Humankind & Resource Distribution—II: What is wealth?

What constitutes the wealth of a nation? Its mineral reserves, bank deposits, stock market capitalisation, national income, or the number of billionaires it produces? None offers a satisfactory answer in isolation. A country can possess enormous natural resources and remain impoverished. Another may have relatively few mineral deposits but flourish through education, technological capability and competent institutions. An economy can report rising financial valuations while workers struggle to secure housing, healthcare and a decent livelihood. Wealth must, therefore, be examined not merely as a stock of possessions but as a society’s capacity to sustain and improve human life.

The  Part I of this series questioned the easy movement from economic scarcity to an explanation of human deprivation. The next inquiry follows naturally: who creates wealth, and how does the wealth created by many become the property of a few?

A particularly useful starting point is Ibn Khaldun (1332–1406), whose Muqaddimah explored the relationships among work, cooperation, urbanisation, taxation, political authority and the rise and decline of states.[1] His observations, recently recalled by historian Ilhan Niaz, deserve examination not as prophetic anticipation of every modern theory but as an unusually integrated account of economic life.[2]

For Ibn Khaldun, geography and climate influence the opportunities available to communities, but natural endowment alone does not determine prosperity. Human beings combine their efforts to secure necessities; specialisation and cooperation make possible an output beyond what isolated individuals could produce.

Towns expand as productive activities diversify, skills become more refined, and exchange supports increasingly complex forms of livelihood. Surplus is thus a social achievement, not simply an individual windfall.

This is the first principle of a credible theory of wealth: no individual creates prosperity alone. Even an exceptionally inventive entrepreneur depends upon language, education, accumulated knowledge, infrastructure, institutions, suppliers, workers and customers. The successful factory depends upon roads, electricity, courts, trained technicians and a functioning market.

The digital platform depends upon scientific discoveries and communications systems developed across generations. Private initiative matters enormously, but it operates within a social architecture. The distinction between collective creation and individual appropriation is not an argument against private property or profit. It is a demand for intellectual precision.

Ownership identifies who holds a legal claim; it does not, by itself, identify every contributor to the creation of value. Nor does the market price of an asset necessarily measure its contribution to social welfare. A speculative rise in urban land prices may enrich an owner without adding a single classroom, clinic or productive workplace.

Ibn Khaldun distinguished livelihoods based on labour and enterprise from wealth accumulated through political rank and privileged access. He also recognised differences among skills and occupations, and how urban demand could reward specialised work.

However, it would be misleading to present his discussion as a fully developed modern labour theory of value. His vocabulary, historical setting and concerns differ from those of later economists; careful scholarship cautions against translating every medieval category directly into contemporary terminology.[3]

Adam Smith later showed how the division of labour increases productive capacity, famously using pin manufacture to demonstrate the gains from specialisation.[4] Karl Marx placed labour and the appropriation of surplus at the centre of his critique of capitalism.[5] Their theories differ fundamentally, yet both help illuminate the question Ibn Khaldun posed in another setting: how does organised human effort generate output beyond immediate subsistence, and who obtains command over that surplus?

The answer requires distinguishing income, wealth and welfare. Income is a flow over time; wealth is a stock of assets net of liabilities; welfare concerns what people are actually able to do and become. These measures are related but not interchangeable. A household may own a modest home yet have little current income. A highly paid worker may own few assets. A society may have substantial aggregate wealth while leaving large numbers without basic capabilities.

Amartya Sen’s capability approach moves the inquiry beyond possession of commodities towards substantive freedoms: being nourished, educated, healthy, secure and able to participate in social life.[6] This provides a necessary corrective to economic accounting that celebrates accumulation without asking whether human possibilities expand.

The World Bank’s comprehensive wealth framework similarly recognises that produced capital and natural resources are only part of a nation’s assets; human capital is central to its long-term productive potential.[7]

Wealth, however, is also shaped by power. Political authorities provide indispensable public goods: security, transport, sanitation, legal order and the infrastructure of exchange. Financing these functions through fair and predictable taxation can enlarge productive possibilities.

When those who govern convert office into a means of securing commercial privileges, monopolies and arbitrary exactions, the relationship reverses. Public authority ceases to protect productive effort and begins to intercept its returns.

Ibn Khaldun’s celebrated observation that a dynasty may initially collect substantial revenue from modest assessments but later obtain little revenue from burdensome assessments must be read in this wider context.[8]

It was not a universal mathematical formula proving that low tax rates always maximise receipts. He was describing the erosion of incentives, trust and economic activity as political orders become predatory.

