Secondly: Nevertheless the law of differential rent would not be suspended in this case, although the general price of the products of the soil would be essentially modified. For if the price of the product of class A should be P + r, and this should be the general market price, then the price of class B would be likewise P 4- r, and so would be the price of classes C, D, etc. But since P — P' = d, in the case of class B, it is evident that (P + i") — (P' + r) is also equal to d, and P — P" in the case of class C would mean that (P + r) — (P'' + r) is equal to 2d, and P — P'" in the case of class D would mean that the formula (P -|- r) — (P'"-!"!") is equal to 3d, and so forth. In other words, the differential rent would still be regulated by the same law as before, although the rent would contain an element independent of this law and would show a general increase in the same way as would the price of the products of the soil. It follows, then, that no matter what may be the condition of the rent upon the least fertile lands, the law of differential rent is not only independent of it, but that also the only manner of viewing differential rent in keeping with its character, is to place the rent of class A at zero. Whether this is zero or larger than zero, is immaterial, so far as the differential rent is concerned, and is not considered in the calculation.
The law of differential rent, then, is independent of the results of the following investigations.
If we now go more deeply into the question, as to what is the sound basis of the assumption that the product of the worst soil A does not pay any rent, we necessarily get the answer: If the market price of the products of the land, say of grain, reaches such a level that an additional investment of capital in the class A of soils pays the ordinary price of production and yields the ordinary average profit to the capitalist, then this is sufficient incentive for investing additional capital in soil of class A. In other words, this condition satisfies the capitalist that new capital may be invested at the average profit and employed in the normal manner.
870 Capitalist Production.
It should be noted here that in this case, likewise, the market price must b© higher than the price of production of A. For as soon as the additional supply has been created, the relation between supply and demand has been altered. Formerly the supply was insufficient, now it is sufficient. So the price must fall. In order to fall, it must have been higher than the price of production of A. But the lesser fertility of the newly added soils of class A brings it about that the price does not fall quite as low as it was at the time when the price of production of the class B regulated the market. The price of production of A forms the limit, not for the temporary, but for the relatively permanent rise of the market price.
On the other hand, if the newly cultivated soil is more fertile than that of the hitherto regulating class A, yet only to the extent of satisfying the increased demand, then the market price remains unchanged. The inquiry as to whether the lowest class of land pays any rent, nevertheless coincides also in this case with our present inquiry, for here again the assumption that class A does not pay any rent must be explained out of the fact that the market price satisfies the capitalist tenant that this price will cover the invested capital plus the average profit, in brief, that the market price will cover the price of production of his commodities.
At any rate, the capitalist tenant can cultivate soil of class A under these conditions, in so far as he has any decision in this matter in his capacity as a capitalist. The prerequisite for a normal self-expansion of capital is now present upon soil A. But the fact that the average conditions of self-expansion would now enable the capitalist tenant to invest capital in soil of the class A if he did not have to pay any rent, does not imply that such land is at the disposal of the capitalist without any further ceremony. The circumstance that the capitalist tenant might invest his capital at the average profit, if he did not have to pay any rent, is no incentive for the landlord to lend his land to the tenant gratis and be so philanthropic as to grant free credit to this friend in business. To assume that this would b^ done would be to do away with private property in land, for its existence is precisely an obstacle to the investment of capital and to the liberal self-expansion of capital through land. This obstacle does not fall by any means before the simple reflection of the tenant that the condition of grain prices would enable him to get the average profit out of an investment of capital in class A of soil, if he did not have to pay any rent, in other words, if he could proceed as though private property in land did not exist. But differential rent is based upon the fact that private property in land exists, that the land monopoly is an obstacle of capital, for without it the surplus profit would not be converted into gToundrent and would not fall into the hands of the landlord instead of those of the capitalist tenant. Private property in land remains as an obstacle, even where differential rent as such is not paid, that is, upon soils of the class A. If we observe the cases, in which capital may be invested in the land, in a country with capitalist production, without paying any rent, we shall find that they imply, all of them, a practical abolition of private property in land, even if not a legal abolition, a condition which is found only under very definite circumstances, which are in their very nature accidental.
