Capital: A Critique of Political Economy, Vol. III. The Process of Capitalist Production as a Whole
By Karl Marx
One of Econlib’s aims is to put online the most significant works in the history of economic thought, and there can be no doubting the significance of Marx’s influence on both economic theory in the late 19th century and on the creation of Marxist states in the 20th century. From the time of the emergence of modern socialism in the 1840s (especially in France and Germany), free market economists have criticised socialist theory and it is thus useful to place that criticism in its intellectual context, namely beside the main work of one of its leading theorists,
Karl Marx.In 1848, when Europe was wracked by a series of revolutions in which both liberals and socialists participated and which both lost out to the forces of conservative monarchism or Bonapartism,
John Stuart Mill published his
Principles of Political Economy. The chapter on Property shows how important Mill thought it was to confront the socialist challenge to classical liberal economic theory. In hindsight it might appear that Mill was too accommodating to socialist criticism, but I would argue that in fact he offered a reasonable framework for comparing the two systems of thought, which the events of the late 20th century have finally brought to a conclusion which was not possible in his lifetime. Mill states in
Book II Chapter I “Of Property” that a fair comparison of the free market and socialism would compare both the ideal of liberalism with that of socialism, as well as the practice of liberalism versus the practice of socialism. In 1848 the ideals of both were becoming better known (and there were some aspects of the ideal of socialism which Mill found intriguing) but the practice of each was still not conclusive. Mill correctly observed that in 1848 no European society had yet created a society fully based upon private property and free exchange and any future socialist experiment on a state-wide basis was many decades in the future. After the experiments in Marxist central planning with the Bolshevik Revolution in 1917, the Chinese Communists in 1949, and numerous other Marxist states in the post-1945 period, there can be no doubt that the reservations Mill had about the practicality of fully-functioning socialism were completely borne out by historical events. What Mill could never have imagined, the slaughter of tens of millions of people in an effort to make socialism work, has ended for good any argument concerning the Marxist form of socialism.Econlib now offers online two important defences of the socialist ideal, Karl Marx’s three volume work on
Capital and the
collection of essays on Fabian socialism edited by George Bernard Shaw. These can be read in the light of the criticism they provoked among defenders of individual liberty and the free market: Eugen Richter’s anti-Marxist
Pictures of the Socialistic Future, Thomas Mackay’s
2 volume collection of essays rebutting Fabian socialism,
Ludwig von Mises post-1917 critique of
Socialism. One should not forget that
Frederic Bastiat was active during the rise of socialism in France during the 1840s and that many of his essays are aimed at rebutting the socialists of his day. The same is true for Gustave de Molinari and the other authors of the
Dictionnaire d’economie politique (1852). Several key articles on communism and socialism from the
Dictionnaire are translated and reprinted in Lalor’s
Cyclopedia.For further reading on Marx’s
Capital see David L. Prychitko’s essay
“The Nature and Significance of Marx’s
Capital: A Critique of Political Economy“.For further readings on socialism see the following entries in the
Concise Encyclopedia of Economics:
Poor Law Commissioners’ Report of 1834,
edited by Nassau W. Senior, et al.
March 1, 2004
Frederick Engels, ed. Ernest Untermann, trans.
First Pub. Date
Chicago: Charles H. Kerr and Co.
First published in German. Das Kapital, based on the 1st edition.
The text of this edition is in the public domain. Picture of Marx courtesy of The Warren J. Samuels Portrait Collection at Duke University.
- Preface, by Frederick Engels
- Part I, Chapter 1
- Part I, Chapter 2
- Part I, Chapter 3
- Part I, Chapter 4
- Part I, Chapter 5
- Part I, Chapter 6
- Part I, Chapter 7
- Part II, Chapter 8
- Part II, Chapter 9
- Part II, Chapter 10
- Part II, Chapter 11
- Part II, Chapter 12
- Part III, Chapter 13
- Part III, Chapter 14
- Part III, Chapter 15
- Part IV, Chapter 16
- Part IV, Chapter 17
- Part IV, Chapter 18
- Part IV, Chapter 19
- Part IV, Chapter 20
- Part V, Chapter 21
- Part V, Chapter 22
- Part V, Chapter 23
- Part V, Chapter 24
- Part V, Chapter 25
- Part V, Chapter 26
- Part V, Chapter 27
- Part V, Chapter 28
- Part V, Chapter 29
- Part V, Chapter 30
- Part V, Chapter 31
- Part V, Chapter 32
- Part V, Chapter 33
- Part V, Chapter 34
- Part V, Chapter 35
- Part V, Chapter 36
- Part VI, Chapter 37
- Part VI, Chapter 38
- Part VI, Chapter 39
- Part VI, Chapter 40
- Part VI, Chapter 41
- Part VI, Chapter 42
- Part VI, Chapter 43
- Part VI, Chapter 44
- Part VI, Chapter 45
- Part VI, Chapter 46
- Part VI, Chapter 47
- Part VII, Chapter 48
- Part VII, Chapter 49
- Part VII, Chapter 50
- Part VII, Chapter 51
- Part VII, Chapter 52
RICARDO is quite right when he writes the following sentences:
“Rent is always the difference between the produce obtained by the employment of two equal quantities of capital and labor” (
Principles, p. 59). [He means differential rent, for he assumes that no other rent but differential rent exists.] He should have added “On the same quantities of land,” so far as ground-rent and not surplus profit in general is concerned.
In other words, surplus profit, if normal and not due to accidental transactions in the process of circulation, is always produced as a difference between the products of two equal quantities of capital and labor. This surplus profit is transformed into ground rent, when two equal quantities of capital and labor are employed on equal quantities of land with unequal results. However, it is by no means absolutely necessary that this surplus profit should arise from unequal results of equal quantities of invested capital. The various investments may also employ unequal quantities of capital. Indeed, this is generally the case. But equal aliquot parts, for instance 100 pounds sterling of each, give unequal results; that is, their rates of profit are different. This is the general prerequisite for the existence of surplus profit in any sphere, where capital is invested. The second prerequisite is the transformation of this surplus profit into ground-rent (and of rent in general as distinguished from profit); it should
always be analysed, when, how, under what conditions this transformation takes place.
