Although more and more masses of fixed capital was employed on the land, which replaced labour, and both responded to a falling agricultural population, and at times promoted it, the value of that fixed capital continually fell. Moreover, as Marx describes in Capital III, Chapter 6, inextricably linked to the law of the tendency for the rate of profit to fall is the fact that not only the proportion of labour in the value of the commodity falls, but also of the fixed capital. Rises in productivity not only make machines more productive, so that their value is spread, as wear and tear, over a much larger volume of output, but the value of the machines themselves falls. That is significant in agriculture, as in mining and other extractive industries, because that fixed capital constitute a large part of the constant capital. As Marx describes, in extractive industries like mining, there really are no raw materials involved in the production process, as there are in manufacturing industry.
As Marx sets out, Rodbertus was wrong to think that agriculture did not have any costs for raw materials. It does, the seed that the farmer employs is raw material, and so on. However, where agriculture differs from manufacturing is that manufacturing can generally only increase the volume of output by increasing the volume of raw material consumed in the production process. As Marx sets out, it is this which is the basis of the tendency for the rate of profit to fall. In each commodity unit, as the volume of production rises, proportionally, the value of wear and tear of fixed capital falls, and so does the value of variable capital and surplus value. But, the value of materials rises.
The value of raw material itself may fall more than the value of fixed capital, or variable capital, but is more than offset by the rise in the volume of raw material processed. In other words, it is the fact that in each commodity unit, the physical amount of fixed capital (use value as wear and tear), and of labour (paid and unpaid) declines, whilst the physical amount of raw material remains the same, which causes this change in the value proportions of each, and results in the lower profit margin.
But, in agriculture, as with other extractive industries, the situation is different. In a mine more fixed capital results in the production say of coal. The fixed capital in the shape of the machine may replace a number of workers, but it does not result in more raw material being consumed. Given that new machines are only introduced where their own value is lower than the value of the paid labour they replace, i.e. wages, this could result in a rise rather than a fall in the profit margin for the same reason. In other words, although absolutely less living labour may be represented in each tonne of coal produced, relatively more labour could be represented in it if the value of fixed capital falls so there's less of it represented in the coal compared to labour.
With agriculture, it may be the case that in order to expand production more raw materials are required. For example, a new piece of land may need to be cultivated. In that case, the same conditions apply as with the tendency for the rate of profit to fall in manufacturing. But, it often is not the case. Often, the increase in agricultural output stems not from the consumption of a greater mass of raw material, as circulating constant capital, but from obtaining a greater yield from the same amount of raw material. So, for example, fixed capital investment may ensure that more of the seed that is planted, actually germinates and becomes a plant, it may ensure more plants survive, and that each plant is bigger and more fruitful than those in the past. In Capital I, Marx described the use of various crop rotation systems that add to that effect, even without any fixed capital investment. He also describes the increase in yield from animal husbandry as new breeds of sheep were developed which reached maturity faster, and which had a larger proportion of meat to body weight, others produced more wool and so on.
All of this much larger output is achieved with only an increase in fixed capital. As a consequence, the proportion of raw material value within the commodity unit declines relative to the proportion of labour, so that the profit margin may rise. A similar thing applies with the capital advanced rather than laid out. Better techniques and so on enable more crops to be harvested more than once during the year. In Brazil, where corn was harvested once during the year, it is now harvested three times. Suppose a farmer sows 1000 kilos of seed, which produces 10,000 kilos of corn once a year. At the end of the year, they take 1000 kilos of corn to replace the seed in kind. This raw material represents 10 per cent of the output. Now, if the farmer is able to harvest the corn three times during the year the following occurs. First, they advanced 1000 kilos of corn as constant capital, as before. After four months 10,000 kilos of corn are produced. The farmer reproduces the 1000 kilos of seed they advanced out of this 10,000 kilos, and so advances the same capital again. After another four months, they do the same, and again at the end of the year. So, now the same 1000 kilos of seed is advanced three times during the year, and where previously 1000 kilos of seed advanced as capital produced 10,000 kilos of corn, it now produces 30,000 kilos, with a consequent effect on the annual rate of profit, and so consequently on the average rate of profit. It would mean a significant rise in the surplus profits in agriculture – even though the profit margin on the laid out capital would be unchanged – providing the basis of higher rents. In the 1950s, Colin Clarke showed that Anderson's thesis that agricultural production could increase way beyond the requirements of population was even more valid.
“With a correct conception of rent, the first point to arise was of course that it does not originate from the land but from the product of agriculture, that is, from labour, from the price of the product of labour, for instance of wheat; in other words, from the value of the agricultural product, from the labour applied to the land, not from the land, and Anderson quite correctly emphasises this.
“It is not […] the rent of the land that determines the price of its produce, but it is the price of that produce which determines the rent of the land, although the price of that produce is often highest in those countries where the rent of land is lowest.”
Rent has thus nothing to do with the absolute productivity of agriculture.” (p 145)
Marx cites Anderson's theory as set out in “An Enquiry into the Nature of the Corn Laws, Edinburgh, 1777”, as quoted in McCulloch's “The Literature of Political Economy", London, 1845. Anderson describes six classes of soil, A – F, with A being the most fertile. As each sell their output at the same market price per unit, and each employed the same capital, A makes larger profits than B, which makes larger profits than C, and so on.
““and as this” “continues to decrease as the sterility increases, it must at length happen that the expense of cultivating some of the inferior classes will equal the value of the whole produce.” [James Anderson, An Enquiry into the Nature of the Corn Laws, Edinburgh, 1777, pp. 45-48, quoted from J. R. McCulloch, The Literature of Political Economy, London, 1845, p. 69)” (p 146)
On the least fertile land, the individual price of production, i.e. its cost of production plus average profit, is only equal to the value of its output, and so it enjoys no surplus profit, and can pay no rent.
