Our generation in the First World is presently living in a time of unprecedented wealth, luxury, and leisure. Technology has allowed huge advances in transportation, health care, and commerce. But much of the “wealth” that has been created is transitory.
Real Wealth
In essence, the only real wealth in the world is extractive. Extractive wealth come from mining, oil drilling, timber cutting, farming, ranching, or fishing. Manufacturing, while important, is essentially re-arranging what was originally extracted. And all other “wealth creation” in the so-called service economy is even more abstract–it is merely shuffling around bits of paper or electronic digits that represent someone else’s original extractive labor, or manufacturing labor.
Our society has put unrealistic values on services. What would you rather own? One share of Google stock (currently worth around $650), or 10 shares of Caterpillar, Inc. (“Cat”) stock–also currently worth around $650.) Google does not produce any tangible products. They only provide a service. Their capital assets are a just office buildings, computers, desks, and chairs. In contrast, Cat has huge factories with almost 100,000 employees that produce many thousands of machines each year that can be used to extract real wealth through mining, farming, and forestry. But oddly, the market capitalization of Google is larger than that of Cat. What is wrong with this picture?
Now consider this: What would you rather own? 12 shares of Caterpillar Tractor stock (currently worth around $850), or an ounce of gold (also currently worth around $850)? The Caterpillar corporation could go bankrupt, making your shares of Cat stock worthless. (Just ask anyone that owned Pan-Am stock. Those stock certificates are now useful only as bird cage liner.) Can the value of an ounce of gold ever reach zero? Certainly not.