Friday, 9 February 2018

Theories of Surplus Value, Part II, Chapter 13 - Part 5

[2. The Ricardian Assertion that Rent Cannot Possibly Influence the Price of Corn. Absolute Rent Causes the Prices of Agricultural Products to Rise]

Ricardo provides an example where three types of land – I, II & III – receive an equal capital investment. He assumes this takes place in a new country, where there is an abundance of land available for cultivation by whatever capital and labour requires it. As Marx points out, there is nothing in Ricardo's example that stipulates that this cultivation is capitalist agriculture, yet Ricardo describes the surplus product as profit of stock”. This surplus product, or “net produce” is, for each type of land, 100, 90 and 80 quarters of corn respectively. Only land type I needs to be cultivated to meet demand, and it is cultivated first to that end. The cultivators of this land appropriate it for that purpose, and all of the surplus product is appropriated by them. If the population expands, it becomes necessary to bring land type II into cultivation. The cultivators appropriate it for that purpose. In other words, Ricardo assumes no prior land ownership, so that cultivators are free to appropriate land for cultivation. The limit is only that there is a limited supply of any given type of land, not of land in general. 

When land type II is brought into cultivation, the capital employed produced ten quarters of corn less than the same amount of capital employed on land type I. This gives rise to a differential rent of ten quarters for land type I. As the cultivators themselves appropriated this land, they do not actually pay a rent of ten quarters, other than theoretically to themselves as the owner of the land. However, were they to lease the land to someone else, they could levy a rent of ten quarters, or alternatively, were they to sell the land, its price would be the capitalised value of this rent. 

Ricardo says: 

““For either there must be two rates of profit on agricultural capital, or ten quarters, or the value of ten quarters, must be withdrawn from the produce of No. 1, for some other purpose. Whether the proprietor of the land, or any other person, cultivated No. 1, these ten quarters would equally constitute rent; for the cultivator of No. 2 would get the same result with his capital, whether he cultivated No. 1, paying ten quarters for rent, or continued to cultivate No. 2, paying no rent” (l.c., p. 58).” (p 314)

In fact, as Marx points out, in reality, there are, of course, not just two but many different rates of profit in agriculture, and it is that fact that enables a differential rent to arise. Indeed, there are many different rates of profit in industry too. Within each industry, there are many rates of profit, because each capital within it produces at different degrees of efficiency, the output of each capital has a different individual value, but they all sell their output at the same market value. Between industries, there are many different rates of profit, because each industry has a different organic composition of capital, and different rate of turnover of capital

It is because there are these different rates of profit that capital thereby moves from one sphere to another in search of the higher rate of profit, and thereby establishes prices of production rather than exchange values as the basis of market prices

“...Ricardo himself says that not only two but many very different rates of profit on capital of the same description within the same sphere of production, hence also on agricultural capital, are not only possible but inevitable.” (p 314)

Ricardo argues that:

““the value of corn is regulated by the quantity of labour bestowed on its production on that quality of land … which pays no rent” (l.c., p. 63). 

But Marx has already shown why this is false. Firstly, all cultivated land will pay an absolute rent except in special conditions, for example, in the colonies where there is an abundance of cultivable land, and an absence of land ownership. Secondly, the market value of corn will also depend on the state of the market. Ricardo assumes that supply is always only just adequate to meet demand, but, where supply exceeds demand, the more fertile land may determine market value.

Similarly, the market value of corn may rise where previously it was sold below its value, or even price of production. Such a situation can exist where agriculture is predominantly pre-capitalist. Under such conditions, the producer is primarily concerned with producing to meet their own needs. Only the surplus is sold, and may then be sold at these lower prices. As such, pre-capitalist production subsides and capitalist production takes its place. The capitalist producers will only produce and sell their output at its market value. 

“Finally, it is correct to say that it makes no difference to the price of corn if the landlord forgoes the differential rent and the farmer pockets it. But this does not apply to absolute rent. It is wrong to say here that landed property does not enhance the price of the raw produce. On the contrary the price goes up because the intervention of landed property causes the raw produce to be sold at its value which exceeds its cost-price.” (p 316)

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