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Notes on Marx and Ground Rent

Marx’s theory of rent sets out to explain that under capitalism, landed property is a source of unearned income going to the landlord by claiming a right over a portion of surplus value.

Surplus value is extracted from the working class during the productive process.

Marx was forced to give over a great deal of time to the question of rent, which he thought was of secondary importance because:

Without this, our analysis of capital would not be complete”, (VOLUME III Chapter 37, Introduction p. 752)

Marx had little time for the rentier:

…by the palpable and complete passivity displayed by the owner, whose activity consists simply in exploiting advances in social development (particularly in the case of mines). Towards which he does not contribute and in which he risks nothing, unlike the industrial capitalist; finally, by the prevalence of a monopoly price in many cases, and particularly the most shameless exploitation of poverty (for poverty is more fruitful source for house-rent than the mines of Potosi were for Spain, the tremendous power this gives landed property when it is combined together with industrial capital in the same hands enables capital practically to exclude workers engaged in a struggle over wages from the very earth itself as their habitat. One section of society here demands a tribute from the other for the very right to live ion the earth, just as landed property in general involves the right of the proprietors to exploit the earth’s surface, the bowels of the earth, the air and thereby the maintenance and development of life (CAPITAL VOLUME III Chapter 46: Rent of Buildings, Rent of Mines. Price of Land p. 908 -909)

Marx was confronted, when he began his study on rent, with a theory of rent already developed by Adam Smith and David Ricardo.

The Political Economist, David Ricardo, was wrong in thinking that ground rent necessarily implies a gradual cultivation of worse and worse land, an idea uncritically taken over later by Henry George and his followers.

Ricardo’s theory of ground rent was superficial in that he believed that economic rent:

…is always the difference between the produce obtained by the employment of two equal quantities of capital and labour

And that:

…whatever diminishes the inequality of the produce obtained on the same or on new land, tends to lower rent and whatever increases that inequality, necessarily produces an opposite effect, and tends to raise it” (PRINCIPLES OF POLITICAL ECONOMY chap. 2)
http://www.econlib.org/library/Ricardo/ricP.html

Ricardo’s theory of ground rent does not explain the principle difficulties of capitalist production in agriculture, any more than his theory of value was able to explain surplus value.

Marx looked at the question of ground rent in the third volume of CAPITAL.

Marx divided rent into “differential Rent” and “absolute ground rent” to explain how agriculture in capitalism produced a rent income for those who farmed the land. Agricultural work could be carried out by the landowner himself, the tenant farmer or wage workers.

Rent is an economic category for one of the three unearned incomes derived from surplus value, the other two being industrial profit and interest.

Ground Rent in Capital and Theories of Surplus Value

Marx’s study on ground rent can be found in Part 6: The transformation of Surplus Value into Ground Rent.

To read these chapters requires an understanding of preceding chapters on the formation of surplus value, the average rate of profit and the difference between value and price of production.

The rate of profit, for example assumes that, under competition, different capitals over different spheres of production efficiently expends socially necessary labour time in the production of commodities.

This would mean that each industrial capital would receive surplus value in proportion to the amount of constant and variable capital employed in production.

Commodities are sold by the formula c + v + p where c is constant capital, v is variable capital and p is the average rate of profit.

Marx also shows that the sum of values equals the sum of selling prices in each sphere of production.

Finally Marx shows that commodities only sell at the values by accident; some commodities sell above and some below their value.

Marx sets out his discussion of ground rent in the following chapters: that is, at their price of production.

Price of production is modified value under competition between capitals of different organic composition of capita – the ratio of constant capital to variable capital (dead labour power to living labour power expended in production) given by the equation c/v.

This is the background in which Marx positions his theory of ground rent – his labour theory of value and the law of value which regulates commodity production and exchange for profit.