Ricardo is also right in the following sentence, provided it is limited to differential rent: “Whatever diminishes the inequality in the produce obtained on the same or on new land, tends to lower rent; and whatever increases that inequality, necessarily produces an opposite effect and tends to raise it.” (P. 74.)
However, among these causes are not merely the general ones (fertility and location), but also 1) the distribution of taxes, according to whether it works uniformly or not; it always has the latter effect, for instance in England, when it is not centralised and when the tax is levied on the land, not on the rent; 2) the inequalities arising from the different development of agriculture in different parts of the country, since this line of industry, on account of its traditional character, is more difficult to level than manufacture; 3) the inequality in the distribution of capital among the capitalist tenants. Since the capture of agriculture by the capitalist mode of production, the transformation of independently producing farmers into wage workers, is in fact the last conquest of this mode of production, these inequalities are greater here than in any other line of industry.
After these preliminary remarks I will give a brief summary of the peculiarities of my own analysis as distinguished from that of Ricardo, etc.
We consider first the unequal results of equal quantities of capital, applied to different lands of equal area; or on lands with unequal areas, but calculated on the same aliquot parts of it.
The two general causes of these unequal results independent of capital, are 1) Fertility. (With reference to this first point the analysis should state, what is included in the natural fertility of lands, and what elements enter into it.) 2) The location of the lands. This is a deciding factor in
colonies, and in general determines the succession in which lands shall be taken under cultivation. Furthermore it is evident that these two different causes of differential rent, fertility and location, may work in opposite directions. A certain soil may be very favorably located and yet be very poor in fertility, and vice versa. This circumstance is important, for it explains how it is that the work of opening the soil of a certain country to cultivation may equally well proceed from the worse to the better soil, instead of vice versa. Finally it is clear that the progress of social production has on the one hand the general effect of leveling the differences arising from location as a cause of ground-rent, by creating local markets and improving locations by means of facilities for communication and transportation; and that, on the other hand, it increases the differences of the individual locations in a certain district by separating agriculture from manufacture and forming great centers of production on the one hand while relatively isolating the agricultural districts on the other hand.
For the present, however, we leave this point, location, out of consideration and confine ourselves to natural fertility. Aside from climatic factors, etc., the difference in natural fertility is one of the chemical compositions of the top soil, that is of its different contents in plant nourishment. However, assuming the chemical composition and natural fertility in this respect to be the same for two areas, the actual fertility will be different according to whether these elements of plant nourishment have a form, in which they may be more or less easily assimilated and immediately utilised for nourishing plants. Hence it will depend partly upon the chemical, partly upon the mechanical development of agriculture, to what extent the same natural fertility may be made available in fields of the same natural fertility. Fertility, although an objective quality of the soil, always implies economic relations, a relation to the existing chemical and mechanical development in agriculture, of course it changes with such a development. By dint of chemical applications (such as the use of certain liquid manures to stiff clay loam,
or burning of heavy clay soils) or of mechanical appliances (such as special plows for heavy soils) the obstacles may be removed, which made a soil of the same fertility as some other actually less fertile (drainage also belongs under this head). Or even the succession of soils in cultivation may be changed thereby, as was the case, for instance, with light sandy soil and heavy clay soil in a certain period of development of English agriculture. This shows once more that historically, in the succession of soils under cultivation, one may pass just as well from very fertile soils to less fertile ones as vice versa. The same may come to pass by any artificially created improvement in the composition of the soil, or by a mere change in the methods of agriculture. Finally the same result may be brought about by a change in the succession of the predominant kinds of soil, owing to different conditions of the subsoil, as soon as it is likewise taken into cultivation and turned over into top layers. This is caused either by the employment of new methods of agriculture (such as planting of stock feed), or any mechanical appliances, which either turn the subsoil into top layers, or mix it with the top soil, or cultivate the subsoil without throwing it up.
All these influences upon the differential fertility of different lands amount to the practical result that for the economic fertility the state of the productivity of labor, in this case the faculty of agriculture of making the natural fertility of the soil immediately available, a faculty which varies in different periods of development, is as much an element in the so-called natural fertility of the soil as its chemical composition and its other natural qualities.
We assume, then, the existence of a certain stage of development of agriculture. We assume furthermore, that the predominant succession of soils is calculated with reference to this stage of development, a thing which is, of course, always the case with simultaneous investments of capital on the different soils. Under such circumstances differential rent may form either in an ascending or a descending succession, for although the succession is an established fact for
the totality of the actually cultivated lands, a movement of succession leading to this formation always preceded it.
Let us assume the existence of four kinds of soil, A, B, C, D. Let us furthermore assume that the price of one-quarter of wheat is three pounds sterling, or 60 shillings. Since rent is here merely a differential rent, this price of 60 shillings per quarter for the worst soil is equal to the cost of production, that is equal to the capital plus the average profit.
Let A be this worst soil and yield for each 50 shillings of expenditure one-quarter of wheat worth 60 shillings, so that the profit is 10 shillings, or 20%.
Let B yield for the same expenditure 2 quarters of wheat, or 120 shillings. This would be 70 shillings of profit, or a surplus profit of 60 shillings.
Let C yield for the same expenditure 3 quarters, or 180 shillings; total profit 130 shillings, surplus profit 120 shillings.
Let D yield 4 quarters, 240 shillings, 190 shillings of profit, 180 shillings of surplus profit.
