions of dollars on armies, on researching how we can create more effective weapons in killing each other? What if we spent that money on research and development which focused on bettering the living standard of people in our societies?

I do think we could feed most people in this world. I have heard of farmers burning their crops rather than cultivating because the price was too low on their product. Or some farmers just let their crops rot away too (http://www.stabroeknews.com/2010/news/stories/09/0...

Again, as I wrote above: I am not sure we can feed everyone but we can do much better, that is for sure. Last time I checked the statistics provided by the "World Food Programme" (http://www.wfp.org/), I think it was stated that over thirty thousand children die each day in this world because of hunger-related diseases. That is simply atrocious!

On the water issue too, people are quite careless not realizing perhaps that only one third of the water on this planet is potable ... I don't know what to say sometimes. How are people so clueless? I am constantly flooded with questions and it boggles my mind when I see people who know nothing and could actually care less about being informed. I guess it hasn't "hit" them yet, or hasn't "hit' them hard enough.

Okay, I have to stop here otherwise I might never stop. Thank you so much again for allowing me the chance to even have this conversation and thank you for your writing. It is so needed! Cheers and only the best!

" ... if technology isn’t aimed specifically at reducing the overall use of materials and energy, it won’t make any headway on that front."


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Will, fine by me. But trust me, economics (and physics) will agree, one does not generate something from nothing. Any wealth that comes to you has reduced a wealth somewhere else and if you stop to think about it, you'll get my point. Thanks for an interesting argument. Lynda

Hi Mr. Happy, Glad I moved you to pick up a pen (though copy and paste works well enough for me. Pen- what's that?) Thank you for all the interesting links. You're right that reality hasn't slapped enough people's faces. I smirk to myself when I hear the national debt (of any country) is the greatest problem we face. If only! It will be exposed for the fraud that it is when the real problems get large enough.

We do need a collective change of mind and heart to move forward, and I see little indication this will come to pass. We are so stuck in a rut of greed, selfishness and insatiable desire fed by a huge propaganda campaign, we may never see the light until overtaken by darkness.

Thanks for commenting here, and you don't really want to go and live as a hermit in the forest. You're far too fond of interacting with the rest of us for that. And it would be a terrible waste! Lynda


Mr. Happy profile image

Mr. Happy 5 years ago from Toronto, Canada

Hello again Mrs. Lynda.

If people think that the national debt is the greatest problem humans face that is because they are told so by the corporate owned media who in turn is also the corporate Wall St. and corporate Wall St. lives by keeping us in constant debt. They would never want us free of debt but they also get worried that they might not get paid therefore, we are constantly told too pay our debt while at the same time banks offer us more credit (debt).

If we do not come to that collective change of mind and heart on our own, I know Mother Earth will teach us that lesson.

You're right that I am fond of interacting with people but I do very well among other species of animals as well; more than most people. For example, I think I can get along (eventually) with almost any dog (and that means wolves too), unless they're really annoying (that is the case when a dog grows to maturity but has not been socialized/trained). I cannot say the same for humans.

And now if you do not mind, I am going to jump-in/pick-up on the conversation you were having with Mr. WillStar because I saw in his second last comment that he put a lot of emphasis on the idea of "wealth". And I get his point: if you take human energy, creativity and labor and added in a constructive way to some sort of materials be they wood, metal, etc., one does end-up with a product which is worth more that the sum of the materials used to create that product.

What Mr. WillStar is not addressing is the issue regarding what he called "material X". Material X which he can take and turn its worth ten-fold, is not of an infinite quantity. So if that material X is lumber or it is oil or it is copper ... whatever that Material X is, when it ends and by the way we're digging and cutting away at this planet it does seem that we are capable of reaching the depletion of some natural resources soon then, we will realize that the material worth we put on plants, animals, trees and so on - that is just wrong ... very wrong.

I will end my comment with that Ojibwa prophecy which you have read before in one of my blogs Mrs. Lynda but perhaps Mr. WillStar would like to take a minute to read it too:

Only After the Last Tree Has Been Cut Down,

Only After the Last River Has Been Poisoned,

Only After the Last Fish Has Been Caught,

Only Then Will You Find That Money Cannot Be eaten.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hi Mr. Happy. But you also missed the same thing Mr. Will missed. You do not have wealth from your combination of product X and labor until someone transfers a portion of his wealth to you in return for your product. Erego, new wealth has not been created, only transferred -- whether that transferred wealth is money, bartered goods -- anything. Our argument is not about the use of shrinking raw materials, but that wealth cannot be generated in the total picture. To an individual it may feel that he has generated wealth, because the wealth that is transferred is new to him, but in fact it came from elsewhere.

