Germany's meritocratic dream is being destroyed by inherited wealth

Wir Erben: Was Geld mit Menschen macht [We The Heirs: What Money Does To People]
by Julia Friedrichs
Berlin Verlag (19.99)

During the 2008 US presidential campaign, Mitt Romney talked about the "politics of envy" to deflect attention from his own wealth and smear Barack Obama. It didn't wash with voters, judging by the election result. And yet the phrase – and idea – goes hand in hand with most discussions of wealth inequality. Usually it's lobbed by defenders of the status quo, so it comes as something of a surprise that Julia Friedrichs, a 35-year-old German journalist and decided critic of inequality, brings up envy – her own – early in her new book about inheritance.

She stumbled onto her subject when she learned that a friend who had always struggled to make a living had suddenly bought a chic townhouse in a desirable Berlin neighbourhood. Other friends with varying income levels soon followed, and when Friedrichs asked how they were managing the high prices, she found they were reluctant to admit it was down to money they'd inherited.

They were right to be reluctant: the fact infuriated her. The meritocracy she'd presumed she was living in was being subsumed by a world in which your basic living conditions depended on one black-and-white question – whether you were an heir.

In Germany, the notion of inequality perpetuated by inherited wealth has been relatively uninteresting until recently. Two world wars and hyperinflation destroyed the country's inheritances, and it wasn't until the 1950s that the middle classes (only in West Germany, of course) were again able to accumulate significant savings. They now plan to pass those savings on to their children and grandchildren, and Friedrichs estimates €2bn to €4bn will be inherited in Germany over the next decade.

Only a tiny portion – for 2014, she calculates an estimated 2% – of the coming wave of inherited wealth will be taxed, partly because of generous tax-free allowances (€400,000 per child, compared with €100,000 in France, €16,000 in Spain, or just under €20,000 in the Netherlands), partly because the law includes big loopholes for family businesses, which often can be passed on without any tax at all.

It's here that Friedrichs' book becomes an interesting companion to Thomas Piketty's Capital in the Twenty-First Century – in part because of the areas where she agrees with him, and in part because of where she departs. First, the former. As Germany's new generation of heirs often inherit more money than they will ever earn on their own, Friedrichs argues, capital will become more important than earnings in determining how you live and society will be transformed into a "refeudalised" system reminiscent of 19th century novels. "The country is changing," she writes. "It's becoming a society of heirs."

But the fact that she does not follow Piketty entirely down his path is telling. Whereas he argues that there is an inbuilt tendency in capitalism towards inequality, Friedrichs presents herself as a true believer in the meritocracy myth of the Western world.

For her, the decades of West German prosperity, in which even middle-class families were able to create their own wealth on the back of fair and rising wages, are a lost golden age.

She blames wealth inequality, not income inequality, for a changed state of affairs where friends without pay cheques can still afford fantastic flats. As she wrote in the weekly Die Zeit: "We believed that talent and hard work would provide a good life for us."

But this belief in a meritocracy rings false – even if Germany has managed to hold back income inequality better than many of its European peers – in part because Friedrichs made a name for herself questioning the fairness of the extant German system, with two books examining the education of the elite and the struggles of the poor.

Where her anger is easier to take is over a lack of discussion in Germany about inheritance and its discontents. Whereas inherited wealth is a topic of endless fascination in the UK and US, the topic is largely avoided in the Federal Republic. That, Friedrichs argues, is down to the power of family – the apparatus of inheritance, after all – as an institution neither the public nor politicians want to start questioning. And yet in the face of such a massive change, her call for a real conversation seems a modest, and reasonable, request.

Further reading on ... prosperity

La Distinction by Pierre Bourdieu. An ancestor of Piketty, he develops the idea of three types of capital, including cultural capital, and argues the French class system hasn't changed since the Revolution.

The Rise Of The Meritocracy by Michael Young. The satire that coined the titular term. Young meant it as a criticism; only later was it picked up as a concept worth striving towards.

Postwar: A History Of Europe Since 1945 by Tony Judt. A highly acclaimed study of how the continent coped with war's aftermath and new prosperity. Debt: The First 5,000 Years by David Graeber. An exhaustive, authoritative study of debt and its ramifications by a major historian and anthropologist.

The Grapes Of Wrath by John Steinbeck. Set during the Great Depression, it describes huge mounds of food being burned to protect prices while people starve for lack of work.

Prosperity Without Growth: Economics For A Finite Planet by Tim Jackson. An adviser to the UK government explosively argues that for developed nations, further growth brings no social benefits.

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