The Future of Private Wealth

This recent article in the NY Times about Ronald Lauder and his tax savviness, and the recent rise, and decline of Occupy Wall Street had me turning to Joseph Thorndike Jr's book The Very Rich again.  His closing chapter seems timely, please allow me to present it here:

"In arriving at any judgement on the social utility of private wealth it is necessary to consider both what the fortune builders contributed to economic progress in the making of their money and what they contributed to social welfare in its use.  If all of them had been pirates like Jay Gould it would not be hard to conclude that the country would be better off without them.  If they had all developed products of recognized utility, like Cyrus McCormick and George Eastman, it could be said that they contributed far more to the general welfare than they got in the way of reward.

"Another judgement must be made on the social utility of these fortunes after they pass out of the hands of their builders.  If all the heirs had spent their riches on conspicuous consumption, as some of the Vanderbilts did, it would be easy to say that such fortunes might better have been forfeit to the tax collector.  But if they had all been devoted to the public good, like those of Carnegie or Ford, it would not be hard to conclude that they have served a better purpose than they would have served if thrown into the general revenue of the federal government.

"But the final assessment is not likely to be made by any such careful calculation of social utility.  Voters may be moved by feelings of envy toward those who strike it rich or--to put it more sympathetically--by feelings that gross inequalities in wealth are offensive to public morality.  On the other hand, they may be moved by the hope that they too may find the gold at the end of the rainbow or--again to put it more sympathetically--that the hope of high rewards still spurs men on to work that benefit society at large.

"There is another question too that may be crucial to the outcome.  That is whether young people--and especially the ablest young people--in our society have the same driving desire to get rich that their fathers and grandfathers did.  Lord Beaverbrook spoke for his generation when he said:  'The money brain is in the modern world the supreme brain.  Why?  Because that which the greatest number of men strive for will produce the fiercest competition of intellect.'

"Lord Beaverbrook was remembering the time when he had been plain Max Aitken, a poor Canadian boy making his way to wealth in the lumber business.  Aside from the fact that he ended up with an English title, his story was that of the American captains of industry.

"More than half a century has passed since that time.  And during these years the goal of moneymaking has been under consistent attack, especially on the college campuses.  Young people cannot but question whether the pursuit of wealth is worth the effort, and equally important, whether it is worthy of their talents.  It was not until about the middle of the last century that moneymaking became the most important goal for American youth.  In other times and places ambitious young men have striven equally hard to become Roman senators or medieval abbots or knights in armor.  In our society, fortune makers have been steadily losing prestige.  In the period that began with the election of John F. Kennedy and ended, for the time at least, with the resignation of Richard Nixon, some of the brightest of them found politics a more compelling life interest.  It is not easy to see where they will turn next, or whether the lights they follow will be more worthy than those followed by Andrew Carnegie or Henry Ford.  It would hardly be a great step forward if they created a society that glorified golf pros and rock stars over captains of industry.

"For some clue to the shape of things to come, we may perhaps return to the family which, more than any other, has been representative of the history of great wealth in this country, namely the Rockefellers. It was John D. who piled up the first of the billion-dollar fortunes and occasioned the greatest uproar over "ill-gotten gains."  It was he and his son and his grandsons who created the model for the philanthropic use of great fortunes.  But a new generation of Rockefellers has come of age, the children of the five brothers and hence known as the Cousins....There is among them little inclination to devote their lives either to conserving their money or to governing its use for philanthropic purposes.  Rather, it would seem, they wish they did not have it.  To many of them the name Rockefeller has itself been a burden, a cause for cringing when they are introduced to strangers, and an obstacle to establishing their own identities....

"Some of the Cousins, to be sure, have followed traditional paths, such as Nelson's son Rodman, who runs IBEC, the Latin American investment firm founded by his father, and John D. IV (Jay) who is president of West Virginia Wesleyan College.  But several of the Cousins have been active in left-wing movements, and several have spent long periods of 'penance' working in ghetto projects, insane asylums, and the like.  Laurance's daughter Marian is married to a Ph. D candidate at the University of California and spends her summers in a converted railroad caboose in the hills of northern California.  They get by on seven hundred dollars a month for a family of four and hope, by growing their own food and making their own clothes, to get down to three hundred dollars or less.

"Among the twenty-two Cousins, not one has become a playboy or a spendthrift or a loafer.  All appear to wrestle with the same Rockefeller conscience that burdened their fathers, but on their own very different terms.  Having tried so hard to distance themselves from their overhanging trust funds, hey were dismayed when Nelson, in order to win confirmation as Vice President, spread the family finances over the front pages of the nation's press.  His son Steven, an assistant professor at Middlebury College in Vermont, and the most articulate of the Cousins, says of the family as an institution, 'Isn't it just an anachronism, a dinosaur that is trying to keep me from going out and getting involved in American life just like everyone else?...The dynasty stuff--that's all finished.'  Says his cousin Laura, 'There is no way to justify the money.'

"It would be rash to conclude, on the evidence of one very special family, that private wealth has lost its appeal to the young.  In the first half century many prophets, including the second Rockefeller, have predicted that the age of great fortunes was ending, and so far they have been wrong.  But ideas and attitudes that begin in the upper levels of a society have a way of working themselves down through the whole pyramid.  If the young Rockefellers do indeed reflect a feeling that is widespread among members of their generation, it may be that Carnegie's Gospel of Wealth will soon have run its course.  When that day comes the multimillionaire will follow into the gallery of history the Roman senator, the medieval abbot, and the armed knight."

Joseph J. Thorndike, Jr.  The Very Rich A History of Wealth, 1976 by American Heritage Publishing, Inc. New York.