Wednesday, 7 February 2018

Theories of Surplus Value, Part II, Chapter 13 - Part 3

As population rises, Ricardo says, the demand for food and agricultural products rises. In fact, demand for these things could rise without a rise in population, if productivity rises and revenues increase. The increased demand for agricultural products means additional land is brought into cultivation. Ricardo's statement that the increased cultivation will result in higher rents from the more fertile land is correct, Marx says, but his claim that it means the introduction of less fertile land is not. As Marx demonstrated extensively, in Capital III, the process can just as easily proceed from less fertile to more fertile land, as vice versa. Either way, a differential rent arises on the more fertile land.

“Ricardo now passes on to [an] example. But, quite apart from other points to be noted later, this example presupposes the descending line. This, however, is mere presupposition. In order to smuggle it in, he says:

“On the first settling of a country, in which there is an abundance of rich and fertile land… not yet appropriated” (l.c., p. 55).

But the case would [be] the same, if, relatively to the colonists, there was “an abundance of poor and sterile land—not yet appropriated”. The non-payment of rents does not depend on the richness or fertility of the land, but on the fact that it is unlimited, unappropriated and of uniform quality, whatever might be that quality as regards the degree of its fertility.” (p 311)

The colonists will choose more fertile land over less fertile land, but this is not the only thing that constrains their choice. Besides fertility, they also have to consider location. The central areas of the United States, for example, may have had more fertile land than those on the East Coast, but there are a host of reasons why the colonists would first settle and cultivate the less fertile land than the more fertile.

For example, in first arriving, the extent of the continent is unknown, its geography not established, until the expeditions of Lewis and Clark, and so on. The colonists must live, and to live must produce, even before they can undertake any exploration of more potentially fertile areas. It is inevitable then that the first areas to be settled and cultivated would be those located on the East Coast, where the colonists first arrived. Moreover, they would want to maintain links to their home country, which meant being close to the ocean, and to the extent that they need to engage in trade, such proximity is again required. Rather than it being the case of the most fertile land being developed first, what Ricardo should have said is that it is the most fertile land in the most advantageous location that is developed first. It is then, in fact, quite possible that, as population and demand expands, other less advantageous locations are settled, but within which, more fertile lands exist. In fact, that is exactly what happens with the colonisation of America.

This idea is also continued within orthodox theories of marginal cost. In other words, it may be the case that, up to a certain level of output, marginal costs rise, but, at higher levels of output, marginal costs fall. This is usually depicted as a series of short-run U shaped marginal cost curves, that form a longer-run downward sloping marginal cost curve. Examples might be where, up to a point, increased output does not justify a certain size of factory. As production in the factory proceeds, and more machines are introduced, floor space is taken up for stock and work in progress, and so on, so the cramped conditions impact on productivity, so that marginal costs rise. But, when output rises beyond a certain level, it becomes possible to move to a bigger factory. In this large factory, there is space for more, and better machines, a more efficient use of space for storage and production, and workflow etc., so that marginal costs are lower than in the original factory.

“Ricardo, however, having rightly amended “… abundance of rich and fertile land…“ to read land of the “same properties […] unlimited in quantity […] uniform in quality”, comes to his example and from there jumps back into the first false assumption:

“The most fertile, and most favourably situated, land will be first cultivated” (l.c., p. 60).

He senses the weakness and spuriousness [in this] and therefore adds the new condition to the “most fertile land”: “and the most favourably situated”, which was missing at the outset. “The most fertile land within the most favourable situation” is how it should obviously read, and surely this absurdity cannot be carried so far [as to say] that the region of the country that happens to be the most favourably situated for the newcomers, since it enables them to keep in contact with the mother country and the old folks at home and the outside world, is “the most fertile region” in the whole of the land, which the colonists have not yet explored and are as yet unable to explore.” (p 312)

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