Capital III, Chapter 39 - Part 2

Marx now turns to his own theory of rent, and the errors of Ricardo and others. The main thing to bear in mind is that differential rent exists because the same amount of capital and labour, applied to equal sized pieces of land, produce different quantities of output. This differential rent exists whether the process involves increasingly inferior land being brought into cultivation, in addition to existing more fertile land, or vice versa, or indeed a combination of the two.

The theory of Differential Rent was actually developed by James Anderson, a practical Scottish farmer, who introduced it, only incidentally, in a polemical pamphlet he wrote in 1777, opposing the introduction of Corn Laws, which, at that time, were aimed at encouraging the importation of cheaper grain, as opposed to the later Corn Laws, which had the opposite intention. Anderson's ideas in regard to rent never obtained any attention at the time, because of being only incidental to his main aim, and because Smith's “Wealth of Nations” had only been published the year before, and attracted all the attention.

As with all of his work, Malthus simply plagiarised Anderson's work, but falsified it, in order to be able to turn it to his main purpose of acting as paid apologist for the landed aristocracy. Ricardo picked up the theory from Malthus, but arrived at the opposite practical conclusions, in respect of land ownership. Where Malthus wanted to keep food prices high so as to continue the provision of high rents for landowners, Ricardo wanted low food prices, in order to reduce the value of labour-power, and so boost profits, and low rents, because rent was a deduction from profit and thereby held back development of the productive forces, which was Ricardo's primary concern.

Ricardo and others assumed that the process must involve only increasingly less fertile land being brought into cultivation. The process, they assumed, was that as demand rises, so that the existing land cannot supply enough to meet it, market prices rise. As prices rise to a level where less fertile land can supply commodities at this price, and make the average profit, so this land will be brought into cultivation.

The most fertile land, still selling its output at this higher price would then make surplus profit, giving rise to differential rent. It is this assumption, of the need to bring into cultivation ever less fertile land that Malthus used to support his theory of population, and which is also behind Ricardo's theory of a falling rate of profit.

Marx shows that this is wrong. Firstly, there are many reasons why the land in cultivation may not be the most fertile, and indeed may be the least fertile. As demand increases, and more land is brought into cultivation, so this land may be more, not less fertile and productive. Secondly, in a global market, especially as transport costs fall, market prices will be based on global production. If commodities become available from other countries, where the land is more fertile, these may dictate market prices, which then fall so that land which previously produced rent can no longer do so.

Thirdly, the fertility of existing land in cultivation can change over time, as a result of developments in agriculture, as well as the continued cultivation of the land – and vice versa, land that was fertile may become less so, as a result of over farming. Anderson himself, in contradiction to Malthus, argued that the fertility of the land could be continuously improved, beyond what might be required to meet the needs of a rising population.

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How Do These Journalists Defend Their Huge Salaries?

I have just been watching BBC's "Dateline London".  The discussion not surprisingly included the challenge to Jeremy Corbyn's leadership of the Labour Party.  Iain Martin, Editor of CapX, commented that the Labour Party was dead, not unusual for a right-wing Conservative to claim, but then went on to claim that the Labour Party had been taken over by the SWP!  Sitting next to him was Polly Toynbee of the Guardian, who did not challenge this ridiculous notion.

It would be tempting to think that Martin's claim about the SWP was just the same kind of propaganda as his claim that the Labour Party itself was dead, but I don't think that is the case.  I think it simply reflects that a) these journalists and other pundits from that milieu, find themselves in a world that they cannot understand that the only way they can try to understand events, is to make up these ridiculous fantasies, to believe in b) they are incredibly ill-informed, but get away with bull-shitting their employers, and anyone silly enough to buy the things they write, and c) they are obviously incredibly lazy, because even five minutes research on the Internet would disabuse them of the utter bollocks they espouse.

It would take less than five minutes, for example, of online research for their to find out from the SWP itself that it utterly opposes any activity within the Labour Party, and has done so for decades. A similar amount of time would disabuse them of the notion that the Socialist Party of England and Wales has any such interest either.  If they don't believe what those organisations themselves have to say on the matter, they only have to read some of the other discussion on the Internet in any number of left-wing forums, where other left-wing groups criticise the SWP and SPEW, for their sectarian attitude towards the Labour Party, and failure to relate to it, and its members.

Either these journalists know that to be the case, and they are simply lying in order to spread disinformation amongst the wider public, to justify their own anti-democratic positions in relation to the Labour Party and its members, or, and I think this is more likely to be the case, it is simply easier for them to believe that this is the case, because it fits their preconceived world view, and is the only way they can rationalise the fact that the vast majority of the Labour Party, stands in opposition to it. And, starting from that preconception, they are too lazy to bother with even the most basic checking of facts.  In fact, they are just as bad as those bigots I referred to in a previous post, who are not just wrong in their interpretation of facts, but bigots precisely because they do not want to allow the facts to get in the way of the preconceptions.

