Chapter 45: Absolute Ground-Rent

If we call the general production price that governs the market P, then, for the product of the worst type of land A, P coincides with its individual production price; i.e. its price pays for the constant and variable capital consumed in the course of production plus the average profit (= profit of enterprise plus interest).

Rent here is zero. The individual production price of the next better type of land B = P’ and P > P’, i.e. P pays for more than the actual production price of the product of land in class B. Now let P ′ P″ = d; d, the excess of P over P’, is thus the surplus profit made by the farmer in class B. This is transformed into rent, to be paid to the landowner. For the third class of land C, let the actual production price be P”, so that P — P” = 2d; this 2d is now transformed into rent. Similarly for the fourth class D the individual production price is P’”, and p — P’” = 3d, transformed into rent, and so on. Let us now assume that the premise of zero rent for land in class A, the price of its product being P + 0, is false. Instead, say that it pays a rent = r. Two things then follow.

Firstly, the price of the product of class A land would not be governed by its price of production, but would contain a surplus over and above this; it would be P + r. For assuming the capitalist mode of production in its normal condition, i.e. assuming that the surplus r that the farmer pays to the landowner is neither a deduction from wages nor from the average profit of capital, he can pay it only by selling his product above its price of production, so that it would yield him a surplus profit if he did not have to part with this surplus to the landowner in the form of rent. The governing market price of the total product on the market from all types of land would then not be the price of production that capital generally yields in all spheres of production, i.e. a price equal to the outlays plus the average profit, it would be this production price plus the rent, P + r rather than just P. For the price of the product of class A land always represents the limit of the governing general market price, the price at which the total product can be supplied, and to this extent it governs the price of this total product.

Secondly, however, in this case, even though the general price of the product of the land would be basically modified, the law of differential rent would not in any way be thereby abolished. For if the price of the product of class A, and therefore the general market price, was P + r, the price for classes B, C, D etc. would be P + r too. But since for class B, P — P’ = d, (P + r) — (P’ + r) would also = d; and similarly for class C, P — P’” =(P + r) — (P” +_r) = 2d; for class D, P – P’” =(P + r)- (P’” + r)= 3d, etc. The differential rent would thus be the same as before, and would be governed by thé same law even though the rent contained an element independent of this law and underwent a general rise together with the price of the product. It follows from this that whatever the rent on the least fertile types of land might be, not only is the law of differential rent independent of it, but the only way to grasp the true character of differential rent itself is to set the rent for class A land at zero. Whether it really is zero, or something positive, is immaterial as far as the differential rent is concerned, and does not need to be taken into account.

The law of differential rent is thus unaffected by the result of the following analysis.

If we now investigate more closely the basis of the assumption that the product of the poorest land A pays no rent, we get the following result. If the market price of the product, say corn, reaches such a level that an additional advance of capital invested in class A land pays the customary price of production, i.e. yields the customary average profit on the capital, this condition is sufficient for the investment of additional capital on class A land. That is to say, this condition is sufficient for the capitalist to invest new capital at the customary profit and to valorize it in the normal way.

It should be noted here that even in this case the market price must be higher than the production price of A. For as soon as the additional supply is obtained, the relationship of demand and supply is evidently changed. Formerly the supply was not sufficient, whereas now it is sufficient. The price must therefore fall. In order to fall, it must have stood higher than the production price of A. But the less fertile character of the class A land that has been newly cultivated means that the price does not fall again as low as it was when the production price of class B governed the market. The production price of A sets a limit for a relatively permanent rise in the market price, and not just for a temporary one. If on the other hand the land newly brought into cultivation is more fertile than the land A that formerly governed the price, and yet is only sufficient to meet the additional demand, the market price remains unchanged. But the analysis of whether the worst class of land pays a rent coincides in this case too with the question under discussion here, for here too the assumption that class A land does not pay any rent would be explained by the fact that the market price is just sufficient for the capitalist farmer to cover the capital applied plus the average profit; in short, the market price provides him with the price of production of his commodities.

In any case, in so far as he has to act as a capitalist, the capitalist farmer on class A land can cultivate under these conditions. The condition for the normal valorization of capital on class A land is then present. But from the premise that capital could now be invested by the farmer on class A land under the average valorization conditions of capital, it in no way follows that this land in class A is now immediately at the farmer’s disposal. The fact that the farmer could valorize his capital at the customary profit if he paid no rent is in no way a reason for the landlord to lease out his land to the farmer for nothing, and be so philanthropic to his client as to extend him a crédit gratuit.* This assumption would mean abstracting from landed property, it would mean abolishing landed property, whose very existence is a barrier to the investment of capital and its unrestricted valorization on the land – a barrier that in no way collapses in face of the farmer’s mere reflection that the level of corn prices would enable him to obtain the customary profit on his capital by exploiting land of type A, as long as he did not pay any rent, i.e. if he could actually treat landed property as non-existent. Differential rent presupposes precisely the monopoly of landed property, landed property as a barrier to capital, for otherwise the surplus profit would not be transformed into ground-rent and would not accrue to the landlord instead of to the farmer. And landed property remains such a barrier even where rent in the form of differential rent disappears, i.e. on type A land. If we consider the cases where capital investment on the land can take place without payment of rent, in a country of capitalist production, we shall find that they all involve a factual – if not a legal – abolition of landed property, an abolition that can occur only under very special conditions of an accidental nature.

