Saturday, 21 October 2017

Theories of Surplus Value, Part II, Chapter 8 - Part 54

Marx then sets out two situations where this worst land would yield rent. Marx here begins an analysis of absolute and differential rent, and their interaction. His initial calculations are based on a proportional relation of rent to fertility, which he modifies in subsequent examples.

Marx does not make clear the payment of absolute rent as opposed to differential rent in this passage. The basis of absolute rent is the lower organic composition of capital in agriculture relative to manufacturing industry, which means, in aggregate, agricultural exchange-values exceed prices of production. That determines the level of absolute rent with differential rent being levied on top of it.

The value of wheat produced on the previous worst land, was £1200 for 3600 kilos = £0.333 per kilo. It previously produced no differential rent, but only absolute rent. If with the new production, the value of a kilo of wheat is higher than £0.333 per kilo, which is the price of production for wheat on the new worst land, that would require that all the other land was proportionally less fertile.

Its not the low fertility of the new worst land which explains why it pays rent, but the relatively higher fertility of the other lands. In other words, its not absolute fertility that determines rent, but relative fertility.

The previous worst land paid absolute rent, not differential rent, and that it didn't pay more rent, was due to the fact that other land was relatively more fertile compared to it.

Northern Soul Classics - The Girl Across The Street - Moses Smith


Friday, 20 October 2017

Friday Night Disco - Woolly Bully - Sam The Sham & The Pharaohs

Merkel and May

Theresa May's supporters have been presenting the comments of Angela Merkel, that she wants to be able to do a trade deal with Britain, and the decision of the EU Council to start internal discussions on the kind of deal they might offer, as some kind of success. It is simply an indication of the extent to which their desperation is leading them into further self-delusion.

Merkel and other EU Ministers have simply cut off the potential for the Tory party's Loony Right being able to claim that the EU was being obstructive, and thereby pushing May into breaking off talks and pushing a sharp, hard Brexit. It has helped to isolate the hard Brexiters, but with Corbyn and Co also in Brussels, it is also increasing the pressure for May and the Tory soft Brexiters to come to some kind of a deal with Labour. It is an indication of the EU politicians, as they have been all along, being several moves ahead of the hapless Brexiteers.

The EU, as expected said that not enough progress had been made on the first stage talks to justify moving on to trade talks. Whilst Merkel, Tusk and others played good cop, holding out an olive branch to May, Juncker played bad copy, saying that he would have used the word “deadlocked” four times, as opposed to Barnier's use of the term three times. The fact is that there is a logjam, and it is is of the British government's making. It is still hard to see how the UK negotiators can get out out of it, and this is the easy bit of the negotiations. The difficulties are both political and technical for the UK politicians.

The Finances

Britain has tried to muddy the waters in relation to the financial settlement. It comes down to this. Imagine that a couple decide to divorce. In the previous years they have agreed to have a family, and now have three kids, and they have also agreed to send the kids to a fee paying school. They have also bought a house, and taken out a thirty year mortgage to pay for it. Now as they divorce, they are to sell the house. But, they are in negative equity. It is quite reasonable, that both parties are required to share the cost of covering the mortgage debt that exceeds the market price obtained in the sale of the house. And, the fact that one parent has custody of the kids does not excuse the other parent from having to meet their commitments to covering the cost of bringing up the kids, and paying their school fees for the next ten years and so on.

What the Tories are trying to do is to get out of the cost of paying for the kids upbringing, on the basis that they do not have custody, and they are trying to deny any liability for the mortgage debt outstanding. What Theresa may offered in her Florence speech was to pay €20 billion, to cover expenses up to 2020. In effect, she is only offering to pay what would in any case be the membership fees for that period, when she is trying to obtain a transitional membership of the customs union and single market. Its as though, during the divorce proceedings, she is saying she will stay in the house, and pay her half of the monthly mortgage payment, and the school fees.

