
New research shows Europe leads the world in inherited wealth - walterbell
http://www.bloomberg.com/news/articles/2016-08-23/how-to-stay-rich-in-europe-inherit-money-for-700-years
======
sevenless
The USA's social mobility is much worse than the EU's, though. If you're born
in the bottom 20% by household income your chance of making it to the top 20%
is lower. The proportion of billionaires who inherited their wealth doesn't
make any odds to the economic mobility of an ordinary person. It is
_ridiculous_ to go from "Overall, heirs and heiresses make up about half of
Western Europe's billionaires" to claim "The lack of social mobility is more
of a concern" in Europe.

[http://www.economist.com/news/united-
states/21595437-america...](http://www.economist.com/news/united-
states/21595437-america-no-less-socially-mobile-it-was-generation-ago-
mobility-measured)

> The study confirms previous findings that America’s social mobility is low
> compared with many European countries. (In Denmark, a poor child has twice
> as much chance of making it to the top quintile as in America.)

~~~
whenwillitstop
The spread is also larger. The difference between the bottom 20% and the top
20% in the USA is higher than in Europe. So measuring by that is useless,
since, in general, a 40%er in the USA is better off than a 40%er in Europe.
Thanks for the propaganda though!

~~~
sevenless
Yet you're arguing that mobilities can't be compared, in response to _my_
post, not to the original article claiming Europe's mobility is worse... :-)

It seems a little like special pleading. The ease of transition from bottom to
top quintile is an accepted index of how mobile or stratified a society is,
not how wealthy individuals are. Of course different nations will be better or
worse off, or will have different Gini indices as a result of social policy,
but that doesn't mean we can't meaningfully compare their mobilities. Pointing
out the figures isn't "propaganda".

> a 40%er in the USA is better off than a 40%er in Europe

Generalizing about "Europe" doesn't make much sense. Between (say) the UK and
Albania, there's a vast economic gap (about 10 fold lower GDP/capita). If
you're talking about Western Europe, what do you mean by "is better off"?

~~~
ppereira
The mobility between quintiles is not particularly interesting; it is far too
coarse a measure. The changes in inequality that we see in the US, Canada, and
the UK affect the relative earning capacity of the bottom 90% vs. the top 10%,
with the 90th percentile being an inflection point at our levels of
inequality.

The relevant reduction in mobility would primarily be within the top 10% tail
of the Pareto distribution for income, the dynamics of the bottom 90% are
quite different -- although their absolute share vs. the top 10% has certainly
declined.

------
ChuckMcM
Wow, a lot of the expected arguments here, but consider that some
"multigenerational" wealthy families are more like businesses than what some
would consider family.

The winery example is a good one, if they stopped producing wine the family
"fortune" would dwindle and evaporate. How is that different than a
corporation which fails if it stops producing product? Not a whole lot. The
big difference is the governance, the family chooses the person to "lead" the
business, and other family members either learn the business or move on to
something else.

I would be interested in research that followed up on heirs and heiresses that
chose to do something other than work in the family business, to see how many
of them created new wealth in the form of the their own business or endeavor.
As opposed to lived a wealthy lifestyle and then died without leaving less
than they started with to their progeny.

------
solidangle
*among billionaires

The numbers of billionaires, and especially percentages of those, are a
worthless metric. Billionaires are about as rare unicorns, especially here in
the Netherlands (pop. 17 million) where we only have 9 billionaires in total.
Due to the high taxes here in Europe it's incredibly difficult to become very
rich, so it's not strange that a lot of our billionaires have inherited their
wealth. We also lack the tech scene which created a lot of self-made
billionaires in the US.

~~~
Noseshine

        > Due to the high taxes here in Europe it's incredibly difficult to become very rich
    

With all due respect, but you don't understand what "getting _very_ rich"
means. You don't get money and place it in a bank. The money is the firm or
firms that you control, and that is where it remains. If you reinvest and
expand your business you don't pay a lot of taxes. The personal tax rate has
nothing to do with becoming a billionaire.

When it is harder to become a billionaire it shows that there is less of a
"winner takes all" system, which has advantages and disadvantages. The US is
much more "winner takes all" than Europe. That Europe still is a lot of
countries, the EU did not change that, is part of why that is so, but I would
not go so far to say it's the major part, even if Europe was "one" I think we
would still not be the same. That's from some business observations I made
while living in the US for a decade (I'm from Europe).

For an example what that means (winner takes all), when I worked for a tech
startup we found it pretty easy to get initial customers in Europe, Germany to
be exact. However, scaling was hard, getting a few customers helped with the
next ones but not all that much. It was very different in the US: It was very
hard to get even medium-sized companies interested, but when it started it was
like an avalanche. And most of those companies purchased from the market
leader (our competitor unfortunately), even as #2 we were far, far behind.
That obviously helps with wealth concentration. I'll leave it to you to decide
if you think that's a good thing, or to find a nuanced view.

