Chapter 41: Differential Rent II – First Case: Price of Production Constant

It is unnecessary here for the capital investment on all types of land to double, as in the table. The law is the same whenever extra capital is applied on one or more of the rent-bearing types of land, no matter in what proportions. All that it requires is simply that production on each type should increase in the same ratio as capital. Here, rent rises simply as a result of increased capital investment on the land and in proportion to this increase of capital. This increase in the product and rent as a result of and in proportion to increased capital investment is just the same, as far as the amount of product and rent is concerned, as if the cultivated area of the rent-bearing lands of the same quality had increased and these were cultivated with the same capital investment as the same types of land were previously. In the case of Table II, for example, the result would remain the same if the additional capital of £2 1/2 per acre were invested on a second acre each of B, C and D.

This assumption also supposes that there is not a more fruitful application of capital, but simply an application of more capital to the same area with the same result as before.

In this case, all proportionate ratios remain the same. However, if we consider not the proportionate differences but the simple arithmetical ones, the differential rent on the various types of land can alter. Let us assume for example that the extra capital has been invested solely on B and D. The difference between D and A is then 7 qrs, as against 3 qrs before; between B and A, 3 qrs instead of 1 qr; between C and B, — 1 instead of +1, etc. But this arithmetical difference, which is decisive in the case of differential rent I, in so far as it expresses the difference in productivity for the same capital investment, is here quite immaterial, since it is simply the result of different further investment or non-investment of capital, given the same difference for each equal portion of capital on the various lands.

III. The extra capitals bring forth an extra product, and thus form surplus profits, though at a declining rate and not in proportion to their increase.

It is once again immaterial, in connection with this third assumption, whether the extra investments of capital put in second time round fall uniformly on the various types of land or not; whether the declining production of surplus profit proceeds in equal or unequal proportions; whether the additional capital investments all fall on the same rent-bearing type of land; or whether they are distributed, uniformly or not, on rent-bearing lands of different quality. All these factors are immaterial for the law to be developed here. The only assumption is that extra capital investments on any of the rent-bearing land types yield surplus profit, but in declining proportion to the increase in capital. In the examples given in the above table, the limits of this decline are 4 qrs = £12, the product of the first capital investment on the best land D, and 1 qr = £3, the product of the same capital investment on the worst land A. Given the same capital investment, the product of the best land on investment of the original capital forms the maximum limit – and the product of the worst land A, which bears no rent and gives no surplus profit, the minimum limit – of the product that the successive capital investments on any of the land types yielding surplus profit actually yield in a situation of a decline in productivity from successive capital investments. While assumption II implies that new plots of land of the same quality as the better types are added to the cultivated area, that the quantity of one or more of the cultivated land types increases, assumption III implies that additional plots of land are tilled whose degree of fertility varies between D and A, between that of the best land and that of the worst. If the successive capital investments take place exclusively on land D, they can encompass the existing differences between D and A, as well as those between D and C and between D and B. If they all take place on land C, they can encompass only the differences between C and A and C and B; if on B, then only the differences between B and A.

But the law is that the rent on all these types of land grows absolutely, even if not in proportion to the additional capital invested.

The rate of surplus profit declines, in relation both to the extra capital and the total capital invested on the land, but the absolute amount of surplus profit increases; just as the falling rate of profit on capital in general is usually combined with an increasing absolute mass of profit. The average surplus profit for the capital investment on B, for example, is now 90 per cent on the capital, while for the first capital investment it was 120 per cent. The total surplus profit, however, increases from 1 qr to 1 1/2 qrs, and from £3 to £4 1/2. The total rent taken by itself – and not in relation to the doubled sum of capital advanced – has risen absolutely. The differences in the rents from the different types of land and their relationship to one another may change in this case; but this change in these differences is here the result of the wider spread of rents and not its cause.