First: This may take place when the landlord is himself a capitalist, or the capitalist himself a landlord. In this case he may himself exploit his land, as soon as the market price shall have risen sufficiently to enable him to get the price of production, that is, cost of production plus the average profit, out of what is now land of class A. But why? Because for himself private property in land is not an obstacle to the investment of his capital. He can treat his land simply as an element of nature, and can listen wholly to considerations of expediency concerning his capital, to capitalist considerations. Such cases occur in practice, but only as exceptions. Just as the capitalist cultivation of the land presupposes the separation of the active capital from property in land, so it excludes as a rule the self-management of property in land. It is evident, that 872 Capitalist Production.
the opposite is only an exception. If the increased demand after grain requires the cultivation of a larger area of land of the class A than is in the hands of self-managing proprietors, in other words, if a part of such land must be rented in order to be cultivated at all, then this hypothetical conception of the obstacle created by private property in land for capital and its investment at once collapses. It is an absurd contradiction to start out from the differentiation between capital and land, capitalist tenants and landlords, which corresponds to the capitalist system, and then to turn around and assume that the landlords, as a rule, exploit their own land in all cases and to the full extent, where capital w^ould not get a rent out of the cultivation of the soil, if private property in land were not separate and distinct from it. (See the passage from Adam Smith concerning mining rent, quoted further along.) Such an abolition of private property in land is accidental. It may or may not occur.
Secondly: In the total area of some rented land there may be certain portions, which do not pay any rent under the existing condition of market prices, so that they are virtually loaned gratis, although the landlord does not look upon it in that light, because he does not consider the special rent of some particular patches in the total rental of his rented land. In such a case, so far as such patches are exempt from rent, private property as an obstacle to the investment of capital is obliterated for the capitalist tenant, and his contract with the landlord implies as much. But he does not pay any rent for such patches for the simple reason that he pays rent for the land to which they belong. The assumption in this case deals with a combination, in which the worse land of the class A is not an independent resort by which to supply the missing product, but rather an inseparable part of some better land. But the ease to be investigated is precisely that in which certain pieces of land of class A are independently cultivated, and must be rented separately under the general conditions of capitalist production.
Thirdly: A capitalist tenant may invest additional capital upon the same rented land, although the additional product secured in this way nets him only the price of production at the prevailing market prices, so that he gets only the average profit, but does not get any surplus profit with which to pay rent. In that case he pays ground-rent with a portion of the capital invested in the land, but does not pay any ground-rent with the remainder of his invested capital.
How little this assumption solves the problem in question, is seen by the following considerations: If the market price (and the fertility of the soil) enables him to obtain a larger yield with his additional capital, so that this additional capital secures for him not merely the price of production, the same as his old capital, but also a surplus profit, then he pockets this surplus profit himself so long as his present lease runs. But why? Because the obstacle of private property has been eliminated for his capital during the time of his lease. But the simple fact, that new and inferior soil must be independently cleared and independently rented, in order to secure this surplus profit for him, proves that the investment of additional capital upon the old soil no longer suffices to fill the required increased demand. One assumption excludes the other. It is true that one might say: The rent of the worst soil A is itself a differential rent, compared either to the land cultivated by the owner himself (which is an accidental exception), or with the additional investment of capital upon the old leaseholds which do not produce any rent. However, this would be a differential rent, which would not arise from the difference in fertility of the various classes of soil^ and which would, therefore, not be based upon the assumption that class A of soil does not pay any rent and sells its product at the price of production.
And furthermore, the question as to whether additional investments of capital upon the same leasehold produce any rent or not is quite immaterial for the question, whether the new soil of class A, which is about to be taken under cultivation, pays any rent or not, just as it is immaterial for the organization of a new and independent manufacturing business whether another manufacturer of the same line of busi- 874 Capitalist Production.
ness invests a portion of bis capital in interest-bearing papers, because be cannot use all of it in bis business; or wbetber be makes certain improvements, wbicli do not secure tbe full profit for bim, but at least more tban interest. Tbis is immaterial for bim. Tbe new establisbments must produce tbe average profit and are built on tbis assumption. It is true tliat tbe additional investments upon tbe old leasebolds and tbe additional cultivation of new land of class A mutually restrict one anotber. Tbe limit, up to wbicb additional capital may be invested upon tbe same leasebold under less favorable conditions of production, is determined by tbe new competing investments upon soil of class A; on tbe otber band, tbe rent wbicb may be produced by tbis class of soil is limited by tbe competing additional investments of capital upon tbe old leasebolds.
