in the soil become the property of the land owner as an inseparable part of the land. In the new contract, which the land owner makes, he adds the interest for the capital in- corporated in the soil to the real gi'ound-rent. And he does this whether he leases the land to the same capitalist who made these improvements or to some other capitalist fanner. His rent is thus increased; or, if he wishes to sell his land (we shall see immediately how its price is determined), its value has risen. He sells not merely the soil, but the improved soil, the capital incorporated in the soil for which he did not pay anything. Quite aside from the movements of real ground-rent, this is one of the secrets of the increasing en- richment of the land owners, of the continuous inflation of their rents, and of the growing money-value of real estate in proportion as economic development proceeds. Thus they pocket a result of social development brought about without '^ See James Anderson and Carey.
Preliminaries. 727 their help, fruges consumere nati, they are born to consume the fruits of the earth. But this is at the same time one of the greatest obstacles to a rational development of agricul- ture, because the capitalist renter avoids all improvements and expenses, for which he cannot expect any returns during the time of his lease. We find tliis fact denounced as such an obstacle, not only in the 18th century by James Anderson, the actual discoverer of the modern theory of rent, who was also a practical capitalist fanner and an advanced agronomist for his time, but also in our own days by the opponents of the present constitution of landed property in England.
A. A. Walton, in his " History of the Landed Tenures of Great Britain and Ireland/' London, 1865, says on this score: All the efforts of the numerous agricultural institutes in our country cannot accomplish any very important or really ap- preciable results in the actual progress of improved cultiva- tion, so long as such improvements increase in a far highei degree the value of real estate and the size of the rent roll of the land o^\Tier, than they improve the condition cf the tenant or the farm laborer. The tenants in general know quite as well as the land owner, his rent collector, or even the president of an agricultural society, that good drainage, am- ple manuring, and good management, together with an in- creased application of labor, cleaning the land thoroughly and working it over, will produce wonderful results, both in the improvement of the soil and in an increased production. But all this demands considerable expense, and the tenants also know very well, that no matter how much they may improve the soil or raise its value, the land owner will in the long run get the princijDal benefit of it in raised rents and increased land values...They are cunning enough to observe, what those speakers [land owners and their agents speaking at agTicultural feasts] always forget to tell them, namely that the lion's share of all improvements made by the tenants must always pass ultimately into the pockets of the land owners. No matter how much the former tenant may have improved his leasehold, his successor will always find, that 728 Capitalist Production.
the land owner will raise the rent in proportion to the in- creased land value due to previous improvements. (Pages In agriculture proper this process does not yet appear quite so plainly as when the land is used for building lots. The overwhelming part of the land used in England for building purposes, but not sold as a freehold, is rented by the land owners for 99 years, or for a shorter time if possible. After the lapse of this time the buildings fall into the hands of the land owner together with the land. The tenants are obliged. says Walton, to deliver the house to the great land owner in a good inhabitable condition after the expiration of the lease, after they have paid up to this time an exorbitant ground- rent. Hardly has the lease expired, when the agent or in- spector of the landlord comes, inspects your house, takes care that you get it into good condition, takes possession of it and annexes it to the domain of his landlord. The fact is that if this system is permitted to exert its full effects for some time longer, the entire ownership of houses as well as of country real estate will be in the hands of the great landed proprietors. The whole West End of London, north and south of Temple Bar, belongs almost exclusively to half a dozen great landlords, is rented at enormous ground-rents, and if the leases have not quite expired, most of them expire in rapid succession. The same applies in a greater or smaller degree to every city in the Kingdom. But even here this greedy system of exclusiveness and monopoly does not stop. Xearly all the docking facilities of our port cities are in the hands of the great land leviathans in consequence of the same process of usurpation. (L. c, p. 93.) Under these circum- stances it is evident that if the census for England and Wales in 1861 gives the total population as 20,066,224 and the num- ber of house owners as 36,032, the proportion of the owners to the number of houses and to the population would take on a very different aspect, if the great house owners were placed on one side and the small ones on the other.
This illustration of property in buildings is important. In the first place, it clearly shows the difference between real Preliminaries. 729 ground-rent and interest on fixed capital incorporated in the soil, which may form an addition to the ground-rent. The interest on buildings, like that on capital incorporated in the soil by the tenant, falls into the hands of the industrial cap- italist, the building speculator, or the tenant, so long as the lease lasts, and has in itself nothing to do with the ground- rent, which must be paid annually at stated dates for the use of the soil. In the second place it shows, that the capital incorporated in the soil ultimately passes into the hands of the landlord together with the land, and that the interest on it helps to swell his rent.