Then we shall have the following succession:
The respective rents are: D = 190 sh.—10 sh., or the difference between D and A; C = 130—10 sh., or the difference between C and A; B = 70—10 sh., or the difference between B and A; and the total rent for B, C, D equals 6 quarters, or 360 shillings, equal to the sum of the differences between D and A, C and A, B and A.
This succession representing a certain product in a certain condition may, abstractly considered, descend from D to A, from very fertile to less and less fertile soil, or rise from A to D, from relatively poor to more and more fertile soil, or may fluctuate in a now rising, now descending curve,
for instance from D to C, from C to A, from A to B (and we have already mentioned the reasons why this might take place in reality).
The process leading to the descending succession took place in the following manner: The price of one-quarter of wheat rose gradually from, say, 15 shillings to 60 shillings. As soon as the 4 quarters produced by D (assume them to have been so many million quarters) did not suffice any more, the price of wheat rose to a point where the missing supply could be raised by C. That is to say, the price of wheat must have risen to 20 shillings per quarter. When it had risen to 30 shillings per quarter, B could be taken under cultivation, and when it reached 60 shillings per quarter, A could be taken in, and the capital invested in it did not have to be content with a lower rate of profit than 20%. In this way a rent was formed for D, first of 5 shillings per quarter, or 20 shillings for the 4 quarters produced by it; then of 15 shillings per quarter, or 60 shillings, then of 45 shillings per quarter, or a total of 180 shillings for 4 quarters.
If the rate of profit of D originally was likewise 20%, then its total profit on 4 quarters of wheat was also but 10 shillings, but this stood for more grain when the price was 15 shillings than it does when the price is 60 shillings. But since the grain enters into the reproduction of labor-power, and a portion of each quarter has to make good some wages and another some constant capital, the surplus-value under this condition was higher, and to that extent, other things being the same, the rate of profit. (The matter of the rate of profit will have to be analysed separately and in detail.)
On the other hand, if the succession went the opposite way, that is, if the movement started from A, then the price of wheat at first rose above 60 shillings, when new land had to be taken under cultivation. But when the necessary supply was raised by B, a supply of 2 quarters, the price fell once more to 60 shillings. B raised wheat at a cost of 30 shillings per quarter, but sold it at 60 shillings, because its supply sufficed just to cover the demand. In this way a rent was formed, first of 60 shillings for B, and in the same way for
C and D; always assuming that the market price remained at 60 shillings, although C and D relatively raised wheat having a value of 20 and 15 shillings respectively, because the supply of the one-quarter raised by A was as much needed as ever to satisfy the total demand. In this case the rising of the demand above the supply first raised by A, then by A and B, would not have made it possible to cultivate successively B, C and D, but would merely have caused a general extension of the sphere of cultivation, by which the more fertile lands came under its control later.
In the first succession, an increase in the price would raise the rent and lower the rate of profit. The lowering of the rate of profit might be entirely or partially checked by opposing circumstances. This point will have to be treated later. It should not be forgotten, that the general rate of profit is not determined uniformly in
all spheres of production by the surplus-value. It is not the agricultural profit, which determines the industrial profit, but vice versa. But of this more anon.
In the second succession the rate of profit on the invested capital would remain the same. The mass of profit would present itself in less grain; but the relative price of grain, compared with that of other commodities, would have risen. Only, whatever increase there might be in the profit, would separate itself from the actual profit in the form of rent, instead of flowing into the pockets of the capitalist tenant and appearing as a growing profit. The price of grain, however, would remain unchanged under the conditions assumed here.
The development and growth of differential rent would remain the same, both with unaltered and with increasing prices, and with a continued progress from worse to better land as well as with a continued regression from better to worse land.
So far we have assumed 1) that the price rises in the one succession and remains stationary in the other; 2) that there is a continual progression from better to worse soil, or from worse to better soil.
But now let us assume that the demand for grain rises from its original figure of 10 to 17 quarters; furthermore, that the worst soil A is displaced by another soil A’, which raises 1 1/3 quarters at a price of production of 60 shillings (50 sh. cost plus 10 sh. for 20% profit), so that its price of production for one-quarter is 45 shillings; or, perhaps, the old soil A may have become improved through a continued rational cultivation, or may be cultivated more productively at the same cost, for instance, by the introduction of clover, etc., so that its product with the same investment of capital rises to 1 1/3 quarters. Let us also assume that the classes B, C and D of soil supply the same product as ever, but that new classes of soil have been introduced, for instance, A’ of a fertility between A and B, furthermore B’ and B” of a fertility between B and C. In that case we should witness the following phenomena:
1) The price of production of one-quarter of wheat, or its regulating market price, would have fallen from 60 shillings to 45 shillings, or by 25%.
2) The cultivation would have proceeded simultaneously from more fertile to less fertile soil, and from less fertile to more fertile soil. The soil A’ is more fertile than A, but less fertile than the hitherto cultivated soils B, C and D. And B’ and B” are more fertile than A, A’ and B, but less fertile than C and D. The succession would thus have proceeded in crisscross fashion. Cultivation would not have proceeded to soil absolutely less fertile than A, etc., but it would have proceeded to relatively less fertile than the soils C and D; on the other hand, cultivation would not have taken up soil absolutely more fertile, but at least relatively more fertile compared to the hitherto least fertile soils A or A and B.
3) The rent on B would have fallen; likewise the rent on C and D; but the total rental would have risen from 6 quarters to 7 2/3; the mass of the cultivated and rent paying lands would have increased, and the mass of the product would have risen from 10 quarters to 17. The profit, if remaining the same for A, expressed in grain, would have risen; but the
rate of profit itself might have risen, because the relative surplus-value did. In this case the wages, and with them the investment of variable capital, and with it the total investment, would have been reduced on account of the cheapening of the means of subsistence. The total rental would have fallen from 360 shillings to 345 shillings.
Let us draw up the new succession.
