If agriculture is undertaken on a more intensive basis, so that the £200 of capital is invested in the one hectare of land, then a rental of £10 per hectare becomes a rate of rent of only 5%. However, if the marginal productivity of capital is rising, this second £100 of capital applied to the land would bring a proportionately greater rise in output, and consequently create additional surplus profit. This would create Differential Rent II, so that, for example, if the rate of rent on this land remained at 10%, £20 of rent would be produced, giving a rental of £20 per hectare.
“In the cotton industry, the price of the raw material fell continuously with the development of the industry itself; the same applies to iron, etc., coal, etc. The growth of rent here was possible, not because its rate rose, but only because more capital was employed.” (p 43)
Ricardo believed that things such as air, light, steam, electricity, and water were free, but land is not because it is limited in supply. If land were freely available, it would be much more productive, because capitalists would use it to expand production. The fact that they have to pay rent to landlords restricts their development of it. But, Marx points out that if land were freely available, then capitalism itself would have been impossible. As the experience in North America showed, when workers only had to pay a minimum amount to buy land, they quickly saved their wages to do so, and thereby turned themselves back into peasant farmers. The consequence was that the resultant shortage of labour-power, pushed up wages.
That in turn encouraged capital to seek out labour-saving equipment, and to recruit additional labour-power from the freed Southern slaves, as well as mass emigration. In Britain too, even in the 18th century, capital found it difficult to recruit enough labour-power on low enough wages, to produce high profits, because workers still had ties to the land, which provided many of their necessities for them without resort to the market, and the need for money wages.
“The productivity of labour in Ricardo’s sense, i.e., in the capitalist sense, the “producing” of someone else’s unpaid labour would thus become impossible. And this would put an end to capitalist production altogether.” (p 44)
It is not that things like steam etc. are free, whereas land is not, but that the land falls under monopoly ownership. Neither the land nor any of these natural forces produce value, they simply enhance the productive power of labour by varying degrees.
“The difference between the productive power of steam and that of the soil is thus only that the one yields unpaid labour to the capitalist and the other to the landowner, who does not take it away from the worker, but from the capitalist. The capitalist is therefore so enthusiastic about this element “belonging to no one.” (p 44)
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