The rate of surplus profit, considering both the additional capital and the total capital invested in the soil, decreases; but the absolute magnitude of the surplus profit increases. In like manner the decreasing rate of profit on capital in general is generally accompanied by an absolutely increasing mass of profit. Thus the average surplus profit of the investment of capital upon B amounts to 90% on the capital, whereas it amounted to 120% on the first investment of capital. But the total surplus profit increases from one quarter to one and a half quarter, or from 3 pounds sterling to 4^ pounds sterling. Considering the total rent by itself — and not comparing it with the doubled magnitude of the advanced capital — it has risen absolutely. The differences of the rents of the various kinds of soil and their relative proportions may vary here; but this variation in the differences is Differential Rent II. First Case. 805 here a consequence, not a cause, of the increase of the rents compared to one another.
4) The case, in which the additional investments of capital upon the superior soils bring forth a greater product than the original ones, requires no further analysis. It is a matter of course that under this assumption the rent per acre will rise, and will do so at a greater rate than the additional capital, no matter upon which kind of soil the investment may have been made. In this case the additional investment of capital is accompanied by improvements. This includes the case, in which an additional investment of less capital produces the same or a greater result than did formerly an investment of more capital. This case is not quite identical with the former one, and this is a distinction, which is important in all investments of capital. For instance, if 100 make a profit of 10, and 200, employed in a certain form, make a profit of 40, then the profit has risen from 10% to 20%, and to that extent it is the same as though 50, employed in a more effective form, make a profit of 10 instead of 5. We assume here that the profit is combined with a proportional increase of the product. But the difference is this, that I must double the capital in the one case, whereas in the other I produce the double effect by the same capital.
It is by no means the same whether I bring forth the same product as before with half as much living and materialized labor, or twice the product as before with the same labor, or four times the former product with twice the labor. In the first case, labor in a living or materialised form is released, which may be employed otherwise; the power to dispose of capital and labor increases. The release of capital (and labor) is in itself an augmentation of wealth; it has just the same effect as though this additional capital had been obtained by accumulation, but it saves the labor of accumulation.
Take it that a capital of 100 has produced a product of ten yards. The 100 may include both constant capital, living labor and profit. In that case one yard costs 10. Now 8o6 Capitalist Production.
if I can produce 20 yards with the same capital of 100, then one yard costs 5. On the other hand, if I can produce 10 yards with a capital of 50, then one yard likewise costs 5, and a capital of 50 is released, assuming the former supply of commodities to be sufficient. Again, if I have to invest 200 of capital in order to produce 40 yards, then one yard also costs 5. The determination of the value, or price, does not indicate such differences as these, neither does the mass of products proportional to the investment of capital. But in the first case, capital is released; in the second case additional capital is saved to the extent that a duplication of production would be required; in the third case the increased product can be obtained only by an augmentation of the invested capital, although not in the same proportion as it would be if the increased product had to be supplied by the old productive power. (This belongs in Part I.)
From the point of view of capitalist production the employment of constant capital is always cheaper than that of variable capital, not where it is a question of increasing the surplus-value, but of reducing the cost price. For a saving of costs even in the element creating the surplus-value, labor, performs this service for the capitalist and makes profit for him, so long as the regulating price of production remains the same. This presupposes in fact the existence of a development of credit and of an abundance of loan capital corresponding to the capitalist mode of production. On the one hand I employ 100 pounds sterling of additional constant capital, if 100 pounds sterling are the product of five laborers during one year; on the other hand, 100 pounds sterling in variable capital. If the rate of surplus-value is 100%, then the value created by those five laborers is 200 pounds sterling; on the other hand, the value of 100 pounds sterling of constant capital is 100 pounds sterling, or perhaps 105 pounds sterling in its capacity as loan capital, if the rate of interest is 5%. The same sums of money express largely different values in product, according to whether they are advanced to production as values of constant or variable capital. Furthermore, as concerns the cost of the commodities from Differential Rent II. First Case. 807 the point of view of the capitalist, there is also this difference that of 100 pounds sterling of constant capital only the wear and tear passes into the value of the product to the extent that this money is invested in fixed capital, whereas 100 pounds sterling invested in wages pass wholly into the values of commodities and must be reproduced in them.
