The Mythical Intergenerational Scalpel

Karl Muth calls for honest about the persistent and intergenerational nature of wealth.

We have an annoying, disingenuous habit in Western society to divide the individual as a person’s existence from birth to death, even though this is clearly untrue. It is a type of affirmative ignorance, a type of destructive “groupthink,” and a type of societal dishonesty.

The funny thing is that the majority of people would say, “You're wrong! I declare that I am myself, an island!” But just as no man (or person) is an island socially, no person is an island temporally (or financially, as I shall soon discuss). Time connects us. Ask the young parents setting aside a substantial chunk of their disposable combined incomes to provide for their new child’s education. Ask the middle-aged professional who has sacrificed every weekend to care for an ailing parent. Ask the highly-educated orphan whose parents left behind life insurance proceeds that paid for her excellent boarding school.

I know all three of these people. You probably do, too, or a version of them.

The concept that we are slices of time that begin at birth and end at death is a particularly dubious one in the context of money. We stand, today, in the midst of the largest intergenerational transfer of wealth in human history. The Baby Boomers, roughly defined as the immediately-postwar generation, are in the process of transferring approximately twenty-seven trillion dollars of wealth to their children in the United States (the transfer will be around forty to forty-one trillion globally by 2042). To pretend this is irrelevant is to not only have a terrible grasp of economics and finance, but to have no concept of the power of intergenerational wealth in shaping the lives of children.

I find it alarming that we, as a society (and I use society to mean something broader than “America” or “Britain”), insistently participate in this masquerade. Walking around posh London postcodes (and the same is true in enclaves within Paris, New York, Monte Carlo, Los Angeles, Vancouver, San Francisco, and Chicago), one cannot help but notice the number of vehicle number plates from faraway places and the number of languages being spoken. We applaud this diversity and the influx of money that comes with it, but ignore the effect of that money on the next generation – and that much of the money purchasing the real estate and luxury goods that surround us was earned prior to the current generation and, much of it, prior to WWII.

A narrative devoid of intergenerational wealth is convenient politically. It ignores the history of intergenerational privilege in both America and England, which is arguably both at its height and best-hidden today. It lets parents who are struggling under crushing debt of irresponsible mortgages, too many credit cards, and BMW payments pretend they are doing just what everyone else is doing and that they aren’t sacrificing the futures of their children to look slightly more successful to their coworkers. It allows the fortunate to take the whole of the credit for their success whilst being unsympathetic and blame-spewing toward those who have achieved less. It encourages politicians to tell rags-to-riches stories that are nearly always untrue in spirit and often untrue in fact. It endorses a collective exaggeration of class mobility which everyone can enjoy false pride in. It avoids the obvious questions of how a person not born with pecuniary advantages would manage to acquire the skills, Rolodex, and education needed to find success in the economic reality we’ve constructed.

The time I spend at universities is generally on one of four campuses (yes, campuses is now the plural usage accepted by the Oxford English Dictionary), all elite universities. The “demographics” of these places is astonishingly diverse, with more countries represented at the London School of Economics than at the United Nations and the University of Chicago bumping up each year against the limit on international student visas America will issue. But the “financial demographics” are far less impressive in their diversity (some universities have improved substantially in this regard, particularly Harvard, which is important to recognise – but there remains much work to be done). Why?

It is not the fault of the universities. It is not the nepotism and favouritism that created third- and fourth-generation Oxford and Harvard men not long ago.

It is, as I joked to a friend recently as we had tea near Harvard Square, a matter of “fertiliser.” To use a horticultural metaphor, wealth can buy you better fertiliser. It isn’t that wealthy people have smart children (those of us who spent childhoods with wealthy people can attest to this), but rather that children are discovered in these groups who have talents that need to be teased out, nurtured somehow, or pollinated by skilled tutors. Children in less-well-resourced groups do not have these talents discovered and the talents we superficially probe these groups for are those with very low probabilities of successful outcomes (e.g. “can these people play basketball well?”).

But let’s be honest: the main advantage children of wealthy parents have is… wealth. This access to funds allows them to have experiences that few other children, no matter how skilled, can afford – like taking an unpaid internship in Hong Kong, London, or New York to build connections or taking a large career risk with a startup company. Wealth also allows wealthy children to go to schools that are prestigious but “overpriced” in median earnings terms, examples being the School of Management at Yale or the Harvard Graduate School of Education, both of which are difficult to justify when one examines median graduate earnings in comparison to staggering tuition costs (compare Yale’s School of Management to the University of Chicago Booth School of Business or Harvard Business School and its graduate median earnings numbers substantially lower in most years).

I don’t have a solution to propose, but I do propose a process. We must have a societal, media, and cultural environment that is more honest about the persistent and intergenerational nature of wealth. We must consider and debate the question of conferred advantage through monetary and other inheritances. We, as those making investments and hiring decisions, must be realistic about why the wonderful candidate from Colombia or South Africa couldn’t afford to fly to New York City to take an unpaid four-month internship – one her competitor from the Upper East Side took as a matter of course.

We must recognise and interrogate our incorrect assumptions that everyone starts at square one. If there is in fact some persistent level of class mobility (which seems to be the case, according to a new paper by Chetty & Saez), one must then look not only at the poor’s aspirations to be middle-class or the middle-class aspiration to be wealthier than one’s parents, but also to the solidified and persistent level of wealth at the top, which is a less-turbulent place on the income spectrum. By focusing on the aspirations of the many, we ignore the persistent privilege of the few – which is, almost certainly, the place where intergenerational bequests of connections, privilege, and wealth are least meritocratic.

Perhaps it is true, as Gertrude suggests, that all that lives must die, passing through nature to eternity. But how little honesty we muster when discussing how eternal money and privilege can be.