Ricardo also noted a feature detailed by Marx, which also acted as a deterrent for raising agricultural production. That was the way landlords were able to appropriate to themselves all improvements on their land, at the end of a lease. Landlords not only benefited from any investment undertaken by capitalist farmers, to clear the land, introduce drainage, or to erect buildings, but, in towns and cities, landlords also took over the ownership of housing built by capitalist builders, and owned leasehold, rather than freehold, at the end of the leasehold period. In this way, many members of the landed aristocracy became large-scale property owners and developers.
The ability to acquire for free such capital investment meant that landlords had an incentive to push for shorter and shorter leases, as not only did they obtain this capital gain, but they were also able to levy higher rents on the improved land. Ricardo says,
““In all countries, and all times, profits depend on the quantity of labour requisite to provide necessaries for the labourers, on that land or with that capital which yields no rent” (l.c., p. 128).” (p 466)
Ricardo's argument here is wrong. It implies that the general rate of profit is determined by the rate of profit of the capital employed on the worst land, which thereby also pays no rent. Ricardo's argument is this. The product of this capital is sold, at its value, and because it pays no rent, this value is divided into the value required to reproduce labour and the average profit. But, as seen previously, this assumes, as Ricardo does, that value and price of production are the same. In fact, value and price of production are not, and cannot be the same.
“I have shown that, where there is capitalist production and where landed property exists, the land or mine of the worst type cannot pay a rent, because the corn is sold below its [individual] value if it is sold at the market-value, which is not regulated by it. For the market-value only covers its cost-price. But what regulates this cost-price? The rate of profit of the non-agricultural capital, into whose determination the price of corn naturally enters as well, however far removed the latter may be from being its sole determinant.” (p 466-7)
What is correct in Ricardo's statement, Marx says, is that in the profit of the capital employed on the worst land, the average rate of profit becomes apparent. In other words, we can see what the average rate of profit is. If the rate of profit on this land were higher, it would pay rent; if it were lower capital would not be invested on it. But, this is not the same thing as saying that the capital employed on this land determines, or in any way regulates the average profit, which is to see things upside down.
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