In the case of colonists and of independent small producers in general, who have no command at all over capital or at least command it only at a high rate of interest, that part of the product which stands in place of wages is their revenue, whereas it constitutes an investment of capital for the capitalist. The colonist, therefore, regards this expenditure of labor as the indispensable prerequisite of his product, which is the thing that interests him first of all. As for his surpluslabor, after deducting that necessary labor, it is evidently realised in a surplus-product; and as soon as he can sell this, or even use it for himself, he looks upon it as something that cost him nothing, because it cost him no materialised labor.
It is only the expenditure of materialised labor which appears to him as an outlay of wealth. Of course, he tries to sell as high as possible; but even a sale below value and below the capitalist price of production still appears to him as a profit, unless this profit is claimed beforehand by debts, mortgages, etc. But for the capitalist the investment of both variable and constant capital represents an outlay of capital. The relatively larger outlay of the capitalist reduces the cost-price, and in fact the value of commodities, provided other circumstances remain the same. Hence, although the profit arises only from surplus-labor, consequently only from the employment of variable capital, still it may seem to the individual capitalist that living labor is the most expensive element of his cost of production, which should be reduced to a minimum above all others. This is but a capitalistically distorted form of the correct view that the relatively greater use of past labor, compared to living labor, signifies an increase in the productivity of social labor and a greater social wealth. From the point of view of competition, everything appears thus distorted and inverted.
8o8 Capitalist Production.
Assuming the prices of production to remain unchanged, additional investments of capital may be made with an unaltered, an increasing, or a decreasing productivity upon the better soils, that is upon all soils from B upward. Upon soil A this would be possible, under the conditions assumed by us, only in the case that productivity should remain the same, in which case this land continues to pay no rent, or in the case that productivity increases in which case a portion of the capital invested in A would produce rent, while the remainder would not. But it would be impossible, if the productivity upon A were to decrease, for in that case the price of production would not remain unchanged, but would rise.
But under all these circumstances the surjjlus-product and the surplus-profit corresponding to it increases per acre, and with them eventually the rent, in grain or in money, regardless of whether the surplus-product yielded by them is proportional to their magnitude, or above or below this proportion, regardless of whether the rate of the surplus-profit of capital remains constant, rises or falls when this capital increases. The growth of the mere mass of surplus-profit, or of the rent calculated per acre, that is, an increasing mass calculated on the same unaltered unit, in the present case on a definite quantity of land, such as an acre or an hectare, expresses itself as an increasing ratio. Hence the magnitude of the rent, calculated per acre, increases under such circumstances simply in consequence of the increase of the capital invested in the soil.
This takes place when the prices of production remain the same, no matter whether the productivity of the additional capital stays unaltered, or decreases, or increases. These last named circumstances modify the volume, in which the level of the rent per acre rises, but not the fact of this increase itself. This is a phenomenon, which is peculiar to differential rent l^o. II and distinguishes it from differential rent No. I. If the additional investments of capital, instead of being made successively one after another upon the same soil, were made side by side upon new additional soil of the corresponding quality, the mass of the rental would have increased, and, as previously shown, the average rent of the cul- Differential Rent II. First Case. 809 tivated total area would likewise have increased, but not the size of the rent per acre. When results remain the same so far as the mass and value of the total production and of the surplus product are concerned, the concentration of capital upon a smaller area of land develops the size of the rent per acre, whereas its distribution over a larger area, under the same circumstances, and other circumstances remaining the same, does not produce this effect. But the more the capitalist mode of production develops, the more develops also the concentration of capital upon the same area of land, and the higher rises the rent calculated per acre. Consequently, if we have two countries, in which the prices of production are identical, the differences of the various kinds of soil the same, and the same amount of capital invested, but in such a way that the investment is made in the form of successive outlays upon a limited area in one country, whereas in the other country it is made more in the shape of co-ordinated outlays upon a wider area, then the rent per acre, and with it the price of land, would be higher in the first and lower in the second country, although the mass of the rent would be the same in both countries. The difference in the size of the rent could not be explained in such a case out of the natural fertility of the various kinds of soil, nor out of the quantity of employed labor, but solely out of the different ways in which the capital is invested.
