Saturday, 17 March 2018

Theories of Surplus Value, Part II, Chapter 14 - Part 13

Some crops may be more valuable, but the cost of producing them is greater both in terms of the capital required in preparing the land for their cultivation, and the actual cost of their production. Smith refers to vineyards, and fruit and vegetable gardens. 

““The rent and profit of those productions, therefore, which require either a greater original expense of improvement in order to fit the land for them, or a greater annual expense of cultivation, though often much superior to those of corn and pasture, yet when they do no more than compensate such extraordinary expense, are in reality regulated by the rent and profit of those common crops” ([O.U.P., Vol. I, p. 176; Garnier,] pp. 323-24).” (p 556-7) 

In examining the situation in the colonies, Smith returns to the Physiocratic basis of his argument that it is the physical surplus of the crop that produces the rent, and that it is only in respect of the staple food that increased supply creates its own demand. 

“[He asserts that] if corn were replaced by some other crop, which with the same amount of labour yielded a much greater quantity of food on the most common land, then 

“the rent of the landlord, or the surplus quantity of food which would remain to him, after paying the labour, and replacing the stock of the farmer, together with its ordinary profits, would necessarily be much greater. Whatever was the rate at which labour was commonly maintained in that country, this greater surplus could always maintain a greater quantity of it, and, consequently, enable the landlord to purchase or command a greater quantity of it” ([O.U.P., Vol. I, p. 181; Garnier,] l.c., p. 332).” (p 357) 

The exception to this is rice, Smith says, because rice fields cannot be turned over to other agricultural production and vice versa. 

Smith also examines what occurs in the case of a change in the staple foodstuff, in particular, he looks at what happens where potatoes become the main element of the diet of workers, rather than corn. 

““…the same quantity of cultivated land would maintain a much greater number of people; and the labourers being generally fed with potatoes, a greater surplus would remain after replacing all the stock, and maintaining all the labour employed in cultivation. A greater share of this surplus, too, would belong to the landlord. Population would increase, and rents would rise much beyond what they are at present” ([O.U.P., Vol. I, p. 182; Garnier,] l.c., p. 335).” (p 357-8) 

Marx then sums up this section of Smith's theory. Smith had begun by arguing that the value of commodities is determined by the labour-time required for their production. He then argues that this value resolves into the revenues of wages, profit and rent. He then turns this on its head, so that he determines the value of commodities as a summation of their cost of production, adding together the “natural prices” of wages, profit and rent. But, in explaining why some commodities always pay rent, and some do not, he drops this argument, and claims that only wages and profit enters into the natural price of commodities, whilst rent enters in a different way. 

Rent always enters into the natural price of those commodities that comprise the basic foodstuff of workers, because any increase in their supply, which causes the price to fall, brings about an increase in population, and so rise in demand and price. These commodities, therefore, regulate the rent of all other agricultural commodities, and use of the land. In other words, a differential rent may arise in relation to these other commodities, where they produce a higher surplus profit. 

“But there is here a secret recollection of the image of the natural price which includes rent as well as profit and wages and which is paid when supply corresponds with demand.” (p 358) 

At the start of Chapter XI, Smith had overturned what he had said in earlier chapters about rent being a component of the natural price of commodities. Having now argued that it doesn't, he can only justify the existence of rent on the basis of the existence of surplus demand, resulting in a price above the natural price. But, as Marx says, there is no explanation of why that condition arises. As Smith himself had said, 

““When the quantity brought to market is just sufficient to supply the effectual demand, and no more, the market price naturally comes to be … exactly … the same with the natural price” ([O.U.P., Vol. I, p. 63; Garnier,] l.c., p. 114).” (p 358) 

But, nowhere now does Smith, in this section, explain how this can be reconciled with the excess demand. It can't, so Smith avoids trying to do so. 

“The contradiction was too conspicuous.” (p 358) 

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