Friday, 8 July 2016

Capital III, Chapter 39 - Part 7

In the first sequence, rising demand causes a rise in price, causing a rise in rent. But, as referred to earlier, this also causes a rise in the value of labour-power, and fall in the general rate of profit.

“Such a decrease might be entirely or partially checked by counteracting circumstances. This point will have to be treated later in more detail. 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 industrial profit, but vice versa.” (p 654)

In the second sequence, the price of wheat does not change, so there is no effect on the value of labour-power, or general rate of profit. At this higher price, the mass of profit is represented by a smaller quantity of wheat. As a consequence, the relative value of wheat to other commodities, including those commodities that comprise elements of constant capital, for agriculture, rises. Put another way, the relative value of this constant capital falls for the former, which means their rate of profit rises.

If previously, four kilos of wheat exchanged for one plough, when the price was £15 per kilo, now a plough costs only one kilo of wheat, when its price is £60 per kilo.

“The amount of profit would be represented by less grain; but the relative price of grain, compared with that of other commodities, would have risen. However, the increase in profit wherever such an increase takes place, becomes separated from the profit in the form of rent, instead of flowing into the pockets of the capitalist tenant farmer and appearing as a growing profit. The price of grain, however, could remain unchanged under the conditions assumed here.” (p 654)

In other words, if we are dealing with the second sequence moving from the least fertile soil, the market price remains £60 per kilo, but for the most fertile soil, the price of production is only £15 per kilo. Yet, it sells its output at £60 per kilo. At this price, it only has to sell 1 kilo of wheat to obtain a plough. If it set the market price, and sold its output at £15 per kilo, it would have had to sell 4 kilos to obtain the plough.

So, it does not matter, in terms of the rent, produced by each type of land, whether the price of wheat remains constant at £60, and the progression is from the worst to best land, or whether the progression is from the best to worst, and the price of wheat rises progressively.

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