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Thread: The Wealth Creator?

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    Politics.ie Member firefly123's Avatar
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    Default The Wealth Creator?

    In a recent thread the question arose as to who creates wealth in a society. There was some debate as to what was created wealth and what was in fact recycling of existing money. I feel this might be worthy of its own thread as we did not come to a satisfactory conclusion and we started to derail the other thread.

    The argument goes that if a shopkeeper has €100 of goods and sells them for €110 then he has created €10 of wealth. I stated that he hasn't as someone else has lost €10 within the economy thus meaning no new wealth has been created. THe argument was that the shop keeper pays wages and tax out of his profit thus creating wealth but has he?

    In my view to create wealth you must either dig something out of the ground, grow or manufacture something and export it or provide a service in exchange for foreign wealth (either through service industry or tourism) at a profit thus creating wealth for the Irish economy. In otherwords I set up a widget factory tomorrow making widgets for €100 and selling them to the chinese for €110 thus adding €10 to the wealth of Ireland. Therefore wealth creators are a small enough group with the rest of us taking turns passing around the money they add to the system.

    Now obviously we need shopkeepers/teachers/accountants/ firefighters as they are part of the supply chain/educate our populace making FDI more likely/help business maximise profit and pay tax/stop the widget factory burning down and without them we would not be able to buy stuff and manufacturers would not be able to sell stuff.
    That raises the question if some people might be destroying wealth by selling things such as cars as the vast bulk of the money is sent out of the country.

    Then there is the question of perceived wealth. A good example would be the independent media group who have seen their share value drop down to next to nothing. Does this destroy wealth in the country or is it the perception that does the damage. The same with the property bubble. Someone somewhere did well out of it. If Joe bought a house for €50,000 and sold it for €300,000 in 2006 then Joe is a lot richer and some poor sod (me) is a lot poorer. Surely that money is still out there somewhere being sat on or something?

    Finally why do we insist on measuring our wealth on a solely financial basis? We should also take in to account the intangibles such as security and happiness to measure the wealth of our nation.
    I am sure this is hugely simplified and I certainly don't profess any expertise on the matter but I don't see how swapping money around in a closed system creates wealth. I've heard about industry having a multiplier effect on the economy but again if we just sell things to each other how does this create new wealth.

    I found this lecture by a professor Reinhard in princeton most interesting http://www.princeton.edu/%7Ereinhard...ay-15-2010.pdf

    I would be very interested to hear the views of other posters on here about this subject.
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    Politics.ie Member bluefirelog's Avatar
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    It's not just manufacturing that creates wealth. Services also generate wealth. I offer you a service e.g. technical support and you on the other side of the world pay for me to offer that service. It may not involve the physical creation of anything.

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    Politics.ie Member firefly123's Avatar
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    Quote Originally Posted by bluefirelog View Post
    It's not just manufacturing that creates wealth. Services also generate wealth. I offer you a service e.g. technical support and you on the other side of the world pay for me to offer that service. It may not involve the physical creation of anything.
    yup. I mentioned that in the OP.
    In my view to create wealth you must either dig something out of the ground, grow or manufacture something and export it or provide a service in exchange for foreign wealth (either through service industry or tourism) at a profit thus creating wealth for the Irish economy.
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    Politics.ie Member bluefirelog's Avatar
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    Oops, missed that. So you don't agree that providing technical support to people living in the country is wealth creating...

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    Politics.ie Member firefly123's Avatar
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    Quote Originally Posted by bluefirelog View Post
    Oops, missed that. So you don't agree that providing technical support to people living in the country is wealth creating...
    No I agree that its important. In fact it is a vital part of our economy but does it create any new wealth for the state? Any more so than any other service?
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    " In my view to create wealth you must either dig something out of the ground, grow or manufacture something and export it or provide a service in exchange for foreign wealth (either through service industry or tourism) at a profit thus creating wealth for the Irish economy. "

    I agree

    Compare and contrast Anglo Irish bank IBRC and Sean Quinn !!!!!!!!!!!!!!!!!!!1

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    Politics.ie Member firefly123's Avatar
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    Quote Originally Posted by supermac2 View Post
    In my view to create wealth you must either dig something out of the ground, grow or manufacture something and export it or provide a service in exchange for foreign wealth (either through service industry or tourism) at a profit thus creating wealth for the Irish economy.

    Compare and contrast Anglo Irish bank IBRC and Sean Quinn !!!!!!!!!!!!!!!!!!!1
    Well thats a good example. When Sean Quinn was exporting cement and whatnot he was doing great. When he started trying to work his magic juggling act in Anglo it all went pear shaped. Quinn Group was a wealth creating organisation whilst Anglo seemed to just lend money to and from powerful individuals within a closed system
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    Politics.ie Member bluefirelog's Avatar
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    Quote Originally Posted by firefly123 View Post
    No I agree that its important. In fact it is a vital part of our economy but does it create any new wealth for the state? Any more so than any other service?
    Well, if we didn't provide it domestically, would we have to import it. Would we have to get the tech support from abroad? Thus if we require a service that we have to pay for and it is provided domestically, are we maintaining the wealth domestically?

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    Politics.ie Member firefly123's Avatar
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    Quote Originally Posted by bluefirelog View Post
    Well, if we didn't provide it domestically, would we have to import it. Would we have to get the tech support from abroad? Thus if we require a service that we have to pay for and it is provided domestically, are we maintaining the wealth domestically?
    Sure I would agree with that. By providing that service we prevent money escaping the system and there is a good chance we develop skills to allow us to export that skill. But do you agree that fictional call centre does not create wealth in a strictly technical sense. Clearly the intangible wealth created by people having a job and money moving around is a good thing.
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