When we look back in time and consider the capital and assets that previous generations have built up, one might wonder why more wealth hasn’t been created during this relatively long period, even among ordinary people. Generations of hard work and real estate should be passed on and endure. What is it, really, that hinders this type of intergenerational saving?
The most common explanation is that families in the past had many children, and that the value of estates and farms was divided until nothing remained. But someone must have acquired the original farm, and what prevented future generations from building on the existing value? Perhaps the division of income and the farm became a zero-sum game? Where the last generation was always left without assets? But shouldn’t a lifetime’s work compensate for the loss incurred during the division of property—even in agriculture and crafts, but to an even greater extent in more skilled professions? One often gets the impression that a very enterprising family member created the wealth and that subsequent generations squandered it. Substance abuse, gambling addiction, divorces, and many other factors can influence this trajectory. And we note that the exceptional relative who built up the assets was indeed exceptional, and that we are slowly returning to a kind of normality. I am unsure, however, whether this explanation holds up, since the successful ancestor should nevertheless have been able to pass on his success.
War and disasters are also blamed. If a country is occupied, the economic system is often reset, and the new ruler introduces their own tax and property system, which in the worst case can overturn the previous order. A socialist occupier may nationalize farmland and businesses, and enormous amounts of saved capital are transferred from individuals to the state. If the occupier then leaves the country within one or two generations, the assets can, in theory, be distributed to their rightful owners—though often with the problem that the assets have been mismanaged and their value has decreased. There are also difficulties with the distribution itself and the risk of injustice.
Another explanation is inflation—that is, the declining value of money—which means that one million in 1970 is not worth as much in 2026. Today, you need over 8 million dollars to have the same purchasing power that one million provided in 1970. We see an eightfold decrease in the value of money in just under 60 years. Most people understand that one should not save in cash, but rather in gold or other assets; however, the declining value of money likely still contributes to eroding our wealth, especially among those who are not wealthy.
Financial crises, stock market crashes, and technological shifts are also factors that contribute to the decline of wealth over time. These economic upheavals first hit the wallets of the wealthy and then have repercussions on the labour market, leading to mass unemployment and depression. This can create refugee flows either within a country—as during the Great Depression in the U.S. in the 1920s and 1930s, when people moved from one end of the country to the other in search of jobs— Or between countries, where people from the Eastern Bloc moved to Western Europe in the 1960s and 1970s in hopes of a better future. These newcomers often arrived without assets and started a new life, without land or inheritance.
Taxes, and above all wealth and inheritance taxes, are also factors that prevent generations from enriching one another. Sometimes one gets the impression that people within the left-wing movement believe there is some form of injustice when people inherit money. But if everyone were to inherit more, whether large or small amounts, everyone would ultimately benefit. Levelling the playing field is in many ways a socialist project, and instead of making everyone a little richer, it makes everyone poorer, creating the illusion that we are more equal. Government pension funds also cannot be inherited if the saver dies prematurely or does not use up the assets; in many countries, these assets are treated merely as a type of tax among other taxes. Elderly care and dementia care can also consume money that might otherwise have been passed on. And this care is not always state funded, even in high tax countries where state funding is the norm.
We see that the state is the arch-villain in this drama, both through monetary policy and inflation, but also through taxes. Even wars can be indirectly blamed on governments, and we see that the arms industry reaps enormous profits when conflicts arise around the world, even though this creates poverty, refugees, and reduced wealth transfer among ordinary people. It may come as a surprise that the state, which is supposed to protect and care for us, instead steals our money and slowly makes the majority poorer.