Chapter 37: Introduction

Chapter 38: Differential Rent in General

Chapter 39: The First Form of Differential Rent (Differential Rent I)

Chapter 40: The Second Form of Differential Rent (Differential Rent II)

Chapter 41: Differential Rent II – First Case: Price of Production Constant

Chapter 42: Differential Rent II – Third Case: Rising Price of Production. Results

Chapter 44: Differential Rent Even on the Poorest Land Cultivated

Chapter 45: Absolute Ground Rent

Chapter 46: Rent on Buildings, Rent of Mines. Price of Land

Chapter 47: The Genesis of Capitalist Ground-Rent

Marx wrote extensively on Adam Smith and David Ricardo’s theory of rent (Chapter IX Notes on the Discovery on the so-called Law of Rent) as well as a polemic against the German economist J. K. Rodbertus (Chapter VIII, Herr Rodbertus, New Theory of Rent).

These accounts are found in THEORIES OF SURPLUS VALUE, Part II.
https://www.marxists.org/archive/marx/works/1863/theories-surplus-value/

Ground Rent

Marx showed that ground rent is compatible with a continual increase in the productivity of agriculture or the cultivation of better and better land.

Only after the questions of value and surplus-value of the industrial capitalist had been resolved was it possible to determine from where the landlord received the money for their rent and what determined the rate of ground rent.

For Marx, the rate of agricultural profits under capitalism is determined by the average rate of industrial profit. Marx defined the rate of profit as the ratio of profit to total capital invested in a given cycle of reproduction.

Circulation time is the period starting from an initial investment of capital to the realisation of the initial capital plus profit when the commodity is sold on the market.

Economic rent, for Marx, means the surplus profit made by the more productive agricultural capitals over and above the average profit realised by the least productive agricultural capital (see Untermann. E., Marx on Ground Rent in Marxian Economics, Kerr, 1913).

The average price, at which the products of the least productive agricultural capital are sold, is equal to their price of production -(their cost price plus the average rate of profit (loc cit p. 209).

This price of production of the least productive agricultural capital is the regulating market-price for the product of all other kinds of land, whether they make more or less the average profit (loc cit p. 209).

Example

We can see how the law of value works among these capitals by looking at the following example. Take four agricultural capitals of 50 shillings each with different rates of productivity. This can be tabulated as follows:

A
Least
Productive

B
Next
Productive

C
Next
Productive

D
Next
Productive

Total Market price

1 quarter of
wheat at 60
shillings
At 10 shillings
of profit =
average rate
of profit of
20%

2 quarters of
wheat at 120
shillings

3 quarters of
wheat at 180
shillings

4 quarters of
wheat at 240
shillings

10 quarters of
wheat at 600
shillings

That is 60
shillings a
quarter

or total price
of production
is 4 x 60
shillings which
gives
240 shillings

50 shillings of
capital

50 shillings of
capital

50 shillings of
capital

50 shillings of
capital

Profit
10 shillings

Profit
70 shillings

Profit
130 shillings

Profit
190 shillings

Surplus profit
(none)

Surplus profit
60 shillings

Surplus profit
120 shillings

Surplus profit
180 shillings

The above example is applied to four lots of land simultaneously. The same is true if applied to the same land with increasing rates of productivity.

Capitalist ground rent is due primarily to the productivity of labour and of the soil. In the last analysis it is the fertility of the soil (loc cit, p. 211)

Industrial surplus profits are an exception but agricultural surplus profits (ground rent) are the rule (loc cit p. 211).

Rent on land used unproductively (as a site for a house or an office) is determined in the last analysis by the rent of productive land. And the rate of prices is determined by the interst derived from the ownership of land, which is productively exploited and yields a surplus-profit, a capitalist ground rent (loc cit p. 212).

Theories of Rent: Bourgeois versus Marxian

Economic theories of rent are wrong because economists misleadingly believe that the price of land under capitalism is a capitalization of land value, and its rent represents so much interest on money invested in ownership.

