The West, Russia and China: Inheritance systems and ways of economic development

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From the Middle Ages to the end of the 19^th century (In some countries until the mid-20^th century), two different systems of inheritance of family property — ultimogeniture and primogeniture were practiced. Under ultimogeniture, the youngest son succeeded to the estate if by the time of parents’ death his elder brothers had already left the family nest and acquired their own homesteads. The daughters had only a dowry and could inherit the parent’s estate and wealth only if there were no sons. Under primogeniture, the eldest son continued to take care of his parents even after marriage: the younger children inherited only a small part of the family wealth, i.e. movable property and money, and the eldest son succeeded to the real estate. According to ultimogeniture, all married children except the youngest son separated from the family; however, the youngest son became the primary heir only after the marriage of all his sisters and the separation of all his brothers. Having left the parent’s house, the elder sons received their share of the family movable property; however, after their parents’ death, elder sons were denied an inheritance. In the age of ultimogeniture, due to the low life expectancy, many families had several children not yet married, who remained in their parents’ house, and the inheritance property was divided between them, which hindered the accumulation of capital provided by the concentration of real estate and income in the hands of one family member.

Ultimogeniture was traditional for nomadic and agricultural people in the areas with low population density, i.e., a lot of free land. Therefore, a son willing to separate from his parents could leave the house and build his own farm. Ultimogeniture was practiced in Eastern Europe, Russia and many Muslim countries. On the contrary, in densely populated Western Europe, primogeniture prevailed since the Middle Ages [2; 12]. All arable land was divided between families, and landowners considered its further fragmentation unreasonable. The estate was inherited by the eldest son, and other children became employees — farmhands and factory workers, which contributed to the development of trade and industry.

However, the increase or decrease of free land did not always lead to a new inheritance system. According to J.G. Frazer, ultimogeniture was traditional for certain regions of England, France, Germany and other countries in the early 20^th century, although for many centuries primogeniture was traditional for the majority of the population of these countries. Frazer considered this as evidence of the domination of ultimogeniture in the early Middle Ages and of the subsequent transition to primogeniture due to the population growth. However, he did not find any evidence of ultimogeniture in Sweden, Norway and even in his native  Scotland despite the population density and the archaic clan system of family and kinship [5. P. 433–440]. The inheritance principle was firmly entrenched as a moral norm, i.e., communal good or rational evil. The perception of the socialeconomic reality as a necessary evil to be accepted was typical for the rationalityoriented Western civilization (perhaps, this is the origin of the Western intolerance to other civilizations). The reliance on ultimogeniture, i.e., communal good, which is pronounced in Russia, China and many Muslim countries, presupposes moral evaluation of economic activity, and if profit is incompatible with communal good, the latter is preferred.

In Russia, ultimogeniture developed when the country was sparsely populated. However, the peasant population growth and land shortage in the 19^th century did not lead to the replacement of ultimogeniture by primogeniture. Ultimogeniture families were replaced by nuclear rather than primogeniture families, i.e., all married children separated from parents, but the inheritance was divided almost equally. Primogeniture encouraged unmarried children to leave their parents’ estate; both married and unmarried children who had separated from their parents had to provide for themselves. Married people preferred activities with immediate and stable income, albeit small, but sufficient to meet the family’s needs, i.e., activities associated with long absence from home and economic risks did not attract them. Even if they did not provide enough for the family, wives could not divorce them since it was very difficult to divorce in the age of primogeniture and ultimogeniture. After leaving parents, singles had to earn money to get married and provide for their family. They often migrated to distant lands, in particular America, and were involved in risky business in pursuit of a large income [8. P. 132]. Thus, primogeniture promoted economic activity better than ultimogeniture.

In Russia, as a rule, all sons received their share of inheritance and daughters received a dowry. Unlike Western Europe, the lack of funds was not a great obstacle to marriage: even very poor people got married relying on their parents’ financial support. In many peasant families, several married sons lived with parents; they separated with time, but the youngest son remained with parents. In Western Europe, even the eldest sons (principal heirs of the estate) had to leave and build a separate house for themselves. Under primogeniture, the fate of younger children was not easy as described in the Western-European fiction [10]. In W.M. Thackeray’s novel The Virginians, there is a vibrant scene [21. P. 66–67]: “‘I’m hanged if there’s any man in England who would like to see his elder brother alive’, says my lord. ‘No, nor his father either, my lord!’, cries Jack Morris”.

