Monday, 2 April 2018

Theories of Surplus Value, Part II, Chapter 15 - Part 5

Ricardo says, 

““There cannot be two rates of profit in the same employment, and therefore when the value of produce is in different proportions to capital, it is the rent which will differ, and not the profit” (l.c., Chapter XII “Land-Tax,” pp. 212-13).” (p 377) 

As Marx points out, this can only relate to the average rate of profit, or else it contradicts what Ricardo stated earlier that not only can more than one rate of profit in agriculture exist, but it's inevitable that they will. In other words, within any particular sphere, the capitals within it will operate at different levels of efficiency so that, if each sells their output at the same market price, each will produce a different rate of profit. Moreover, because each sphere has a different organic composition of capital, this means that if capitals in each sphere sell their output at their exchange value, different rates of profit, in each sphere, must result. It is those variations that result in capital moving from one sphere to another, which then results in commodities selling at prices of production, rather than at their exchange-value. 

In Chapter XII, Ricardo, in dealing with Land Tax, demonstrates his superiority over Say. Ricardo writes, 

““M. Say supposes, ‘A landlord by his assiduity, economy and skill, to increase his annual revenue by 5,000 francs;’ but a landlord has no means of employing his assiduity, economy and skill on his land, unless he farms it himself; and then it is in quality of capitalist and farmer that he makes the improvement, and not in quality of landlord. It is not conceivable that he could so augment the produce of his farm by any peculiar skill” (the “skill” therefore is more or less empty talk) “on his part, without first increasing the quantity of capital employed upon it” (l.c., p. 209).” (p 377) 

In Chapter XIII, Ricardo deals with taxes on gold, which is important for his theory of money. He also deals with the variation between market price and natural price

“They amount to this, how long the equalisation of the two prices takes depends on whether the particular sphere of production permits a rapid or slow increase or reduction of supply, which in turn is equivalent to a rapid or slow transfer or withdrawal of capital to or from the sphere in question.” (p 377-8) 

In other words, as I've written elsewhere, it depends on the price elasticity of demand. Where prices fall by a higher proportion than the increase in supply, less capital must transfer into that sphere, from lower profit spheres, to reduce market prices to the price of production, and vice versa. 

“Ricardo has been criticised by many writers (Sismondi, etc.) because, in his observations on rent, he disregards the difficulties that the withdrawal of capital presents for the farmer who employs a great deal of fixed capital, etc. (The history of England from 1815 to 1830 provides strong proof for this.) Although this objection is quite correct, it does not in any way affect the theory, it leaves it quite untouched, because in this case it is invariably only a question of the more or less rapid or slow operation of the economic law.” (p 378) 

However, Marx says, Ricardo is quite wrong in his argument that new capital can be introduced in new land without regard to the landlord. 

“Ricardo assumes that this can take place without the intervention of the landlord, that in this case capital is operating in a field of action, in which it does not meet with any resistance. But this is fundamentally wrong. In order to prove this assumption, that this is indeed so, where capitalist production and landed property are developed, Ricardo always presupposes cases in which landed property does not exist, either in fact or in law, and where capitalist production too is not yet developed, at least not on the land.” (p 378) 

In other words, where land is already being cultivated by a capitalist farmer, they may cultivate it more intensively, by introducing additional capital, without immediate regard to the landlord, with whom they have already negotiated the rent. Only when a new lease is negotiated may the higher profitability of the land, as a result of this investment, result in a differential rent. Where landed property does not exist, capital can be invested in new lands, regardless. However, where landed property does exist, the landowner will not allow capital to be invested in any uncultivated land unless the farmer first agrees a rent for its use. 

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