But, the claim is, of course, as anyone on the left knows totally ridiculous for other reasons.  At its height in the 1970's, the SWP had no more than around 3,000 members.  The Militant, now the Socialist Party, claimed around 10,000 members, but in reality it was probably no more than 5,000 at most.  In both case, the numbers that were really active was much smaller.  But, today both organisations number their members in hundreds not thousands.  At best together both organisations, along with other such sects might total around 3,000 members.  So, how on Earth could organisations that amount to no more than 3,000 even if they were all members of the Labour Party, which clearly they are not, because the SWP and SPEW reject activity within the Labour Party, have taken it over.  How on Earth could they outweigh the half million people that have joined the Labour Party as members, or registered supporters?

It is clearly nonsense.  Moreover, we all know that these right-wing journalists have connections with the secret services that have their own agents working in the various sects.  Some of those journalists have themselves worked for the secret services in the past, some went on to be novelists, writing spy stories.  So, if they don't trust what the sects say themselves about their own activities, don't trust what others on the left say about the activities of these different sects, why don't they just ask their friends in Special Branch or MI6, for the information?  They would confirm to them that they are talking bollocks.

If these very highly paid journalists are so out of touch, so badly informed about the world they live in, and the things they pronounce upon, with such apparent knowledge and authority, its no wonder that they are completely lost when it comes to understanding what is going on, and continually get things so wrong in what they think is going to happen.  We are often told that the problem with the Internet is that it will always require professional journalists to do all of the objective checking of facts, the research and so on that everyone else relies upon.  But, its increasingly obvious that those supposed professional journalists, with a few honourable exceptions have been very far from doing any objective research and analysis.

Its no wonder that the number of people buying newspapers has continued to decline.  Yet, these journalists continue to get their employers to pay them huge salaries, way beyond what any ordinary worker could expect.  And a completely incestuous world is created by those journalists, as one set of journalists, as with Dateline, then invite on, as their authoritative sources, other journalists, who pump out this unsourced, ill-considered garbage as though it was gospel truth.

Its no concern of mine whether the owners of the newspapers and journals that employ these hacks, are getting screwed royally in paying huge salaries for a load of bilge, but if I were the owner of one of those publications, I think I would rapidly be showing them the door until such time that they could show they were worth their coin.

Capital III, Chapter 39 - Part 1

First Form of Differential Rent (Differential Rent I)

Marx distinguishes his theory of Differential Rent from that of Ricardo, but he begins by setting out those main elements on which they agree.

“Ricardo is quite right in the following observations:

"Rent is always the difference between the produce obtained by the employment of two equal quantities of capital and labour" (Principles, p. 59). 

[He means differential rent, for he assumes that no other rent but differential rent exists.] He should have added, "on equal areas of land" in so far as it is a matter of ground-rent and not surplus-profit in general.” (p 649)

Surplus profit arises when two equal amounts of capital and labour produce different amounts of profit. But, this only results in ground-rent where these equal quantities of capital and labour are employed on equal amounts of land. It is the land ownership which enables the landowner to appropriate the surplus profit.

It does not have to be the case that equal masses of capital and labour are involved, only that the proportional relation results in more profit in one case than the other, i.e. a higher rate of profit.

“Ricardo is also right in the following observation, provided it is limited to differential rent:

"Whatever diminishes the inequality in the produce obtained on the same or on new land, tends to lower rent, and whatever increases that inequality, necessarily produces an opposite effect and tends to raise it" (p.74).” (p 649)

These factors are not just restricted to the fertility or location of the land in question. Marx lists three factors which may have those effects. Firstly, taxes. If there is a single tax system then this should be neutral, affecting all land equally, but, if taxes are determined locally, a higher rate of tax, on land, in one area, will act to reduce potential profits, compared to another area, where the tax on land is lower.

There will also be differences where the tax is levied on the rent received by the landlord, as opposed to on the land itself.

Secondly, agriculture may be more developed in some parts of the country than others, and due to the nature of agriculture, as opposed to manufacturing, these differences may take longer to even out. In areas where development is more advanced, productivity will be higher, irrespective of the fertility of the soil, etc. So, there will arise surplus profits in these areas, as they sell their commodities into a national market.

Thirdly, within each area, there will be significant differences in the amount of capital each farmer has at their disposal, and these differences are again not so easily evened out as in manufacturing. Lenin analysed this in his The Development of Capitalism In Russia, showing how this results in an increasing differentiation of the peasantry. But, this same process means that the richer peasants/farmers produce surplus profit, as a result of their more efficient use of capital, and this capital creates the potential for ground-rent. It further facilitates the increasing power of these rich farmers, therefore, to the extent that they are themselves the landowner.

