By ADAM TOOZE*
German billionaire wealth is enormous and underreported
“Crazily rich Germans”? Now, that doesn't sound good, right!? It is certainly known that Germany is a well-organized social market economy. Behold, there are no ill-behaved, crazy and rich people in this nation who spend a lot of money on absurd luxuries.
You can make films based entirely on clichés about new rich Asians. The wealth of Arab sheikhs is legendary. Europe has been dining on gossip about the antics of American billionaires for more than a century. Thomas Piketty's famous inequality studies updated this transatlantic trope for the 21st century. But what do you know about Europe's ultra-rich themselves?
Obviously, there are a lot of people on the old continent with a lot of money. It's no surprise that Europe is home to a significant percentage of the world's luxury brands. British aristocrats still own huge chunks of the country. Russian oligarchs boast some of the biggest yachts in the world. Paris is a city of extreme wealth and exquisite luxury and this is quite obvious to any visitor. Places like Luxembourg, Zurich or Geneva shine based on wealth. But what do you know about Germany, Europe's most powerful economy?
Germany is a society, like any other based on capitalism, that harbors enormous inequality. Not surprisingly, it is home to one of the oldest socialist movements in Europe. Germany gave rise to social democracy before the social market economy. Germany was once a place where barons of industry, commerce and banking were notorious for cozying up to the Kaiser and supporting Hitler.
After 1945, German industrialists were tried in Nuremberg for their involvement with the Nazi regime. Today, some of Germany's biggest and most successful companies are still privately held – think BMW or the Audi chains. Of course there are some very, very rich people in Germany – there are multi-multi-billionaires there.
But who they are and how much they have is a more difficult question to answer. If there's one thing that's distinctive about Germany's ultra-rich, it's that they're very discreet. There is no equivalent in German public life to an Elon Musk, Bill Gates or Bernard Arnault. In public, the rich stay out of the spotlight, allowing Germany to be celebrated as a harmonious social market economy.
In addition to discretion, the fact that there is no official record of wealth helps maintain this myth. The annual national report on poverty and wealth does not provide an in-depth look at the situation of the super-rich. It defines “rich” as anyone who has a net income of more than 4.200 euros per month, a capital income of more than 5000 euros per year or a personal wealth of more than 500.000 euros. This classifies almost 10% of the population as “rich”. This level of privilege is important. But it does not capture the relationships of power and influence conferred by real wealth.
O Bundesbank tracks wealth unevenly, as this is only part of its macroeconomic monitoring effort; however, it also does so at a very high level of aggregation. When it comes to monitoring the wealth of elites, sources are very scarce. The magazine Forbes counted 117 German billionaires in 2023.
But as great wealth is organized in family holdings, it is more significant, as the magazine does Manager of Germany, count the “fortunes” of billions of euros (Vermoegen). The magazine, in 2023, counted 226 of these fortunes. The list, however, is clearly incomplete. And the magazine acknowledged that it faced behind-the-scenes legal pressure to omit several notable families.
We know this surprising fact thanks to a new wave of public interest about inequality in Germany. German activists are beginning to flex their muscles, challenging the lack of exposure to the reality of differences in this country. Sites like ungleichheit.info do a great job telling the dramatic story of this growing inequality.
Here's a surprising fact: the two richest German families own more wealth than the bottom half of the German population:
This month, two researchers from the German Tax Justice Network (Netwerk Steuergerechtigkeit), Julia Jirmann and Christoph Trautvetter, released a remarkable technical report reestimating German billionaire wealth. It was chosen by TV documentary makers and inequality researchers Julia Friedrichs and Jochen Breyer as the backbone of a hard-hitting exposé. Is it possible to access it (in German) here.
Jirmann and Trautvetter's unprecedented comprehensive investigations added 11 fortunes to the list, for a total of 237 fortunes of billionaire families in Germany. Most significantly, they raised the estimate of their total wealth from the 900 billion previously identified by Manager Magazine to somewhere between 1,4 and 2 trillion euros. The missing fortunes of billions of euros that have not yet been reported in the list of Manager Magazine include new data.
As the researchers show, the magazine Forbes generally achieves higher estimates of wealth than their German counterparts in Manager Magazine and therefore some adjustments are warranted. Furthermore, accrual accounting struggles to fully capture undistributed profits.
One thing is clear. German billionaire wealth is enormous and underreported. And much of it is no longer linked to direct family ownership of companies. Demystifying the supposed connection with family entrepreneurship is essential to delegitimize the extreme concentration of wealth that actually exists.
Germany's richest families may be discreet, but that doesn't stop them from engaging in powerful lobbying activity through a network of foundations led by Stiftung Familienunternehmen (Foundation for Family Businesses), Die Familienunternehmer and the initiative Neue Soziale Marktwirtschaft (INSM). These groups assiduously promote the idea of family ownership on behalf of the core group of super-rich, who actually represent 0,00017% of the three million small family businesses in Germany.
In fact, 18% of Germany's largest fortune no longer has any connection to a specific company. Only slightly more than half of large “family” businesses are actually led by a family member. In less than 10% of these companies there is a woman in a leadership position and there is only one East German family company in this elite group of German capitalism.