In speaking of a surplus-product in this case, we mean that aliquot part of the product, in which the surplus-profit presents itself. Ordinarily we mean by surplus-product that portion of the product, in which the total surplus-value is materialised, or in some cases that portion, in which the average profit presents itself. The specific significance, which this term assumes in the case of rent-paying capital, gives rise to misunderstanding, as we have shown in another place.
8io Capitalist Production.
CHAPTER XLII.
DIFFERENTIAL BENT II. SECOND CASE: FALLING PEICE OP PRODUCTION.
The price of production may fall, when the additional investments of capital take place with an unaltered, a falling, or a rising rate of productivity.
I. The Productivity of the Additional Investment of Capital Remains the Same.
In this case the assumption is that the product increases in the same proportion as the capital invested in the various soils and in accordance with their respective qualities. This implies, always assuming the differences of the various soil to remain unaltered, that the surplus-product increases jn proportion to the increased investment of capital. This case, then, excludes any additional investment of capital upon soil A which might affect the differential rent. Upon this soil the rate of surplus-profit is 0; it remains 0, since we have assumed that the productive power of the additional capital and therefore the rate of surplus-profit remairi the same.
But under these conditions the regulating price of production can fall only, because instead of the price of production of A that of the next best soil B, or of any better soil than A, becomes the l-egulator; so that the capital is withdrawn from A^ OT perhaps from B and A, in case the price of production of C should become the regulating one and all inferior soil should be eliminated from the competition of the wheat raising soils. The prerequisite for this wouid be, under the assumed conditions, that the additional product of the additional investments of capita-!, should satisfy the demand, so Differential Rent II. Second Case, 8ii that the product of the inferior soils A, etc., would become superfluous for the formation of a full supplyi Take, for instance. Table II, but in such a way that 18 quarters instead of 20 will satisfy the demand. Soil A would drop out; D and its price of production of 30 shillings would become regulating. In that case the differential rent would assume the following form: Table IV.
t < « ft- c U O It Rertt Rate of Surplus Profit B C D VA I'A T'ls In other words, compared to Table II the ground-rent would have fallen in money from 36 pounds sterling to 9 pounds sterling and in grain from 12 quarters to 6 quarters, whereas the total output would have fallen only by 2, from 20 to 18. The rate of surplus-profit, calculated on the capital, would have fallen by two-thirds, from 180% to 60%. The fall of the price of production in this case is accompanied by a decrease of the rent in grain and money.
Compared to Table I there is merely a decrease in the money rent; the rent in grain in both cases is 6 quarters. But in the one case these bring 18 pounds sterling, in the other only 9 pounds sterling. So far as the soils C and D are concerned, the rent in grain compared to Table I remains the same., In fact, owing to the additional production put forth by the uniformly working additional capital, the product of A has been pushed out of the market, the soil A has been eliminated from the competition of the producing agents, and a new differential rent No. 1 has thus been formed, in which the better soil B plays the same role as formerly the inferior soil A. Consequently the rent of B disappears on the one side; on the other side nothing has been altered in the differences Capitalist Production.
of B, C and D by the investment of additional capital, according to our assumption. For this reason that part of the product, which is converted into rent, is reduced.
If the above result, the satisfaction of the demand "with A left out, should have been accomplished by the investment of more than double the capital upon C or D, or upon both, then the matter would assume a different aspect. Let us suppose, that a third investment of capital is made upon C.
Table IV a.
< Profit £ Cost of Production £ Product Qrs.
Scllingr Price £ Yield £ Rent Rate of Surplus Profit Grain Qrs.