Taxation that finances education, public health and infrastructure can strengthen prosperity; taxation coupled with corruption, exemptions for the powerful and deteriorating services can undermine it.

The same distinction applies to capital. Savings invested in machinery, research, skills and productive businesses can expand future output. Capital deployed to acquire exclusive licences, corner essential markets or speculate on publicly created land values may generate private gains without comparable social benefits.

Debt can finance productive investment; it can also become a mechanism through which future earnings are pledged to maintain present consumption or protect privileged creditors. No financial instrument is intrinsically productive merely because it yields a return.

The most troubling transformation occurs when wealth purchases influence over the rules governing its further accumulation. Owners of concentrated assets may shape land-use decisions, tax concessions, procurement, financial regulation and access to credit. The outcome is not a free market rewarding enterprise but an institutional hierarchy protecting incumbents. The productive worker and innovative newcomer then compete on terms designed by those already powerful.

This has direct relevance for Pakistan. Its agricultural land, mineral potential, entrepreneurial communities and youthful population represent possibilities, not guaranteed prosperity. Weak schooling, uneven health services, privileged access to land and credit, unreliable enforcement and persistent fiscal inequities prevent these possibilities from becoming widely shared capabilities. Extractive privilege and low productivity can reinforce each other: the first discourages competition, while the second narrows the tax base and intensifies pressure on those least able to resist.

A national balance sheet must record more than financial claims. It must ask whether land is productive, whether children learn, whether workers can acquire skills, whether public institutions merit trust, whether women can participate fully in economic life, and whether the natural environment can sustain future generations. These are not sentimental additions to economics. They determine productivity, resilience and the durability of growth.

There is also a deeper dimension of wealth that conventional accounts struggle to value: knowledge freely transmitted, institutions established for public benefit, trust earned through fair dealing, and acts of courage that enable others to live with dignity. Such contributions may continue to generate benefits long after their originators have died.

They are not identical to financial assets, and we should not pretend they can all be assigned a market price. Their continuing social value nevertheless helps explain why the richest society is not necessarily the one with the greatest accumulation of private fortunes.

The decisive question, then, is not whether wealth may be owned privately. It is whether its creation is broad-based, its rewards defensible, and its use compatible with the freedom and welfare of others. Prosperity requires incentives to save, invest and innovate; justice requires that public institutions prevent the capture of collectively created gains by entrenched power.

In the next instalment, we will examine the distinction between possession and freedom. A person may command immense assets and remain captive to the need to preserve and enlarge them. Another may use a modest surplus to expand the opportunities of others. Nations confront the same choice when they organise their economies around productive exchange or the extraction of claims upon the labour and resources of others.

Wealth begins in human cooperation. Its ultimate worth is measured by the human possibilities it creates—and by how far those possibilities extend beyond its owners.

Endnotes

[1] Ibn Khaldun, The Muqaddimah: An Introduction to History, translated by Franz Rosenthal, 3 vols., Princeton University Press, 1958; abridged edition, edited by N. J. Dawood, Princeton University Press, 1967. See especially discussions of livelihood, profit, crafts, cooperation and taxation.

[2] Ilhan Niaz, public commentary on rereading Ibn Khaldun and the relationship between wealth, power and order, X, post supplied for this series, The sixteen observations are Niaz’s synthesis, not quotations from Ibn Khaldun.

[3] For contextual discussion, see Ibn Khaldun, The Muqaddimah, Rosenthal translation, Book V, chapters on crafts, labour and gain. Distinctions between medieval concepts and modern theories of value should be preserved.

[4] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776, Book I, chapter 1, “Of the Division of Labour.”

[5] Karl Marx, Capital: A Critique of Political Economy, vol. I, 1867, especially Parts III–V, on labour processes and surplus value.

[6] Amartya Sen, Development as Freedom, Oxford University Press, 1999, chapters 1–2; see also Commodities and Capabilities, North-Holland, 1985.

[7] World Bank, The Changing Wealth of Nations 2024: Revisiting the Measurement of Comprehensive Wealth, Washington, DC, 2024,

[8] Ibn Khaldun, The Muqaddimah, Rosenthal translation, Book III, discussion of taxation at the beginning and end of dynasties; the argument links fiscal burdens with governance, incentives and dynastic decline, not a universal optimal tax rate.

[To be continued]

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Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds an LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.