The German wealth lobby is pushing hard for policies that serve its interests. And despite the rhetoric about a social market economy, they managed to change the tax system to the disadvantage of the vast majority of the German population.
Germany's wealth tax was suspended in 1997. Corporation tax was reduced in 2001 and 2008 and new loopholes were added. Germany's top income tax rate was repeatedly cut in the early 2000s; additional benefits were introduced to exempt dividends.
Furthermore, Germany's rich received expert legal and accounting advice to manipulate the system in their favor. The net result is that, as elsewhere, Germany's extremely rich families pay almost no tax on the income they derive from their immense wealth.
A very revealing compilation of the benefits exploited by a typical wealthy family in Germany has been put together by Jirmann and Trautvettter. And tax is just one of the facets of public life that the superstitious can influence.
One might think that German democratic politics, with its publicly funded political parties, would be relatively immune to the influence of great wealth. Or at least less sensitive to the interests of the rich than the US democratic system, where politicians can be openly bought. But work by Lea Elsässer, Svenja Hense and Armin Schäfer has shown that German democratic politics is, at most, even more sensitive to the preferences of the richest, and less sensitive to the preferences of the poorest, than the system in the US.
Here’s what they say: “In this article, we show that political responsiveness in Germany is also biased toward the most advantaged, as is the case in the United States. Lower social classes see their preferences reflected in political decisions less frequently than higher social classes, particularly when it comes to highly contested issues.” “In order to facilitate comparison with the findings for the USA, we replicated the research design that others have used for the case of this country. Our original dataset includes 842 questions about agreement or disagreement with specific policy proposals made between 1980 and 2013. We calculate the degree of support for both income groups and occupational groups, adding information about how the German parliament decided the implementation of these policies, maintaining a four-year deadline”. “Our results show, in general, that the Bundestag’s decisions are aimed at the most advantaged; Furthermore, they practically ignore the preferences of the poor. When it comes to issues on which rich and poor disagree, the effect of support from low-income groups on the probability of enactment becomes negative. The more these groups favor a given policy, the less likely it is to become law.”
Privilege and political influence thus form a self-reinforcing cycle that is difficult to shake. According to historical data compiled by Albers, Bartels and Schularick, the only period in which the structure of German wealth inequality was shaken was the “between the world wars” period from 1914 to 1945. The history of the Federal Republic of Germany and of its legendary social market economy was marked by the stabilization and then a gradual increase of wealth inequality.
Since the early 1990s, Germany has seen a highly unbalanced increase in the wealth of the top 1%. The following graph shows the growth in wealth between 1993 and 2018. The result is stark: the German elite has every reason to put a veil of discretion over its activities.
As data from a research center in Cologne confirm, Germany's social market economy, like Scandinavia's social democracies, gets its “social” nickname from substantive income equalization. But this redistributive effort hides an underlying wealth inequality, which is enormous.
If we believe the data, German wealth in the 2010s was more concentrated than in any other major European society. In terms of wealth, France and Italy are closer to the former communist Czech Republic than to Germany. In terms of the Gini coefficient, Germany's wealth inequality is at 0,79 and is closer to that of the US (the US wealth Gini is at 0,81-0,86).
Germany can think of itself as a social market economy. In terms of income redistribution, this demand is real. But underlying this political model is a society that truly deserves only the label “capitalist democracy.”
Now, capitalism and democracy form a tense pair. And what is at stake in progressive politics will certainly increase the tension in this relationship. Public opinion in Germany, as elsewhere, is increasingly convinced that the benefits of modern society are distributed very unequally. Rather than condemning these views as populist, or denouncing them as “social envy,” progressive politics should surely aim to organize this dissatisfaction and arm it with arguments and data.
In the fight against inequality, an essential prerequisite is publicity. Research shows that in Europe, unlike in the US, giving voters information about inequality intensifies their preference for redistribution. As Julia Jirmann and Christoph Trautvetter of the German Tax Justice Network comment, what the German public lacks is adequate information about the basic structure of their own society.
The wealth of Germany's billionaire fortunes is divided among just 4.300 families. If regular analysis were extended to the top 1000 fortunes and their business and property empires, it would be necessary to monitor the finances of around 0,1% of the population or 40.000 families. Would the latter be too difficult a task for a sophisticated state apparatus like Germany's? Or it would simply be too embarrassing to reveal how little contribution this vast wealth makes to public finances.
A 2% wealth tax – a modest proposal to begin with – would generate substantial revenues. It would ensure, if properly implemented, that the richest paid approximately the same rate of tax on their capital income as the rest of society on their labor income. This would slow the growth of further polarization. And it would bring the issue of wealth inequality into public discussion. It would place the wealth and income it generates alongside taxes on labor and social spending, which are so often the focus of demands for containment and austerity. At a time of (self-inflicted) budget crisis, this should certainly be on the negotiating table.
*Adam Tooze is professor of history at Columbia University (USA). Author, among other books, of The price of destruction (Record).
Translation: Eleutério F. S. Prado.
Originally published on newsletter Chartbook.
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