IV. The case in which the extra capital investments on the better types of land produce a greater product than the original requires no further analysis. It is immediately comprehensible how on this assumption the rents per acre rise, and in a higher ratio than the extra capital, whatever the type of land on which it is invested. In this case, the extra capital investment is combined with an improvement. This includes the case in which a small extra capital produces the same or a greater effect than the previous addition of a larger amount. This case is not quite identical with the former, and this is a distinction that is important for all capital investments. If for instance 100 gives a profit of 10, when applied in a particular form, and 200 a profit of 40, then the profit has risen from 10 per cent to 20 per cent, and in this respect it is the same as if 50, applied in a more effective way, gave a profit of 10 instead of 5. We assume here that the profit is bound up with a proportionate increase in the product. But the difference is that in the one case I have to double the capital, while in the other I produce the doubled effect with the same capital as before. It is certainly not the same whether I produce (1) the same product as before with half as much living and objectified labour, (2) double the previous product with the same labour, or (3) four times the previous product with twice the labour. In the first case labour is set free – in either living or objectified form – and can be applied elsewhere; more labour and capital is available. The release of capital (and labour) is in itself an increase in wealth; it has exactly the same effect as if this extra capital was obtained by accumulation, but it spares the task of accumulation.

Let us assume that a capital of 100 has produced a product of 10 metres [of cloth]. Say that this capital contains as much constant capital as it does living labour and profit. The cost is 10 per metre. If I can then produce 20 metres with the same capital of 100, the cost falls to 5 per metre. If on the other hand I can produce 10 metres with a capital of 50, the cost is still 5 per metre, and a capital of 50 is also released, in so far as the former supply is still sufficient. If I have to invest a capital of 200 to produce 40 metres, the cost is similarly 5 per metre. In this case there is no difference in the determination of value or price, any more than in the quantity produced in proportion to the capital advanced. But in the first case capital is released; in the second case extra capital is spared, given that twice the production is required; in the third case the increased product can be obtained only by a growth in the capital advanced, although not in the same proportion as if the increased product had had to be supplied at the old level of productivity. (This belongs in Part One.)

Considered from the standpoint of capitalist production, then as far as a fall in the cost price is concerned, rather than an increase in surplus-value – and a saving in costs on the surplus-value-forming element, labour, does the capitalist the same service as a rise in surplus-value itself; it similarly forms profit for him, as long as the governing production price remains the same – it is always cheaper to employ constant capital rather than variable. This presupposes in fact the development of credit and the abundance of loan capital that corresponds to the capitalist mode of production. Say I employ on the one hand an additional constant capital of £100, this £100 being the product of five workers over a year; on the other hand, £100 in variable capital. If the rate of surplus-value is 100 per cent, the value that the five workers have created is £200; the value of the £100 constant capital, however, is £100, while as capital it is perhaps £105, if the rate of interest is 5 per cent. The same sums of money express very different values, when their products are considered, according to whether they are advanced to production as sums of constant capital or of variable. Another factor, as far as the cost of commodities from the capitalist’s standpoint is concerned, is the further distinction that of the £100 constant capital, in so far as this is invested in fixed capital, only the wear and tear goes into the value of the commodity, whereas the £100 for wages must be completely reproduced in it.

In the case of colonists and independent petty producers in general, who have no access to capital, or only at high interest rates, the portion of the product that represents wages is their revenue, whereas for the capitalist it is a capital advance. They therefore consider this outlay of labour as an indispensable precondition for the proceeds of their labour, which is the most important thing for them. As far as their extra labour is concerned, after this necessary labour is deducted, it is always realized in an excess product; and whenever they can sell it or can employ it themselves, they consider it as something that has cost them nothing, as it has not cost any objectified labour. It is only the expenditure of objectified labour which is seen by them as an alienation of wealth. They naturally seek to sell as dear as possible; but even a sale below value and the capitalist price of production still seems to them a profit, as long as this profit is not anticipated by incurring any debt, mortgage, etc. For the capitalist, on the other hand, the outlay of both constant capital and variable is an advance of capital. The relatively greater advance of constant capital reduces the cost price, other things being equal, as it also reduces the value of the commodities. Hence although profit arises simply from the surplus labour, i.e. simply from the employment of variable capital, it can seem to the individual capitalist that living labour is the most expensive element in his production costs, which should be reduced to the smallest possible minimum. This is simply a capitalistically distorted form of the correct statement that the relatively greater application of past labour, compared with living, means an increase in the productivity of social labour and greater social wealth. This is how everything appears from the standpoint of competition: incorrectly, and standing on its head.