Some writers, either acting as spokesmen of landlordism against the attacks of bourgeois economists, or endeavoring to transform the capitalist system of production from' a system of antagonisms into one of '' harmonies," as did Carey, have tried to represent ground-rent, the specific economic expres- sion of private property in land, as identical with interest. For this would obliterate the antagonism between landlords and capitalists. The opposite method was employed in the beginning of capitalist production. In those days landed property was still regarded by popular conception as the prim- itive and respectable form of private property, while interest on capital was decried as usury. Dudley North, Locke and others, therefore represented interest on capital as a fonu analogous with ground-rent, just as Turgot deduced the justi- fication of interest from the existence of ground-rent. — Aside from the fact that ground-rent may, and does, exist in its pure form without any addition for interest on capital in- corporated in the soil, these more recent writers also forget, that in this way the landlord does not only receive interest on the capital of other people that cost him nothing, but also pockets this capital of others without any compensating re* turn. The justification of private property in land, like that of all other forms of property within a certain mode of pro- duction, is that the mode of production is itself a transient historical necessity, and this includes the conditions of pro- duction and exchange, which flow from it. It is true, as we shall see later, that property in land differs from the other 730 Capitalist Production.
kinds of property by the fact that it appears superfluous, and even noxious, at a certain stage of development, even from the point of view of capitalist production.
In another form, ground-rent may be confounded with in- terest and its specific character overlooked. Ground-rent as- sumes the shape of a certain sum of money, which the land- lord draws annually out of the lease of a certain piece of the globe. We have seen that every sum of money may be capitalised, that is, considered as the interest on an imaginary capital. For instance, if the average rate of interest is 5%, then an annual ground-rent of 200 pounds sterling may be regarded as the interest on a cajjital of 4,000 pounds sterling. Ground-rent so capitalised forms the purchase price or value of the land, a category which is on its face irrational, just as the price of labor is, since the earth is not the product of labor and therefore has no value. But on the other hand a real relation in production is concealed behind this irrational form. If a capitalist buys land yielding a rent of 200 pounds sterling annually and pays 4,000 pounds sterling for it, then he draws the average interest of 5% on his capital of 4,000 pounds sterling, just as though he had invested this capital in interest-bearing papers or loaned it directly at 5% interest. It is the utilisation of a capital of 4,000 pounds sterling at 5%. On this assumption he would recover the purchase price of his estate in twenty years by its revenues. In England, therefore, the purchase price of land is calculated on so many years' purchase, and this is merely a different expression for the capitalisation of tie ground-rent. It is in fact the pur- chase price, not of the land, but of the ground-rent yielded by it, calculated on the ordinary rate of interest. But this capitalisation of rent has for its premise the existence of rent, for rent cannot be explained and derived from its own capital- isation. Its existence, independent of its sale, is rather the condition from which the inquiry must start.
It follows, then, that the price of land may rise or fall in- versely as the rate of interest rises or falls, if we assume that ground-rent is a constant magnitude. If the ordinary rate of interest should fall from 5% to 4%, then the annual Preliminaries. 731 Preliminaries. 731 ground-rent of 200 pounds sterling would represent the an- nual self-expansion of a capital of 5,000 pounds sterling in- stead of 4,000 pounds sterling. The price of the same piece of land would thus have risen from 4,000 to 5,000 pounds sterling, or from 20 years' to 25 years' purchase. The re- verse would take place in the opposite case. This is a move- ment of the price of land, which is independent of the move- ment of ground-rent itself and regulated only by the rate of interest. But as w'o have seen that the rate of profit has a tendency to fall in the course of social progress, and that the rate of interest has the same tendency, so far as it is regu- lated by the rate of profit; and since, furthermore, the rate of interest has a tendency to fall in consequence of the growth of loanable capital, aside from the influence of the rate of profit, it follows that the price of land has a tendency to rise, even independently of the movement of ground-rent and the prices of the products of the soil, of which the rent forms a part.
The mistaking ground-rent for the interest form, which it assumes for the buyer of the land — a mistake due to a complete nnfamiliarity with tlie nature of ground- rent — must lead to the most absurd conclusions. Since landed property is considered, in all old countries, as a par- ticularly noble form of property, and its purchase also as an eminently safe investment of capital, the rate of interest at which ground-rent is bought is generally lower than that of other investments of capital for a long time, so that a buyer of real estate draws, for instance, only 4% on his purchase price, whereas he would draw 5% for the same capital in other investments. In other words, he pays more capital for the ground-rent than he would for the same amount of income in other investments. This leads Mr. Thiers to conclude in his utterly valueless work on La Propriete (a reprint of a speech of his made in 1849 against Proudhon in the French National Assembly) that ground-rent is low, while it proves merely that its purchase price is high.