But all tbese false subterfuges do not solve the problem, wbicb in simple language consists of tbis: Assuming tbe market price of grain (wbicb sball be typical of all products of the soil in tbis inquiry) to be sufficient for tbe purpose of taking portions of soil of class A under cultivation and securing the price of production (cost of production plus average profit) by means of tbe capital invested in tbese new fields; in other words, assuming tbe conditions for tbe normal self-expansion of capital upon tbe soil A to be existent, is this sufficient cause for making the investment of such capital really possible? Or must tbe market price rise to a point where even tbe worst soil A will produce a rent? Does the monopoly of the land owner place an obstacle in the way of the capitalist who wants to invest, an obstacle which would not exist from tbe capitalist's point of view without that monopoly in land? Tbe conditions, under wbicb tbis question is put, show that tbe question as to whether capital may really be invested in soil of class A, which would produce the average profit, but no rent, is not at all solved by the fact that, for instance, additional investments upon tbe old leaseholds may exist, which produce only the average profit but no rent at the prevailing market prices. The question still remains unanswered. The fact that tbe additional investments, whicla do not produce any rent, do not satisfy the demand is proved by the necessity of taking new land under cultivation out of class A. If the additional cultivation of land of class A takes place only to the extent that it produces a rent, that is, more than the price of production, then only two cases are possible. Either the market price must be such that even the last additional investments of capital upon the old leaseholds produce a surplus profit, which may be pocketed by the tenant or by the landlord. This raise in price and this surplus profit of the last additional investment of capital would then be a result of the fact that soil A cannot be cultivated without producing a rent. For if the price of production were sufficient to bring about a cultivation of land A, if the mere average profit were enough for that, then the price would not have risen to this point and the competition of new lands would have manifested itself as soon as they could produce just this price of production. The additional investments upon the old leaseholds, which do not produce any rent, would then have to compete with the investments upon soil A, which likewise do not produce any rent.
Or, the last investments upon the old leaseholds may not produce any rent, but still the market price may have risen sufficiently to make the cultivation of soil A possible and to get a rent out of it. In this case, the additional investment of capital, which does not produce any rent, would be possible only for the reason that soil A could not be cultivated until the market price enabled it to produce a rent. Without this condition its cultivation would have begun when prices stood lower; and those later investments of capital upon the old leaseholds, which require a high market price in order to produce the ordinary profit without any rent, could not have taken place. For they produced only the average profit at the high market prices. At a lower market price, which would have become the regulating market price of production from the time that soil A would have been taken under cultivation, those later investments upon the old leaseholds could not have produced this average profit, and this means that the investments would not have been made under such SyS Capitalist Production.
conditions. In this way, the rent of soil A would indeed form a differential rent, compared to the investments upon the old leaseholds, which do not produce any rent. But the fact that the area of A forms such a differential rent is but a consequence of the condition that this area is not taken under cultivation at all, unless it produces a rent. The first condition in this case is that the necessity of this rent, which is not based upon any differences of soil, must exist and form a barrier to the possible investment of additional capitals upon the old leaseholds. In either case, the rent of soil A would not be a simple consequence of the rise in grain prices, but on the contrary, the fact that the worst soil must produce a rent in order to become available for cultivation would be the cause of a rise in the price of grain to the point at which this condition may be fulfilled.