“Anderson does not say the last cultivated land cannot bear a rent. He only says that if it “happens” that the expenses (the costs of production plus the average profit) are so great that the difference between the market-price of the product and its average price disappears, then rent also disappears and that this must be the case if one descends ever further down the scale. Anderson says expressly that a definite market-price equal for equal quantities of produce that have been produced under more favourable or less favourable conditions of production, is the prerequisite for this formation of rent. He says that a surplus profit or excess of profit from the better types of soil over that from the worse, necessarily follows “if an equal quantity of corn, the produce of each field, can be sold at the same price”, i.e., if a general market-price is presupposed.” (p 146 – 7)
Anderson does not assume that this different fertility of the soil is just a consequence of its natural fertility. That is why he can disagree with Malthus, and argue that this fertility can be continually raised. The fertility is continuously raised as a consequence of additional employment of capital to the land. Moreover, by the same process, existing differences of natural fertility can be removed, as this second element of fertility becomes an increasingly dominant factor.
“On the one hand, the progress in the productivity of labour in general makes it easier to bring land into cultivation; on the other hand, cultivation increases the diversity of soils, in that the original fertility of land A which is cultivated and land B which is not, may have been the same if we deduct from A’s fertility that part which, though it is now inherent in it, had previously been added artificially. Thus cultivation itself increases the diversity of natural fertility between cultivated and waste lands.” (p 147)
As a capitalist farmer, Anderson necessarily saw an inequity that arises from this fact. The last fertile land pays no rent, but, as a result of an application of capital, over time, this least fertile land may become as fertile as another class of land, and begin to pay rent. But, this rent that the capitalist must now pay, is a direct consequence of the improvements in fertility which they have brought about by their own investment of capital.
““Yet it cannot be expected that, if the superior produce has been immediately occasioned by his own outlay of capital and exertions of industry, he can pay nearly the same proportion of it as real: but after the land has been for some time in a permanent state of fertility to that degree, though it even originally derived that fertility from his own industry, he will be content to pay such a proportion of rent as is here stated…” (l.c., pp. 109-10).” (p 147)
If the most fertile land produces 2000 kilos per hectare, with a value of £500, or £0.25 per kilo, if the price of production is £300, equivalent to 1200 kilos, it produces a surplus profit of £200, equal to 800 kilos, which it pays in rent. If the rate of profit is 10 per cent, the cost of production is £272.73, and the profit is £27.27.
If the farmer comes to bring a piece of waste land into use which has the same natural fertility, in order to bring it up to the standard of the original land, additional capital will have to be spent on it so that it too has the additionally created fertility deriving from prolonged cultivation. Suppose a total of £181.81 of additional capital was required for that purpose. The 10 per cent profit on this makes it up to £200. In that case, the individual price of production of output on this land is now £500, and it sells 2000 kilos of output for £500. It makes no surplus profit, and so pays no rent. However, after 10 years, the repeated investment of the capital has become bound to the soil, so then no additional investment is required. At this point, this land too would be producing surplus profits, and would pay rent even though this change in its condition was due to the capital investment, made by the farmer, rather than any action by the landlord.
“Thus Anderson comprehends both phenomena:
1. That the differential rent of the landlords is partly the result of the fertility which the farmer has given the land artificially.
2. That after a certain lapse of time, this artificial fertility appears as the original productivity of the soil itself, in that the soil itself has been transformed and the process by which this transformation has been accomplished, has disappeared and is no longer visible.” (p 148)
This is a difference in agriculture with industry, Marx says. If I build a cotton mill today, it will cost less (in real terms) than the same mill did 10 years ago, or alternatively for the same advance of capital, a better, more productive mill can be built. That is because, during that 10 years, technology will have improved so that the new mill will benefit from more efficient machines, more efficient energy production and transmission systems, better methods of factory construction, and so on. It will also benefit from rising social productivity, so that all the commodities that comprise the factory will have become cheaper. All those benefits come to me free of charge, simply as a result of building the factory now rather than 10 years earlier. But, Marx says, in agriculture it is different. The same thing applies to the value of the commodities that comprise the capital that is consumed. For example, better, cheaper fertilizers will be available; better, cheaper farm machinery will be available, and so on, but all of these act only to reduce the extent of the additional cost of capital that must be applied, simply to bring the newly cultivated land to the same level as land of equal natural fertility that has been cultivated for decades previously.
All of the previously cultivated land has the cost of that capital absorbed into it, to raise its actual level of fertility.
“The difference between the original fertilities of the soils is magnified by that part of the so-called natural fertility of the soil which, in fact, has been once produced by men, but has now become incorporated in the soil and is no longer to be distinguished from its original fertility. Owing to the development of the productive power of labour in general, it costs less to raise uncultivated soil of the same original fertility to the improved level of fertility, than it cost to bring the original fertility of the cultivated soil to the apparently original fertility it now has, but some expenditure is still required to bring that equalisation about. The average price of the new product is consequently higher than that of the old, the difference between market-price and average price is thus smaller and may disappear completely.” (p 149)
It would require that the newly cultivated land were more productive than the previously cultivated land, by a sufficient degree to offset the additional capital invested in it. For example, if in the previously given case the waste land brought into cultivation produced not 2000 kilos per hectare – £500 – but 2800 kilos per hectare, with a value of £700, that would mean it produced a surplus profit of £200, over its individual price of production, which could comprise rent. Had it not required the additional £200 of capital expenditure, it would have produced a surplus profit and rent of £400.
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