The fact that capitalised ground-rent represents itself as the price or value of land, so that the earth is bought and sold like 732 Capitalist Production.
any other commodity, serves to some apologists as a justifi- cation of private property in land, seeing that tlie buyer pays an equivalent for it the same as he does for other commodi- ties, and that the major portion of property in land has changed hands in this way. The same reason would, in that case, serve also to justify slavery, since the returns from the labor of the slave, whom the slave holder has bought, repre- sent merely the interest on the capital invested in this pur- chase. To derive from the sale and purchase of ground-rent a justification for its existence signifies to justify its existence by its existence.
It is very important for a scientific analysis of ground- rent, that is of the independent and specifically economic form of property in land on the basis of capitalist production, to study it in its pure form and free from all falsifying and obliterating by-work. And it is no less important for an un- derstanding of the practical effects of property in land, even for a theoretical comprehension of a multitude of facts, which run counter to the conception and nature of ground- rent and yet appear as modes of existence of ^ound-rent, to know the elements which give ri'^e to such t^'^Sscurities in theory.
In practice everything appears naturally as ground-rent that is paid in the form of lease money by the tenant to the landlord for the pei'mission of cultivating the soil. What- ever may be the composition of this tribute, whatever may be its sources, it has this in common with real ground-rent that the monopoly of the so-called owner of a piece of the globe enables him to levy such a tribute and impos*^ such a tax. This tribute furthermore shares with the real ground- rent the fact that it determines the price of land, m Inch, as we have indicated above, is nothing but the capita] ised in- come from the lease of the land.
We have already seen, that the interest for the capital in- corporated in the soil may form one of those foreign ingredi- ents in ground-rent, an element which must become a contin- ually growing addition to the total rent of a certain country Preliminaries. 733 in proportion as economic development proceeds. But aside from this interest it is possible that the lease money may con- ceal a deduction from the average profit or from the normal wages, or both, being made up of them either in part or wholly, so that in some cases it may not represent any real ground-rent at all and the soil may be valueless. This por- tion of the profit, or of wages, appears then as ground-rent, because instead of falling normally into the hands of the in- dustrial capitalist or the wage worker, it is paid to the land- lord in the form of lease money. Economically speaking neither the one nor the other of these portions constitutes any ground-rent; but in practice they constitute some of the rev- enue of the landlord, an economic utilisation of his monopoly, just as real ground-rent does, and they have a determining influence on land prices just as ground-rent has.
We are not now speaking of conditions, in which ground- rent, the form of landed property adapted to the capitalist mode of production, fomially exists without the capitalist mode of production itself, so that the tenant is not an indus- trial capitalist, nor the mode of his management a capitalist one. Such is the case in Ireland. The tenant is here gen- erally a small farmer. What he pays to the landlord in the shape of rent absorbs frequently not merely a part of his profit, that is, of his ovra surplus-labor, to which he is entitled as the possessor of his own instruments of production, but also a part of his normal wages, which he would receive un- der different conditions for the same amount of labor. Be- sides, the landlord, who does not do anything for the improve- ment of the soil, also expropriates him from his small cap- ital, which he incorporates for tlie greater part in the soil by his own labor, just as a usurer would do under similar cir- cumstances. Only the usurer would at least risk his own capital in the operation. This continual robbery is the cen- ter of the disputes over the Irish Land Bill, which has for its principal aim to compel the landlord, when giving notice to his tenant to vacate, should pay him an indemnity for the improvements made by him in the soil, or for the capital in- 734 Capitalist Production.
corporated by him in the laud. Pahuerston used to meet this demand with the cynical answer: " The House of Commons is a house of landlords."
A'^or do we sj^eak of exceptional circumstances, in which the landlord may enforce a high rent even in countries with a capitalist production, although this rent may not be in any way connected with the product of the soil. Of such a na- ture is the renting of small patches of ground to laborers in English factory districts, either for small gardens or for ama- teur agriculture in spare hours. (Reports of Inspectors of Factories.)
