5. Absolute Ground-Rent and monopolistic Ground-Rent – their unity and differences.

In the analysis of differential rent we proceeded from the assumption that the worst soil does not pay any ground-rent; or, to put it more generally, only such land pays ground-rent whose product has an individual price of production below the price of production regulating the market, so that in this manner a surplus-profit arises which is transformed into rent.

Differential rent has the peculiarity that landed property here merely intercepts the surplus-profit which would otherwise flow into the pocket of 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 commodity-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.

However, the mere existence of an excess in the value of agricultural products over their price of production would not in itself suffice to explain the existence of a ground-rent which is independent of differences in fertility of various soil types and in successive investments of capital on the same land — a rent, in short, which is to be clearly distinguished in concept from differential rent and which we may therefore call absolute rent.

If capital meets an alien force which it can but partially, or not at all, overcome, and which limits its investment in certain spheres, admitting it only under conditions which wholly or partly exclude that general equalization of surplus-value to an average profit, then it is evident that the excess of the value of commodities in such spheres of production over their price of production would give rise to a surplus-profit, which could be converted into rent and such made independent with respect to profit. Such an alien force and barrier are presented by landed property, when confronting capital in its endeavour to invest in land; such a force is the landlord vis-à-vis the capitalist.

Landed property is here the barrier which does not permit any new investment of capital in hitherto uncultivated or unrented land without levying a tax, or in other words, without demanding a rent, although the land to be newly brought under cultivation may belong to a category which does not yield any differential rent and which, were it not for landed property, could have been cultivated even at a small increase in market-price, so that the regulating market-price would have netted to the cultivator of this worst soil solely his price of production. But owing to the barrier raised by landed property, the market-price must rise to a level at which the land can yield a surplus over the price of production, i.e., yield a rent. However, since the value of the commodities produced by agricultural capital is higher than their price of production, according to our assumption, this rent (save for one case which we shall discuss forthwith) forms the excess of value over the price of production, or a part of it. Whether the rent equals the entire difference between the value and price of production, or only a greater or lesser part of it, will depend wholly on the relation between supply and demand and on the area of land newly taken under cultivation. So long as the rent does not equal the excess of the value of agricultural products over their price of production, a portion of this excess will always enter into the general equalization and proportional distribution of all surplus-value among the various individual capitals. As soon as the rent does equal the excess of the value over the price of production, this entire portion of surplus-value over and above the average profit will be withdrawn from this equalization. But whether this absolute rent equals the whole excess of value over the price of production, or just a part of it, the agricultural products will always be sold at a monopoly price, not because their price exceeds their value, but because it equals their value, or because their price is lower than their value but higher than their price of production. Their monopoly would consist in the fact that, unlike other products of industry whose value is higher than the general price of production, they are not leveled out to the price of production. Since one portion of the value, as well as of price of production, is an actually given constant, namely the cost-price, representing the capital = k used up in production, their difference consists in the other, the variable portion, the surplus-value, which equals p, the profit, in the price of production, i.e., equals the total surplus-value calculated on the social capital and on every individual capital as an aliquot part of the social capital; but which in the value of commodities equals the actual surplus-value created by this particular capital, and forms an integral part of the commodity-values produced by this capital. If the value of commodities is higher than their price of production, then the price of production = k + p, and the value = k + p + d, so that p + d = the surplus-value contained therein. The difference between the value and the price of production, therefore, = d, the excess of surplus-value created by this capital over the surplus-value allocated to it through the general rate of profit. It follows from this that the price of agricultural products may lie higher than their price of production, without reaching their value. It follows, furthermore, that a permanent increase in the price of agricultural products may take place up to a certain point, before their price reaches their value. It follows likewise that the excess in the value of agricultural products over their price of production can become a determining element of their general market-price solely as a consequence of the monopoly in landed property. It follows, finally, that in this case the increase in the price of the product is not the cause of rent, but rather that rent is the cause of the increase in the price of the product. If the price of the product from a unit area of the worst soil = P + r, then all differential rents will rise by corresponding multiples of r, since the assumption is that P + r becomes the regulating market-price.

If the average composition of the non-agricultural social capital were = 85c + 15v, and the rate of surplus-value = 100%, then the price of production would = 115. If the composition of the agricultural capital were = 75c + 25v and the rate of surplus-value were the same, then the value of the agricultural product and the regulating market-price would = 125. If the agricultural and the non-agricultural product should be equalized to the same average price (we assume for the sake of brevity the total capital in both lines of production to be equal), then the total surplus-value would = 40, or 20%, on the 200 of capital. The product of the one as well as the other would be sold at 120. In an equalization into prices of production, the average market-prices of the non-agricultural product would thus lie above, and those of the agricultural product below, their value. If the agricultural products were sold at their full value, they would be higher by 5, and the industrial products lower by 5, than they are in the equalization. If market conditions do not permit the sale of the agricultural products at their full value, to the full surplus above the price of production, then the effect lies between the two extremes; the industrial products are sold somewhat above their value, and the agricultural products somewhat above their price of production.