But, that does not begin to address the longer term financial commitments that have to be resolved, such as the costs of EU civil servants pensions, and so on, which extend decades into the future. The Tories repeatedly talk in bland terms of meeting their commitments, but without nailing down the definitions of exactly what those commitments are, such statements are meaningless. May knows that technically this is easy to resolve. It is simply a matter of nailing down those commitments, and agreeing to cough up what Britain owes. Ultimately, whether Britain pays €20 billion or €100 billion is irrelevant, because for a $2 trillion economy, either sum is peanuts in the grand scheme of things, especially as the latter would almost certainly be paid in stages. The idea that this is a stumbling block or the main issue for the EU is also silly, because for a $14 trillion EU economy, the sums are even more trivial.
The problem is political. The EU cannot allow Britain to get away without meeting its commitments, because that would send very bad signals, but more importantly it has no need to do so. It is the EU in the driving sat, and it is the UK that triggered Article 50. The problem for May is that if she agrees to pay what Britain owes, she will face a revolt from her Loony Right, and may have to rely on support from Labour to face them down. But, in many ways the question of the money is the easiest to resolve.

EU Citizens in Britain

The issue of EU citizens living in Britain should also be easy to resolve technically. All it requires is for those citizens to be granted the same rights they have now, and for a reciprocal arrangement for UK citizens living in the EU. The cost of doing that is pretty minimal. In fact, given that those EU workers make a net contribution to the British economy, not doing so represents a cost. But, again the problem is political. Firstly, a large core of the 37% who voted for Brexit is accounted for by that 25% of the population that self-describes itself as racist. Recent vox pops, show a significant number of these bigots, particularly amongst the older sections of the population, who not only want to stop further immigration, but who want to send existing EU citizens back home.

There has been a notable increase in xenophobic attacks since the Brexit vote, and it is not surprising, therefore, that EU politicians are keen to ensure that the three million EU citizens living in Britain have the protection of the European Court of Justice behind them. Many of those citizens when they have come to apply for UK citizenship have found that their path has been obstructed, not least by the 84 page application form they have to fill in to do so. But, a main bugbear for the Tory Loony Right has always been the ECJ, and they are determined not to allow it any jurisdiction.

Ireland

Politically, the question of Ireland is the easiest to resolve, because on all sides there is agreement that the foundations of the Good Friday Agreement should not be imperilled, and that there should be no return to any kind of border between the North and the Republic. The problem is that this is technically impossible to achieve on the basis of the conditions that the Tories have already set down. From the beginning Theresa May has said that Britain is not only leaving the EU, but is also leaving the single market and the customs union. But, if you leave the customs union, then that means that there has to be a customs border between the EU and Britain. That means a border between Northern Ireland and the Republic, and a border between Gibraltar and Spain. That is a contradiction in aims that cannot be bridged.

Britain has said that in order to resolve this issue its necessary to couple it with the stage 2 trade talks. If as part of its aims in those trade talks, Britain was proposing to remain in the customs union that would be a valid argument, but Britain has already said that its aim is to be outside the customs union. If Britain is outside the customs union, no amount of discussion on future trade arrangements can overcome the requirement for a border. The only alternative would be if the EU allowed Britain to be outside the customs union and single market, and yet to still have free access to those institutions. That, obviously is what Britain wants to achieve, and is the reason it has tried to tie the two things together at this stage, but it is impossible to have your cake and eat it in this way. There is absolutely no way that the EU can allow the UK to be outside the single market and customs union, to make no contribution to those organisations, and also thereby to be free to make its own trade deals with other countries, and yet still have access to the single market and customs union, as though it were still a member. For the EU to do that would be to sign its own death warrant. It makes no more sense than for a trades union to give preferential treatment to non-members as opposed to members.

If Britain wants to have no border between Northern Ireland and the Republic and between Spain and Gibralatar, it has to agree to remain inside the customs union. But, then May will not be able to sell that to her Loony backbenchers. If Britain is outside the customs union then there has to be a border between Spain and Gibraltar and between Northern Ireland and the Republic. Its not just a question of the goods moving backwards and forwards across the border. In Ireland, any such border will quickly result in a return of the rampant smuggling that characterised the past. Many of those engaged in that smuggling are parts of sectarian gangs, and it will not take long for the more extreme of those to use the finances raised by such activities to resume the violent conflict of the past.

