That this soil does not have to be very rich, as Ricardo imagines, nor soils of equal fertility have to be cultivated, may be seen from the following: In the state of Michigan 465,900 acres were planted in 1848 with wheat and produced 4,739,300 bushels, or an average of 10^ bushels per acre; de- ducting the seed grain this leaves less than 9 bushels per acre. Of the 29 counties of this state 2 produced an average of 7 bushels, 3 an average of 8 bushels, 2 one of 9, 7 one of 10, 6 one of 11, 3 one of 12, 4 one of 13 bushels, and only one county produced an average of 16 bushels, and another of 18 bushels per acre (L. c, p. 226).
In practical agriculture a higher fertility of the soil coin- cides with a greater immediate utilisation of this fertility. This may be greater in a naturally poor soil tlian in a natu- rally rich one; but it is the kind of soil which a colonist will take up first, and must take up from lack of capital.
4) The extension of cultivation to greater areas — aside from the case just mentioned, in which recourse must be had to inferior soil than that hitherto cultivated — upon the vari- ous classes of soil from A to D, for instance, the cultivation of larger tracts of B and C, does not presuppose by any means a previous rise of the prices of cereals, any more than the annually increasing expansion, for instance of cot- ton spinning, presupposes a continual rise in the price of yarn. Although a considerable rise or fall of market prices affects the volume of production, nevertheless, aside from this, that relative overproduction which is in itself identical with accumulation always takes place even with average prices, whose stand has neither a paralysing nor an excep- tionally stimulating effect upon production. This takes place in agriculture as w^ell as in all other capitalistically managed lines of production. Under different modes of production, this relative overproduction is effected directly First Form of Differential Rent. 787 by the increase of population, and in colonies by continual immigration. The demand increases constantly, and in an- ticipation of this new capital is continually invested in new land, although the products of this land will vary according to circumstances. It is the formation of new capitals, which in itself brings this about. But so far as the individual cap- italist is concerned, he measures the volume of his production by that of his available capital, to the extent that he himself can still superintend it. What he aims at is to occupy as much room as possible on the market. If there is any over- production, he does not blame himself, but his competitors. The individual capitalist may expand his production by ap- propriating a larger aliquot share of the existing market, or by expanding the market itself.
CHAPTER XL.
THE. SECOND FORM OF DIFFERENTIAL RENT.
{Differential Rent 11.)
So far we have considered differential rent only as the re- sult of the different productivity of different investments of capital upon equal areas of land with different fertilities, so that the differential rent was determined by the difference between the yield of the capital invested in the w^orst, rent- less, soil and that of the capital invested in the superior soils. Here we had the invested capitals side by side upon different areas of land, so that every new investment of capital sig-ni- fied a more extensive cultivation of the soil, an expansion of the cultivated area. But in the last analysis the differential rent was by its nature merely the result of the different pro- ductivity of equal capitals invested in land.
But could it make any difference, perhaps, whether masses of capital of different productivities are invested successively on the same piece of land, or side by side on different pieces of land, provided that the results are the same?
788 Capitalist Production.
In the first place, it cannot be denied that it is immaterial, so far as the fomiatiou of surplus profit is concerned, whether 3 pounds sterling of cost of production are invested in one acre of A and yield one-quarter of wheat, so that 3 pounds sterling are the price of production and regulating market price of 1 quarter, while 3 pounds sterling of cost of produc- tion applied to one acre of B give 2 quarters, and with them a surplus profit of 3 pounds sterling, while in the same way 3 pounds sterling of cost of production applied to one acre of C give 3 quarters and 6 pounds sterling of surplus profit, and finally 3 pounds sterling of cost of production applied to one acre of D give 4 quarters and 9 pounds sterling of surplus profit; or whether the same result is accomplished by apply- ing these 12 pounds sterling of cost of production, or 10 pounds sterling of capital, with the same results and in the same succession upon one and the same acre. It is in either case a capital of 10 pounds sterling, a part of whose succes- sively invested shares of a value of 2^ pounds sterling each, whether invested in four acres of different fertility side by side, or successively upon one and the same acre, does not yield any surplus profit on account of their different products, whereas the other parts yield a surplus profit in propor- tion to the difference of their yield from that of the rentless investment.
