29 August 2016

Inherited Wealth

Capital in the Twenty-First Century by Thomas Piketty, 2014, Excerpts

Inherited wealth is a long term process. The advantage of owning things is that one can continue to consume and accumulate without having to work. It is not an insignificant thing when one country works for another and pays out a substantial share of its output as dividends and rent to foreigners over a long period of time.

When the rate of return on capital significantly exceeds the growth rate of the economy, then inherited wealth grows faster than output and income. It is inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor by a wide margin, and the concentration of wealth will attain extremely high levels – levels incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies.

Wealthy people are constantly coming up with new and ever more sophisticated legal structures to house their fortunes. Trust funds, foundations, and the like often serve to avoid taxes, but they also constrain the freedom of future generations to do as they please with the associated assets.

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