RALEIGH – According to research reported in the Christian Science Monitor, about nine out of every 10 American families who become wealthy will lose that wealth by the third generation. I suppose that to the thieves who champion the welfare state, this is disastrous news – how do those 10 percent continue to escape our justice? – but to more reasonable folk, the information should prompt other thoughts.
In a sense, recent data on wealth transfers across the generations merely serve to codify an old wisdom about “shirtsleeves to shirtsleeves in three generations.” We are all familiar with the names of prominent families whose fortunes do survive the generations intact, often in the form of major institutions created or charitable foundations endowed. Vanderbilt, Carnegie, Rockefeller, in this state Duke and Reynolds – the names survive, though the businesses may not. What’s worth remembering, though, is that for every family whose scions luxuriate and honors proliferate, there are many more who built fortunes and proceeded to dissipate them within a few decades. There’s a reason we don’t recall their names, but the failure to do so can blind us to the precarious status of “the wealthy” in a dynamic, non-feudal society where wealth must be earned by continuing to deliver goods and services that demanding consumers will choose to buy.
If my own family tree ever included a branch or knot of wealth, I’ve never heard about it. We’re talking about simple Piedmont and mountain folks who didn’t go to college and didn’t own their own businesses (though personal frugality, another common element in financial success, is a theme in family stories, many involving individuals with Gaelic-tinged names). But neither has there ever been much support in my clan for big government or coercive wealth transfers.
It is a great mistake to assume, as so many would-be redistributionists have throughout American history, that there is an inherent desire on the part of people of modest means to loot people of immodest means. Sure, there is a gut-level, populist resentment of wasteful luxury that unsavory politicians seek to tap. I continue to feel it myself on occasion. When I read about some of the free-spending antics of the rich and famous, the annoyance arises unbidden. How could yet another pricey automobile even come close to making one feel as good as giving money to an effective charity, commissioning a great and abiding work of art, or making a personal contribution to a needy, deserving family? I know intellectually that buying the car also confers social benefit, as the people who make both the end product and its constituent elements are assured of continued employment and the pride of producing an attractive and valuable product. But I can’t help acting out in my own mind a scene in which I approach the blighter, pop him on the forehead, and say, “Man, what are you thinking?”
In a free society, of course, what annoys or even angers us does not automatically become a punishable transgression. If a family’s wealth is earned justly – that is, not by using force or fraud, most especially including government largesse (as so many “robber barons” did in the 19th century) – then it is the family’s property to do with as it sees fit. That’s what freedom means. It also means that the rest of us are free to praise, condemn, cajole, or criticize to our heart’s content in response to what the family does with its money. It is consistent to argue that you have the right to spend your dollars without encroachment and that you are spending them stupidly or irresponsibly.
Perhaps the “problem” will go away altogether, though, once the statists figure out the proper mix of taxes and regulations to nail that last 10 percent.
Hood is president of the John Locke Foundation.