“Now it does not by any means follow, as Ricardo supposes, that the rate of profit has fallen because wages have risen as a result of the relative increase in the price of agricultural products. For the average wage is not determined by the relative but by the absolute value of the products which enter into it.” (p 19)
If previously it required 4 hours of labour-time to produce the food required by a worker, and 4 hours to produce the other commodities they needed, then, if productivity in agriculture rises by 25%, this will mean that it now takes 3 hours to produce their food, and if productivity in industry rises by 50%, it will require only 2 hours to produce these other commodities. Previously, the ratio of agricultural productivity to industrial productivity was 1:1, and is now 2:3. Agricultural productivity has fallen relatively, but it has risen absolutely. Previously, 8 hours of labour-time were required to reproduce labour-power, whereas now only 5 hours are required.
If there is a 12 hour working-day, surplus value will have risen from 4 hours to 9 hours. What it does mean is that the rate of surplus value, in agriculture, does not rise by as much as in industry. The proof of that, Marx says, is the fact that agricultural products from Russia were more competitive than those from England, whilst British industrial goods were more competitive than all others.
“Incidentally, this does not prove that poor countries produce more cheaply, that their agricultural labour is more productive. Even in the United States, the volume of corn at a given price has increased, as has recently been proved by statistical information, not however because the yield per acre has risen, but because more acres have come under cultivation. It cannot be said that the land is more productive where there is a great land mass and where large areas, superficially cultivated, yield a greater absolute product with the same amount of labour than much smaller areas in the more advanced country.” (p 19-20)
But, Ricardo did not just believe that it was this relative productivity which fell in agriculture, but also absolute productivity. In other words, as the demand for food rose, less and less fertile soil would have to be brought into cultivation – falling marginal productivity – and this would push up food prices and wages, and reduce the mass of profit. However, Ricardo was again wrong on several counts.
“The fact that less productive land is brought under cultivation does not necessarily prove that agriculture has become less productive. On the contrary, it may prove that it has become more productive; that the inferior land is being cultivated, not [only] because the price of the agricultural product has sufficiently risen to compensate for the capital investment, but also the converse, that the means of production have developed to such an extent that the unproductive land has become “productive” and capable of yielding not only the normal profit but also rent. Land which is fertile at a [given] stage of development of productive power may be unfertile for a lower developmental stage.” (p 20)
Moreover, as Marx demonstrated in Capital III, Ricardo's assumption that it is progressively less fertile land that is brought under cultivation is false. It is quite conceivable, even with unchanged technology, for example, that a sizeable increase in demand for food makes possible investment of capital in more fertile, but more distant land, e.g. the opening up of the North American prairies.
In agriculture, the physical limitations also reduce the rate of surplus value. The times during which labour can be undertaken during the day, are limited by the amount of daylight, and during the year by weather conditions, so absolute surplus value is restricted. Moreover, because output is governed by the production time of crops, even if the rate of surplus value is high, the annual rate of surplus value is low, because these prolonged production times reduce the rate of turnover of capital.
“Hence in this respect even if, for the above-mentioned reasons, the mass of surplus-value is relatively smaller than it [would be] with the employment of the same number of people in industry—this latter condition is partly offset again by the wage falling below its average level—the rate of profit can be greater than in industry, But if there are, in agriculture, any causes (we only indicate the above) which raise the rate of profit (not temporarily but on an average as compared with industry) then the mere existence of the landlord would cause this extra profit to consolidate itself and accrue to the landlord rather than enter into the formation of the general rate of profit.” (p 20-21)
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