The surplus profits and the various rates of surplus profit for different parts of the value of capital are formed in the same way in either case. And the rent is nothing but a form of this surplus profit, which constitutes its substance. But at any rate, there are some difficulties in this second method in the way of the transformation of surplus profit into rent, of this change of form, which implies the transfer of the sur- plus profit from the capitalist tenant to the owner of the land. This accounts for the obstinate resistance of the English ten- ants to an official statistics of agriculture. It accounts for the struggle between them and the landlords over the ascer- tainment of the actual results of an investment of capital (Morton). For the rent is fixed when the lease for the land is made out, and after that the surplus profits arising from Second Form of Differential Rent. 789 excessive investments of capital flov^^ into the pockets of the tenant so long as the lease lasts. Therefore the tenants fought for long leases, and on the other hand the landlords enforced by their superior numbers an increase of the tenancies at will, which could be cancelled annually.
It is evident from the outset that even though it is immate- rial for the law forming the surplus profit, whether equal capi- tals are invested with unequal results side by side upon equal areas of land, or whether they are invested successively on the same land, it does make a considerable difference for the conversion of surplus profit into ground-rent. The latter method confines this conversion within boundaries, which are narrower on one side and less definite on the other. For this reason the business of the tax assessor, as Morton shows in his " Resources of Estates," becomes a very important, com- plicated and difficult profession in countries with an inten- sive cultivation (and economically we mean by intensive cul- tivation nothing else but the concentration of capital upon the same piece of land, instead of its distribution over ad- joining pieces of land). If the improvements of the soil are of the more permanent kind, the artificially raised dif- ferential fertility of the soil coincides with its natural fer- tility as soon as the lease expires, and this leads to the assess- ment of the rent by the basis of that which is due to the mere differences of fertility in different soils generally. On the other hand, so far as the formation of surplus profit is determined by the magnitude of the working capital, the amount of the rent paid by a certain amount of capital is added to the average rent of the country and care is taken that the new tenant commands sufficient capital to continue cultiva- tion in the same intensive manner.
In the study of differential rent II, the following points must be noted: 1) Its basis and point of departure, not merely historic- ally, but even as concerns its movements at any given period, is differential rent I, that is the simultaneous cultivation side 790 Capitalist Production.
by side of soils of different fertility and location; in other words the simultaneous application, side by side, of different portions of the total agricultural capital upon soil areas of different quality.
Historically this is a matter of course. In colonics the colonists have but little capital to invest. The j^^'i^^cipal agents of production are labor and land. Every individual head of a family seeks to acquire for himself and his, an in- dependent field of employment, apart from that of his fellow colonists. This must be generally the case even under pre- capitalist modes of production in agriculture proper. In the case of sheep pastures, and generally of cattle raising as an independent line of production, the exploitation of the soil is more or less collective, and it is extensive from the outset. The capitalist mode of production starts out from former modes of production, in which the means of production are actually or legally the property of the tiller himself, in which agriculture is carried on by professionals. jSTaturally this mode of agriculture gives way but gradually to the concen- tration of means of production and their transformation into capital with a simultaneous change of direct producers into wage workers. So far as the capitalist mode of production asserts itself here in a typical manner, it does so at first mainly in sheep pastures and cattle raising; after that it does not assert itself by a concentration of capital upon a relatively small area of land, but in production on a larger scale, so that the expense of keeping horses and other costs of production may be saved; but in fact not by, investing more capital in the same land. It is furthermore in the na- ture of field tillage that capital, which implies at this stage also the means of production already produced, should be- come the dominating element of agriculture, when cultivation has reached a certain hight and the soil has become corre- spondingly exhausted. So long as the tilled land constitutes a small area compared to the untilled, and so long as the strength of the soil has not been exhausted (and this is the case so long as cattle raising prevails with meat as the staple food, before agriculture proper and plant food have become Second Form of Differential Rent. 791 dominant), the beginnings of the new mode of production show their opposition to peasants' economy mainly by large tracts of land which are tilled for the account of some cap- italist, in other words, the new mode of production itself starts out with an extensive application of capital to larger areas of land. It should therefore be remembered from the outset, that differential rent No. I is the historical basis from which a start is made. On the other hand, the movement of differential rent No. II puts in its appearance at any given moment only upon a territory, which is itself but the varie- gated basis of differential rent No. I.
