The Land Trap

The Lie of the Land

About 3,200 years ago, more than a millennium before Caesar's crossing of the Rubicon and the beginnings of the Roman Empire, more than six centuries before the birth of either Plato or Confucius, a lucky servant named Munnabittu received a gift of land from Meli-Šipak II, one of the Kassite kings who reigned in ancient Babylon.

We know quite a few things about Munnabittu and his patch of earth. We know that he owned several hundred acres, a little more than a square mile. The parcel would have made him moderately rich, but not immensely so. We know that the land was on the banks of a canal in a place called Hudadu, possibly an ancient name for Baghdad. We know the name of some of Munnabittu's neighbors too, because he faced a legal challenge over the ownership of his plot, and we know that the decision eventually fell in Munnabittu's favor. We know the names of the officials who adjudicated the disagreement, and we know the names of the bureaucrats who trekked from the royal palace of Marduk-apla-iddina I, the son of Meli-Šipak II, to confirm the size of the estate.

We know more with some degree of certainty about Munnabittu-a Babylonian servant who lived in the dying days of the Bronze Age, who was otherwise a historical nobody-than we do about many of the kings, warriors, scholars and prophets who were born during the centuries and millennia that followed. We know about Munnabittu specifically and solely because of the land he possessed, the ownership and saga of which is carved into a piece of smooth black limestone around half a meter long. The stone was recovered from Susa, in Iran, by archaeologists in the early twentieth century. Known as a kudurru, the stone was the centrally held record of the servant's landownership. Munnabittu likely would have had a replica of his own to prove possession to any subsequent doubters.

The fact that Munnabittu's story was recorded in such a permanent manner, and survived for thousands of years even as so much other knowledge was lost, is not some fluke of history. Munnabittu's wealth was carved indelibly into solid stone for a good reason. For many early civilizations, land was power. Governments collected taxes in the form of grain, for which records of ownership were of the utmost importance. Without knowing who owned each segment of earth, it was impossible to know who owed what to the tax collectors. For the very earliest agricultural economies, the way in which land was owned, organized and used was one of the foremost priorities of state-building, which made the difference between economic survival and total collapse.

Across a range of ancient languages, among different civilizations spread thousands of miles around the world, some of the very earliest surviving records are those which delineate landownership. In India, flat copper plates recorded grants of land from local rulers, often to religious establishments, from as early as the third and fourth centuries BC. In Egypt, tombs that were built and sealed more than four thousand years ago are inscribed with the details of the lives of the men buried within-including descriptions of the land they owned. Before the existence of investment funds, pensions, stocks, bonds or international currency markets, even before human history was recorded in any meaningful way, land was the original asset. The ability to own and control territory was the first means of turning power into wealth.

Munnabittu would presumably find a lot of things about the modern world very confusing, but there are elements that might seem familiar to him. After centuries of gargantuan social and economic change, land is still at the center of our world. Owning it still confers social status and financial security. It is still the asset that governs the course of our lives, our successes and failures, more than any other form of wealth. Today, land remains the world's largest single asset by some margin and a prized possession to its owners. One estimate, by the McKinsey Global Institute, pins the total value of land at about 35 percent of the $520 trillion in real wealth on earth, a category that includes all of the physical and intangible assets in the world, from buildings to intellectual property. The total sum of the machinery, infrastructure and equipment across the planet makes up another 17 percent, while commercial property and residential housing-the actual structures on top of the land-are worth another 11 percent and 21 percent apiece.

That makes the market in land about twice as valuable as all of the listed companies on every stock exchange in the world. While those publicly traded securities are monitored, second by second, by a global army of investors and a breathless financial media, land is relegated to a second-order asset, hidden within the categories of housing and real estate. When we talk about commercial and residential property, the terms we use tend to give the impression that it is the buildings rather than the earth below them that hold most of the real value. But in the bustling cities where housing and property are most expensive, that is overwhelmingly because of the high price of land. Most of the variation in the price of properties, street by street, town by town and indeed country by country are variations in the cost of land, not the structures on top. In places where real estate is most expensive, land makes up a far larger share of the total value of properties.

In an increasingly intangible and digital world, the centrality of land poses a puzzle. Since the turn of the twenty-first century, the share of land in private assets in the countries across the rich world (those for which data is available) has risen from 18 to 26 percent on average. Relative to all the other forms of wealth taken together-both financial assets like stocks and bonds, and real wealth like buildings, machinery and intellectual property-the importance of land has only increased, even as the world seems to have become more incorporeal. In the booming economies of East Asia, the source of so much of the world's economic growth over the last three decades, the value of land has exploded. In China alone, a tremendous real estate boom has created tens of trillions of dollars of land wealth. No asset is more powerful in global finance than land, which serves as a form of vital security to lenders in rich and poor countries alike, enabling tremendous volumes of borrowing for households, small companies and entire governments.

The immense power of land is also what can make it enormously dangerous. Many of the biggest economic and social challenges that we believe are disparate and unrelated problems-financial booms and busts, sluggish economic growth, the persistence of inequality and the bitter zero-sum politics of today and throughout history-are rooted in land and the unique ways it functions as an asset. The explanation of why the world is still so hooked on our most ancient form of wealth, how we reached this state of affairs and the dangers it poses to us all are the focus of this book. The nature of land, who owns it and its vital position in the financial system matter enormously for every one of us, even when we don't know it. It is not just the most important asset to the billions of ordinary people for whom it is their greatest store of wealth, but one that can make and break families, businesses and even entire nations.

