Quick Q&A

What about money? Surely being rich is the definition of “wealthy”?

It’s true that “wealthy” is often used in relation to money, but wealth and money are actually quite different things. Money is a tool or an input for the creation of wealth. It allows us to do things that increase our real wealth. But it’s the doing that creates wealth, not the money.

So billionaires are not necessarily wealthy?

Not necessarily wealthier than the rest of us! Think of it this way - if on the day you are born someone puts £1m in your bank account, and you leave it there, accumulating compound interest until the day you die, you will be immensely richer on the day you die, but that money will not have added to the wealth you experience in the quality of your life.

OK. So money is only wealth when you spend it?

That’s right, provided you spend it on something of real value. Money that’s stashed away in bank accounts or financial assets is not wealth - it's just a wasted opportunity.

Wasted in what way?

Wasted because so many other people lack the money that they need to create the wealth to improve the quality of their lives.

A fuller picture

Wealth is something we create for ourselves. Money can help, but on its own it is not sufficient.

Often the word “wealthy” just means having lots of money. But plenty of rich people lead miserable lives, and plenty of people who aren't conventionally rich think that their lives are great. So we need a better definition of wealthy than simply money.

A good definition goes like this: Wealth is that which improves the quality of people’s lives. Or, even more briefly, Wealth is whatever we truly value.These definitions capture the things that make life good, and recognise that some aspects of wealth may be different for different people.

Many things, however, we will generally agree on. Good health, or, failing that, good healthcare; good quality food in sufficient quantity; good quality housing; a sense of security for ourselves and our families.Then come material wants such as cars, holidays and mobile phones. And there are plenty of non-material things we also value greatly, such as good relationships and the pleasure of being in the open air while the sun is shining.

Money can help to provide some of these things, but it is not the only ingredient for wealth creation and on its own it is not sufficient. The key ingredient is actually the effort we make for ourselves. Paid work can bring a sense of purpose and self-worth, along with money (provided it is not exploitative or oppressive). Then there is all the unpaid work we do to sustain ourselves - cooking; washing; shopping; cleaning and maintaining our homes. Beyond that, we speak of working on our health and fitness; working on our relationships;  working to improve our knowledge and skills.

Most of these things require access to money. To cook a meal for one's family requires at least that one buys the ingredients. So money is important, but it’s the combination of money and our own efforts that creates wealth.

That is why measuring wealth in terms of money is so useless, and why government policies to increase the wealth of society so consistently fail. Governments measure wealth only in terms of money turnover (GDP), so their policies are targeted (often unsuccessfully) to increase this measure. The other aspect, which is the capacity of people to make use of money to create actual wealth, is routinely ignored.

The capacity to create wealth depends on people having access to money, and the time and opportunity to make use of it productively. Where money goes, therefore, is crucially important. Money in the bank accounts of people who are too rich to need it is not wealth and is never going to create wealth. Put it in the hands of a deprived family, however, and it can create wealth rapidly by giving the children a proper meal.