On top of that, EU citizens will be free to fly into the republic, and then to simply walk across the border into the North, and from there they can simply cross into the UK mainland. Any idea the Brexiters might have of reducing immigration, would, thereby go out of the door on day one. Britain outside the single market and customs union is simply incompatible with the idea of there being no border between the Republic and the North of Ireland, or between Spain and Gibraltar.

So, although the EU has given Britain more time to resolve these irreconcilable contradictions, its unlikely they will do so, and even less likely they will do so by Christmas. The idea that even if stage 2 talks started in January a trade deal could be agreed by next October is ridiculous, because those negotiations will be even more difficult than the current ones. What the EU have also done is to give businesses in Britain time to start making preparations for moving out, rather than facing a sudden cliff edge if the Tory Loonies had forced a walk-out. Many of those businesses have already said that December was a cut-off for them.

It makes sense for the big banks to start to move their operations to Frankfurt where the ECB is based. Lloyd Blankfein of Goldman Sachs has already been tweeting to that effect. The UK economy already facing rising inflation as the value of the Pound erodes due to Brexit, and facing increasing stagnation as its productivity slows, and businesses fail to invest due to Brexit induced uncertainty is set for a tough time, with no end to it in sight.

Labour would do well to create clear blue water between it and the Tories and the Brexit chaos they are bringing about. Now is the time for Labour to set out clearly just what a mistake Brexit is, and just how much people were deliberately misled by people such as Farage, Trump, Johnson and co. Labour should commit itself to a clear opposition to Brexit, and begin campaigning for Article 50 to be revoked, before it is too late.

Theories of Surplus Value, Part II, Chapter 8 - Part 53

Even where no rent exists economically, i.e. there is no surplus profit, the landlord will not allow the land to be used for free. They will charge a rent. The rent then reduces the tenant's profit below the average, and where the tenant is a peasant producer, it may even eat into their wages. Similarly, a capitalist tenant, whose profit is reduced below the average, by such a lease-rent, may seek to compensate by reducing wages.

In areas such as the United States, where vast areas of land existed, which had not become private property, workers who had emigrated to the continent were able to acquire land, and turn themselves back into peasant producers. Their production was usually inefficient, despite the fertility of the land, because they lacked capital. The organic composition of capital was low, depending on large amounts of manual labour, relative to constant capital. So, the value of production was high. But, surplus profits did not exist for the same reason as in other industries. That is additional capital, in the shape of more workers, was constantly able to acquire land, and increase the supply of agricultural products. So, the market price of agricultural products was forced down, no surplus profit existed, and so no basis for rent to be formed existed.

“But in countries where landed property exists, the same situation, namely that the last cultivated land pays no rent, may also occur for the reverse reasons.” (p 97)

It requires that the fertility of the last cultivated land is so low that the output only generates enough return, at the market price of grain, so as to only produce the average profit.

Suppose £1,000 is invested and produces an output of 3600 kilos with an exchange-value of £1200. The price per kilo is £0.33. There is a 6 day week, and 12 hour working day. A week's labour equals £10. One day's labour is then equal to £1.67. £1,000 then equals 100 weeks labour, and £1200, 120 week's labour.

Ten kilos of grain has a value of £3.33, which is equal to 2 day's labour. Of the 2 day's labour, 20% is unpaid labour, or £0.67.

If average profit is 10%, then on the £1,000 of capital advanced, the price of production for the 3600 kilos is £1,100, which is £0.31 per kilo.

The value of the output is then £100 above the price of production, which is then surplus profit,, appropriated as rent. Rent then constitutes half the surplus value on this production. More fertile lands would produce greater output for the same £1,000 of capital, and would thereby produce more rent.