The differential rent has this peculiarity, that the landlord merely catches the surplus profit which would otherwise go into the pocket of the tenant, and which the tenant may actually pocket under certain circumstances during the time of his lease. The property in land is here merely the cause of the transfer of a portion of the price of the product, which arises without any active participation of the landlord in production and resolves itself into surplus profit. This transfer of a portion of the price from one individual to another, from the capitalist to the landlord, is due to private property in land. But private o\vnership of land is not the cause which creates this portion of the price, or brings about the rise in the price, upon which it is conditioned. On the other hand, if the worst soil A cannot be cultivated — although its cultivation would yield the price of production — until it produces something in excess of the grice of production, then private property in land is the creative cause of this rise in price. Private property in land itself has created rent. This fact is not altered, if, as in the second case mentioned, the rent now produced by soil A is a differential rent compared with the last additional investment of capital upon the old leaseholds, which pays only the price of production. For tt* circumstance, that soil A cannot be cultivated, until the regulating price of j)roduction has risen high enough to admit of a rent for soil A, is in this case the sole reason of the rise of the market price to that level, which enables the last investments upon the old leaseholds to secure the price of production, bj means of which a rent is obtained from soil A. The fact that this soil has to pay any rent at all is in this case the cause which creates a differential rent between soil A and the last investment upon the old leaseholds.
Speaking in general of the fact that soil of class A, under the assumption that the price of grain is regulated by the price of production, does not pay any rent, we mean rent in the categorical sense of the word. If the tenant pays a rent, which is either a deduction from the normal wages of his laborers, or from his own normal average profit, then he does not pay a rent which is clearly distinguished from wages and profit in the price of his product. We have already indicated that this takes place continually in practice. To the extent that the wages of the agricultural laborers in a certain country are continually depressed below the normal level of wages, so that a part of the wages, being deducted from them, passes generally over into the rent, this is no exception for the tenant upon the worst kind of soil. In the same price of production, which makes the cultivation of the worst soil possible, these low wages already form a constituent element, and the sale of his product at the price of production does not enable the tenant upon this soil to pay any rent. The landlord might rent his land also to some laborer, who may be satisfied to pay all or a part of that in the form of rent which he may get in the selling price above the wages. In all these cases, however, no real rent is paid, but merely lease money. But wherever conditions correspond to the capitalist mode of production, rent and lease money must coincide. It is precisely this normal condition which must be analyzed here.
A reference to colonial conditions proves even less for our problem than do the above-mentioned cases, in which actual investments of capital under conditions of capitalist production may take place upon the land without producing any rent. What makes a colony of a colony — we have in mind 8/8 Capitalist Production.
only true agricultural colonies — is not merely the vast area of fertile lands in a natural state. It is rather the circumstance that these lauds are not appropriated, are not brought* under private ownership. It is this which makes the enormous difference between the old countries and the colonies, so far as the land is concerned, it is this nonexistence, legal or actual, of private property in land, as Wakefield remarks correctly;^^^ and long before him the elder Maribeau, the physiocrat, and other older economists had discovered. It is quite immaterial here, whether the colonists take possession of the land without further ceremony, or whether they pay to the state a fee for a valid title to the land under the title of a nominal price of land. It is also immaterial, that already settled colonists may be legally the owners of land. In fact the land ownership is not an obstacle to the investment of capital here, nor to the employment of labor upon land without any capital. The settling of a part of the land by the established colonists does not prevent the newcomers from employing their capital or their labor upon new land.
Therefore, if we are asked to investigate the influence of private ownership of land upon the prices of the products of land and upon the rent in places where such ownership is an obstacle to the investment of capital, it is very absurd to speak of free bourgeois colonies, in which neither the capitalist mode of production in agriculture, nor the form of private property belonging to it, exist, and in which the latter does not exist at all in fact. Eicardo is an illustration of this in his chapter on ground-rent. In the beginning he says that he is going to investigate the effect of the appropriation of land upon the value of the products of the soil, and immediately after that he takes for an illustration the colonies, assuming that real estate exists in a relatively elementary form and that its exploitation is not limited by the monopoly of private ownership in land.
The mere legal property in land does not create any ground- 1^* Wakefield, England and America, London, 1S33. Compare also Capilrl, Volume I, Chapter XXVII.
rent for the landlord. But it gives him the power to withdraw his land from exploitation until the economic conditions permit him to utilize it in such a way that it will yield him a surplus, whenever the land is used either for agriculture proper or for other productive purposes, such as buildings, etc. He cannot increase or decrease the absolute quantity of its field of employment, but he can do so with its marketable quantity. For this reason, as Fourier has already remarked, a characteristic fact in all civilized countries is that a comparatively considerable portion of the land always remains uncultivated.