Firstly. If the landowner is himself a capitalist or the capitalist a landowner. In this case he can cultivate his land himself as soon as the market price has risen sufficiently to obtain the price of production from the present land A, i.e. to replace capital plus average profit. And why? Because as far as he is concerned, landed property does not set any barrier to the investment of his capital. He can treat the land as a simple natural element and let his decision be determined exclusively by considering the valorization of his capital, by capitalist considerations. Such cases do exist in practice, but only as exceptions. Just as the capitalist cultivation of the land assumes a separation between functioning capital and landed property, so it generally rules out cultivation by the landed proprietor himself. We can see immediately how this is purely accidental. If an increased demand for corn requires the cultivation of a greater extent of type A land than is to be found in the hands of self-farming proprietors, i.e. if one part of it has to be leased in order to be cultivated at all, this hypothetical abolition of the barrier that landed property places to the investment of capital immediately disappears. It is an absurd contradiction to start from the separation between capital and land, tenant farmer and landowner, which corresponds to the capitalist mode of production, and then to assume the reverse, i.e. that the landowner is his own farmar, up to the point that, or wherever, capital would draw no rent from cultivating the land if there were no landed property independent of it. (See the passage on rent of mines in Adam Smith, quoted below.)* This abolition of landed property is accidental. It may exist or it may not.

Secondly. A leasehold may include particular pieces of land that pay no rent at the given level of market prices, and are in fact rented free, though they are not viewed in this light by the landowner, since what he pays attention to is the total rental of the land leased and not the particular rent of individual component parts. In this case the rent paid by the farmer for the investment of his capital disappears as far as these non-rent-bearing pieces of his farm are concerned, and with it landed property as a barrier to the application of capital, and this is moreover by contract with the landlord himself. But the only reason why he pays no rent for these pieces of land is that he does pay rent for the land to which they are an accessory. In this case, the combination presupposed is precisely one in which resort does not have to be had to the worse type-A land as an independent and new field of production in order to make up the missing supply. Instead, this worse land simply forms an inseparable filling sandwiched between the better land. But the case that is to be investigated here is precisely that in which tracts of type-A land are farmed independently and have therefore to be independently leased out under the general preconditions of the capitalist mode of production.

Thirdly. A farmer may invest extra capital on his existing leasehold even though at the existing market prices the additional product obtained in this way simply yields him the price of production, the customary profit, and does not enable him to pay an additional rent. Thus for one part of the capital invested on the land he does pay ground-rent, for the other part not. But we can see from the following consideration how little this solves the problem. If the market price (and also the fertility of the soil) enables him to obtain a surplus yield with the additional capital, which, like the old capital, yields him a surplus profit as well as the price of production, then he pockets this profit himself for the duration of the lease. And why? Because as long as the tenancy contract lasts, the barrier that landed property places to the investment of his capital in the land has been removed. Yet the mere fact that in order to secure this surplus profit, he must take on additional worse land and lease it separately, shows irrefutably that the investment of additional capital on the old land is not sufficient to produce the increased supply that is needed. The one assumption rules out the other. Now one could say that the rent of the worst type-A land is itself a differential rent compared with the land cultivated by its own proprietor (even though this occurs only as a chance exception), or with additional capital investment on the old leaseholds that do not yield any rent. This however would be (1) a differential rent that did not arise from the differing fertility of types of land and hence did not presuppose that type-A land paid no rent and its product was sold at the price of production. While (2) whether additional capital investments on the same leasehold yield rent or not is as completely immaterial for whether the land in class A that is newly taken on pays rent or not, as it is immaterial for example for investment in a new and independent factory, whether another manufacturer in the same branch of production invests a part of his capital in interest-bearing paper because this cannot be completely valorized in his own business; or whether he makes particular extensions that do not yield him the full profit, though they do yield more than the interest. As far as he is concerned, this is a secondary matter. But any new enterprise must yield the average profit, and is set up on this expectation. Additional capital investment on the old leaseholds, moreover, and the additional cultivation of new land in type A, set limits to one another. The limit up to which additional capital can be invested on the same leasehold under less favourable conditions of production is given by the competing new investments on class-A land; on the other hand the rent that this class of land can yield is limited by the competing additional capital investments on the old leaseholds.

But none of these dodges solves the problem, which put simply is as follows. Let us assume that the market price for corn (which in our analysis represents any product of the soil) is sufficient for portions of class-A land to be taken into cultivation and for the capital invested to obtain the production price of the product from these new fields, i.e. replacement of capital plus average profit. Let us assume, in other words, that the conditions for the normal valorization of capital on class-A land are present. Is this enough? Can this capital then really be invested? Or must the market price rise high enough for even the worst land A to yield a rent? In other words, does the monopoly of landed property set a barrier to the investment of capital that would not be present, from a purely capitalist standpoint, without the existence of this monopoly? The very terms of the question itself show how, if for example there are additional capital investments on old leaseholds that yield no rent at the prevailing market price but simply the average profit, this in no way solves the problem of whether capital can now actually be invested on class-A land which would similarly yield the a. orage profit but no rent. This is precisely the question. It is clear from the need to take new land into cultivation that the additional capital investments which yield no rent do not satisfy the demand. If the additional cultivation of land A is undertaken only in so far as this yields rent, i.e. yields more than the price of production, two cases are possible.

