Monday, 5 March 2018

Theories of Surplus Value, Part II, Chapter 14 - Part 1

Adam Smith’s Theory of Rent

[1. Contradictions in Smith’s Formulation of the Problem of Rent]

Marx's analysis of Smith's views here cannot be separated from his discussion of the contradiction in Smith's theory of value. On the one hand, Smith correctly develops a labour theory of value, in which value is a product of labour, and this value then resolves into a series of revenueswages, profit, interest and rent – and, on the other, Smith, almost immediately, flips over his theory to instead determine the value of commodities on the basis of a summation of these separate revenues. In other words, the difference can be summed up as a theory whereby value creation proceeds prior to the resolution of this value into revenues, and one in which value itself is a product of the different revenues. 

Adam Smith based his theory of rent on the principal vegetable crop, because, he argued, the land used for this purpose was readily exchangeable for land used for any other agricultural production, be it foodstuff or industrial crops. Marx includes in this timber production, though, given the length of time required to grow and harvest a forest, its not clear that this applies. Similarly, 

“Adam Smith excludes rice from this, wherever it is the principal vegetable food, since rice fields (or bogs) are not convertible into grass land, wheat lands, etc. and vice versa.” (p 342) 

Smith correctly defines rent as ““the price paid for the use of land” ([O.U.P., Vol. I, p. 162; Garnier,] t, I, p. 299)” (p 342). By land here is also meant all powers of nature associated with the land, for example, water, water-power, wind-power, geothermal power, minerals. 

As seen previously, Rodbertus, still taking the viewpoint of peasant production, failed to include the value of raw material reproduced in kind, as part of the value of constant capital in agriculture. It was on this basis that he derived a higher annual rate of profit in agriculture, and the basis of his theory of rent. Smith, from the start, takes the standpoint of capitalist agriculture, and sets out all of the capital used in agricultural production. 

““Whatever part of the produce or… of its price, is over and above this share” (which pays for the capital advanced “together with the ordinary profits”), “he” (the landlord) “naturally endeavours to reserve to himself as the rent of his land” ([O.U.P., Vol. I, p. 163; Garnier,] l.c., p. 300).” (p 342) 

In the previous analysis of rent, in Capital III, Marx noted that what is often identified as rent is actually interest on capital. For example, where capital is advanced to erect barns and other buildings on land, the farmer who then uses this fixed capital pays for the use of this capital (its use value as capital to produce the average rate of profit), and the payment for the use value of capital is interest. Yet, in practice, the farmer pays simply a rent, which includes the payment for the use of these elements of fixed capital. 

“Smith refuses to confuse rent with the interest on capital invested in the land. 

“The landlord demands a rent even for unimproved land” ([O.U.P., Vol. I, p. 163; Garnier,] l.c., pp. 300-01). 

and, he adds, even this second form of rent [i.e., the rent on the improved land] is peculiar in that the interest from the capital used on improvement is interest on a capital which has not been laid out by the landlord, but by the farmer.” (p 342-3)

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