Private wealth.. what’s that all about?
Well it’s easy to explain. It wealth, that is to say assets and money, which is owned and controlled by a private individual or privately owned organisation for their private gain. Easy.
What about common wealth, what’s that? Well it’s sort of the opposite, where assets and money are owned and controlled for the common good, for the gain of all around. Easy as well.
Ah, says someone at the back, this is just socialism and capitalism reheated isn’t it? Well no, actually it’s not.
In all forms of society and economic management there is both private wealth and common wealth. The socialist/capitalist debate is founded upon what drives and shapes and benefits from the economy; while that has a knock on effect it should not detract from what is or should be considered common or private wealth.
For example: I own my house. I borrowed money from the bank to buy it and have paid off the mortgage. This is the use of private wealth to accumulate private assets.
I then drive downtown to do some shopping. Whist the shopping bit is is all about the exchange of privately owned assets, the road bit is not. That is something which is there for the common good: a common asset not a private one.
Don’t get me wrong: highways can be run by private organisations, there’s nothing theoretically wrong with that. But as a road it is there for public, not private, use and benefit. It is, in short, common wealth.
Where problems have arisen in recent decades is where you take an item of common wealth, formerly run by the state, and transferred it into private hands to be run as an enterprise. Either the transfer into private hands has been viewed as the creation of a private asset, which undermines the asset’s status as part of the common wealth, or the asset has been run for profit but subsidised by the government, which makes a mockery out of running it for profit.
As another example, take nuclear power stations. These again are patently common wealth: they are run for the good of the public as a whole, not for the private needs of any particular individual or organisation. However they are then run by private organisations whose rationale is to generate enough profit from the sale of the electricity to provide electricity for the public good.
Then, post Fukushima, it was discovered that the vast majority of nuclear power stations are not disaster proof so regulators around the world raised the safety bar and asked the power station companies to jump. Some did, some asked for a subsidy to make them jump. Thankfully, most of those who asked for a subsidy were told where to go, because there’s never any reason to subsidise nuclear.
The trouble with having private wealth invested in institutions which generate common wealth is that confusion arises over whether the organisation is there to deliver private or common wealth. That question should not arise: if the output from an organisation is patently common wealth (like roads, or electricity) than the provision of that output has to take precedence over the production of private wealth.
This is not a black/white argument: it’s not saying that assets which are common wealth cannot be run by organisations which generate private wealth. But it is establishing a very clear order or precedence: generating the common wealth has to come first and the private wealth needs to take second place to that.
Take our subsidy seeking power station organisations. Even if they have to take out private asset loans to upgrade the safety features of the power stations, these can still operate as private wealth generating organisations; it’s just that the private wealth will be smaller and the timescales longer that’s all.
Similarly, if you have a commercial running the maintenance of the roads the condition of that road has to be a good as possible. If that means that the shareholders get a smaller return one year then so be it: the road’s condition should come first.
This nettle has yet to be grasped, but it is fundamental to building a sustainable economy. The desire to gain private wealth is not sustainable if it damages common wealth in the process. If this principle was clearly understood then there would never have been any question of degrading the environment or polluting the air for the sake of creating private wealth in the first place.
Picture Credit: hand finger hands / Vasiliy Koval / photoXpress