Now, if another piece of land is cultivated, which only produces 3500 kilos of grain with the same expenditure of 120 weeks of labour, at £3.333 pre kilo, it will only return £1100.But, 10 kilos is now equal to 2.18 days of labour, whereas previously it was only equal to 2 days labour.

The price of production for the 3300 kilos is £1 per kilo. The price of production for the output is £1100, but the value of output is £1200. If it sells its output at £0.333, it will sell it below its value, but at its price of production. So, there would be no surplus profit, or basis for rent.

Thursday, 19 October 2017

The Number of UK Wage Slaves Rises

At Prime Minister's Questions, yesterday, Theresa May opened her remarks by associating herself with opposition to slavery, and its persistence into the modern world. She did not seem to recognise the irony of almost immediately going on to welcome, and indeed praise the role of her government in facilitating, the fact that the latest employment data shows that the number of UK wage slaves has again risen. Everyone understands that those who benefit from more slaves being put to work are the slave-owners, who appropriate the surplus product produced by the slave, yet, the Tories continually expect us to bow down in gratitude that more wage slaves have been employed, in order for those wage slaves to produce a larger surplus product, and surplus value, for a handful of very rich capitalists. The irony of May's statements would not have been missed by economists, and MP's, such as David Ricardo, in the 19th century. Ricardo recognised that being a wage slave was a misfortune that as few people should be subjected to as possible.

The irony would also not have been lost on the author of “Black Swans”, Nicholas Nassim Taleb, who wrote in his book, “The Bed of Procrustes”,

“Karl Marx, a visionary, figured out that you can control a slave much better by convincing him he is an employee.” 

Adam Smith, following on from the Physiocrats, had recognised that value is labour, and that in all modes of production, other than the most primitive, the producers (workers) produce a greater quantity of new value by their labour than is required for the reproduction of their own labour-power, and physically this is reflected by the fact that they thereby produce a surplus product. For so long as these producers owned their own means of production, they were able to appropriate this surplus product/value themselves. It is what led Smith to understand the law of value as being one in which not only is the value of a commodity equal to the labour-time required for its production, but it is also equal to the amount of labour it can command. In other words, a peasant producer of a metre of linen that has a value of 10 hours of labour, can thereby exchange the metre of linen for other commodities with a value equal to 10 hours of labour, and thereby has command over this equal amount of labour used to produce say beer, or bibles.

However, Smith recognised that as soon as a small number of people in society are able to monopolise ownership of either land, or means of production, this law of value appears to break down, because it then becomes obvious that this small group of people is able to command labour for which they have given no equal amount of value/labour, in return. As soon as this situation arises, the owners of this land or means of production, are able to appropriate themselves the surplus labour/product of the producers, just as surely as is the slave owner who directly appropriates the surplus product created by the slave. This situation confused Smith, because he did not distinguish between the value created by labour, and the value of labour-power itself, and the fact that it is precisely because, under capitalism, the producer/worker, sells their labour-power as a commodity, and thereby becomes a wage slave, that the law of value by which the value of commodities is determined by the labour required for their production continues to operate, and yet the capitalist is able to get something for nothing, that the commodities in their possession commands a greater quantity of labour, than is required for their own production.

The reason for this is precisely because these commodities, wage goods, in the possession of the capitalist, do not act as commodities, but as capital. The capitalist only exchanges these commodities, that comprise their variable-capital, or their money equivalent, wages, with the worker on condition that the worker provides more labour, and thereby creates more new value, than those commodities themselves require for their production. In short, if the total economy were viewed, the producers/workers create a quantity of products that are immediately appropriated by capital, and capital only gives back a proportion of those products to the workers, just as the slave owner only gives back to the slave those things required for their subsistence, and capital then directly appropriates the surplus product/surplus value. The tiny number of owners of capital, thereby, can use this surplus product/value to create a lavish lifestyle for themselves as well as to use it to create more capital, and thereby to increase their command over labour, and ensure their ability to appropriate even more profits in future. It is this extension of wage slavery, and exploitation that Theresa May, and the Tories expect us to show our gratitude for!