Assuming stable production prices, the extra capital investments can be made with constant, increasing or decreasing productivity on the better lands, i.e. on all land from B upwards. On A itself, this would only be possible, on our assumptions, either with productivity unchanged, in which case the land would continue to bear no rent, or if productivity increases; one part of the capital invested on land A would then bear rent, the other not. But it would be impossible on the assumption that A’s productivity declines, for in that case the production price would not remain constant, but would rise. Under all these circumstances, however, i.e. whether the surplus product brought in is proportionately above or below this proportion – and thus whether the rate of surplus profit on the capital remains constant, rises, or falls as the capital grows – the surplus product and the surplus profit per acre corresponding to it increase, and so too therefore, potentially, does the rent, in corn and in money. The growth in the simple mass of surplus profit or rent, reckoned per acre, i.e. reckoning the growing mass on a constant unit, and here therefore on some definite quantity of land, an acre or a hectare, is expressed as a growth in the proportion. The level of rent, reckoned per acre, thus grows under these conditions simply as a result of the increase in the capital invested on the land. And this takes place moreover with production prices remaining the same, and irrespective of whether the productivity of the extra capital remains the same, decreases or increases. The latter factors modify the degree to which the level of rent per acre grows, but not the fact that it does grow. This is a phenomenon that is peculiar to differential rent II and distinguishes it from differential rent I. If the additional capital investments were made alongside one another in space on new additional land of the appropriate quality, instead of successively in time on the same land, the mass of the rental would have grown, and so would the average rent of the overall cultivated area, as shown earlier, but not the level of rent per acre. With the result remaining the same, as far as the mass and value of the total production and the surplus product are concerned, the concentration of capital increases the level of rent per acre on a more restricted area, whereas under the same conditions its scattering over a greater area, with other factors remaining the same, could not produce this effect. The more the capitalist mode of production develops, however, the more the concentration of capital on the same area increases, so that the rent per acre rises. Hence in two countries where production prices are the same, the differences between land types the same and the same amount of capital is invested, but in one country more in the form of successive investments on a restricted area and in the other more in the form of coordinated investments on a wider area, the rent per acre and therefore the land price would be higher in the first country and lower in the second, even though the total rental in both countries was the same. This difference in the levels of rent could thus be explained neither in terms of a difference in the natural fertility of the land types nor in the amount of labour applied, but exclusively in terms of the different kind of capital investments.

In speaking of a surplus product here, we mean the aliquot portion of the product in which the surplus profit is expressed. Generally, however, we take surplus product to mean the portion of the product in which the total surplus-value is expressed, or in particular cases the portion that represents the average profit. The specific meaning that this term obtains in the case of rent-bearing capital can give rise to misunderstandings, as we saw previously.

Type of land	Acres	Capital (£)	Profit (£)	Price of prod. (£)	Output (qrs)	Selling price (£)	Proceeds (£)	Rent		Rate of surplus profit
								qrs	£
A	1	2 1/2 + 2 1/2 = 5	1	6	2	3	6	0	0	0
B	1	2 1/2 + 2 1/2 = 5	1	6	4	3	12	2	6	120%
C	1	2 1/2 + 2 1/2 = 5	1	6	6	3	18	4	12	240%
D	1	2 1/2 + 2 1/2 = 5	1	6	8	3	24	6	18	360%
	4	20			20		60	12	36

Type of land	Acres	Capital (£)	Profit (£)	Price of prod (£)	Output (qrs)	Selling price (£)	Proceeds (£)	Rent		Rate of surplus profit
								qrs	£
A	1	2 1/2	1/2	3	1	3	3	0	0	0
B	1	2 1/2 + 2 1/2 = 5	1	6	2 + 1 1/2 =3 1/2	3	10 1/2	1 1/2	4 1/2	90%
C	1	2 1/2 +2 1/2 = 5	1	6	3 + 2 = 5	3	15	3	9	180%
D	1	2 1/2 +2 1/2 = 5	1	6	4 + 3 1/2 =7 1/2	3	22 1/2	5 1/2	16 1/2	330%
		17 1/2	3 1/2	21	17		51	10	30