discovolante wrote: ↑Thu Sep 10, 2020 1:32 pm
Millennie Al wrote: ↑Thu Sep 10, 2020 12:25 am
However the idea that we pass wealth like that is ridiculous. How many very wealthy people have inherited it from their great grandparents? Generally when people inherit wealth they are less able to manage it than their parents, and another generation or two generally sees the wealth decline a lot.
And, quite apart from that, it betrays a fundamental error in how the world works. Wealth is not zero sum. In aggregate, people today are wealthier than their parents, who in turn were wealthier than their parents. You don't have to go very far back before the comparison gets to the point that an ordinary person today is wealthy beyond the wildest dreams of their ancestor.
I'm talking about distribution, not relative wealth over time within generations.
But you said:
as far as I can remember, it's been demonstrated that inherited wealth is becoming more concentrated rather than the other way round.
If you means non-inherited wealth, then that's a very different matter, and very difficult to measure.
Can you give evidence of how people 'generally' squander their inherited wealth?
Find any list of rich people - e.g. the Sunday Times rich list - and see how many of them are wealthy due to inheriting it and have got richer than whoever they inherited from other than by generating the wealth themselves.
To take a very simple and concrete example - houses. There has been lots of house building going on, resulting in a very obvious and tangible increase in the total wealth to go around. And it's certainly not the case that the new houses are distributed amongst the descendants of wealthy people. Many homeowners have become so simply by paying for their house.
Or...granting a security over the property to their bank. Which is owned by...you may own the house outright eventually but most people aren't cash buyers.
When you take out a mortgage loan you still own the property. And I'd be very surpised if you could find a major bank that is owned by rich people rather than by shareholders (which, obviously, will then include ordinary people via pension funds etc).
as far as I can remember, it's been demonstrated that inherited wealth is becoming more concentrated rather than the other way round.
I would be very interested to see such a demonstration, as it seems very highly implausible. Especially in the UK with inheritance tax at 40%.
I think perhaps what I was getting at was concentration of wealth, with inheritance being a factor, but my memory played tricks on me. Anyway for now I've just managed to dig up a couple of graphs from Thomas Piketty which are a bit more modest than I might have suggested but show a reversal of a trend in the 20th century towards a lower concentration of inherited wealth (connected with WWII of course). The first one is based on figures from France but I wasn't specifically talking about the UK.
http://piketty.pse.ens.fr/files/capital ... /F11.6.pdf - a simulation of the value of inheritance as a percentage of national income, from 1820 to present and then projected to 2100.
http://piketty.pse.ens.fr/files/capital ... F11.12.pdf - inheritance flow in France, UK and Germany 1900 to 2010 (again, value of inheritance as a percentage of national income). Lower than 1900 but on the increase from the mid 20th century.
I was very pleased to see that those graphs said where I could find sources to the data, and then very disappointed to find it was just a link to Piketty's book. I'm not reading a whole book just to try to track down where that data came from. However, looking at the graphs, 12% of "national income" in France was the "actual value of bequests and gifts". I'll assume the national income means GDP, which is $2.7trillion, so this means that annually, $324billion is inherited or gifts. I'll have to assume that the gifts are intergenerational, because otherwise Piketty has added together two figures that make no sense when added together. From
https://www.visualcapitalist.com/map-wealth-of-nations/ I find that the total wealth of France is $5.9trillion. Since intergenerational transfers can, by definition, only happen once per generation, (and must also happen at that rate, as the dead cannot keep owning their property) that means that French people live an average of 18 years.