No, this is not correct. The way developed countries support a high standard of living is by creating enormous amounts of wealth. That wealth wasn't taken from anywhere; it did not exist before the developed countries created it.
Currently we create a lot of wealth, but that wealth is highly pinned on farming lots of actual labor of to places with high population/cheap labor and keeping the expensive labor here.
If we are unable to convert those jobs to automated tasks before the standards of living increase in those high population/poor countries then we are going to have a big problem, because there will not be anyone to farm that work off to cheaply (as we see with China starting to purchase cheaper labor from African countries). There will be a massive bout of stagflation at some point.
That does not change the fact that wealth is created; there is not a fixed pool of wealth on the planet that will never change. There is nothing impossible about creating enough wealth to give everyone on the planet a first world standard of living. That doesn't mean it is guaranteed to happen; but it does mean it can happen.
Some things like software don't have to follow these inflationary paradigms, but things like land definitely do. This is what I'm warning about that we're running on borrowed time with cheap labor unless we replace it with automation. All your 'wealth' will quickly disappear in inflation.
So you work for the Federal Reserve? They're the ones who are allowed to print money. (Which, as you note, will cause inflation if we don't increase the production of goods and services. But even if we do, it is still a transfer of buying power from those who don't get the newly printed money to those who do. Which means from everyone who isn't a financial institution, to financial institutions. Which is why the financial institutions lobbied to get the Federal Reserve created in the first place.)
> things like land definitely do
I'm not sure what you mean by "inflationary paradigm". Land is one of the few things of economic interest that (a) actually does have a finite, limited supply, and (b) can't be replaced by other substitutes for important uses. But that has nothing to do with inflation. It would be the same if the money supply were fixed forever.
> we're running on borrowed time with cheap labor unless we replace it with automation
Which will happen (in fact it has already been happening for decades now) due to natural economic incentives as labor becomes more expensive (which I agree will happen over time as more people gain access to a higher standard of living). The biggest obstacle to it continuing to happen is, as I said, misgovernment.
- Accounting tricks - e.g. most software-created wealth is here, and it's increasingly apparent that it doesn't improve productivity, but rather diffuse the work so it's hard to track, resulting only in "mysterious", "unexplained" drop of productivity overall;
- Use of natural resource - that one has always been a source of wealth, because it's an actual input to the economy;
- Population growth - i.e. the other fundamental input to the economy;
- Outsourcing approximately all manufacturing to countries with cheap labor and low safety and environmental standards.
I'm sure there's plenty of honest-to-$deity pie growing, but can't think of a single example right now. Agricultural efficiency improvement maybe?
You must be joking. The US produces a huge quantity of genuine goods and services every year. You buy groceries, right? That's wealth creation. You have electricity in your home, right? (Otherwise how would you be able to post here?) That's wealth creation. You buy clothes, household goods, etc.? I could go on and on. And since we're here on HN, how about all of the software that is created and updated by US programmers? All of that is wealth creation too.
Of course none of this vast amount of wealth creation makes the news, because it's all "dog bites man" so the media isn't interested in it. They'd rather talk about the crooks and the parasites because that's what captures eyeballs. But that doesn't mean wealth creation isn't happening.
Electricity overall isn't much of a "growth" sector, as the total hasn't changed much in developed nations in recent decades, only the sources:
* USA: https://www.statista.com/statistics/220174/total-us-electric...
* Germany: https://en.wikipedia.org/wiki/File:Germany_electricity_produ...
* Poland: https://en.wikipedia.org/wiki/File:Poland-electricity-source...
And even then: if the new stuff is PV imported from China, it's not really western nations doing the wealth creation.
> You buy clothes, household goods, etc.?
I think their point was these are increasingly outsourced…
> how about all of the software that is created and updated by US programmers?
…while these are accounting tricks. (I don't actually agree with this claim, but that is how I read the comment you are replying to).
Really? You can just go pick groceries out of the ground in your backyard without any processing whatsoever? Because that's what "natural resources" means.
Groceries in your grocery store have gone through a huge supply chain to get there from the point where they are "natural resources". That supply chain is wealth creation.
> isn't much of a "growth" sector
Wealth creation is not the same thing as "growth"; it's much broader. For example, electricity that was produced and used yesterday is no good to you today. More of it needs to be produced because what was produced before got used up. That is wealth creation. Much wealth creation has to happen simply to make up for the wealth that gets used every day to support our lives. That doesn't mean it isn't wealth creation.
> if the new stuff is PV imported from China, it's not really western nations doing the wealth creation
Sure it is. Goods in China are no good to you in the US. Shipping goods across the world is wealth creation.
If you want to argue that maybe we shouldn't trust goods from China, I have no problem with that. But that's a different discussion.
> these are increasingly outsourced
Or automated. That's true. It still doesn't mean these things aren't wealth creation. Trade is wealth creation.
> these are accounting tricks
No, they aren't. Producing software that meets people's needs is wealth creation. (You appear to agree with that.)
First: That's what a vegetable garden is, my parents had one. I also enjoy picking fruits off blackberry bushes, and those things are invasive weeds that grow basically everywhere in both city and countryside.
