Inheritocracy summary

In a famous thought experiment, political philosopher John Rawls asks us to imagine designing a just society from scratch. He helps us resist the urge to add unfair advantages by placing us behind a “veil of ignorance.” What that means is that we don’t know where we’ll end up: we could as easily be in the bottom 1 percent as the top five – or anywhere in between. Now, we want features that give everyone a fair chance. Suddenly, merit is at the center of our designs. Inherited privileges, meanwhile, are made to matter as little as possible. 

Rawls wasn’t making an abstract point. Writing in the 1960s, he was defending the kind of society he believed best matched up to his philosophical description of justice: Western welfare states. These societies, he thought, had redistributed resources as equitably as possible in the real world. As a result, most people had a fair chance, and opportunity reliably flowed to those who merited it through talent and effort. 

There are several ways to describe an inheritocracy. The numbers tell part of the story. Take this one, for example: British parents handed over $11 billion to their children during the pandemic. That’s around 10 percent of the government’s COVID-19 job retention scheme – one of the most expensive peacetime economic interventions in British history. That wasn’t a one-off, though. As already mentioned, the Bank of Mom and Dad is a top-ten mortgage lender in Britain. In 2023, that amounted to $13 billion in gifts and loans.

Numbers only get us so far. But here’s an interesting statistic: 51 percent of baby boomers own a house with two spare bedrooms. That their children feel forced to stay in those rooms well into their 30s paints a picture of a society in which novel economic forces are overturning conventional ideas about growing up. The meaning of adulthood changes when your parents’ wealth determines your ability to achieve the milestones associated with it. In the words of one economist, parents are becoming “the gatekeepers to their children’s adulthood.” 

The UK isn’t alone: the Bank of Mom and Dad operates internationally. Survey data from the Royal Bank of Canada, for example, suggests that 50 percent of Canadian parents subsidise “children” aged between 25 and 35. A 2019 study by Merrill Lynch found that 70 percent of millennials in the United States had received financial support from their parents that year. 

Making your way independently through life is a lot harder than it used to be across the West. Wages have stagnated: in real terms, workers are earning less than they did in 2008 even as productivity continues to rise. Housing takes ever larger bites out of pay-checks. As the welfare state retreated, families stepped up to cushion kids from these economic blows. As one commentator noted, ours is an age of “good parents and poor citizens.” 

There’s an elephant in the room: people lead longer lives and require increasingly complex medical care as they age. That care is expensive – and politically explosive. 

How expensive? The average cost of a residential care home is around $1,000 a week; a week in a nursing home is closer to $1,500. Let’s take the latter figure. That makes around $78,000 a year – more than Eton, Britain’s most exclusive private school. The average stay in a nursing home is 2.2 years, but financial advisors urge families to plan for five. All in all, you’re looking at close to $800,000 for a couple. If you want a buffer – and advisers will tell you that you do want a buffer – you should be putting aside a sum closer to $1 million. In short: care is very expensive.