Capital III, Chapter 47 - Part 21

This form of production ends for reasons set out in Volume I. Firstly, it requires a combination of agricultural production and domestic industry. As the towns develop, and capitalist production, even as just manufacturing, prior to machine industry grows, the basis of domestic industrial production is undermined. This form of agricultural production succumbs to a degradation of the soil, due to over cultivation, a lack of the previous natural relations that replenished it, and inadequate capital, by the small farmer, to provide chemical fertilisers etc. In addition, the small farmers rely on use of common land for grazing cattle, hunting game, gathering fuel and so on. Over a period, the common lands are appropriated by the landlords.

The process of differentiation of the peasantry enables some to turn themselves into capitalist farmers, whilst others are reduced to becoming day labourers. As land is sold as a commodity, capitalists themselves buy land, and establish larger scale capitalist farms that are more efficient and undermine the small farmers. In the colonies, large-scale plantations, using slave labour, fulfil a similar function.

Alongside the development of capitalist agriculture goes an agricultural revolution that transforms methods and hugely reduces agricultural prices, so that the small producers are squeezed. The same process lays the basis of the land enclosures, which lead to a further expropriation of the small peasants, unable to afford the required outlays. The small-scale fragmented nature of the means of production prevent any form of socialised labour, or other socialisation of the productive forces.

“Usury and a taxation system must impoverish it everywhere. The expenditure of capital in the price of the land withdraws this capital from cultivation. An infinite fragmentation of means of production, and isolation of the producers themselves. Monstrous waste of human energy. Progressive deterioration of conditions of production and increased prices of means of production — an inevitable law of proprietorship of parcels. Calamity of seasonal abundance for this mode of production.” (p 807)

Because the land here assumes the form of a commodity that is bought and sold, the frequency of these sales increases, and the producer, including the landlord where they invest capital in such production, is increasingly faced with a rising price of land, as a cost of production.

“The price of land is nothing but capitalised and therefore anticipated rent. If capitalist methods are employed by agriculture, so that the landlord receives only rent, and the farmer pays nothing for land except this annual rent, then it is evident that the capital invested by the landowner himself in purchasing the land constitutes indeed an interest-bearing investment of capital for him, but has absolutely nothing to do with capital invested in agriculture itself. It forms neither a part of the fixed, nor of the circulating, capital employed here; it merely secures for the buyer a claim to receive annual rent, but has absolutely nothing to do with the production of the rent itself.” (p 808)

In this way, it is no different than loanable money capital, or fictitious capital, in the form of a share or a bond. A share entitles the owner to interest as a share of future profits in the form of a dividend. If A sells the share to B, they sell this right to receive those dividends. But, the money that B pays to A for the share, forms no part of the company's capital, that enables the profit to be created, and out of which those dividends are paid.

In reality, when B uses an amount of their capital to buy land from A, they do so in order to obtain the right to receive future rent from that land. But, this rent is then nothing more than interest on the loanable money-capital they have laid out for the purchase of the land, no different than had they done so to buy a share or bond. An example of that today is the number of “buy-to-let” landlords that have sprung up, and people who see such action as an alternative means of providing themselves with a pension, rather than buying bonds or shares into a pension fund. Their loanable money-capital is only used to buy property, if the interest they obtain on it, in the form of rent, is at least as lucrative as the interest they would receive from buying bonds or shares. Where that interest is higher in any of these asset classes, adjusted for risk and other costs, loanable money-capital moves towards it, pushing up the price of land, shares or bonds respectively, and thereby reducing the yield on that asset.

“Whether he bought the land dear or cheap, or whether he received it for nothing, alters nothing in the capital invested by the farmer in his establishment, and changes nothing in the rent, but merely alters the question whether it appears to him as interest or not, or as higher or lower interest respectively.” (p 808)

Back To Part 20

Forward To Part 22