Capital III, Chapter 40 - Part 2

If we take a farmer on land type A, and assume that the additional investment of capital occurs over successive years, they go from a situation where they are making no surplus profit, to one in which the final increment of capital brings them a surplus profit of £9 (from £9 to £18). With a long tenancy, such investment is worthwhile, because the farmer initially took on rentless land – we'll see later that, of course, rent is paid on all land – on the basis that it produced no surplus profit.

However, the shorter the term of the lease, the less worthwhile such investment becomes. Not only does the landlord take over, cost-free, all of the improvements made to the land, by the farmer, but the new rent is now based on the fact that this land produces the same amount of surplus profit as previously, only the best land, type D, produced.

For a farmer on land type D, facing falling marginal productivity of capital, they are already paying rent on this land, on the basis of its superior fertility. They have an incentive to invest additional capital, provided the price of wheat remains at £3, because this additional investment, although it causes their own rate of profit to fall, still results in their mass of profit rising, and on each additional investment, they make surplus profit up to the last increment.

Marx describes the way, historically, it must be the case that Differential Rent I forms the basis of the departure for Differential Rent II. That is because, in past modes of production, agricultural producers owned their own small means of production, so that cultivation expanded on the basis of extension of the area cultivated, not a more intensive cultivation of existing areas.

“In the colonies, colonists have but little capital to invest; the principal production agents are labour and land. Every individual head of family seeks for himself and his kin an independent field of employment alongside his fellow-colonists. This must generally be the case in agriculture proper even under pre-capitalist modes of production. In the case of sheep-herding and cattle-raising, in general, as independent lines of production, exploitation of the soil is more or less common and extensive from the very outset.” (p 676)

Capitalist production in agriculture begins with sheep herding and cattle raising, but initially, at least the basis of increasing herd sizes, is the extension of grazing areas. But, as capitalist agriculture initially confronts peasant agriculture, in conditions where there are still large untilled areas, it does so again by extending the area under cultivation, rather than a more intensive cultivation of existing land.

“Secondly, in the differential rent in form II, the differences in distribution of capital (and ability to obtain credit) among tenants are added to the differences in fertility. In manufacturing proper, each line of business rapidly develops its own minimum volume of business and a corresponding minimum of capital, below which no individual business can be conducted successfully. In the same way, each line of business develops a normal average amount of capital above this minimum, which the bulk of producers should, and do, command. A larger volume of capital can produce extra profit; a smaller volume does not so much as yield the average profit.” (p 677)

Back To Part 1

Forward To Part 3