All Wealth is Communal
I am not an economist. I am neither an academic nor a scholar. I call myself a non-technical philosopher. I write as way to develop and explore ideas. I am interested in what is known and how it comes to be known. I also wish to understand how to help more people know what is true. I am interested in promoting values as embodied in the principles of Beauty and Goodness as well as Truth. I seek discussion with anyone who can help me in these efforts.
The statement that all wealth is communal may appear to be controversial or contestable. In actuality, it is a theoretical truth which is necessitated by what we mean when we use the word ‘wealth’. The meaning of the concept “wealth” requires that wealth cannot exist in relation to an individual separate from the economic community in which he or she lives.
In this essay, the attempt to demonstrate the truth of the proposition that all wealth is communal will proceed by giving the definition of what the term “wealth” means as I understand it in the context of modern economic thinking. The definition will then be explicated by showing how it can be understood in terms of an example.
The Definition: Wealth comes into existence when:
(1) Some product is created in excess of what can be consumed by whoever produces it,
(2) the product is needed or wanted by someone other than the producer
(3) that someone else has something that the producer wants or needs so that he or she is willing to accept it in exchange for what has been originally produced
(4) what is so accepted by the producer is not needed for his or her current consumption
(5) what is accepted by the producer can be conveniently held or converted by him or her into something that can be easily held long-term as a claim on someone else’s (future) production.
All of these conditions must be met in order for what we mean by wealth to exist. Since the second and third specification in the definition specify the necessity for the existence of another someone (person or economic unit) in addition to the first producer, a communal aspect is inherent to what is meant by the word “wealth”.
Another aspect of the definition of wealth which requires a communal context for its existence, is contained in the 5th specification which states that wealth involves the holding and accumulating of something which provides a claim on (someone else’s) future production. If there are no others who are going to produce anything or be willing to provide it in exchange for whatever the original producer is holding, then what is being held has no (economic) value and can’t be considered wealth. This implies a community that exists and endures into the future.
Any definition of wealth which leaves out any of the above elements, distorts the basic understandings of fundamental economic concepts, and is likely to result in a loss of usefulness of the concept — for example in individual or societal decision-making in the economic realm. Hopefully, the example presented next will make this clearer.
The Example: If a farmer and her family grow 100 bushels of corn every year to feed cows, chickens and her family, the corn is of “value” to her because she and they use (consume) the corn.
If she only uses 60 bushels of corn every year to feed her family and other creatures, the excess is potential wealth. Why can’t this extra production be meaningfully called wealth? Further consideration of the farmer’s situation will show why the 40 extra bushels can only become actual wealth if the other conditions of the definition are met.
The farmer could save the “extra” 40 bushels for next year because the crop might fail then, or she might have more children or more cows and chickens in the future, but this saving, is not, in and of itself “wealth”. It is only a kind of holding onto the product because it will have future value to the person producing it. In this way, it is not yet fully in excess to her consumption needs. Several factors would eventually limit this kind of “saving” — mostly related to the amount of time, space and energy required to store the corn in a way that will maintain its value. Corn can be stored for quite a while, but not indefinitely. Building structures or facilities to keep the corn usable requires production itself — i.e., has a cost. At some point, the corn which is in excess (over current consumption) would be of less value than the cost of saving it.
If the farmer keeps growing corn beyond the limit of her capacity to store it and keep it consumable, and there is no one else who wants or needs the corn, then any further extra corn will be “wasted”. In this situation there is no accumulation of wealth, because what is being produced above and beyond what can be consumed (now or in the near future) would be of no (economic) value. Eventually it would have to be thrown away, given to the crows or discarded because it has rotted. Under these conditions the farmer would no doubt soon decide to stop producing 100 bushels of corn a year and reduce what she grows so that there will be no excess over what is currently consumed and what can be stored and consumed in the reasonably foreseeable future.
Even in a simple, family based, agrarian economy, there is likely to soon develop a communal aspect to economic life, even though that step does not yet lead to the creation of wealth. This is represented by the development of a barter-based economic system. Very few family farmers have ever produced everything which has been needed (or wanted) for themselves and their families. In the circumstances of a preindustrial society, there might be agricultural products which any single farmer might need or want and not produce herself, as well as non-agricultural items, (for example iron plowshares) which some non-farming “specialist” might make (e.g., a blacksmith).
