But everything is perishable. The transoceanic steamboats and the railroads of Xorth and South America and India en- abled very peculiar masses of land to enter into competition upon the European grain markets. There were on the one hand the North American prairies, the Argentine pampas, steppes, made fertile for the plow by nature itself, virgin soil, which offered rich harvest for years to come even with a primitive cultivation and without any fertilization. Then there were the lands of the Russian and Indian communes, that had to sell a portion of their product, and an increasing one at that, for the purpose of obtaining money for the taxes wrung from them by the pitiless despotism of the state, very often by means of torture. These products were sold without regard to their cost of production, sold at the price offered by the dealer, because the peasant had to have money under all circumstances when tax paying day came around. And against the competition of the virgin prairie soils and of the Russian and Indian peasants ground down by taxation, the European capitalist farmer and peasant could not stand up at the old rents. A portion of the soil of Europe fell definitely out of the competition for the raising of grain, the rents fell everywhere. Our second case Variant II (falling prices and falling productivity of the additional investment of capital) became the rule for Europe. This accounts for the woes of the landlords from Scotland to Italy, and from vSouthem France to Eastern Prussia. Fortunately all prairie lands Analysis of Differential Rent. 843 have not been taken under cultivation. There are enough of them left to ruin all the great landlords of Europe and the small ones into the bargain. — F. E.]
The heads, under which rent is to be analyzed, are the fol- lowing: A. Differential rent.
1) Meaning of differential rent. Illustration bv water power. Transition to real agricultural rent.
2) Differential rent ISTo. I, arising from different fer- tilities of different pieces of land.
3) Differential rent No. II, arising from successive investments of capital upon the same soil. Differ- ential rent Xo. II is to be analysed a) with a stationary price of production.
b) with a falling price of production.
c) w^th a rising price of production. And furthermore d) the transformation of surplus profit into rent.
4) Influence of this rent upon the rate of profit.
B. Absolute rent.
C. The price of land.
D. Final Remarks concerning ground rent.
As the general result of our analysis of differential rent we come to the following conclusions: 1) The formation of surplus profits may take place in different ways. On the one hand it may come about by the help of differential rent 'No. I, that is, by an investment of the entire agricultural capital upon one soil area consisting of soils of different fertilities. Or, it may come about by means of differential rent No. II, that is by means of the varying differential productivity of successive investments of capital upon the same soil, which signifies here a greater pro- ductivity, say in wheat measured by quarters, thaii is se- cured with the same investment of capital upon the worst 844 Capitalist Production.
rentless soil, which regulates the price of production. But no matter how these surplus profits may arise, their transfor- mation into rents, their transfer from the capitalist farmer to the landlord, always presupposes that tlie various individual prices of production represented by the partial products of the individual capitals invested in succession (independently of the general price of production by which the market is regulated) have previously been reduced to an individual average price of production. The excess of the general reg- ulating price of production of the product of one acre over its individual average price, forms and measures the rent per acre. In differential rent No. I the differential results may be distinguished by themselves, because they take place upon differentiated portions of land lying side by side, with an in- vestment of capital and a degree of cultivation considered normal per acre. In differential rent ISTo. II they must first be made distinguishable; they must in fact be reconverted into differential rent ]^o. I, and this cannot take place in any other but the indicated way. Take for instance Table III, Chapter XLI, 3.
Soil B gives for the first investment of capital 2^ pounds sterling 2 quarters per acre, and for the second equally large one 1^ quarters; together 3^ quarters upon the same acre. These 3| quarters do not show what part of them is a prod- uct of the investment of capital No. I and what part a product of capital ISTo. II, for they are all grown upon the same soil. They are in fact the product of the total capital of 5 pounds sterling; and the actual condition of the matter is that a capi- tal of 2^ pounds sterling produced 2 quarters, and a capital of 5 pounds sterling produced only 3^ quarters, not 4 quar- ters. The case would be just the same, if these 5 pounds sterling were producing 4 quarters, so that the proceeds of both investments of capital would be the same, or even 5 quarters, so that the second investment of capital would yield a surplus of 1 quarter. The price of production of the first 2 quarters is 1^ pounds sterling per quarter, and that of the second 1^ quarters is 2 pounds sterling per quarter. Consequently the 3^ quarters together cost 6 pounds sterling.