Adam Smith recognised that the landed aristocracy was able to appropriate the surplus product produced by peasants simply as a result of the fact that their ancestors had been effective murderers and cutthroats, who had built up their ownership of landed property, throughout Europe, and that, on the basis of this ownership, they were able to demand that the surplus product that the peasant producers would previously have owned themselves, was paid, instead, as rent, to the landowner. It was why Smith was scathing of such parasitic elements in society such as the aristocracy, the clergy etc. Smith also recognised that it was the fact that the means of production had been monopolised by a small group of capitalists, and that as capitalist production replaced peasant production, and the old guild production, the labourers could only work, if they had access to these means of production.

It was the fact that there were many labourers seeking work, but a relative shortage of capital, which Smith believed explained the breakdown of the law of value, so that the owners of capital were able to command a greater quantity of labour with the commodities in their possession, than was represented by the value of those commodities. In other words, Smith believed that the law of value broke down because the relative oversupply of labour, pushed down its price, whilst the relative shortage of capital pushed up its price. Writing near the dawn of this capitalist production, Smith saw the rapid accumulation of capital, and the rapid growth in the number of people who were themselves becoming capitalists. On this basis, Smith mistakenly believed that this relative imbalance in the supply of labour and capital would be resolved, as the supply of capital was thereby increased, and the demand for labour increased along with it. The result would be that the ability of capital to appropriate the surplus value created by labour would then be diminished, so that the mass and rate of profit would continually be squeezed. 

This was Smith's explanation for the historical tendency for the rate of profit to fall, and he saw it as inevitably leading to a crisis for capitalism, as eventually the profit would disappear altogether. He was wrong, as Marx describes.

“A distinction must he made here. When Adam Smith explains the fall in the rate of profit from an over-abundance of capital, an accumulation of capital, he is speaking of a permanent effect and this is wrong. As against this, the transitory over-abundance of capital, over-production and crises are something different. Permanent crises do not exist.” 

(Theories of Surplus Value, Chapter 17, Footnote 1)

Marx recognised that although, there are indeed times when capital accumulates rapidly so that the demand for labour-power rises, pushing up wages, and squeezing profits, it is the very fact that capital will only employ wage slaves when those wage slaves hand over a portion of their labour gratis that ensures that this cannot be a permanent situation. It only arises exceptionally, although periodically, in temporary crises of overproduction. The response of capital to such situations is always to create for itself a relative surplus population, and it does this by investing in the development of new labour-saving technologies, so that the existing output can be produced with less labour, and increased output with the same amount of labour, so that the relative shortage of labour-power is overcome, wages are pushed down, and the rate of exploitation thereby pushed up.

As Marx puts it,

“Take, for example, the rise in England of agricultural wages from 1849 to 1859. What was its consequence? The farmers could not, as our friend Weston would have advised them, raise the value of wheat, nor even its market prices. They had, on the contrary, to submit to their fall. But during these eleven years they introduced machinery of all sorts, adopted more scientific methods, converted part of arable land into pasture, increased the size of farms, and with this the scale of production, and by these and other processes diminishing the demand for labour by increasing its productive power, made the agricultural population again relatively redundant. This is the general method in which a reaction, quicker or slower, of capital against a rise of wages takes place in old, settled countries. Ricardo has justly remarked that machinery is in constant competition with labour, and can often be only introduced when the price of labour has reached a certain height, but the appliance of machinery is but one of the many methods for increasing the productive powers of labour. The very same development which makes common labour relatively redundant simplifies, on the other hand, skilled labour, and thus depreciates it.”