Either the market price must rise in such a way that even the final additional capital investments on the old leaseholds yield surplus profit, whether this is pocketed by the farmer or the landlord. This rise in price and the surplus profit from the final additional capital investments would then be the result of the impossibility of cultivating land A unless rent is obtained thereby. For if the price of production, the yield of the average profit pure and simple, was sufficient to induce cultivation, the price would not have risen so high and new lands would already have come into competition as soon as they yielded simply these prices of production. The additional capital investments on the old leaseholds that yielded no rent would then be faced with competition from the capital investments on land A that likewise yield no rent.

Or, alternatively, the final capital investments on the old leaseholds yield no rent, but the market price has still risen high enough for land A to be taken up and to yield rent. In this case, the additional capital investment that yielded no rent was possible only because land A could not be cultivated until the market price allowed it to pay rent. In the absence of this condition, it would already have been cultivated, at a lower price level; and those later investments of capital on the old leaseholds that need the high market price to yield the customary profit without rent could not have taken place. Given the high market price, they yield only the average profit. At a lower price, which would have become the governing one with the cultivation of land A, as its price of production, these investments would not have yielded this profit and so they could not have taken place at all under this condition. The rent of land A would thus form a differential rent compared with these capital investments on the old leaseholds that yield no rent. But if the acreage of A forms such a differential rent, this is simply the result of its not being available for cultivation at all unless it yields a rent; i.e. unless there is a need for this rent which is not determined by any difference in the types of land and which sets a barrier to the possible investment of additional capitals on the old leaseholds. In both cases the rent of land A would not be just the result of a rise in corn prices but the very opposite; the fact that the worst soil has to yield a rent for cultivation to be permitted at all would be the reason why corn prices rise to the point at which this condition can be fulfilled.

Differential rent has the peculiarity that here landed property seizes only the surplus profit that the farmer himself would otherwise pocket, and under certain circumstances does pocket for the duration of his tenancy. Here landed property simply causes the transfer of a portion of the commodity price that arises without any effort on its part (rather as a result of the determination by competition of the production price governing the market), a portion reducible to surplus profit, from one person to the other, from the capitalist to the landowner. Landed property is not in this case a cause that creates this component of price or the rise in price that it presupposes. But if the worst type-A land cannot be cultivated – even though its cultivation would yield the price of production – until it yields a surplus over and above this production price, a rent, then landed property is the creative basis of this rise in price. Landed property has produced this rent itself. Nothing is altered in this if, as in the second case treated here, the rent now paid by land A forms a differential rent compared with the final additional capital investment on old leaseholds that only pays the price of production. For the fact that land A cannot be cultivated until the governing market price has risen high enough to let it yield a rent is the sole basis here for the rise in the market price to a point which, while it pays the final capital investments on the old tenancies only their price of production, still pays a price of production that also yields a rent for land A. The fact that this land must pay rent at all is the cause which works here to create a differential rent between land A and the final capital investments on the old farms.

Whenever we speak of class-A land paying no rent – on the assumption that the corn price is governed by the price of production we mean rent as a specific category. If the lease-price paid by the farmer involves a deduction from the normal wages of his workers or from his own normal average profit, he does not pay any rent as an independent component of the price of his commodity distinct from wages and profit. We have already noted how this constantly happens in practice. In so far as the wages of agricultural workers in a country are depressed below the normal average level, so that there is a deduction from wages, with a part of wages regularly going into rent, this is no exceptional case for the farmer on the worst land. The same price of production that makes the cultivation of this land possible already includes these low wages as a constituent item, and so the sale of the product at its price of production does not enable the farmer of this land to pay a rent. The landowner can even lease out his land to a worker who is content to pay someone else, in the form of rent, everything, or the greater part of it, that the sale price yields him over and above his wages. In none of these cases is a genuine rent paid, even though a lease-price is. Where relations corresponding to the capitalist mode of production exist, however, rent and lease-price must coincide. This is precisely the normal situation that is under analysis here.

