The rent amounts to zero in this case. The individual price of production of the next better soil B is equal to P', and P is larger than P'; that is P pays more than the actual price of production of the product of the soil B. Now let us assume that P minus P' is d; in this case d, the excess of P over P', is a surplus profit, which the tenant realises upon class B of soil. This d is converted into rent, which must be paid to the landlord. Let the actual price of production of the third class of soil, C, be V, and P minus V" equal to 2d; then this 2d is converted into rent; likewise let the in- dividual price of production of the fourth class of soil, D, be P"', and P minus P"' equal to 3d, which is converted into ground-rent, etc. ISTow take it that the assumption of a rent upon soil A equal to zero and of a price of production equal to P plus zero is wrong. Rather let the class A of soil also pay a rent, equal to r. In that case we come to two conclu- sions.
First: The price of the product of the land of class A would not be regulated by its price of production, but by containing a surplus above it would come to P -1- r. For assuming the capitalist mode of production to be in a normal condition, that is, assuming that the surplus r, which the tenant pays to the landlord, is neither a deduction from wages nor from the average profit of capital, it can be paid only by selling the product above its price of production, so that a surplus profit arises, which the tenant might keep if he did not have to turn it over to the landlord as a rent. In that case the regulating market price of the total product of all soils existing on the market would not be the price of pro- duction, which capital generally makes in all spheres of pro- duction, which is a price equal to the cost of production plus the average profit, but it would be the price of production plus the rent, P -|- r, and not merely P. For the price of the product of soil A expresses generally the limit of the reg- ulating general market price, at which the total product can be supplied, and to that extent it regulates the price of this total product.
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 independ- ent of this law and would show a general increase in the same way as would the price of the products of the soil. It fol- lows, 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 invest- ment of capital in the class A of soils pays the ordinary price of production and yields the ordinary average profit to the cap- italist, then this is sufficient incentive for investing addi- tional capital in soil of class A. In other words, this condi- tion 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 mar- ket 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. For- merly 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 mar- ket. 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 ex- plained out of the fact that the market price satisfies the cap- italist 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 de- cision 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 condi- tions 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 cir- cumstance that the capitalist tenant might invest his cap- ital 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 ten- ant 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 invest- ment 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 pri- vate 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 gTound- rent and would not fall into the hands of the landlord in- stead 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 prac- tical 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 acci- dental.
First: This may take place when the landlord is him- self 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 cap- ital, to capitalist considerations. Such cases occur in prac- tice, but only as exceptions. Just as the capitalist cultiva- tion 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 propri- etors, in other words, if a part of such land must be rented in order to be cultivated at all, then this hypothetical con- ception 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 be- tween 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 cap- ital 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 vir- tually 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 con- tract 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 assump- tion 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 pre- cisely that in which certain pieces of land of class A are in- dependently 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 prod- uct secured in this way nets him only the price of produc- tion 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 por- tion 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 cap- ital 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 invest- ment of capital upon the old leaseholds which do not pro- duce 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 in- vestments 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 culti- vation, pays any rent or not, just as it is immaterial for the organization of a new and independent manufacturing busi- ness 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 mutu- ally 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 cap- ital 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 nor- mal self-expansion of capital upon tbe soil A to be existent, is this sufficient cause for making the investment of such cap- ital 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 mo- nopoly 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 lease- holds 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 de- mand 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 pock- eted 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 compe- tition of new lands would have manifested itself as soon as they could produce just this price of production. The addi- tional investments upon the old leaseholds, which do not pro- duce any rent, would then have to compete with the invest- ments 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 suf- ficiently 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 produc- tion 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 un- der 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 ac- tually 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 pro- duction and resolves itself into surplus profit. This trans- fer of a portion of the price from one individual to another, from the capitalist to the landlord, is due to private prop- erty 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 com- pared 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 coun- try 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 pro- duction, 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 nor- mal 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 produc- tion 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 circum- stance that these lauds are not appropriated, are not brought* under private ownership. It is this which makes the enor- mous 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 posses- sion 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 invest- ment 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 pri- vate 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 cap- italist mode of production in agriculture, nor the form of private property belonging to it, exist, and in which the lat- ter 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 appro- priation 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 ele- mentary form and that its exploitation is not limited by the monopoly of private ownership in land.