17A037  Inherited Wealth by Jim Davies, 10/24/2017    


Few topics infuriate archists on the Left more than this. They show a deep hatred of rich kids; people whose Daddy earned a fortune and left it to his children. What contribution have these parasites made to society? Why should they bask in luxury while black single Moms have to scrape and beg for enough to keep their children from starvation? Etc.

It's a fact of nature that everyone is born into different circumstances. The only way that could be changed would be to generate babies in artificial wombs and raise them in a kiddie factory, grading them at every age to prepare them for specific classes of job chosen by committees of Wise Persons - the "solution" envisaged in Huxley's dystopian Brave New World. A solution infinitely worse than the problem. The socialist redistribution ideal is just a pale imitation of that, and springs directly from envy. Everyone does have talents; the task is to use and adapt them so as to live a fulfilling life.

In the coming zero government society that's exactly what all will be free to do, and no doubt that will lead to a spectrum of material wealth, from comfortable to very rich. Will that, in turn and in time, lead to dynasties of mega-rich families dominating society generation after generation?

No, and here's why.

Consider two historical situations: America following the extraordinary Industrial Revolution of the 19th Century, and England after the Norman conquest of 1066. In each case there was a rapid concentration of wealth among a few families.

The American case was accompanied by an unprecedented increase in wealth throughout society, not just among the captains of industry misrepresented as "robber barons" (they held no titles, and far from robbing anyone they enriched everyone.) In the English case, there was no such general prosperity; those who previously had owned and worked small lots of land had it confiscated and were made into serfs by the conquering Lords, appointed by the King. But in each case, there were a few hundred families controlling immense wealth.

The few very rich US families in 1900 did not preserve it for very long - or most of them did not. Some 65% of family fortunes are lost after one generation, and an astonishing 90% is lost after two; and this, despite the fact that in this democratic society, money buys political power and most wealthy people don't hesitate to purchase plenty. So today, after one century, names like Astor and Vanderbilt and Carnegie and Morgan and Hill are known as millionaires of the past, but not billionaires of the present. Rockefeller is an exception, but the well known Charles Schwab is not related to his namesake who ran Bethlehem Steel. Carnegie's is perhaps the best known of those names, but mainly because he chose to give most of his wealth away, rather than try to preserve it in family hands

This reflects the similar fact that companies dominant for a time most usually decline in influence after a few decades - despite, again, their best efforts to purchase political influence to protect them from more nimble competitors. According to Forbes, only one (GE) of the original dozen giant firms making up the Dow Jones list in 1896 is still in existence. A mere 40 years ago, IBM so dominated the world of computers that many saw it as a monopoly; the firm still prospers today, but has been overtaken by Apple and Microsoft - which did not exist at that time.

So, even when money can buy some government protection, the American case vividly shows that it is at least as hard to preserve wealth as it is to gain it in the first place. The market, distorted here though it is, does not favor dynasties.

The English case is different. The primary source of wealth was land, and the land was apportioned off to the King's lieutenants, and those estates were titled to the families permanently, from father to firstborn son - and only recently have they been relaxed in favor of daughters. Second and third sons were expected to serve in the military or the church, or sometimes in other professions, and were provided for - but had no share in the estate. Some present noble families can trace their lineage all the way back to that era. These were dynasties indeed, and lasted eight centuries and longer; and the key reason for their longevity was the protection provided by laws of inheritance.

Even those, however, were not enough once the market began to work in earnest, in the 1800s after the "Corn Laws" were abolished in 1846. These were protectionist laws that kept high the price of grain, and so maintained the agricultural revenue of the landed gentry. Once abolished in favor of free trade, the aristocracy was in financial crisis - and often resorted to marriage with wealthy American heiresses, who in effect kept it afloat in exchange for noble titles. The deliberate targeting of the aristocracy by the socialist governments of the early 20th Century often delivered it a coup de grace, but did not originate the decline. That was down to the free market.

These two examples furnish a good indicator of the prospects for long-term dynasties in the ZGS. They illustrate the two influences that determine how long a family keeps its wealth.

First, freedom from the curse of government will cause a vast increase in prosperity for all, including the most talented in business, and hence lead to large accumulations of fortune; just as the partially free societies in England and America did in the 19th Century and as the Chinese one has in the 30 years since trade (alone!) was liberalized in 1980; its GDP grew by eight times in 30 years! The total elimination of government here after E-Day will stimulate growth by even more; and the most successful will pass on that wealth to their children. So, there will be a tendency for dynasties to begin.

But second, the main way that they are preserved long-term is shown to be the help and protection of government, and there won't be any of that at all. Hence, wealth will be passed down and inherited, but will be kept in each family only if the "rich kids" are as skilled as their parents, and even with the considerable help of government in this country, that is not at all easy - as that 90% loss statistic showed. There are exceptions now (the Trump family may well be one; Donald inherited from Fred and has grown the business; Don Jr, Eric and Ivanka appear likely to do the same) and in the ZGS there may be more; but the tendency will be for rich kids who are idle to lose it; for the easiest way to get one billion dollars is to start with two.

It will be interesting to find out how many are preserved beyond two generations. I can hardly wait.

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