If our problem is not solved by the cases considered above, i.e. those in which capital investments can be made on the land in the capitalist mode of production without yielding rent, still less is it solved by making reference to colonial conditions. What makes a colony a colony – and here we are referring only to agricultural colonies proper – is not just the amount of fertile land to be found in its natural condition. It is rather the situation that this land is not appropriated, is not subsumed under landed property. It is this that makes for the tremendous distinction between the old countries and the colonies as far as land is concerned: the legal or factual non-existence of landed property, as Wakefield 35 correctly notes, a fact already discovered long before him by Mirabeau père, the Physiocrat, and other early economists. It is completely immaterial here whether colonists appropriate the land directly or whether they pay the state a simple tax for a valid legal title, under the guise of a nominal land price. It is also immaterial that colonists already settled may be the legal owners of the land. Here, landed property actually forms no barrier to the investment of capital, or of labour without capital; the seizure of part of the land by colonists already established does not prevent later arrivals from making new land into a field of investment for their own capital or labour. Thus if we want to investigate how landed property affects the prices of its products, and rent, in cases where it restricts the land as a field of investment for capital, it is completely absurd to refer to free bourgeois colonies where neither the capitalist mode of production in agriculture nor the form of landed property corresponding to this exists, indeed where landed property does not exist at all. This is what Ricardo does, for example, in his chapter on ground-rent. He starts by saying that he intends to analyse the effect of the appropriation of land on the value of its products, but immediately goes on to take the colonies as his illustration, assuming that land there is in a relatively elementary state and its exploitation not impeded by the monopoly of landed property.

Legal ownership of land, by itself, does not give the proprietor any ground-rent. It certainly does give him the power, however, to withdraw his land from cultivation until economic conditions permit a valorization of it that yields him a surplus, whether the land is used for agriculture proper or for other productive purposes such as building, etc. He can neither increase nor reduce the absolute quantity of this field of occupation, but he can affect the quantity of it on the market. It is a characteristic fact, therefore, and one which Fourier already noted, that in all civilized countries a relatively significant portion of the land always remains uncultivated.

Assuming then that demand requires the taking up of new land which is, say, less fertile than that previously cultivated, will the owner of this land lease it for nothing just because the market price of its product has risen high enough for capital investment to pay the farmer the price of production and thus yield him the customary profit? In no way. The capital investment must yield him a rent. He leases only when a lease-price can be paid. The market price must therefore have risen above the price of production, to P + r, so that a rent can be paid to the landowner. Since by our assumption landed property does not bring in anything without being leased, unleased land being economically worthless, a small rise in the market price above the price of production is sufficient to bring new land of the poorest kind onto the market.

The question now arises whether it follows from ground-rent on the poorest land, which cannot be derived from any difference in fertility, that the price of its product is necessarily a monopoly price in the customary sense, or a price that includes rent in the form of a tax, levied in this case by the landowner rather than the state? It is obvious that this tax has its given economic limits. It is limited by additional capital investments on the old leaseholds, by competition from foreign agricultural products (assuming their free import), by competition between landed proprietors and finally by the need of the consumers and their ability to pay. But this is not what is involved here. The question is whether the rent that is paid by the poorest land goes into the price of its product, which by our assumption is what governs the general market price, in the same way as a tax goes into the price of the commodity on which it is levied, i.e. as an element independent of its value.

This in no way necessarily follows, and is maintained only because the distinction between the value of commodities and their price of production has as yet not been understood. We have already seen that the production price of a commodity is not at all identical with its value, even though the production prices of commodities considered in their totality are governed only by their total value, and although the movement of production prices for commodities of different kinds, taking all other circumstances as equal, is determined exclusively by the movement of their values. It has been shown that the production price of a commodity may stand above or below its value and coincides with it only in exceptional cases. But the fact that agricultural products are sold above their price of production in no way proves that they are also sold above their value; just as the fact that industrial products are sold on average at their price of production does not show that they are sold at their value. It is possible for agricultural products to be sold above their price of production yet below their value, just as many industrial products on the other hand yield their price of production only because they are sold above their value.

The relationship of a commodity’s price of production to its value is determined exclusively by the proportion between the variable part of the capital with which it is produced and the constant part, i.e. by the organic composition’ of the capital producing it. If the composition of capital in one sphere of production is lower than that of the average social capital, i.e. if its variable component, that laid out on wages, is greater in relation to the constant component, that laid out on material conditions of labour, than is the case for the average social capital, the value of its product must stand above its price of production. That is to say, such a capital produces more surplus-value given the same exploitation of labour, and therefore more profit, than an equally large aliquot part of the average social capital, because it applies more living labour. The value of its product thus stands above its price of production, because this price of production is equal to the replacement of the capital plus the average profit, and the average profit is less than the profit produced in this commodity. The surplus-value produced by the average social capital is less than the surplus-value produced by a capital of this low composition. The reverse is true if the capital invested in a particular sphere of production is higher in composition than the average social capital. The value of the commodities it produces then stands below their price of production, which is generally the case with the products of the most highly developed industries.

If the capital in a particular sphere of production has a lower composition than the average social capital, this is firstly only a different expression for the fact that the productivity of social labour in this particular sphere of production stands below the average level; for the level of productivity attained is expressed in the relative preponderance of the constant portion of capital over the variable, or in the steady decline of that component of a given capital laid out on wages. If the capital in a particular sphere of production has a higher composition, on the other hand, this expresses a level of development of productivity which is higher than the average.

Leaving aside actual artistic works, which are excluded from our subject by the very nature of the case, it is self-evident that different spheres of production, according to their technical characteristics, require differing proportions of constant and variable capital, and that living labour must play a greater part in some and a smaller part in others. In extractive industry, for example, which should be clearly distinguished from agriculture, raw material completely disappears as an element of the constant capital, and even ancillary materials play a significant role only very occasionally. But the other part of constant capital, fixed capital, does play a major role in mining. Here, too, we can measure the course of development by the relative growth in constant capital compared with variable.