In his discussion of ground rent in his book MaARXIAN ECONOMICS, ch. XVII p 203 to 216 Kerr ed. 1907), Ernest Untermann quoted Marx on this:

The mistaking ground rent for the interest form which it assumes for the buyer of land…must lead to the most absurd conclusions. Since landed property is considered, in all old countries, as a particularly noble form of property, and its purchase also as an eminently safe investment of capital, the rate of interest at which ground rent is bought, is generally lower than that of other investments of capital for a long time, so that a buyer of real estate, for instance, only 4 per cent of his purchase price, whereas he would draw 5 per cent for the same capital in other investments. In other words, he pays more capital for the ground rent than he would for the same amount of income in other investments. This leads Mr. Thiers to conclude in his utterly valueless work on La Propriété… that ground rent is low, while it proves merely that its purchase price is high…To derive from the sale and purchase of ground rent a justification for its existence signifies to justify its existence by its existence” (CAPITAL. VOL. III, ch. XXXVII, Kerr edition)

Even though the worst land yields no ground rent it still may yield a profit on capital. This is because ground rent only signifies the difference between the average profit and the surplus-profit realised in capitalist agriculture. The worst land must produce at least the average profit.

The reason is simple. A capitalist farmer exploiting labourers on such land must still reproduce his constant capital plus his variable capital plus the average profit as well as selling his commodities at the average price of production.

However, the agricultural capitalist will not make any surplus-profit, and the land will not yield any ground rent.

But how can the capitalist farmer get access to such land without paying rent? (loc cit p,. 213)

There are three sources:

First, the capitalist farmer may own the land in question, rather than renting it from a land-lord, and exploit it with is own capital.

Second, the capitalist farmer may pay ground rent for the land, only a part of which actually yields a surplus-profit.

Third, a capitalist farmer may invest accumulated capital in land for which he pays ground rent, and the additional capital may yield only the average rate of profit, while the reproduced original capital continue to yield a surplus-profit.

Then there is absolute ground rent due to the ownership of the land itself. This too can only be explained by the law of differential rent or ground rent proper.

In practice this means that agricultural products may be sold above their price of production and below their value (loc. cit 215).

This is just the same case where the price of production of industrial commodities may be above or below their value and, as a rule; do not coincide with their value.

All the complications, to which capitalism gives rise in creating new forms of rent and transforming and dominating survivals of old forms, require for their theoretical understanding the “pure” form, of the law of value.

Marx alone found the answer to all these problems which eluded Ricardo and others. The Marxian theory of differential rent and absolute rent is the only sound and valid theory.

Unpublished paper by “H” (Edgar Hardcastle)

23rd October 1967

Attached to the above paper:

Ernest Untermann and Ground Rent

Chapter XVII

Ground Rent


Private ownership of land, like private ownership of capital, has gone through many different forms. Before we discuss the peculiar form of ground rent, which is typical of the capitalist system of production, we will take a short glance at other forms, which preceded it in the historical order.

In ancient and medieval times, ground rent was paid in kind, that is, in labour, products of the soil, or cattle, not in money, Capitalist renters of the modern kind, that is, farmers investing capital in rented land and exploiting wage labourers on the land, did not exist in ancient or medieval times. Rome and Carthage, at a certain period of their most developed form, did large contractors rent land from the state and till the land by the help of paid labourers with a view of exploiting their products. But these were rare and passing exceptions. Rent as a specific kind of surplus-value, as a surplus exceeding the average capitalist profit and drawn by the owner of the soil out of the pockets of the productive capitalist, did not come into existence as the prevalent form until industrial capital became dominant.

The simplest and most primitive form of rent, which has persisted by the side of other forms of rent to this day, is rent in the form of labour. The privilege of tilling a certain piece of land is granted on condition that the labourer performs a certain amount of labour on the land of the owner. This kind of rent is still prevalent in a vast portion of the Southern states of Northern America.

This was the typical form of rent in feudal times. The serf worked with his implements and animals so many days on the estate of the feudal lord, without receiving any equivalent in return for this labour. The remainder of the week the serf worked on his own land.

If this labour rent is transformed into produce rent, it does not alter its economic character. Rent in kind, even when it has become the predominant form, is still a modified sort of labour rent, and often accompanied by direct survivals of labour rent, for instance, by forced labour for the lord or the state.

