Monday, 29 August 2016

Capital III, Chapter 46 - Part 2

To the extent that a demand for land is created for all these other activities, as social progress creates rising populations, and that need more houses, roads, schools, and so on, and at the same time, creates more factories etc., the potential for rent increases, because even land unsuitable for agriculture or mining can now be put to productive use. In addition, the same social progress creates additional demand for the output of the land, both for agricultural products and for minerals and other raw materials.

“"The paving of the streets of London has enabled the owners of some barren rocks on the coast of Scotland to draw a rent from what never afforded any before." Adam Smith [An Inquiry into the Nature and Causes of the Wealth of Nations,] Book 1, Chapter XI, 2.” (Note 40, p 774)

Of particular interest in relation to the housing crisis in Britain, Marx reiterates the point made in Capital II, Chapter 12, that as regards speculation it relates to the ground rent, not the house. Houses, as commodities, tend to fall in value, with social progress, because of rising social productivity. That makes the cost of materials cheaper, and means less labour-time is required for construction. Where house prices rise, this is because of the monopoly of land ownership, which prevents additional land being made available to increase housing supply.

The extent to which the landlords benefited is indicated from the testimony of a London property speculator, Edward Capps, to the Select Committee on the Bank Acts, 1851.

“"I think a man who wishes to rise in the world can hardly expect to rise by following out a fair trade is necessary for him to add speculative building to it, and that must be done not on a small scale; ...for the builder makes very little profit out of the buildings themselves; he makes the principal part of the profit out of the improved ground-rents. Perhaps he takes a piece of ground, and agrees to give £300 a year for it; by laying it out with care, and putting certain descriptions of buildings upon it, he may succeed in making £400 or £450 a year out of it, and his profit would be the increased ground-rent of £100 or £150 a year, rather than the profit of the buildings at which many instances, he scarcely looks at all."” (p 774-5)

But, as Marx points out, although the property speculator would make their profit during this time, the land with all these buildings, at the end of the lease, reverts to the landowner or their successor. By these means, landowners, in London and other major cities, were able to amass huge fortunes, as vast areas of residential and commercial property came into their possession without them paying a farthing for it.

“Mining rent proper is determined in the same way as agricultural rent.” (p 775)

Many coal mines were operated by the landowners, because it was not possible to obtain a sufficient profit from their operation to be able to pay rent. The Duke of Bridgewater operated mines near Manchester, and commissioned James Brindley to build a canal for its shipment, for example. Near to where I was born, a mine where my grandfather worked, at Birchenwood, was owned by the Duke of Bridgewater, and on the same site, he also developed an iron works and a gas and coke plant.

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