Finally, if only the classes of soil A, B, C and D were cultivated, but their productivity raised in such a way that A would produce 2 quarters instead of 1, B, 4 quarters instead of 2, C, 7 quarters instead of 3, and D, 10 quarters instead of 4, so that the same causes would have acted differently upon the various classes of soil, the total production would have increased from 10 quarters to 23. Assuming that the demand would absorb these 23 quarters by an increase of the population and the falling of prices, we should get the following table:
The numbers in this and in other tables are arbitrarily chosen, but the assumptions are quite rational.
The first and principal assumption is that the improvement in agriculture acts differently upon different soils, and in this case more so upon the best classes of soil, C and D, than upon the A and B classes. Experience has shown that
this is indeed the case, although the opposite may also take place. If the improvement should affect the lesser soils more than the better ones, the rent on these last ones would have fallen instead of rising.
But in our table we have assumed that the absolute growth of the fertility of all classes of soil is simultaneously accompanied by an increase of the higher relative fertility of the better classes of soil, C and D, which implies an increasing difference between the various products with the same investment of capital, and thus an increase of the differential rent.
The second assumption is that the total demand must keep step with the increase of the total product. In the first place, one need not imagine such an improvement to come abruptly, but gradually, until the succession in table III is reached. In the second place, it is a mistake to say that the consumption of necessities of life does not grow with their cheapening. The abolition of the corn laws in England proved the reverse (see Newman), and the contrary view is derived merely from the fact that great and sudden differences in the harvests, caused by the weather, bring about at one time an extraordinary fall, at another an extraordinary rise in the prices of cereals. While in such a case the sudden and short cheapness does not get time to exert its full effect upon the extension of consumption, the opposite takes place when the cheapening process arises out of the lowering of the regulating price of production itself and has permanency. In the third place, a portion of the grain may be consumed in the shape of whiskey or beer. And the rising consumption of these articles is by no means confined within narrow limits. In the fourth place, this matter depends partly upon the increase of the population, and for the other part the country may be a grain exporting one, as England was far beyond the middle of the 18th century, so that the demand is not regulated by the boundaries of a mere national consumption. Finally the increase and cheapening of the wheat production may have the result of making wheat instead of rye or oats the principal article of consumption for the masses, so that
the demand for it may grow for this reason alone, just as the opposite may take place when the product decreases and prices rise.—Under these assumptions, and with the figures previously chosen, succession No. III would show a fall in the price per quarter from 60 shillings to 30, that is 50%, that production compared to succession No. I would increase from 10 quarters to 23, in other words, by 130%; that the rent would remain stationary upon the soil B, be doubled upon C, and more than doubled upon D, and that the total rental would increase from 18 pounds sterling to 22, a growth of 22 1/9%.
A comparison of these three tables (taking table I twice, one rising from A to D, and one descending from D to A), which may be considered either as existing gradations under some definite stage of society, for instance, as existing side by side in three different countries, or as succeeding one another in different periods of development in the same country, would show:
1) That the succession, when complete, whatever may have been the course of its formative process, always has the appearance of being in a descending line; for in studying the rent, the point of departure will always be the soil producing the maximum of rent, and the closing point will be the soil yielding no rent.
2) That the price of production of the worst soil, which yields no rent, is always the regulating market price, although this market price in table I, if its succession was formed in an ascending line, could not remain stationary, unless better and better soil were cultivated. In that case the price of the grain produced on the best soil is a regulating one to the extent that it depends upon the quantity produced on such soil in what measure the soil of class A shall remain the regulator. For instance, if B, C, D should produce more that the demand calls for, then A would cease to be the regulator. This is what Storch has in mind, when he adopts the best class of soil as the regulating one. In this manner the American price of cereals regulates the English price.
3) Differential rent arises from the differences in the natural
fertility of the soil which depends upon the prevailing degree of development of cultivation (leaving aside for the present the question of location), in other words, from the limited area of the best lands, and from the circumstance that equal capitals must be invested in unequal soils, which yield unequal products with the same capital.
4) The existence of differential rent and of a graduated succession of differential rents may be due quite as much to a descending succession, which leads from the better to the worse soils, as to an ascending one, which takes the opposite direction. Or it may be brought about by alternating forward and backward movements. (Succession No. II may form by a process from D to A, or from A to D; succession No. II comprises both movements.)
5) According to its mode of formation, differential rent may develop with a stationary, rising or falling price of the products of the soil. With a falling price the total production and the total rental may rise, and rent may form on hitherto rentless lands, even though the worst soil A may have been displaced by a better one, or may itself have become improved, and although the rent may decrease on other better, or even the best, lands (table II); this process may also be accompanied by a fall of the total rent (in money). Finally, when prices are falling on account of a general improvement of cultivation, so that the product and the price of the product of the worst soils decrease, the rent may remain the same or may fall on a part of the better soils, but rise on the best soils. It is true that the differential rent of every soil, compared with the worst soil, depends upon the price, say, of the quarter of wheat, when the difference of the quantity of products is given. But when the price is given, differential rent depends upon the magnitude of the differences of the quantity of products, and if, with an increasing absolute fertility of all soils that of the better soil grows relatively more than that of the worse soil, the magnitude of this difference grows to that extent. In this way (see Table I), when the price is 60 shillings, the rent of D is determined by its differential product as compared to A, in other words,
by its surplus of 3 quarters. The rent is therefore three times sixty, or 180 shillings. But in Table III, in which the price is 30 shillings, the rent is determined by the quantity of the surplus product of D as compared to A, that is 8 quarters, and therefore it is eight times thirty, or 240 shillings.
