Friday, 15 July 2016

Capital III, Chapter 39 - Part 14

The conclusion is then that if the price of grain remains constant, the relative levels of fertility of the different soil types, doesn't change, and so the rent per hectare of each type of land remains constant, an increase in the area of land under cultivation will bring about an increase in total rent, unless the increase is solely on the rentless land. But, depending on whether the more fertile soil or less fertile soil accounts for the bigger proportion of the increase, this will affect the average rent per hectare, and the rate of rent.

“Hence, if we consider the average rent per acre, or hectare, of the total cultivated land as is generally done in statistical works, in comparing either different countries in the same period, or different periods in the same country, we find that the average level of rent per acre, and consequently total rental, corresponds to a certain extent (although by no means identical, but rather a more rapidly increasing extent) to the absolute, not to the relative, fertility of the soil in a given country; that is, to the average amount of produce which it yields from the same area.” (p 667)

This seems to contradict the theory of differential rent, suggesting that rent is dependent on absolute fertility and not on differences in fertility. But, in fact, all this shows is that, at times, the more fertile lands constitute a greater proportion of land under cultivation, and so average rent per hectare and rates of rent increases and vice versa.

As was the case with money-capital, that was loaned, but not used for productive purposes, yet yielded average interest, land that is uncultivated and produces no rent, has the same price as land of the same quality that is cultivated in the same location.

Capital as a commodity, i.e. loan capital, has no value, because it is not the product of labour. Similarly, land has no value because it also is not the product of labour. As loan capital is capitalised interest, so the price of land is capitalised rent.

When loan capital is borrowed, it does not matter whether it is used to acquire productive-capital or to finance consumption or speculation. The interest to be paid is based on the fact that this loan capital has the potential to create profits. When land is sold, its price is determined by the fact that it could produce rent, and the more rent the land could produce, the higher the price of the land.

“Since all land with the exception of the worst yields rent (and this rent, as we shall see under the head of differential rent II, increases with the quantity of capital and corresponding intensity of cultivation), the nominal price of uncultivated plots of land is thus formed, and they thus become commodities, a source of wealth for their owners. This explains at the same time, why the price of land increases in a whole region, even in the uncultivated part (Opdyke). Land speculation, for instance, in the United States, is based solely on this reflection thrown by capital and labour on uncultivated land.” (p 669)

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