Monday, 5 February 2018

Theories of Surplus Value, Part II, Chapter 13 - Part 1

Ricardo’s Theory of Rent (Conclusion)

[1. Ricardo’s Assumption of the Non-Existence of Landed Property. Transition to New Land Is Contingent on Its Situation and Fertility]

Ricardo sneaks into his theory the assumption that there is no absolute rent, by first setting out a series of conditions of society where absolute rent would not be possible, and then subsequently proceeding to elaborate his theory as though these conditions actually existed. So, for example, he describes an historical scenario by which the land is colonised and subsequently cultivated. On the basis of this scenario, he assumes that the people colonising the land would first settle and cultivate the most fertile land; he assumes that there is an abundance of land relative to the labour and capital that wish to cultivate it; he assumes, on that basis, that there is no landed property, because any labour or capital that sought to cultivate the land would always be able to find land that was not owned.

If all these conditions did hold, then, as Marx has previously described, there would be no economic basis for the existence of absolute rent. As Ricardo goes on to say, and as Marx has also previously demonstrated, that does not mean that there could be no rent at all, but the only rent that could exist economically speaking, would be differential rent. In other words, suppose there is an abundance of land, so that anyone who wants to produce can find a piece of land on which to do so. A piece of land I might be in the possession of X, for example, but they could not charge an absolute rent for it, because if A wants to cultivate an area of land identical to I, they could settle some other piece of land that is currently not in anyone's possession. However, suppose A finds a piece of land to cultivate and starts production. They spend 2,500 hours in a year, producing wheat, and their output is 1,000 kilos. If they had applied this 2,500 hours of their labour to producing wheat on X's land, on the other hand, their output would have been 2,000 kilos, as a result of its greater fertility. Although A could have farmed another piece of land for free, therefore, so long as X charges a rent of less than 1,000 kilos of wheat, it will be worthwhile for A to rent X's land, and cultivate it, rather than take possession of a free piece of less fertile land. But, the rent that A then pays to X is not an absolute rent, it is a differential rent, whose economic basis is the greater fertility of this land, relative to the alternative land.

The rent which A appropriates here is a portion of the surplus value produced by A. In other words, it is a portion of the surplus labour undertaken by A. Something similar can be seen today in developing economies. If A is a peasant producer, they produce this 1,000 kilos of wheat. They may require say 200 of that as seed for the next year, a further 200 kilos, which they exchange with the blacksmith who provides them with tools, and repairs their equipment, leaving them with 600 kilos of wheat that meets their consumption needs of them and their family. Let's say this 600 kilos of wheat, which in capitalist terms is equal to their wages, has an exchange value of £1,000. If they take up a job in the new car factory, in the nearby city, however, they may work the same 2,500 hours, in a year, and be paid £2,000 doubling their standard of living. Yet, it may well be that, due to the much higher level of productivity in the car factory, their labour, in these 2,500 hours creates far more new value than it did employed on the land.

On their land, engaged in peasant agriculture, their 2,500 hours of labour produced 1,000 kilos of wheat with a value of £1,666, but their labour in the car factory may produce a new value of say £10,000. In fact, therefore, the peasant who becomes a worker, in this new highly productive factory, hands over £8,000 of surplus value to the capitalist. It is labour, for which the capitalist has not paid, just as the landlord was able to appropriate the unpaid labour of the peasant as rent. The peasant producer is willing to pay the differential rent, because the more fertile land enables their labour to be more productive, and so their output and standard of living can rise. The peasant is prepared to give up cultivation of their land, and become a wage worker, in a new factory, because it enables the worker's labour to be far more productive, so that their output and standard of living can rise even after having provided a large amount of unpaid labour to the capitalist.

That is why we see huge numbers of, particularly young workers, leaving their family farms, in developing countries, across Asia, Africa, and parts of South America, in order to seek employment in the large towns and cities. In terms of exploitation, in Marx's sense, they are far more exploited in the towns and cities, i.e. they hand over a far greater quantity of unpaid labour. But, the far greater productivity of their labour, in the towns and cities, at least in the newer factories, means that, even having handed over this unpaid labour, their standard of living is higher than had they remained a self-employed peasant producer, in the countryside.

“Here the assumption therefore is: no landed property. Although this description of the process is approximately correct for the settlings of modern peoples, it is, firstly, inapplicable to developed capitalist production; and [secondly] equally false if put forward as the historical course of events in the old Europe.” (p 308) 

In other words, the scenario that Ricardo depicts, and the process he outlines, is more or less correct as far as the colonisation of America, Canada, and Australia, and Africa. However, the production undertaken in those areas was not capitalist agriculture. Moreover, as soon as industrial capitalism does start to dominate those areas, the relative abundance of land quickly disappears. Landed property then does arise, and, in order for capital and labour to utilise it, the owner of that land will then demand an absolute rent.

Secondly, the assumption of the non-existence of landed property did not apply in Europe. Capitalism develops, in Europe, on the basis of pre-existing land ownership, arising under feudalism. From the start, capitalist agriculture, in Europe, confronts that land ownership, and can only take place on the basis of payment of rent, or the purchase of land, whose price is only capitalised rent. Ricardo's argument for the existence of differential rent itself assumes that, although there may be an abundance of land, in general, the amount of land, of a specific quality, is limited. If all land were of the same quality – whether that quality is good or bad, or something in between – there could be no differential rent. Farmers are only prepared to pay a differential rent if it is to be able to cultivate a land of higher fertility.

“The whole point therefore is: If land confronts capital in elemental abundance, then capital operates in agriculture in the same way as in every other branch of industry. There is then no landed property, no rent. At most, where one piece of land is more fertile than another, there can be excess profits as in industry. In this case these will consolidate themselves as differential rent, because of their natural basis in the different degrees of fertility of the soil.” (p 309-10)

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