2) In differential rent No. II, the differences in the dis- tribution of capital (and of the ability to get credit) among tenants are added to the differences in fertility. In manu- facture proper, each line of business rapidly develops its own minimum volume of business and a corresponding minimum of capital, below which no individual business can be carried on successfully. In the same way each line of business de- velops, above this minimum, a normal size of capital, which the mass of producers must be able to command and do com- mand. Whatever exceeds this, can form extra profits; what- ever is below this, does not get the average profit. The cap- italist mode of production invades agriculture but slowly and unevenly, as may be seen in England, the classic land of the capitalist mode of production in agriculture. To the extent that no free importation of cereals exists, or that its effect is but limited, because its volume is small, the producers working upon inferior soil and thus with worse than average conditions of production determine the market price. A large portion of the total mass of capital invested in husbandry and available for it is in their hands.
It is true that the farmer spends much labor on his small plot of land. But it is labor isolated from the objective so- cial and material conditions of productivity, labor robbed and stripped of these conditions.
This circumstance makes it possible for the real capitalist tenants to appropriate a portion of the surplus profit; this would not be so, at least so far as this point is concerned, if 792 Capitalist Production.
the capitalist mode of production were as uniformly devel- oped in agi'iculture as in manufacture.
Let us first consider tlie formation of surplus profit in differential rent Xo. II, without taking notice for the present of the conditions under which the conversion of this surplus profit into ground rent may take j^lace.
It is evident, in that case, that differential rent Xo. II is but a different expression of differential rent No. I, but that it coincides with it in substance. The different fertility of the various kinds of soil exerts its influence in the case of differential rent No. I only to the extent that it brings about unequal results of the capitals invested in the soil, so that the products of equal capitals, or of equal aliquot parts of unequal capitals, are unequal. Whether this inequality takes place for different capitals invested successively in the same land, or for capitals invested in various tracts of different classes of soil, cannot alter anything in the differences of fertility, or in the differences of their products, nor in the formation of the differential rent for the more productively invested parts of capital. It is still the soil which shows different fertilities with the same investment of capitals, only that in this case tlie same soil does for a capital successively invested in different portions what different kinds of soil do in the case of differential rent No. I for various equally large portions of social capital invested in them.
If the same capital of 10 pounds sterling, which is shown by Table I to be invested in the shape of separate capitals of 2| pounds sterling by different tenants in one acre of each of the soils A, B, C and D, were invested successively in one and the same acre D, so that its first investment yielded 4 quarters, the second 3 quarters, the third 2 quarters and the fourth 1 quarter (or vice versa), then the price of the 1 quar- ter, which is furnished by the least productive capital, namely the price of 3 pounds sterling, would not pay any differential rent, but would determine the price of production, so long as the supply of wheat with a price of production of 3 pounds sterling would be needed. And since our assumption is that the capitalist mode of production prevails, so that the price of 3 Second Form of Differential Rent. 793 pounds sterling includes the average profit made by a capital of 24 pounds sterling generally, the other three portions of capital of 2^ pounds sterling each will make surplus profits accord- ing to the difference of their product, since this product is not sold at their own price of production, but at the price of pro- duction of the least productive investment of 2| pounds ster- ling, which does not pay any rent and whose price of produc- tion is determined by the general law of prices of production. The formation of the surplus profits would be the same as in Table I.