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Northern Soul Classics - I Can't Get Enough - Johnny Sayles

One monster northern sound and then some.

Friday Night Disco - Stay In My Lonely Arms - The Elgins

Listen To Chakrabarti Dismantle The Renewed Attacks on Corbyn Over Israel

Shami Chakrabarti has confirmed that Corbyn reflected her report on anti-Semitism accurately, and says she has been dismayed at the way the media have spun his comments to make it seem that he was comparing Israel with ISIS.

Her comments can be found here in an interview on LBC.

Capital III, Chapter 38

Differential Rent: General Remarks

Its assumed that agricultural and mining products sell at their prices of production, as with any other commodity. That is their price comprises their cost of production plus an amount of profit calculated on the basis of the general rate of profit, on the advanced capital, C, i.e. the total value of the fixed capital plus the circulating capital advanced for one turnover period.

The question then arises how it is possible to pay ground-rent on this basis. Marx begins by giving an example from industry rather than agriculture. Suppose nearly all factories derive their power from steam engines, but a few obtain their power from natural waterfalls. The former, as part of their cost of production, will have the cost of buying the steam engines, and of the coal to keep them running. The latter will have lower costs, therefore, because the waterfall provides free energy.

As a result, the individual value of commodities, produced by the latter will be lower than the social value of those commodities, because the social value will be determined by the higher costs of the former, which account for the majority of production. But, the latter will sell their commodities at the market value all the same, and thereby obtain a surplus profit over and above that of the former.

The surplus profit is equal to the difference between the individual price of production and the market price of production.

If the general rate of profit is 15%, and assuming the capital turns over once, then if the cost of production, for the producers, using steam engines, is 100, and for the others only 90, then the price of production for the former is 115, and for the latter 103.5. The latter, therefore, makes 11.5 in surplus profit. If the price of coal fell, the cost price of the former would fall, which would reduce the general price of production, and thereby reduce the difference, and the surplus profit.

The producers using the waterfall are able to produce the same quantity of output as the others, but with less constant capital. In other words, the productivity of labour for these firms is higher. But, because it is the owner of the firm who benefits from the higher profits, not the worker, it appears that the higher productivity is a higher productivity of capital not labour.

These kinds of differences in individual values between between firms were analysed earlier. They mean that where a firm produces commodities with a lower individual value, because it has been lucky enough to buy constant capital at lower than average prices, or where its management is more astute etc. it is able to pocket these surplus profits. 

But, here the surplus profit arises not because of any of these things, but because the firm is able to benefit from the advantages of a freely available natural force. But, this cannot be the whole story. After all, the firms who employ the steam engines also benefit from a freely available force of nature, the power of steam to expand. They pay for the steam engine, and for the coal to fuel it, but not for this natural capacity of steam.

“This monopolisation of natural forces, that is, of the increase in labour-power produced by them, is common to all capital operating with steam-engines. It may increase that portion of the product of labour which represents surplus-value in relation to that portion which is transformed into wages. In so far as it does this, it raises the general rate of profit, but it does not create any surplus-profit, for this consists of the excess of individual profit over average profit. The fact that the application of a natural force, a waterfall, creates surplus-profit in this case, cannot therefore be due solely to the circumstance that the increased productivity of labour here results from the application of a natural force. Other modifying circumstances are necessary.” (p 643)

In industry, in general, if some additional benefit is obtained, for example, from the use of a new machine, which increases productivity, this produces a surplus profit, only where one or a few firms are able to monopolise its use, and thereby reduce their cost of production below the average. But, in industry it is always the case that other firms will then seek to introduce this machine, so that the advantage and the surplus profit disappears.

What is different about the capital that is able to use the waterfall is that this is a free gift of nature that is not available to all other capitals. All capitals can obtain the free gift of the power of steam to expand, provided they buy a steam engine. All capital can obtain the benefit of higher productivity obtained from a particular machine, if they buy the machine. But, not all capital can obtain the benefit of a waterfall, because it is specific to its geographical location.

“It is found only locally in Nature and, wherever it does not exist, it cannot be established by a definite investment of capital. It is not bound to goods which labour can produce, such as machines and coal, but to specific natural conditions prevailing in certain portions of land. Those manufacturers who own waterfalls exclude those who do not from using this natural force, because land, and particularly land endowed with water-power, is scarce.” (p 645)

Where a capital has the use of such a force of nature, its power can be increased. More efficient water wheels or turbines can be introduced, but this increase in power remains one monopolised by this particular capital.

“... this natural force, which can be monopolised in this manner, is always bound to the land. Such a natural force does not belong to the general conditions of the sphere of production in question, nor to those conditions of the latter which may be generally established.” (p 645)

Because these natural forces are associated with the land, and restricted to particular locations, and because the land becomes owned by individuals, landowners, these natural forces can themselves be monopolised.