Analysis of Differential Rent. 845 This is the individual price of production of the total product, and it makes an average of 1 pound and 14y shillings per quarter, in round figures If pounds sterling. With the aver- age price of production regulated by soil A, namely 3 pounds sterling, this makes a surplus profit of I5 pounds sterling per quarter, and for the total 3^ quarters a surplus profit of 4f pounds sterling. With the average price of production of B this is represented by about 1| quarters. In other words, the surplus profit of B is represented by an aliquot portion of the product of B, by these 1^ quarters, which express the rent in terms of grain, and which under the prevailing price of production sell at 4^ pounds sterling. But on the other hand, the surplus product of one acre of B compared to that of A is not without ceremony a formation of surplus profit, is not offhand a surplus product. According to our assump- tion one acre of B produces 3^ quarters, whereas one acre of A produces only 1 quarter. The surplus of the product of B is, therefore, 2^ quarters, but the surplus product is only 1^ quarters; for the capital invested in B is twice that of A, and for this reason its cost of production is doubled. If soil A should also receive an investment of 5 pounds sterling, and the rate of productivity should remain the same, then the product would amount to 2 quarters instead of 1 quarter, and it would then be seen that the actual surplus product is found, not by a comparison of 3^ with 1, but of 3^ with 2, so that it would be only 1^ quarter, not 2? quarters. Furthermore, if B should invest a third capital of 2^ pounds sterling, which would produce only 1 quarter, so that this quarter would cost 3 pounds sterling, the same as that of A, then its selling price would cover only the cost of production, would yield only the average profit, but not a surplus profit, and would not offer anything that could be converted into rent. The prod- uct per acre of any kind of soil, compared with the product per acre of soil A, shows neither whether it is a product of the same or of a larger investment of capital, nor whether the additional product covers merely the price of production, nor whether it is due to a greater productivity of the additional capital.
846 Capitalist Production.
2) With a decreasing rate of productivity of the additional investments of capital, whose limits, so far as tlie new forma- tion of surplus profit is concerned, is that investment of capi- tal which just covers the cost of production, in other words, which produces one quarter at the same expense as the same investment of capital in one acre of soil A, amounting to 3 pounds sterling according to our assumption, we come to the following conclusions on the basis of what has gone before: That the limit, where the total investment of capital in one acre of B would not yield any more rent, is reached when the individual average price of production of the product per acre of B would rise to the price of production per acre of A.
If B invests only such additional capital as pays just the price of production, but forms no surplus profit, no rent, then this raises only the individual average price of produc- tion per quarter, but does not affect the surplus profit, or eventually the rent, formed by previous investments of cap- ital. For the average j)rice of })roduction always remains under that of A, and when the excess over the price per quar- ter decreases, then the number of quarters increases in the same ratio, so that the total excess over the price remains un- altered.
In the case assumed, the first two invesiments of capital of 5 pounds sterling produce 3^ quarters upon B, which amounts to li quarters of rent, at 4^ pounds sterling, according to our assumption. Now, if a third investment of capital of 2^ pounds sterling is added, which produces only one additional quarter, then the total price of production (including a profit of 20%) of the 4^ quarters is 9 pounds sterling, so that the average price per quarter is 2 pounds sterling. The average price of production per quarter upon B has then risen from I7 pounds sterling to 2 pounds sterling, so- that the surplus profit per quarter, compared with the regulating price of A, has fallen from if- pounds sterling to 1 pound sterling. But 1 X 4^ = 4^ pounds sterling, just as formerly If X 3i = 4^ pounds sterling.
If two more investments of 22 lbs. sterling each were added Analysis of Differential Rent. 847 upon B, and that these investments produce one quarter only at its average price of production, then the total product per acre would be 6^ quarters, and their cost of production 15 ])ounds sterling. The average price of production per quar- ter of B would have risen once more, from 1 pound sterling to 2j^ pound sterling, and the surplus profit per quarter, com- pared with the regulating price of production of A, would have dropped once more, from 1 pound sterling to yg- pound sterling. But these yg- would now have to be calculated upon 6^ quarters instead of 4^ quarters. And y^g- X 6-| = 1 X 4^ ^ 4^ pounds sterling.
The inference from this is, in the first place, that no rais- ing of the regulating price of production is necessary under these circumstances, in order to make possible additional in- vestments of capital even to the point where the additional capital ceases wholly to produce any surplus profit and yields only the average profit. It follows furthermore that the sura of the surplus profit per acre remains the same here, no mat- ter how much the surplus profit per quarter may decrease; this decrease is always balanced by a corresponding increase of the quarters produced per acre. In order that the average price of production may rise to the general price of production (in tliis case to 3 pounds sterling for soil B) it is necessary that additions should be made to the capital, which must have a product of a higher price of production than the regulating one of 3 pounds sterling. But we shall see that this does not suffice without further ado in order to raise the average price of production per quarter of B to the general price of pro- duction of 3 pounds sterling.
