Tuesday, 30 August 2016

Capital III, Chapter 46 - Part 3

“It must be distinguished, whether the rent springs from a monopoly price, because a monopoly price of the product or the land exists independently of it, or whether the products are sold at a monopoly price, because a rent exists.” (p 775)

A monopoly price exists basically because demand exceeds what can be supplied. A buyer is prepared to offer a higher price that has no relation to the price of production, and unlike temporary fluctuations in market price, it is not possible to reduce the market price by increasing supply.

“A vineyard producing wine of very extraordinary quality which can be produced only in relatively small quantities yields a monopoly price. The wine-grower would realise a considerable surplus-profit from this monopoly price, whose excess over the value of the product would be wholly determined by the means and fondness of the discriminating wine-drinker. This surplus-profit, which accrues from a monopoly price, is converted into rent and in this form falls into the lap of the landlord, thanks to his title to this piece of the globe endowed with singular properties.” (p 775)

In this case, the rent arises because of the monopoly price. But, as was argued previously, a landowner will not allow a capitalist to make profits from using their land, without paying a rent. If making an average profit is impossible due to the need to pay this rent, then capitalists will not seek to bring such land into use. So, supply will be lower than it would otherwise have been.

This applies whether the land is to be used for agriculture or some other purpose. Only as above, where the landowner uses their own land, for productive purposes, does this not apply.

This was one reason that, in the 19th century, many representatives of capital argued for land to be nationalised. Only when prices rise to such a level that the land can be brought into use and pay the rent, whilst also retaining the average profit, will the supply be increased. But, had the land been brought into use sooner, supply would have risen and prices would have fallen. Here, it is the rent which causes an artificial restriction of supply.

“That it is only the title of a number of persons to the possession of the globe enabling them to appropriate to themselves as tribute a portion of the surplus-labour of society and furthermore to a constantly increasing extent with the development of production, is concealed by the fact that the capitalised rent, i.e., precisely this capitalised tribute, appears as the price of land, which may therefore be sold like any other article of commerce. The buyer, therefore, does not feel that his title to the rent is obtained gratis, and without the labour, risk, and spirit of enterprise of the capitalist, but rather that he has paid for it with an equivalent. To the buyer, as previously indicated, the rent appears merely as interest on the capital with which he has purchased the land and consequently his title to the rent.” (p 775-6)

In other words, possession has been turned into title of ownership. Its clear that no one can claim exclusive ownership to any particular piece of the Earth's surface. The most anyone can claim is that they staked such a claim on it prior to anyone else, but staking a first claim is no logical or ethical basis for ownership. It is, as Rousseau describes in “The Social Contract”, only a state of possession. But, possession and ownership are two different things.

Slave “owners” possessed slaves, but did this mean they had an ethical right to own them? No. And, if the original slave trader had no ethical or legal right to own another human being, they cannot create such a right simply by selling the slave to someone else. No matter how many times slaves are sold as commodities it does not create a right to ownership where none could have existed to begin with. In the same way, if I buy a stolen car, I have no legal ownership. That resides with its actual owner.

The same applies to land. No one can own land, because there could have been no original ethical or legal right to possession. The fact that such possession was exercised, sometimes by force, for long periods, and passed down through inheritance could equally give no legal right to ownership. So, when land is sold, it is no different to selling a stolen car or a slave.

What, in fact, gave the title of ownership of a slave, was the production relations of the time, which led to such slave owning societies. The legal right, irrespective of the moral right, flowed from the productive and social relations. Similarly, what creates the title of ownership of land – where in the past people were considered to belong to the land, and not vice versa – was the development of feudal society. In societies where the Asiatic Mode of Production dominated, for example, the land was in the possession of the state, and village communes.

Where that feudal land ownership conflicts with the needs of capital, as capitalist productive relations dominate, it leads to similar demands for land nationalisation, until the landlords and capitalists become more closely merged.