“Therefore, the surplus-profit which arises from the employment of this waterfall is not due to capital, but to the utilisation of a natural force which can be monopolised, and has been monopolised, by capital. Under these circumstances, the surplus-profit is transformed into ground-rent, that is, it falls into possession of the owner of a waterfall.” (p 646)

Suppose,the capital that uses the waterfall, and whose cost of production is £90, pays the owner of the waterfall £10, for its use, as ground-rent, then their total capital advanced becomes £100. Adding the 15% average profit, that makes their price of production £115, the same as the general price of production. The surplus profit, thereby, disappears.

If the capitalist themselves owns the land, and the waterfall, this does not change anything. It simply means that they pay the £10 of ground-rent to themselves as landowner. There is an apparent difference here that Marx does not pick up on. The surplus profit was initially £11.50, being the difference between the individual price of production and the general price of production. When the capitalist pays £10 in ground-rent, this still leaves a surplus profit of £1.50. However, that is only because this is equal to the average profit of 15% on the additional £10 that the capitalist now has to advance as rent. However, if the capitalist owns the land, they do not actually advance this £10 of rent as capital, because it is paid to themselves.

But, this is only apparent. In fact, the capital is advanced but as capitalised rent, i.e. they have had to buy the land, in the first place. Even if they did not buy the land, its value has to be taken as being advanced, because it takes part in production, and moreover, this capital-value could otherwise have been used in some other activity.

“First, it is evident that this rent is always a differential rent, for it does not enter as a determining factor into the general production price of commodities, but rather is based on it. It invariably arises from the difference between the individual production price of a particular capital having command over the monopolised natural force, on the one hand, and the general production price of the total capital invested in the sphere of production concerned, on the other.” (p 646)

As differential rent, it arises not because of an absolute rise in productivity, which simply causes a fall in values, but because of a relatively higher level of productivity in one capital compared to another, arising from the ability to monopolise these natural advantages.

“For instance, if the use of steam should offer overwhelming advantages not offered by the use of water-power, despite the fact that coal has value and the water-power has not, and if these advantages more than compensated for the expense, then, the water-power would not be used and could not produce any surplus-profit, and therefore could not produce any rent.” (p 646)

It is not the natural force that is the source of the surplus profit, but only the fact that, as a natural force, related to the land, it can be monopolised. The same applies to any other such advantage that can be similarly monopolised, e.g. a drug company that can monopolise some new drug as a result of patent laws.

“In the same way, use-value is in general the bearer of exchange-value, but not its cause. If the same use-value could be obtained without labour, it would have no exchange-value, yet it would retain, as before, the same natural usefulness as use-value. On the other hand, nothing can have exchange-value unless it has use-value, i.e., unless it is a natural bearer of labour.” (p 647)

If commodities sold at their individual values, rather than exchange values, or prices of production, the fact that the waterfall increases productivity would simply reduce the prices of commodities produced with its use.

“Similarly, on the other hand, this increased productivity of labour itself would not be converted into surplus-value were it not for the fact that capital appropriates the natural and social productivity of the labour used by it as its own.” (p 647)

Nor is it the fact that the land is privately owned that creates the surplus profit. If the land was not owned by anyone, but was simply used by this particular capital, they would continue thereby to monopolise its use, and the specific advantage it provides in reducing their costs. They would thereby continue to be able to obtain a surplus profit as a result. What the private ownership of the land does is to enable the landowner to claim this surplus profit for themselves as ground-rent, and thereby to put it in their pocket rather than the pocket of the capitalist.

The price of production is determined by the cost-price of commodities produced using steam engines, because these constitute the majority of production. On this basis, the surplus profit of the capital using the waterfall is determined and thereby the ground-rent is determined.

The ground-rent, therefore, does not determine the price of production of these commodities, but is itself determined by the price of production. However, the ground-rent does enter the cost price of the capital that uses it. But, if the price of the waterfall, like the price of all land is an irrational price that is based on the capitalised rent.

In other words, if the average rate of interest is 5%, and the rent is £10, the price of the waterfall, should its owner sell it, would be £200.

“That it is not the waterfall itself which has value, but that its price is a mere reflection of the appropriated surplus-profit capitalistically calculated, becomes at once evident from the fact that the price of £200 represents merely the product obtained by multiplying a surplus-profit of £10 by 20 years, whereas, other conditions remaining equal, the same waterfall will enable its owner to appropriate these £10 every year for an indefinite number of years — 30 years, 100 years, or x years; and, whereas, on the other hand, should some new method of production not applicable with water-power reduce the cost-price of commodities produced by steam machinery from £100 to £90, the surplus-profit, and thereby the rent, and thus the price of the waterfall, would disappear.” (p 648)

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