What is the difference between wealth and money? This was the question Paul McCarthy, the CEO of Mannkal, asked me at my initial scholarship interview about 12 to 18 months ago. And like condensation dripping off an ice-cold glass of water sitting on a kitchen counter, the sweat dripped off my brow as I waffled for a few minutes.
Earlier this week I finished writing a memo on a House of Lords debate on eliminating poverty in the UK. Most of the speakers seemed to favour spending more money on education, especially early child education, and increasing the number of affordable housing by spending more money on building housing and relaxing strangling planning law regulations. While these are all potentially beneficial strategies, especially easing planning law burdens on housing development, to me they do not seem to address the fundamental issue.
First, let’s define national wealth as all the real goods and services left from the past plus all the real goods and services currently being produced, and let’s define money as simply individual wealth in the sense that “other individuals will supply [other people] with the real goods and services that [they] want in exchange for [their] money”. Then, logically, increasing or redistributing the amount of money in circulation is frivolous. You can print more money and distribute it evenly to everyone in society—or, without printing a single new bill, you can redistribute all the existing money evenly to everyone—but there is still only the exact same amount of real goods and services left from the past and currently being produced. Yes, everyone will then be able to purchase the same amount of real goods and services as each other (the socialist dream) but, and this is big BUT, there is no wealth creation, only wealth stagnation. And I disagree with the contention that the amount of national wealth is invariable.
We must become builders. We must build wealth. We must build the structures that do not exist and augment the structures that do exist which stimulate the creation of real goods and services. The more there is, the more there is to go around, and therefore the less it will cost consumers. Poverty simply means that a section of people, of consumers, cannot afford to purchase real goods and services. The demand is there but the supply is not, so the price increases and “prices” those unfortunate consumers out. We need to increase the supply of real goods and services to drive down prices and increase the purchasing power of the existing amount of money.
The real question that should have been addressed is: How do we increase the supply of real goods and services; how do we build wealth? I hope, Paul, that this a more satisfactory answer to the difference between wealth and money than the clueless answer I gave when we first met. Please let me know your thoughts, for this question has been bugging me for a long time!
Onto my sightseeing: I went to a conference on Brexit at the Royal Geographical Society on Saturday. I must say, London is full of “Remainers” and they cheered loudly every time a negative comment was made about the Brexit vote. It’s sad, really. Daniel Hannan made the positive and powerful argument that the UK is a global powerhouse and should stand on its own two feet in making global trade deals. A chorus of boos rang out. So sad that Londoners think the UK is weak and in need of Claude Juncker’s omniscient guidance.
On Sunday I went to Churchill’s War Rooms and the British Museum. The War Rooms are well worth the entrance fee and provide a wonderful opportunity to learn more about, at least in my opinion, the greatest man in western history. He saved Western civilisation when it was on the brink. As for his leadership credentials the fact that King George VI had to personally “persuade” Churchill to stay away from the D-Day invasion speaks volumes. He wanted to be with his men. I think character is something we learn from our role models. If I’m right, we should all make Churchill one of our role models.
The British Museum is breathtaking. I mean, wow. Of all the museums I’ve seen so far in London—heck, the world—this one was the best. Need I say more than “the Rosetta Stone”! If you come here to London and don’t go see it, you’re a fool. Also, I would suggest setting aside 4 to 5 hours at least if you want to see most of the museum. It is not small.
I’ve got one week left at the IEA and one weekend left in London: I’m heading off to plan out the next 11 days so I can make the most of my time left!