“What created it in the first place were the production relations. As soon as these have reached a point where they must shed their skin, the material source of the title, justified economically and historically and arising from the process which creates social life, falls by the wayside, along with all transactions based upon it. From the standpoint of a higher economic form of society, private ownership of the globe by single individuals will appear quite as absurd as private ownership of one man by another. Even a whole society, a nation, or even all simultaneously existing societies taken together, are not the owners of the globe. They are only its possessors, its usufructuaries, and, like boni patres familias, they must hand it down to succeeding generations in an improved condition.” (p 776)

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Monday, 29 August 2016

Capital III, Chapter 46 - Part 2

To the extent that a demand for land is created for all these other activities, as social progress creates rising populations, and that need more houses, roads, schools, and so on, and at the same time, creates more factories etc., the potential for rent increases, because even land unsuitable for agriculture or mining can now be put to productive use. In addition, the same social progress creates additional demand for the output of the land, both for agricultural products and for minerals and other raw materials.

“"The paving of the streets of London has enabled the owners of some barren rocks on the coast of Scotland to draw a rent from what never afforded any before." Adam Smith [An Inquiry into the Nature and Causes of the Wealth of Nations,] Book 1, Chapter XI, 2.” (Note 40, p 774)

Of particular interest in relation to the housing crisis in Britain, Marx reiterates the point made in Capital II, Chapter 12, that as regards speculation it relates to the ground rent, not the house. Houses, as commodities, tend to fall in value, with social progress, because of rising social productivity. That makes the cost of materials cheaper, and means less labour-time is required for construction. Where house prices rise, this is because of the monopoly of land ownership, which prevents additional land being made available to increase housing supply.

The extent to which the landlords benefited is indicated from the testimony of a London property speculator, Edward Capps, to the Select Committee on the Bank Acts, 1851.

“"I think a man who wishes to rise in the world can hardly expect to rise by following out a fair trade ...it is necessary for him to add speculative building to it, and that must be done not on a small scale; ...for the builder makes very little profit out of the buildings themselves; he makes the principal part of the profit out of the improved ground-rents. Perhaps he takes a piece of ground, and agrees to give £300 a year for it; by laying it out with care, and putting certain descriptions of buildings upon it, he may succeed in making £400 or £450 a year out of it, and his profit would be the increased ground-rent of £100 or £150 a year, rather than the profit of the buildings at which ...in many instances, he scarcely looks at all."” (p 774-5)

But, as Marx points out, although the property speculator would make their profit during this time, the land with all these buildings, at the end of the lease, reverts to the landowner or their successor. By these means, landowners, in London and other major cities, were able to amass huge fortunes, as vast areas of residential and commercial property came into their possession without them paying a farthing for it.

“Mining rent proper is determined in the same way as agricultural rent.” (p 775)

Many coal mines were operated by the landowners, because it was not possible to obtain a sufficient profit from their operation to be able to pay rent. The Duke of Bridgewater operated mines near Manchester, and commissioned James Brindley to build a canal for its shipment, for example. Near to where I was born, a mine where my grandfather worked, at Birchenwood, was owned by the Duke of Bridgewater, and on the same site, he also developed an iron works and a gas and coke plant.

Back To Part 1

Sunday, 28 August 2016

Productive Labour - Part 15 of 15

Both Sismondi and Ricardo accepted Smith's first correct definition of productive labour as that which exchanges with capital. Sismondi writes,

““The one always exchanges its labour against the capital of a nation; the other always exchanges it against a part of the national revenue.”” (TOSV 1, p 177)

D'Avenant (An Essay upon the Probable Methods of Making a People Gainers in the Ballance of Trade, London, 1699, p. 50) put forward a mercantilist view of productive and unproductive labour. For the Mercantilists, it was activity that created a surplus of trade which was productive. This trade surplus, thereby provided the gold and silver as a surplus value, which could then be used to finance the employment of labour in all other activities. In this regard, D'Avenant quotes the work of Gregory King (Scheme of the Income and Expense of the Several Families of England, calculated for the year 1688) who divided the nation into two classes, the first who were productive of wealth and the second who were destructive of wealth, and dependent on the first.

