Podium: It is time to redefine personal wealth

Lecture by Chairman of the Royal Society for the encouragement of Arts, Manufactures & Commerce

SINCE THE dawn of the industrial revolution, and perhaps even before that, the definition of personal wealth has become increasingly narrow. We have now reached the point where even the newest of new editions of the Oxford Dictionary of English defines it only as money or other financially measurable assets. Wealth now implies only material prosperity, whereas in Middle English its roots come from "well" or "wellness". In those pre-industrial days, personal health was the critical component of a person's wealth portfolio. Well-being, added to a panoply of other advantages, constituted total wealth. For wealth to remain the appropriate word that it once was, it needs once again to be defined more broadly.

There is some urgency! First, there is a general assumption today that capitalism has just won a great ideological victory. Accepting that as a truth, and with nothing left to prove, government and business leaders will become increasingly dependent for the formulation of policy and strategy on economic, particularly financial and monetary, measures. The intangible and less measurable aspects of the market philosophy are getting less attention.

Secondly, the legal profession, in its new pro-active mood, claims to be able to put a financial value on just about any misfortune. They even put precise financial values on any human life or incapacity. They are skilfully manoeuvring the population at large into believing that they all have the right to claim compensation at the expense of their fellow citizens for any inconvenience, however trivial.

The legal profession is enthusiastically supported by the insurance industry, which will now cover almost any contingency that may lead to litigation, and the media, which so ghoulishly sups off human misfortune and pays large sums to any "victim" with a personal story to tell.

Thirdly, while capitalism may have won the most recent round, there are other forces rapidly lining up to challenge the narrow definition of wealth that gives credit only to tangible assets. A multicultural society in an advanced state of development such as our own needs to adapt its assessment of what is important enough to be counted as wealth. The same must apply to the increasing numbers of people who are concerned about this planet and the species that inhabit it - the environmentalists. They, too, are encouraging a reassessment of the components of wealth and are proposing actions where the cost of implementation is clearly identifiable but where the benefits of success may be impossible to measure in financial terms.

Generic examples of those components of personal wealth that would broaden our definition would be: knowledge of almost any kind; sociability, and the ability to contribute to a community; mental and physical health; time, and the ability to use it well; freedom of thought and expression; and an ability to contribute to a secure, sustainable environment.

There are many others. They share a number of difficulties when they stake their claim as components of wealth.

First, they are not easily valued in financial terms and, indeed, some are not measurable at all. Secondly, they are not assets that are easily insurable, so that will require us to take personal risk without coverage. Greater risk-taking will require a return to the application of common sense in our daily lives. Thirdly, their expansion or restriction is quite difficult to legislate, thus discouraging legislators and the legal profession from interfering in our personal judgements. And, fourthly, because the components are difficult to value, they are difficult to tax. Governments are already concerned at the ease with which proprietary knowledge flashes along optical fibres and across international borders with no opportunity for financial levies, except through the profits of the communications industry.

The time has come to have a more flexible, more civilised definition of wealth, reflecting a full array of assets accumulated during a lifetime. Any such redefinition will have to be adopted by individuals rather than organisations.

The developed world needs to reverse its current inexorable move to concentration on material wealth, so that emerging economies can accelerate progress towards sharing our success by using a new, common definition.

If the trend towards a more peaceful world and a more responsible use of resources is to continue, then at our peril do we in the developed world continue to accept the current definition.

We are in danger of raising yet another generation to believe that success consists predominantly of material wealth.