Capital Vol. III Part VI
Transformation of Surplus-Profit into Ground-Rent

Chapter 39. First Form of Differential Rent (Differential Rent I)

Ricardo is quite right in the following observations:

"Rent is always the difference between the produce obtained by the employment of two equal quantities of capital and labour" (Principles, p. 59).

[He means differential rent, for he assumes that no other rent but differential rent exists.] He should have added, "on equal areas of land" in so far as it is a matter of ground-rent and not surplus-profit in general.

In other words, surplus-profit, if normal and not due to accidental occurrences in the circulation process, is always produced as a difference between the products of two equal quantities of capital and labour, and this surplus-profit is transformed into ground-rent when two equal quantities of capital and labour are employed on equal areas of land with unequal results. Moreover, it is by no means absolutely necessary for this surplus-profit to arise from the unequal results of equal quantities of invested capital. The various investments may also employ unequal quantities of capital. Indeed, this is generally the case. But equal proportions, for instance £100 of each, produce unequal results; that is, their rates of profit are different. This is the general prerequisite for the existence of surplus-profit in any sphere of capital investment. The second prerequisite is the transformation of this surplus-profit into the form of ground-rent (of rent in general as a form distinct from profit); it must be investigated in each case when, how, under what conditions this transformation takes place.

Ricardo is also right in the following observation, provided it is limited to differential rent:

"Whatever diminishes the inequality in 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" (p.74).

However, among these causes are not merely the general ones (fertility and location), but also 1) the distribution of taxes, depending on whether it operates uniformly or not; the latter is always the case when, as in England, it is not centralised and when the tax is levied on land, not on rent; 2) the inequalities arising from a difference in agricultural development in different parts of the country, since this line of production, owing to its traditional character, evens out with more difficulty than manufacture; and 3) the inequality in distribution of capital among capitalist tenants. Since the invasion of agriculture by the capitalist mode of production, transformation of independently producing peasants into wage-workers, is in fact the last conquest of this mode of production, these inequalities are greater here than in any other line of production.

Having made these preliminary remarks, I will first present a brief summary of the characteristic features of my analysis in contradistinction to that of Ricardo, etc.

We shall first consider the unequal results of equal quantities of capital applied to different plots of land of equal size; or, in the case of unequal size, results calculated on the basis of equal areas.

The two general causes of these unequal results — quite independent of capital — are: 1) Fertility. (With reference to this first point, it will be necessary to discuss what is meant by natural fertility of land and what factors are involved.) 2) The location of the land. This is a decisive factor in the case of colonies and in general determines the sequence in which plots of land can be cultivated. Furthermore, it is evident that these two different causes of differential rent — fertility and location — may work in opposite directions. A certain plot of land may be very favourably located and yet be very poor in fertility, and vice versa. This circumstance is important, for it explains how it is possible that bringing into cultivation the land of a certain country may equally well proceed from the better to the worse land as vice versa. Finally, it is clear that the progress of social production in general has, on the one hand, the effect of evening out differences arising from location as a cause of ground-rent, by creating local markets and improving locations by establishing communication and transportation facilities; on the other hand, it increases the differences in individual locations of plots of land by separating agriculture from manufacturing and forming large centres of production, on the one hand, while relatively isolating agricultural districts, on the other.

For the present, however, we shall leave this point concerning location out of consideration and confine ourselves to natural fertility. Aside from climatic factors, etc., the difference in natural fertility depends on the chemical composition of the top soil, that is, on its different plant nutrition content. However, assuming the chemical composition and natural fertility in this respect to be the same for two plots of land, the actual effective fertility differs depending on whether these elements of plant nutrition are in a form which may be more or less easily assimilated and immediately utilised for nourishing the crops. Hence, it will depend partly upon chemical and partly upon mechanical developments in agriculture to what extent the same natural fertility may be made available on plots of land of similar natural fertility. Fertility, although an objective property of the soil, always implies an economic relation, a relation to the existing chemical and mechanical level of development in agriculture, and, therefore, changes with this level of development. Whether by chemical means (such as the use of certain liquid fertilisers on stiff clay soil and calcination of heavy clayey soils) or mechanical means (such as special ploughs for heavy soils), the obstacles which made a soil of equal fertility actually less fertile can be eliminated (drainage also belongs under this head). Or even the sequence in types of soils taken under cultivation may be changed thereby, as was the case, for instance, with light sandy soil and heavy clayey soil at a certain period of development in English agriculture. This shows once again that historically, in the sequence of soils taken under cultivation, one may pass over from more fertile to less fertile soils as well as vice versa. The same results may be obtained by an artificially created improvement in soil composition or by a mere change in agricultural methods. Finally, the same result may be brought about by a change in the hierarchical arrangement of the soil types due to different conditions of the subsoil, as soon as the latter likewise begins to be tilled and turned over into top layers. This is in part dependent on the employment of new agricultural methods (such as the cultivation of fodder-grass) and in part on the employment of mechanical means which either turn the subsoil over into top layers, mix it with top soil, or cultivate the subsoil without turning it up.

All these influences upon the differential fertility of various plots of land are such that from the standpoint of economic fertility, the level of labour productivity, in this case the capacity of agriculture to make the natural soil fertility immediately exploitable — a capacity which differs in various periods of development — is as much a factor in so-called natural soil fertility as its chemical composition and other natural properties.