(Value, Price and Profit) 

Rather than the amount of profit falling, as Smith believed, therefore, it is actually increased. Yet, as Marx also describes, it is these measures to overcome the crisis of overproduction, which then lead to the tendency for the rate of profit to fall, that Smith, and other economists had been struggling to explain. That is because, this rise in productivity means that more material is processed by the same amount of labour, which in turn means that the proportion of the value of the final output accounted for by material rises, whilst that of labour (divided into wages and profits) falls. This tendency for the rate of profit to fall, therefore, does not, as Smith and others believed, represent some existential threat to the system, but on the contrary, is the manifestation of its ability to continually overcome these periodic crises of overproduction, to raise productivity, and with it the mass of profit, and thereby to continue its upward path. It represents not an indication of decay, but of continued vibrancy, of the ability to continually be able to revolutionise the means and methods of production, so as to overcome those temporary shortages of labour.

If anything, therefore, the rise in UK employment of wage slaves, and fall in unemployment should be seen as a bad thing, when combined with the further fact that UK productivity has not just slowed, but is now falling, and with the fact that the wages of British workers are lower today, in real terms than they were ten years ago. It indicates that UK capital is suffering from decay, and a failure to revolutionise the means and methods of production, so as to increase the mass of profits via greater efficiency. Instead, it is relying on maintaining its existing levels of profits by reducing wages, and forcing workers thereby to sustain their level of subsistence by increasing resort to debt, not to mention the resort to food banks, and other forms of charity, reminiscent of the 19th century, and the novels of Charles Dickens.

The critique of the bourgeois-liberal view of the freedom of the labourer was also indicated by Linguet. Ricardo pointed out that it is better for a society to have only 200 labourers who are productive enough to be able to support a population of 300, than to have a society of 300 labourers that are able to support a population of 400. The gross product is greater in the latter case, but its net product, i.e. the product left over after the consumption of the labourers has been met, is only 33.3%, whereas in the former case, although the gross product is 25% less, the net product is 50%. Ricardo argued that the fate of the productive labourer is to produce a surplus product and surplus value always for someone else, and so the number of people placed in this unfortunate position should be kept to a minimum.

The Tories have tried to deflect criticism of the fact that real wages are lower today than ten years ago, by talking about the cuts in income tax, but those tax cuts primarily benefit those on higher incomes. Moreover, whilst they mention the raising of income tax thresholds, they fail to mention that, after 2010, they and their Liberal allies increased the rate of VAT by 20%, from 17.5% to 20%, and indeed in January 2010, VAT was only at 15%. Given that the lowest paid workers have to spend all their wages in buying goods and services, to live, the rise in VAT is far more burdensome on them than any relief given from a reduction in income tax. Moreover, lower paid workers are more reliant on public services provided by local councils, and it is again those, often free, services that have been cut, by the Tory policies of austerity, forcing those households now to have to pay for what were once free services, or else to do without them altogether.

The Tories also talk hypocritically about the need to make work pay, and that the way out of poverty is through work. Of course, the fact is that it is those in work who have seen their wages fall in real terms, and who are also the main recipients of benefits that have also been cut as a result of Tory austerity. But, as Ricardo and others point out, the idea that it is work that pays, or is the way out of poverty is itself a lie. It is not the workers who are the main beneficiaries of their labour, but the owners of capital, and, unlike in Ricardo's day, the main owners of that capital are not even functioning capitalists, but merely rentiers, people who own money-capital, and whose wealth is in the form of fictitious-capital, of shares and bonds, from which they can simply draw interest. They are no different to the useless parasitic, landed aristocracy that was criticised by Adam Smith, and who have no further useful role to play.

Take someone with £1 million, who even just puts it in a savings account that currently pays them even the measly 1% interest currently available. It would provide them with an income thereby of £10,000 a year, or just under half the national average wage, and about two-thirds the average wage in a place like Stoke. Yet, they have to do no work to obtain this £10,000, they have to own no business, or risk their capital in any way. By the same token, someone with £10 million would get an income from it of £100,000 a year, or four times the national average wage. So, how is it possible to argue that work is the means to riches, or that work is being made to pay as against not working? Its quite clear here that those who do not work, but who have even a modest amount of capital are the ones who are the ones that are benefiting, and the interest they are paid on their capital is the direct result of the surplus value being produced by those in work, whose wages amount to only a fraction of the unearned incomes of the rentiers.