Let us assume that soil B produced.
1) 3^ quarters as before at a price of production of 6 pounds sterling; this with two investments of capital of 2^ pounds sterling each, which both fonn surplus profits, but of a decreasing amount.
2) 1 quarter at 3 pounds sterling; an investment of cap- ital, in which the individual price of production shall be equal to the regulating price of production.
3) 1 quarter at 4 pounds sterling; an investment of capi- 848 Capitalist Production.
tal, in which the individual price of production shall be higher by 25% than the regulating price.
We should then have 5^ quarters per acre, at 13 pounds sterling, with an investment of a capital of 10 pounds sterling; this would be four times the original investment of capital, but not quite three times the product of the first in- vestment of capital.
5| quarters per acre at 13 pounds sterling make an aver- age price of production of 2yt pounds sterling, which would give a surplus of xV pound per quarter at the regulating price of production of 3 pounds sterling. This surplus may be converted into rent. 5| quarters sold at the regulating price of production of 3 pounds sterling make 16^ pounds sterling. After deducting the cost of production of 13 pounds sterling a surplus, or rent of 3^ pounds sterling remains, which, cal- culated at the present average price of production per quar- ter of B, that is, at 2 -j^ pounds per quarter, represent ly^2 quarters. The money rent would have fallen by 1 pound sterling, the grain rent by about | quarter, but in spite of the fact that the fourth additional investment upon B does not produce a surplus profit, but even less than the average profit, a surplus profit and a rent still continue to exist. Let us assume that not only the investment of capital as illustrated in No. 3), but also that in No. 2), produce at a cost exceed- ing the regulating price of production, then the total produc- tion is S^ quarters at 6 pounds sterling plus 2 quarters at 8 pounds sterling, total 5| quarters at 14 pounds sterling cost of production. The average price of production per quarter would be 2yT pounds sterling, and it would leave a surplus of ■^ pound sterling. The 5^ quarters, sold at 3 pounds sterling, make 16^ pounds sterling; subtract the 14 pounds sterling of cost of production, and 2| pounds sterling remain for rent. At the present average price of production upon B this would be equivalent to ff quarters. In other words, a rent would still remain, although less than before.
This shows at any rate, that upon the better soils with addi- tional investments of capital, whose product costs more than the regulating price of production, the rent does not disap- Analysis of Differential Rent.
pear, at least not within the bounds of admissible practice, al- though it must decrease, and will do so in proportion, on the one hand, to the aliquot part formed by this unproductive capital in the total investment of capital, on the other hand in proportion to the decrease of its fertility. The average price of its fertility would still stand below the regulating price and would still leave a surplus profit that could be con- verted into rent.
Let us now assume that the average price per quarter of B coincides with the general price of production, in consequence of four successive investments of capital (2^, 2|, 5 and 5 pounds sterling) with a decreasing productivity.
Capital P.St.
Profit P. St.
Yield Qrs.
Cost of Production Selling Price P. St.
Proceeds P. St.
Surplus for Rent per Or. P.St.
Together P.St.
Qrs.
P St.
V2 1 2 1 2 4 6 3 3 6 6 3 3 3 3 6 3 1 3 VA 15 3 6 18 18 The capitalist renter in this case sells every quarter at its individual price of production, and consequently the total number of quarters at their average price of production per quarter, which coincides with the regulating price of 3 pounds sterling. Hence he still makes a profit of 20%, or 3 pounds sterling, upon his capital of 15 pounds sterling. But the rent is gone. What has become of the surplus in this com- pensation of individual prices of production per quarter with the general price of production?
The surplus profit on the first 2| pounds sterling was 3 pounds sterling; on the second 2^ pounds sterling it was li pound sterling; total surplus profit on one-third of the in- vested capital, that is, on 5 pounds sterling, 4| pounds ster- ling, or 90%.
In the case of investment ISTo. 3) the 5 pounds sterling do not only yield no surplus profit, but its product of 1^ quarters, if sold at the general price of production, gives a minus of 1^ pounds sterling. Finally, in the case of in- 3B 850 Capitalist Production.
vestment No. 4), which amounts likewise to 5 pounds sterling, its product of 1 quarter, if sold at the general price of pro- duction, gives a minus of 3 pounds sterling. Both invest- ments of capital together give a minus of 4^ pounds sterling, equal to the surplus profit of 4^ pounds sterling, which was realized on investments Xos. 1) and 2).