We assume, then, the existence of a particular stage of development in agriculture. We assume furthermore that the hierarchical arrangement of soil types accords with this stage of development, as is, of course, always the case for simultaneous capital investments on different plots of land. Differential rent may then form either an ascending or a descending sequence, for although the sequence is given for the totality of actually cultivated plots of land, a series of movements leading to its formation has invariably taken place.

Let us assume the existence of four kinds of soil: A, B, C, D. Let us furthermore assume the price of one quarter of wheat = £3, or 60 shillings. Since the rent is solely differential rent, this price of 60 shillings per quarter for the worst soil is equal to the price of production, that is, equal to the capital plus average profit. Let A be this worst soil, which yields 1 quarter = 60 shillings for each 50 shillings spent; hence the profit amounts to 10 shillings, or 20%.

Let B yield 2 quarters = 120 shillings for the same expenditure. This would mean 70 shillings of profit, or a surplus-profit of 60 shillings.

Let C yield 3 quarters = 180 shillings for the same expenditure; total profit = 130 shillings; surplus-profit = 120 shillings.

Let D yield 4 quarters = 240 shillings = 180 shillings of surplus-profit.

We would then have the following sequence:

TABLE I

The respective rents are: D = 190sh. — 10sh., or the difference between D and A; C = 130sh. — 10sh., or the difference between C and A; B = 70sh. — 10sh., or the difference between B and A; and the total rent for B, C, D = 6 quarters = 360 shillings, equal to the sum of the differences between D and A, C and A, B and A.

This sequence, which represents a given product in a given condition may, considered abstractly (we have already offered the reasons why this may be the case in reality), descend from D to A, from fertile to less and less fertile soil, or rise from A to D, from relatively poor to more and more fertile soil, or, finally, may fluctuate, i.e., now rising, now descending — for instance from D to C, from C to A, and from A to B.

The process in the case of a descending sequence was as follows: The price of a quarter of wheat rose gradually from, say, 15 shillings to 60 shillings. As soon as the 4 quarters produced by D (we may consider these 4 quarters as so many million quarters) no longer sufficed, the price of wheat rose to a point where the supply shortage could be produced by C. That is to say, the price of wheat must have risen to 20 shillings per quarter. When it had risen to 30 shillings per quarter, B could be taken under cultivation, and when it reached 60 shillings A could be taken under cultivation; and the capital invested did not have to content itself with a rate of profit lower than 20%. In this manner, a rent was established for D, first of 5 shillings per quarter = 20 shillings for the 4 quarters produced by it; then of 15 shillings per quarter = 60 shillings, then of 45 shillings per quarter = 180 shillings for 4 quarters.

If the rate of profit of D originally was similarly = 20 %, then its total profit on 4 quarters of wheat was also but 10 shillings, but this represented more grain when the price was 15 shillings than it does when the price is 60 shillings. But since the grain enters into the reproduction of labour-power, and part of each quarter has to make good some portion of wages and another constant capital, the surplus-value under these conditions was higher, and thus other things being equal the rate of profit too. (The matter of rate of profit will have to be specially analysed, and in greater detail.)

On the other hand, if the sequence were in the reverse order, that is, if the process initiated from A, then the price of wheat at first would rise above 60 shillings per quarter when new land would have to be taken under cultivation. But since the necessary supply would be produced by B, a supply of 2 quarters, the price would fall to 60 shillings again, for B produced wheat at a cost of 30 shillings per quarter, but sold it at 60 shillings because the supply just sufficed to cover the demand. Thus a rent was formed, first of 60 shillings for B, and in the same way for C and D; it is assumed throughout that the market-price remained at 60 shillings, although C and D produced wheat having an actual value of 20 and 15 shillings per quarter respectively, because the supply of the one quarter produced by A was needed as much as ever to satisfy the total demand. In this case, the increase in demand above supply, which was first satisfied by A, then by A and B, would not have made it possible to cultivate B, C and D successively, but would merely have caused a general extension of the sphere of cultivation, and the more fertile lands might only later come under cultivation.

In the first sequence, an increase in price would raise the rent and decrease the rate of profit. Such a decrease might be entirely or partially checked by counteracting circumstances. This point will have to be treated later in more detail. It should not be forgotten that the general rate of profit is not determined uniformly in all spheres of production by the surplus-value. It is not the agricultural profit which determines industrial profit, but vice versa. But of this more anon.

In the second sequence the rate of profit on invested capital would remain the same. The amount of profit would be represented by less grain; but the relative price of grain, compared with that of other commodities, would have risen. However, the increase in profit wherever such an increase takes place, becomes separated from the profit in the form of rent, instead of flowing into the pockets of the capitalist tenant farmer and appearing as a growing profit. The price of grain, however, could remain unchanged under the conditions assumed here.

The development and growth of differential rent would remain the same for fixed as well as for increasing prices, and for a continuous progression from worse to better soils as well as for a continuous retrogression from better to worse soils.

Thus far we have assumed: 1) that the price rises in one sequence and remains stationary in the other; 2) that there is a continuous progression from better to worse soil, or from worse to better soil.

