Skip to Content

Cooking the Books 2: Feudal Relic

In July the House of Commons Public Accounts Committee issued a report on the finances of the Duchy of Cornwall which, since feudal times, has provided a private income for the heir to the throne. A reminder that the “royal family” not only supply heads of state for UK Capitalism Inc but are also aristocrats in their own right, with their own landed estates.

The thrust of the committee’s report – dominated as the committee is by New Labour MPs who favour a “modernised” capitalism – was that Prince Charles was not running the Duchy as a proper capitalist enterprise. But the Duchy is a landed estate rather than a capitalist corporation. The aim is still of course to end up with a surplus, but Charles’ income comes mainly from the rents paid to his estate by tenant farmers and, increasingly it seems, commercial firms for the use of the land he has inherited from previous heirs to the throne. According to the report, the Duchy’s assets at the end of 2004 were valued at £428 million, most of it land.

England was the classic country of a landowning class of this type, and Marx’s mid-19th century analysis of the operation of capitalism which then still had a large agricultural sector, like that of Adam Smith and David Ricardo before him, was based on a three class system: a landowning class renting out its land to capitalist tenant farmers who employ wage workers. These latter produce surplus value which is then shared between the capitalist employer as profit and the landowner as rent.

Ground-rent is a pure monopoly income which accrues to people who, for accidental historical reasons, happen to be owners of a portion of the globe; which allows them to say, even to capitalists, “you can’t use my land for your farm or your factory or whatever unless you hand over to me a share of the proceeds”. So landowners are parasites on parasites. In the 19th century this was a big issue with capitalist politicians continually raising the “land question”, but it eventually ended in compromise and intermarriage between members of the two classes. We can now talk of an essentially two class system - capitalists and workers - even though ground-rent remains money for nothing.

Actually, Charles is also a bit of a capitalist in his own right. He markets organic food under the label “Duchy Originals” but which, according to the Times (22 July), “made a profit of £1 million on a turnover of £40 million, which most commercial enterprises would regard as an inefficient return”. But then, if you’ve got an income from your private estate of £11.9 million in the tax year 2003-4 (Committee Report) you don’t have to be so ruthless in your pursuit of any commercial profit as you would be if this was your only source of income.

But the New Labour MPs are right. If all capitalist firms took the same aristocratic attitude to profit-making as Charles, then British capitalism would be in trouble on world markets. The typical capitalist firm has to try to maximise its profits, not just to please its shareholders, but to keep in a fit state to continue to compete by having funds to invest in means to reduce its costs.

In the 1860s when Marx was writing Capital the typical capitalist was still an individual owner who ran his own business or a partnership of such owners, though this was beginning to change with the coming of the limited liability company. Marx described the individual capitalist as “capital personified and endowed with consciousness and a will” (Volume I, chapter 4). Thus, the individual capitalist’s greed was not a personal failing but a reflection of the fact that he personified capital’s need to expand continuously.

Limited companies (which Marx did discuss in Volume III of Capital) are now the dominant form and maximising profits is no longer a mere personal motivation; it is a legal obligation on those who run companies. The same applies to pension funds and other so-called “institutional investors”; the managers and trustees of such funds are under a legal obligation to maximise the fund’s income or face a breach of trust charge. Which makes them as ruthless profit-seekers as any capitalist corporation or 19th century Gradgrind.

Prince Charles is just not in this league, but then he’s more of a personification of landed property.