Lamberto Frescobaldi sets two wine glasses atop a wooden barrel in the spacious cellar of his company’s winery in an 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 is 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. It has also let the descendants of Jakob Fugger in Germany continue to run the social-housing complex founded by the Emperor's banker nearly half a millennium ago.
However, it is less of a blessing for Europe as a whole, where family fortunes are more prevalent than in the United States or Asia. Their relatively high level is a sign of the continent’s low social mobility, which keeps education, income and social connections from evolving over generations.
Life at the top
The richest Florentine families today were already at the top of the socioeconomic ladder nearly 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 a third of Italy’s richest people inherited their fortunes, compared with just 29 per cent in the US and 2 per cent 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, at 65 per cent. 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 US, but the lack of social mobility is more of a concern because economic output and the number of available jobs are smaller.
The US has grown 9.9 per cent in real terms since 2007; the comparable figure for the European Union over the same period, based on Eurostat data, is 2.8 per cent. Gross domestic product per capita in the EU is almost a third lower than in the US when adjusted for purchasing power; the unemployment rate is nearly twice that of the US.
The US economy is expanding, so “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. “The number of positions open is higher than the number of ‘sons and daughters of’.”
At a time when some European economies are stalling, he said, wealth and social inheritance must be closely watched because inequality can further constrain countries’ ability to revive growth.
A head for wine
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,” he said. “I was the son of the boss!”
Today, after earning a degree in viticulture at the University of California, Davis, he chairs the Marchesi Frescobaldi Group, which produces 11 million bottles a year, one of the biggest in Italy. He even named his dog Brunello, after the company's Brunello di Montalcino.
Before entering winemaking in 1308, the Frescobaldis were wool traders and bankers. They financed King Edward I’s wars in Wales and France and built Florence’s first-ever bridge, the Ponte Santa Trinita.
The family also includes Girolamo Frescobaldi, one of the main composers of keyboard music in the late Renaissance and early Baroque periods, as well as medieval 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.
Since the Renaissance, the Frescobaldis have also commissioned works from artists such as Filippo Brunelleschi.The family has introduced a contemporary art award called Artisti per Frescobaldi. For this project, 999 special bottles are produced every year and some of the proceeds are reinvested to support contemporary art.
The Frescobaldis’ long lineage is hardly unique in Florence, Tuscany’s capital. Bank of Italy researchers Guglielmo Barone and Sauro Mocetti recently compared tax records of Florentine taxpayers in 1427 and 2011 to track inter-generational mobility. They found a “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.
Those who have it . . .
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 financial assets while paying almost no estate tax.
Count Alexander Fugger-Babenhausen (34), a descendant of arguably Europe’s richest man in the 16th century, says maintaining the fortune’s integrity is a responsibility. He 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 in Augsburg founded by his descendent, 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 while saving his soul. Those living in the complex of cosy, two-story terrace houses pay a yearly rent of €0.88, 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.
The Fuggerei’s 140 apartments have survived innumerable conflicts and partial destruction during the second World War. While they have been renovated, the units still follow the original floor plans and feature 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.”
– (Bloomberg)