But now let us assume that the demand for grain rises from its original figure of 10 to 17 quarters; furthermore, that the worst soil A is displaced by another soil A, which produces 1 ⅓ quarters at a price of production of 60 shillings (50sh. cost plus 10sh. for 20% profit), so that its price of production per quarter = 45 shillings; or, perhaps, the old soil A may have improved through continuous rational cultivation, or be cultivated more productively at the same cost, for instance through the introduction of clover, etc., so that its output with the same investment of capital rises to 1 ⅓ quarters. Let us also assume that soil types B, C and D yield the same output as previously, but that new soil types have been introduced, for instance, A' with a fertility lying between A and B, and also B' and B" with a fertility between B and C. We should then observe the following phenomena:

First: The price of production of a quarter of wheat, or its regulating market-price, falls from 60 shillings to 45 shillings, or by 25%.

Second: The cultivation proceeds simultaneously from more fertile to less fertile soil, and from less fertile to more fertile soil. Soil A' is more fertile than A, but less fertile than the hitherto cultivated soils B, C and D. B' and B" are more fertile than A, A' and B, but less fertile than C and D. The sequence thus proceeds in crisscross fashion. Cultivation does not proceed to soil absolutely less fertile than A, etc., but to relatively less fertile soil with respect to the hitherto most fertile soil types C and on the other hand, cultivation does not proceed to soil absolutely more fertile, but to relatively more fertile soil with respect to the hitherto least fertile soil A, or A and B.

Thirdly: The rent on B falls; likewise the rent on C and D; but the total rental in grain rises from 6 quarters to 7 ⅔ the amount of cultivated and rent-yielding land increases, and the amount of produce rises from 10 quarters to 17. The profit, although it remains the same for A, rises if expressed in grain, but the rate of profit itself might rise, because the relative surplus-value does. In this case, the wage, i.e., the investment of variable capital and therefore the total outlay, is reduced because of the cheapening of means of subsistence. This total rental expressed in money falls from 360 shillings to 345 shillings.

TABLE II

(* In the German 1894 edition this reads: 25 2/7. — Ed.)

Let us draw up the new sequence. [See p. 655 — Ed.]

Finally, if only soil types A, B, C and D were cultivated as before, but their productiveness rose in such a way that A produced 2 quarters instead of 1 quarter, B — 4 quarters instead of 2, C — 7 quarters instead of 3, and D — 10 quarters instead of 4, so that the same causes affect the various types of soil differently, the total production increases from 10 quarters to 23. Assuming that demand absorbs these 23 quarters through an increase in population and a fall in prices, we should obtain the following result:

TABLE III

The numerical proportions in this and in other tables are chosen at random but the assumptions are quite rational.

The first and principal assumption is that an improvement in agriculture acts differently upon different soils, and in this case affects the best types of soil, C and D, more than types A and B. Experience has shown that this is generally the case, although the opposite may also take place. If the improvement affected the poorer soils more than the better ones, rent on the latter would have fallen instead of risen. But in our table, we have assumed that the absolute growth in fertility of all soil types is simultaneously accompanied by an increase in greater relative fertility of the better soil types, C and D; this means an increase in the difference between the product at the same capital investment, and thus an increase in differential rent.

The second assumption is that total demand keeps pace with the increase in the total product. First, one need not imagine such an increase coming about abruptly, but rather gradually — until sequence III is established. Secondly, it is not true that the consumption of necessities of life does not increase as they become cheaper. The abolition of the Corn Laws in England proved the reverse to be the case (F. Newman, Lectures on Political Economy, London, 1851, p.158. — Ed.); the opposite view stems solely from the fact that large and sudden differences in harvests, which are mere results of weather, bring about at one time an extraordinary fall, at another an extraordinary rise, in grain prices. While in such a case the sudden and short-lived reduction in price does not have time to exert its full effect upon the extension of consumption, the opposite is true when a reduction arises from the lowering of the regulating price of production itself, i.e., is of a long-term nature. Thirdly, a part of the grain may be consumed in the form of brandy or beer; and the increasing consumption of both of these items is by no means confined within narrow limits. Fourthly, the matter depends in part upon the increase in population and in part on the fact that the country may be grain-exporting, as England still was long after the middle of the 18th century, so that the demand is not solely regulated within the confines of national consumption. Finally, the increase and price reduction in wheat production may result in making wheat, instead of rye or oats, the principal article of consumption for the masses, so that the demand for it may grow if only for this reason, just as the opposite may take place when production decreases and prices rise. Thus, under these assumptions, and with the previously selected ratios, sequence III yields the result that the price per quarter falls from 60 to 30 shillings, that is, by 50%; that production, compared to sequence I, increases from 10 to 23 quarters, i.e., by 130%; that the rent remains fixed for soil B, increases by 25% (In the German 1894 edition this reads: doubles.— Ed.) for C, and by 33⅓% (Ibid.p 22.— Ed.) for D; and that the total rental increases from £18 to £22½, (Ibid. 22. — Ed.), by 25%. (Ibid.: 22 1/9% — Ed.)

A comparison of these three tables (whereby sequence I is to be taken twice, rising from A to D, and descending from D to A), which may be considered either as given gradations under some stage of society, for instance, as existing side by side in three different countries, or as succeeding one another in different periods of development within the same country, shows:

1) The sequence, when complete, whatever the course of its formative process may have been, invariably appears as being in a descending line; for when analysing rent the point of departure will always be land yielding the maximum rent, and only finally do we come to land yielding no rent.