The surplus profits and deficits balance one another. Therefore the rent disappears. In fact this is possible only because the elements of surplus-value, which form a surplus profit, or rent, now pass into the formation of the average profit. The capitalist renter makes this average profit of 3 pounds sterling on 15 pounds sterling, or of 20%, at the expense of the rent.
The compensation of the individual average price of pro- duction of B to the general price of production of A, which regulates tlie market, presupposes that the difference, by which the individual price of the product of the first investment of capital stands below the regulating price, is more and more compensated and finally balanced by the difference, by which the product of the subsequent investments of capital stands above the regulating price. What appears as a surplus profit, so long as the product of the first investment of capitals sold by itself, becomes by degrees a part of their average price of production, and thereby enters into the formation of the aver- age profit, until it is finally absorbed in this way.
If only 5 pounds sterling are invested in B, instead of 15 pounds sterling, and if the additional 2^ quarters of the last Table are produced by taking 2| new acres of A under culti- vation with an investment of 2| pounds sterling per acre, then the invested additional capital would amount only to 6| pounds sterling, so that the total investment on A and B for the production of these 6 quarters would be only 11^ pounds sterling instead of 15 pounds sterling, and the total cost of production of these including the profit of 13^ pounds sterling. The 6 quarters would still be sold at 18 pounds sterling, but the investment of capital would have decreased by 3f pounds sterling, and the rent upon B would be 4^ pounds sterling per acre, as before. It would be different, if Analysis of Differential Rent. 851 the production of the additional 2^ quarters would require that inferior soil than A, for instance A — 1, A — 2, should be taken under cultivation; so that the price of production per quarter, for 1^ quarters on soil A — 1 would be 4 pounds sterling, and for the last quarter on soil A — 2 would be 6 pounds sterling. In tliis case these 6 pounds sterling would be the regulating price of production per quarter. The 3^ quarters of B would then be sold at 21 pounds sterling in- stead of 10^ pounds sterling, and this would leave a rent of 15 pounds sterling instead of 4^ pounds sterling, or in grain a rent of 2^ quarters instead of 1^ quarter. In the same way the one quarter on A would now leave a rent of 3 pounds ster- ling, or of ^ quarter.
Before we discuss this point any further, we will pause to make the following observation.
The average price of one quarter of B is compensated and coincides with the general price of production of 3 pounds sterling per quarter, regulated by A, as soon as that portion of the total capital, which produces the excess of 1^ quarter, is balanced by that portion of the total capital, which pro- duces a deficit of 1^ quarter. How soon this compensation is effected, or how much capital with less than average pro- ductivity must be invested in B for that purpose, will de- pend, assuming the surplus productivity of the first invest- ments of capital to be given, upon the relative underproduc- tivity of the later invested capitals, compared with an invest- ment of the same amount upon the worst regulating soil A, or upon the individual price of production of their product, compared with the regulating price.
We now come to the following conclusions from the fore- going: 1) So long as the additional capitals are invested in the same soil with a surplus productivity, even a decreasing one, the absolute rent in grain and money increases per acre, al- though it decreases relatively, in proportion to the advanced capital (in other words, the rate of surplus profit, or rent).
852 Capitalist Production.
The limit is here formed by that additional capital, which yields only the average profit, or the price of production of whose product coincides with the general price of production. The price of production remains the same under these circum- stances, unless the production upon the lesser soils becomes superfluous through an increased supply. Even with a fall- ing price may these additional capitals still produce a surplus profit, though a smaller one, within certain limits.
2) The investment of additional capital, which produces only the average profit, whose surplus productivity is there- fore zero, does not alter anything in the level of the exist- ing surplus profit, and consequently of the rent. The indi- vidual average price per quarter increases thereby upon the superior soils; the surplus per quarter decreases, but the number of quarters, which carry this decreased surplus, in- creases, so that the product remains the same.
3) Additional investments of capital, whose product has an individual price of production exceeding the regulating price, whose surplus productivity is therefore not merely zero, but less than zero, that is, a minus lower than the pro- ductivity of the same investment of capital upon the regulat- ing soil A, bring the individual average price of production of the total product of the superior soil closer to the general price of production, reduce more and more the difference between both, which forms the surplus profit, or rent. More and more of that which forms a surplus profit, or rent, passes over into the formation of the average profit. But neverthe- less the total capital invested in one acre of B continues to yield a surplus profit, although a decreasing one in proportion as the capital with undernormal productivity and the degree of its underproductivity increase. The rent, with an in- creasing capital and increasing production, decreases in this case absolutely per acre, not merely relatively as compared to the increasing size of the invested capital, as in the second case.