We see here once more that differential rent ITo. II is con- ditioned upon differential rent No. I. The minimum prod- uct raised by a capital of 2^ pounds sterling upon the worst soil is here assumed to be 1 quarter. Take it then that the tenant using soil of class D invests in this same soil, aside from the 2^ pounds sterling which raise 4 quarters and pay a differential rent of 3 quarters, still another capital of 2h pounds sterling, which raise only 1 quarter, like the same capital upon the worst soil A. This would be a rentless in- vestment, which would pay him only the average profit. There would be no surplus profit, which could be converted into rent. On the other hand, this decreasing yield of the second investment of capital in D would not have any influ- ence on the rate of profit. It would be the same as though 2^ pounds sterling had been invested in another acre of the soil of class A, a. circumstance which would in no way affect the surplus profit, nor for that reason the differential rent of the classes A, B, C, and D. But for the tenant this ad- ditional investment of 2^ pounds sterling in D would have been quite as profitable as the investment of the original 2^ pounds sterling had been per acre of D, according to our assumption, although this had raised 4 quarters. Furthermore, if two other investments of 2^ pounds sterling each should yield an additional product of 3 quarters and 2 quarters re- spectively, another decrease would have taken place compared wuth the product of the first investment of 2^ pounds ster- ling in D, wdiich amounted to 4 quarters and paid a surplus profit of 3 quarters. But it would be merely a decrease in 794 Capitalist Production.
the amount of surplus profit, and would not affect either the average profit or the' regulating price of production. It would have such an effect only if the additional production yielding this decreasing surplus profit should make the pro- duction upon A superfluous and throw class A out of cultiva- tion. In that case the decreasing fertility of the additional investments of caj^ital in class D would be accompanied by a fall of the price of production, for instance from 3 pounds sterling to 1^ pounds sterling, and the class B would become the rentless regulator of the market price.
The product of D would now be 4 + 1 + 3 + 2 = 10 quarters, whereas it was only 4 quarters formerly. But the price per quarter as regulated by B would have fallen to 1^ pounds sterling. The difference between D and B would be 10 — 2 = 8 quarters, at 1^ pounds sterling per quarter, or 12 pounds sterling, whereas the money rent in D used to be 9 pounds sterling. This should be noted. Calculated per acre, the amount of the rent would have risen by 33^% in spite of the decreasing rate of the surplus profits on the two additional capitals of 2^ pounds sterling each.
We see by this to what highly complicated combinations differential rent in general, and particularly form II coupled with form I, may give rise, whereas Ricardo, for instance, treats it very onesidedly and as a simple matter. One may meet, as in the above case, with a fall of the regulating mar- ket price and at the same time with a rise of the rent upon superior soils, so that both the absolute product and the abso- lute surplus product grow. (In differential rent No. I, in a descending line, the relative surplus product and thus the rent per acre may increase, although the absolute surplus product per acre may remain constant or even decrease.) But at the same time the fertility of the investments of capital made successively in the same soil decreases, although a large portion of them falls upon the superior lands. From a certain point of view — both as concerns the product and the prices of production — the productivity of labor has risen. But from another point of view it has decreased, because the rate of surplus profit and the surplus product per acre de- Second Form of Differential Rent. 795 crease for the various investments of capital in tlie same soil. Differential rent ITo. II, with a decreasing fertility of the successive investments of capital, would be necessarily accom- panied with a rise of the price of production and an absolute decrease of the productivity only in the case that these in- vestments of capital could be made on none but the worst soil A. If one acre of A, which raised with an investment of a capital of 2^ pounds sterling 1 quarter at a price of produc- tion of 3 pounds sterling, should raise only a total of 1^ quar- ters with an additional investment of 2^ pounds sterling, or a total investment of 5 pounds sterling, then the price of pro- duction of this 1^ quarter would be 6 pounds sterling, or that of one quarter 4 pounds sterling. Every decrease of the productivity with a growing investment of capital would im- ply a relative decrease of the product per acre in such a case, whereas it would signify only a decrease of the surplus prod- uct upon superior soils.
The nature of the matter will carry with it the fact that with the development of intensive culture, i. e., with succes- sive investments of capital upon the same soil, mainly the superior soils will show this tendency, or will show it to a greater degree. (We are not speaking now of permanent im- provements, by which a hitherto useless soil is converted into useful soil.) The decreasing fertility of the successive in- vestments of capital must, therefore, have principally the effect indicated above. The better soil is chosen, because it offers the best prospects that the capital invested in it will be profitable, since this soil contains the greater quantity of the useful elements of fertility, which need but be utilised.
When after the abolition of the corn laws the cultivation in England was made still more intensive, a great deal of the former wheat land was used for other purposes, particularly for cattle pastures, while the tracts best adapted t o wheat and fertile were drained and otherwise improved. The cap- ital for wheat culture was thus concentrated into a more lim- ited area.
