Will Trump Promote Dynastic Wealth?

Some of President-elect Trump's campaign proposals are proving perishable. (The Great Wall may look more like a fence, or perhaps a line of "No Trespassing" signs.) Abolishing the federal estate tax, a mainstream Republican goal, could have a better shelf life. Paul Sullivan in the NY Times fears "wealthy families may find it much easier to amass dynastic levels of wealth."

But dynastic wealth isn't necessarily all that great, as George Goodman, writing as Adam Smith, pointed out in his 1960's classic, The Money Game. While a fortune in appreciated stock makes a family feel rich,  they don't necessarily live rich.

Goodman used IBM, the Google-Apple-Amazon of its day, to illustrate.

Mr. Smith said to [his wife and children], "Our family owns IBM, which is the greatest growth company in the world. I invested twenty thousand dollars in IBM and that twenty thousand has made me a millionaire. If something happens to me, whatever you do, don't sell the IBM." Mr. Smith himself never sold a share of IBM. Its dividends were meager, naturally, and so Mr. Smith had to work hard at his own business to provide for his growing family. But he did create a marvelous estate. ***

Mr. Smith died; the IBM was divided among his children. The estate sold only enough IBM to pay the estate taxes. Otherwise the children—now grown, with children of their own— followed their father's dictum, and never sold a share of IBM. The IBM grew again, made up for what had been amputated to pay estate taxes, and each of the children grew as rich as Mr. Smith had been…. They had to work quite hard at their own businesses, because their families were growing and their only money was in IBM. Only one of them even borrowed on his IBM, to get the down payment for a heavily mortgaged house. And the faithful children were rewarded by seeing IBM multiply and grow. *** 

The Smiths are now in their third generation of IBM ownership, and this generation is telling the next, "Whatever you do, don't sell the IBM." And when someone dies, only enough IBM is sold to pay the estate taxes. 

In short, for three generations the Smiths have worked as hard as their friends who had no money at all, and they have lived just as if they had no money at all, even though the various branches of the Smith family all put together are very wealthy indeed. And the IBM is there, nursed and watered and fed, the Genii of the House, growing away in the early hours of the morning when everyone is asleep.