Thursday, 1 September 2016

Capital III, Chapter 46 - Part 5

The relation of rent to land is itself “absurd and irrational”, Marx says. Money is the independent expression of value. Exchange value is the ratio of the value of one product against the value of another. But, land has no value. It is not the product of labour. It is a use value that is measured not by value, but by size, fertility etc. To compare rent to land is then to compare two things that are incommensurate.

“This expresses in fact nothing more than that, under the given conditions, the ownership of so many square feet of land enables the landowner to wrest a certain quantity of unpaid labour, which the capital wallowing in these square feet like a hog in potatoes has realised.” (p 779)

But, in fact, as previous analysis has shown, capitalist production results in a number of such irrational forms. The price of labour (wages) is the irrational form of the value of labour-power, for example. In a mode of production based on the production and exchange of commodities, it is inevitable that everything has the tendency to be turned into a commodity, into something that can be bought and sold. Everything must then have a price, even if it has no value.

“However, the reconciliation of irrational forms in which certain economic relations appear and assert themselves in practice does not concern the active agents of these relations in their everyday life. And since they are accustomed to move about in such relations, they find nothing strange therein. A complete contradiction offers not the least mystery to them. They feel as much at home as a fish in water among manifestations which are separated from their internal connections and absurd when isolated by themselves. What Hegel says with reference to certain mathematical formulas applies here: that which seems irrational to ordinary common sense is rational, and that which seems rational to it is itself irrational.” (p 779)

The point being that although a rise in rent related to capital is rational because these are two values, whilst a rise in rent related to the use value of land is irrational, it is this latter rise, which is the basis of the rise in the price of that land.

If productivity rises, on the better land, this will cause a greater differentiation, additional surplus profit and increased rent, thereby causing the price of these lands to rise. But, the higher productivity may have led the price of production of agricultural products to fall.

Agricultural product prices may have fallen because labour productivity rises. But, output may have risen by so greater a proportion so that surplus profit rises causing rents and land prices to rise.

For example, the price of production may fall from £60 per kilo to £40 per kilo, as productivity rises. But, if an hectare now produces 2 kilos rather than 1, the value of output from an hectare has risen from £60 to £80.

This can arise in two ways.

“Either bad soil is excluded from competition, but the price of the better soil increases with the increase in differential rent, i.e., the general improvement affects the various soil types differently. Or, the same price of production (and the same value, if absolute rent is paid) expresses itself on the worst soil through a larger mass of products, when labour productivity has become greater.” (p 780)

A rise in productivity on the better soil may make production on the worst soil impossible. But, if the rise in productivity on this soil is large enough, the differential rent on it may rise, bringing with it a rise in the price of that land.

Marx opposes the idea that increasing investment of capital in the land must lead to soil degradation and diminishing returns. That view was held by previous economists because they lacked the knowledge of chemical science that developed later.

“If this be considered a special disadvantage of agriculture, precisely the opposite is true. It is possible to invest capital here successively with fruitful results, because the soil itself serves as an instrument of production, which is not the case with a factory, or holds only to a limited extent, since it serves only as a foundation, as a place and a space providing a basis of operations. It is true that, compared with scattered handicrafts, large-scale industry may concentrate much production in a small area. Nevertheless a definite amount of space is always required at any given level of productivity, and the construction of tall buildings also has its practical limitations. Beyond this any expansion of production also demands an extension of land area. The fixed capital invested in machinery, etc., does not improve through use, but on the contrary, wears out. New inventions may indeed permit some improvement in this respect, but with any given development in productive power, machines will always deteriorate. If productivity is rapidly developed, all of the old machinery must be replaced by the more advantageous; in other words, it is lost. The soil, however, if properly treated, improves all the time. The advantage of the soil, permitting successive investments of capital to bring gains without loss of previous investments, implies the possibility of differences in yield from these successive investments of capital.” (p 781)

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