Rent in kind is not paid by performing surplus-labour on the land of the lord but on the serf’s own land and delivering the surplus-product on his land to the lord. This form of rent, like the more primitive ones preceding it and persisting by its side, is based on a mode of production, which combines agricultural and industrial family labour, and rent in kind is paid in both agricultural and industrial products.

Under labour rent as well as under rent in kind, particularly under the latter, (as the predominating form of rent), the labourer may accumulate considerable wealth for himself, and may even rise to the point, which permits him to exploit other labourers working under his supervision. The mode of production, resting on a technical basis which does not offer any great opportunities for deep-reaching changes of methods, is very stable and may become almost stationary, as it has in Asia for thousands of years. If a ruling class from a more advanced system of production, for instance of a commercial nation, invades such a system of rent in kind and seeks to exploit it for the purposes of commerce, this form of rent may be carried to such extremes, that even the requirements of reproduction (sufficient seeds, cattle, crop rotation, systematic tillage) are endangered and millions exposed to periodical cycles of starvation. See, for instance, British East India.

Rent in kind lends itself most easily to a transformation of rent in money, the form next in the historical order. Money rent is conditioned on a considerable development of commerce, city industries, production for exchange rather than use in general. This implies a general circulation of money as the typical medium of exchange. It implies that markets have become established, in which the average prices of commodities approach their social values, a thing which is not necessarily the case in preceding stages.

Money rent is a modified form of rent in kind. The producer pays to the land lord the money-price of the produce, instead of the produce itself. In other words the producer must sell his products in the market, and deliver the money for his surplus-product to the land lord. The tendency to bring this kind of rent into vogue indicates that feudalism is in the stage of transition to modern capitalism, that feudal production is losing its self-supporting character, and that the requirements of commerce compel the feudal classes to get in touch with the new rising strata of society.

This is the stage of the Wat Tyler rebellion, and its theoretical reflection brings forth such vague speculations as Wickliff’s “theory of dominion”, while the poetical reflex of the struggles and longings of the peasantry and small burghers is found in such dreamy appeals to individual righteousness as Langland’s “Vision Concerning Piers the Plowman”. At a more advanced stage of this form of rent, when its capitalist character has asserted itself and turned from a revolutionary ideal into a practical method of transforming farmers into debtors, centralizing money into the hands of bankers, and figuring interst at a compound rate, the dreamy poetry gives way to fierce denunciation and the sober reality dispels the “visions” and stalks the bloody heels through the wars of the Reformation.

Money rent is the last of the historical forms of ground rent in which rent absorbs all the surplus-value of production. In its further development, money rent leads to the transfer of the land to the free ownership of the peasant, and to his exploitation by means of capitalist commerce, or else to the capitalist form of ground rent, that is, rent paid by a capitalist farmer to the owner of the soil. Along with and even before the transformation of natural rent into money rent, arises a class of landless farm hands, who work for hire. These labourers are mainly recruited from that class of serfs, who were employed by well-to-do serfs during the feudal regime, while the well-to-do serfs develop into capitalist farmers. A typical form of this transition to capitalism and of the difficulties standing in its way is presented by France before the great Revolution and has its theoretical spokesman in Quesnay and the physiocrats.

The capitalist theory of ground rent, however, is a specifically English product, and its historical cradle is very naturally found in England, for the reason that it was there that ground rent first passed over into a mode of production, which began to differentiate rent of land from industrial profit and banker’s interest.

The capitalist mode of production is conditioned on the separation of the agricultural producer from his bonds to the feudal lord, and in general on the expropriation of the masses of the labouring poor from the soil.

