An interesting article in FT – ‘Inheritance should not be an alternative to hard work’ talks of rising importance of inherited wealth, on a scale that will make it a viable alternative to work. This is a result of slow economic growth in rich countries. Slow growth reduces wealth created by other sources and hence increases importance of inheritance.
The phenomenon is noteworthy for its social, political and economic implications. If it persists over long term, it would influence direction of economies, their efficiencies & sustainability. It would also present risk to belief in fairness of society. The issue, and all its effects gain importance in an environment of slow growth over a long time horizon.
One solution to this issue is higher economic growth. However, the structure of this growth is important. To be sustainable, growth should be based on productive activities, i.e. those that produce goods or services of some utility, and not just an asset price increase. Another attribute of sustainable growth is perception of fairness of opportunity, i.e. a perception that everyone gets an opportunity to benefit from the growth. The existing economic structure should also have an element of meritocracy, a belief that at least to some extent people have a control over their destiny. When inherited money becomes more important, perceptions of fairness and meritocracy become weak.
These factors are useful benchmarks to evaluate government stimulus programs in different economies. Measured this way, most governments today need to do more to ensure sustainability of growth. Scrambling for growth in any form is not the way to do that.
The phenomenon is noteworthy for its social, political and economic implications. If it persists over long term, it would influence direction of economies, their efficiencies & sustainability. It would also present risk to belief in fairness of society. The issue, and all its effects gain importance in an environment of slow growth over a long time horizon.
One solution to this issue is higher economic growth. However, the structure of this growth is important. To be sustainable, growth should be based on productive activities, i.e. those that produce goods or services of some utility, and not just an asset price increase. Another attribute of sustainable growth is perception of fairness of opportunity, i.e. a perception that everyone gets an opportunity to benefit from the growth. The existing economic structure should also have an element of meritocracy, a belief that at least to some extent people have a control over their destiny. When inherited money becomes more important, perceptions of fairness and meritocracy become weak.
These factors are useful benchmarks to evaluate government stimulus programs in different economies. Measured this way, most governments today need to do more to ensure sustainability of growth. Scrambling for growth in any form is not the way to do that.
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