Marx quotes Proudhon,
““Rent,” continues M. Proudhon, “is the interest paid on a capital which never perishes, namely – land. And as the capital is capable of no increase in matter, but only of an indefinite improvement in its use, it comes about that while the interest or profit on a loan (mutuum) tends to diminish continually through abundance of capital, rent tends always to increase through the perfecting of industry, from which results the improvement in the use of the land.... Such, in its essence, is rent.”” (p 150)
So, here, Proudhon equates rent with interest, which also means equating land with capital. But, then, land is limited in supply, whereas capital is not. Consequently, Proudhon says, over time, rents must rise, whilst interest falls. But, land is not capital, and land has no value.
“For the landed proprietor himself, rent represents the interest on the capital that the land has cost him, or that he would draw from it if he sold it. But in buying or selling land he only buys or sells rent. The price he pays to make himself a receiver of rent is regulated by the rate of interest in general and has nothing to do with actual nature of rent.” (p 151)
In other words, the laws relating to rent are entirely separate to those relating to interest. These rents rise or fall according to those laws, i.e. the amount of surplus profit, but assuming any given level of rent, the price of land is determined by the rate of interest. If interest rates rise, land prices fall, and vice versa. The reason for that was described earlier, i.e. if interest rates rise, a £1 million bond may now pay £20,000 in interest, so someone with £1 million will buy bonds rather than land, which produces a return of only £10,000 in rent. Owners of land will seek to sell it to obtain money to buy bonds instead, so land prices will fall. What is being bought is not land, as use-value, but land as means of obtaining a revenue from it, i.e. rent.
“Land, so long as it is not exploited as a means of production, is not capital. Land as capital can be increased just as much as all the other instruments of production. Nothing is added to its matter, to use M. Proudhon’s language, but the lands which serve as instruments of production are multiplied. The very fact of applying further outlays of capital to land already transformed into means of production increases land as capital without adding anything to land as matter – that is, to the extent of the land. M. Proudhon’s land as matter is the Earth in its limitation. As for the eternity he attributes to land, we grant readily it has this virtue as matter. Land as capital is no more eternal than any other capital.” (p 152)
It is not the fact that the amount of land, in total, is limited that gives rise to rent, but that the available land is already, previously, owned, and these owners exercise a monopoly over its supply. That is not changed by different names appearing on the title deeds to the land. As Marx sets out, the absolute quantity of land available turns out, itself, to be relative. The application of capital to a hectare of land can raise its productivity to that of 2 hectares of land. For buildings, they can be built higher and higher, and so on. For mineral extraction, new technologies enable greater degrees of extraction, mining to lower depths, and so on. Even for agricultural production, new methods of hydroponics enable crops to be grown in multi-story buildings, as well as new techniques enabling multiple harvests per year.
Land, as land, is eternal, but it is not that which is the basis of rent. Some land produces no rent, for example. Some land that previously did produce rent may cease doing so, because capital is no longer applied to it, as new, more fertile, lands replace it.
“The representative of land as capital is not the landlord, but the farmer. The proceeds yielded by land as capital are interest and industrial profit, not rent. There are lands which yield such interest and profit but still yield no rent.
Briefly, land in so far as it yields interest, is land capital, and as land capital it yields no rent, it is not landed property. Rent results from the social relations in which the exploitation of the land takes place. It cannot be a result of the more or less solid, more or less durable nature of the soil. Rent is a product of society and not of the soil.” (p 152-3)
Marx explains this, in Capital III. A piece of land, farmed by its owner, may produce commodities that produce a profit, but not a surplus profit, i.e. no rent.
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