To this extent the monopoly of landed property is a historical premise, and remains the basis, of the capitalist mode of production, just as it does of all other modes of production, which rest on the exploitation of the masses in one form or another. But that form of landed property, which the capitalist mode of production meets in its first stages, does not suit its requirements. It creates for itself that form of property in land, which is adapted to its requirements, by subordinating agriculture to the dominion of capital. It transforms feudal landed property, tribal property, small peasants’ property of mark communes, whatever may be their legal form, into the economic form corresponding to the requirements of capitalism” (Karl Marx, CAPITAL, VOL. III, chap. XXXVII)

Already Adam Smith demonstrated that the ground rent paid in the production of minor crops and cattle is determined by the ground rent paid in the production of such staples as wheat and corn. And he clearly distinguished between capitalism’s profits, landlord’s rent, and labourer’s wages. He was one of the first to warn economists against confounding these things and obliterating their economic significance by applying such terms as profit, rent, wages, indiscriminately to all surplus- value. But he was himself still struggling with the subject and suffering from the inconsistencies of his own position.

In the form given to it by Ricardo, the classic theory of ground rent is still full of inconsistencies and errors. The gist of his theory is that economic rent “is always the difference between the produce obtained by the employment of two equal quantities of capital and labour”, and that “whatever diminishes the inequality of the produce obtained on the same or on new land, tends to lower rent and whatever increase that inequality, necessarily produces an opposite effect, and tends to raise it” (PRINCIPLES OF POLITICAL ECONOMY, pages 59. and 74.) In brief, his idea of rent is merely that capitals invested in lands of different productivity and working with the same amount of money and labour produce different amounts of surplus-value and that whatever exceeds the surplus-value produced on the least productive land constitutes the rent, which the capitalist must hand over to the landlord.

In this form, the theory of ground rent does not explain the principle difficulties of capitalist production in agriculture, any more than Ricardo’s theory of value was able to explain the difficulties of industrial surplus value. It did not clearly define what kind of labour produced value and measured it, nor by what methods surplus-value is produced. Much less did it explain the formation of the average rate of profit, and the relation of this average rate of profit to the surplus-profit paid in the form of ground rent. Ricardo’s theory of ground rent fails particularly in its appreciation of the fact, that ground rent does not necessarily imply a gradual cultivation of worse and worse land (an idea which Henry George copied without further ado), but ion the contrary, that ground rent is very well compatible with a continual increase in the productivity of agriculture or a cultivation of better and better and better land.

Marx performed pioneer work on this ground rent just as he did in the field of industrial surplus-value. The Marxian theory of differential rent and absolute rent is the only really exhaustive and satisfactory theory, which exists in political economy. Only after the question of the value and surplus-value of industrial capital, and of the method of its realization in the circulation had been solved, was it possible to arrive at a solution of the question whence the landlord received the money for his rent and what determined the rate of ground rent.

The basis of Marx’s theory of ground rent is his theory of the average rate of profit. The rate of agricultural profits under capitalism, according to him, is determined by the rate of the industrial profit. Economic rent, in his sense of the term, means the surplus profit made by the more productive agricultural capitals over and above the average profit realized by the least productive agricultural capital. The average price, at which the products of this least productive agricultural capital are sold, is equal to their price of production, that is, equal to their cost-price plus the average rate of profit. This price of production of the least productive agricultural capital is the regulating market-price for the products of all other kinds of land, whether they make more or less than the average profit. The law of value works among these capitals in the following general way:

Take four agricultural capitals of 50 shillings each with different rates of productivity. Let A, the least productive, produce one quarter of wheat at 60 shillings, making 10 shillings of profit, or 20 pct.; let B produce two quarters of wheat, worth 120 shillings, making 70 shillings of profit, or 60 shillings of surplus-profit; let C produce 3 quarters of wheat, worth 180 shillings, 130 shillings of profit or 120 shillings of surplus-profit; let D produce four quarters of wheat, worth 240 shillings, a profit of 190 shillings, or a surplus profit of 180 shillings. The total market-price of these four yields of wheat is then 60+120+180++240 = 600 shillings for 10 quarters of wheat. But the total price of production of these ten quarters of wheat is only four times 60, or 240 shillings since each capital has a cost-price of only 50 shillings, to which the average profit of 10 shillings is added to make up their price of production. The market-value of these products is, therefore, larger than their total price of production. And this is the effect of capitalist competition, the social method of determining the market value of all products.