In the first class, King places “Lords, Baronets, Knights, Esquires, Gentlemen, Persons in Office and Places, merchants in oversea trade, Persons in the Law, Clergymen, freeholders, farmers, persons in liberal arts and sciences, shopkeepers and tradesmen, artisans and handicrafts, Naval Officers, Military Officers. As against these, the “unproductive” class consists of: common seamen, labouring people and out servants (these are agricultural labourers and day wage-labourers in manufacture), cottagers (who in D’Avenant’s time were still a fifth of the total English population), common soldiers, paupers, gipsies, thieves, beggars and vagrants generally.” (TOSV 1, p 178)

D'Avenants justification for this position was that those in the first class not only obtained an income sufficient for their consumption, but also obtained a surplus, which could be used to employ others. By such employment, D'Avenant suggested they were consumptive of the wealth created by the first class.

In fact, what was paid out as wages, and thereby added to domestic consumption was directly seen as destructive of wealth by D'Avenant and other Mercantilists, because what was consumed at home was not exported, and thereby reduced the trade surplus, which reduced the flow of gold into the country.

However, Marx says,

“Incidentally, it must not be thought that these Mercantilists were as stupid as they were made out to be by the later Vulgar-Freetraders.” (TOSV 1, p 179)

Marx quotes D'Avenant (Discourses on the Publick Revenues, and on the Trade of England, etc., London, 1698) where he indicates that he clearly understood that the real wealth consisted not simply in the store of precious metal, but in the productive capacity of the economy.

““Gold and Silver are indeed the Measure of Trade, but the Spring and Original of it, in all Nations, is the Natural, or Artificial Product of the Country, that is to say, what their Land, or what their labour and Industry produces. And this is so true, that a Nation may be suppos’d, by some Accident, quite without the Species of Money, and yet, if the People are numerous, industrious, vers’d in Traffick, skill’d in Sea-Affairs, and if they have good Ports, and a Soil fertile in variety of Commodities, such a people will have Trade, […] and, they shall quickly get among ‘em, a plenty of Gold and Silver so that the real and effective Riches of a Country, is its Native Product” (p.45)” (TOSV 1, p 179)

William Petty also has this conception of foreign trade, which brings in money, being the basis of what is productive wealth, but Petty includes in his definition of who is involved in this productive activity soldiers. This presumably reflects their role, for example, within the East India Company, of securing these colonial markets from which treasure was returned from such trade.

““Husbandmen, Seamen, Soldiers, Artizans and Merchants, are the very Pillars of any Common-Wealth: all the other great Professions, do rise out of the infirmities and miscarriages of these; now the Seaman is three of these four” (navigator, merchant, soldier) ([William Petty,] Political Arithmetick, etc. [in Several Essays in Political Arithmetick], London, 1699, p. 177). “… the Labour of Seamen, and Freight of Ships, is always of the nature of an Exported Commodity, the overplus whereof, above what is Imported, brings home Money, etc.” (p. 179).” (TOSV 1, p 180)

Petty also indicates that with a certain level of trade, a nation can also benefit from the division of labour, so that it can build different types of ships to carry different types of cargo, and to operate in different types of sea conditions, and thereby reduce the cost of construction and the cost of freight.

Petty also adopts a position similar to Smith in respect of a definition of productive being determined by whether what is produced is a material commodity.

“If taxes are taken from industrialists, etc., in order to give [money] to those who in general are occupied in ways “which produce no material thing, or things of real use and value in the Commonwealth: In this case, the Wealth of the Publick will be diminished: Otherwise than as such Exercises, are Recreations and Refreshments of the mind; and which being moderately used, do qualify and dispose Men to what in it self is more considerable” (l.c., p. 198).” (TOSV 1, p 180)

Petty anticipates the analysis of surplus value, but only in the form of rent. He defines value in terms of labour-time – although, as with Benjamin Franklin, he doesn't distinguish between concrete and abstract labour. So, he says that if it takes the same time to bring an ounce of silver from the ground in Peru, to London, as it takes to produce a bushel of corn, then “one is the natural price of the other.”

Marx quotes a further passage from Petty's A Treatise of Taxes, and Contributions…, London, 1662. In this passage Petty says that after a husbandman planted, cultivated and harvested a certain area of land by hand, then after they had deducted from their output what was required to replace their seed, what was required to cover their own consumption, and what had been given to others in exchange for the clothes and other commodities they require, then “..the Remainder of Corn is the natural and true Rent of the Land for that year; and the medium of seven years, or rather of so many years as makes up the Cycle, within which Dearths and Plenties make their revolution, doth give the ordinary Rent of the Land in Corn.” (p 182)

He goes on to ask what the corn and the rent would be in money, and again repeats the argument made previously.

