Theories of Surplus Value, Part II, Chapter 8 - Part 14

Suppose we take somewhere like the United States, in the 18th or 19th century. There are large tracts of unsettled land. It becomes possible for capitalist farms to be established on these lands, and given their fertility, the wheat produced on them results in surplus profits. But, there is no landlord to appropriate these surplus profits as rent. Consequently, farmers produce and obtain surplus profits, and that encourages these capitals to expand, and additional capitals to invest. The consequence is that the supply of grain rises, grain prices fall, and along with it the surplus profit disappears. Grain is then sold below its exchange value, but at its price of production.

Because grain is now sold below its exchange-value, a portion of the surplus value produced in grain production is transferred to other commodities. Grain is an input for capitals engaged in a range of other manufactures, as well as forming a large part of the means of consumption for workers. So, the change in the output price of grain is simultaneously a change in the input costs of many other capitals. It reduces the value of both their constant and variable capital, thereby increasing both their mass and rate of profit.

“... the surplus-value which the farmer produces on top of average profit is not realised in the price of his product, but that he may have to share it with his brother capitalists in the same way as this is done with the surplus-value of all commodities which would give an excess profit, i.e., raise the rate of profit above the general rate, if their surplus-value were realised in their price. In this case the general rate of profit would rise, because wheat, etc., like other manufactured commodities, would be sold below its value. This selling below its value would not constitute an exception, but rather would prevent wheat from forming an exception to other commodities in the same category.” (p 38)

The requirement here is that there is sufficient land for the investment of this additional capital, so that supply of grain rises, and grain prices and profits fall, and that the land itself is not under monopoly ownership.

If all land were of the same quality, so that no surplus profit were possible on any particular land, then no rent could arise. But, similarly, the absence of rent could not influence the general rate of profit. Where surplus profits exist these should act to raise the general rate of profit, as described above. But, where rent arises it absorbs the surplus profits and so prevents it from raising the general rate of profit. However, here, the reason there is no rent is that there is no surplus profit that could anyway have caused a rise in the general rate of profit.

“Since the commodities belong to this category just because their inherent surplus-value equals the average profit [they] cannot alter the level of this profit, on the contrary they conform with it and do not influence it at all, although it influences them.” (p 39)

By contrast, if the quality of the land is so poor that the capital employed on it could only produce lower than average profits, then even without rent, capital would leave the land to be employed in manufacturing or other areas. The price of agricultural products would then rise, as their supply fell, until they reached a level where average profit becomes possible.

Simultaneously, these agricultural products are inputs for manufacture and consumption. The higher prices raise the cost of production for manufacture, and reduce the mass of profit. This is combined with the additional capital employed in manufacturing that has left agriculture, causing manufactured goods prices to fall, as their supply rises. The consequence is falling manufactured goods prices and profits, and rising agricultural goods prices and profits. A portion of the surplus value produced in manufacture is thereby transferred to agriculture, and the general rate of profit falls.

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