The mere legal property in land does not create any ground- 1^* Wakefield, England and America, London, 1S33. Compare also Capilrl, Volume I, Chapter XXVII.
rent for the landlord. But it gives him the power to with- draw his land from exploitation until the economic conditions permit him to utilize it in such a way that it will yield him a surplus, whenever the land is used either for agricul- ture proper or for other productive purposes, such as build- ings, etc. He cannot increase or decrease the absolute quan- tity of its field of employment, but he can do so with its mar- ketable quantity. For this reason, as Fourier has already remarked, a characteristic fact in all civilized countries is that a comparatively considerable portion of the land always remains uncultivated.
Assuming, then, that the demand requires the opening up of new lands, and that these lands are less fertile than those hitherto cultivated, will the landlord rent such lands for nothing, just because the market price of the products of the soil has risen high enough to pay to the tenant the price of production on his investment in this land and enable him to reap the average profit? By no means. The investment of capital must net him a rent. He does not rent his land un- til he can get lease money for it. Therefore the market price must have risen above price of production to the point P -|- r, so that a rent can be paid to the landlord. Since the real estate does not net any income, according to our assump- tion, until it is rented, so that it is economically valueless until then, a small rise of the market price above the price of production will suffice to bring the new land of the worst class upon the market.
The question is now: Does it follow from the ground-rent of the worst soil, which cannot be derived from any differ- ence of fertility, that the price of the products of the soil is necessarily a monopoly price in the ordinary meaning of the term, or a price, into which the rent enters like a tax, only with the distinction that the landlord levies the tax instead of the state? It is a matter of course that this tax has certain definite economic limits. It is limited by the additional in- vestments of capital upon the old leaseholds, by the competi- tion of the products of the soil of foreign countries, which are imported free of duty, by the competition of the land- ^8o Capitalist Production.
lords among themselves, and finally by the wants and the solvency of the consumei's. But this is not the point. The point is whether the rent paid by the worst soil passes into the price of its products, which price regulates the general market price according to our assumption, and whether it enters into this price in the same way as a tax enters into the price of commodities which are dutiable, in other words, whether this rent enters into the price as an element inde- pendent of its value.
This does not necessarily follow by any means, and the con- tention that it does has been made only because the distinc- tion between the value of commodities and their price of pro- duction had not been understood up to the present. We have seen that the price of production of a commodity is by no means identical with its value, although the prices of pro- duction of all commodities, considered as a whole, are regu- lated only by their total value, and although the movement of the prices of production of the various kinds of commodities, taking all other circumstances as equal, is controlled exclu- sively by the movement of their values. It has been demon- strated that the price of production of a commodity may stand above or below its value, and coincides but rarely with its value. Hence the fact that the products of the soil are sold above their prices of production does not prove by any means that they are sold above their values. I^either does the fact that the products of industry are, on an average sold at their prices of production, prove that they are sold at their values. It is possible that the products of agriculture are sold above their price of production and below their value, while many products of industry bring the price of production only because they are sold above their value.
The relation of the price of production of a certain com- modity to its value is exclusively determined by the propor- tion, in which the variable part of the capital with which it is produced stands to its constant part, or by the organic composition of the capital producing it. If the composition of the capital in a certain sphere of production is lower than that of the social average capital, in other words, if its variable portion, which is used for wages, is relatively larger than its constant portion, which is invested in material require- ments of production, compared to the social average capital, then the value of its products must stand above their price of production. In other words, such a capital, employing more living labor, produces at the same rate of exploitation of labor more surplus-value, and therefore more profit, than an equally large aliquot portion of the social average capital. The value of its products stands, therefore, above their price of production, since this price of production is equal to the cost of production plus the average profit, and the average profit is lower than the profit produced in these commodities. The surplus-value produced by the social average capital is smaller than that produced by a capital of this lower composition. On the other hand, when the capital invested in a certain sphere of production is of higher than average composition, then the case is rever-sed. The value of the commodities pro- duced by it stands below their price of production, and this is generally the case with the products of the most highly develo])ed industries.
