‘Large private equity firms have been targeting UK supermarkets, which they view as undervalued and attractive due to their large property portfolios’ (BBC, 5 July). That’s why three different sets of these vulture capitalists were circling Morrisons. It was certainly not because they want to enter the grocery business. Like the BBC says, they wanted the land on which Morrisons’ supermarkets and warehouses are situated which they calculated could be put to a more money-spinning use.
It is not so much commercial profits that they are after as ground rent. Ground rent (not to be confused with house rent, which is a price) is a pure property income that accrues to the owner of land simply because they monopolise a portion of the Earth’s surface. It enables them to extract an income from the industrial or commercial capitalist they let use the land; the better the location and the higher the demand for its use the higher the rent they can extract.
In Volume III of Capital Marx pointed out that one feature of ground rent was ‘the palpable and complete passiveness of the owner, whose sole activity consists (especially in mines) in exploiting the progress of social development, toward which he contributes nothing and for which he risks nothing, unlike the industrial capitalist’ (Chapter 46). At the end of the previous chapter he had described it as ‘something for nothing’.
However, if they are clever, the ground landlord can increase their income from rent if they are prepared to invest some money to make their land more desirable by building houses or shops on it. In addition to bringing them a return on their capital this will increase their ground rent. This is what the aristocratic landowners who own large parts of central London have done. The Cadogan Estate, for instance, which reported recently:
‘Earl Cadogan and his family have controlled about 93 acres of Chelsea and Kensington for 300 years … Retail property accounts for about half of Cadogan’s rental income. A third comes from residential and remainder is offices’ (Times, 1 July).
Their rental income will be partly a return on their investment in the buildings but most will be ground rent (like with houses prices, where most of the price is not for the building but for the land on which it is built).
The vulture capitalists circling Morrisons wanted to get in on this act. They wanted to acquire the supermarket as it ‘owns the freehold of 85 percent of its 497 sites’ (Guardian, 5 July) and to use some of this land to erect different buildings that would bring them more income.
This kind of thing went on in Marx’s day too. Marx quotes the evidence of a London builder to a parliamentary committee in 1857:
‘The builder makes very little profit out of the buildings themselves; he makes the principal part of the profit out of the improved ground rents. Perhaps he takes a piece of ground, and agrees to give £300 a year for it; by laying it out with care, and putting certain descriptions of buildings upon it, he may succeed in making £400 or £450 a year out of it, and his profit would be the increased ground rent of £100 or £150 a year, rather than the profit of the buildings at which …in many instances, he scarcely looks at at all’.
Since the vulture capitalists would be the freeholder (rather than leaseholder as in this case) the whole £400-450 would go to them, as it does to the Earl of Cadogan, Duke of Westminster and Howard de Walden families and other parasites on parasites that ground landlords are.
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