Random Thoughts

Where does the wealth go?

So... if worker productivity has been increasing steadily over the last decade, (to the highest level ever?) and the American worker has been putting in ever-rising amounts of time on the job, what can we deduce from this?

Increased productivity multiplied by increased time applied will certainly, by the definitions used to produce these statistics, result in more creation of goods and services, which must surely equate to more wealth, if the statistical wizards deserve their paychecks.

So if there is even more wealth being created than ever before, why are people working more than ever? Are they benefitting with better living conditions for themselves, or more importantly, everyone?

Wealth can be found distributed in several different ways:

Individual human essentials

    Including reasonable amounts for food, shelter, clothing, transportation. While consumed and discarded, these are essential to survival and as such totally justifiable.

Short term consumer products

    These would be generally non-essential quality of life items, ranging from "excess" food and clothing to toys and entertainments. These items, while certainly useful at times, mostly are waste - the energy expended, in both human and natural resources, is used up and gone once the "product" life is over.

Medium term consumer products (so-called "durable goods")

    Any products with a useful lifetime of about 5 to 25 years. Not a true form of wealth since they deteriorate and are disposed of, but many of the industrial devices which make our lives much easier fall into this category. These items range from environmentally destructive, socially corrosive things like the automobile, to such things as refrigerators. Life without cars might take some adjustment (especially in their corollary, the suburbs), but life without refrigeration would truly be a step backwards.

Long term consumer products

    Things that essentially "last forever," like good solid furniture and well built housing. These items truly constitute "wealth" for the people, since once manufactured, they have been almost permanently added to our stock of available resources.


    Services are a bizarre form of production. On the one hand, they certainly do not last for some indefinite time span in such a way as to be clearly a form of wealth, but on the other they can often be the sort of thing that makes life easier, or at least makes it easier for an ever-increasing specialization in lives to occur. This is because the more that one can pay for the time of other people to "do things" for one, the more time one has to do one's own specialized labors. Or, I suppose, goof off (but this is America, and that would be a sin).

Government spending - infrastructure

    Whether invested in building or maintenance of permanent structures, these can be considered to be a long term wealth product, except as they simply support wasteful short term consumption (i.e., more and more roads to nowhere). Public sanitation (water and sewer systems) would be a good example of justifiable government infrastructure spending of freshly created wealth.

Government spending - bureaucracy

    Considered by many to be the most wasteful use of wealth, so long as the cost of doing the work is a reasonable percentage of the total funds involved (and in many government programs, the costs are lower than the private sector!), these are a good use of our shared wealth. Some may even be easy to justify, as far as the bureaucracy concerned defends the health and safety of the individual from the rapacious tendencies of the business corporation (oops, there it is, I'm a liberal).

Government spending - redistribution

    A way of making sure that the benefits of our capitalist system are not entirely accrued by those lucky enough to have the right connections, skin color, etc., or be in the right place at the right time, these programs are what justifies the existence of an economic system where people are free to generate and accumulate vast amounts of personal wealth. Without a basic level of support for all humans in the system, capitalism is not worth the trouble for the rest of us to "sign on." Note to angry Puritans: hard work does not equate automatically to wealth or even a decent living in most capitalist systems. You just think it does, so you can blame the poor or unsuccessful rather than the system. Rich people often like this philosophy, though.

Government spending - short term waste (military, etc.)

    Obviously, paying people to stand around and do nothing is one of the biggest wastes of wealth ever invented. Paying them to stand around cleaning incredibly expensive weaponry is exponentially more wasteful. Of course, making a war every decade or so that lets them run around using the weapons, instead, masks the huge drain on the worlds efforts and labors that these foolish things truly represent.

Business profits - reinvested

    A perfectly reasonable place for some of the wealth generated by workers to be returned, since it keeps the system that lets us generate the wealth working. This includes repairs and upgrades to equipment, tooling up new production facilities, cleaning up past environmental disasters, etc.

Business profits - returned to stockholders

    Justifiable inasmuch as the stockholders might be taking a genuine risk with their investment, which is often not the case. In many instances you will find that the business community has strong armed the government (which is us) into bearing the greater portion of the risk of a project, leaving the investors to either make a lot of money or not lose their investment. The local power company here in N.H. is a great example - having bankrupted themselves trying to build a "state of the art" twin reactor nuclear generator (to meet huge projected increases in demand with power "too cheap to meter" - neither one happened, by the way), they are still collecting more per kilowatt from us than electricity costs them to generate and distribute, to pay for their "stranded investment." I feel this loss should have been borne by the stockholders, entirely.


    A complete waste of wealth, in that all it does typically is drive the acquisition of inessential short term consumer products by attempting to create a sense of unhappiness which supposedly will be cured by the purchase of these products. It tends to feed off the unmet spiritual, social, and humanistic needs of those participating in a rampantly materialistic culture, without filling any of them.

Oh, and lastly, I suppose there is "cash in hand," an abstract representation of created wealth that is not technically "doing anything" at any given moment (this pretty much must be cash moeny, since if it is in the bank it is being invested). Of course, the raw cash floating around in the economies of the world are part of what creates demand pressure to sustain prices and encourge production.


So if there is more of this stuff, where is it going?

While part of me wants to say that I don't see life seeming any better materially around me than, say twenty years ago, I suspect that people are consuming more, even if they are not wealthier. In the nineties, approximately eleventeen zillion personal computers have been built, bought, rendered obsolete, and thrown away, at an average cost of a couple of thousand dollars each. Similar trends have occurred in other "high tech" areas - home entertainment (televisions, stereos, and game things), for instance.

If more wealth is being made, then more is being poured into the military, since the boys and girls in green and brass tend to get their hands on a percentage of our output rather than a fixed amount. So that is gone...

We've been building more houses - I hope they are better, more efficient (some are, at least), and getting their walls around more and more families' hearths. Also, more and more commercial property is "developed," frequently to replace "obsolete" styles of housing, businesses, and former locations that are no longer, um, fit for human occupation. On the one hand, there is a net increase in useful square footage, but on the other, there is also a net increase in acreage that is permanently (or at least close to it) blighted. Here our increase in wealth creates a decrease in the quality of the environment.

Back to main question now... if productivity and hours worked are both increased, where is this wealth going? I think it is the ephemereal "service industry" that makes it all disappear. Services are goods produced that instantly vanish, in most cases (the exception of increasing our knowledge base as a form of wealth must stand, but is only a small part of services produced, I think). The service is an act that cannot be "reused," will not be transferrable or durable. It may enrich the life of the person who consumes it, but mostly it serves to keep the "wheels going round," it keeps the cash flowing in an economy that is losing its ability to produce more tangible goods that are even slightly needed and get them into the hands of those who need them.

Instead of the so-called science of economics gradually formulating ways to enrich and improve the lives of all participants, it simply figures out ways to keep itself afloat, with whatever form of "production" and "consumption" will do the trick on paper.

Footnote: Twenty years ago, I worked in a factory. Conditions of employability were pretty basic: reasonable physical health and the ability to fill out the application form. Wages were on the order of eight to ten dollars an hour within a year of hiring. In today's dollars that could easily be twenty to twenty five dollars an hour. I had great health insurance, paid holidays, a couple of weeks of paid vacation each year, a college tuition reimbursement plan, and a generous (and honest) ESOP available to me.

How is it that the wealthiest country ever to exist can also become the poorest in terms of the opportunities for basic comfortable living?

August 2001

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© Huw Powell

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