Rob’s comments below are in italics.Derek’s comments below are in normal font.

Wealth is one of those terms we all think we know. When you dig into it, it’s quite hard to pin down, isn’t it? Or we just equate it to “money in the bank”. Maybe there’s a slightly wider perspective on it as well.

Yes, I thought we’d start by examining that question, because it’s something we take for granted.

When we were talking about what is money, one of the main aspects we discussed was that money is a claim on wealth. So right away, that indicates that money and wealth are two distinct things. If money is a claim on wealth, it can’t actually be wealth itself.

We tend to think of wealthy people as having lots of money. When we talk about the statistics of Bill Gates or Jeff Bezos or Warren Buffett, their wealth is actually stated in terms of an amount of money, and very often they probably haven’t got any actual money at all; it’s all in other assets. Interestingly, most of the expenditure that the ultra-rich have is not done by cashing in their other forms of wealth, because that would dilute what they own. That’s the real bedrock of it.

What they do instead is borrow against that wealth at extremely low interest rates, compared with what’s available to the rest of us. They spend that, and eventually, when they die and their estate is settled, some of those assets will be realised and it will repay the loans. It’s partly one of the reasons why they very often pay almost no tax at all, because on the face of it their income is close to zero. The income that derives from their wealth, usually in the form of shareholdings in their enterprises, or real estate or land, along with all the rents from that, goes into trust funds rather than being paid to them directly. That would have been the straightforward way of doing it, which would have incurred enormous income tax bills.

Wealth is Things People Want

So if money is a claim on wealth, wealth is the actual thing itself. I’ve just mentioned two or three examples of the kind of things we think of once we step back a bit: shareholdings, large holdings of treasury bonds, houses, apartment blocks or farms. But I’d like to look at it in the broadest, simplest terms possible. I’d like to make this suggestion: wealth is things people want. How does that seem to you, Rob?

Yes, because the value is only in the eye of the beholder, surely?

Exactly. Which of course raises the question, what sort of things do people want? It also flags up the fact that wealth doesn’t actually need to be anything permanent. It could be something semi-permanent like furniture and appliances. It could be something pretty permanent like farmland or houses. Or it could be something entirely transient, like a holiday or a meal out at a restaurant.

I’ve been thinking it could be something personal. As this is the Sovereign Finance show, if you don’t have the time and space to be sovereign, you aren’t really wealthy. If you never have time to do school run, or have time for a nice homemade meal with your spouse, are you wealthy? So there’s a lifestyle element to it as well.

Yes, and that is indicated really by the etymology of the word. Wealth comes from the same root as whole, heal and hail, from which we get words like health and well-being. Wealth in a way is the abstract noun from the word well, just as health is the abstract word from the verb heal. They’ve clearly got very similar roots in language. Wealth, as it’s generally used in everyday language, has drifted a long way from that.

A good starting point for answering the question of what people want is to look at Maslow’s hierarchy of human needs. In the original version he created in the 1950s, at the base level we have our physiological needs: our need for air, water, food, clothing and shelter. At the base level you have non-negotiable physiological needs, things you’re not going to survive without.

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Once they’re taken care of, the next level is the need for safety and security. It’s pretty compelling if you’re living in fear of what other people are going to do to you, or whether wild animals are going to break in and eat you in the night.

Above that are the social needs: the need for love, affinity and companionship. Above that, he suggested there’s a need for esteem, both the need for self-esteem and the need for respect from others. At the top of his original formulation, he put self-actualisation. In its broadest terms, that’s what we eventually settle on and decide for ourselves are the things that matter. It might be creativity, travel and new experiences, or artistic expression.

It’s making your life the fullest expression of you, and doing that from a position of strong self-understanding.

Yes. There’s another element he added in a later revision a decade or two on, where he put something called transcendence at the top.

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The way he characterised that is the very highest and most exclusive levels of human consciousness: behaving and relating as ends rather than means, to oneself, to significant others, to human beings in general, to other species, to nature and the cosmos. You might regard that as the focus of what’s generally regarded as religious or spiritual.

That’s an important point, because it’s something that’s been in abeyance over the most recent modern period, when people have generally become more atheistic and materialistic. Even where they’ve been overtly religious, they probably haven’t had that empathy with other people, or, in a lot of cases, the sense of awe at the cosmos and the wonder of the whole thing. If we’re ever going to make our way through the chaos of the current era, a renaissance of recognition of that aspect of human life is going to be important.

Yes, it’s having a sense of wonder as well, isn’t it? A sense that we don’t actually have all the answers. Although I wonder if the pendulum is swinging back in that regard.

I have no doubt about it. The only question is whether it’s going to swing back fast enough and comprehensively enough to avert the obvious disasters we appear to be facing at the moment. All we’ve got is this moment now, and there’s no point getting unduly depressed about things which haven’t happened yet.

But one point that’s been made to me by various people, particularly some with Buddhist backgrounds or other spiritual perspectives, is that maybe I’ve got that upside down, and maybe transcendence comes first. I’ve thought about that, and there’s quite a lot in it. But what I’d say is that it can’t come quite first. We still need to address the physiological needs, because if you haven’t got food, water or air, you won’t be reaching enlightenment.

You need bread on the table first and foremost. It’s back to the aeroplane analogy: you put your own mask on first, and then you put someone else’s mask on. You don’t go around putting everyone else’s mask on.

Absolutely. So it’s a useful thing to reflect on. Suppose we had our physiological needs and our needs for safety and security taken care of. Suppose we had, as a next priority, the drive for transcendence. Then possibly all of the other things further up the pyramid would come much more easily and naturally.

Another thing worth contemplating, if we look at wealth this way, is that unless you’re in a position where you can entirely grow your own food, you do need some money for the transactions to get your food, a roof over your head and your clothes. You may or may not personally need money to buy yourself safety, given that there are bad actors around and we need police services of some sort, which have to be paid for. In the society we live in, that’s managed through the distribution of money.

But if you look at those other levels, the social needs, the needs for love and affinity, the needs to express yourself creatively, you could go a long way with many of those without money coming into the picture at all. This is something we build on as we look at alternative lifestyles, at creating a life on your own terms.

We covered this a bit last time as well, where if you’re dealing more with people at a community level, you maybe don’t need as much money, because you can barter more.

Or you can just do it out of reciprocity.

You can do it out of reciprocity. You can put it into the network and then take it out of the network when you need to as well.

Yes, and I don’t want to be a boring old fart about it, but I’d say that over the course of my lifetime there’s been a distinct decline in that. For instance, I was a diving coach for fourteen years, and I did that entirely as an amateur. I didn’t even expect to have expenses paid by anybody else for travelling around and getting whatever kit I needed. That was fairly common. These days, more and more, even with children’s sports, it’s increasingly expected that somebody who coaches will be financially reimbursed, and that the sports people or their parents will hand over money for it. Whereas in the past, it was taken for granted that people would do that as a form of self-expression, if you like, and as a form of contribution.

People do want t...