If the composition of capital in agriculture proper is less, than the social average, this is prima facie an expression of the fact that in countries of developed production, agriculture has not progressed to the same extent as manufacturing industry. Leaving aside all other economic conditions, which have some determining effect, this fact is explicable simply in terms of the earlier and more rapid development of the mechanical sciences, and especially of their application, compared with the later and in part still very recent development of chemistry, geology and physiology, and their application to agriculture in particular. It is also an indubitable and long-known fact 36 that advances in agriculture are themselves always expressed in a relative growth in the constant portion of capital as against the variable. Whether the composition of agricultural capital is less than the social average in a particular country of capitalist production, say England, is a question which can be settled only by statistical investigation and which it would be superfluous for our purpose to go into in detail. In any case, it still holds theoretically that it is only on this premise that the value of agricultural products can rise above their price of production; i.e. that the surplus-value produced in agriculture by a capital of a given size, or, what comes to the same thing, by the surplus labour that it sets in motion and commands (i.e. the total living labour applied), is greater than for an equally large capital of the average social composition.

This assumption is therefore sufficient as far as the form of rent we are examining here is concerned, and it is a necessary assumption for this rent to arise. Where this hypothesis is inapplicable, the form of rent corresponding to it disappears.

This simple fact, however, of a surplus in the value of agricultural products over and above their price of production would in no way be sufficient in itself to explain the existence of a ground-rent independent of the differences in fertility between types of land or successive investments of capital on the same land – in short, of a rent conceptually distinct from differential rent, which we can therefore denote as absolute rent. A whole number of manufacturing products are characterized by a value above their price of production, without thereby yielding a surplus over and above the average profit, a surplus profit that could be transformed into rent. It is rather the existence and the concept of the price of production and the general rate of profit it involves which rest on the fact that individual commodities are not sold at their values. The prices of production arise from an adjustment of commodity values under which, after the reimbursement, of the respective capital values consumed in the various spheres of production, the total surplus-value is distributed not in the proportion in which it is produced in the individual spheres of production, and hence contained in their product, but rather in proportion to the size of the capitals advanced. It is only in this way that an average profit arises, and a production price for commodities can be arrived at, the characteristic element of which is this average profit. It is the constant tendency of capitals to bring about, by competition, this adjustment in the distribution of the surplus-value that the total capital produces, and to overcome all obstacles towards it. It is therefore their tendency only to tolerate such surplus profits as arise, under whatever circumstances, not from the difference between the values of commodities and their prices of production, but rather from the general price of production governing the market and the individual production prices differing from this; surplus profits which therefore do not arise between two different spheres of production but rather within each sphere of production, so that they do not affect the general production prices of the different spheres, i.e. the general rate of profit, but rather presuppose both the transformation of value into price of production and the general rate of profit. This presupposition, however, depends as already explained on the continuously changing proportionate distribution of the total social capital between the various spheres of production; on a continuous immigration and emigration of capitals; on their transferability from one sphere to another; in short, on their free movement between these various spheres of production as so many available fields of investment for the independent parts of the total social capital. It is assumed in this connection that no barriers, or at least only accidental and temporary ones, prevent the competition of capitals – e.g. in a sphere of production where the value of commodities stands above their price of production or where the surplus-value produced stands above the average profit – from reducing value to price of production and thereby distributing the extra surplus-value of this sphere of production between all spheres exploited by capital in due proportion. If the opposite occurs, i.e. capital comes up against an alien power that it can overcome only partly or not at all, a power which restricts its investment in particular spheres of production, allowing this only under conditions that completely or partially exclude that general equalization of surplus-value to give the average profit, it is clear that in these spheres of production a surplus profit will arise, from the excess of commodity value above its price of production, this being transformed into rent and as such becoming autonomous vis-à-vis profit. And it is as an alien power and a barrier of this kind that landed property confronts capital as regards its investment on the land, or that the landowner confronts the capitalist.

If the average composition of the non-agricultural social capital were 85_c + 15_ν and the rate of surplus-value 100 per cent, the price of production would be 115. If the composition of the agricultural capital were 75_c + 25_ν, the value of the product and the governing market value would be 125, given the same rate of surplus-value. If the agricultural and non-agricultural products balanced out to give an average price (we assume for the sake of brevity that the total capital is the same in both branches of production), the total surplus-value would be 40, i.e. 20 per cent on a capital of 200. The product of each would be sold at 120. Given an equalization to production prices, therefore, the average market prices of the non-agricultural products would come to stand above their values, and those of the agricultural products below. If the agricultural products were sold at their full value, they would stand 5 higher, and the industrial products 5 lower, than if this equalization took place. If market conditions do not permit agricultural products to be sold at their full value, at the total surplus over their price of production, the effect lies between the two extremes: industrial products would be sold somewhat above their value and agricultural products somewhat above their price of production.