    
    
        > We also lack the tech scene which created a lot of self-made billionaires in the US.
    

Food for (your) thought(s): Secret History of Silicon Valley -
[https://www.youtube.com/watch?v=ZTC_RxWN_xo](https://www.youtube.com/watch?v=ZTC_RxWN_xo)
A truly remarkable lecture form the Computer History Museum in Mountain View,
CA. TL;DR Silicon Valley was made possible by huge amounts of money spent by
the US government during WWII on R&D. The "billionaires" happened on that
basis. Also, and since I saw this first hand on both continents I feel very
comfortable making that claim, much of the current-time explanation for this
lies in what I wrote above - "winner takes all" plus "one market" sure helps
to concentrate wealth and more quickly too.

IMHO the US _does_ have something important: They have people and networks of
people who understand scale and what is important and what isn't for business
success. More so than others, although I can only compare with Germany. I
completely reject your "analysis" though, well with that one sentence that
makes a statement about a reason (taxes).

------
dogma1138
It doesn't take much research to see this especially in the continental
states.

The UK and some of the Nordic countries do have some new money in the UK it's
mostly in the financial sector and rich individuals from the colonies moving
into the UK.

And as far as the Nordics go historically the wealth was more limited than in
the richer states, so the post war economy had greater impact on the wealth of
those nations.

If you discount the wealth redistribution following WW1 and especially WW2
(like it or not Nazi gold is part of the economy today, as well as many other
wartime confiscations) it would probably have worse wealth distribution than
the US since it still has lower mobility and maybe even worse than some
emerging and developing markets.

~~~
jcbrand
> it would probably have worse wealth distribution than the US since it still
> has lower mobility and maybe even worse than some emerging and developing
> markets.

But higher taxes for the rich and more redistributive social policies. So I'm
not convinced.

~~~
dogma1138
You should read are bit more about this these 2 are a good start.

[https://mises.org/blog/poor-us-are-richer-middle-class-
much-...](https://mises.org/blog/poor-us-are-richer-middle-class-much-europe)
[http://www.institutmolinari.org/IMG/pdf/tax-burden-
eu-2015.p...](http://www.institutmolinari.org/IMG/pdf/tax-burden-eu-2015.pdf)

Taxes are higher but not for the rich, the majority of the tax burden in
Europe falls on employers ("payroll" style tax) and on the middle class. The
US has one of the highest capital gains and corporate tax rates in the
developed world and higher than pretty much every country in Europe.

When you add all the indirect and direct taxes on EU workers you get a pretty
much horrible system where the majority of the poor in the US have a similar
or higher purchasing power than what the median salary workers see in the EU
after taxes.

Accumulating wealth in the EU is considerably harder because of just how
harshly you are taxed the joke about being paid half and have double the tax
is kinda silly but it's kinda true even in tech. Yes many EU countries do
offer things like healthcare and education for free but it's far from free and
I'm not sure if locking their middle class into a loop that prevents it from
accumulating wealth is really worth it.

Also since employing individuals in the EU is so expensive especially compared
to the US you get to the point where recovering from any economic crises is
much harder and leaves the workers at a considerable disadvantage to both
being replaced by automation and poached by high paying countries and emerging
economies.

When you get to the point where your tax income is half your GDP I think you
are doing something seriously wrong as you are playing a nearly zero sum game
because overall your citizens are not gaining much wealth and you are just
shoveling it from one pocket into the other.

[https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven...](https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP)

And worse when most of that tax burden falls on the individuals through VAT
and social insurance and income taxes, while capital gains taxes are just a
rounding error

[http://ec.europa.eu/eurostat/statistics-
explained/images/0/0...](http://ec.europa.eu/eurostat/statistics-
explained/images/0/01/Breakdown_of_tax_revenue_by_country_and_by_main_tax_categories%28percentage_of_GDP%29_2014.PNG)

------
bloatisgood
How does receiving the assets of your parents after their death affect social
mobility? By the time your parents die you are usually 50 years old which
means your social environment is a far bigger factor. During the time the
parents are alive the children benefit from their support directly, no
inheritance needed. Even a 100% inheritance tax is not going to solve that.

What a lot of people seem to think is that an inheritance is undeserved
because the person receiving it didn't do anything to earn it. Obviously the
parents earned this through their income and decided to not spend everything
and give what remained of their wealth to their children. Even if the parents
merely received their wealth from another inheritance they still had to decide
to not spend more than they add to the inheritance, otherwise it would dry up
over multiple generations.