2) The price of production on the worst soil, i.e., which yields no rent, is always the one regulating the market-price, although the latter in Table I, if its sequence were formed in an ascending line, only remained fixed because better and better soil was constantly drawn into cultivation. In such a case, the price of grain produced on the best soil is a regulating one ill so far as it depends upon the quantity produced on such soil to what extent soil type A remains the regulator. If B, C and D should produce more than demand requires, A would cease to be the regulator. Storch has this point hazily in mind when he adopts the best soil type as the regulating one. (H. Storch, Cours d'économie politique, ou Exposition des principes qui determinent la prospérité des nations, Tome II, St.-Petersbourg, 1815, pp. 78-79. — Ed.) In this manner, the American price of grain regulates the English price.

3) Differential rent arises from differences in the natural fertility of the soil which is given for every given stage of agricultural development (leaving aside for the present the question of location); in other words, from the limited area of the best land, and from the circumstance that equal amounts of capital must be invested on unequal types of soil, so that an unequal product results from the same amount of capital.

4) The existence of a differential rent and of a graduated differential rent can develop equally well in a descending sequence, which proceeds from better to worse soils, as in an ascending one, which progresses in the opposite direction from worse to better soils; or it may be brought about in checkered fashion by alternating movements. (Sequence I may be formed by proceeding from D to A, or from A to D; sequence II comprises both types of movement.)

5) Depending on its mode of formation, differential rent may develop along with a stationary, rising or falling price of the products of the land. In the case of a falling price, total production and total rental may rise, and rent may develop on hitherto rentless land, even though the worst soil A may have been displaced by a better one or may itself have improved, and even though the rent may decrease on other land which is better, or even the best (Table II); this process may also be connected with a fall in total rent (in money). Finally, at a time when prices fall on account of a general improvement in cultivation, so that the product of the worst soil and its price decrease, the rent on some of the better soils may remain the same, or may fall, while it may rise on the best ones. Nevertheless, the differential rent of every soil, compared with the worst soil, depends, if the difference in quantity of products is given, upon the price, say, of a quarter of wheat. But when the price is given, differential rent depends upon the magnitude of the difference in quantity of products, and if with an increasing absolute fertility of all soils that of the better ones grows relatively more than that of the worse ones, the magnitude of this difference grows proportionately. In this way (see Table I), when the price is 60 shillings, the rent on D is determined by its differential product as compared with A; in other words, by the surplus of 3 quarters. The rent is therefore = 3 × 60 = l80 shillings. But in Table III, where the price = 30 shillings, the rent is determined by the quantity of surplus-product of D as compared with A = 8 quarters; we therefore obtain 8 × 30 = 240 shillings.

This takes care of the first false assumption regarding differential rent — still found among West, Malthus, and Ricardo — namely, that it necessarily presupposes a movement toward worse and worse soil, or an ever-decreasing fertility of the soil. ([West] Essay on the Application Of Capital to Land, London, 1815. Malthus, Principles of Political Economy, London, 1836. Malthus, An Inquiry into the Nature and Progress of Rent, and the Principles by which it is regulated, London, 1815. Ricardo, On the Principles of Political Economy, and Taxation, Third edition, London, 4824, Chap. 11. —Ed.) It can be formed, as we have seen, with a movement toward better and better soil; it can be formed when a better soil takes the lowest position that was formerly occupied by the worst soil; it can be connected with a progressive improvement in agriculture. The precondition is merely the inequality of different kinds of soil. So far as the increase in productivity is concerned, it assumes that the increase in absolute fertility of the total area does not eliminate this inequality, but either increases it, leaves it unchanged, or merely reduces it.

From the beginning to the middle of the 18th century, England's grain prices constantly fell in spite of the falling prices of gold and silver, while at the same time (viewing this entire period as a whole) there was an increase in rent, in the over-all amount of rent, in the area of cultivated land, in agricultural production, and in population. This corresponds to Table I taken in conjunction with Table II in an ascending line, but in such a way that the worst land A is either improved or eliminated from the grain-producing area; however, this does not mean that it was not used for other agricultural or industrial purposes.

From the early 19th century (date to be specified more precisely) until 1815 there is a constant rise in grain prices, accompanied by a steady increase in rent, in the over-all amount of rent, in the area of cultivated land, in agricultural production, and in population. This corresponds to Table I in a descending line. (Cite some sources here on the cultivation of inferior land in that period.)

In Petty's and Davenant's time, farmers and landowners complained about improvements and the bringing into cultivation of new land; the rent on better lands decreased, and the total amount of rent increased through the extension of the area of land yielding rent.

(These three points should be illustrated later by quotations; likewise for the difference in fertility of various cultivated sections of land in a particular country.)

Regarding differential rent in general, it is to be noted that the market-value is always above the total price of production of the total quantity of products. As an example, let us take Table I. Ten quarters of total product are sold for 600 shillings because the market-price is determined by the price of production of A, which amounts to 60 shillings per quarter. But the actual price of production is:

The actual price of production of these 10 quarters is 240 shillings; but they are sold for 600 shillings, i.e., at 250% of the price of production. The actual average price for 1 quarter is 24 shillings; the market-price is 60 shillings, i.e., also 250% of the production price.

