Friday, 16 March 2018

Theories of Surplus Value, Part II, Chapter 14 - Part 12

In setting out his argument, Smith does not even start from his own theory of value, or from prices. His argument is set out on the Physiocratic basis of physical products and quantities. So, basically, he says, suppose a kilogram of wheat and a kilogram of meat have the same price. A hectare of land will produce say 1,000 kilograms of wheat with the employment of 100 hours of labour, whereas it will only produce say 500 kilograms of meat. So, the land used to cultivate wheat will produce a surplus of 500 kilograms, and this can be appropriated by the landlord as rent

“This sounds quite physiocratic and contains neither proof nor explanation of why the “price” of these particular commodities pays a rent, a surplus over and above the “sufficient price”.” (p 354) 

Smith also sets forth the basis of differential rent arising not just from favourable fertility, but also location. 

““The rent of land not only varies with its fertility, whatever be its produce, but with its situation, whatever be its fertility” ([ibid., p. 166] l.c., p. 133).” (p 354) 

Smith's theory here is the Physiocratic theory whereby both profit and rent are constituted of surplus product, after the products required for the reproduction of labour-power have been replaced in kind. 

“This is really the physiocratic view, which is based on the fact that in an agricultural country man lives almost exclusively on the agricultural product, and industry manufacture, itself appears as a rural side-line which uses the local product of nature.” (p 354-5) 

Where fertility is lower, or more labour is required, to get the product to market, a greater proportion of the product must go to reproduce labour, and so the proportion of the surplus product out of which both profit and rent is derived must be reduced. And, Smith applies the same argument in relation to the labour required to produce a given quantity of meat from pasture, compared to the same quantity of corn from arable land. Smith ignores the question here of the price or value of corn as opposed to meat, and simply bases his argument on the physical quantity. 

“Although corn costs more labour, the cornfield yields a larger surplus of food, after labour has been paid, than a meadow used for stock raising. And it is worth more, not because corn costs more labour, but because the surplus in corn contains more nourishment.” (p 355) 

Smith's assumption, ““If a pound of butcher’s meat, therefore, was never supposed to be worth more than a pound of bread”, of course, is not valid, because a pound of meat represents a greater quantity of labour-time. If we deduct the value of the labour-power required to produce a kilo of meat from the value of the meat, it is possible that the resultant surplus value is greater than the surplus value produced from growing a kilo of wheat, because although the value of labour-power employed in the latter activity may be lower than the former, the value of the wheat may be less than the value of the meat by an even greater extent. 

“Having replaced the natural price by the sufficient price, and declared rent to be the surplus over and above the sufficient price, Smith forgets altogether, that it is a question of price, and derives rent from the ratio between the amount of food yielded by agriculture and the amount of food consumed by the agricultural worker. 

In point of fact—apart from this physiocratic interpretation—he postulates that the price of the agricultural product which supplies the principal food pays rent in addition to profit. This is the starting-point for his further arguments. With the extension of cultivation, the natural pastures become insufficient for stock raising and cannot satisfy the demand for butcher’s meat. Cultivated land has to be employed for this purpose.” (p 355-6)

Only if the price of meat rises to a level where it not only covers the wages and profit of the farmers, plus the rent that a landlord would have obtained from renting land for growing corn would land be devoted to that purpose. 

Smith also correctly identifies the basis of differential rent here as the difference between the market value and the individual value of the output from different lands. 

“The cattle bred upon the most uncultivated moors, when brought to the same market, are, in proportion to their weight or goodness, sold at the same price as those which are reared upon the most improved land. The proprietors of those moors profit by it, and raise the rent of their land in proportion to the price of their cattle.”” (p 356) 

The rise in market value for meat here arises not in conditions where there is a transition to less fertile soil, but to more fertile soil. Initially, cattle are pastured on soil not suitable for arable production, but as the demand for meat rises, and these uncultivated areas no longer suffice for cattle raising, former arable land is turned over to pasture. Similarly, Marx described, in Capital III, how arable land in the Eastern US was turned over to cattle raising and other production, when more fertile soils, in the Mid-West, were opened up that undermined the profitability of the previous arable production. 

Smith continues, 

““In all great countries, the greater part of the cultivated lands are employed in producing either food for men or food for cattle. The rent and profit of these regulate the rent and profit of all other cultivated land. If any particular produce afforded less, the land would soon be turned into corn or pasture; and if any afforded more, some part of the lands in corn or pasture would soon be turned to that produce” ([O.U.P., Vol. I, pp. 172-73; Garnier,] l.c., p. 318).” (p 356) 

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