It is the capacity to feed people that determines the size of the population not the capacity to clothe and shelter them. Initially, low levels of productivity means that a large part of the social working day is required to produce food, but as the land is improved, and social productivity rises, the output of food rises relative to the labour required for its production. This means that the population can increase, and a larger proportion of this population can then be employed in non-agricultural labour.
“The other half can then satisfy the other wants and fancies of mankind. The principal objects of those wants and fancies are clothing, lodging, household furniture, and what is called luxury. The desire for food is limited. Those other desires are unlimited. Those who possess a surplus of food “are always willing to exchange the surplus”. “The poor, in order to obtain food”, exert themselves to satisfy those “fancies” of the rich, and, moreover, compete with one another in their endeavours. The number of workmen increases with the quantity of food, i.e., in proportion to the progress of agriculture. [The nature of] their “business admits of the utmost subdivisions of labour”; the quantity of materials which they work up therefore increases even more rapidly than their numbers. “Hence arises a demand for every sort of material which human invention can employ, either usefully or ornamentally, in building, dress, equipage, or household furniture; for the fossils and minerals contained in the bowels of the earth, the precious metals, and the precious stones.” (p 360)
In these comments, Marx says, Smith gives “the true physical basis of Physiocracy, namely, that the creation of surplus-value (including rent) always has its basis in the relative productivity of agriculture. The first real form of surplus-value is surplus of agricultural produce (food) , and the first real form of surplus labour arises when one person is able to produce the food for two. Otherwise this has nothing to do with the development of rent, this specific form of surplus-value, which presupposes capitalist production.” (p 360)
The basis of rent here for Smith then, for these products of the land, other than food, is that the demand for them rises above the supply at the sufficient price, i.e. a price that only includes wages and profit.
“What else does this mean, but that the supply at the sufficient price is so great that landed property cannot offer any resistance to the equalisation of capitals or labour? That therefore, even though landed property exists legally, it does not exist in practice, or cannot be effective as such in practice?” (p 361)
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