This is determination by market-value as it asserts itself on the basis of capitalist production through competition; the latter creates a false social value. This arises from the law of market-value, to which the products of the soil are subject. The determination of the market-value of products, including therefore agricultural products, is a social act, albeit a socially unconscious and unintentional one. It is based necessarily upon the exchange-value of the product, not upon the soil and the differences in its fertility. If we suppose the capitalist form of society to be abolished and society organised as a conscious and planned association, then the 10 quarters would represent a quantity of independent labour-time equal to that contained in 240 shillings. Society would not then buy this agricultural product at two and a half times the actual labour-time embodied in it and the basis for a class of landowners would thus be destroyed. This would have the same effect as a reduction in price of the product to the same amount resulting from foreign imports. While it is, therefore, true that, by retaining the present mode of production, but assuming that the differential rent is paid to the state, prices of agricultural products would, everything else being equal, remain the same, it is equally wrong to say that the value of the products would remain the same if capitalist production were superseded by association. The identity of the market-price for commodities of the same kind is the manner whereby the social character of value asserts itself on the basis of capitalist production and, in general, any production based on the exchange of commodities between individuals. What society overpays for agricultural products in its capacity of consumer, what is a minus in the realisation of its labour-time in agricultural production, is now a plus for a portion of society, for the landlords.

A second circumstance, important for the analysis to be given under II of the next chapter, is the following:

It is not merely a matter of rent per acre, or per hectare, nor generally of a difference between the price of production and market-price, nor between the individual and the general price of production per acre, but it is also a question of how many acres of each type of soil are under cultivation. The point of importance here relates directly only to the magnitude of the rental, that is, the total rent of the entire cultivated area; but it serves us at the same time as a stepping-stone to the consideration of a rise in the rate of rent although there is no rise in prices, nor increase in the differences in relative fertility of the various types of soil if prices fall.

We had above:

TABLE I

Now let us assume that the number of cultivated acres is doubled in every category. We then have:

TABLE Ia

Let us assume two more cases. Suppose in the first case production expands on the two poorest types of soil in the following manner:

TABLE Ib

And, finally, let us assume an unequal expansion of production and cultivated area for the four soil categories:

TABLE Ic

In the first place, the rent per acre remains the same in all these cases — I, Ia, Ib and Ic — for, in fact, the result of the same investment of capital per acre of the same soil type has remained unchanged. We have only assumed what is true of any country at any given moment; namely, that various soil types exist in definite ratios to the total cultivated area. And we also assumed what is always true of any two countries being compared, or of the same country at different periods, namely, that the proportions in which the total cultivated area is distributed among the different soil types vary.

In comparing Ia with I we see that if the cultivation of land in all four categories increases in the same proportion a doubling of the cultivated acreage doubles the total production, and that the same applies to the rent in grain and money.

However, if we compare Ib and then Ic with I, we see that in both cases a tripling of the area under cultivation occurs. It increases in both cases from 4 acres to 12, but in Ib classes A and B contribute most to the increase, with A yielding no rent and B yielding the smallest amount of differential rent. Thus, out of the 8 newly cultivated acres, A and B account for 3 each, i.e., 6 together, whereas C and D account for I each, i.e., 2 together. In other words, three-quarters of the increase is accounted for by A and B, and only one-quarter by C and D. With this premise, in Ib compared with I the trebled area of cultivation does not result in a trebled product, for the product does not increase from 10 to 30, but only to 26. On the other hand, since a considerable part of the increase concerns A, which does not yield any rent, and since the major part of the increase on better soils concerns B, the rent in grain rises only from 6 to 14 quarters, and the rent in money from £18 to £42.

But if we compare Ic with I, where the land yielding no rent does not increase in area and the land yielding a minimum rent increases but slightly, while C and D account for the major part of the increase, we find that when the cultivated area is trebled production increases from 10 to 36 quarters, i.e., to more than three times its original amount. The rent in grain increases from 6 to 24 quarters or to four times its original amount; and similarly money-rent, from £18 to £72.

In all these cases it is in the nature of things that the price of the agricultural product remains unchanged. The total rental increases in all cases with the extension of cultivation, unless it takes place exclusively on the worst soil, which does not yield any rent. But this increase varies. Should this extension involve the better soil types and the total output, consequently, increase not merely in proportion to the expansion of the area, but rather more rapidly, then the rent in grain and money increases to the same extent. Should it be the worst soil, and the types of soil close to it, that are principally involved in the expansion (whereby it is assumed that the worst soil represents a constant type), the total rental does not increase in proportion to the extension of cultivation. Thus, given two countries in which soil A, yielding no rent, is of the same quality, the rental is inversely proportional to the aliquot part represented by the worst soil and the inferior soil types in the total area under cultivation, and therefore inversely proportional to the output, assuming equal capital investments on equal total land areas. A relationship between the quantity of the worst and the quantity of the better cultivated land in the total land area of a given country thus has an opposite influence on the total rental than the relationship between the quality of the worst cultivated land and the quality of the better and best has on the rent per acre and — other circumstances remaining the same — on the total rental. Confusion between these two points has given rise to all kinds of erroneous objections raised against differential rent.

The total rental, then, increases by the mere extension of cultivation, and by the consequent greater investment of capital and labour in the land. But the most important point is this: Although it is our assumption that the ratio of rents per acre for the various kinds of soil remains the same, and therefore also the rate of rent considered with reference to capital invested in each acre, yet the following is to be observed: If we compare Ia with I, the case in which the number of cultivated acres and the capital invested in them have been proportionately increased, we find that as the total production has increased proportionately to the expanded cultivated area, i.e., as both have been doubled, so has the rental. It has risen from £18 to £36, just as the number of acres has risen from 4 to 8.

