The Origins of Economic Wealth

  • Edward B. Barbier
Chapter

Abstract

The purpose of the following chapter is to trace the historical origins of our present-day concept of wealth, by examining how human perceptions of wealth have evolved over previous eras. These changing perceptions are important to understanding our present predicament — which is to “undervalue” the contribution of nature to our economies. This misalignment between our exploitation of nature and the creation of wealth is fundamental to the structural imbalance in modern economies. In subsequent chapters, we explore the causes and consequences of this imbalance.

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    Raymond W. Goldsmith (1985) Comparative National Balance Sheets: A Study of Twenty Countries, 1688–1978. Chicago: University of Chicago Press.Google Scholar
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    Thus, in the system of national income accounts of economies, it is assumed that the financial balance of an economy, i.e., the net acquisition of financial assets (new assets acquired less new liabilities) should be zero. The rationale behind this assumption is explained by Dudley Jackson (1982) Introduction to Economics: Theory and Data. London: The Macmillan Press, p. 543: “… it appears to make common sense that the sum of all the sectors’ financial balances must in principle sum to zero because a financial asset (a claim on someone) cannot be acquired without a corresponding acceptance of a financial liability by someone else: for the system as a whole the total of — new — financial assets acquired (plus) and total — new — financial liabilities accepted (minus) must in principle match each other exactly, so that their algebraic total is zero.” As Jackson further explains (p. 85), this assumption of a zero financial balance between new assets and new liabilities in an economy is essential to the economic principle that all investments in an economy must equal all savings: “Thus any system of financial balance equations can be rearranged to show the equivalence of the total flow of saving to the total flow of investment. To subtract total investment from total saving, as does the equation for the sum of financial balances, must therefore give a total of zero.” Of course, including net foreign-owned assets in the aggregate financial assets of an economy is important. For example, if new domestic-owned assets exceed new domestic-owned liabilities in an economy, then a person or enterprise in the economy is clearly accumulating foreign assets abroad (accepting a financial liability incurred by someone located overseas). Conversely, if new liabilities exceed new assets in the domestic economy, then someone is clearly borrowing overseas; i.e., foreign residents or enterprises are accumulating domestic financial assets.CrossRefGoogle Scholar
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    Several scholars have noted the relationship between global frontier and economic expansion and the rise of the West. One of the earliest was Walter P. Webb (1964) The Great Frontier. Lincoln: University of Nebraska Press, who suggested (p. 13) that exploitation of the world’s “Great Frontier”, present-day temperate North and South America, Australia, New Zealand and South Africa, was instrumental to the “economic boom” experienced in the “Metropolis”, or modern Europe: “This boom began when Columbus returned from his first voyage, rose slowly, and continued at an ever-accelerating pace until the frontier which fed it was no more. Assuming that the frontier closed in 1890 or 1900, it may be said that the boom lasted about four hundred years.”Google Scholar
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    This estimate is from Colin McEvedy and Richard Jones (1978) Atlas of World Population History. London: Penguin Books, p. 215. Note that over this same period, 1500–1810, the authors suggest that the traditional “Arab” supply of African slaves to the Middle East was about 1.2 million. Actual shipping records indicate that Europeans sent almost eight million slaves to the New World between 1500 and 1867.Google Scholar
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    As described by Ronald Findlay (1993) “The ‘Triangular Trade’ and the Atlantic Economy of the Eighteenth Century: A Simple General-Equilibrium Model”, in R. Findlay (ed.), Trade, Development and Political Economy: Essays of Ronald Findlay. London: Edward Elgar, p. 322, “the pattern of trade across the Atlantic that prevailed from shortly after the time of the discoveries down to as late as the outbreak of the American Civil War came to be known as the ‘triangular trade’, because it involved the export of slaves from Africa to the New World, where they produced sugar, cotton, and other commodities that were exported to Western Europe to be consumed or embodied in manufactures, and these in turn were partly exported to Africa to pay for slaves.”Google Scholar
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Copyright information

© Edward B. Barbier 2015

Authors and Affiliations

  • Edward B. Barbier
    • 1
  1. 1.University of WyomingUSA

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