Lamberto Frescobaldi sets two wine glasses atop a wooden barrel in the spacious cellar of his company's winery in a 1,000-year-old castle not far from Florence. Uncorking a bottle of Nipozzano, he takes a sip and nods. The red that his family supplied to Michelangelo and Pope Leo X still tastes pretty darn good.
To Frescobaldi, 53, directing the family business is something of a trust. It’s a way to preserve a dynasty that began with wool traders in about the year 1000 and made its money financing the English crown almost 200 years later.
“You have to feel that what you have inherited, you actually do not own,” he said, seated on a wine cask. “You only have to run it properly, and to carry on to something else.”
Maintaining inherited wealth has worked for generations of Frescobaldis over 700 years, and it has let the descendants of Jakob Fugger in Germany continue to run the social-housing complex the Emperor’s banker founded almost half a millennium ago. It’s less of a blessing for Europe as a whole, where family fortunes are more prevalent than in the U.S. or Asia. Their relatively high level is a sign of the continent’s low social mobility, keeping education, income and social connections from evolving over generations.
The richest Florentine families today were already at the top of the socioeconomic ladder almost 600 years ago, according to a recent study by the Bank of Italy. And research by the Organization for Economic Cooperation and Development shows that in many European countries, not only wealth and income but even occupations tend to be “sticky,” passed on from generation to generation.
More than one-third of Italy’s richest people inherited their fortunes, compared with just 29 percent in the U.S. and 2 percent in China, according to a 2014 study of the world’s billionaires by the Peterson Institute for International Economics. Germany has the highest share of inheritor-billionaires among developed economies, 65 percent. Overall, heirs and heiresses make up about half of Western Europe’s billionaires.
Europe’s income classes aren’t much more rigid than in the U.S. The lack of social mobility is more of a concern, though, because economic output and the number of available jobs are smaller. The U.S. has grown 9.9 percent in real terms since 2007; the comparable figure for the European Union over the same period, based on Eurostat data, is 2.8 percent. Gross domestic product per capita in the EU is almost one-third lower than in the U.S when adjusted for purchasing power; the unemployment rate is nearly twice that of the U.S.
Because America’s economy is expanding, “they need more engineers, more chemists, more economists, more analysts, more bankers than in Europe,” said Antonio Schizzerotto, professor emeritus of sociology at the University of Trento and scientific director of the Research Institute for the Evaluation of Public Policies in the same city. “The number of positions open is higher than the number of ‘sons and daughters of.”’
At a time when some European economies are stalling, wealth and social inheritance must be closely watched because if inequality reaches a certain limit, it can further constrain countries' ability to revive growth, Schizzerotto said.
For Frescobaldi, the family patrimony can be summed up in one word: wine. His first experience with red came at the age of six, when he got drunk and fainted at a summer party with vineyard workers.
“They couldn’t give me water, I was the son of the boss!” he said. Today, after getting a degree in viticulture at the University of California, Davis, he chairs a company, Marchesi Frescobaldi Group, that produces 11 million bottles a year, one of the biggest in Italy. He even named his dog Brunello, after the Brunello di Montalcino the company makes.
Before entering winemaking in 1308, the Frescobaldis were wool traders and bankers, financing King Edward I’s wars in Wales and France. The family — which also built Florence’s first-ever bridge, Santa Trinita — also includes Girolamo Frescobaldi, one of the main composers of keyboard music in the late Renaissance and early Baroque periods, as well as poet Dino Frescobaldi. The latter collected and conserved the first seven Canti of the Divine Comedy for Dante Alighieri when he was sent to exile, allowing him to complete the work.
The Frescobaldis’ long lineage is hardly unique in Florence, Tuscany’s capital. Bank of Italy researchers Guglielmo Barone and Sauro Mocetti compared tax records of Florentine taxpayers in 1427 and 2011 to track inter-generational mobility, and found that there was meaningful persistence of socioeconomic status across the centuries.
“The huge political, demographic and economic upheavals that have occurred in the city across the centuries were not able to untie the Gordian knot of socioeconomic inheritance,” the authors wrote.
Germany may be prone to even more concentrations of inherited wealth, research shows.
“In hardly any other country does social origin influence one’s income as much as in Germany,” wrote Marcel Fratzscher, head of the Berlin-based German Institute for Economic Research, in a recent book. “The richest citizens are also those with the highest income. For to everyone who has, more shall be given.”
Germany’s high share of family wealth is in part a consequence of a tax system that until this year allowed family-owned businesses — including a large proportion of the medium-sized companies that are the backbone of its economy — to pass on their financial assets while paying almost no estate tax.
Count Alexander Fugger-Babenhausen, a descendant of arguably Europe’s richest man in the 16th century, says maintaining the fortune’s integrity is a responsibility. The 34-year old returned to Germany to manage the family’s wealth and charitable activities after working in investment banking and private equity in London.
“It’s not the fast-lived, dynamic sector that forces you to take high risks,” he said at the Fuggerei, the affordable-housing complex founded by Jakob Fugger in 1521. “In every decision we make for the Fuggerei, we try to consider that and be prudent. It would be disastrous if a mistake brought sustainability to an end after 19 generations.”
Jakob Fugger ordered the construction of the Fuggerei to give back to his city, and try to save his soul in the meantime. Those living in the complex of cozy, two-story terrace houses pay a yearly rent of 0.88 euros, as per Fugger's decree that the cost be one Rhenish florin, and must make three daily prayers for the founder’s soul and family.
Similarly, the Frescobaldis, who since the Renaissance have commissioned works from artists such as Filippo Brunelleschi, have introduced a contemporary art award called “Artists for Frescobaldi.” For this project, 999 special bottles are produced every year and some of the proceeds are reinvested to support contemporary art.
The Fuggerei’s 140 apartments have survived innumerable wars and partial destruction during World War II. While they have been renovated, they still follow the original floor plans and feature some unique Renaissance decor, such as a lever-activated door-opening mechanism that in the past let tenants allow visitors in without leaving the apartment’s only heated room.
“I almost feel a little bit more like a trustee,'' said Fugger-Babenhausen, head of one the three surviving family branches that still run the housing complex through a foundation. As for the family business, “I become very frugal in what I take for myself.”
–With assistance from Flavia Rotondi and Giovanni Salzano in Rome
This article was provided by Bloomberg News.
