Thursday, 22 February 2018

Theories of Surplus Value, Part II, Chapter 13 - Part 17

[5. Ricardo’s Criticism of Adam Smith’s and Malthus’s Views on Rent]

Chapter XXIV of Ricardo's “Principles” is, Marx says,

“...of great importance for the difference between Ricardo and Adam Smith.” (p 330)

Ricardo quotes Adam Smith's correct understanding of when agricultural prices result in rent. However, Marx points out, Smith, unlike Ricardo, believed that land used for food production always produces rent.

Marx quotes a passage from Ricardo which is significant because it highlights a number of errors in his theory.

““I believe that as yet in every country, from the rudest to the most refined, there is land of such a quality that it cannot yield a produce more than sufficiently valuable to replace the stock employed upon it, together with the profits ordinary and usual in that country. In America we all know that is the case, and yet no one maintains that the principles which regulate rent, are different in that country and in Europe” (l.c., pp. 389-90).” (p 330) 

Marx points out that the principles are substantially different in the US, where no monopoly of landed property existed, and Europe where it did.

“Where no landed property exists—actual or legal—no absolute rent can exist. It is absolute rent, not differential rent, which is the adequate expression of landed property. To say that the same principles regulate rent, where landed property exists and where it does not exist, means that the economic form of landed property is independent of whether landed property exists or not.” (p 330-1) 

Ricardo's statement about the existence of land unable to produce output “more than sufficiently valuable to replace the stock employed upon it, together with the profits”, is also confused. The value of the output is a function of the labour expended. What changes is the quantity of use values that make up the output, and, consequently, the value of each unit of output. But, whether a rent is paid depends upon the existence of surplus profit, which requires that this value exceeds the price of production for this output. That in turn depends upon the price of production of all other commodities, which determines the average rate of profit.

If the value of cotton produced with £1,000 of capital is £1200, the actual rate of profit for this capital is 20%. Then, if the average value of commodities produced, in total, in industry, is, with £1,000 of capital, £1,100, the general rate of profit is 10%, so that the agricultural capital enjoys a 10% surplus profit, which produces rent. But, if the value of all other commodities is £1200, so that the general rate of profit is 20%, there is no surplus profit, in agriculture, and no basis for absolute rent.

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