If the capital in a certain sphere of production is of a lower composition than the social average capital, then this is primarily an expression of the fact that the productive power of the social labor in this particular sphere of produc- tion is below the average; for the prevailing degree of pro- ductive power shows itself in the relative preponderance of the constant over the variable capital, or in the continual decrease of the portion used in a certain capital for wages. On the other hand, if the capital in a certain sphere of pro- duction is of a higher composition, then it expresses a devel- opment of the productive power above the average.
Leaving aside the work of artists, which is naturally ex- cluded from our discussion, it is a matter of course that dif- ferent spheres of production require different proportions of constant and variable capital according to their technical pe- culiarities, and that living labor must occupy more room in some, less room in others. Tor instance, in the extractive industries, which must be clearly distinguished from agri- 3D 882 Capitalist Production.
culture, raw material as an element of constant capital is wholly absent, and even the auxiliary material plays only rarely an important role in them. Nevertheless the progress J of development may be measured also in them by the relative increase of the constant over the variable capital.
If the composition of the capital in agriculture proper is lower than that of the social average capital, then this would be on its face an expression of the fact that in countries with a developed production agriculture has not progTcssed as far as the industries which work up its products. This fact could be explained, aside from all other economic circum- stances which are of paramount importance, from the earlier and more rapid development of mechanical sciences, and especially by their application, compared to the later and partly quite recent development of chemistry, geology and physiology, and particularly their application to agriculture. For the rest it is an indubitable and long known fact^"^ that also the progress of agriculture expresses itself steadily in a relative increase of the constant over the variable capital. Whether in a certain country with capitalist production, for instance in England, the composition of the agricultural cap- ital is lower than that of the social average capital, is a ques- tion which can be decided only by statistics, and which need not be discussed in detail for the purposes of this inquiry. So much is theoretically accepted that the value of the agri- cultural products cannot be higher than their price of production unless this condition obtains. In other words, a capital of a certain size in agriculture produces more surplus- value, or what amounts to the same, sets in motion and com- mands more surplus-labor (and with it employs more living labor) than a capital of the same size in industry of social average composition.
This assumption, then, suffices for that form of rent which we are analyzing here, and which can take place only so long as this assumption holds good. Wherever this assumption falls, the form of rent corresponding to it falls likewise.
However, the mere fact of an excess of the value of agri- ^** See Dombasle and R. Jones.
cultural products over their price of production would not suffice in itself for the explanation of the existence of a ground-rent, which is independent of differences of fertility or of successive investments of capital upon the same land, a rent which is to be clearly differentiated from differential rent, and which we may therefore call absolute rent. Quite a number of manufactured products have the peculiarity that their value is higher than their price of production, and yet they do not produce any excess above the average profit, a surplus profit, which might be converted into rent. On the other hand, the existence and meaning of the price of production and of the average rate of profit which it implies rest upon the fact that the individual commodities are not sold at their value. The prices of production arise from an equalization of the values of commodities. This equaliza- tion after restoring their respective capital values to the vari- ous spheres of production, in which they were consumed, distributes the entire surplus-value, not in proportion as it has been produced in the individual spheres of pro- duction and incorporated in their commodities, but in proportion to the magiiitude of the capital invested in them. Only in this way is an average profit brought about and with it the price of production, whose character- istic element this average profit is. It is the continual tendency of the capitals to bring about this equalization in the distribution of the surplus-value produced by the total capital by means of competition, and to overcome all obstacles to this equalization. This implies the tendency to permit only such surplus profits as arise under all circumstances. not from differences between the values and the prices of production of the commodities, but rather from the general prices of production, which regulates the market and from the individual prices of production, which differ from it. In other words, only such surplus profits are tolerated, which occur within a certain sphere of production and not such y^ occur between two different spheres of production, so that they do not touch the general prices of production of the dif- ferent spheres, or their general rate of profit, but which 884 Capitalist Production.