In this case — and all possible surplus rates between the highest surplus product of the best soil and the product of 796 Capitalist Production.
the rentless soil A coincide here, not with a relative, but with an absolute increase of the surplus product per acre — the newly formed surplus profit (eventually rent) does not rep- resent a portion of a former average profit converted into rent (not a portion of the product in which the average profit formerly incorporated itself) but an additional surplus profit, which converted itself out of this form into rent.
Only in the case in which the demand for cereals would in- crease to such an extent, that the market price would rise above the price of production of A, so that for this reason the surplus product of A, B, or any other class of soil could be supplied only at a higher price than 3 pounds sterling, would the decrease of the results of an additional investment of cap- ital in A, B, C and D be accompanied by a rise of the price of production and of the regulating market price. To the extent that this would last for a certain length of time with- out calling forth the cultivation of additional soil (which should be at least of the quality of A), or without bringing on a cheaper supply through other circumstances, wages would rise in consequence of the dearness of bread, other circum- stances remaining the same, and the rate of profit would fall accordingly. In this case it would be immaterial, whetlier the increased demand w^ould be satisfied by drawing upon in- ferior soil than A, or by additional investments of capital, no matter upon which of the four classes of soil. Differential rent would then rise in connection with a falling rate of profit.
This one case, in which the decreasing fertility of addi- tional capitals invested in already cultivated soils may lead to an increase of the price of production, a fall in the rate of profit, and a formation of higher differential rents — for this rent would rise under the given circumstances upon all classes of soil just as tliough inferior soil than A were regulating the market — has been stamped by Ricardo as the only case, the normal case, to which he reduces the entire formation of differential rent Ko. II.
This would also be the case, if only the class A of soils were cultivated, and if successive investments of capital upon it Second Form of Differential Rent. 797 were not accompanied by a proportional increase of the product.
Here then differential rent No, I is entirely lost sight of when analysing differential rent No. II.
With the exception of this case, in which the supply from the cultivated classes of soil is insufficient, so that the market price stands continually higher than the price of production, until new soil of an inferior character is taken under culti- vation in addition to the others, or until the total product of the additional capitals invested ia the various classes of soil can be supplied only at a higher price of production than the hitherto customary one, with the exception of this case the proportional decrease in the productivity of the additional capitals leaves the regulating price of production and tlie rate of profit unchanged. For the rest three cases are possible.
a) If the additional capital upon any one of the classes of soil A, B, C or D yields only the rate of profit determined by the price of production of A, then no surplus profit, and therefore no rent, is formed, any more than there would be, if additional soil of the A class had been cultivated.
b) If the additional capital yields a larger product, then a new surplus profit (potential rent) is, of course, formed, provided the regulating price remains the same. This is not necessarily the case, namely it is not the case when this ad- ditional production throws the soil A out of cultivation and thus out of the succession of the competing soils. In tliis case the regulating price of production falls. The rate of profit would rise, if a fall in wages were connected with this, or if the cheaper product were to enter into the constant capi- tal as one of its elements. If the increased productivity of the additional capital had taken place upon the best soils C and D, it would depend entirely upon the degree of the in- creased productivity and the mass of the additional capitals to what extent a formation of increased surplus profit (and thus increased rent) would be connected with the fall in prices and the rise of the rate of profit. This rate may also rise without a fall in wages, by a cheapening of the ele- ments of constant capital.
ygS Capitalist Production.
c) If the additional investment of capital takes place with decreasing surplus profits, but in such a waj that the product of such additional investment still leaves a surplus above the product of the same capital in A, a new formation of surplus profits takes place under all circumstances, unless the increased supply throws the soil A out of cultivation. This new formation of surplus profit may take place simultaneously upon all four soils, D, C, B and A. But if the worst soil A is crowded out of cultivation, then the regulating price of production falls, and it will depend upon the projwrtion be- tween the reduced price of 1 quarter and the increased num- ber of quarters yielding a surplus profit, whether the surplus profit expressed in money, and consequently the differential rent, shall rise or fall. But at any rate we meet here with the peculiarity, that in spite of decreasing surplus profits of suc- cessive investments of capital the price of production may fall, instead of rising, as it seems it ought to do at first sight.