Where Wealth Comes From – and Remains
Daria Tisch
Wealth in Germany is highly concentrated – and often deeply rooted in history. Some of the largest private fortunes remain in the hands of families that were already part of the economic elite over 100 years ago. This dynastic wealth, which has weathered political upheavals, world wars, and economic crises, raises fundamental questions about equal opportunity, power structures, and the role of inheritance.
Just a handful of families own the largest private fortunes in Germany today. According to estimates from the German Institute for Economic Research, the richest 10 percent of the population own around 67 percent of all private wealth. The richest 1 percent own around 35 percent, and the top 0.1 percent as much as 20 percent. Meanwhile, around half of the population have little or no savings, and many are in debt. This deeply unequal distribution means that wealth has different functions for different sections of the population. For those with little in the way of financial means, wealth equates primarily to savings put aside for retirement or a rainy day. Those who own more can afford to buy tangible assets, such as property or cars. Wealth likewise allows them to participate in society by spending money on things such as leisure activities and education. The higher up the wealth distribution people are, the greater too is the transfer function of their wealth: Parents can give their offspring a better start in life by gifting or bequeathing wealth to them, for example to buy a home, fund their education, or start a company. For the richest members of society, wealth does not just bring security or quality of life; above all, it brings influence. Wealth creates economic power and often social as well as political agency.
»Wealth means influence: It creates economic power and political agency.«
Often, the people who own hundreds of millions of euros also control companies, and with them thousands of jobs. Through donations, lobbying, or their own media enterprises, the super-rich influence public opinion and exert political pressure. And through their extensive real estate portfolios and investment strategies, they have a hand in shaping urban development, set rental prices, and select who can rent their properties.
The sociologists Aaron Reeves and Sam Friedman argue in their recent book, Born to Rule, that the social background of elites determines how they influence politics, the economy, and society. This applies not only to the present-day super-rich. Over decades, elites shape the rules of political and social life – the same rules that protect great wealth and entrench inequality today. So, what are the historical roots of Germany’s largest fortunes?
The origins of Germany’s top wealth today
Reliable information on the super-rich is hard to come by. For one thing, super-rich people are heavily underrepresented in sociological surveys, and they are simultaneously even more reserved than the rest of the population when it comes to talking about financial matters. Researchers have therefore also been using “rich lists” for some years now as an additional resource for studying large fortunes. Usually published by media outlets, these lists are based on research by journalists in archives and commercial registers as well as on conversations with financial advisors and lawyers. In Germany, Manager Magazin regularly publishes rich lists. One of the most comprehensive to date appeared in 2019 and covered the country’s wealthiest 1,032 families.
»The super-rich are even less forthcoming about financial matters than the rest of the population.«
Rich lists dating back over a hundred years are another valuable source of information on the German wealth elite. Rudolf Martin, a former official of the Prussian interior ministry, published annual reports between 1911 and 1914 recording the names, addresses, income, and wealth of German millionaires. While the current wealth ranking is based on extensive research and estimated figures, Rudolf Martin was able to draw on official tax statistics. In total he listed over 4,500 people who owned over two million Reichsmark, which corresponds roughly to the richest 0.01 percent of the population at the time. The list’s publication caused something of a scandal, offering as it did a first glimpse into the lives of the economic elite, as the historian Eva Maria Gajek shows in her research.
Continuity undeterred by history
In a meritocratic society, the composition of the economic elite should change significantly in the course of a hundred years: Those who have ability and talent, take the biggest risks, or come up with the most successful innovations will get rich. In Germany’s case, it would be fair to also expect two world wars and the political upheavals and economic crises of the 20th century to have destroyed existing wealth. To find even a single descendant of the 1912 rich list in the ranking today would be statistically remarkable. Yet in reality, around 8 percent of the 1,032 largest private fortunes of our time can be traced back to wealth that existed at the beginning of the 20th century. More specifically, the ancestors of 82 families on the current list were already among the very richest of the German population in 1912. This historical continuity works in the opposite direction too: Of the roughly 4,500 richest people at the beginning of the 20th century, at least 5 percent have descendants on today’s rich list. Even more surprisingly, of the 884 richest people – those who owned over six million Reichsmark – at the time, around 10 percent still have descendants who are among the richest 0.01 percent today. The remaining 90 percent were not necessarily no longer rich, but they did not make it onto the 2019 ranking of the super-rich. This level of preservation of wealth seems unusually high given the historical upheavals that took place in Germany in the interim: two world wars, the Holocaust and the systematic expropriation of Jewish assets, economic crises, several currency reforms, and regime changes.
»Around 8 percent of the largest private fortunes can be traced back to wealth that existed at the beginning of the 20th century.«
The founding years of companies tell their own tale about the origins of today’s richest families. Figure 1 shows that over one-third of companies behind the 1,032 largest private fortunes were founded before WWI. Some were also successful at the time. August Oetker, for example, was already one of the richest individuals in 1912 thanks to the success of his baking powder. His descendants still appear on the rich list today, and the company has long been known for much more than baking powder. Others did not have great wealth early on. The Deichmann family business, for example, now one of the largest footwear retailers in Europe, began as a shoemaker’s shop in 1913. Although the family was then not yet wealthy, Heinrich Deichmann had laid the foundation for its subsequent rise to become one of Germany’s richest entrepreneurial families.
Family as a bastion of wealth
Families are important to the continuity of large fortunes, and not always through direct transfers across the generations alone. Marriage is another mechanism by which strategic alliances are created between wealth dynasties. It is a means of securing wealth that was commonly used by the nobility.
While people tend not to marry for purely strategic reasons nowadays, choosing a partner who belongs to the same social class as oneself (marital homogamy) is not uncommon, especially among the highest social classes. This too reinforces wealth inequality. Even among the wealthiest 0.01 percent, marital lines exist between families. Figure 2 illustrates the intergenerational ties between some members of the rich lists past and present. The lines connecting them are kinship ties, blue dots indicate individuals on the 1912 rich list, and red dots those on the current rich list. Family networks like this do not occur in open societies with random marriages. Such a network of – clearly not random – ties therefore points to social closure.
Consequences of dynastic wealth
The dynastic transfer of large fortunes in Germany contributes to the long-term concentration of economic resources in just a handful of families. Inherited privilege and exclusive networks reinforce existing power structures. These dynamics affect not only social inequalities in general but also inequalities related to gender. Research at the MPIfG has shown, for instance, that fathers hand down large fortunes, especially company shares, more often to their sons than to their daughters. The effect is to fortify differences that already exist between men and women in terms of wealth and economic influence.
This has prompted both academic and political debate on potential reform. Two instruments central to those debates are the (re-)introduction of a wealth tax and a reform of inheritance and gift tax. MPIfG research shows that the majority of the German population are not in favor of an inheritance tax but have a more positive attitude toward taxing large private fortunes – as long as it does not affect them personally.
The historical origins of Germany’s top wealth clearly show that economic inequalities are not just a thing of the here and now but are passed down through generations. In working toward a better understanding of the underlying mechanisms and developing appropriate policy responses, this is where research must systematically begin, in particular by examining the seldom-explored linkages between wealth and social power in Germany.