This does away with the primitive misconception of differential rent still found among men like West, Malthus, Ricardo, to the effect that it necessarily requires a progress toward worse and worse soil, or an ever decreasing productivity of agriculture. It rather may exist, as we have seen, with a progress to a better and better soil; it may exist when a better soil takes the lowest position formerly occupied by the worst soil; it may be accompanied with a progressive improvement of agriculture. Its premise is merely the inequality of the different kinds of soil. So far as the development of productivity is concerned, it implies that the increase of absolute fertility of the total area does not do away with this inequality, but either increases it, or leaves it unchanged, or merely reduces it somewhat.
From the beginning to the middle of the 18th century England’s cereal prices fell continually in spite of the falling prices of gold and silver, while at the same time (viewing this entire period) there was an increase of rent, of the rental, of the area of the cultivated lands, of agricultural production, and of the population. This corresponds to Table I combined with Table II in an ascending line, but in such a way that the worst land A is either improved or eliminated from the grain area; this does not imply that it was not used for other agricultural or industrial purposes.
From the beginning of the 19th century (the date should be given more precisely) until 1815 there is a continual rise in the cereal prices, accompanied by a steady growth of the rent, of the rental, of the volume of the cultivated lands, of agricultural production, and of the population. This corresponds to Table I in a descending line. (Quote here some passages on the cultivation of inferior lands in those times.)
In Petty’s and Davenant’s time, the farmers and land owners
complain about the improvements and the breaking of new ground; the rent on the superior soils falls, the total rental increases through the extension of the soils yielding rent.
(These three points should be illustrated later on by quotations; likewise the difference in the fertility of the different cultivated portions of the soil in a certain country.)
The general rule in differential rent is that the market-value always stands above the total price of production of the mass of products. For instance, take Table I. The ten quarters of the total product are sold at 600 shillings, because the market price is determined by the price of production of A, which amounts to 60 shillings per quarter. But the actual price of production is:
|A||1 qr. = 60 sh.||1 qr. = 60 sh.|
|B||2 qrs. = 60 sh.||1 qr. = 30 sh.|
|C||3 qrs. = 60 sh.||1 qr. = 20 sh.|
|D||4 qrs. = 60 sh.||1 qr. = 15 sh.|
|10 qrs. = 240 sh.||Average||1 qr. = 24 sh.|
The actual price of production of these 10 quarters is 240 shillings. But they are sold at 600 shillings, 250% too dear. The actual average price for 1 quarter is 24 shillings; the market price is 60 shillings, also 250% too dear.
This is a determination by the market-value, which is enforced on the basis of capitalist production by means of competition; it creates a false social value. This arises from the law of the market-value, to which the products of the soil are subject. The determination of the market-value of the products, including the products of the soil, is a social act, although performed by society unconsciously and unintentionally. It rests necessarily upon the exchange-value of the product, not upon the soil and its differences in fertility.
If we imagine that the capitalistic form of society is abolished and society is organized as a conscious and systematic association, then those 10 quarters represent a quantity of independent labor, which is equal to that contained in 240 shillings. In that case society would not buy this product of the soil at two and a half times the labor time contained in it. The basis of a class of land owners would thus be
destroyed. This would have the same effect as a cheapening of the product to the same amount by foreign imports. While it is correct to say that, by retaining the present mode of production but paying the differential rent to the state, the prices of the products of the soil would remain the same, other circumstances remaining unchanged, it is wrong to say that the value of the products would remain the same, if capitalist production were superseded by association. The sameness of the market prices for commodities of the same kind is the way in which the social character of value asserts itself on the basis of capitalist production, as it does of any production resting on the exchange of commodities between individuals. What society in its capacity as a consumer pays too much for the products of the soil, what constitutes a minus for the realisation of its labor time in agricultural production, is now a plus for a portion of society, for the landlords.
A second circumstance, important for the analysis to be given under II in the next chapter, is the following:
It is not merely a question of the rent per acre, or per hectare, nor in general of a difference between the price of production and the market price, nor between the individual and general price of production per acre, but it is also a question of how many acres of each class of soil are under cultivation. The point of importance is here primarily the magnitude of the rental, that is, of the total rent of the entire cultivated area; but it serves us at the same time as a transition to the development of a rise in the rate of the rent, although there is neither a rise in the prices, nor an increase in the differences of the relative fertility of the various kinds of soil when prices are falling.
We had above:
Now let us assume that the number of cultivated acres is doubled in every class. Then we have:
Let us assume two other cases, and let the first be one, in which production expands on the two inferior classes of soil, in the following manner:
Finally let us assume an unequal expansion of production and of the cultivated area on all four classes, in the following manner:
In the first place, the rent per acre remains the same in all these four cases I, I a, I b and I c. For in fact the result of the same investment of capital per acre of the same class of soil has remained unchanged. Nothing more has been assumed than a fact which may be observed in any country at any given moment, namely that the various classes of soil participate in certain definite proportions in the entire cultivated
area. And furthermore, a fact which may be observed in any two countries that are compared, or in the same country at different periods of time, namely that the proportion varies in which the cultivated area is distributed among these classes.
If we compare Ia with I, then we see, if the cultivation of the soils of all four classes grows in the same proportion, that a doubling of the cultivated acres doubles the total production, and at the same time doubles the rent in grain and money.
If we compare Ib and Ic successively with I, we see that in both cases a triplication of the area subject to cultivation takes place. It rises in both cases from 4 acres to 12, but in Ib it is the classes A and B which get the greatest share of the increase, although A pays no rent, and B yields the smallest differential rent. But of 8 newly cultivated acres A and B get 3 each, or 6 between the two of them, whereas C and D get only 1 acre each, or together 2 acres. In other words, three-quarters of the increase go to A and B, and only one-quarter to C and D. According to this assumption and comparing Ib with I, the trebled area of cultivation does not result in a trebled product, for the product does not increase from 10 to 30, but only to 26. On the other hand, seeing that a considerable portion of the increase takes place on A, which does not yield any rent, and since the principal portion of the remaining increase takes place on B, the rent in grain rises only from 6 quarters to 14, and the rent in money from 18 pounds sterling to 42.
