Capitalism without Capital Intro

Published by @piggymouse1 on 2018-03-12

Valuation, the Old-Fashioned Way: or, a Thousand Years in Essex

Colin Matthews was vexed. To have valuers crawling all over his airport was the last thing he wanted. But after three years, it could no longer be stopped.

It was the summer of 2012. For three years he had been fighting the UK competition authorities’ attempts to break up British Airports Authority (BAA), the company he ran and which owned most of Britain’s large airports. He had exhausted his legal options and was giving up.

So now the men and women with suits and spreadsheets and high-viz vests were going round his airports, working out how much they were worth to potential buyers. Accountants and lawyers and surveyors and engineers measured and counted, and bit by bit, they came up with a value for the whole of Stansted, Britain’s fourth-busiest airport, to the northeast of London.

They priced up the tarmac, the terminal, the baggage equipment. There was an agreed value for the parking lots, the bus station, and the airport hotel. There was some argument about the underground fuel pumps, but the calculation was not out of the ordinary for BAA’s accountants: the cost of the asset less its depreciation, with some adjustment for inflation. Sure enough, when Stansted was sold in 2013 (for £1.5 billion), the price was pretty close to what the accountants had valued the business at.

In one sense, the valuation of Stansted looked like a quintessentially twenty-first-century scene. There was the airport itself. What could be a better emblem of globalized high modernity than an airport? There was the troupe of accountants and lawyers, those ubiquitous servants of financial capitalism. And, of course, there was the economic logic of the process: from the privatization that put BAA in the private sector in the first place, to the competition policy that caused the breakup, to the infrastructure funds that circled to buy the assets after breakup; all very modern.

But at the same time, the valuation of Stansted was the kind of thing that had been going on for centuries. The business of working out how much something was worth by counting up and measuring physical stuff has a long and noble tradition.

Nine and a quarter centuries before, Stansted, then just another country village, had played host to a similar scene. Reeves and messengers, the eleventh-century forerunners of the accountants and lawyers that had so vexed Colin Matthews, had converged on the place to assess its value for Domesday Book, the vast survey of England’s wealth carried out by William the Conqueror. Using tally-sticks rather than laptops, they carried out their own valuation. They talked to people and counted things. They recorded that Stansted had a mill, sixteen cows, sixty pigs, and three slaves. Then they measured what they counted and valued the manor of Stansted at £11 per year.

And although the value they put on the medieval village of Stansted was rather less than the £1.5 billion BAA got for selling the airport in 2013, the reeves and envoys who did the measuring for William the Conqueror were doing something fundamentally similar to what Colin Matthews’s accountants were doing.

For centuries, when people wanted to measure how much something ought to be worth—an estate, a farm, a business, a country—they counted and measured physical stuff. In particular, they measured things with lasting value. These things became the fixed assets on accountants’ balance sheets and the investments that economists and national statisticians counted up in their attempts to understand economic growth.

Over time, the nature of these assets and investments changed: fields and oxen became less important, animals gave way to machinery and factories and vehicles and computers. But the idea that assets are for the most part things you could touch, and that investment means building or buying physical things was as true for twentieth-century accountants and economists as it was for the scribes of Domesday Book.