If we take the total area of 4 acres, we find that the total rental amounted to £18 and thus the average rent, including the land which does not yield any rent, is £4½. Such a calculation might be made, say, by a landlord owning all 4 acres; and in this way the average rent is statistically computed for a whole country. The total rental of £18 is obtained by the investment of a capital of £10. We call the ratio of these two figures the rate of rent; in the present case it is therefore 180%.

The same rate of rent obtains in Ia, where 8 instead of 4 acres are cultivated, but all types of land have contributed to the increase in the same proportion. The total rental of £36 yields for 8 acres and an invested capital of £20 an average rent of £4½ per acre and a rate of rent of 180%.

But if we consider Ib, where the increase has taken place mainly upon two inferior categories of soil, we obtain a rent of £42 for 12 acres, or an average rent of £3½ per acre. The total invested capital is £30, and therefore the rate of' rent = 140%. The average rent per acre has thus decreased by £1, and the rate of rent has fallen from 180 to 140%. Here then we have a rise in the total rental from £18 to £42, but a drop in average rent calculated per acre as well as on the basis of capital; the drop takes place parallel to an increase in production, but not proportionately. This occurs even though the rent for all types of soil, calculated per acre as well as on the basis of capital outlay, remains the same. This occurs because three-quarters of the increase is accounted for by soil A, which does not yield any rent, and soil B, which yields only minimum rent.

If the total expansion in Case Ib had taken place solely on soil A, we should have 9 acres on A, I acre on B, I acre on C and I acre on D. The total rental would be £18, the same as before; the average rent for the 12 acres therefore would be £1½ per acre; and a rent of £18 on an invested capital of £30 would give a rate of rent of 60%. The average rent, calculated per acre as well as on the basis of invested capital, would have greatly decreased, while the total rental would not have increased.

Finally, let us compare Ic with I and Ib. Compared with I, the area has been trebled, and also the invested capital. The total rental is £72 for 12 acres, or £6 per acre — as against £4½ in Case I. The rate of rent on the invested capital (£72:£30) is 240% instead of 180%. The total output has risen from 10 to 36 quarters.

Compared with Ib, where the total number of cultivated acres, the invested capital, and the differences between the cultivated soil types are the same, but the distribution different, the output is 36 quarters instead of 26 quarters, the average rent per acre is £6 instead of £3½, and the rate of rent with reference to the same invested total capital is 240% instead of 140%.

No matter whether we regard the various conditions in tables Ia, Ib and Ic as existing simultaneously side by side in different countries, or as existing successively in the same country, we come to the following conclusions: So long as the price of grain remains unchanged because the yield on the worst, rentless soil remains the same; so long as the difference in the fertility of the various cultivated types of soil remains the same; so long as the respective outputs remain the same, hence, given equal capital investments on equal aliquot parts (acres) of cultivated area in every type of soil; so long as the ratio, therefore, between the rents per acre on each category of soil is constant, and the rate of rent on the capital invested in each plot of the same kind of soil is constant: First, the rental constantly increases with the extension of cultivated area and with the consequent increased capital investment, except for the case where the entire increase is accounted for by rentless land. Secondly, the average rent per acre (total rental divided by the total number of cultivated acres) as well as the average rate of rent (total rental divided by the invested total capital) may vary very considerably; and, indeed, both change in the same direction, but in different proportions to each other. If we leave out of consideration the case in which the expansion takes place only on the rentless soil A, we find that the average rent per acre and the average rate of rent on the capital invested in agriculture depend on the proportions which the various classes of soil constitute in the total cultivated area; or, what amounts to the same thing, on the distribution of the total employed capital among the kinds of soil of varying fertility. Whether much or little land is cultivated, and whether the total rental is therefore larger or smaller (with the exception of the case in which the expansion is confined to A), the average rent per acre, or the average rate of rent on invested capital, remains the same as long as the proportions of the various categories of soil in the total cultivated area remain unchanged. In spite of an increase, even a very considerable one, in the total rental with the extension of cultivation and expansion of capital investment, the average rent per acre and the average rate of rent on capital decrease when the extension of rentless land, and land yielding only little differential rent, is greater than the extension of the superior one yielding greater rent. Conversely, the average rent per acre and the average rate of rent on capital increase proportionately to the extent that better land constitutes a relatively greater part of the total area and therefore employs a relatively greater share of the invested capital.