But if we compare Ic with I, where the soil yielding no rent does not increase in area, and the soil yielding a minimum rent increases but slightly, while the principal portion of the increase takes place on C and D, we find that the trebled area results in an increase of production from 10 quarters to 36, more than three times the quantity. The rent in grain has risen from 6 quarters to 24, or quadrupled; and so has the money rent from 18 pounds sterling to 72.
In all these cases the price of the agricultural product naturally remains stationary. The total rental increases in
all cases with the extension of cultivation, unless it takes place exclusively on the worst soil, which does not pay any rent. But the growth is unequal. In proportion as the extension of cultivation takes place upon the superior classes of soil and consequently the quantity of the products grows not merely at the ratio of expansion of the area, but even faster, the rent in grain and money increases. In proportion as the worst soil and the class next above it share principally in the expansion of the area (provided that the worst soil represents a constant class), the total rental does not rise in proportion to the extension of cultivation. If there are two countries, in which the class A, that yields no rent, is of the same nature, the rental stands in the reverse ratio to the aliquot part represented by the worst soil and the lesser classes next above it in the total area of the cultivated soil, and therefore in the reverse ratio to the quantity of the products of equal investments of capital on the same total areas of land. The proportion between the quantity of the worst cultivated soil and that of the better soil, within the total cultivated area of a certain country, thus has the opposite effect upon the total rental than the proportion between the quality of the worst cultivated soil and that of the better soil has upon the rent per acre and, other circumstances remaining the same, upon the total rental. The confounding these two things has given rise to many mistaken objections to differential rent.
The total rental, then, increases by the mere extension of the cultivation, and by the consequent greater investment of capital and labor in the soil.
But the most important point is this: Although it is our assumption that the proportion of the rents upon the various classes of soil remains the same, calculated per acre, and therefore also the rate of rent considered with reference to the capital invested in each acre, yet we must observe the following: If we compare Ia with I, the case in which the number of cultivated acres and the capital invested in them have been proportionately increased, we find that just as the total production has increased proportionately to the expanded agricultural area, that is just as both of them have been
doubled, so has the rental. It has risen from 18 pounds sterling to 36, just as the number of acres has risen from 4 to 8.
If we take the total area of 4 acres, we find that the total rental amounted to 18 pounds sterling, or the average rent, including the soil which does not pay any rent, 4½ pounds sterling. This calculation might be made, say, by a landlord owning all 4 acres. And in this way the average rent is statistically calculated upon a whole country. The total rental of 18 pounds sterling is secured by the investment of a capital of 10 pounds sterling. We call the ratio of these two figures the rate of rent; in the present case it is 180%.
The same rate of rent follows in Ia, where 8 instead of 4 acres are cultivated, but all classes of land have shared in the same proportion in the increase. The total rental of 36 pounds sterling gives for 8 acres and an invested capital of 20 pounds sterling an average rent of 4½ pounds sterling per acre and a rate of rent of 180%.
But if we consider Ib, in which the increase has taken place mainly upon the two inferior classes of soil, we find there a rent of 42 pounds sterling upon 12 acres, or an average rent of 3½ pounds sterling per acre. The invested total capital is 30 pounds sterling, and the rate of rent 140%. The average rent per acre has decreased by one pound sterling, and the rate of rent has fallen from 180 to 140%. Here then we have an increase of the total rental from 18 pounds sterling to 42, and yet a fall of the average rent, calculated both per acre and per capital, while production grows also, but not proportionately. This takes place, although the rent upon all classes of soil, both per acre and per capital, remains the same. It does so, because three-quarters of the increase go to the class A, which does not pay any rent, and upon class B, which pays only the minimum rent.
If the total extension in the case Ib had taken place only upon the soil A, then we should have 9 acres upon A, 1 acre upon B, 1 acre upon C and 1 acre upon D. The total rental would be 18 pounds sterling, the same as before, the average rent upon the 12 acres would be 1½ p. st. per acre; and a rent of 18 pounds sterling on an invested capital of 30 pounds
sterling would give a rate of rent of 60%. The average rent, both per acre and per invested capital, would have decreased, and the total rental would not have increased.
Finally, let us compare Ic with I and Ib. Compared to I, the area has been trebled, also the invested capital. The total rental is 72 pounds sterling upon 12 acres, or 6 pounds sterling per acre against 4½ pounds sterling in case I. The rate of rent upon the invested capital (72: 30 pounds sterling) is 240% instead of 180%. The total product has risen from 10 quarters to 36.
Compared to Ib, where the total area of the cultivated acres, the invested capital, and the difference between the cultivated classes are the same, but the distribution different, the product is 36 quarters instead of 26, the average rent per acre is 6 pounds sterling instead of 3½, and the rate of rent with reference to the same invested total capital is 240% instead of 140%.
No matter whether we regard the various conditions in Tables Ia, Ib and Ic as existing side by side in different countries, or as existing successively in the same country, we come to the following conclusions: so long as we have the conditions mentioned hereafter, that is, so long as the price of cereals remains unchanged, because the worst rentless soil has the same product; so long as the differences in the productivity of the different cultivated soils remain the same; so long as the respective products of the same invested capitals are the same for aliquot parts (acres) of the areas cultivated in every class of soil; so long as the ratio between the rents per acre of each class of soils and with the same rate of rent upon the capital invested in each portion of the same kind of soil is constant: 1) the rental always increases with the extension of the cultivated area and with the consequent increased investment of capital, with the exception of the case in which the entire increase falls on the rentless soil. 2) Both the average rent per acre (total rental divided by the total number of acres) and the average rate of rent (total rental divided by the invested total capital) may vary very considerably; both of them in the same direction, but in different
proportions compared to one another. If we leave out of consideration the case, in which the increase takes place upon the rentless soil, we find that the average rent per acre and the average rate of rent upon the capital invested in agriculture depend upon the proportional shares, which the various classes of soil claim in the cultivated area; or, what amounts to the same, upon the distribution of the employed total capital among the classes of soil of different fertility. Whether much or little land is cultivated, and whether the total rental is therefore larger or smaller (with the exception of the case, in which the increase is confined to A) the average rent per acre, or the average rent per invested capital, remains the same so long as the proportions of the participation of the various classes of soil in the total cultivated area remain unchanged. In spite of the rise, even of a very considerable one, in the total rental with the extension of cultivation and the expansion of the invested capital, the average rent per acre and the average rent per capital fall whenever the extension of the rentless lands, or of the lands of inferior fertility, increases more than that of the superior rent paying ones. On the other hand the average rent per acre and the average rent per capital increase in proportion as the better lands constitute a greater part of the total area and employ a relatively greater share of the invested capital.