I don't know how else to state this difficult-to-accept but blatantly obvious principle. The entire free-enterprise system is based on this idea of 'wealth creation' which is true if, and only if you look at one side of the equation alone.

Ecology and the rape of the earth was not the basis of our disagreement, however you have my total agreement with what you state here. I believe Mother Earth has already begun to teach us our lesson in the dwindling fertility of our soil, the environmental disease due to our polluted air and water, and the threat of pandemic diseases as we zoom about our globe. Yes, the reckoning will come, but not in the form we are expecting -- financial collapse.

Thanks again. Lynda


Mr. Happy profile image

Mr. Happy 5 years ago from Toronto, Canada

I did indeed miss your argument. As you can see from my comment, I do not put as much importance on wealth as I put on what people call "resources". Going so fast through them is what worries me more.

I see your argument now. If I take for example wood and make a chair I can say the wood as a chair is worth more so, I go and sell it but the money I get is from someone else so that person will give-up wealth. It is economics 101 though: one gain equals a loss somewhere else. I think that was grade 13 in high-school for me lol.

Thank you for clearing that-up.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

See -- you get it!


WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"But you also missed the same thing Mr. Will missed. You do not have wealth from your combination of product X and labor until someone transfers a portion of his wealth to you in return for your product."

I see. So if I cut down some trees, saw it into lumber, and build myself a house, it is not considered wealth until someone else buys it?

Utter nonsense.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

@ Will. You do not have wealth, you have shelter. But you know what? Forget it. I give up. I surrender. There's no point. By the way, the next time you, or anyone else, cuts down trees, makes lumber and builds a house without any transfer of wealth or energy -- can I watch?


Mr. Happy profile image

Mr. Happy 5 years ago from Toronto, Canada

If we are to keep this in technical terms if you take wood and metal and make lumber and nails, turning them into a house - you would have a house, shelter as Mrs. Lynda put it. If you sell it, then you get some money for it but until someone gives you some money, it's worth the wood and metal that it is made out of.

I do think Mrs. Lynda is right. Whatever we create has no material value or worth as you like to put it until it is valuable for someone else and that in turn means someone else has to give us money. In economics one gain does equal a loss somewhere else.

I am glad we're talking about wealth ... can we have a bowl of quarters for dinner and wash 'em down with a few hundred dollar bills when we run out of what people call resources? A house out of coins might look interesting although a roof out of bills might not work so well.


Amanda Severn profile image

Amanda Severn 5 years ago from UK

"In truth, zero population growth should be an encouraged goal for all people, but look at what is going on here, where a war is being waged on women and reproductive rights. Strange how we agree to the idea of globalization when it comes to finance and resources but fear it when it comes to populations"

Wow, Lynda, I have read about the religious right's anti-birth control agenda, but I had assumed this lunacy was based on some super-Christian idealism. Of course your comment puts a whole different perspective on things. Maybe right-wing America would like to go the way of Soviet Russia, and start giving medals to 'hero Mothers' who have over ten children!


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

So it would seem, Amanda. But you forget those people don't care about the children once they're born.

There was a time where people had as many children as they could so at least one or two would survive long enough to look after them in their old age. It made sense. But times have changed. We no longer live in little villages in harmony with the land.

Stranger yet, I don't see the wives of these right-wing, anti-choice folks squeezing out as many children as they possibly can over their fertile lives. I wonder what their secret is. Maybe they don't have sex. Wouldn't surprise me.

Much is made over China's mandatory one child policy as against human rights, but forcing women to give birth is justifiable. Another of the world's great mysteries.

Thanks for commenting here. Lynda


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hi Mr. Happy, Thanks for trying to clear the issue. Many a company has gone bankrupt with a full warehouse of goods no one wants. Many a builder has lost his shirt with completed houses on the market -- especially here. Value-added activity such as assembly does not always add up to wealth received.


