‘Great Wealth Transfer’ – different strokes for different folks

The “Great Wealth Transfer” has been a buzz term for a while – especially in business media – but it has different meanings that can provoke resentment and envy, excitement or outrage, and even confusion or acceptance.

In the 1970s and ’80s, Milton Friedman was embraced by Big Business and its Republican handmaidens who used his “Greed is Good” philosophy, and critics warned of increases in wealth inequality, and have blamed him ever since.

A U.S. economist awarded a 1976 Nobel Memorial Prize in Economic Sciences for research on consumption analysis, monetary history and theory and the complexity of stabilization policies, Friedman’s theory was basically “the social responsibility of business is to increase its profits.” Period. Maximizing profits to stockholders, the doctrine said, would be an efficient way to benefit society.

“The Great Wealth Transfer has been a result of a number of factors, including the declining bargaining power of workers, tax policies that favor the wealthy, and a shift in corporate culture toward maximizing shareholder value,” commented business analyst Chris Calhoun, who especially blasts corporations’ stock buybacks, which artificially boost stock prices and stockholder profits. Also, a “profits above all” approach can decrease investments, workers training and many long-term plans.

“This emphasis on profits has led to a narrow focus on short-term gains and a disregard for the interests of other stakeholders, including employees, communities and the environment,” Calhoun continued. “As a result, the distribution of wealth has become increasingly unequal, with the top 1% of the population owning a disproportionate share of the wealth.”

Eighteen years ago, economist Paul Krugman brought widespread criticism of Friedman to the 21st century with an analysis of George W. Bush continuing to enrich the wealthy at the expense of everyone else (and foreshadowing Donald Trump’s 2017 tax reforms that mostly benefited the rich).

“So much growth is being siphoned off to a small, wealthy minority that most Americans are failing to gain ground even during a time of economic growth – and they know it.”

The GOP has justified lowering taxes on the rich by a flawed (and subsequently confirmed) “trickle-down” theory that as the rich and powerful became wealthier, they would invest and expand the economy. A related approach rationalized fighting any hike in the country’s minimum wage and opposing workers’ unionizing – both of which would impede profits, they argued.

“At the same time, there has been a concerted attack on the institutions that have helped moderate inequality -- in particular, unions,” Krugman said. “During the late 1970s and early 1980s, at least 1 in every 20 workers who voted for a union was illegally fired; some estimates put the number as high as 1 in 8.”
Another claim of a Great Wealth Transfer focuses not on class, but generations, as complaints mount about decades of skewed government policies inadvertently resulting in a huge transfer of wealth to Baby Boomers (those born 1946-1964), from future generations, especially Gen X (born 1965-1980), Millennials (1981-1996) and Gen Z (1997-2012). According to Bank of America Research, trillions of dollars of wealth moved from the public to private holdings over the last 40 years – in particular household wealth, which ballooned from $17 trillion to $150 trillion (and Boomers and older Americans have two-thirds – $146 trillion – of that despite challenges such as 1970s inflation and occasional financial crises.

“The Boomer generation is so big that it still wields enough political and financial clout to press for a system that works for them.

“Boomers have been and still are consuming more than their fair share of the pie,” wrote Boomer Howard Marks. “This will leave future generations saddled with substantial debt stemming from expenditures they didn’t benefit from proportionally.”

That particular Great Wealth Transfer assertion says the Millennials and Gen Z-ers have economic struggles because of Boomers, according to a 2023 survey by OnePoll.

But a third Great Wealth Transfer is imminent, according to an estimate by Coldwell Banker – and Millennials are predicted to benefit. Between $84 trillion and $68 trillion could be inherited by Millennials through 2045, adds the financial market intelligence firm Cerulli and Associates, as Boomers pass on – and pass on their assets.

“The Baby Boomer generation is expected to leave a significant amount of money to their Millennial children,” wrote Jack Kelly in Forbes magazine last summer. “It's estimated that more than $68 trillion will be bequeathed to their offspring. The great wealth transfer is expected to make Millennials the richest generation in American history.

“This will be a substantial change in fortune for Millennials, who have had to deal with recessions, exorbitant college tuition, nearly unaffordable home prices, and trying to maintain a lifestyle that can’t compare to their parents,” he continued.

That could result in increased consumer spending and change the job market and the economy, and possibly make a generally progressive generation even more focused on fair policies by a government that a more engaged generation will elect.

Finally, a detached look at some statistics seems to demonstrate that overall changes in generations’ share of wealth simply, maybe inevitably, shifts, with positives and negatives experienced by different generations over the years. A Federal Reserve study illustrates losses and gains since 1989, with Boomers collectively losing a few percent, Gen X gaining a lot, and Millennials gaining far more.

If there’s a bottom line, then, it may be that change happens. And voters’ influences on government and policies, whether following a relatively elitist perspective like Friedman’s or more grassroots advocacy as articulated by U.S. Sens. Bernie Sanders and Elizabeth Warren simply make minor adjustments to the pendulum of “free market” economics.

In 2006, Krugman nevertheless cautioned about dire social consequences of uneven wealth transfers – a warning that seems relevant in this election year.

“The statistical evidence shows unequal societies tend to be corrupt societies,” he said. “When there are huge disparities in wealth, the rich have both the motive and the means to corrupt the system on their behalf.”