Home Economics How We Britons Solved Wealth Inequality - Free Trade And Technological Change

How We Britons Solved Wealth Inequality – Free Trade And Technological Change

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A little side issue in a story about property rights here:

The billionaire owner of fashion chain H&M has banned all hunting on his vast country estate after allegations of illegal practice by a local group of riders, as saboteurs claim hunts are “fighting for their existence”.

Stefan Persson is the latest landowner to suspend trail hunting following similar moves by Forestry England, The National Trust, The Church of England and others, with campaigners saying “the tide is turning”.

Mr Persson bought Ramsbury Estates, four miles from Hungerford and stretching across 19,000 acres of Wiltshire, Berkshire and Hampshire for £17 million in 1997, and confirmed that all hunting will be stopped on the estate’s land “for the foreseeable future”.

It’s his land, he gets to decide what people can do on it. That some might not like what he’s doing with his own property is an opportunity for those people to shut up.

However, the far more interesting point is the price paid for that estate. Sure, £17 million is more than I’ve got – possibly it’s more than you do too. And yet £17 million isn’t some sum that’s beyond all dreams. Noddy Holder’s bass player could afford it. OK, sure, it would be a stretch and all that, but it’s about possible. The bass player and Noddy get some £500k a year each in royalties from that Christmas song. That’s a royalty stream that’s going to last for another 70 years minimum. You’d be able to find a bank (City, not retail) that would finance that then. Adding in earnings from the estate itself you could plus there’s a certain amount of security there.

Now think of what 19,000 acres was back in the 19th century. That was a ducal estate – and income too. You’d be lucky today if that much farmland maintained the sort of house that it would have built – and often did – back then.

That is, we’ve lowered, massively, the relative value of farmland in the UK. Which, given that’s where the aristocratic fortunes were, means we’ve reduced wealth inequality rather massively. This is in one of the Saez/Zucman etc papers. Actually, they stop measuring agricultural land as a part of household wealth in the 1920s or so as it becomes nugatory compared to private housing and pensions.

So, how did we do that? We had free trade. We abolished the Corn Laws so that those who owned the land that grew the wheat no longer had a stranglehold on the society. And then steamships meant American and Canadian wheat could be brought in. We can even see this as the gap in price between the price of wheat out on the prairies and that in London narrowed from 1865 onwards. Then it happened again in the 1890s as the railways opened up the Ukraine to wheat farming. The 1870s and 1890s being two vast and deep agricultural depressions in Britain.

By the 1920s those stately piles funded by agricultural rents could not even be heated let alone maintained – that’s why we’ve got the National Trust, to keep those piles standing.

So, how did we kill those ancient fortunes? Free trade and technological progress.

How are we going to kill off the current ones that cause so much angst? Free trade and technological progress. You know, exactly the things that the people currently whining won’t allow us to do.

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5 COMMENTS

  1. Must admit the current ones don’t cause me angst.

    But, while I agree with you on technological change, I’m more dubious about free trade. I just don’t trust all those foul foreign fiends.

    Perhaps it’s islamophobia, sinophobia, xenophobia or just simple paranoia. I’d guess all four.

    • And you trust all the domestic fiends? This is why we have standards, contract law and all the rest – it makes the system work to an acceptable level of risk no matter where the actors are.

      • @BIK

        Interesting point. I did some contracting for a Chinese firm (ain’t globalisation grand?) and if I had wanted to sue them, the contract required me to do so at a particular court in Beijing. Under Chinese law, naturally. In practice I figured I’d they didn’t pay me, they didn’t pay me, and there’d be no point chasing anyone up about it. An equivalent British firm might not be inherently more trustworthy but I would have had the peace of mind of the small claims court for example.

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