But, then look at the situation that exists in Britain. There are 134 billionaires in the UK. Just 1% interest on a billion Pounds comes to £10 million a year! For that, you would need do no work, invest in no productive activity, simply sit back and draw the interest. And, where does that interest come from? It comes from millions of workers, paid minimum wage, doing jobs of varying degrees of security, who, like the slaves before them, produce all of the goods and services, but who only consume themselves a portion of those very same goods and services, the surplus product they produce thereby being appropriated by capital, and portions of it then being handed over in the form of interest to share and bondholders, rents to landlords, taxes to the capitalist state, as well as lucrative sinecures to all of the bureaucrats, lackeys, and executives who look after the interests of the capitalists, and ensure that the payment of these dividends, rents, and interest continues.  No wonder the Tories see the increase in the number of wage slaves as cause for celebration!

In between the £10,000 interest of the rentier with just £1 million of capital, and the £10 million of interest received by the billionaire rentier (and in fact, the yield they get on their ownership of shares is greater than 1%) there are thousands more who draw large huge incomes in this way without contributing anything of any value to society. The idea that in capitalist Britain work pays, is a cruel deception, perpetrated by the Tories.

Theories of Surplus Value, Part II, Chapter 8 - Part 52

[9. Differential Rent and Absolute Rent in Their Reciprocal Relationship. Rent as an Historical Category. Smith’s and Ricardo’s Method of Research]


Differential Rent divides into two types.

“So far as the difference in rents is concerned, provided equal capital is invested in land areas of equal size, it is due to the difference in natural fertility, in the first place, specifically with regard to those products which supply bread, the chief nutriment; provided the land is of equal size and fertility, differences in rent arise from unequal capital investment.” (p 95)

Differential Rent I, arising from relative soil fertility, affects not just the amount of rent, but also the rate of rent, i.e. the rent as a proportion of the advanced capital. Differential Rent II only affects the amount of rent, the rate of rent staying the same.

In other words, a hectare of land on which £1,000 of capital is invested may produce £100 of rent. If £200 is invested the rent rises to £200, but the rate of rent remains 10%. The effect of these additional investments of capital will then vary dependent upon whether the marginal productivity of capital is rising, constant or falling.

“The existence of different excess profits or different rents on land of varying fertility does not distinguish agriculture from industry. What does distinguish it is that those excess profits in agriculture become permanent fixtures, because here they rest on a natural basis (which, it is true, can be to some extent levelled out).” (p 95) 

In agriculture, the need to meet demand by bringing into cultivation less fertile land, means that existing more fertile land thereby produces surplus profits. But, Marx argues, in industry, it is never the case that new production is introduced, which is less efficient. Of course, the basis of the neoclassical, marginalist analysis is precisely the opposite. It is that production is always being undertaken on the most efficient basis, and that any additional supply requires production to take place on the basis of rising marginal costs, which is the basis for the supply curve rising from left to right.

In fact, all experience supports Marx's position that firms never introduce a new machine or technique on the basis of it being less efficient or more expensive than an existing machine or technique, and so all expansion, all new production enjoys falling, not rising marginal costs of production.

But, this also applies in agriculture, as Ricardo admits. Ricardo does not argue that agricultural productivity falls absolutely, but that it falls relatively, compared to industry. Its possible for more fertile land, such as the North American prairies to be brought into cultivation, for more efficient machinery to be introduced, and for new developments to raise natural fertility of the soil.

These more fertile lands, when brought into cultivation, later, may even throw some of the older, previously more fertile lands out of production. The farmers on these lands then have to turn them over to other agricultural products, or other types of industry.

“The fact that the differences in rents (excess profits) become more or less fixed distinguishes agriculture from industry. But the fact that the market-price is determined by the average conditions of production, thus raising the price of the product which is below this average, above its price and even above its value, this fact by no means arises from the land, but from competition, from capitalist production. Hence this is not a law of nature, but a social law.” (p 96)