This is but a general illustration of the way in which the rate of ground rent (or agricultural surplus-profit) is determined. Marx suppliers in his work many other illustrations, dealing specifically with the different possibilities of this problem. We need not to go into such details here. It is sufficient here to make the reader familiar with the general idea. Whether this general idea is applied to different rates of productivity obtained one after another on the same land or simultaneously on different lands, this theory will suffice for all practical purposes. We must not look for mathematical exactness in the working out of economic laws, any more than we can arrive at absolute exactness in the working out of algebraic formulae in higher mathematics.

The general rule following from Marx’s theory of ground rent is that capitalist ground rent (surplus profit increases absolutely on all lands, although the increase is not proportional to the increase in the invested capital. Taking the entire capital invested productively in the land (old and additional capital) as a basis of calculation, the rate of ground rent decreases; but the absolute mass of surplus-profit increases; in like manner the decreasing rate of industrial profit is generally combined with an absolute increase of the mass of industrial profit. And this law holds good, with corresponding modifications, whether the prices of production of these capitals are rising or falling.

The ground rent proceeding in the form of surplus profits from productive capitals must not be confounded with other kinds of rent, which exist side by side with it. Capitalist ground rent is due primarily to the productivity of labour and of the soil. In the last analysis, it must be attributed to the fertility of the soil, for without it there would be no basis for any surplus-profit over and above the average rate of industrial profit, which is the foundation of the entire law of ground rent.

The law of the average rate of industrial profit implies that industrial capitals get, as a rule, only the average profit, and that industrial surplus-profits are an exception. The law of ground rent, on the other hand, implies that agricultural surplus-profits are the rule; and no capital invested in agriculture unless it pays at least the average profit so that additional capital invested must bring more than the average profit, otherwise no additional capital would be invested. This agricultural surplus-profit cannot be due, in the last analysis, to any other cause than the fertility of the soil, or natural powers such as waterpower, for which the capitalist pays nothing, any more than any capitalist pays anything for the average profit he realizes. And the increasing fertility of the soil is as much a premise for the increase of the mass of agricultural surplus-profit, as the increase in the productivity of labour is a premise for the growth of the mass of average profit.

This capitalist ground rent may be, and generally is, complicated with other forms of rent, which represent modified survivals of older forms. But these modified older forms are all subject to the movement of modern capitalist rent, and are in the last resort determined by it.

The price of land under capitalism is generally regarded by bourgeois economists as a capitalization of land value, and its rent represents so much interest on money invested in ownership. But the rate of prices is determined by the interest derived from the ownership of land, which is productively exploited and yields a surplus=-profit, a capitalist ground rent. Only when this capitalist ground rent is explained, can other forms of rent, such as money rent in the form of interest, be explained. Rent on land used unproductively (as a site for a dwelling place or an office) is determined in the last analysis by the rent of productive land. To explain land values, or interest drawn from capitalized land values, by their own capitalization, as some would-be economists are trying to do is like explaining industrial profit by the self-capitalization of money.

The mistaking ground rent for the interest-form which it assumes for the buyer of land…must lead to the most absurd conclusions. Since landed property is considered, in all old countries, as a particularly noble form of property, and its purchase also as an eminently safe investment of capital, the rate of interest at which ground rent is bought, is generally lower than that of the other investments of capital for a long time, so that a buyer of real estate, for instance, only 4 pct. on his purchase price, whereas he would draw 5 pct. for the same capital in other investments. In other words, he pays more capital to for the ground rent than he would for the same amount of income in other investments. This leads Mr. Thiers to conclude in his utterly valueless work on La Propriété… that ground rent is low…To derive from the air and purchase of ground rent a justification for its existence signifies to justify its existence by its existence” (Karl Marx, CAPITAL, VOL. III, chap. XXXVII).

While the worst land does not yield any ground rent, it may yield profits on capital. Since ground rent signifies here only the difference between the average profit and the surplus-profit realized in capitalist agriculture, it is based on the assumption, that the worst land must produce at least the average profit. A capitalist farmer exploiting labourers on such land must reproduce his constant capital plus his variable capital plus the average rate of profit and sell his product at the average price of production. But he will not make any surplus-profit, and the land will not yield any ground rent.