The farmer we have been considering might be growing corn, even to excess, but might not have the proper conditions for growing spinach or beets. Or she might have a wonderful dairy herd that is thriving on the corn and providing milk and butter and cheese, and even leather, but perhaps she is not able to raise sheep for the wool required for warm winter clothing.
If the spinach or beets or wool is available from another farmer (who is producing more of these things than he needs for his consumption, and that farmer grows no corn, which he wants or needs) then the “excess” corn of the first farmer can be traded or bartered for the excess spinach or beets or wool of the second farmer. The value of the “excess” corn (and the excess wool and spinach and beets) is created by the fact that someone else wants it (or them) and has something that the producer wants or needs and will accept in return.
Assuming that the products bartered for are also used for current or near-term consumption, there is still no wealth being created. There is only bartering of one person’s current excess production for someone else’s current excess goods or services. The problem of the future usefulness of more and more extra production of wool and corn, beyond what the two farmers need for both of their consumption needs is still present.
Wealth can be said to be created when a producer is accepting, in payment for her or his excess production, something which he or she is not going to use for any kind of consumption in the foreseeable future, but is willing to accept and hold that something because there is some kind of social system that the producer can participate in and which has given assurances that what is being held and kept will be able to be used to obtain (a wide range of) future products created by others.
The ability to create wealth can only occur when a society or culture, or group of human beings create a medium of exchange that grants access to future goods (and services) over a wide expanse of space and time. It requires “money” and “markets” — both of which are communal in nature, by definition and according to conceptual (economic) meaning. This system of exchange also keeps the larger economic system in balance because it ensures that one person’s excess can be made into something of use to someone else who has a deficit. It also creates a system whereby communal excess can be used for “investment” (capital) to create more wealth (so that production and consumption in the larger economic community can grow over time).
Assume that the first farmer produces 100 bushel of corn and her family and beasts consume 60 bushels, and 20 per year are usefully stored for future need, and she uses 10 more bushels to barter for all of the products she needs that she is not producing. This still leaves another 10 bushels of corn that are excess to any current or near-term need or want. If these ten bushels are not to be wasted there has to be a way for the farmer to obtain something for those ten bushels of corn which is easy and relatively “cost” free to hold onto and which will be able to be used in the extended future to obtain a wide range of goods and services. This something requires that there be a medium of exchange whose value is maintained through some kind of communal agreement (implicit or explicit).
In other words, a system of “money” is required for the creation of wealth. Money is a communal, social construction; an individual can’t create money. Whether the unit of exchange is sea shells or buttons or coins made of various materials, or paper bills, or markings on a bank ledger, or ones and zeros on a computer network, or gold, the value of the unit is inherently a communal (and not an individual’s) construction.
While it might be obvious to most modern people that sea shells represent an arbitrary and socially constructed medium of exchange, many people seem to think that the monetary value of gold is somehow objective and absolute and not communally created. It is true that gold has usefulness in addition to its value as a unit of currency or money, but it is its socially agreed upon value as a unit of currency that is important in the economic system, not its value for jewelry or as a component of manufactured products. Gold’s relatively limited supply and its non-monetary usefulness may make it a preferable unit of monetary exchange, but those same qualities also constrain its usefulness as a medium of exchange in large modern economies.
If the farmer who is meeting all of her current and near term consumption needs, can “sell” her truly excess ten bushels of corn at a ‘market’ and receive dollar bills for it, she now has an asset in a form that it is proper to call wealth. Whether she keeps the dollar bills in a safe in her home, or deposits them with a bank who then gives her a receipt indicating how many dollars she has in her account, the client now has an asset that is easy to hold, has a theoretically indefinite life span, and can be used to buy a wide range of goods and services in an unspecified future time.
However, the money or bank account is only as safe as is the social contract honored by the community at large. Thus the medium of exchange, whether it is gold or paper money or, ultimately “credit” of some kind of bookkeeping in a “bank” or “stock portfolio”(or even clam shells) depends upon a social, communal context. The value of the gold, or the paper, or the bank credit or the stock certificate (or the clam shells) is a set of social, communal conventions. This can become (perhaps painfully) clear when a currency is devalued. This is also why other units of wealth (e.g., stocks in companies) can have advantages over holding currency or claims to money in the banking system.