Assuming, then, that the demand requires the opening up of new lands, and that these lands are less fertile than those hitherto cultivated, will the landlord rent such lands for nothing, just because the market price of the products of the soil has risen high enough to pay to the tenant the price of production on his investment in this land and enable him to reap the average profit? By no means. The investment of capital must net him a rent. He does not rent his land until he can get lease money for it. Therefore the market price must have risen above price of production to the point P -|- r, so that a rent can be paid to the landlord. Since the real estate does not net any income, according to our assumption, until it is rented, so that it is economically valueless until then, a small rise of the market price above the price of production will suffice to bring the new land of the worst class upon the market.
The question is now: Does it follow from the ground-rent of the worst soil, which cannot be derived from any difference of fertility, that the price of the products of the soil is necessarily a monopoly price in the ordinary meaning of the term, or a price, into which the rent enters like a tax, only with the distinction that the landlord levies the tax instead of the state? It is a matter of course that this tax has certain definite economic limits. It is limited by the additional investments of capital upon the old leaseholds, by the competition of the products of the soil of foreign countries, which are imported free of duty, by the competition of the land- ^8o Capitalist Production.
lords among themselves, and finally by the wants and the solvency of the consumei's. But this is not the point. The point is whether the rent paid by the worst soil passes into the price of its products, which price regulates the general market price according to our assumption, and whether it enters into this price in the same way as a tax enters into the price of commodities which are dutiable, in other words, whether this rent enters into the price as an element independent of its value.
This does not necessarily follow by any means, and the contention that it does has been made only because the distinction between the value of commodities and their price of production had not been understood up to the present. We have seen that the price of production of a commodity is by no means identical with its value, although the prices of production of all commodities, considered as a whole, are regulated only by their total value, and although the movement of the prices of production of the various kinds of commodities, taking all other circumstances as equal, is controlled exclusively by the movement of their values. It has been demonstrated that the price of production of a commodity may stand above or below its value, and coincides but rarely with its value. Hence the fact that the products of the soil are sold above their prices of production does not prove by any means that they are sold above their values. I^either does the fact that the products of industry are, on an average sold at their prices of production, prove that they are sold at their values. It is possible that the products of agriculture are sold above their price of production and below their value, while many products of industry bring the price of production only because they are sold above their value.
The relation of the price of production of a certain commodity to its value is exclusively determined by the proportion, in which the variable part of the capital with which it is produced stands to its constant part, or by the organic composition of the capital producing it. If the composition of the capital in a certain sphere of production is lower than that of the social average capital, in other words, if its variable portion, which is used for wages, is relatively larger than its constant portion, which is invested in material requirements of production, compared to the social average capital, then the value of its products must stand above their price of production. In other words, such a capital, employing more living labor, produces at the same rate of exploitation of labor more surplus-value, and therefore more profit, than an equally large aliquot portion of the social average capital. The value of its products stands, therefore, above their price of production, since this price of production is equal to the cost of production plus the average profit, and the average profit is lower than the profit produced in these commodities. The surplus-value produced by the social average capital is smaller than that produced by a capital of this lower composition. On the other hand, when the capital invested in a certain sphere of production is of higher than average composition, then the case is rever-sed. The value of the commodities produced by it stands below their price of production, and this is generally the case with the products of the most highly develo])ed industries.
If the capital in a certain sphere of production is of a lower composition than the social average capital, then this is primarily an expression of the fact that the productive power of the social labor in this particular sphere of production is below the average; for the prevailing degree of productive power shows itself in the relative preponderance of the constant over the variable capital, or in the continual decrease of the portion used in a certain capital for wages. On the other hand, if the capital in a certain sphere of production is of a higher composition, then it expresses a development of the productive power above the average.
Leaving aside the work of artists, which is naturally excluded from our discussion, it is a matter of course that different spheres of production require different proportions of constant and variable capital according to their technical peculiarities, and that living labor must occupy more room in some, less room in others. Tor instance, in the extractive industries, which must be clearly distinguished from agri- 3D 882 Capitalist Production.
culture, raw material as an element of constant capital is wholly absent, and even the auxiliary material plays only rarely an important role in them. Nevertheless the progress J of development may be measured also in them by the relative increase of the constant over the variable capital.