Even though landed property can drive the price of agricultural products above their price of production, it does not depend on this, but rather on the general state of the market, how far the market price rises above the price of production and towards the value, and to what extent, therefore, the surplus-value produced over and above the given average profit in agriculture is either transformed into rent or goes into the general equalization of surplus-value that settles the average profit. In any case, this absolute rent, arising from the excess value over and above the price of production, is simply a part of the agricultural surplus-value, the transformation of this surplus-value into rent, its seizure by the landowner; just as differential rent arises from the transformation of surplus profit into rent, its seizure by landed property, at the general governing price of production. These two forms of rent are the only normal ones. Apart from this, rent can derive only from a genuine monopoly price, which is determined neither by the price of production of the commodities nor by their value, but rather by the demand of the purchasers and their ability to pay, consideration of which therefore belongs to the theory of competition, where the actual movement of market prices is investigated.

If all land available for agriculture in a country were leased out – assuming the capitalist mode of production, and normal conditions everywhere – there would be no land that did not yield rent, but there could be capital investments, particular portions of capital invested on the land, that did not yield rent; for once the land is leased out, landed property ceases to operate as an absolute barrier to the capital investment needed. It continues to operate as a relative barrier even then, in so far as the reversion to the landowner of the capital incorporated into the soil sets the farmer very definite barriers. In this case, though, all rent would be transformed into a differential rent determined not by the quality of the soil but rather by the difference between the surplus profit arising on a particular class of land after the final capital investments, and the rent that would be paid for the lease of land of the worst class. Landed property operates as an absolute barrier only in as much as any permission to use land, as a field of investment for capital, enables the landowner to extract a tribute. Once this permission has been given, the landowner can no longer place any absolute barrier to the quantitative level of capital investment on a given piece of land. In the case of house-building, a barrier is always imposed by the landed property of a third party in the land on which the house is to be built. But once this land is leased for house-building purposes, it depends on the lessee whether he plans to erect a large house on it or a small one.

If the average composition of agricultural capital were the same as that of the average social capital, or even higher than this, the result would be the disappearance of absolute rent in the sense developed above, namely a rent that is different both from differential rent and from rent depending on an actual monopoly price. The value of the agricultural product would not stand above its price of production, and agricultural capital would not set more labour in motion, and would thus not realize more surplus labour, than did non-agricultural capital. It would be the same thing if the composition of agricultural capital were equalized with that of the average social capital as agriculture advanced.

At first sight it may seem a contradiction to assume that on the one hand the composition of the agricultural capital increases, with its constant part growing vis-à-vis its variable part, while on the other hand the price of agricultural products rises high enough for new and worse land than previously to pay a rent, which in this case could derive only from an excess of the market price over the value and the price of production, in other words only from a monopoly price for the product.

A distinction has to be made here.

When we started to consider the formation of the rate of profit, we saw that capitals of similar technical composition, which set the same amount of labour in motion in proportion to machinery and raw material, may still be composed differently because of the differing values of their constant capital components. The raw material or machinery may be dearer in one case than in the other. In order to set the same amount of labour in motion (and this was necessary, on our assumption, to work up the same amount of raw material), a larger capital had to be advanced in one case than in the other, since with a capital of 100, for example, I cannot set in motion the same amount of labour if the raw material that has to be purchased out of 100 in both cases costs in the one case 40 and in the other case 20. But we immediately see, if the price of the dearer raw material falls down to the level of that of the cheaper one, that these capitals are none the less similar in their technical composition. The value ratio between variable and constant capital would then be the same, although no change had taken place in the technical proportion between the living labour applied and the quantity and nature of the conditions of labour required. A capital of lower organic composition, on the other hand, considered simply in terms of its value composition, could evidently rise to the same level as a capital of higher organic composition, simply by an increase in the value of its constant parts. Let us take a capital of 60_c + 40_ν, which therefore uses a great deal of machinery and raw material in relation to living labour-power, and another capital of 40_c + 60_ν, which uses a lot of living labour (60 per cent), little machinery (say 10 per cent) and little and cheap raw material in relation to its labour-power (say 30 per cent): a simple rise in the value of the latter’s raw and ancillary material from 30 to 80 could thus equalize the composition, as the second capital would now need 80 in raw materials and 60 in labour-power for every 10 in machines, i.e. 90_c + 60_ν, which reduced to percentages would also be 60_c + 40_ν, without any kind of technical change in its composition having occurred. Capitals of the same organic composition can thus have a differing value composition, and capitals of the same percentage [value] composition can stand at varying levels of organic composition, displaying various different levels of development of the social productivity of labour. Thus the mere fact that agricultural capital now stood at the same level by value composition would not prove that the social productivity of labour was equally highly developed. All it could show would be that its own product, which again forms part of its conditions of production, is dearer, or that ancillary materials such as fertilizer, which used to be obtained locally, now have to be carted a long way, etc.

Leaving this aside, however, we still have the particular character of agriculture to consider.