Money £ B C D 1% 1% T'!s SVA In this case, compared to Table IV, the product of C has risen from 6 quarters to 9, the surplus product from 2 quarters to 3, the money rent from 3 pounds sterling to 4i pounds sterling. Compared to Table II, in which the money rent was 12 pounds sterling, and Table I, in which it was 6 pounds steriing, it has fallen off. The total rental in grain is 7 quarters. It has fallen compared to Table II, in which it was 12 quarters, but has risen compared to Table I, in which it was 6 quarters. In money the rent is lOo pounds sterling and has fallen compared to both of the other Tables, in which it was 18 and 36 pounds sterling respectively.
If the third investment of capital, amounting to 2i pounds sterling, had been applied to soil B, it would indeed have altered the quantity of production, but would not have touched the rent, since the successive investments, according to our assumption, do not produce any differences upon the same soil, and soil B does not produce any rent.
Again, if we assume that the third investment of capital takes place upon D instead of C, we get Differential Rent II. Second Case. Table IV b.
m < a U Profit £ Cost of Production £ Product Qrs.
Selling Price £ Rent Rate of Surplus Profit '0 in Yield £ Qrs.
£ B C D VA T'ls 3^ Here the total product is 22 quarters, more than double that of Table I, although the invested capital is only 17^ pounds sterling as against 10 pounds sterling, in other words, not twice the size. The total product is also larger by 2 quarters than that of Table II, although the capital in it is larger, namely 20 pounds sterling.
Compared to Table I, the rent in grain upon soil D has increased from 2 quarters to 6, whereas tlie money rent has remained the same, 9 pounds sterling. Compared to Table II the grain rent of D is the same, namely 6 quarters, but the money rent has fallen from 18 pounds sterling to 9 pounds sterling.
Comparing the total rents, the grain rent of IV b is 8 quarters, larger tlian that of I which is 6 and than that of IV a which is 7 quarters; but it is smaller than that of II which is 12 quarters. The money rent of IV b, 12 pounds sterling, is larger than that of IV a, which is lOi pounds sterling, and smaller than that of Table I, which is 18 pounds sterling and that of Table II, which is 36 pounds sterling.
In order that the total rental under the conditions of Table IV b, after the elimination of the rent upon B, may be equal to that of Table I, we need 6 pounds sterling of surplus product more, that is, 4 quarters at 1^ pounds sterling, which is the new price of production. Then we shall have once more a total rental of 18 pounds sterling, the same as in Table I. The magnitude of the required additional capital will differ, according to whether we invest it upon C or D, or distribute it between these two.
In the case of C 5 pounds sterling of capital result in a Capitalist Production.
surplus product of 2 pounds sterling, consequently 10 pounds sterling of additional capital will result in 4 quarters of additional surplus product. In the case of D 5 pounds sterling of additional capital would suffice for the purpose of producing 4 quarters of additional grain rent, under the conditions assumed here, namely that the productivity of the additional investments of capital will remain the same. We should then get the following Tables: Table IV c.
Soils < Capital £ Profit £ Cost of Prod'n £ Product Qrs.
Selling Price £ Yield £ Rent Rate of Surplus Profit Qrs.
< Capita!
Profit £ Cost of Production £ Product Qrs.
Selling Price £ Yield £ Rent Soils Qrs.
£ plus Profit D 4M Totals The total money rental would be exactly one-half of what it was in Table 11^ where the additional capitals were invested under conditions, in which the prices of production remained the same.
The most important thing is to compare the above Tables with Table I.