Hence, if we consider the average rent per acre, or hectare, of the total cultivated land as is generally done in statistical works, in comparing either different countries in the same period, or different periods in the same country, we find that the average level of rent per acre, and consequently total rental, corresponds to a certain extent (although by no means identical, but rather a more rapidly increasing extent) to the absolute, not to the relative, fertility of the soil in a given country; that is, to the average amount of produce which it yields from the same area. For the larger the share of superior soils in the total cultivated area, the greater the output for equal capital investments on equally large areas of land; and the higher the average rent per acre. In the reverse case the opposite takes place. Thus, rent does not appear to be determined by the ratio of differential fertility, but by the absolute fertility, and the law of differential rent appears invalid. For this reason certain phenomena are disputed, or an attempt is made to explain them by non-existing differences in average prices of grain and in the differential fertility of cultivated land, whereas such phenomena are merely due to the fact that the ratio of total rental to total area of cultivated land or to total capital invested in the land — as long as the fertility of the rentless soil remains the same and therefore the prices of production, and the differences between the various kinds of soil remain unchanged — is determined not merely by the rent per acre or the rate of rent on capital, but quite as much by the relative number of acres of each type of soil in the total number of cultivated acres; or, what amounts to the same thing, by the distribution of the total invested capital among the various types of soil. Curiously enough, this fact has been completely overlooked thus far. At any rate, we see (and this is important for our further analysis) that the relative level of the average rent per acre, and the average rate of rent (or the ratio of the total rental to the total capital invested in the land), may rise or fall by merely extensively expanding cultivation, as long as prices remain the same, the differential fertilities of the various soils remain unaltered, and the rent per acre, or rate of rent for capital invested per acre in every type of soil actually yielding rent, i.e., for all capital actually yielding rent, remains unchanged.

It is necessary to make the following additional points with reference to the form of differential rent considered under heading I; they also apply in part to differential rent II:

First, it was seen that the average rent per acre, or the average rate of rent on capital, may increase with an extension of cultivation when prices are stationary and the differential fertility of the cultivated plots of land remains unaltered. As soon as all the land in a given country has been appropriated, and investments of capital in land, cultivation, and population have reached a definite level — all given conditions as soon as the capitalist mode of production becomes the prevailing one and also encompasses agriculture — the price of uncultivated land of varying quality (merely assuming differential rent to exist) is determined by the price of the cultivated plots of land of the same quality and equivalent location. The price is the same — after deducting the cost of bringing the new land into cultivation — even though this land does not yield any rent. The price of the land is, indeed, nothing but the capitalised rent. But even in the case of cultivated land, the price pays only for future rents, as, for instance, when the prevalent interest rate is 5% and the rent for twenty years is paid at one time in advance. When land is sold, it is sold as land yielding rent, and the prospective character of the rent (which is here considered as a product of the soil, but it only seems to be that) does not distinguish the uncultivated from the cultivated land. The price of the uncultivated land, like its rent the price of which represents the contracted form of the latter is quite illusory as long as the land is not actually used. But it is thus determined a priori and is realised as soon as a purchaser is found. Hence, while the actual average rent in a given country is determined by its actual average annual rental and the relation of the latter to the total cultivated area, the price of the uncultivated land is determined by the price of the cultivated land, and is therefore but a reflection of the capital invested in the cultivated land and the results obtained therefrom. Since all land with the exception of the worst yields rent (and this rent, as we shall see under the head of differential rent II, increases with the quantity of capital and corresponding intensity of cultivation), the nominal price of uncultivated plots of land is thus formed, and they thus become commodities, a source of wealth for their owners. This explains at the same time, why the price of land increases in a whole region, even in the uncultivated part (Opdyke). Land speculation, for instance, in the United States, is based solely on this reflection thrown by capital and labour on uncultivated land.

Secondly, progress in extending cultivated land generally takes place either toward inferior soil or on the various given types of soil in varying proportions, depending on the manner in which they are met. Extension on inferior soil is naturally never made voluntarily, but can only result from rising prices, assuming a capitalist mode of production, and can only result from necessity under any other mode of production. However, this is not absolutely so. Poor soil may be preferred to a relatively better soil on account of location, which is of decisive importance for every extension of cultivation in young countries; furthermore, even though the soil formation in a certain region may generally be classified as fertile, it may nevertheless consist of a motley confusion of better and worse soils, so that the inferior soil may have to be cultivated if only because it is found in the immediate vicinity of the superior soil. If inferior soil is surrounded by superior soil, then the latter gives it the advantage of location in comparison with more fertile soil which is not yet, or is about to become, part of the cultivated area.

Thus, the State of Michigan was one of the first Western States to become an exporter of grain. Yet its soil on the whole is poor. But its proximity to the State of New York and its water-ways via the Lakes and Erie Canal initially gave it the advantage over the States endowed by Nature with more fertile soil, but situated farther to the West. The example of this State, as compared with the State of New York, also demonstrates the transition from superior to inferior soil. The soil of the State of New York, particularly its western part, is incomparably more fertile, especially for the cultivation of wheat. This fertile soil was transformed into infertile soil by rapacious methods of cultivation, and now the soil of Michigan appeared as the more fertile.

In 1838, wheaten flour was shipped at Buffalo for the West; and the wheat-region of New York, with that of Upper Canada, were the main sources of its supply. Now, after only twelve years, an enormous supply of wheat and flour is brought from the West, along Lake Erie, and shipped upon the Erie Canal for the East, at Buffalo and the adjoining port of Blackrock... The effect of these large arrivals from the Western States — which were unnaturally stimulated during the years of European famine ... has been to render wheat less valuable in western New York, to make the wheat culture less remunerative, and to turn the attention of the New York farmers more to grazing and dairy husbandry, fruit culture, and other branches of rural economy, in which they think the North-West will be unable so directly to compete with them." (I. W. Johnston, Notes on North America, London, 1851, I, pp.220-23.)