Primogeniture led to sacrificing good family relations and secondary heirs’ fates for economic considerations. Parents favored the eldest son: he started working earlier than brothers and could take care of aged parents; in reward he inherited parents’ estate and land. The interests of other children were hardly taken into account. People knew how to prevent pregnancy but preferred to give birth to other children regarding them as ‘insurance’ in the age of high infant mortality [9].

If several children survived, they all, except for the eldest, left the parents’ estate almost empty-handed. The younger sons of noble families did not inherit estates but continued to be nobles. If they did not have the means to provide for the family at the level acceptable for noble families, they could not marry noblewomen. The eldest peasant sons were poorer than the poorest nobles but inherited land. Peasant women willingly married them but abandoned their poor younger brothers. Marriages between representatives of the upper and lower classes were condemned by public opinion especially if a bride was of higher lineage than a groom, and there were few misalliances. Men without sound financial basis acceptable for their social class and women without a sufficient for their social class dowry often remained unmarried until the end of life, and Western European society considered it normal. Only the most energetic younger children left offspring, and the social Darwinism theory provided science-like ideological grounds for this long-existing practice.

In the 18^th — 19^th centuries, due to the reduced infant mortality, the number of families with sons increased significantly, which expanded the wage labor market and contributed to the development of capitalism and market economy. One of the reasons for the extinction of the primogeniture and ultimogeniture systems was that children took less care of parents. Due to the significant increase in life expectancy, children had to wait increasingly longer for inheritance. Many no longer agreed to depend on parents and left the parents’ estate even before marriage. Thus, in the primogeniture countries, parents who had always prioritized their personal interests began to treat elder children in the same way as the younger. Thus, the disappearance of the primogeniture rules did not lead to a decrease in economic activity.

Younger sons of European families actively participated in the colonization of the New World since at home, in the Old World, they had no perspective. They did not transfer the hated customs of primogeniture overseas. Unlike Europe, American families have always been nuclear, and children leave parents’ home after graduation and earn a living. Many young people from wealthy families live frugally and do not seek help from parents. However, parents do not expect children’s care when they grow old and can no longer serve themselves — they move to nursing homes. This is the typical situation for the United States and many Western-European countries. For instance, “the nuclear family predominates in France; mutual assistance and relations between relatives are not as intense here as in Georgia or Russia. They are not of a patriarchal or patrilocal character and are more symmetrical in respect of generations” [3]. Parents help adult children only in extreme cases and not in a greater degree than children help them. This assistance is not as important for both sides as in Russia.

The revolution in France in the end of the 18^th century and democratic reforms in other Western-European countries in the second half of the 19^th century provided equal rights to all citizens, in particular inheritance rights. In England, the law of primogeniture was abolished only in 1926, in Scotland — in 1964. But even nowadays, in some families the principle of undivided succession of real estate works: many parents bequeath their real property to the child with whom they have a better relationship, and this can be a younger son instead of an elder son or a daughter instead of a son.

The eldest sons have long been considered the principal heirs in Japan and Korea, and primogeniture has resulted, inter alia, in the Japanese and South Korean “economic miracle”. In Japan and South Korea, only after the Second World War all children received de jure equal inheritance rights, but de facto many elder sons have some advantages, e.g., in inheritance of a family business, so that business remains in the hands of the family within a generational change [6]. In the United States, Western Europe and Russia, heirs usually do not agree on joint management of the company, which results in its sale and in sharing the proceeds.

The development of the primogeniture system in Russia was hindered by the absence of the right to private property and its guarantees. In the age of serfdom, the peasants’ land did not belong to families, but to the rural community which periodically redistributed land. Growing households, whose size had increased after the previous redistribution, received additional land allotments as taken by the community from decreased households. Married sons received a part of their parents’ land, and the community often provided them with a larger land plot than their parents agreed to hand over. This practice was revived when the Soviet government abolished private ownership: if the size of the family in two isolated rooms in the communal apartment decreased drastically (a single person), one room was given to the growing family.

Until the late 18^th century, Russian nobles could receive estates and serfs from the tsar only for temporary possession. Both a nobleman, who received an estate, if his health permitted, and all his adult sons were obliged to participate in the state military campaigns. All sons, except the youngest brother, got land as a reward for their service. The youngest son was granted the right to inherit his father’s estate upon entering the service. However, if the nobleman stopped serving without a valid reason or died without having an heir who could serve in his stead, the estate could be confiscated but not sold or mortgaged. Despite the country’s expansion and confiscation of land from those princes and boyars who incurred the tsar’s wrath, by the end of the 17^th century the tsars could no longer provide all noblemen with estates, and sometimes a village could be divided between noble brothers.