Ultimately any material (physical) monetary unit (even gold) limits its usefulness in large modern economic systems (including any kind of international or global system). These include but are not limited to problems of storage and transportation. More importantly, gold or even paper money cannot give a modern economy the flexibility it needs to manage the monetary system to foster the greatest Good. This is why a banking system and abstract units of account become necessary to support the diversity and growth potential of industrial and postindustrial societies. Of course, banking systems create new potential problems (e.g., mismanagement as well as embezzlement and theft through hacking or cyber failures or attacks).
Yet a banking system, where the money just becomes some kind of units of account — whether written or digital — is necessary for the “growth” or expansive potential of modern economic systems. Economic growth depends upon the creation of wealth — excess production over current consumption — which becomes the capital needed for investment to enable further economic growth. In turn, it is economic growth which can lead to improvements in health, less onerous and life shortening work, more leisure for pleasure and joy for more and more people. At the same time the existence of the kind of money and wealth a banking system enables is also what makes it possible for particular individuals to potentially accumulate larger and larger amounts of wealth.
Whether one gladly embraces the truth that wealth is communal or accepts it painfully and grudgingly, one must also accept that this Truth does not lead to the conclusion that every individual contributes equally to the creation of wealth in a community, nor that the ownership of wealth should be distributed equally among all members of a community.
Because wealth is fundamentally communal, such distribution decisions should be communal and ought to fully embrace principals of what is best for individuals and the society collectively and for the future as well as the present. Both practical (what works) and moral (what is good or fair) principals should guide decisions about permissible equality and inequality in the distribution of wealth.
Consideration of these matters of distribution brings into focus another important (and inherently communal, societal) aspect of wealth. When wealth has been created in a society, the duration of its existence is not tied to the life of any individual producer. Wealth, once created can outlive the person who had claim to its production. Again, decisions about how to distribute wealth at the time of the original producer’s death is a societal matter, but should be tied to criteria of what works and what is right. How much wealth an individual should be able to leave to heirs of his or her choice (whether people or institutions) should depend on what benefits the societal economic system within which it was produced, as well as what is ethical and moral (these two are not unrelated).
One way that modern economies respond to the extended time dimension (both in the creation and endurance) of wealth is by establishing economic units such as corporations which are not people but can hold wealth longer than the lifetime of any human being. The fact that these institutions have been created by society and don’t exist outside of communal reality is another testament to the truth that modern wealth is collective in nature).
It should also be acknowledged that in matters of the holding of wealth and the distribution of wealth, economic theory is no longer a set of propositions that are true by commonly agreed upon definition. Different economic theories and different economists may wildly disagree about what works best and is also usually influenced by their own (ethical or moral) sense of what is right or Good.
This raises another issue related to decision making in relation to the distribution of wealth in a society. Such decisions are made within the political realm of any given society or nation and are subject to the ways in which a particular society arranges political power in its decision making processes. Wealth becomes a source of power for those who have it, for it can be used to buy influence over others. So the unbridled and unequal accumulation of wealth by individuals (or other economic units) in a society, gives disproportional power in the decisions about how to distribute wealth to those who already have it. Unexamined and unchecked, this melding of wealth and political power is likely to lead to very negative practical and ethical effects on the functioning of society.
Coda: My experience in discussing the nature of wealth with others leads me to believe that very many people will find my reasoning unpersuasive. In fact, the issue of why it is so difficult for theoretical truths to play a full, constructive part in societal decision making, is actually of even more interest to me than a discussion of wealth. My understanding of economic theory and its implications is not original or unique — and, no doubt, not complete. I do know enough to be sure that I could have tried to demonstrate the communal nature of wealth by discussing it from other starting places — for example the social nature of production or the social nature of constructions like “ownership” and “private property”. I imagine that discussing these aspects of wealth would add little to the effectiveness of an effort to persuade people of what I am describing as an incontestable truth.
I end, therefore, with the posing of this question: “Why is it that the knowledge we have is so poorly used in human affairs and decision making?” And the additional one: “What, if anything, can we do about that?”
I’ll explore these issues from my perspective in other essays on this platform. I will continue to add to writings on my website (HarrisStern.com) and Kindle Books (Search Harris Stern)and my Newsletters (Support for Change, archived on Constant Contact) that also explore topics highly related to these concerns. I am already working on another essay for Medium that attempts to provide balance in relation to the current essay. Look for it under the title: All Well-being Is Individual.