Second: Your statement exceeds the requirement to be in the primary sector of the economy: https://en.wikipedia.org/wiki/Primary_sector_of_the_economy
Note also that TeMPOraL's comment said "primarily", and agriculture composed 0.7% of the UK economy, 1.12% of the US economy, and only 5.9% of the global economy: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_secto...
> Goods in China are no good to you in the US. Shipping goods across the world is wealth creation.
I'm not denying that shipping is on the service-goods continuum.
It's also: (1) not much of developed economies (~5% of USA for all logistics combined, including local transport); (2) not necessarily supplied by the western economies that receive the goods (where does the line get drawn? It's not as clear-cut as, say, looking at who owns the logistics firm); (3) useless in the absence of things to ship; (4) historically speaking, when desirable goods exist but cannot be shipped, the customers move.
> Or automated. That's true. It still doesn't mean these things aren't wealth creation. Trade is wealth creation.
Then you agree with, or are overlooking, the specific caveat "in the West" that was in TeMPOraL's comment?
Did you get all your groceries that way? What about people who don't have vegetable gardens? You were claiming that all groceries are "natural resources". That claim is obviously false. If all you are saying now is that some groceries can be thought of as natural resources, since some people grow some of their own groceries, of course that's true, but it's a much, much weaker statement than the claim of yours that I objected to.
> Your statement exceeds the requirement to be in the primary sector of the economy
So what? That has nothing to do with what I was saying. Not to mention that such definitions are arbitrary anyway.
> I'm not denying that shipping is on the service-goods continuum.
I'm talking about wealth creation. If you agree that shipping is wealth creation, good.
> It's also: (1) not much of developed economies (~5% of USA for all logistics combined, including local transport); (2) not necessarily supplied by the western economies that receive the goods (where does the line get drawn? It's not as clear-cut as, say, looking at who owns the logistics firm); (3) useless in the absence of things to ship; (4) historically speaking, when desirable goods exist but cannot be shipped, the customers move.
None of these contradict anything I was saying. (See further comment below about "western".)
> Then you agree with, or are overlooking, the specific caveat "in the West" that was in TeMPOraL's comment?
Neither. First, "Western" countries trading with "non-Western" countries gives wealth to both, not just to the "Western" countries. (For example, a "Western" firm paying a "non-Western" firm to ship goods to the "West" creates wealth for both.) Second, you do know that "Western" countries trade with other "Western" countries, right?
How many of these things are the wealthiest nations net exporters of — or at least breakeven on, eg they produce enough for self-sustenance?
The basic economic definition is that wealth is possibilities: the wealthier you are, the more things it is possible for you to choose to do.
Resources and productive capacity are kinds of wealth, since they make it possible to do things, but not the only kinds.
> How many of these things are the wealthiest nations net exporters of
The wealthiest nations export all kinds of wealth. Wealth is not limited to the narrow view you are taking.
Never heard of that definition, most definitely not as a basic economic definition. Where did you hear it?
Anyways, if we use your definition of wealth then we must definitely define what "possibilities" in this context mean. To me it seems that there is far less wealth today than in the past. The only possibility for me right now is to sell my time to someone else so that I could ensure my survival. I can't grow my own food since I don't have the money for it. Can't move since I don't have money for it... you get the picture. It seems, by your definition, I'm poor as any man has ever been.
If by "possibilities" you meant how many different beers they have on offer in my local pub then I'm one of the wealthiest people in the world.
I've given it in an unusual phrasing, but what I've said is equivalent to what you will find in, say, David Friedman's Price Theory.
> we must definitely define what "possibilities" in this context mean. To me it seems that there is far less wealth today than in the past.
Nonsense. To give just one example: say you get a bacterial infection. A century ago your only option was to drink fluids, rest, and hope your immune system could fight it off--which in lots of cases it couldn't. Today you can get antibiotics. As a result of advances like this (and others like vaccinations for common diseases), the death rate from disease is vastly lower today than in the past, because of all the possibilities for fighting disease that exist today that didn't exist then. That is a huge amount of wealth creation.
To give another example: say your family lives across the country and you want to visit them. A century ago you could take a train that would take about a week to get there. Today you can get in an airplane and be there in a few hours. As a result, there are many more possibilities for events, from business meetings to family gatherings, that simply could not have taken place at all in the past. That is wealth creation.
For one more quick example, the discussion we are having now could not have taken place a few decades ago, nor could billions like it. That is wealth creation.
We tend to forget such things because we take our current level of wealth for granted and don't stop to think about the vast number of possibilities open to us that were not open to our ancestors. But they're there, and they represent wealth.
> by your definition, I'm poor as any man has ever been
No, you (and I) are far richer than the vast majority of humans who have ever lived. See above.
The usual "solution" offered is that eventually 100% of nations will become "developed." This is probably fantasy anyway, but it's not even clear if this is a biophysical possibility. Thus far, the only way "developed" countries have been able to support their existence is by systemic organized theft of resources from the "developing" countries (this is another thing people really really don't like when you point it out :-D).