UlrikeGrace profile image

UlrikeGrace 5 years ago from Canada

Wow! Lynda you amaze me in how you can process these thoughts and put them in an order that I can follow. But I have to tell you these are scary thought...and ones that we...no let me change that...I need to pay attention too, give my own thought to and change where I know I need to change. Its called individual responsibility. We/I have to stop waiting for someone else to make all the changes! Blessings girl...Ulrike Grace


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hello UlrikeGrace. Thank you. Yes, it is scary -- reality often is. What will they say about the human race a few millenium from now? If anything at all. Will they say, they consumed,made war, reproduced and despoiled their environment until the planet could no longer support them? Unlike the dinosaurs, we won't even have the excuse of a meteor (or whatever it was.) Or will we change our ways in time? Who knows?

Thanks for commenting here. Lynda


RachaelLefler profile image

RachaelLefler 5 years ago from Illinois

Well I grew up pretty damn poor so if I can break into the middle class through higher education, even if I don't achieve more unrealistic dreams like owning a Mercedes or wearing only high-end designer labels, as long as I can afford a house that's decent enough and have enough time and money for annual vacations, I'd be extremely happy.

Anyway, what you said about the economy being totally unpredictable is true as it is for other social sciences like sociology and political science. Both of which are similarly mislabeled. How is it that we can always predict the behavior of a helium atom but when you're talking about the activities of humans everything gets a LOT more unpredictable and unstable?


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hi Rachelle, I'm happy for you that you've improved your life and found satisfaction. I don't have to ask; I know the kind of work involved in such achievements. This article isn't about individual development, but the big picture, which is nowhere near as rosy. For myself, I suppose my parents were very middle class. In fact, I'd have to say I've degenerated from the family heritage, but even in my small house and my modest life-style, I couldn't be happier. As to your question, that's easy: human activities do not follow any physical law. I hope you tune in for the next article on the growth in China. I've been researching it for several weeks now, and I hope it will be an eye-opener. Thanks so much for commenting here. Lynda


Quilligrapher profile image

Quilligrapher 5 years ago from New York

There are many people, Lynda, who confuse the two concepts of wealth and value. If I use my labor to make a product, or to provide a service, I have not created wealth. I have created a product or a service that has a value equal to the value of all of the components. The product can be a mansion or a birdhouse but it doesn’t matter. The only difference between the two is the sum of different sets of values. The value of all of the components does not change just because the project is completed. It remains the same. Now, if I exchange my product, or service, for something with a value less than my cost for the components then, in the end, I will I have less wealth then I had before starting the project. Conversely, if I exchange it for something having a value greater than my cost then I will have increased my wealth. It should be noted, however, that the change in the level of my wealth does not occur until the exchange takes place.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Thank you Quilligrapher. This is exactly what I was saying, but you said it better. This mythical idea that wealth can be generated (created) is one that causes so much misery in the world. We must learn that an increase here means a decrease there, and start to think accordingly. Thank you for this succinct addiction to the debate. I hope you'll look for the subsequent article on China. I've been researching for weeks and have amassed so much information, the real problem is in cutting out the heart of the matter and using that. I'll have many fine people to thank for the finished product. Should be of interest to a thinking man like you. Lynda


WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

" If I use my labor to make a product, or to provide a service, I have not created wealth. I have created a product or a service that has a value equal to the value of all of the components."

On the face of it, that is obviously untrue. Is a stack of lumber, nails, paint, roofing, etc., equal in value to a completed house? Of course not!

In fact, each of those components required the labor of thousands if not millions of people before they became valuable components of that house.

Someone once calculated the value of the raw materials involved in the building of a Cadillac,and it was less than $500. It was the labor required to turn all that raw material into a car that created the value.

I suggest you read 'I Pencil', by Leonard E. Read, and learn the extraordinary path involved in creating virtually anything of value.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Thank you, Will. As I have said from the beginning, there is always the component of labor (energy) in the production of anything. I am not disputing the value-added component of labor, but it is not free, even if it is your own. And I am well aware of production cost analysis. The point is value does not become wealth without an exchange of wealth. At which point, your gain reduces another wealth. Thanks again for commenting. Lynda


WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"I am not disputing the value-added component of labor, but it is not free, even if it is your own."

Nor did I say it was free,but I own it and I control it. I can choose to not use my labor or I can choose to employ it gainfully, to create wealth. Bill Gates is a great example of a man who created massive wealth by laboring to create an operating system for computers.

All of that wealth did not exist before he created it and since it is an intellectual creation, it did not require any raw materials.

Is there more wealth in the world today than there was is in, say, the days when we lived in caves? If so, who created all that additional wealth if not man and his labor?


