In his famous treatise, the economist Adam Smith reminds us “that wealth does not consist in money, or in gold and silver; but in what money purchases, and is valuable only for purchasing.” Put another way, a nation’s wealth comprises “its land, houses, and consumable goods of all different kinds” — that is, the products and services available for purchase.
A modern-day example of this principle, albeit a negative one, is Venezuela. As a result of that country’s hyperinflation, created by an extraordinary expansion of its money supply, the monthly minimum wage there won’t even buy a Coca-cola. What is the current minimum wage? One million bolivares. Compare that to what a million dollars or euros could buy, and we can see Adam Smith’s point.
To increase a nation’s wealth, then, is not to increase its money supply but to produce more and better products and services. For a given supply of money, an increase in the quantity and quality of products and services increases wealth. Which means that every company, large or small, makes the nation richer, according to its level of productiveness. Which also means that whatever supports them in that process — or hampers them — can directly affect the nation’s economic wellbeing.
And that is the ultimate implication of Adam Smith’s point: that what matters fundamentally is what helps or hurts our ability to produce. Which seemingly should be the chief concern of anyone interested in the Wealth of Nations.
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