From: lessgovt@gmail.com   
      
   America is exceptional for the number and size of its fortunes—and for   
   the fact that they don’t seem to last. John Steele Gordon takes a look   
   at the nation’s curious lack of dynastic wealth.   
      
   [Feature from Fall 2010 issue of Philanthropy magazine]   
   By John Steele Gordon   
      
   No country in the history of the world has created so much wealth as   
   has the United States. Nor has any country created so many fortunes of   
   legendary size. The names are still household words: Vanderbilt,   
   Astor, Carnegie, Rockefeller, Morgan, Gould, Mellon, Harriman, Frick,   
   Huntington, Croker, Flagler, Duke, and Hearst. And yet none of those   
   names are among the great American fortunes of today. Indeed, only   
   three of those names—Rockefeller, Hearst, and Mellon—make the Forbes   
   list of today’s 400 largest fortunes, and not one is near the top.   
      
   What happened to these vast fortunes? Why don’t American fortunes last   
   as so many European fortunes have? The Howard family, dukes of   
   Norfolk, for instance, has been among Britain’s richest families for   
   more than 500 years. But while John D. Rockefeller Sr. was worth   
   perhaps $2 billion in 1915 (a year when the federal government spent   
   only $746 million), his grandson David Rockefeller stands at 147 on   
   the Forbes list. By far the wealthiest living Rockefeller—largely on   
   account of a long, successful career in finance—David in 2009 had a   
   net worth of $2.2 billion, about what his grandfather was worth in   
   nominal terms a century ago. Taking inflation into account, however,   
   his fortune is only about 10 percent the size of his grandfather’s.   
   Moreover, Senior’s great grandson, Sen. John D. (“Jay”) Rockefeller   
   IV, has a reported net worth of just $83 million. To be sure, $83   
   million will keep the wolf very comfortably far away from the door.   
   But it is only a small fraction of the fortune his namesake created.   
      
   One reason often given for the short life-span of great American   
   fortunes is the estate tax. But the estate tax actually has very   
   little to do with the transience of American wealth. Death duties, as   
   the British straightforwardly call them, have long been much higher in   
   the United Kingdom than in the United States, but great British   
   fortunes persist for generations, thanks to good lawyering and estate   
   planning.   
      
   Why then are the great American fortunes so seemingly ephemeral? The   
   answer lies in three exceptional features of American life: our   
   inheritance laws and traditions, our economic dynamism, and our   
   vibrant tradition of philanthropy.   
      
   Primogeniture and Entail   
      
   In pre-industrial Europe, land was the basis of most of the great   
   fortunes. Even the proceeds of fortunes made in some other way, such   
   as trade or banking, were usually invested in land as the new wealth   
   tried to enter the ranks of the aristocracy. In feudal times, land was   
   granted by the king in return for military service. And it was   
   important to keep large estates intact so that the lord could fulfill   
   his obligation to provide knights and soldiers when the king called   
   for them.   
      
   As feudalism had waned in Western Europe, military obligations were   
   replaced with taxes. But the principal mechanisms for ensuring that   
   landed estates stayed intact—primogeniture and entail—continued into   
   the 20th century.   
      
   Primogeniture simply means the tradition that the eldest son inherits   
   the estate intact, with younger sons and daughters getting little or   
   nothing. Should there be no son, the land usually went to the nearest   
   male heir. It was never a matter of law (at least in England), but it   
   served the purposes of a well-established aristocracy that was the   
   dominant force in British politics well into the 19th century.   
      
   Entail was a legal device to ensure that wastrel heirs did not destroy   
   their inheritance or divide it. In effect, entail is a perpetual trust   
   in which the heir has only a life tenancy in the property. So the   
   property could not be divided or mortgaged, and the holder had no say   
   as to whom the entail passed after his death. (In Jane Austen’s Pride   
   and Prejudice, for instance, the fact that Mr. Bennet had five   
   daughters but no son meant that the estate was entailed away to his   
   cousin Mr. Collins—a very sore point with Mrs. Bennet.)   
      
   Neither entail nor primogeniture was ever widely adopted in the   
   American colonies. The reason they were not is largely due to the fact   
   that most immigrants to the American colonies in the early days of   
   settlement were not aristocrats, and primogeniture and entail were   
   mechanisms for maintaining an aristocracy. Further, while land in   
   Europe was scarce and thus to be husbanded closely, the American   
   colonies had land in limitless abundance, free for the taking (except,   
   of course, for the labor of making it productive).   
      
   In England, the laws of intestacy followed the tradition of   
   primogeniture. The law in the new American colonies largely did not.   
   Rhode Island was an exception and early Massachusetts and Pennsylvania   
   laws called for the eldest son to get a double portion of the estate.   
   But by the middle of the 19th century, the American tradition had   
   become to divide an estate more or less equally among all the heirs.   
      
   As always there were exceptions. John Jacob Astor, who died the   
   richest American in 1848, left the great bulk of his fortune to his   
   son William Backhouse Astor. (His only other surviving son was   
   mentally ill, confined to a private sanitarium.) When “Commodore”   
   Cornelius Vanderbilt, the wealthiest man in America, died in 1877, he   
   left almost all of his $105 million fortune to his son William H.   
   Vanderbilt.   
      
   The Commodore’s other children (he had eight daughters and another,   
   profligate, son) sued to get a larger portion of the estate than their   
   father had left them. The case was a sensation, covered in every   
   newspaper in the country, and William Vanderbilt settled more money on   
   his sisters and brother to end it. He went on to double his father’s   
   fortune in the next eight years before his own death. But he did not   
   follow his father’s precedent, instead leaving the money to be divided   
   among his four sons while also providing generously for his daughters.   
      
   Today there are thousands of living Vanderbilt descendants, and the   
   last one to be vastly rich thanks to the Commodore’s fortune was   
   Harold S. Vanderbilt, a great-grandson of the Commodore who   
   co-invented contract bridge and defended the America’s Cup. Childless,   
      
   [continued in next message]   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)