In Russia prince’s sons were named princes already during the life of their father and divided the father’s inheritance equally upon his death. Therefore, each new generation of Russian aristocrats was more numerous, but poorer than the previous one. While in England, there was only one Duke of Marlborough at one time, and in France, only one Duke of Richelieu. The eldest son of the duke inherited his father’s title and estate only after his father’s death. Princes and boyars were only formally owners of their estates: “to teach the Muscovite the difference between ‘ownership’ and ‘tenure’ was not an easy task, especially when the right of property was violated at every step, not only by the supreme authority, as in the case of every banishment in the times of Ivan the Terrible or Godunov, but by any powerful feudatory. “What I hold is mine until they take it from me” — this juridically incorrect but psychologically quite intelligible notion was typical for every early Russian landholder, whether under votchina or pomestie tenure” [13. P. 106]. In Russia, this problem has not been solved yet; however, the freezing of assets and the seizure of property of Russian oligarchs in the United States and European countries after February 24, 2022, revealed that the inviolability of private property was a myth of the Western world.

Many social-cultural phenomena become relevant when clarified: psychologists often associate the formation of personality with ‘de-objectification’, i.e., revealing inherent ideas of artifacts. The symbol of the Western property rights is a castle of the count or baron: for centuries it has meant the land of the noble family’s generations. People considered property inviolable even if its withdrawal brought benefits to them and corresponded to moral imperatives. On the contrary, in Russia there were no feudal estates or castles. On the other hand, rational evil, a detached attitude to moral aspects of the well-established rules, justification of the cruelty of these rules by their economic benefits have always been a feature of the Western civilization. This explains the popularity of social Darwinism in the USA and Great Britain in the 19^th century and the propaganda of ‘shock therapy’ by Western and pro-Western neoliberalists at the turn of the 20^th– 21^st centuries.

In the 18^th–19^th centuries, the property rights of noblemen (later — of representatives of other classes) were limited and violated in Russia to a much lesser extent than in earlier and later periods. However, the Russian mentality hindered the transition to primogeniture as it did not allow to disinherit all children except one or give a dowry only to the eldest daughter and send other daughters to a convent, which was common in Western Europe. In 1714, Peter the Great issued a Decree of Single Inheritance: estates were equated to votchina, renamed as imenie (from the verb imet — “to have”), recognized as the personal property of nobles, and each landowner with several sons was to bequeath his estate only to one of them. If there was no will, the eldest son was the heir, and if there were only daughters, the eldest daughter was the heir. Peter the Great supposed that disinherited sons of noblemen would enlist as in Western Europe. The Decree of 1714 was opposed by the society since it affected people’s vital interests and contradicted traditions and customs. “Parents wanted to distribute the estate equally among their children by all means due to equal love for each. They used fraudulent sales and mortgages and obliged their children with great oaths so that the son who would receive the property after their death would share it with his brothers. Thus, inheritance led to quarrels, murders and hatred among children and relatives” [16. P. 472]. Therefore, the Empress Anna Ioannovna Romanova abolished the Decree of Single Inheritance in 1731.

In 1785, the Charter to the Gentry was issued by Catherine the Great. The Charter united all nobility’s privileges and declared that estates of the gentry were not subject to forfeiture even for serious crimes of their owners. The guaranteed property rights led to the transition to primogeniture. The state supported primogeniture as an incentive for the voluntary recruitment of noblemen. They were exempted from mandatory service since 1762 as provided by the Manifesto on the Freedom of the Nobility. Catherine the Great allowed owners of large estates to apply for bequeathing their manors according to the primogeniture rule. Until the 1840s, a special Emperor’s decree on the status of the estate was to be issued for each case of the property transformation, but there was no law on that right. In 1845, the Regulations on Reserved Hereditary Estates guaranteed that estates were not subject to division or sale and could not be alienated for debts. Despite that privilege, in Russia from 1845 to 1905 only 60 family estates were declared impartible and inherited according to the primogeniture principle [1. P. 90–91]. In Russia, parents disinherited children only for a very serious reason or guilt.