Assume that labour-saving machinery, chemical ancillaries, etc. take up a greater share, so that the constant capital grows in relation to the labour-power applied – not just in value but in quantity too. In agriculture, however (as also in mining), we not only have the social productivity of labour to consider but also its natural productivity, which depends on the natural conditions within which labour is carried on. It is possible for the increase in the social productivity of agriculture to simply compensate for the decline in natural productivity, or not even to do this much – and this compensation can only be effective for a certain period – so that despite the technical development, the product does not become cheaper but is simply prevented from becoming dearer. It is also possible, in a situation of rising corn prices, for the absolute amount produced to decline while the relative surplus product grows; i.e. there may be a relative increase in the constant capital, which consists for the most part of machines or livestock, only the depreciation of which has to be replaced, and a corresponding decline in the variable portion of capital, that laid out on wages, which must always be replaced in full out of the product.

But it is also possible that, as agriculture progresses, only a moderate rise in the market price above the average will be needed for poorer land which, given a lower level of technical assistance, would have required a rise in the market price, to be cultivated and also yield a rent.

The fact that in stock-raising, for example, the amount of labour-power applied is on the whole very small compared with the constant capital existing in the livestock themselves, could be taken as refuting the contention that agricultural capital, in percentage terms, sets more labour-power in motion than does non-agricultural capital of the average social composition. It should be noted here, however, that in explaining rent we take as the initial determinant that section of agricultural capital which produces the decisive cereal foodstuffs and thus the major means of subsistence for all civilized peoples. Adam Smith has already shown, and this was one of the services he performed, that in stock-raising and in the general average of all capital invested on the land that does not go into the production of the major staples, such as corn for example, the determination of price is completely different. Price here is determined by the fact that the price of the product of land which is used, say, as an artificial pasture for cattle, but which could equally well be turned into arable land of a certain quality, has to rise high enough to yield the same rent as equally good arable land; in this case, therefore, the rent of the corn-growing land is a determining factor in the price of cattle, so that Ramsay was correct to note that in this way the price of cattle is artificially raised by rent, by the economic expression of landed property, and thus by landed property itself.*

‘By the extension besides of cultivation the unimproved wilds become insufficient to supply the demand for butcher’s meat. A great part of the cultivated lands must be employed in rearing and fattening cattle, of which the price, therefore, must be sufficient to pay, not only the labour necessary for tending them, but the rent which the landlord and the profit which the farmer could have drawn from such land employed in tillage. The cattle bred upon the most uncultivated moors, when brought to the same market, are, in proportion to their weight or goodness, sold at the same price as those which are reared upon the most improved land. The proprietors of those moors profit by it, and raise the rent of their land in proportion to the price of their cattle’ (Adam Smith, Book One, Chapter XI, I [p. 252]).

In this case, too, therefore, the differential rent, as distinct from the corn rent, is in favour of the worst land.

Absolute rent explains certain phenomena which at first sight make rent appear due to a mere monopoly price. Take for instance the owner of a woodland that exists without any human action, i.e. not as the result of afforestation – in Norway, for example – and append this to Adam Smith’s example. If he is paid a rent by a capitalist who has timber felled, perhaps to meet English demand, he is paid a greater or lesser rent in timber over and above the profit on the capital advanced. This seems in the case of this purely natural product to be a simple monopoly surcharge. In actual fact, however, the capital here consists almost solely of variable capital laid out on labour, which therefore sets more surplus labour in motion than another capital of the same size. The value of the timber thus contains a greater excess of unpaid labour, or surplus-value, than the product of capitals of higher composition. The average profit can thus be paid from the timber, while a significant excess accrues to the owner of the woodland in the form of rent. We may assume, conversely, that given the ease with which the felling of timber can be extended, and this production thus rapidly increased, the demand would have to rise very steeply to make the price of timber equal to its value, so that the entire excess of unpaid labour (over and above the part that accrues to the capitalist as average profit) would accrue to the proprietor in the form of rent.

We have assumed that land newly drawn into cultivation is of still poorer quality than the worst previously cultivated. If it is better, it bears a differential rent. Here, however, we are precisely investigating the case where rent does not appear as differential rent. There are only two possible alternatives, here. Either the land newly taken up is worse, or it is just as good as the last. We have already investigated the position where it is worse. The only case left to investigate is where it is equally good.

Equally good land, and even better, can be newly cultivated as agriculture develops just as much as worse land can, as we have already shown in the case of differential rent.

Firstly, because in the case of differential rent (and rent in general, since even in the case of non-differential rent there is always still the question whether the fertility of the land on the one hand, and its location on the other, permit it to be cultivated at all at the governing price, with profit and rent), two factors operate in opposite directions, sometimes counterbalancing one another and sometimes with one outweighing the other. A rise in market price – assuming that the cost price of cultivation has not fallen, in other words that technical progress has not stimulated additional cultivation – may bring into cultivation more fertile land which was previously excluded from competing by its location. Or else, in the case of less fertile land, it may increase the advantage of location so much that this balances the low yield. Alternatively, even if the market price does not rise, the location can bring better land into competition by way of improved means of communication, as we have seen on a large scale with the prairie states of North America. Even in countries which have long been civilized this is constantly the case, if not on the same scale as in the colonies, where, as Wakefield correctly notes,* location is decisive. Thus firstly the contradictory effects of location and fertility, and the variability of the location factor, which is constantly balanced out, bringing about constant progressive changes which also tend to balance out, alternately bring equally good, better or worse tracts of land into competition with those previously cultivated.