But how can a capitalist farmer get access to such land without paying rent?

In the first place, he may be the owner of such land and exploit it with his own capital. Marx considers this an exception under capitalism.

In the second place, the capitalist farmer may pay ground rent for land, only a part of which actually yields a surplus profit. But so long as he can make the average profit on the remainder of the land, he will cultivate this also.

In the third place, a capitalist farmer may invest accumulated capital (additional capital) in land for which he pays ground rent, and this additional capital may yield only the average rate of profit, while the original reproduced capital continues to yield a surplus profit. He pays ground rent out of the proceeds of his original capital, but not of his additional capital.

But such exceptions from the rule are a confirmation of Marx’s theory of ground rent, not a refutation of it. They cannot be explained, unless the rule is first explained.

Neither is the Marxian theory of ground rent refuted by the fact that the products of land, whose productivity does not yield any economic rent, may be sold, under exceptional market conditions above the average price of production, so that a surplus-profit is actually realized on them. For in the first place, this surplus profit is not due to the productivity of the land, but to exceptional opportunities in circulation. In the second place, even such opportunities cannot be explained on any other basis but that of the Marxian theory of industrial profit and ground rent. Such exceptions are explained only by the rule, that the average price of production is actually the standard, around which all market prices fluctuate.

If the regulating market price of the products of the soil is not the average price of production (cost price of the capital plus average profit, but rather a price which is equal to the average price of production plus a certain amount of rent, then this rent is not economic rent in the strict meaning of the term, but “absolute” ground rent, derived from the ownership of the land itself. But even so, this absolute ground rent can be explained only by the law of differential rent, or ground rent proper. It signifies that the monopoly of land can enforce an increase of prices of production over and above the average which regulates differential rent.

In practice this amounts to saying that agricultural products may be sold above their price of production and below their value, just as the price of production of industrial commodities may be above or below their value and, as a rule, does not coincide with their value.

All the complications, to which the capitalist mode of production gives rise by creating new forms of rent and transforming and dominating survivals of old forms, require for their theoretical solution the understanding of the “pure” form, through which capitalism expresses its typical tendencies and enforces its prevailing law, the law of value.

Marx alone has found the key to all these problems.

Once that we understand the Marxian law of value and the significance of the different roles played by constant and variable capital in production, or by the circulation of value, we can readily grasp the fact, that fixed capital invested in the soil, unlike fixed capital invested in industrial machinery, etc., increases in value in proportion as the soil is treated scientifically, so that this fixed capital becomes, through the peculiar productivity of the soil, an element in yielding surplus-value over and above the average and producing different forms of rent.

There have been at all times thinkers, who have tried to conceal economic lines of cleavage by a sentimental reconciliation of antagonisms on paper. Economic theories are not free from such attempts. The Ricardian theory of ground rent, which laid bare the antagonism between industrial capitalists and landlords, was combatted by economists like Carey, who tried to represent rent as interest on capital, similar to interest on loaned money. This was equivalent to making capitalists of landlords and wiping out the line of economic cleavage between landlords and capitalists. But the bitter reality of capitalist development laughed Carey to scorn and called both fierce struggle between these two economic classes.

In modern times, Henry George has made a similar attempt by garbling the Ricardian theory of ground rent into an indefinite theory of land values, and making of this distorted classic theory a blanket, by which to cover the class-struggle between proletarians and capitalists. I do not mean to insinuate that this was George’s open intention. But his theory practically works in this direction. It is evident that this attempt, like Carey’s, must come to grief in proportion as the class-struggle goes its inexorable way and lights the revolutionary fires, which must consume the economic foundations of both landlordism and capitalism.

Marxian Economics: A Popular Introduction to the three Volumes of Marx’s Capital, Chapter XVII pp 203 to 216, by Ernest Untermann, Kerr edition, 1913)

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