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

How did Gates get his wealth? From the millions of customers who purchased his product. Of course the wealth existed before, in the pockets of those who paid for it. Now, we've both made our arguments and there is no point in continuing on. I've answered the questions you pose here many times over and I thank you for an interesting debate, but it is time to let it go. Lynda


WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"How did Gates get his wealth?"

He created it with his labor. It did not exist before he created it, which is the point, and the reason I cited it as an example of created wealth, which I realize you do not accept.

Bill gates is one of the wealthiest men on Earth because he labored and created Microsoft. That is the beauty of the free market and capitalism, and that is why socialism will always fail.

I’ll answer my own question: “Yes, there is far more wealth today than there was even a hundred years ago, and it was all created by labor.”


WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

BTW, Lynda, I very much enjoyed both the exchange and your courteous replies.


Martyjay 5 years ago

I would like to reply to WillStarr. In your last few comments you mentioned Bill Gates. First of all he did not get his wealth from Microsoft products. He gained his wealth through the issuance of Microsoft stock. This was a transfer of wealth from individuals to purchase shares in his company. Through trading the value of the shares increased. He did not create the wealth the trading of the stock did. I agree with lmmartin you can build a home from lumber and materials which you have acquired through your personal labor. However, that home has no value until someone is willing to offer you something which has value. The most common medium of exchange is money. However, there are other means of exchange such as loans. To be very basic, your example would produce a home with a zero basis because you did not exchange any wealth for it. Therefore you have only created a shelter.


WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"In your last few comments you mentioned Bill Gates. First of all he did not get his wealth from Microsoft products. He gained his wealth through the issuance of Microsoft stock."

Microsoft stock in what? His creation of a computer operating system! Yes, of course people trade some of their wealth to purchase stock in his created wealth or to buy his creation, but if he had not created it, there would be nothing to buy and no wealth created.

New wealth is created every day by our labor. Writing a good book is creating wealth, and there are a wealth of good books out there, including Lynda's. :-)


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

But Will, I only receive that "wealth" if someone else is willing to give up his in exchange. one debit/one credit. This is the point you continue to overlook. Yes, wealth is generated from the point of view of one individual, but it is reduced for another source, and as all wealth has its base (at some point) in the earth, and as all labor is energy consumed -- also with a base in the earth, there is a reduction in potential wealth in the world picture.

All the time I spent writing my book, I ate food, consumed water, had shelter, heated or cooled my living quarters, consumed electricity, bought a computer -- in other words reduced overall wealth and considered it an investment. Now my book is published (also a transfer of wealth) and sits on the market. But so far, all I have from an individual perspective is negative wealth. I've consumed more wealth than I've realized. Then along comes a customer who buys the book and gives me a portion of his wealth. Gain for me, reduction for him. But still, at this point -- unhappily -- I still have not realized as much wealth as I put into it, so my wealth is diminshed. But even when I do, that gain will still be balanced by the reduction of wealth in my customers. I have created no wealth, only initiated a transfer.

In answer to your idea that there is more wealth now than in cave man days, the answer is not really. The wealth that has been acquired has as it's basis a loss of wealth for the physical earth (much to it's detriment in many ways) and in the calories (energy) consumed, raw materials, etc, etc -- all of which have value. Wealth has transferred, not been created.

Even cave man who went out to hunt for his food and clothing by virtue of his labor may have increased his personal wealth, but reduced the wealth of the wild-life around him, eventually leading to species extinction. One gain, one loss.

Now, seriously, this is last word here. As you said, I've courteously allowed you to reiterate your position many times over, and you have yet to add anything new but state the same thing. It's enough, and I grow weary of repeatedly explaining what should, if you stopped arguing long enough to think about it, make sense. I didn't make this up. This isn't my opinion. Denial won't change a basic truth, no matter how many times you plug your ears and shout, no, no, no -- I'm not listening!

I am now turning the comment section to pre-screening. I've given you more than ample opportunity to express you opinion but have no desire to continue this fruitless exercise. Your next comment will be denied.

Seriously, thank you for the interest you express in this subject, your participation, and I hope you'll read the next one on the Cost of Growth using China as an example. I've spent weeks in research getting it ready, and who knows, you may have a eureka moment. At any rate, I'd love to have your opinion.


