Tuesday, 21 June 2016

Capital III, Chapter 37 - Part 5

The more permanent forms of fixed capital are also usually paid for by the capitalist farmer, rather than the landlord, because the farmer wants the land to be as productive as possible. This is one reason that the landlords sought to introduce ever shorter periods of tenure, because, on this basis, they were able to acquire gratis all improvements made by the tenant, and then also to increase the ground rent. The ground rent not only reflects the improved condition of the land itself, but also includes the interest on the fixed capital introduced.

As a result, if the landowner seeks to sell the land, its capitalised value will have been increased, so they will obtain a higher price for it.

“Quite aside from the movements of ground-rent itself, here lies one of the secrets of the increasing enrichment of landowners, the continuous inflation of their rents, and the constantly growing money-value of their estates along with progress in economic development. Thus they pocket a product of social development created without their help — fruges consumere nati. [Horace, Epistles, Book I, Epistles 2, 27. — Ed]. But this is at the same time one of the greatest obstacles to a rational development of agriculture, for the tenant farmer avoids all improvements and outlays for which he cannot expect complete returns during the term of his lease.” (p 620)

Marx cites James Anderson, as the creator of the modern theory of rent. Anderson was not only an agronomist, but also an active capitalist farmer. Marx analyses his work in Theories of Surplus Value, Chapter 9

Anderson denounced the practice as limiting a rational capitalist development of agriculture. But, Marx also quotes the work of A.A. Walton, “History of The Landed Tenures of Great Britain and Ireland”, which also describes this practice by the landlords. Later it will be seen how the same practice meant that the big landlords in London, acquired for free all of the houses built on their land, by capitalist builders on leasehold, at the end of the lease, and thereby made large fortunes.

“"All the efforts of the numerous agricultural associations throughout the country must fail to produce any very extensive or really appreciable results in the real advancement of agricultural improvement, so long as such improvements mean in a far higher degree increased value to the estate and rent-roll of the landlord, than bettering the condition of the tenant farmer or the labourer. The farmers, generally, are as well aware as either the landlord or his agent, or even the president of the Agricultural Association, that good drainage, plenty of manure, and good management, combined with the increased employment of labour, to thoroughly cleanse and work the land, will produce wonderful results both in improvement and production. To do all this, however, considerable outlay is required, and the farmers are also aware, that however much they may improve the land or enhance its value, the landlords will, in the long run, reap the principal benefit, in higher rents and the increased value of their estates.... They are shrewd enough to observe what those orators” [landowners and their agents speaking at agricultural festivities], "by some singular inadvertence, omit to tell them —namely, that the lion's share of any improvements they may make is sure to go into the pockets of the landlords in the long run.... However much the former tenant may have improved the farm, his successor will find that the landlord will always increase the rent in proportion to the increased value of the land from former improvements.”” (Quoted from Walton), (p 620-1)

Walton points out that the situation with housing was even more overt, and that increasing swathes of housing across the country was passing into the hands of a few landlords. Most property was leased, at high rents, and at the end of the lease, the landlord quickly made sure that any deficiency had to be corrected, by the tenant, whilst any improvement was pocketed by the landlord.

“This illustration of ownership in buildings is important. In the first place, it clearly shows the difference between actual ground-rent and interest on fixed capital incorporated in the land, which may constitute an addition to ground-rent. Interest on buildings, like that on capital incorporated in the land by the tenant in agriculture, falls into the hands of the industrial capitalist, the building speculator, or the tenant, so long as the lease lasts, and has in itself nothing to do with ground-rent, which must be paid on stated dates annually for the use of the land. Secondly, it shows that capital incorporated in the land by others ultimately passes into the hands of the landlord together with the land, and that the interest for it inflates his rent.” (p 621-2)

This is important, because although rent and interest are similar, in that they are a price paid for something that is lent – land or money-capital – they are not the same thing. But, some economists, such as Carey, sought to equate them.

“This would eliminate the opposition between landlords and capitalists. The opposite method was employed in the early stages of capitalist production. In those days, landed property was still regarded by popular conception as the pristine and respectable form of private property, while interest on capital was decried as usury. Dudley North, Locke and others, therefore, represented interest on capital as a form analogous to ground-rent, just as Turgot deduced the justification for interest from the existence of ground-rent.” (p 622)

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