Secondly. With the development of natural science and agronomy, the fertility of the land itself changes, since there is an alteration in the means by which the soil’s elements can be made capable of immediate exploitation. In the recent past, for example, light varieties of soil, which were previously considered inferior, have risen to the first rank in France and the eastern counties of England. (See Passy.)† On the other hand, land which was considered poor not on account of its chemical composition but because mechanical and physical obstacles stood in the way of its cultivation was turned into good land as soon as the means for overcoming these obstacles were discovered.

Thirdly. In all countries of old-established civilization, old historical and traditional conditions, in the form of crown lands, common lands, etc. have withheld great stretches of land from agriculture in a purely arbitrary manner. The sequence in which these are brought into cultivation depends neither on their quality nor on their location, but rather on quite external conditions. The history of the English common lands, as these were successively turned into private property by the Enclosure Acts and ploughed up,‡ shows that nothing would be more ridiculous than the fantastic idea that this sequence was worked out by a modern agricultural chemist in the manner of Liebig, and that certain fields were marked off for cultivation on account of their chemical properties while others were excluded. What was decisive here was rather ‘the opportunity that makes the thief’: the more or less plausible legal pretexts for appropriation which the great landlords found.

Fourthly. Leaving aside the fact that the level of population and capital reached at any given time sets a certain limit to the extension of agriculture, even if an elastic one; leaving aside, too, the effects of accidents which have a temporary influence on market price, such as a series of favourable or unfavourable seasons, the geographical extension of agriculture then depends on the overall condition of the capital market and the state of business in the country in question. In periods when business is poor, the possibility that uncultivated land may yield the farmer an average profit – whether he pays rent or not – will not suffice to divert additional capital to agriculture. In other periods, when capital is abundant, it streams into agriculture even without a rise in market prices, as long as the normal conditions are fulfilled. Better land than that previously cultivated was in fact only excluded from competition by the element of location, or by previous barriers which had not yet been broken through, or else by accident. We have only to deal therefore with kinds of land which are equally good as those last cultivated. Between the new land and that last cultivated, however, there always exists a distinction in the shape of the varying cost of ploughing up, and it depends on the level of market prices and credit conditions whether this is undertaken or not. Once this land actually does come into competition, the market price falls back again to its previous level, other conditions remaining the same, so that the new land will bear the same rent as the corresponding old land. The hypothesis that it bears no rent is demonstrated by its supporters by assuming what should actually be proved, i.e. that the last land did not bear any rent. One could prove in the same way that the last houses to be built yield no rent besides simple interest on the buildings, even if they are rented out. The fact of the matter is that they yield ground-rent even before they bring in house-rent, for they often stand empty a long while. Just as successive capital investments on one piece of land can yield a proportionate surplus product and hence the same rent as the first investments, so can fields of the same quality as those last cultivated yield the same product at the same cost. It would otherwise be incomprehensible how fields of the same quality are ever brought under cultivation successively and not all at once, or indeed why any are at all, since the first would draw after it the competition of all others. The landowner is always ready to draw a rent, i.e. to receive something for nothing, but capital requires certain conditions in order to fulfil its desire. The mutual competition of plots of land depends not on the landowner’s intention to have them compete but rather on the availability of capital to compete on new fields with the old.

The extent to which agricultural rent proper is simply a monopoly price can only be a small one, just as absolute rent can only be small in normal conditions, whatever the excess value of the product over its production price may be. The essence of absolute rent consists in this: equally large capitals produce different amounts of surplus-value in different spheres of production according to their differing average composition, given an equal rate of surplus-value or equal exploitation of labour. In industry these different amounts of surplus-value are equalized to give the average profit and are divided uniformly between the individual capitals as aliquot parts of the total capital. Landed property, whenever production needs land, whether for agriculture or for the extraction of raw materials, blocks this equalization for the capitals invested on the land and captures a portion of surplus-value which would otherwise go into the equalization process, giving the general rate of profit. Rent then forms a part of the value of commodities, in particular of their surplus-value, which simply accrues to the landowners who extract it from the capitalists, instead of to the capitalist class who have extracted it from the workers. It is assumed in this connection that agricultural capital sets more labour in motion than an equally large portion of non-agricultural capital. The extent of this gap, or its existence at all, depends on the relative development of agriculture vis-à-vis industry. By the nature of the case, this difference must decline with the progress of agriculture, unless the ratio in which the variable part of the capital declines vis-à-vis the constant part is still greater in industrial capital than in agricultural.

This absolute rent plays a still more important role in extractive industry proper, where one element of constant capital, raw material, completely disappears, and where, with the exception of branches for which the portion consisting of machinery and other fixed capital is very significant, the lowest composition of capital invariably prevails. Precisely here, where rent seems due to a monopoly price alone, extraordinarily favourable market condition are required for the commodities to be sold at their values or for rent to equal the entire excess of surplus-value in a commodity over and above its price of production. This is the case for example with rent for fishing grounds, quarries, natural forests, etc.37