Mr. Happy profile image

Mr. Happy 5 years ago from Toronto, Canada

Mr. Will, indeed Mrs. Lynda created a book but without my money or your money that book has no monetary value. I bought two copies and so, I gave some of my wealth in return for her book. That is a transfer of wealth: one person gains and one losses (wealth). If I did not buy her book and if nobody else did, that book would not be worth anything except the paper that makes it up.

It is indeed a slippery argument, one not easily caught. I missed it too at first.

Cheers!


martyjay3 5 years ago

Bill Gates did not labour to invent DOS. He purchased it. A transfer of wealth. He licensed it to IBM for their machines . A transfer of wealth.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hi Mr. Happy, You have seen one side of the law. Here's the other: there can be no creation of new matter, only transformation. We once held a world rich in resources, water, flora and fauna, now we hold far less than we once did because we've transferred this wealth into other forms of wealth. Every time we ingest food for energy to go about our wealth gathering activities we have consumed some of the earth's wealth. Hopefully, we return some of the wealth back into the earth (though we seem to always take out more than we put in.) All of life's activities can be seen as a transfer of wealth. The problem is, people now see the term wealth as meaning only money. But even in monetary terms, wealth cannot be made from nothing, labor cannot be done without fuel, every increase is offset by a decrease in one form or another. and each transfer equals in both loss and gain. As I said, I didn't make this up.

I think my next hub might help show that balance. Whatever is gained in economic activity is offset by loss, and in the case of China, perhaps more loss than gain in real terms.


DonDWest profile image

DonDWest 5 years ago from Halifax, Nova Scotia, Canada

Good Hub Immartin;

This entire Hub seems to follow the theory of that from Antoine Lavoisier (1743–1794), chemist, who theorized that mass can’t be created or destroyed, only transferred or altered.

The theory however, was later disproved by Einstein's theory of relativity. Mass could be converted into energy under different forms. In his case, it was nuclear energy.

I will say that Lavoisier's theory, which you use to disprove the idea of wealth building, could also be used to dismiss your argument that we're overpopulated. For our population should automatically adjust to the level of critical mass we can support.

I have much more to say, but I have to go to bed. It's 3:00am here. I will bookmark this Hub and get back to you.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Your theory on population was put forth by Malthus and disproved by the industrial revolution. And I never was any good at physics, don't know who Lavoisier is or his theories. Therefore I'm not following it.

And to be frank, I'm fatigued of theoretical debate (as you can see there's been a lot of it) because it has completely shrouded the main subject matter and sidetracked attention from the main points of this article. Search for theory to prove or disprove the obvious?

I hope you'll take time to read the next one on the Cost of Growth. Thanks for commenting. Lynda


SUSIE405 profile image

SUSIE405 5 years ago from Delray Beach, Florida

Thanks for a good hub with great information.


skilby1 5 years ago

Interesting article, although i disagree with most of your arguements it was good to see that they were backed up by some facts which is often neglected in such debates. I am personally of the belief that the human race is capable of almost anything and can find a solution to anything given time.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

You're welcome Susie405. Thank you for commenting here.

Hello Skilby, Agree, disagree, that's the whole point isn't it. Another believer in the "we will find a way" theory. I hope so, but I doubt it. Thanks for commenting here. Lynda


Deborah Demander profile image

Deborah Demander 5 years ago from First Wyoming, then THE WORLD

Lynda, I must hand it to you, not only do you write well, but you can also hold your own during a fight. I'll be your huckleberry.

Namaste friend.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hi Deborah -- My huckleberry? Explanations and translations please. Thanks for commenting and see you later. Lynda


DavitosanX profile image

DavitosanX 5 years ago

Really great hub! Well, kind of depressing, actually, but I agree with it 100%. Looks like we're screwed...


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Dear /davitosanx, there's always the hope we [humanity] learn to live at a sustainable level, in balance with our planet and resources, find a hitherto unknown source of clean energy, give up greed and acquisition as a lifestyle -- you're right; we're screwed. Thanks for commenting. Lynda


Hound Cat profile image

Hound Cat 5 years ago from Los Angeles area of Southern California USA

You made many a good point. Those myths happen to be the real american dream. Just a dream, and the facts are proving it out that the dream is strictly a myth. Due to extensive world travel, (I have only traveled a bit) I have seen the oncoming water shortages and the devastating effects of too many people attempting to live on too few resources. My trip to Asia only showed me one country with potable water (Singapore). I had to drink only bottled water for safety. Even in Israel, the Dead Sea region the water was no good. I found extreme poverty in all regions that I traveled.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hi Hound Cat. I've traveled extensively, too and what an eye-opener it is. Unfortunately, less than 6% of Americans ever travel outside their own country, and as the media here does not give anything resembling a true picture of life elsewhere, many Americans have no idea of what the world is like, or their true position in it. Which is kind of sad. It's as if Americans consider themselves as separate from the world, not part of it.