In Russia, most of the population were peasants, i.e., petty proprietors, and social contradictions were of a different nature compared to Western Europe. However, in Russia Marxist calling to the destruction of private property for the sake of social justice and equality became more popular than in the West. Capitalism had never been the main social-economic formation in pre-revolutionary Russia, and after the transition to socialism and communism, the return to capitalism ended in failure: Russian reformers of the 1990s were unable to create a prosperous capitalist society on the Western model as it was incompatible with the Russian traditions.

The ideal of liberal capitalism of the Anglo-Saxon type remained attractive for centuries, and even today there are supporters of this model all over the world. Nevertheless, the situation is changing; countries without the primogeniture historical experience of the Western type have started to gain more political and economic power on the basis of other market-economy models. Most countries with the highly developed market economy either passed through the stage of primogeniture (Western Europe, Japan, South Korea) or have been mainly inhabited by descendants of people from the countries with the strong primogeniture tradition (USA, Canada, Australia). China has achieved huge economic success and has become a dangerous competitor for the United States and the West: despite the high population density, there has never been primogeniture in China, and the economic breakthrough is partly due to the features of the Chinese family business. In China, family assets have been commonly divided between all direct descendants, which impaired family economic stability and caused internal competition between relatives. “Since the ancient times, in the Chinese society there has been a fairly general conviction that the family prosperity does not last more than three generations” [11. P. 17]. This approach still determines the patterns of the Chinese family business to a certain extent: heads of families (founders of the family business) often tend to leave financial assets and savings in an inheritance, but not the company. Therefore, they do not develop business by boosting investment; instead, they focus on the sale of the enterprise in the foreseeable future in order to divide funds between heirs.

Due to the lack of long-term prospects, the Chinese family business is unstable and family-run companies rarely turn into large enterprises.

Small family companies have various advantages that lead to significant economic results. Small business is highly flexible and adaptable to changes; small family companies can operate effectively despite the absence of legal regulations of property rights due to the high team cohesion, well-developed partnerships based on personal relations, focus on mutual support and cooperation, low transaction costs and the ability to respond quickly and flexibly to market fluctuations. These features create certain advantages over large enterprises and enhance the effectiveness of small family companies. According to F. Fukuyama, “countries with relatively small firms on average — Italy within the European Community, for example, and Taiwan and Hong Kong in Asia — have grown faster in recent years than their neighbors with large firms” [6]. The centuriesold traditions still influence business strategies and patterns of Chinese families, such as a high propensity to save. From 2001 to 2005, savings increased from 39 % to 48 % of GDP in mainland China, from 30 % to 33 % in Hong Kong, from 22 % to 26 % in Taiwan and from 44 % to 49 % in Singapore (three-quarters of the population are ethnic Chinese) [4. P. 204–205; 14. P. 102]. The propensity to save is not a brake but a driver for the economy. Having no investment deficit (people’s savings), the above-mentioned countries successfully develop in the postindustrial era. Under primogeniture, material assets (company) remain in private ownership; the Chinese tradition dictates that assets accumulated by the older generation come into common ownership; thus, resources are likely to be more effectively used.

Despite historical changes, the priority of family interests and concern for the well-being of all family members remain the dominant attitude for the Chinese business development strategy. Mainly due to the tradition of the division of family property, the Chinese family business is of the network nature: all founder’s heirs can head up autonomous business organizations. This approach is widespread in the segment of large and medium-sized business and mitigates rivalry and conflicts between heirs. In addition, the networking of small enterprises allows them to jointly develop major projects without powerful hierarchical structures traditional for industrial societies. Chinese business networks can unite both family members and people who do not belong to the family. In southeastern China and Taiwan, the so-called guanxi networks unite relatives with fellow countrymen, university graduates, etc., i.e., can be considered non-family networks. One of the brightest examples of the family network organization is the business of the Malaysian–Hong Kong billionaire R. Kuok who owns the Shangri-La hotel group and the South China Morning Post newspaper. His heirs (sons and a daughter) and other relatives take an active part in business and hold top management positions.