The rent cannot disappear, unless the individual average price of production of the total product of the better soil B coincides with the regulating price, so that the entire sur- Analysis of Differential Rent. 853 plus profit of the first more productive investment of capital is consumed in the formation of the average profit.
The minimum limit of the fall for the rent per acre is the point at which it disappears. But this point does not assert itself, as soon as the additional investments of capital work with an underproductivity, but rather as soon as the addi- tional investment of the underproductive capitals becomes so great that their efi^ect paralyzes the overproductivity of the first investments of capital, so that the productivity of the total capital becomes the same as that of A, and the individual average price of the quarter of B the same as that of the quarter of A.
In this case, likewise, the regulating price of production, 3 pounds sterling per quarter, remains the same, although the rent would have disappeared. Only after this point would have been passed, would the price of production have to rise in consequence of an increase of either the degree of under- productivity of the additional capital or of the magnitude of the additional capital of the same underproductivity. For instance, if in the above Table 2^ quarters were produced in- stead of 1^ quarters, at 4 pounds sterling per quarter, upon the same soil, then we should have altogether 7 quarters at 22 pounds sterling cost of production; the quarter would cost uj pounds sterling; it would be j above the general price of production which would have to rise.
For a long time, then, additional capital with underpro- .luctivity, or even increasing underproductivity, might be in- vested, until the individual average price per quarter of the best soils would become equal to the general price of produc- tion, until the excess of the latter over the former, and with it the surplus profit and the rent, would entirely disappear.
And even in this case the disappearance of the rent from the better kinds of soil would only signify that the individual average price of their products would coincide with the general price of production, so that this last price would not have to nse.
In the above illustration, upon soil B, which is there the lowest of the better rent paying soils, 3^ quarters were pro- Capitalist Production.
duced by a capital of 5 pounds sterling with a surplus pro- ductivity, and 2\ quarters by a capital of 10 pounds sterling with underproductivity, together 6 quarters, of which -^^ are produced by the capitals with underproductivity. And only at this point does the individual average price of production of the 6 quarters rise to 3 pounds sterling and coincide with the general price of production.
Under the law of landed property, however, the last 2i quarters could not have been produced in this way at 3 pounds sterling per quarter, with the exception of the case, in which they may be produced upon 2| new acres of the soil A. The case, in which the additional capital produces only at the general price of production, would have been the limit. Beyond it the additional investment of capital would have to cease upon the same soil.
If the capitalist renter once pays 4^ pounds sterling of rent for the first two investments of capital, he must continue to pay them, and every investment of capital, which produces one quarter below 3 pounds sterling, would cause him a de- duction from his profit. The compensation of the individual price of production, in the case of underproductivity, is thereby prevented.
Let us take this case in the previous illustration, in which the price of production of the soil A, at 3 pounds sterling per quarter, regulates the price for B.
Capital P.St.
Profit P. St.
Cost of Production Yield Qrs.
Cost of Production per Qr.
Sellinj per Qr. P. St.
I Price Together P. St.
Surplus Profit P.St Loss P.St.
2^ 2^ 5 5 W2 1 1 3 3 6 6 2 1 2 3 6 3 3 3 3 6 3 IK > 15 4 18 18 4^ The cost of production of the 3^ quarters in the first two investments is likewise 3 pounds sterling per quarter for the capitalist renter, since he has to pay a rent of 4^ pounds sterling, the difference between his individual price of produc tion and the general price of production not flowing into his Analysis of Differential Rent. 855 pocket. In his case, then, the excess of the price of the first two investments of capital cannot serve for the compensation of the deficit incurred in the production of the third and fourth investment of capitah The 1^ quarters in investment No. 3) cost the capitalist renter, with profit included, 6 pounds sterling; but at the regulating price of 3 pounds sterling per quarter he can sell them only for 4| pounds sterling. In other words, he would not only lose his whole profit, but also ^ pound sterling, or 10% of his invested capital of 5 pounds sterling. The loss of profit and capital in the case of investment No. 3) would amount to 1^ pound sterling, and in the case of investment No. 4) 3 pounds sterling, together 4^ pounds sterling, just as much as the rent of the better investments amounts to, whose individual price of production cannot take part in the compensation of the individual average price of production of the total product of B, because its surplus is paid as a rent to some third person.