– A blog series by Bill Rau –
We are all familiar with the law of Unintended Consequences
We also know that when a government institutes a tax, it rarely goes away and it typically goes up.
One of the crazy reasons that America is the land of art and antiques and we have more treasures here than anywhere else in the world, ironically lies in the English tax system.
About a century and a half ago, some clever English politician had the grand idea of putting an inheritance tax on all the large English landowners of the time.
This tax started out at only three percent of one’s estate. That does not sound like a lot. If your estate was worth a hundred thousand pounds, and you died, your family would have to pay only three thousand pounds in tax.
But they forgot to put a marital exclusion in there. So what happened was, if the Earl of Grantham died one year and the Countess died the next year, not only did their heirs have to pay the tax once, they had to pay it twice. Ordinarily, even under most circumstances, this would not be that onerous of a tax.
Now, one of the curious things that most people do not remember about the English upper classes, is that they did not typically work.
If you were a gentleman of high social status in England in the 19th century, there were only three professions available to you. If you did work in any profession besides these three, you would be considered unfit for society. These accepted professions were the church, politics, and the military.
The great majority of the English upper classes didn’t work in any of these professions. They just lived off the wealth from their lands.
However, they did not work the land themselves. As a general rule, they rented the land to farmers who were the equivalent of share-croppers, who would then pay them rent with a percent of their profit, not unlike our Pieter Brueghel painting Paying of the Tithes of three centuries earlier.
So, for one second, let’s travel across the Atlantic to America.
By the 1870s, new railroads crisscrossed our country and transportation had become more efficient than ever before.
America was now able to produce food that was far less expensive than the rest of the globe. This is when we became known as the bread-basket of the world. We could produce food less expensively, because not only did we had very fertile lands, we also had the network of railways to transport the food, as well as ships that had cut the sailing time to Europe by over half.
Thus, we could deliver food from the United States to Europe, and that was thirty to fifty percent less expensive, than the food they were growing over there.
And for the very first time in history, food prices around the world fell dramatically.
So the English landed gentry with their giant homes were now being taxed and were not now taking in enough money from their tenants to keep up both their homes and their lifestyles. Often the very first things they sold was their art and valuable antiques, objects that often had been in their family for generations. And typically, they sold these treasures to the Americans.
The world had changed, and the people with the real money in those days were the Americans.
Eiffel Tower
A perfect example illustrating this transfer of wealth to the new world comes via the 1889 Paris Exhibition. This was, of course, the World’s Fair where the famed Eiffel Tower was unveiled.
The iconic Eiffel Tower, was paid for by the entire French nation. The construction used more iron than any building that had ever been built. It was not only the largest monument ever made in square footage; it was also the tallest man-made structure the entire world.
But here’s an amazing fact. The giant Eiffel Tower was not the most expensive project being constructed in the world that year.
The most expensive project was this:
Construction of Biltmore House
A vacation home, intended to be used only 3 months a year by a single family, was being built that at the exact same time — a home by the name of Biltmore.
It was being constructed in rural Asheville, North Carolina, by the Vanderbilt family.
And that single vacation home, cost more than the entire Eiffel tower.
There can be perhaps no clearer indication of the transfer of wealth to America than this one tiny example.
And Americans that were wealthy came over to Europe, to buy their art, antiques, and of course their culture.
It was being constructed in rural Asheville, North Carolina, by the Vanderbilt family.
And that single vacation home, cost more than the entire Eiffel tower.
There can be perhaps no clearer indication of the transfer of wealth to America than this one tiny example.
And Americans that were wealthy came over to Europe, to buy their art, antiques, and of course their culture.
