Saturday, 20 August 2016

Capital III, Chapter 45 - Part 5

The point, however, that has to be addressed here is on what basis rent is levied, even on the worst land, taken on its own, and under market conditions where it can only return the average profit. Moreover, if under these conditions rent is levied, this will mean that the capital invested on this land then makes below average profit. On that basis, can the capital then be invested?

Marx sets out that this rent, even on the worst soil, cannot be a differential rent, as previously described. What is being assumed is that all existing land under cultivation has been reduced effectively to the same level, either because the fertility of the soil is the same, or else as a result of additional investments of capital, the capacity of each piece of land to increase its marginal product has been reduced to the same level, i.e. an additional investment, in bringing into cultivation another piece of land of type A, results in the same output as its investment on land types B,C and D.

If this were not the case, the capital would be invested in one of these other types of land, so as to make additional surplus profit. The problem then seems to be that if rent is a deduction from the surplus value, but each investment of additional capital must, at least, return the average profit, it seems impossible for rent to be charged on the worst land, because it would then make less than average profit. The only other answer would be for the rent to form an additional cost, so that the market price rose. But, this contradicts the argument that it is not such an additional cost, but only a deduction from surplus value.

“But landed property is not the cause which creates this portion of the price, or the rise in price upon which this portion of the price is premised. On the other hand, if the worst soil A cannot be cultivated — although its cultivation would yield the price of production — until it produces something in excess of the price of production, rent, then landed property is the creative cause of this rise in price. Landed property itself has created rent.” (p 755)

In other words, Marx's solution here is that its not that the absolute rent enters as a cost of production, for the output of soil A, but that soil type A here is only brought into cultivation when the market price of its output rises to such a level that the capital employed on land type A makes sufficient profit that it can pay the rent, and still make average profit.

If landed property did not exist, therefore, so that the rent did not have to be paid, this capital could have been invested when market prices were lower, and still returned, the average profit. Landed property, therefore, acts to restrict the investment of capital in agriculture.

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