Hence, if we consider the average rent per acre, or hectare, of the total cultivated soil, in the way that is generally done in statistical works, by comparing either different countries at different epochs, or different epochs in the same country, we find that the average level of the rent per acre, and consequently the total rental, corresponds in certain proportions (although by no means equal ones, but rather more rapidly moving ones) to the absolute, not to the relative, productivity of agriculture in a certain country, that is, to the mass of products brought forth by it on an average upon the same area. For the larger the share taken by the superior soils in the total cultivated area, the greater is the mass of products brought forth by equal investments of capital upon equally
large areas of land. And the higher is the average rent per acre. In the opposite case the reverse takes place. In this way the rent does not seem to be determined by the ratios of differential fertility, but of absolute fertility, and the law of differential rent seems thereby abolished. For this reason certain phenomena are disputed, or perhaps they are explained by non-existing differences in the average prices of cereals and in the differential fertility of the cultivated lands, whereas such phenomena are merely due to the fact that the ratio of the total rental, either to the total area of the cultivated soil, or to the total capital invested in this soil, so long as the fertility of the rentless soil remains the same and with it the price of production, and so long as the differences of the various classes of soil remain unchanged, is determined not merely by the rent per acre or the rate of rent per capital, but quite as much by the proportional number of acres of each class of soil in the total number of cultivated acres; or, what amounts to the same, by the distribution of the invested total capital among the various classes of land. Curiously enough this fact has been completely overlooked so far. At any rate we see (and this is important for the progress of our analysis), that the relative level of the average rent per acre, and the average rate of rent (or the ratio of the total rental to the total capital invested in the soil), may rise or fall, through the mere extensive expansion of cultivation, while prices remain the same, the differential fertilities of the various soils remain unaltered, and the rent per acre is constant, or while the rate of rent for the capital invested per acre in every actual rent paying class of soil, or for every rent paying capital, remains unchanged.
We have to make the following additional remarks with reference to the form I of the differential rent, which also apply partly to form II:
1) We have seen that the average rent per acre, or the average rate of rent per capital, may rise with an extension of cultivation, with stationary prices, and unaltered differential
fertilities of the cultivated lands. As soon as all the land in a certain country has been appropriated, while the investment of capital in land, the cultivation of the soil, and the population, have reached a certain level—all of which conditions are matters of fact as soon as the capitalist mode of production becomes the prevailing one and invades also agriculture—the price of the uncultivated soil of various classes (assuming differential rent to exist) is determined by the price of the cultivated lands of the same quality and equivalent location. The price is the same—after deducting the cost of breaking the ground—although this soil does not carry any rent. The price of the land is, indeed, nothing but the capitalised rent. But even in the case of cultivated lands their price pays only future rents, as for instance, when the regulating rate of interest is 5% and the rent for twenty years is paid in advance at one time. When land is sold, it is sold as a rent paying land, and the prospective character of the rent (which is here considered as a fruit of the soil, which it is only seemingly) does not distinguish the uncultivated from the cultivated soil. The price of the uncultivated lands, like their rent, which it represents as though it were its contracted formula, is quite illusory, so long as the land is not actually used. But it is thus determined beforehand and realised as soon as a purchaser is found. Hence, while the actual average rent of a certain land is determined by its real average rental per year and by its proportion to the entire cultivated area, the price of the uncultivated portions of land is determined by that of the cultivated land, and is therefore but a reflex of the capital invested in cultivated land and of the results obtained by such investments. Since all lands with the exception of the worst carry rent (and this rent, as we shall see under the head of differential rent II, rises with the mass of the capital and the corresponding intensity of cultivation), the nominal price of the uncultivated portions of the soil is thus formed, and thus they become commodities, a source of wealth for their owners. This explains at the same time, why the price of land increases in the whole region, even in the uncultivated part (Opdyke). The speculation
in land, for instance in the United States, rests merely upon this reflex, which capital and labor throw on the uncultivated land.
2) The advance in the extension of the cultivated soil in general takes place either toward inferior soil, or upon the various existing soils in different proportions according to the way in which they present themselves. The step toward inferior soil naturally is never made voluntarily, but cannot be due to anything but to rising prices (assuming the capitalist mode of production to be a fact), and under any mode of production it will be a result of necessity. However, this is not absolutely so. An inferior soil is preferred to a relatively better soil on account of its location, which decides the point during all extension of cultivation in new countries; furthermore for the reason that, while the formation of the soil in a certain region may belong to the superior ones, the better will nevertheless be relieved here and there by inferior soil, so that the inferior soil must be cultivated along with the superior on account of its location. If inferior soil is surrounded by superior soil, then the better soil gives to the poorer soil the advantage of location as against other and more fertile soil, which is not connected with the already cultivated soil, or with soil about to be cultivated.