Although landed property may drive the price of agricultural produce above its price of production, it does not depend on this, but rather on the general state of the market, to what degree market-price exceeds the price of production and approaches the value, and to what extent therefore the surplus-value created in agriculture over and above the given average profit shall either be transformed into rent or enter into the general equalization of the surplus-value to average profit. At any rate this absolute rent arising out of the excess of value over the price of production is but a portion of the agricultural surplus-value, a conversion of this surplus-value into rent, its being filched by the landlord; just as the differential rent arises out of the conversion of surplus-profit into rent, its being filched by the landlord under a generally regulating price of production. These two forms of rent are the only normal ones. Apart from them the rent can be based only upon an actual monopoly price, which is determined neither by price of production nor by value of commodities, but by the buyers’ needs and ability to pay. Its analysis belongs under the theory of competition, where the actual movement of market-prices is considered.

Absolute rent explains some phenomena, which, at first sight, seem to make merely a monopoly price responsible for the rent. The progress of cultivation may just as well bring equally good, or even better soils under the plough as worse soil.

First. Because in differential rent (or any rent in general, since even in the case of non-differential rent the question always arises whether, on the one hand, the soil fertility in general, and, on the other hand, its location, admit of its cultivation at the regulating market-price so as to yield a profit and rent) two conditions work in opposing directions, now cancelling one another, now alternately exerting the determining influence.

Secondly. With the development of natural science and agronomy the soil fertility is also changed by changing the means through which the soil constituents may be rendered immediately serviceable. On the other hand, soil considered inferior not for bad chemical composition but for certain mechanical and physical obstacles that hindered its cultivation, is converted into good land as soon as means to overcome these obstacles have been discovered.

Thirdly. In all ancient civilizations, old historical and traditional relations, for instance, in the form of state-owned lands, communal lands, etc., have purely arbitrarily withheld from cultivation large tracts of land, which only return to it little by little. The succession in which they are brought under cultivation depends neither upon their good quality nor siting, but upon wholly external circumstances.

Fourthly. Apart from the fact that the stage of development reached at any time by the population and capital increase sets certain limits, even though elastic, to the extension of cultivation, and apart from chance effects which temporarily influence the market-price — such as a series of good or bad seasons — the extension of agriculture over a larger area depends on the overall state of the capital market and business conditions in a country. In periods of stringency it will not suffice for uncultivated soil to yield the tenant an average profit — no matter whether he pays any rent or not — in order that additional capital be invested in agriculture. In other periods when there is a plethora of capital, it will pour into agriculture even without a rise in market-price if only other normal conditions are present.

To the extent that the agricultural rent proper is purely a monopoly price, the latter can only be small, just as the absolute rent can only be small here under normal conditions whatever the excess of the product’s value over its price of production. The essence of absolute rent, therefore, consists in this: Given the same rate of surplus-value, or degree of labour exploitation, equally large capitals in various spheres of production produce different amounts of surplus-value, in accordance with their varying average composition. In industry these various masses of surplus-value are equalized into an average profit and distributed uniformly among the individual capitals as aliquot parts of the social capital. Landed property hinders such an equalization among capitals, invested in land, whenever production requires land for either agriculture or extraction of raw materials, and takes hold of a portion of the surplus-value, which would otherwise take part in equalizing to the general rate of profit. The rent, then, forms a portion of the value, or, more specifically, surplus-value, of commodities, and instead of falling into the lap of the capitalists, who have extracted it from their labourers, it falls to the share of the landlords, who extract it from the capitalists. It is hereby assumed that the agricultural capital sets more labour in motion than an equally large portion of non-agricultural capital. How far the discrepancy goes, or whether it exists at all, depends upon the relative development of agriculture as compared with industry. It is in the nature of the case that this difference must decrease with the progress of agriculture, unless the proportionate decrease of variable as compared with constant capital is still greater in the case of industrial than in the case of agricultural capital.

This absolute rent plays an even more important role in the extractive industry proper, where one element of constant capital, raw material, is wholly lacking and where, excluding those lines in which capital consisting of machinery and other fixed capital is very considerable, by far the lowest composition of capital prevails. Precisely here, where the rent appears entirely attributable to a monopoly price, unusually favorable market conditions are necessary for commodities to be sold at their value, or for rent to equal the entire excess of a commodity’s surplus-value over its price of production. This applies, for instance, to rent from fisheries, stone quarries, natural forests, etc.