Why do we even care about billionaires anyway? Why should I care e.g. that
Bill Gates' networth is $78 billion? Why not care about the people at the
bottom? Why not give them the things they truly need like financial security
instead of letting them worry that if they earn too much their income drops.
Either you're poor and heavily depend on welfare or you earn enough to not
need welfare in the first place. There is no middle ground and the gap between
the two is very large.

~~~
sevenless
The problem with inherited wealth in general is that you end up with
aristocracies. I mean, that's literally how aristocracies formed in the first
place. Wealth begets wealth, so the fixed point of a society without
confiscatory inheritance tax is feudalism.

> Why do we even care about billionaires anyway?

For one thing, money is power. It's undemocratic to allow some people to be
worth millions of times others. If you allow some individuals to become
infinitely wealthy, they will eventually buy your political system and bend it
to benefit them. In principle, that's bad. In practice, it's happened.

For another, the way the wealthy got rich constitutes a wholesale transfer of
wealth from the nation. Bill Gates is a rich man because he benefited from
government spending and welfare for the rich. Specifically from a form of
welfare for the rich known as 'intellectual property law', which means people
have to pay a large fee to Microsoft, enforced by the US government, to copy
some 1's and 0's. He got rich from government spending on education,
infrastructure and defense, which built a stable middle class that could buy
computers. He also got rich from the defense and research spending that built
the internet and gave the technology freely to the people. Finally, he got
even richer from monopolistic anti-competitive behavior, and tax evasion which
put Microsoft's tax address in Nevada, and from the political lobbying that
allowed this theft to happen.

Bill Gates, like all billionaires, is a welfare queen, and the wealth he's
sitting on should be returned to the nation he took it from.

------
jkot
> _More than _one-third_ of Italy’s richest people inherited their fortunes,
> compared with _just 29 percent_ in the U.S_

Garbage article

~~~
chrisseaton
Do you have some other information you'd like to share about that? You've just
said it's "garbage" without saying why.

~~~
fzzzy
Why do they switch the units they use in the same sentence, except to
obfuscate the fact that the two values are very close to each other? If they
said 31 percent of italy and 29 percent of us, the case might seem weaker.

~~~
chrisseaton
Ah, I actually didn't see that. I would have done if you had said more than
"garbage".

~~~
fzzzy
That wasn't me. I agree the original comment could have been more substantial.
:)

~~~
SilasX
I agree (with your point and the "garbage" remark) but FWIW it was obvious to
me what the criticism was -- 29% vs [obscured way of saying GT 33.3%].

------
cs702
Interestingly, I can't think of a single self-made entrepreneur out of
continental Europe -- think Germany, France, Italy, and their neighboring
countries -- who in recent history has become immensely wealthy by creating
new products or services that have changed the world.

In continental Europe, there is no Jeff Bezos, no Sergei Brin, no Bill Gates,
no Steve Jobs, no Elon Musk, no Larry Page, no Mark Zuckerberg... one could
keep going.

I don't think it's a coincidence.

\--

PS. In response to comments below, note that the founders of Skype, Spotify,
Ikea, are not from continental Europe; they are from the _Scandinavian
Peninsula_. Note also that I'm talking about NEW kinds of products and
services that have changed the world.

~~~
loopbit
Not technical and the "creating new products or services that have changed the
world" is hugely debatable, but how about Amancio Ortega[0]?

A spaniard, son of a railroad worker. Started working as a shop hand at age 14
and it's now, at least according to Forbes[1], the richest man in Europe and
the wealthiest retailer in the world. You can't be more self-made than that.

On the other hand, some of the people you mention were already well-off to
begin with, even if not really rich.

Once said that, I agree with you at some level: The mindset in Europe is (or
was, maybe it's changing?) different from the US and, generally speaking, more
risk-averse. Also, the feeling among most of the european entrepreneurs I've
met is that the US is the place to go if you really want to succeed: Funding,
market fit, know-how... all that is perceived to be better/easier to get in
the US.

Anyway, just my 2 cents and my very personal, very subjective, anecdote-based
perception of it.

[0]
[https://en.wikipedia.org/wiki/Amancio_Ortega](https://en.wikipedia.org/wiki/Amancio_Ortega)
[1] [http://www.forbes.com/profile/amancio-
ortega](http://www.forbes.com/profile/amancio-ortega)

~~~
cs702
I agree: Amancio Ortega is self-made and his accomplishments are incredible,
but like you, I don't see Zara as a "world-changing" product or service. By
the way, I realize that "world-changing" is a rather imprecise moniker, but I
still find it useful: no one would deny that the iPhone and Google, for
example, were new world-changing products.

I also agree with your perception that the mindset in Europe is (or was?)
different from the US and, generally speaking, more risk-averse. I don't think
this is unrelated to the greater prevalence of inherited wealth.

~~~
dilemma
The apparel industry provides one of three basic needs. The two others are
food and shelter. A company that goes beyond providing bare necessities to
also make products that fulfill psychological and social functions by offering
different types of aesthetics that can be used for signaling, for everyone
almost regardless of class and income, is providing a very valuable service.

A company like Zara faces similar challenges in regards to distribution as
does Amazon. But it also does more, it designs and produces the products it
sells, something that Amazon is completely incapable of doing. Furthermore,
they own and operate something like 30-50% of the production capacity they
need. These are hard problems that very few companies are able to understand
and solve.

