Inheriting is becoming nearly as important as working

Subscribe to enjoy similar stories. Work hard, children are told, and you will succeed. In recent decades this advice served the talented and the diligent well.

Many have made their own fortunes and live comfortably, regardless of how much money they inherited. Now, however, the importance of hereditary wealth is rising around the rich world, and that is a problem. People in advanced economies stand to inherit around $6trn this year—about 10% of GDP, up from around 5% on average in a selection of rich countries during the middle of the 20th century.

As a share of output, annual inheritance flows have doubled in France since the 1960s, and nearly trebled in Germany since the 1970s. Whether a young person can afford to buy a house and live in relative comfort is determined by inherited wealth nearly as much as it is by their own success at work. This shift has alarming economic and social consequences, because it imperils not just the meritocratic ideal, but capitalism itself.

In part, the inheritance boom is a reflection of a wealthier and ageing society. As economies have become richer, they have accumulated capital per worker—capital that someone has to own. But because the pace of economic growth has slackened and housing markets have boomed, the scale of this wealth relative to incomes has ballooned.

Nowhere is this combination of towering wealth and enduring sclerosis more evident than in Europe, where productivity growth has been dismal. More wealth means more inheritance for baby-boomers to pass on. And because wealth is far more unequally distributed than income, a new inheritocracy is being born.