The Nature of Wealth
The wealth of a country consists, not in the gold and silver held by the rich, but in the standard of living of its people.
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‘Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life.’ (WN I.v.1, p.47)
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‘The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour.’ (WN I.i.1, p. 11)
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To maintain and augment the stock which may be reserved for immediate consumption is the sole end and purpose both of the fixed and circulating capitals. It is this stock which feeds, clothes, and lodges the people. Their riches or poverty depends upon the abundant or sparing supplies which those two capitals can afford to the stock reserved for immediate consumption. (WN II.i, 25, p. 283)
One of Smith’s most revolutionary contributions is arguing for a radically different way of conceptualisation what Wealth is. He begins by suggesting that the mercantilist idea of wealth as how much gold a country held was fundamentally mistaken.
Instead, Smith suggests wealth is about the quantity of goods and services a society can make and consume. These quantities matter because they affect the quality of life people in the society can afford to have. For Smith, a truly wealthy society was one in which ordinary people could afford to share in the material riches their labour produced. Central to this is emphasising that the nature of wealth for a country requires fair and competitive conditions underpinning the expansion of the economy that would in turn allow the wages of workers to improve.
