Wealth creation, part 1

I was listening to a group of future watchers on television. The discussion was “the influence of internet on our lives and work”. And on the society as a whole. They analyzed that internet is destroying millions of jobs and so in fact it creates poverty. Words like “rules, prohibit, destruction and restore” were used all the time.

The general opinion was that internet has no good influence on job creating. Over 25% of the present jobs are threatened by it. According to them it creates poverty in families and it would have been better for many if it hadn’t started at all. There are no solutions to solve this problem of job creating.

I see this different. Compare this to 200 years ago: every woman on earth was working with the spinning wheel. Then James Hargreaves developed the “Spinning Jenny” in 1764 and after 100 years 100% of the women had lost this work. That was 50% of the world’s population. So what is happening now with internet is still nothing compared to the influence of the invention of the “Spinning Jenny”. However, instead of poverty, the spinning wheel invention created wealth. Of course the women lost their work, but they started to do other work. So however there were big economic problems in individual families for a while, society as a whole became much more productive, as each woman started to be productive in other areas.

So the problem of internet is not that people lose their job. The problem is that we as a society should offer new jobs to them in order to be productive in new unexplored areas. What we however do is that instead of creating new jobs, we offer them a small fee to stay at home and not be productive anymore. The 21st century solution seems more social, but on the longer term it will not lead to wealth creation. Instead of that it will lead to poverty and that is what we see growing around us in Europe. This is what happened then with the spinning wheel and now with the internet:

Spinning wheel: people lost their job = cost saving for the producers. The people who lost their job looked for, created and found new ways to be productive. This generated extra income. That is “wealth creation”.

Internet: people lose their job, get small fee from government that collects this money from companies through taxing = higher costs for companies. For the people who lost their job it is made difficult to look for, create and find new ways to be productive. As soon as they find a job, they lose their fee from the government. That is not stimulating. Because of taxing jobs, companies try to avoid creating jobs and invest in machinery. At this moment there are no jobs available and our productivity doesn’t rise anymore through offering jobs to people, but through automation and throw out people. This is “wealth destruction”.

It is not so that internet is destroying wealth. It is the principle of income generation and income dividing that in the 21st century is very different from the 18th century, that is destroying our wealth. In the 21st century people who are put out of the production process, cannot find their way back into the production process and create more wealth.

We have 60 million people sitting at home in Europe. There income is low, their perspective is negative. Some of them do not even know anymore what “wealth” means. We have a moral obligation to solve this. Are there no ideas to help them getting on board again? Yes there are.

Read my next blog about the subject ”Wealth creation”.

Pieter Hoff,
Green Musketeer