Theories of Surplus Value, Part II, Chapter 12 - Part 36

The progression from IV to I continues on this basis. As demand continues to grow, as the population and economy expands, the price would rise until it reached the value of III's output. At that level, II still cannot enter, because its individual price of production is higher than the individual value of III's production. Only when the market price rises to a level whereby the production on II is able to produce some absolute rent would it begin to be used.

Table D

Class	Capital £	Absolute Rent £	Market- Value per ton £	Cost-price (Price of Production) £	Number of tons	Total Value £	Differential Rent £
I	100	0	1.833	1.833	60.00	110.000	0(-)
II	100	9.167	1.833	[1.692]	65.00	119.167	-(latent)
III	100	10.000	1.833	[1.467]	75.00	137.500	+17.500
IV	100	10.000	1.833	[1.189]	92.50	169.500	+49.583
Total	400	29.167			292.50	536.250	67.083

In Table D, I yields no rent. It is land that was already in cultivation. But, when land IV enters production, its greater productivity causes the market value to fall. The market value falls to where I can pay no rent, and only covers the individual price of production for its output.

“It will only continue to be thus exploited, if the owner is himself the farmer, and therefore in this individual case landed property does not confront capital, or if the farmer is a small capitalist prepared to accept less than 10 per cent or a worker who only wants to make his wage or a little more and hands over his surplus-labour, which is equal to £10 or £9 or less, to the landowner instead of the capitalist. Although in the two latter cases fermage is paid, yet economically speaking, no rent, and we are concerned with the latter. In the one case the farmer is a mere labourer, in the other something between labourer and capitalist.” (p 306)

The landlord, as much as the capitalist, can withhold their property from the market, where they believe the potential revenue from it is insufficient. In the case of land, the landowner may also hoard it, if they expect that they may obtain a capital gain on it, as a result of a future rise in its price.

“The best proof of this is the large amount of fertile land that is uncultivated in the most developed countries of Europe, such as England, the land which is taken out of agriculture and put to the building of railways or houses or is reserved for this purpose, or is transformed by the landlord into rifle-ranges or hunting-grounds as in the highlands of Scotland etc. The best proof of this is the vain struggle of the English workers to lay their hands on the waste land.” (p 306) 

In the case of land hoarding, in the expectation of capital gain, it is today more likely that the landowner, including construction companies sitting on huge land banks, withholds it from use for construction of houses etc., in the expectation that a continued property bubble will cause further future rises in the price of development land. Meanwhile, existing high land prices inflate the cost of new construction, which reduces additional housing supply, and thereby causes the property bubble to inflate further, creating a vicious circle.

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