Premature death and insufficient wealth are closely related. Wealth inequality is increasing at an accelerating rate. In the 1950s, economist Simon Kuznets developed the idea of the “Kuznets Curve”. Market forces and economic structural changes result in very long-term cycles of increasing and then decreasing wealth inequality. Economist Branko Milanovic believes the rich are now riding a Kuznets wave propelled by technology and global trade, which is drowning the poor and “middle class”. The Economist 4/2/16. The bargaining power of workers in the rich world is being undermined by global labor, cheap technology (twice as many people in India have access to cell phones then to latrines) and political uncertainty. The working poor are under constant threat of job and income loss. They cannot self-insure or benefit from returns on financial capital like the wealthy can.
The war between the elite wealthy and the poor masses has been raging back and forth for centuries. A 2002 Harvard paper on the political economy of the Kuznets Curve lays out the pattern: 1) rapidly growing inequality, 2) the poor decide whether to initiate a revolution, 3) the rich cede some political power to prevent revolution, 4) resulting in either some wealth redistribution or revolution if it’s not enough, and then 5) the process repeats.
The falling economic power of the poor is compounded by falling political power and this is perpetuated and entrenched over generations. The children of the poor miss out not only on inherited money, but more importantly on education, advice, family connections and values, which shortens their lives. An Estate Planning War Chest protects not only a secure, comfortable lifestyle but also the physical quality and length of your life and the lives of your descendants. Wealth is a matter of life and death.
There is no equality of opportunity at this stage in the current Kuznets wave. It’s up to you to protect your family using the resources that you are fortunate to have inherited or somehow built. Many in the baby boom generation were able to climb into the Mass Affluent demographic without too much cross generational support, but not anymore. Cumulative advantage is carving deep, hostile divisions among wealth segments:
“One child is born blind, another with sight. One child has parents deeply concerned about his welfare who provide a background of culture and understanding; another has dissolute, improvident parents. Children at birth clearly do not have identical opportunities in relation to abilities or environment. (Milton and Rose Friedman, Free to Choose, New York (1980)).
A University of Illinois sociologist recently warned:
“If where you end up is totally dependent on your parents, or a set of random circumstances over which you have no control, and there’s no individual description of how you get to a stable place in the economic system, then we’ve lost the narrative about how to get ahead. And that’s where things get dangerous.” The Sociological Quarterly March 2016.
Be careful out there. This wealth war cycle is just getting started. Stay tuned for future developments on the bloodshed.