We are speaking of ground-rent in countries with a devel- oped capitalist production. Among English tenants, for in- stance, there is a number of small capitalists, who are des- tined and compelled by education, training, tradition, com- petition, and other circumstances, to invest their capital as tenants in agriculture. They are compelled to be satisfied with less than the average profit, and to yield up a part of it to the landlords for rent. This is the only condition on which they are permitted to invest their capital in the soil, in agri- culture. Since the landlords exert everywhere a consider- able, in England even an overwhelming, influence on legisla- tion, they are in a position to exploit this for the purpose of grinding do^^^l the entire class of tenants. The corn laws of 1815, for instance, a bread tax confessedly imposed upon the country for the purpose of securing for the idle landlords a continuation of their abnormally increased rentals during the anti-Jacobin wars, had indeed the effect, with the exception of a few extraordinarily rich years, of keeping the prices of agricultural products above the level which they could have held in free competition. But they did not have the effect of keeping prices at that level, which had been ordered by the law-making landlords to seiwe as standard prices in such a way as to form the legal limit for the importation of foreign corn. But the leases were made out under the impression created by these normal prices. As soon as the illusion passed away, a new law was made, with new normal prices, which were as much an impotent expression of the greedy land- Preliminaries. 735 lord's phantasy as the old ones. In this way the tenants were cheated from 1815 to the thirties. Hence we have dur- ing all this period the standing subject of agricultural dis- tress. And with it we have during this period the expropri- ation and the ruin of a whole generation of tenants, and the appropriation of their places by a new class of capitalists. -"^^^ A much more general and important fact, however, is the depression of the wages of the actual farm laborers below their normal average, so that a portion of the wages is de- ducted in order to become a part of the lease money and thus flowing into the pockets of the landlord instead of the laborer under the disguise of ground-rent. This is the case quite generally in England and Scotland, with the exception of a few favorably situated counties. The inquiries of the Par- liamentarian Committees into the scale of wages made before the passing of the corn laws in England — so far the most valuable and almost unexploited contributions to a history of wages in the 19th century, and at the same time a monument of disgrace erected for themselves by the English aristocracy and bourgeoisie — proved convincingly and beyond a doubt that the high rates of rent and the corresponding raise in the land prices during the anti- Jacobin wars, were due in part to no other cause but the deductions from wages and the depression of wages even be- low the physical minimum. In other words, a part of the wages had been paid over to the landlords. Various circum- stances such as the depreciation of money, the handling of the poor laws in the agricultural districts, etc., had made these operations possible, at a time when the incomes of the tenants were rising enormously and the landlords amassed fabulous riches. Yes, one of the main arguments for the introduction of the corn laws, used by both tenants and land- lords, was that it was physically impossible to depress the wages of the fann laborers still more. This condition of '-^ See the anti-corn law prize essays. However, the corn laws always kept prices at an artificially higher level. For the better situated tenants this was fa- vorable. They profited by the stationary condition, in which the protective duties kept the great mass of tenants, who relied with or without reason on the excep- tional average price.
^36 Capitalist Production.
things has not been materially altered, and in England as well as in all European countries a portion of the normal wages is absorbed by the ground-rent the same as ever. When Count Shaftsbury, then Lord Ashley, one of the philanthropic aristocrats, was so extraordinarily moved by the condition of the English factory laborers and acted as their spokesman in Parliament during the agitation for a ten hour day, the spokesmen of the industrials got their revenge by publish- ing statistics on the wages of the agricultural laborers in the villages belonging to him (see Volume I, chapter XXV, 5e, The British Agricultural Proletariat), which showed clearly, that a portion of the ground-rent of this philanthropist con- sisted of the loot, which his agents filched for him out of tho wages of the agricultural laborers. This publication is also interesting for the reason, that the facts exposed by it may rank in the same class with the worst exposures made by the Committees in 1814 and 1815. As soon as circumstances permit of a temporary raise in the wages of the agricultural laborers, a cry goes up from the capitalist tenants to the effect that a raising of the wages to their normal level, as custom- ary in other lines of industry, would be impossible and would ruin them, unless ground- rent were reduced at the same time. This is a confession, that the tenants deduct a portion from the wages of the laborers under the name of ground-rent and pay it over to the landlords. For instance, from 1819 to 1859 the wages of the agricultural laborers rose in England through a combination of ovei'^vhelming circumstances, such as the exodus from Ireland, which cut off the supply of agri- cultural laborers coming from that country; an extraordinary absorption of the agi'ieultural population by the factories; a demand for soldiers to go to war; an exceptional emigration to Australia and the United States (California), and other causes which need not be mentioned here. At the same time the average prices of grain fell by more than 16% during this period, with the exception of the poor agricultural years from 1854 to 1856. The tenant capitalists shouted for a re- duction of their rents. They succeeded in single cases. But on the whole they failed to get what they wanted. They