But, within a sphere, it means that one or more capitals enjoy greater productivity than the average and thereby obtain surplus profits, even though there may be no surplus profit in the sphere overall, i.e. the surplus profits of some capitals in the sphere are matched by the below average profits of other capitals in that sphere.
“In the above example, I yields a rent, only because in agriculture the proportion of variable capital to constant capital is greater than in industry, i.e., more new labour has to be added to the materialised labour—and because of the existence of landed property this excess of value over average price is not levelled out by competition between capitals.” (p 100)
Rodbertus' claim that every agricultural capital that produces average profit also produces a differential rent is then wrong, Marx says, and flows from the false basis of his theory about agriculture making higher profits than industry because of not bearing the cost of raw materials. Not only is this claim about raw materials wrong, as Marx has shown, but, even were it correct, it would not matter if instead agriculture had to bear a proportionally greater cost of machinery than industry, on the same basis. But, the real basis of the surplus profit, in agriculture, compared to industry, is that the organic composition of capital is lower, in aggregate, in agriculture than it is in industry.
In industry, such a situation between spheres, whereby The Law of the Tendency for the Rate of Profit to Fall means that the rate of profit is lower in those spheres where the organic composition of capital becomes progressively higher, is resolved by competition. Capital moves to the areas where the organic composition is lower and rate of profit higher. The increased supply of commodities, in these spheres, pushes their market prices, and so profits, down to the average level.
But, in agriculture, that is prevented from happening, because of the limited supply of land, and its ownership by landlords. Capital seeking to enter agriculture must rent land from existing landlords before they can start production. Just to obtain the average profit, after paying an absolute ground rent to the landlord, the prices of agricultural products must first be high enough for the capitalist to be able to pay this rent. On any land that the capitalist is able to make more than the average profit, after paying the absolute ground-rent, the landlord will charge an additional differential rent, which swallows up the surplus profit.
The consequence is that capital can never simply move into agricultural production, as it does in other spheres, so that the supply of agricultural products rises, pushing down their market price to the price of production, because these surplus profits are never there for capital to obtain. If they were, the demand for such land from capital, would cause landlords to charge higher rents on that land. The surplus profit is then swallowed up as rent by landlord's, and so never participates in the formation of the general rate of profit.
If they did, the general rate of profit would be higher. Capital would flood into agriculture in search of this higher rate of profit, due to the value of agricultural commodities exceeding the price of production. The supply of agricultural products would rise, and prices would fall. The consequence would be lower food prices, reducing the value of labour-power, thereby raising industrial surplus value, and the rate of profit, as well as lower raw material prices, reducing the value of constant capital, and so raising the rate of profit.
“The magnitude of this general difference determines the amount and the existence of rent on No. I, the absolute, non-differential rent and hence the smallest rent. The price of wheat from I’, the newly cultivated land which does not yield a rent, is, however, not determined by the value of its own product, but by the value of I, and consequently by the average market-price of the wheat supplied by I, II, III and IV.” (p 100-101)
In other words, as stated earlier, the lower organic composition of capital, in agriculture, in aggregate, compared to industry, in aggregate, is the basis of absolute ground rent. It means that even on the worst land, the value of its production is higher than its individual price of production, and so there is surplus profit, which is taken as absolute rent. If the organic composition of capital, in agriculture, were to rise, then the amount of the surplus profit would fall. If it were to rise so that the organic composition in agriculture was the same as in industry, this surplus profit would disappear altogether, so that absolute ground rent becomes impossible.
However, a number of qualifications have to be made here. Firstly, absolute ground-rent becomes impossible economically, but that does not mean that rent itself disappears. The landlord will still seek to obtain rent. They will do so by renting it to smaller farmers, sharecroppers, peasant producers and so on who produce obtaining less than average profit, and often where the rent itself eats into wages.
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