First Form of Differential Rent (Differential Rent I)
Marx distinguishes his theory of Differential Rent from that of Ricardo, but he begins by setting out those main elements on which they agree.
“Ricardo is quite right in the following observations:
"Rent is always the difference between the produce obtained by the employment of two equal quantities of capital and labour" (Principles, p. 59).
[He means differential rent, for he assumes that no other rent but differential rent exists.] He should have added, "on equal areas of land" in so far as it is a matter of ground-rent and not surplus-profit in general.” (p 649)
Surplus profit arises when two equal amounts of capital and labour produce different amounts of profit. But, this only results in ground-rent where these equal quantities of capital and labour are employed on equal amounts of land. It is the land ownership which enables the landowner to appropriate the surplus profit.
It does not have to be the case that equal masses of capital and labour are involved, only that the proportional relation results in more profit in one case than the other, i.e. a higher rate of profit.
“Ricardo is also right in the following observation, 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).” (p 649)
These factors are not just restricted to the fertility or location of the land in question. Marx lists three factors which may have those effects. Firstly, taxes. If there is a single tax system then this should be neutral, affecting all land equally, but, if taxes are determined locally, a higher rate of tax, on land, in one area, will act to reduce potential profits, compared to another area, where the tax on land is lower.
There will also be differences where the tax is levied on the rent received by the landlord, as opposed to on the land itself.
Secondly, agriculture may be more developed in some parts of the country than others, and due to the nature of agriculture, as opposed to manufacturing, these differences may take longer to even out. In areas where development is more advanced, productivity will be higher, irrespective of the fertility of the soil, etc. So, there will arise surplus profits in these areas, as they sell their commodities into a national market.
Thirdly, within each area, there will be significant differences in the amount of capital each farmer has at their disposal, and these differences are again not so easily evened out as in manufacturing. Lenin analysed this in his The Development of Capitalism In Russia, showing how this results in an increasing differentiation of the peasantry. But, this same process means that the richer peasants/farmers produce surplus profit, as a result of their more efficient use of capital, and this capital creates the potential for ground-rent. It further facilitates the increasing power of these rich farmers, therefore, to the extent that they are themselves the landowner.
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