The legend of King Midas dates back to the early days of Greek mythology and tells the story of a King, for whom everything that he touched turned to gold. Like all folk stories, the tale can be told in different ways. Aristotle reports that he died of hunger. Other versions say that he was rescued by the gods, when he repented after turning his daughter, Zoe (or ‘life’) into gold. Here in one story that has lasted over centuries is the conundrum of wealth. Is wealth the accumulation of money and property that can enable us to do the things that what we want to do, or is it those things themselves?
The artist and critic John Ruskin in the nineteenth century declared that there is no wealth but life – and in doing so, he was declaring himself for King Midas’ daughter: family, relationships, purpose, meaning, wellbeing – these to Ruskin are then true wealth. But the story of King Midas doesn’t necessarily so neatly line up with that – legends never do. He was, after all, already a King, with kingly possessions and a kingdom’s obedience. So, an alternative interpretation is that wealth may be gold – something that is scarce, desired, tradeable – but there are limits to wealth. In wealth, as in life, balance is everything.
The property that King Midas accumulated, gold, is scarce, famously so, and tradeable, reliably so. It is emblematic of wealth, in the sense that a stock of wealth today is something that we believe will allow for a flow of benefits and entitlements tomorrow. The term ‘capital’ captures both this sense of wealth, and offers an accounting framework for how future benefits may be valued or, if your wealth is in a form akin to a metal that rusts, depreciated. There are, of course, more forms of capital than money or precious metals – mainstream economics includes, typically, land, labour and physical structures and equipment – but, conventionally, the value of such capital can still be measured in terms of money. It is not gold per se. But, with a reference price, it can be counted in terms of gold coins.
What marked out King Midas though was not that he had too much gold. That is a different legend, the one of Croesus. It was that he loved gold so much that he turned other things, including those that had value of a different form, into gold. In terms of economics, this comes to the heart of the issue of wealth – what forms and combinations of capital do combine to increase the flow of benefits and services more widely. How wealth is spent is easier to trace. How wealth is created over time in the most effective way remains, if not a mystery, certainly a conundrum.
There can, for example, be more forms of capital than those that are measured in traditional economic terms. One model of this is to characterise four forms of capital – environmental capital, human capital (including knowledge, skills and health), physical capital and social / organisational capital (including legal, political, community, family, organisation and firms). This feels more encompassing, but, in turn, less likely to be reduced to the calculus of money. Even if there are attempts from time to time to do just that, putting a price, or a shadow price, on what is outside of conventional markets in order to understand or adjust for wealth that can’t be counted in gold, there are limits. What price parenthood? What price the butterfly?
There is a long tradition of radical economic thinking that argues that prices established in money terms in the context of a market trade between two or more parties is blind to these wider forms of potential wealth, because they suggest that it is possible or even desirable to cash them in for money. John Ruskin, in the nineteenth century context of the British Industrial Revolution, had a name for this. He distinguished ‘wealth’, as life giving, and ‘illth’ as economic activity that created ugliness and unhappiness. One hundred years later, President Kennedy sparked a debate that continues today about the measurement of wealth in national accounts – again contrasting what is measured in economic terms as wealth as measuring all but that makes life worthwhile. The ‘Nobel Prize’ Economist Herbert Simon argued that most wealth was created on the back of a common inheritance from previous generations. A more recent prize winner, the late Elinor Ostrom focused on wealth outside of the market, in the form of commons. These are ideas reflective of the co-operative tradition of commonwealth and common ownership.
The challenges these perspective throw up are far more than the issues of unconsidered costs, which might lead you to consider such ‘externalities’, or narrow measurement, which might tell you to broaden your national accounts or indicators of progress. The crunch issue is the extent to which we can draw down one form of capital, in order to build another. After all, it has been a hallmark of modern economic development that it draws into the market those activities that were previously outside of the field of monetary exchange, whether household work or subsistence farming… and assigns a lower status to what is left.
Some forms of capital, though, cannot simply be cashed in. Some environmental assets, such as the diversity of species, may have a value beyond a narrow market price (that is, in turn, ‘discounted’ over time, leading inexorably to a short-term view of what may be long-run assets). But they may also be critical to our survival, in which case no amount of money gain will capture quite what we are doing. This is the argument of Herman Daly, a pioneer of the field of ecological economics. What we take for economic growth is, in his words, uneconomic growth.
In short, then, to assume that wealth is narrowly financial is as impoverished an account of economic life as assumptions of poverty that start and end with income and expenditure. It is important, but far from the whole story – and in turn may be a framing that becomes problematic, for example if today’s economics rights and rents are at odds with a climate constrained world tomorrow. Today’s wealth may not be that of tomorrow.
But, as with the legends of old, these are claims that have life that is sometimes unconstrained by the fact and evidence to back them. It is a tendency of us all to look to stories that confirm our existing beliefs, rather than to keep a genuinely open mind. I was pleased this year to be part of a Wealth Commission set up by the University of Birmingham, which was an attempt to explore some of the facts that lie behind one of the most enduring challenges of our day – how to generate and distribute wealth and prosperity in ways that are self-reinforcing rather than self-defeating. My contribution was to help explore these competing ideas of wealth.
The legend of King Midas echoes today. Our own balance of wealth has shifted in recent years, in terms of a less even distribution of people, for all the widening of growth around the world, who are able to share in prosperity. It has also shifted in terms of a perceived decline of the quality or sustainability of the social, civic and natural environment, just as the reach of financial factors in decision-making is larger than ever.
So, what does it mean to be wealthy? It suggests, I think, that you have the means, the mindset and the relationships that allow you to sustain what matters all around you.