1. Economic relations in agriculture.

A portion of the surplus-value produced by capital falls to the share of the landowner. We assume, then, that agriculture is dominated by the capitalist mode of production just as manufacture is; in other words, that agriculture is carried on by capitalists who differ from other capitalists primarily in the manner in which their capital, and the wage-labour set in motion by this capital, are invested. So far as we are concerned, the farmer produces wheat, etc., in much the same way as the manufacturer produces yarn or machines. The assumption that the capitalist mode of production has encompassed agriculture implies that it rules over all spheres of production and bourgeois society, i.e., that its prerequisites, such as free competition among capitals, the possibility of transferring the latter from one production sphere to another, and a uniform level of the average profit, etc., are fully matured. The form of landed property is a specifically historical one a form transformed through the influence of capital and of the capitalist mode of production, either of feudal landownership, or of small-peasant agriculture as a means of livelihood, in which the possession of the land and the soil constitutes one of the prerequisites of production for the direct producer, and in which his ownership of land appears as the most advantageous condition for the prosperity of his mode of production.

Landed property is based on the monopoly by certain persons over definite portions of the globe, as exclusive spheres of their private will to the exclusion of all others.

The prerequisites for the capitalist mode of production therefore are the following: The actual tillers of the soil are wage labourers employed by a capitalist, the capitalist farmer who is engaged in agriculture merely as a particular field of exploitation for capital, as investment for his capital in a particular sphere of production. This capitalist farmer pays the landowner, the owner of the land exploited by him, a sum of money at definite periods fixed by contract, for instance, annually (just as the borrower of money-capital pays a fixed interest), for the right to invest his capital in this specific sphere of production. This sum of money is called ground-rent, no matter whether it is paid for agricultural land, building lots, mines, fishing grounds, or forests, etc. It is paid for the entire time for which the landowner has contracted to rent his land to the capitalist farmer. Ground-rent, therefore, is here that form in which property in land is realized economically, that is, produces value. Here, then, we have all three classes — wage-labourers, industrial capitalists, and landowners constituting together, and in their mutual opposition, the framework of modern society.

2. The essence of capitalist ground-rent. Ground-rent and rent.

Ground-rent assumes the form of a certain sum of money, which the landlord draws annually by leasing a certain plot on our planet. We have seen that every particular sum of money may be capitalized, that is, considered as the interest on an imaginary capital. For instance, if the average rate of interest is 5%, then an annual ground-rent of £200 may be regarded as interest on a capital of £4,000. Ground-rent so capitalized constitutes the purchase price or value of the land, a category which like the price of labour is prima facie irrational, since the earth is not the product of labour and therefore has no value. But on the other hand, a real relation in production is concealed behind this irrational form. If a capitalist buys land yielding a rent of £200 annually and pays £4,000 for it, then he draws the average annual interest of 5% on his capital of £4,000, just as if he had invested this capital in interest-bearing papers or loaned it directly at 5% interest. It is the expansion of a capital of £4,000 at 5%. On this assumption, he would recover the purchase price of his estate through its revenues in twenty years. It is in fact the purchase price-not of the land, but of the ground-rent yielded by it — calculated in accordance with the usual interest rate. But this capitalization of rent assumes the existence of rent, while rent cannot inversely be derived and explained from its own capitalization. Its existence, independent of its sale, is rather the starting-point for the inquiry.

It follows, then, that the price of land may rise or fall inversely as the interest rate rises or falls if we assume ground-rent to be a constant magnitude. If the ordinary interest rate should fall from 5% to 4%, then the annual ground-rent of £200 would represent the annual realization from a capital of £5,000 instead of £4,000. The price of the same piece of land would thus have risen from £4,000 to £5,000, or from 20 years' to 25 years' purchase. The converse would take place in the opposite case. This is a movement of the price of land which is independent of the movement of ground-rent itself and regulated only by the interest rate.

In practice, naturally, everything appears as ground-rent that is paid as lease money by tenant to landlord for the right to cultivate the soil. No matter what the composition of this tribute and no matter what its sources, it has this in common with the actual ground-rent — that the monopoly of the so-called landed proprietor of a portion of our planet enables him to levy such tribute and impose such an assessment. It has this in common with the actual ground-rent — that it determines the price of land, which, as we have indicated earlier, is nothing but the capitalized income from the lease of the land.