Thursday, April 30, 2009

The Distribution Of Wealth II: Opportunities

In an ideal world, there is no need for wealth because Mother Nature provides for all humanity.

But, even in this ideal world, wealth will be distributed according to the natural terrain and the natural environment.

There is, therefore, an implicit distribution of wealth depending on where we are born - in the tropics or in the extreme poles or anywhere in between.

In organised societies, the distribution of wealth is determined by the extra advantages that one can obtained from factors other than one's bodily well-being and strength.

The first that comes along is physical infrastructure - houses, transportation, tools, money.

Next comes human capital - knowledge, technology.

Nowadays, it is fashionable to talk about social capital - there is a dividend in peace.

Implicit in the existence of capital is ownership and hence property rights - physical or intellectual.

The opportunities for the accumulation of wealth therefore come from confidence over the right of ownership of the fruits of one's labour - and that labour invariably comes from the effort of abstence in the midst of plenty and being resolved to work hard, despite being rich, at improving one's effectiveness and efficiency in the production of goods and services for which there is a great need by humanity.

The opportunities for the distribution of wealth therefore come from a change of habit - of inculcating habits that are amiable to the accumulation of wealth within the context of the economic structure that we already have.

This personal change is a tricky one - for individuals are infinitely intelligent and each acts and reacts rationally to the signals of the external environment.

If manna falls from heaven, we all just wait. If nothing comes without effort, we would have to exert effort to try to achieve something. We learn our role in the economic system we currently are in.

The structure of the economic system is therefore critical in defining the opportunities to the creation of wealth, its accumulation and its distribution.

The best economic structure should be one that promotes efficiency - for this saves time and effort and allow people to spend their extra time pursuing their interests.

But such an economic system will favour a particular set of people - people who are quick and nimble.

The implication is that, given the economic system, children and even adults may need to be trained and be equipped with the right set of skills in order to increase their chances of doing well in the system.

The alternative solution is to tweak the economic system so that it is easy for most of the people. This means:

(1) The economic system is set below optimal to achieve a lower output; there is no stress on any thing that the adjustment is in the national effort.

(2) There is no benchmarking for any of the components of national economic survival and therefore there is no policy direction except to maintain the prevailing system which "seems to be working fine."

(3) For the tweaked economic system to survive, it may have to isolate itself from the international economic system. This will work so long as the government has no budgetary constraint.


In capitalism, the means to the accumulation of capital is capital itself which is the ingenious use of one's savings. The game in town is to provide for one's future so that one can live comfortably for the rest of one's life. Children should therefore be taught to know how to earn an income, how to spend properly, and how to save safely and productively. Underlying this effort of creating and accumulating wealth is the implicit existence of proerty rights. But capitalism punishes those who are out of the mainstream, and therefore there should be a social safety net to train and retrain people so that they can also have a meaningful existence within the context of the great force forward in the world.

1 comment:

walla said...