rather have for their basis the conversion of values into prices of production and into an average rate of profit for the vi^hole. This condition rests, however, as previously exj)lained, upon the continually changing proportional distribution of the total social capital among the various spheres of production, upon the unremitting emigration and immigration of cap- itals, upon their transfer from one sphere to another, in short upon their free movement between the various spheres of production, which represent so many available fields of in- vestment for the independent constituents of the total cap- ital of society. And the other assumption in this case is that no barrier, or at least only a temporary and accidental bar- rier, interferes with the competition of the capitals, for in- stance in some sphere of production, in which the value of the commodities is higher than their prices of production, or where the produced surplus-value is larger than the average profit, so that nothing prevents the reduction of value to a price of production and the proportional distribution of the excess of surplus-value of this sphere of production among all spheres exploited by capital. But if the reverse hap- pens, if capital meets some foreign power, which it cannot overcome, or which it can but partially overcome, and which limits its investment in certain spheres, admitting it only un- der conditions which wholly or partly exclude that general equalization of surplus-value to an average profit, then it is evident that the excess of the value of commodities in such spheres of production over their prices of production would give rise to a surplus profit, which could be converted into rent and made independent as such compared to profit. Such a foreign power is private o^\Tiership of land, when it builds obstacles against capital in its endeavor to invest in land, such a power is the landlord in his relation to the capitalist. Private property in land is then the barrier which does not permit any new investment of capital upon hitherto unculti- vated or unrented land without levying a tax, in other words, without demanding a rent, although the land to be taken under new cultivation may belong to a class which does not produce any differential rent, and which, were it not for the intervention of private property in land, might have been culti- vated at a small increase in the market price, so that the regulating market price would have netted to the cultivator of this worst soil nothing but his price of production. But on account of the barrier raised by private property in land, the market price.must rise to a point, where the land can pay a surplus over the price of production, in other words, where it can pay a rent. JSTow, since the value of the com- modities produced by agricultural caj)ital is higher than their price of production, as we have assumed, this rent (with the exception of one case which we shall discuss immediately) forms the excess of the value over the price of production, or a part of it. Whether the rent consumes the entire dif- ference between the value and the price of production, or only a greater or smaller part of it, will depend wholly upon the relation between supply and demand and upon the area of the new land taken in cultivation. So long as the rent is not equal to the excess of the value of agricultural prod- ucts over their price of production, a portion of this excess would always enter into the general equalization and pro- portional distribution of all surplus-value among the various individual capitals. As soon as the rent is equal to the ex- cess of the value over the price of production, this entire por- tion of the surplus-value over and above the average profit would be withdra^vn from the equalization. But whether this absolute rent is equal to the whole surplus of value over the price of production, or only equal to a part of it, the agri- cultural jDroducts would always be sold at a monopoly price, not because their price would exceed their value, but because their price would be equal to their value, or because their price would be lower than their value but higher than their price of production. Their monopoly would consist in the fact that they are not, like other prod- ucts of industry whose value is higher than the general price of production, leveled to the plane of the price of production. Since one portion of the value and of the price of produc- tion is an actually existing constant element, namely the cost price, representing the capital k consumed in production, their 886 Capitalist Production.