In this way the state of Michigan was one of the first to export corn. Yet its soil is on the whole poor. But its vicinity to the state of New York and its water routes by lakes and by the Erie Canal gave to it the advantage before the naturally more fertile states which were farther west. The example of this state, as compared to the state of New York, shows us also the transition from superior to inferior soil. The soil of the state of New York, particularly the western portion of it, is far more fertile, particularly in the raising of wheat. This fertile soil was made sterile by robbing it, and now the soil of Michigan appeared as the more fertile.
“In 1836 wheat flour was shipped from Buffalo to the West, principally from the wheat belt of New York and Canada. At present, only 12 years later, enormous supplies
of wheat and flour are brought from the West, by way of Lake Erie, and shipped East upon the Erie Canal, in Buffalo and the neighboring port of Blackrock. The export of wheat and flour was particularly stimulated by the European famine in 1847. The wheat in western New York thus became cheaper, and the raising of wheat less profitable; this caused the New York farmers to throw themselves more upon cattle raising and dairying, fruit growing, etc., lines in which the Northwest, in their opinion, will be unable to compete with them directly.” (J. W. Johnston,
Notes on North America, London, 1851, I, p. 222.)
3) It is a mistaken assumption that the land in colonies, and in new countries generally, which can export cereals at cheaper prices, must for that reason be necessarily of a greater natural fertility. The cereals are not only sold below their value in such cases, but below their price of production, namely below the price of production determined by the rate of profit in the older countries.
The fact that we, as Johnston says (p. 223) “are accustomed to connect with these new states, which ship annually such large supplies of wheat to Buffalo, the idea of great natural fertility and endless stretches of rich soil,” depends primarily upon economic conditions. The entire population of such a country, for instance of Michigan, is at first almost exclusively engaged in agriculture, and particularly in producing agricultural goods in large masses, which they can alone exchange for products of industry and tropical goods. The whole surplus product of this population appears, therefore, in the shape of cereals. This distinguishes from the outset the colonial states founded on the basis of the modern world market from those of former, particularly of antique, times. They receive from the world market finished products, which they would have to make themselves under different circumstances, such as clothing, tools, etc. Only on such a basis were the southern states of the Union enabled to make of cotton their staple product. The division of labor upon the world market permitted this. Hence, if they seem to produce a large surplus product in spite of their youth and small
relative population, it is not due to the fertility of their soil, nor to the productivity of their labor, but to the onesided form of their labor, and therefore of the surplus product, in which this labor is incorporated.
Furthermore, a relatively inferior soil, which is newly cultivated and was never touched by civilisation before, has accumulated much easily soluble plant food, at least in its upper layers, provided the climatic conditions are not extremely hard, so that it will yield crops without any manure for a long time, even with very superficial cultivation. The western prairies have the additional advantage of requiring hardly any expenses for clearing, since nature has cleared them herself.
*127 In less fertile districts of this kind a surplus is produced, not through the great fertility of the soil or the yield per acre, but through the large number of acres, which may be superficially cultivated, because this soil costs the cultivator little or nothing compared with older countries. For instance, where share farming exists, as it does in certain parts of New York, Michigan, Canada, etc., there this condition is found. A family cultivates superficially, say, 100 acres, and although the product per acre is not large, the product of 100 acres yields a considerable surplus for sale. In addition to this cattle may be kept on natural pastures for almost nothing, without any artificial grass meadows. It is the quantity, not the quality of the soil, which decides the point here. The possibility of this superficial cultivation is naturally more or less rapidly exhausted, in a reverse ratio to the fertility of the new soil, and in a direct ratio to the export of its products. “And yet such a country will yield excellent harvests, even of wheat; whoever skims the first cream off the soil, will be able to ship an
abundant surplus of wheat to the market” (L. c., p. 224). In countries of older civilisation the property relations, the determination of the price of the uncultivated soil by that of the cultivated, etc., make such an extensive economy impossible.
That this soil does not have to be very rich, as Ricardo imagines, nor soils of equal fertility have to be cultivated, may be seen from the following: In the state of Michigan 465,900 acres were planted in 1848 with wheat and produced 4,739,300 bushels, or an average of 10 1/5 bushels per acre; deducting the seed grain this leaves less than 9 bushels per acre. Of the 29 counties of this state 2 produced an average of 7 bushels, 3 an average of 8 bushels, 2 one of 9, 7 one of 10, 6 one of 11, 3 one of 12, 4 one of 13 bushels, and only one county produced an average of 16 bushels, and another of 18 bushels per acre (L. c., p. 226).
In practical agriculture a higher fertility of the soil coincides with a greater immediate utilisation of this fertility. This may be greater in a naturally poor soil than in a naturally rich one; but it is the kind of soil which a colonist will take up first, and must take up from lack of capital.
4) The extension of cultivation to greater areas—aside from the case just mentioned, in which recourse must be had to inferior soil than that hitherto cultivated—upon the various classes of soil from A to D, for instance, the cultivation of larger tracts of B and C, does not presuppose by any means a previous rise of the prices of cereals, any more than the annually increasing expansion, for instance of cotton spinning, presupposes a continual rise in the price of yarn. Although a considerable rise or fall of market prices affects the volume of production, nevertheless, aside from this, that relative overproduction which is in itself identical with accumulation always takes place even with average prices, whose stand has neither a paralysing nor an exceptionally stimulating effect upon production. This takes place in agriculture as well as in all other capitalistically managed lines of production. Under different modes of production, this relative overproduction is effected directly
by the increase of population, and in colonies by continual immigration. The demand increases constantly, and in anticipation of this new capital is continually invested in new land, although the products of this land will vary according to circumstances. It is the formation of new capitals, which in itself brings this about. But so far as the individual capitalist is concerned, he measures the volume of his production by that of his available capital, to the extent that he himself can still superintend it. What he aims at is to occupy as much room as possible on the market. If there is any overproduction, he does not blame himself, but his competitors. The individual capitalist may expand his production by appropriating a larger aliquot share of the existing market, or by expanding the market itself.
Part VII, Chapter XLII.