We find that the total money rental has remained the same, namely 18 pounds sterling, while the price of production has fallen by one-half, from 60 shillings to 30 shillings per quarter, and that the grain rent has been correspondingly doubled, from 6 quarters to 12. The rent upon B has disappeared; the money rent upon C has risen by one-half in IV c, but fallen by one-half in IV d; upon D the money rent has remained the same, 9 pounds sterling, in IV c, and has risen Differential Rent II. Second Case. 815 from 9 pounds sterling to 15 pounds sterling in IV d. The production has risen from 10 quarters to 34 in IV c, and to 30 quarters in IV d; the profit from 2 pounds sterling to 5| pounds sterling in IV c and to 4| pounds sterling in IV d. The total investment of capital has risen in one case from 10 pounds sterling to 27^ pounds sterling, and in the other from 10 pounds sterling to 22| pounds sterling, in either case by more than one-half. The rate of rent, that is, the rent calculated on the invested capital, is everywhere the same in all the Tables from IV to IV d for the respective kinds of soils, for this was implied by the assumption that every kind of soil should retain the same rate of productivity with the two successive investments of caj)ital. But compared to Table I, this rate has fallen, both for the average of all kinds of soil and for each one of them individually. In Table I it was 180% on an average, whereas in IV c it is (18 -^-27|) X 100 = 65-3^% and in IV d it is (18 ~ 224) X 100 = 80%. The average money rent per acre has risen.
Formerly, in Table I, its average was 4^ pounds sterling per acre upon all four acres, whereas now, in IV c and IV d, it is 6 pounds sterling per acre upon the three acres. Its average upon the rent paying soil was formerly 6 pounds sterling, whereas now it is 9 pounds sterling per acre. Hence the money value of the rent per acre has risen, and represents now double the grain product that it did formerly; but the 12 quarters of grain rent are now less than one-half of the total product of 33 and 27 quarters respectively, whereas in Table I the 6 quarters represent f ths of the total product of 10 quarters. Consequently, although the rent as an aliquot part of the total product has fallen, and has also fallen when calculated on the invested capital yet its money-value, calculated per acre, has risen and still more its value as a product. If we take soil D in Table IV d, we find that the cost of production expended in it amounts to 15 pounds sterling, of which 12^ pounds sterling are invested capital. The money rent is 15 pounds sterling. In Table I, for the same soil D, the cost of production was 3 pounds sterling, the invested capital 24pounds sterling the money rent 9 pounds sterling, that is, the 8i6 Capitalist Production.
money rent aDioiinted to three times the cost of production and almost four times the capital. In Table IV d, the money rent for D, 15 pounds sterling, is exactly equal to the cost of production and only by ith larger than the capital. Xevertheless the money rent per acre is two-thirds larger, namely 15 pounds sterling instead of 9 j^ounds sterling. In Table I the grain rent of 3 quarters constitutes three quarters of the total product of 4 quarters; in Table IV d it is 10 quarters, or onehalf of the total product of 20 quarters of one acre of D. This shows that the money value and grain value of the rent per acre may rise, although it forms a smaller aliquot part of the total yield and has fallen in proportion to the invested capital.
The value of the total product in Table I is 30 pounds sterling. The rent is 18 pounds sterling, more than one-half of it. The value of the total product of IV d is 45 pounds sterling, the rent is 18 pounds sterling, or less than one-half of it.
The reason, why in spite of the fall of the price by 1^ pounds sterling per quarter, a fall of 50%, and in spite of the reduction of the competing soil from 4 acres to 3, the total rent remains the same and the grain rent is doubled, while on a calculation per acre both the grain rent and money rent rise, is that more surplus product is created. The price of grain "falls by 50%, the surplus product increases by 100%. But in order to accomplish this result, the total production under the conditions assumed by us must be trebled, and the investment of capital upon the superior soils must be more than doubled. In what proportion this last factor must increase, depends in the first place upon the distribution of the additional investments of capital among the superior and best kinds of soil, always assuming that the productivity of the capital upon every kind of soil increases proportionately to its size.
If the fall of the price of production were smaller, less additional capital would be required for the production of the same money rent. If the supply required for the purpose of throwing soil A out of cultivation — and this depends not Differential Rent II. Second Case.
merely upon the product per acre of A, but also upon the proportional share taken by A in the entire cultivated area — were larger, and with it also the amount of additional capital required upon better soils than A, then, other circumstances remaining the same, the money rent and the grain rent would have increased still more, although both of them would disappear upon the soil B.