Family networks are of principal importance for the Chinese economy. The division of business fields among relatives is widespread and has a positive impact. Being engaged in different spheres of family business, brothers and sisters diversify risks and contribute to the economic stability of the entire family business network. The focus on the network instead of the large corporation is an important reason for the success of Chinese entrepreneurs in the post-industrial age. However, the focus of business owners on family relations leads to the instability in business, limited opportunities for growth and development, difficulties in institutional transformations and transition to professional management. As Fukuyama emphasized, “businesses tend to be family owned and managed and tend therefore to be of rather small scale. There is a reluctance to bring in professional managers because this requires reaching outside the bounds of the family, where trust is low… These family businesses are often dynamic and profitable, but they have a hard time institutionalizing themselves into more permanent enterprises”. Fukuyama stressed that that the path to professional management was difficult and often insurmountable for Chinese family business due to the traditional devotion to the family [6]. The business development strategy is subordinated to family goals and patterns, and Chinese traditions result in the specific features of family companies [7; 17; 22]: high concentration in the small and mediumsized business sectors; instability and short longevity; strong presence in labor-intensive areas; focus on family resources and ties; priority of family management and high dependence on the competences of family members; limited professional management.

Many heirs deeply respect their family’s business traditions and are actively involved in the company management. Fostering respect for the will of older generations is a part of the Chinese culture. However, the current global trend towards independent career choice has started to change relationships in the Chinese family business. Some heirs refuse to continue family business: do not have a sense of responsibility for the family business or a desire to take part in the company management. Thus, the family business is not considered an uncontested life strategy, which threatens the continuity in family-run companies. Generation changes in business is often accompanied by rivalry among heirs. The tradition to divide family property in equal parts remains in force; consequently, people with different professional level and motivation enter the company; competition between family members for control often leads to business destabilization and even company liquidation.

However, similar problems are typical for family-run companies all over the world. Entrepreneurial talent and business interest are not generally inherited. So, with the change of generations and the weakening heir’s interest in family business, many families face the fragmentation of family property. These problems are solved in different ways. For instance, American family companies as a rule rapidly become institutionalized and implement professional management; already in the third generation, many companies are only controlled by the family with the controlling block of shares but are run by professional managers. Chinese family companies rarely invite professional managers and would prefer breakup or collapse as the non-family business form and its longevity are not priorities in the Chinese society.

The commitment of Chinese families to small business influence both the size of enterprises and the scale of their activity. Small family-run companies specialize mainly in narrow areas and focus on the production of a small list or a single type of products/services. Business is generally developed by the separation of related structures which continue to operate in close partnership with the parent company. The network of related companies with strong cooperation and partnership contributes to the further expansion of the family business. The pursuit of networking and horizontal relationships, which is typical for family business, determines organizational forms and economic strategies. The trend of keeping business within a family community and high concentration in the small and medium-sized business sectors are determined by the Chinese traditions: “Cultures in which the primary avenue toward sociability is family and kinship have a great deal of trouble creating large, durable economic organizations” [6].

The traditional structure and related problems of the Chinese family-run companies have undergone significant changes in recent decades due to the reduction in the average number of heirs. From 1979 to 2015 in China the onechild policy allowed to reduce the birth rate. In addition to the global factors of lower birth rates, this demographic program led to the dominance of onechild families in Chinese cities. The one-child policy ended in 2015, and fines and other sanctions for the birth of several children were cancelled; however, the birth rate has not increased. The prevalence of one-child households results in the population decline and ageing, which was the main reason for changes in the China’s demographic policy. Nevertheless, the predominance of onechild families should have a positive effect on the Chinese family business since it is increasingly inherited by the only child and neither division nor sale is needed. Family ties in business remain strong; thus, family businesses in China may increase longevity while keeping organizational networks created by previous generations.

In some countries, people do not deny moral norms and family values for the sake of profit. The comparison of the Western, Russian and Chinese traditions is particularly important for understanding of what is better — destruction of family ties for personal gain or rejection of exceptional wealth for the sake of good relations and mutual assistance of family members. The Anglo-Saxon ideal of liberal capitalism has remained attractive for centuries, but the situation changes. Countries without the primogeniture experience of the Western type have started to gain more political and economic power on the basis of other economic models. Today in such countries as Russia, China, India, the Arab East, Brazil, etc., a different approach develops in the market economy: people do not agree to substitute moral norms for monetary values and fierce competition. Only time will tell how viable this new form of capitalism will be.

About the authors

O. V. Dorokhina

Russian Presidential Academy of National Economy and Public Administration

Author for correspondence.
Email: odorokhina@yandex.ru
Vernadskogo Prosp., 82, Moscow, 119571, Russia

A. B. Sinelnikov

Lomonosov Moscow State University

Email: sinalexander@yandex.ru
Leninskie Gory, 1/33, Moscow, 119234, Russia

S. A. Barkov

Lomonosov Moscow State University

Email: barkserg@live.ru
Leninskie Gory, 1/33, Moscow, 119234, Russia

References