For the vast majority of recorded human history, through the Babylonian Empire and for millennia afterwards, well into the twentieth century for most of the world, life was simple, local and rural. People were overwhelmingly poor. What wealth they had, if any, stemmed mostly from their land: what could be grown from it, raised on it and mined from it.

For those who owned a great deal of land, their holdings often conferred power over and responsibility for the people who lived on it too. The very highest positions of status in preindustrial Europe and Asia often went hand in hand with huge quantities of arable land. The inhabitants of the land owed a chunk of their labor, crops, income or all three to the class of elites who possessed the vast agricultural estates on which peasants lived and died. When the men who tilled the soil were called on to fight and die in wars in Europe, it was the landed gentry-earls and barons, seigneurs and Lehnsherren-who pressed the unfortunate conscripts into service. These landed aristocrats played a vital role in governing their countries, acting as the sometimes-brutal intermediaries between the rural population and the feeble central government, a hierarchy that emerged all over the premodern world.

This book aims to answer the question of why land is so important today, and why it will continue to shape-and threaten-our future. But understanding how the world's most important asset was once used is more than just a matter of distant social history. It is a vital part of understanding the grip that land holds over society today, and why people are so attached to the idea of owning it. Beyond every other common source of wealth, land is symbolic and stirs powerful emotions. Throughout history, the ownership of land has conferred liberation from serfdom and feudalism, a totem of freedom from the yoke of the landlord. In much of the world, it still symbolizes something similar. Becoming an owner of land and the real estate on top of it secures membership in the stable and independent middle classes. It is a symbol of adulthood and financial security. People believe not just that land belongs to them, but that they belong to it too. It is deeply wrapped up with conceptions of belonging and identity-the very core of how people define who they are.

But the last three hundred and fifty years of human history, which will be the focus of this book, have been profoundly different from the centuries, even millennia, that preceded them. That chunk of time has been a transformative but brief sliver of our history, like a sudden handbrake turn after thousands of miles of familiar, steady driving. As the era of industrialization began, the world shifted from one in which the production and distribution of food was the dominant form of commercial activity to one in which agriculture accounts for not even a twentieth of global economic output. In the richest nations of the world today, farming usually accounts for less than a percentage point of a country's GDP, and fewer than one in fifty jobs. Taxes are paid not in grain or military service, but in money.

During the eighteenth and nineteenth centuries, the last of Europe's tens of millions of serfs, who had previously been tied directly to the land on which they lived, were emancipated from attachments to their landlords. The previously rural populations of Europe and North America flooded into new and burgeoning cities. Places that barely registered on the map were quickly populated by hundreds of thousands of residents. New and vastly more productive forms of manufacturing, transport, trade and communication emerged. The ancient role of land began to ebb away. The enormous estates where tenants farmed the land, which had previously been the most valuable assets of all, declined in both value and esteem. The world we know today was being born.

Almost everything about the way we live has been transformed since Munnabittu's era, and even since the first Europeans began to arrive in North America. But land is still crucially important to the global economy and the everyday lives of people all over the world. Its significance stems from three crucial features, which explain why its value has only risen, even as its original role as a source of food and raw commodities has become so much less important. These features help to explain why it remains the most important asset in the financial system and the store of such enormous wealth today. They are also what makes it the source of a great deal of global inequality. Land defies some of the usual laws of capitalism that apply to other assets and goods. Its special features are also what make land so profoundly dangerous, and such a crucial component in catastrophic financial crises.

The first of these special features is that it is incredibly difficult-usually impossible-to create more land. In the terminology of economists, its supply is fixed. A few modest slivers of earth have been created in a process known as "reclamation." It has been possible on the coasts of the Netherlands and the city-state of Singapore and in Tokyo Bay. Where that is possible, it is an enormously worthwhile pursuit, which can create hundreds of billions of dollars in valuable earth. But in the aggregate, there is barely any more land in the world today than there was before the Industrial Revolution began. That makes land unlike any of the other goods or assets we produce for one another, which have exploded in scale in response to ever-growing demand. When people want more of something, it rises in price, and new producers rush to make similar items. In stark contrast, acquiring more land, especially in popular areas, means buying or taking it from someone else. Most forms of wealth are what economists call "positive-sum," meaning that one person gaining more of it does not mean another person is losing out. But land is very often a zero-sum asset.

During the period of rapid economic growth since the beginning of the Industrial Revolution, the supply and nature of all the other things we value has changed continuously. Inventive new ways of doing things have rapidly eclipsed old methods. Among the five largest American companies today, collectively worth more than $15 trillion at the end of 2024, just one (Microsoft) has been around for as long as fifty years. Several of the mighty corporate giants of the recent past-former technological leaders like Kodak, Polaroid, Nokia and Motorola among them-once seemed immovable but have plunged into irrelevance. Businesses are continually pressed to create new goods and services by relentless competition, and those that stand still are quickly crushed. If much of the machinery, technology and intellectual property that was enormously valuable as recently as twenty years ago was transported to the modern era, it would be almost completely worthless, designed for markets that no longer exist and with methods that now seem archaic. Land is fundamentally different. In the old real estate investor's platitude, they're not making any more of it.

The second crucial factor that makes land so different from every other asset is its immobility: it can't be picked up and moved somewhere it might be more useful. When the land in a buzzing urban area becomes enormously valuable, more land cannot be brought in from a place where it is still dirt cheap. The other parts of an economy are far more fluid and movable. People migrate between neighborhoods, to new cities and across borders in search of fresh opportunities. Equipment and machinery can be transported by road, rail, sea and air. Ideas flow so very freely that governments institute laws to prevent the theft of new concepts and inventions. Even the buildings on top of land can be moved in extreme circumstances, and the parts from which they were built can be recycled and reused. Not so with land.