difference consists in the other, the variable, portion, the sur- plus-value, which amounts to p in the price of production, that is, to the profit which is equal to the total surplus-value calculated on the social capital and on every individual cap- ital as an aliquot part of the social capital. This profit equals in the value of commodities the actual surplus-value created by this particular capital, and forms an integral part of the value of commodities created by this capital. If the value of commodities is higher than their price of produc- tion, then the price of production is k -|- p, the value k + p -j- d, so that p + d represents the surplus-value contained in it. The difference between the value and the price of pro- duction is, therefore, equal to d, the excess of the surplus- value created by this capital over the surplus-value assigned to it by the average rate of profit. It follows from this that the price of agricultural products may stand higher than their price of production, without reaching up to their value. It follows, furthermore, that up to a certain point a perma- nent increase in the price of agricultural products may take place, before their price reaches their value. It follows also that the excess in the value of agricultural products over their price of production can become a determining element of their general market price only because there is a monop- oly in private ownership of land. It follows, finally, that in this case the increase in the price of the product is not the cause of the rent, but rather the rent is the cause of the in- crease in the price of the product. If the price of the prod- uct of the unit of the worst soil is equal to P + r, then all differential rents will rise by the corresponding multiples of r, since the assumption is that P -1- r becomes the regidating market price.
If the average composition of the non-agricultural capital were 85 c + 15 v, and the rate of surplus-value 100%, then the price of production would be 115. If the composition of the agricultural capital were 75 c + 25 v, and the rate of surplus-value the same^ then the value of the agricultural product and the regulating market price would be 125. If the agricultural and the non-agricultural product should be leveled to the same average price (we assume for the sake of brevity that the total capital in both lines of production is equal), then the total surplus-value would be 40, or 20%, upon the 200 of capital. The product of the one as of the other would be sold at 120. In the equalization into the prices of production the average market prices of the non-agricul- tural capital would stand above, and those of the agricultural capital below their value. If the agricultural products were sold at their full value, they would stand higher by 5, and the industrial products lower by 5, than they do in the equal- ization. If the market conditions do not permit the sale of the agricultural products at their full value, at the full sur- plus above the price of production, then the result hangs be- tween the two extremes; the industrial products would be sold a little above their value, arid the agricultural products a little above their price of production.
Although the private ownership of land may drive the price of the products of the soil above their price of produc- tion, it does not depend upon this ownership, but upon the general condition of the market, to what extent the market price shall exceed the price of production and approach the value, and to what extent the surplus-value created in agri- culture over and above the given average profit shall either be converted into rent or enter into the general equalization of the surplus-value to an average profit. At any rate this absolute rent, which arises out of the excess of value over the price of production, is but a portion of the agricultural surplus-value, a conversion of this surplus-value into rent, its appropriation by the landlord; so does the differential rent arise out of the conversion of surplus-profit into rent, its ap- propriation by the landlord, under an average price of pro- duction which acts as a regulator. These two forms of rent are the only normal ones. Outside of them the rent can rest only upon an actual monopoly price, w^hich is determined neither by the price of production nor by the value of com- modities, but by the needs and the solvency of the buyers. Its analysis belongs in the theory of competition, where the actual movement of market-prices is considered.
888 Capitalist Production.
If all the land suitable for agriculture in a certain coun try were leased — assuming the capitalist mode of produc- tion and normal conditions to be general — then there would not be any soil that would not pay any rent; but there might be certain parts of some capitals invested in land that might not produce any rent. For as soon as the land has been rented, private property in land ceases to be an absolute bar- rier against the investment of the necessary capital. Still it continues to act as a relative barrier even after that, to the extent that the appropriation of the capital incorporated in the soil by the landlord draws very definite lines for the ac- tivity of the tenant. Only in this case would all rent be converted into a differential rent, although this would not be a differential rent determined by any differences in the fer- tility of the soil, but rather by differences between the sur- plus profits arising from the last investments of capital in a certain soil and the rent paid for the lease of the soil of the worst quality. Private property in land serves as an abso- lute barrier to the investment of capital only to the extent that it exacts a tribute for the permission of giving access to the land. As soon as this access has been gained, it can no longer set any absolute obstacles in the way of the size of any investment of capital in a certain soil. The building of houses meets a barrier in the private ownership of the land upon which the houses are to be built by people who do not own this land. But after this land has once been leased for the purpose of building houses on it, it depends upon the ten- ant whether he wants to build a large or a small house.