““You might want to assert, that, just as originally the law of equal capital gains would have had to depress raw product prices so far that ground-rent would have to disappear only to be re-created as a result of a rise in prices due to the difference between the yield of more fertile and less fertile land— so, to-day the advantages of drawing rent besides the usual capital gain, would induce the capitalist to spend capital on new cultivation and improvements until, due to the flooding of markets brought forth by this, prices would fall sufficiently in order to make rents on the least favourable capital investments disappear again. In other words, this would be to assert that, so far as the raw product is concerned, the law of the equalisation of capital gains invalidates the other law, that the value of the products is governed by labour costs, while it is just Ricardo, who, in the first chapter of his work, uses the former to prove the latter” (Rodbertus, l.c., p. 174).” (p 154)
This also reflects his transposition of feudal conditions, in which the landlord is also the farmer on to capitalist conditions.
The equalisation of rates of profit does not invalidate the labour theory of value, by which values are determined by labour time, but it does invalidate Ricardo's theory that 'natural prices' or average prices are equal to these values, and that market prices revolve around them. In every sphere, the 'natural price' is equal, not to the exchange-value, but the price of production of the commodity, the cost price plus the average profit. The exchange-value may be higher or lower than this price of production. Consequently, if the exchange-value is higher than the price of production, a rent can be extracted equal to this difference.
“The types of land which possibly pay no rent to-day, pay none, because the market-price of raw products is for them equal to their own average price, and because the competition of more fertile types of land deprives them of the privilege of selling their product at its ‘value”.” (p 155)
Rodbertus attributes to Ricardo the ridiculous idea that cultivation of land only begins when capital exists, and is allocated according to the law of average profits. Of course, cultivation of the land goes back millennia, and each new mode of production takes on board the existing forms of land ownership and production. Capitalist farming inserts itself into the existing feudal agriculture, and forms of land ownership. On the one hand, some of the peasant farmers are able to accumulate capital as a process of differentiation takes place, which is described in great detail, in Lenin's "The Development of Capitalism in Russia". On the other hand, capitalists themselves become farmers. In both cases, it amounts to capitalist farmers arising as a separate class to the landlords on one side, and peasant producers on the other.
“Only when a capitalist has squeezed himself as farmer between the husbandman and the landed proprietor—be it that the old tenant has swindled his way into becoming a capitalist farmer, or that an industrialist has invested his capital in agriculture rather than in manufacture—only then begins, by no means “the cultivation of the land”, but ‘capitalist” land cultivation which is very different, both in form and content from the previous forms of cultivation.” (p 155)
Marx says that Rodbertus cannot understand the situation because he views it through its own lens as the landowner, and not from the perspective of the transition from feudal landownership to capitalist landed property that was the basis of Ricardo's theory. So, he cannot envisage the process of enclosure of common land that took place. In the case of the U.S., Rodbertus refers to the land being sold by the state,
““in lots, first to the cultivators at a low price, it is true, but one which must at all events already represent a rent” (l.c., pp. 179-80).” (p 156)
But, as Marx points out, this price was in no sense capitalised rent, as Rodbertus suspects. The price that the U.S. State imposed was effectively just a tax.
““With regard to the cause of the rise under point b” (the increase in population or the increase in the quantity of labour employed) “I maintain, however, that rent has precedence over capital gain. The latter can never rise because, as a result of the increased value of the national product—if productivity remains the same but productive power increases (increased population)—more capital gain accrues to the nation, for this greater capital gain always accrues to a capital which is greater in the same proportion, the rate of profit therefore remains the same” (l.c., pp. 184-85).” (p 156)
This is wrong, Marx argues, because the mass and value of capital advanced does not increase in proportion to the additional surplus value. If say the population rises, and more workers are employed, they may be employed in shifts. If say 100 workers work an 8 hour shift, 300 workers may be employed over three 8 hour shifts. But, no more factory space is required, and no additional machines. As Marx describes in Capital I, the machines and tools may wear out more quickly, as a consequence of the more intensive use, but they will not wear out three times as quickly. The only increase in the mass of capital would be in the additional material processed.
If it is a matter of an increase in surplus labour arising from relative or absolute surplus value, then no additional variable capital is advanced.
“Thus, given the same productivity, profit grows here, because not only the surplus-value grows, but also the rate of surplus-value. In agriculture this is impracticable because of the natural conditions. On the other hand, productivity is easily altered with the increased outlay of capital. Although an absolutely large amount of capital is laid out, it is relatively not so big, due to economies in the conditions of production, quite apart from the division of labour and machinery. Thus the rate of profit could grow even if the surplus-value (not only its rate) remained the same.” (p 156)
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