A Tale of the Tail

Legal forms that were well adapted to a world in which wealth was zero sum, and borrowing against an estate could serve no purpose other than to carry out a slow transfer of it to others, were poorly adapted to a world in which wealth could be created, and borrowing against an estate could fund investment that would improve its productivity:

In Hitel Széchenyi argued that Hungary’s agriculture remained unproductive because of its reliance on the unpaid labor of serfs. If they wanted to raise production, landowners should instead employ wage labor on their estates. But in order to afford large numbers of wage laborers or the luxury of experimenting with new technologies, Hungary would also have to rid itself of the legal tradition of entailed estates. Entail prevented the estates of the magnates—the highest aristocrats—from being partitioned or sold. It required that land be passed down undivided according to specif‌ic inheritance rules. An entailed estate could not be used as collateral for raising mortgage loans, nor could any of it be sold off to raise funds. These laws made it impossible to use land as a resource for raising the money needed to invest in new technologies or to develop a system that paid wages to free peasant laborers. Széchenyi pointed out that while nobles owned more than two thirds of the arable land in Hungary, a surprisingly high percentage of that land remained uncultivated. And this in a time where 920,000 peasant families in Hungary were registered as “landless.” If nobles could sell or mortgage their lands for credit, they could invest in new technologies of production, and they could pay wages to peasant workers. If they could raise credit, nobles could also fund new manufactures that could employ landless peasants. Széchenyi criticized many other aspects of the feudal system in Hungary, especially the nobles’ continued immunity to taxation, the inability of most peasants to own land, the restrictions that the guild system placed on the free development of manufactures, and the lack of legal equality for the vast majority of the population.

Pieter M. Judson, The Habsburg Empire: A New History 111 (2016).