File spoon-archives/marxism-general.archive/marxism-general_1997/97-02-20.225, message 11


Date: Mon, 17 Feb 1997 00:56:23 +0100
From: m-14970-AT-mailbox.swipnet.se (Hugh Rodwell)
Subject: M-G: Value theory, prices and ground rent 2/2


And so to ground rent. Mark writes:

>Marx's theory of market-values allows for ground rent to be set by the
>worst marginal land without conceding that scarcity (or monopoly control
>of a gift of nature eg a waterfall) can create value. More: it is
>possible within Marx's theory to hypothesize a sector of industry in
>which there are no worst and best cases from which a technical average
>must be derived. Such a sector, in which market-values coincide not only
>with the aggregate product but with each individual commodity, and where
>only the standard condition of production holds, might still attract
>extra surplus value in the form of surplus profit from other sectors,
>due to temporary fluctuations in prices resulting from
>supply-and-demand. This explains differential rent. In the same way that
>extra s-v, in the form of surplus profit, contains the socially
>necessary labour cost of improving production methods and extending
>production until equilibrium is reestablished, extra s-v in the form of
>differential rent will flow to landowners as part of the same process of
>capitalist competition through which the prices of production of
>agricultural goods are determined.

I'm afraid this is wrong.

The opening sentence is right in as far as scarcity or monopoly control
doesn't create value. But then the argument falls on its face. Mark writes:

>it is
>possible within Marx's theory to hypothesize a sector of industry in
>which there are no worst and best cases from which a technical average
>must be derived. Such a sector, in which market-values coincide not only
>with the aggregate product but with each individual commodity, and where
>only the standard condition of production holds, might still attract
>extra surplus value in the form of surplus profit from other sectors,
>due to temporary fluctuations in prices resulting from
>supply-and-demand. This explains differential rent.

In his discussion of differential rent, Marx is very clear about best cases
and worse cases, and lists them in tables time and again. He is forever
computing prices and differences, and there is no problem whatever in
getting an average from these. (Remember, the market price of the
agricultural product is the same for all land producing it, both good and
bad, the difference between different kinds of land lies in the relative
productivity, the amount of produce per acre.)

Mark's mistake here is to try to explain differential rent in terms of the
rest of capitalist production. Temporary fluctuations in supply-and-demand
have got nothing to do with it either. What is true is that a higher price
is extorted (not "attracted" for Christ's sake!) from the rest of the
economy for agricultural produce than would be the case if land behaved
like other means of production.

The reason land behaves differently is social. There are relations of
production in the way. Relations of such fundamental importance that they
give rise to the third great class in capitalist society alongside the
working class and the bourgeoisie.

Basically landlords have a monopoly on the land. They can screw the rest of
society, and do. The mechanism is capitalist farming for an average rate of
profit. Farmers rent the land from the landowners, and then proceed as any
other capitalists would do, investing fixed and variable capital,
extracting surplus value from labour and turning the average profit. The
landlord, by right of ownership, sits back and regards his rent as interest
on the money he laid out to buy the title to the land. By right of
ownership, the landlord can refuse to lease out his land unless it produces
a rent for him. This is the basis for *absolute rent* as a special case of
differential rent. By right of ownership, the landlord can skim off all
returns over and above the average rate of profit as rent. The better the
land, the more exorbitant the rent.

As opposed to the *particular* monopoly beloved of "waterfall" theorists,
this is a *general*, or even *universal* class monopoly of a basic factor
of production, enshrined in law and ideology. The effect is the same as any
monopoly, distorting the allocation and distribution of social production
and the social product. Not only is value pumped from less
capital-intensive sectors (such as, ironically enough, traditional
agriculture!) to more capital-intensive sectors, but it is also pumped
directly into the pockets of totally unproductive parasites with a class
monopoly on the land.

Mark finishes off:

>Clearly therefore there is no need to resort to a theory of 'market
>windfalls' to explain the profits resulting from control of waterfalls.

Well, these profits are either, as Marx puts it, due to monopoly prices
arising from the existence of rent, which is in fact a case of a
manipulated market (the kind of thing The Economist would love to call a
"market windfall"), or they are temporary profits arising from a
competitive edge. I'd go for the monopoly of  ownership explanation. Rent
has been with us for too long to be a temporary phenomenon of the kind Mark
is referring to.

>Under capitalism such theories are used to apologise for the existence
>of parasitic and reactionary landed interests. Under socialism such
>revenues and social classes would be abolished, although to judge from
>Justin's insistence that these 'windfalls' are value-producing, perhaps
>under "market-socialism" there would continue to be a landed gentry.

Indeed, if you see value as a reflection of prices, there is a big risk
you'll be seeing lots of other things in the same distorting mirror. But
Mark underestimates the voluntarism of Justin's political position. Justin
hates capitalism and is struggling in his way for its downfall. So although
he shares a number of very important principles with bourgeois and vulgar
economists, there is a great battle going on as to where his own front line
is situated between the classical orthodox trenches of Marxism and
bourgeois ideology. The result is quite arbitrary as far as I can see, and
it's impossible to derive a principled position for Justin on the landed
gentry from anything but Justin's own statements on that very issue.

Here, finally, are a couple of quotes from Book III which indicate the
drive of Marx's argument. The first is from the very end of chapter 44,
"Differential rent also on the worst cultivated soil", and the other two
are from ch 45, "Absolute ground rent", half-a-dozen or so pages into the
chapter. I'll return to the arguments in these chapters some other time to
demonstrate what Marx himself has to say on this matter in more detail.


       A most amusing phenomenon is that all the opponents of Ricardo
       who oppose the idea that value determination is based exclusively on
       labour, rather than regarding differential rent as arising from
       differences in soil, point out that here Nature rather than labour
       determines value, but at the same time they credit this
       determination to the location of the land -- and to an even greater
       extent -- the interest on capital put into the land during its
       cultivation.

        (Progress Publishers, 1966, p746)


        Differential rent has the peculiarity that landed property here
       merely intercepts the surplus-profit which would otherwise flow into
       the pocket of the the farmer, and which the latter may actually
       pocket under certain circumstances during the period of his lease.
       Landed property is here merely the cause for transferring a portion
       of the comodity-price which arises without the property having
       anything to do with it (indeed, in consequence of the fact that the
       price of production  which regulates the market-price is determined
       by competition) and which resolves itself into surplus-profit -- the
       cause for transferring this portion of the price from one person to
       another, from the capitalist to the landlord. But landed property is
       not the cause which *creates* this portion of the price, or the rise
       in price upon which this portion of the price is premised. On the
       other hand if the worst soil A cannot be cultivated --  although its
       cultivation would yield the price of production -- until it produces
       something in excess of the price of production, rent, then landed
       property is the creative cause of *this* rise in price. *Landed
       property itself has created rent.*

       (Progress Publishers, 1966, p755)


       The mere legal ownership of land does not create any ground-rent for
       the owner. But it does, indeed, give him the power to withdraw his
       land from exploitation until economic conditions permit him to
       utilize it in such a manner as to yield him a surplus, be it used
       for actual agricultural or other production purposes, such as
       buildings, etc. He cannot increase or decrease the absolute
       magnitude of this sphere, but he can change the quantity of land
       placed on the market. Hence, as Fourier already observed, it is a
       characteristic fact that in all civilized countries a comparatively
       appreciable portion of land always remains uncultivated.

       (Progress Publishers, 1966, p757)

(The strategic reserve of the unemployed hinterland!)

Cheers,

Hugh




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