It also has a lot to wealth distribution. I suspect that Danish teacher’s salary is much higher up Denmark’s relative income scale than an American teacher’s.
Like here in the UK, US politicians seem to talk a lot ‘wealth creators’ and give them tax cuts to incentivise & reward. They also argue that it is not the relative distribution of wealth that matters, but how much in absolute terms those at the bottom have.
But is it actually possible to create ‘wealth’?
Governments can create more money at will. But that dilutes its value relative to other currencies and generates inflation. So money certainly isn’t the same thing as wealth.
Indeed if you start considering too closely what money actually is since the end of the gold standard, the whole house of cards is in danger of collapsing. Safest to just take it at face value. Those words “[I]I promise to pay the bearer on demand…[/I]” mean what you actually hold is a piece of government debt.
So when the Chancellor of the Exchequer George Osborne declared his intention to eliminate all government borrowing, he was actually vowing to end money (in the modern sense), capitalism and the economic model used for the last 500 years. (Either that or he didn’t have a clue what he was talking about.)
Back to wealth…
A company like Apple can produce a product which sells in vast quantities all around the world, but that hasn’t created any wealth just aggregated money which was previously distributed across millions of pockets & bank accounts into one place.
And digging the minerals out of the ground to make it hasn’t created wealth either. There is only a finite amount, so at best you could say it was pre-existing potential wealth. But even the most sought after and valuable minerals only have value because people are prepared to pay for them with existing wealth or money.
But does it actually matter if wealth cannot be created?
Well if that is the case the sum total is finite, then logically [U]everything[/U] becomes relative. The actual value of something finite cannot be determined by an arbitrary absolute numerical value assigned to it. As has already been established the quantity of money in circulation can be increased at will by central banks and its value is highly variable. So the value of any given portion of wealth can only be determined by its relative size.
On the other hand debt can be created.
For example, lets suppose you have an annual council tax bill of Â£1000. The money for you to pay it has to come from somewhere, but the amount requested can be just a number conjured from thin air. As payment isn’t optional, failure to match the amount of money available to the size of the demand has created a debt (not simply moved it around). Another example is money. Governments can increase the quantity of money in circulation at will, and as money in modern sense is a piece of government debt what they have created is debt not wealth. And these days there is with no upper limit as money it not tied to anything physical. It isn’t even necessary to actually print the money.
So what happens when somebody has the bright idea of reclassifying debt - something entirely intangible which can be created at will - as an asset equivalent to wealth?
The scary thing is that the ‘solution’ being enacted is the same as what led to the disaster. And even more incomprehensible, the apparent measure of success would be a return to the state immediately before the collapse.