Thirdly, it is a mistaken assumption that the land in colonies and, in general, in young countries which can export grain at cheaper prices, must of necessity be of greater natural fertility. The grain is not only sold below its value in such cases, but below its price of production, i.e., below the price of production determined by the average rate of profit in the older countries.

The fact that we, as Johnston says (p.223),

"are accustomed to attach the idea of great natural productiveness and of boundless tracts of rich land, to those new States from which come the large supplies of wheat that are annually poured into the port of Buffalo,"

is primarily the result of economic conditions. The entire population of such an area as Michigan, for instance, is at first almost exclusively engaged in farming, and particularly in producing agricultural mass products, which alone can be exchanged for industrial products and tropical goods. Its entire surplus production appears, therefore, in the form of grain. This from the outset sets apart the colonial states founded on the basis of the modern world-market from those of earlier, particularly ancient, times. They receive through the world-market finished products, such as clothing and tools which they would have to produce themselves under other circumstances. Only on such a basis were the Southern States of the Union enabled to make cotton their staple crop. The division of labour on the world-market makes this possible. Hence, if they seem to have a large surplus production considering their youth and relatively small population, this is not so much due to the fertility of their soil, nor the fruitfulness of their labour, but rather to the one-sided form of their labour, and therefore of the surplus-produce in which such labour is incorporated.

Furthermore, a relatively inferior soil which is newly cultivated and never before touched by civilisation provided the climatic conditions are then not completely unfavourable, has accumulated a great deal of plant food that is easily assimilated — at least in the upper layers of the soil — so that it will yield crops for a long time without the application of fertilisers and even with very superficial cultivation. The western prairies have the additional advantage of hardly requiring any clearing expenses since Nature has made them arable.^[33a] In less fertile areas of this kind, the surplus is not produced as a result of the high fertility of the soil, i.e., the yield per acre, but as a result of the large acreage which may be superficially cultivated, since such land costs the cultivator nothing, or next to nothing as compared with older countries. This is the case, for instance, where share cropping exists, as in parts of New York, Michigan, Canada, etc. A family superficially cultivates, say, 100 acres, and although the output per acre is not large, the output from 100 acres yields a considerable surplus for sale. In addition to this, cattle may be grazed on natural pastures at almost no cost, without requiring artificial grass meadows. It is the quantity of the land, not its quality, which is decisive here. The possibility of such superficial cultivation is naturally more or less rapidly exhausted, namely, in inverse proportion to the fertility of the new soil and in direct proportion to the export of its products.

"And yet such a country will give excellent first crops, even of wheat, and will supply to those who skim the first cream off the country, a large surplus of this grain to send to market" (1, c., p.224).

Property relations in countries with maturer civilisations, with their determination of the price of uncultivated soil by that of the cultivated, etc., make such an extensive economy impossible.

That this soil, therefore, need not be exceedingly rich, as Ricardo imagines, nor that soils of equal fertility need be cultivated, may be seen from the following. In the State of Michigan 465,900 acres were planted in 1848 to wheat which yielded 4,739,300 bushels, or an average of 10 1/5 bushels per acre after deducting seed grain, this leaves less than 9 bushels per acre. Of the 29 counties of this State, 2 produced an average of 7 bushels, 3 an average of 8 bushels, 2—9, 7—10, 6—11, 3—12, 4—13 bushels, and only one county produced an average of 16 bushels, and another 18 bushels per acre (l. c., p. 225).

For practical cultivation higher soil fertility coincides with greater capability of immediate exploitation of such fertility. The latter may be greater in a naturally poor soil than in a naturally rich one; but it is the kind of soil which a colonist will take up first, and must take up when capital is wanting.

Finally, the extension of cultivation to larger areas — aside from the case just mentioned, in which recourse must be had to soil inferior than that cultivated hitherto — to the various kinds of soil from A to D, thus, for instance, the cultivation of larger tracts of B and C does not by any means presuppose a previous rise in grain prices any more than the preceding annual expansion of cotton spinning, for instance, requires a constant rise in yarn prices. Although considerable rise or fall in market-prices affects the volume of production, regardless of it there is in agriculture (just as in all other capitalistically operated lines of production) nevertheless a continuous relative over-production, in itself identical with accumulation, even at those average prices whose level has neither a retarding nor exceptionally stimulating effect on production. Under other modes of production this relative overproduction is effected directly by the population increase, and in colonies by steady immigration. The demand increases constantly, and, in anticipation of this new capital is continually invested in new land, although this varies with the circumstances for different agricultural products. It is the formation of new capitals which in itself brings this about. But so far as the individual capitalist is concerned, he measures the volume of his production by that of his available capital, to the extent that he can still control it himself. His aim is to capture as big a portion as possible of the market. Should there be any over-production, he will not take the blame upon himself, but places it upon his competitors. The individual capitalist may expand his production by appropriating a larger aliquot share of the existing market or by expanding the market itself.

Notes

33a. [It is precisely the rapidly growing cultivation of such prairie or steppe regions which of late turns the renowned statement of Malthus, that "the population is a burden upon the means of subsistence," into ridicule, and produced in its stead the agrarian lament that agriculture, and with it Germany, will be ruined, unless the means of subsistence which are a burden upon the population are forcibly kept away from them. The cultivation of these steppes, prairies, pampas, ilanos, etc., is nevertheless only in its beginning; its revolutionising effect on European agriculture will, therefore, make itself felt in the future even more so than hitherto. — F. E.]

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