If the eliminated capital of A had been 5 pounds sterling, we should have to compare Tables II and IV d: The total product would have increased from 20 quarters to 30. The money rent would be only half as large, that is, 18 pounds sterling instead of 36 pounds sterling; the gTain rent would be the same, namely 12 quarters.
If a total product of 44 quarters, valued at 66 pounds sterling, could be produced upon D with a capital of 27^ pounds sterling — ■ corresponding to the old rate of D, 4 quarters per 2^ pounds sterling of capital — then the total rental would once more reach the level of Table II, and we should get the following diagram: Soils Capital p. St.
Product quarters Grain Rent quarters Money Rent p. St.
B C D The total production would be 54 quarters as against 20 quarters in Table II, and the money rent would be the same, 36 pounds sterling. But the total capital would be 37^ pounds sterling, whereas it was 20 in Table 11. The invested total capital would almost be doubled, while production would be nearly trebled; the grain rent would have been doubled, the money rent would have remained the same. Hence, if the price falls as a result of the investment of additional money-capital, while productivity remains the same, upon the better soils which pay rent, that is, all soils above A, then the total capital has a tendency not to increase in the same proportion as the production and the grain rent; so that the increase of the grain rent may offer 2Z 8i8 Capitalist Production.
a compensation for the loss in money rent due to the falling price. The same law also manifests itself through the fact that the invested capital must be larger in proportion as it is more largely invested upon C than D, upon the soils paying a smaller rent rather than upon the soils paying a larger rent. The point is simply this: In order that the money rent may remain the same or rise, a certain additional quantity of surplus product must be created, and this requires less capital in proportion as the productivity of the soils yielding a surplus product is greater. If the difference between B and C, C and D were still greater, still less additional capital would be required. The proportion is determined 1) by the proportion in which the price falls, in other words, by the difference between soil B, which is not paying any rent now, and soil A, which formerly was the soil that did not pay any rent; 2) by the proportion between the differences of the better soils from B upward; 3) by the amount of newly invested additional capital, and 4) by its distribution among the different qualities of soil.
In fact, we see that this law expresses merely the same thing which we ascertained already in the case of the first illustration: When the price of production is given, no matter what may be its figure, the rent may increase in consequence of additional investments of capital. For owing to the elimination of A, we have now a new differential rent Xo. I with B as the worst soil and 1^ pounds sterling per quarter as the new price of production. This applies to Tables IV as well as to Table II. It is the same law, only that we have as a basis soil B instead of A, and a price of production of 1^ pounds sterling instead of 3 pounds sterling.
The important thing here is this: To the extent that so and so much additional capital was necessary for the purpose of withdrawing the capital from soil A and satisfying the supply without it, we find that this may be accompanied by an unaltered, a rising, or a falling rent per acre, if not upon all soils, then at least upon some and so far as the average of the cultivated lands is concerned. We have seen that the Diiferential Rent II. Second Case. 819 grain rent and the money rent do not maintain a uniform ratio to one another. However, it is merely due to tradition that grain rent is still playing any role at all in political economy. One might demonstrate equally well that a manufacturer can buy much more of his own yarn with his profit of 5 pounds sterling than he could formerly with a profit of 10 pounds sterling. It shows at any rate, that the landlords, when they are at the same time owners or partners of manufacturing establishments, sugar factories, distilleries, etc., may still make a considerable profit even when the money rent is falling, in their capacity as producers of their o^vn raw materials. ^^^ II. The Rate of Productivity of the Additional Capitals Decreases.
This does not carry anything new into the problem, in so far as the price of production may also fall in this case as in the previously considered one, when additional investments of capital upon better soils than A make the product of A superfluous and withdraw the capital from A, or lead to the employment of A for the production of other things. We have analysed this eventuality exhaustively. We have shown that in this case the rent in grain and money per acre may increase, decrease, or remain unchanged.
For the purpose of easy comparison we reproduce