MOSCOW — The older brother got the mill, the middle brother got the donkey and the youngest got nothing but a cat. That’s the beginning of the story Puss In Boots, and an informative read for future economic historians because this sort of right-of-inheritance is good for economic growth.
Monogamy was something that was already taken for granted in this 17th century European fairy tale because the Catholic Church imposed it on Europe by the 12th century. But the most famous piece of literature from the Arab world, One Thousand And One Nights, is also a useful read from an economic point of view.
In the Middle Ages, business in the Middle East was far more developed and sophisticated than in Europe, with trade routes spanning thousands of kilometers and bazaars filled with exotic goods. But modern economics was born in Europe. Why?
According to the American economist Timur Kuran, one of the most important reasons was polygamy and the inheritance system. Islamic merchants ran successful businesses, but any company they started would generally die with them, because it would be cut into so many pieces, divided among wives and children. The death of one partner in a caravan business usually meant company collapse, unless the remaining partner managed to make a deal with a whole crowd of heirs.
In Europe, monogamy dictated another route. European merchants had fewer children — at least legitimate ones. And so the concentration of capital didn't decrease over the generations because a single heir would get everything.
That system is less fair than in Islamic law, where all of the heirs are treated equally. But European monogamy and inheritance law created the conditions that allowed major corporations to grow and thrive. Capital could outlive the company owners.
Of course, the Church also has fought against what sociologists call serial monogamy. Though it was an argument based on moral and religious considerations, it was also selfish. Fewer heirs among the aristocracy meant more members of the elite bequeathing money to the Church.
But the most important consequence of monogamy and the concentration of capital that followed was the rise of an adventurous-innovative class — that is, the advent of the market economy.
Too much — and not enough
Not enough concentration of capital is bad, but so is too much. It breeds inequality, which in turn makes the entire economy less competitive. Oligarchs who have excessive political power force governments to make decisions with the interests of only the elite in mind. In the long term, it's bad for everyone, because property is inherited but business talent isn't.
According to American researchers Larry Kotlikoffa and Larry Sammersa, 81% of wealth comes from inheritance. According to Credit Suisse, 27% of American billionaires inherited their money. That number is much higher in Europe — 65% in Germany and 60% in France. In Russia, the number is close to zero.
That's because the process of bequething property is long, and most fortunes in Russia were made in the 1990s and 2000s. So it remains to be seen how inheritances will play out. Another problem in Russia is that there is inequality even among the rich, and an unusually high number of super rich. That means that wealth in Russia is much more heavily concentrated than in other countries.
It has led some to wonder whether polygamy could be an economic panacea in Russia. The founder of the first Saudi Arabian state, Muhammed ibn Saud, who died in 1765, has between 15,000 and 30,000 heirs eight generations later. And now Saudi Arabia has equality ratings comparable to European countries.
So if Russia follows the Saudi Arabian example and legalizes — even encourages — polygamy, perhaps the problem of inequality could be fixed in, say, 200 to 300 years.
“In history, it’s well known that oligarchs like to create harems, and that the number of descendants can be extremely large, in the several hundred range,” explains Russian writer Victor Pelevin. “The inheritance process leads to a dilution in wealth. If that happens over two or three generations, the country will have a middle class that is capable of becoming a stabilizing force in the society.”
Among the richest 25 people in Russia, the average number of children is two. So the current number of heirs is obviously not enough to solve the wealth concentration problem.
There have been calls from Russian political leaders — who are usually more concerned with Russia’s low birth rate — to legalize polygamy. And many politicians in Russian Muslim regions say it would be a welcome return to tradition and would more accurately reflect reality in those regions.
But it’s not surprising that the most recent survey on the topic found a majority of Russians not yet ready to accept polygamy. In 2006, 49% of men and 73% of women said they were against legalizing it. It’s not clear whether the female respondents understood that in an equal society, it would not be possible to legalize polygamy without also legalizing polyandry (multiple husbands).
It seems unlikely that Russians will turn their backs on monogamy, even if it resulted in an economic lift. The most well-off would be the clear winners, while the poor could suffer from too few women. In Arab countries, such a circumstance created revolutions, and in British colonies, it fostered homosexuality.