I have traveled extensively inside the US as well as outside, and I feel compelled to add I've seen extreme poverty here as well. I often wonder if it isn't easier to be poor in a poor place, than poor in a rich one...

Thanks for your thoughtful comment and I hope you'll tune in for the next hub: The Cost of Growth -- China, a case study. I think you'll enjoy it. Lynda


SUSIE DUZY profile image

SUSIE DUZY 5 years ago from Delray Beach, Florida

Very thought provoking hub. Thanks.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

You're welcome, Susie and thanks for reading.


CaravanHolidays profile image

CaravanHolidays 5 years ago from Wales UK

Nearly everything is subjective, the only observable objective fact for me is that my 2 and a half year old daughter is going to be taller than me, and I am taller than both my parents.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hi CaravanHolidays, Perhaps it's evolution at work, growing us taller in a futile attempt to raise our noses above the pollution and to give us a better view of the world. Lynda


Boyd Lemon 5 years ago

Not a pretty picture, Lynda, but excellent article. Thanks. My book is coming out in about two weeks. I'm very excited.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Thanks Boyd. Nice to hear from you. Best of luck with the book and looking forward to hearing more about it. Lynda


Duchess OBlunt 5 years ago

I've been away for awhile, and you are the one I wanted to read and see what you have been up to. This was intense and chocked full of details and research. This will take more than one reading for me to take it all in. I'll be back.


ThePelton profile image

ThePelton 5 years ago from Martinsburg, WV USA

I read an article some time ago about Easter Island that said that the indigenous people, who had originally migrated from somewhere else, had consumed all the materials required to make canoes, and were stuck there, unable to leave. Most of the population eventually dieing in cannabalistic wars. The article put forth the idea that Easter Island was a microcosm of the world in general. We could easily go past the point where we lost the access to the materials we needed to repair the whole world, and begin to consume ourselves.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hi Duchess, So nice to hear from you. Thanks for reading and commenting here. Look forward to your further thoughts. Lynda

Hello ThePelton, an intriguing analogy. Thanks for commenting. Lynda


backwardsevolution 4 years ago

Brilliant! So well said, so much truth. Thank you!


lmmartin profile image

lmmartin 4 years ago from Alberta and Florida Author

Thanks, backwardsevolution.


Goodpal profile image

Goodpal 2 years ago

I am glad I chanced upon this brilliant hub.

As long as the focus of "development" remains fixated on GDP growth - year by year... till eternity - it is the trap of produce more, consume more.

I think we need to shift focus to developing people and enriching all aspects of their lives, rather than converting them into robots of economic growth and then consumers of end products and expect them to keep spending and consuming endlessly.

The real question that needs asking and answering is "How do we create better and superior human beings, year after year and generation after generation - in terms of morality, ethics and responsibility?"

I doubt if technology or economics and their endless development makes people better than when the were born, or having kids with bigger bodies makes them superior to me.

I tried raising the issue of people development in this hub "Why 'Development' should Focus on People, Not Economy":

http://hubpages.com/education/Why-Development-shou...


lmmartin profile image

lmmartin 2 years ago from Alberta and Florida Author

Thank you for the comment and the link. I'll read it.


Perpendicular profile image

Perpendicular 22 months ago from Colorado

Interesting article, but I feel like your underestimating the Earth and Humanity. I agree that the Earth is finite in resources, but at the exponential exponential rate that technology is growing (see "The Singularity is Near" by Ray Kurzweil), we will have access to what might as well be infinite amount of resources be them on Earth or otherwise. Thomas Malthus had a similar perspective as you, which for most of human history was true, that the gains made by humanity would be offset by the burden of extra population. In the last 200 years though, really ever since the industrial revolution, we've seen that this isnt the case anymore, gains have far outpaced the burden of population growth. So while I think you bring up good points, it's hard to swallow it all.


lmmartin profile image

lmmartin 22 months ago from Alberta and Florida Author

Okay. We can differ in opinion. I'm not that optimistic, I guess.

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