Lucius - Nature of Money & Wealth (was Future Professions...

Sat Apr 2 17:37:18 UTC 2005

No: HPFGUIDX 126981

--- In HPforGrownups at yahoogroups.com, "Megan" <WNCMegs at a...> wrote:
> 
> 
> <SNIPS GALORE>
> 
> > bboyminn:
> > 
> > Well, as far as Slytherins and especially Draco, what they want to
> > be when they grow up is . . . . . RICH! Draco is easy, he comes 
> > for what appears to be an 'Old Money' family, all he has to do is 
> > continue with his father's partronage network and his many 
> > business ventures. 
> 

> Megan:
> 
> Of course I am glad I asked!!! :-D
> 
> I wonder what EXACTLY DOES Lucius Malfoy DO for a living. I know 
> where has to be SOMETHING. Oh well! I wonder if his credibitily as a 
> business man has been ruined because of his arrest. ...edited...

bboyminn:

Funny you should ask (again), I just happen to have an essay on that
very subject which I posted in a different group.

Date: Mon Jan 26, 2004  6:47 pm
Subject: Speculation on the Nature of Money and Wealthy - Lucius Malfoy

I guess we would have to classify this as speculative canon; taking
what we see in the book, and speculating on what we don't see, but
that which is none the less reasonable and likely.

On various occasions the question has been raised as to how Lucius
Malfoy makes and maintains his wealth. I think if we take Alec's
patronage network idea (Hogs_Head-msg#540 -Expecto Patronus - Part
III) and expand on it, it becomes very clear how someone like Malfoy
earns his money. If you have seen the movie Nicholas Nickelby, then
evil Uncle Ralph Nickelby mirrors Lucius Malfoy very closely.

Again, this is all speculation, but I think it is reasonable and
likely speculation.

Alec portrays Lucius as the head of a large patronage network, and I
believe Lucius makes his money by facilitating business transactions
within his network.

For example, let's say an importer who is a friend of Lucius's need
working capital to import and sell a large shipment of thin bottomed
cauldrons. Lucius supplies that working capital in return for a share
of the profits. A quick turn over of his money and a handsome profit.
The perfect example of a patron supporting his clients; he takes care
of them and they take care of him.

But Lucius also facilitates transactions between his co-clients. Let's
suppose that the owner of the Potion Ingredients shop (apothecary) is
a friend of the Malfoy Network. Naturally, he is going to support the
network by buying his ingredients from wholesalers that are also part
of the Malfoy network. In exchange for assuring the continued
efficient and effective operation of both businesses, Malfoy takes a
small slice of the profit from the transactions.

The Buyer, the owner of the apothecary shop, buys from Malfoy's
supplier even if the price is slightly higher than on the general
market, because there may very well come a time when he needs to call
more deeply on Malfoy's service. For example, he may suddenly need to
by a large quantity of a rare and expensive ingredient. The end
customers of the apothecary shop don't care where the ingredients come
from, that's the owner's problem, they just know they want them and
it's his job to supply them. So, the apothecary shop owner borrows
working capital from Malfoy to complete the transaction. Malfoy gets a
profit slice of the transaction that takes place in his network and
interest on the loan.

One might ask why the owner would borrow from Malfoy rather than the
bank? The difference is that Malfoy's network is mutually beneficial,
and extends far beyond the loaning of money. The shop owners and
import/export companies also get to draw on Malfoy's extensive network
of foreign, domestic, and political contacts. Where as the Goblin's
simply loan money. It's not their job to help you run your business;
they don't care if you succeed or fail as long as they get their
money. Malfoy however has a very vested interest in making sure that
everyone gets what they want. Because every successful transaction is
money in his pocket as well as interest from any loans.

It's entirely possible that Malfoy also has inherited or purchased
investment real estate and may own major or minor interest in several
businesses. These are nothing more that money making investments to
him, I seriously doubt he takes an active part unless he sees his net
return diminish for some reason. When we read books and see movies
that take place in an era similar to that depicted in the wizard
world, (think Scrooge) we see that money lenders and evil landlords
are classic roles for rich people.

Ammendment(4/2/05)- We know Malfoy lives on a large estate in
Wiltshire in western England, typical of landlords of this (apparent)
era, Malfoy probably rents his land to peasants, who work it and
return a substantial portion of their profits to Malfoy.

In the fewest possible words, Malfoy lives by the old adage, 'it takes
money to make money'.

Thoughts on the nature of Malfoy's wealth-

Malfoy is Old Money, he lives off of what he inherited from his
family, as they lived of what they inherited. In our discussions of
the nature of inheritance in the wizard world and in old Europe, there
was the implication that those who inherit 'old money' have a
responsibility to not deplete that old money, but to use it as a way
of generating new money to live off of, and to perhaps even increase
the overall net worth of the estate. This desperation to maintain the
original level of assets could account for how ruthless old rich
people are typically portrayed.

If we assume Malfoy inherited 1,000,000 Galleons in assets not all of
which was cash (5.0 million pounds or $7.5 million) then he has an
obligation to maintain that level of wealth. He has an obligation to
assure that there is at least G1,000,000 in assets for Draco to
inherit. So, it is possible that Lucius might drain his net assets
down to G500,000 which would represent devastating circumstances to
him. Keep in mind, that is 'assets' not cash. A situation like this
could indeed represent desperate times for someone like Lucius. It
might cause him to have to mortgage his assets which very strongly
implies the risk of losing them if his financial fortunes don't make
an up turn.

Nothing could be a greater disgrace than to deplete the family
fortune. Even if Lucius died and left Draco net assets of G500,000
that would be a terrible disgrace in the eyes of old money old Europe.

In addition, to maintain the flow of commerce in his patronage
network, Lucius would have to constantly have a large amount of
working capital on hand. If his cash on hand diminished then he would
be unable to service his patronage, and they could very well desert
his network and seek out a better patron.

Some have speculated that Lucius may not be as wealthy as he appears
to be, if Malfoy was having a reversal of fortunes, he would go to
desperate measure to keep his patronage network from finding out, and
desperate measure can create desperate circumstances.

If Malfoy is having financial problems, then his imprisonment in the
latest book is going to wreak havoc with his patronage network as they
all depend on him for their contined existence, and conversely and
obviously, Malfoy depends on his network for his daily income. Indeed
a sudden stagnation of Malfoy's assets could have rapid and
devastating effects.

Just a few thoughts.

Steve/bboyminn

Note: 
My idea for this essay came for Alexander Dossetor's five part essay
which was reposted in the Hogs_Head Group by Lucky_Kari, where Alec
speaks a length on the concept of a Patronage Network and other
aspects of the wizard world; very interesting. Worth the read if you
are a member of that group.

Date: Sun Jan 25, 2004  12:40 am
Subject: "Expecto Patronus" - or how the Wizarding World really works:
Part I (of five)
http://groups.yahoo.com/group/Hogs_Head/message/538

It's long, very indepth and detailed, and more importantly, very
insightful.

Also, in Hogs_Head post#585 Alec himself replied to my post where
among other things he comments on the /cost/ of maintaining a
Patronage Network as well as profit.

Steve