Most of the critiques of Smith, Marx says, focussed on his second incorrect definition of productive-labour, and developed the weak and wrong aspects of Smith's theory.

Capital III, Chapter 46 - Part 1

Building Site Rent. Rent in Mining. Price of Land


If the basis of differential rent is a surplus profit over the average profit, made on marginal land, then the higher profits that can be made from the use of land for mining, industry or residential development create a basis for differential rent.

“This rent is distinguished, in the first place, by the preponderant influence exerted here by location upon differential rent (very significant, e.g., in vineyards and building sites in large cities); secondly, by the palpable and complete passiveness of the owner, whose sole activity consists (especially in mines) in exploiting the progress of social development, toward which he contributes nothing and for which he risks nothing, unlike the industrial capitalist; and finally by the prevalence of monopoly prices in many cases, particularly through the most shameless exploitation of poverty (for poverty is more lucrative for house-rent than the mines of Potosi ever were for Spain), and the monstrous power wielded by landed property, when united hand in hand with industrial capital, enables it to be used against labourers engaged in their wage struggle as a means of practically expelling them from the earth as a dwelling-place.” (p 773)

As social productivity rises, the potential for higher profits rises. But, in addition, this higher productivity results from and creates a greater accumulation of capital. The capitalist accumulates fixed capital, which makes this higher productivity possible, but as seen in relation to agriculture, at the end of a lease, this capital, incorporated in the land, is appropriated by the landlord, and forms the basis of the new higher rent.

The landlord has to do nothing here other than benefit from this social progress.

“Not only the population increase and with it the growing demand for shelter, but also the development of fixed capital, which is either incorporated in land, or takes root in it and is based upon it, such as all industrial buildings, railways, warehouses, factory buildings, docks, etc., necessarily increase the building rent.” (p 774)

In relation to house rent, it comprises two elements according to Marx. Firstly, it comprises actual rent for the land on which the house sits. In Marx's time, it was common for this land to remain in the hands of the landlord, and be rented by the capitalist builder/developer. This is separate from the interest on the money-capital advanced by the builder in the form of the house.

In other words, the builder provides the use value of the house to the tenant. The house for the builder is capital, which has a money value. As was seen earlier, when capital in the shape of commodities is loaned out, it is the same as if money-capital of the same value is loaned out. The rent then depends on this capital value, plus the current rate of interest.

In addition, the capitalist will seek to recover, in the house rent, the rent they have to pay for the land, plus an amount for wear and tear of the house. The same applies to factories, shops and offices.

The land here has two separate aspects. Firstly, it is used in agriculture, mining etc. as a means of production and reproduction. Secondly, in all uses, it is a fundamental requirement for all activity – we must have land to stand on, to live on, to put factories, shops and offices on. The landowner requires rent, whichever of these functions it serves for the tenant.  Marx deals with this further in Theories of Surplus Value, Part II, in analysing the confusion in this regard by Ricardo.

Saturday, 27 August 2016

Capital III, Chapter 45 - Part 12

It was no doubt true, in Marx's day, that the majority of capital required would have been variable capital, required for the felling of trees and their transportation. It is not today. I live on the edge of a forest, and the job of felling is undertaken by less than a handful of workers, using heavy machinery, which cuts the trees, strips the branches, and cuts the trunks into regular lengths, prior to stacking them. The stacks are then collected by a single worker, with a lorry that grabs the trunks and loads them on the lorry. Yet, I have no doubt that, despite the fact, that the value of this timber is thereby below its price of production, the landowner still requires a rent for the use of the forest.

If newly cultivated land is of a superior quality to existing land, it produces surplus profit and differential rent. If it is inferior, it will produce absolute rent. But, what if it is the same quality, but does not produce differential rent?

If there has been no technical innovation that reduces values, and thereby makes it possible to bring into cultivation additional land, the bringing into cultivation of this additional land may be due to a rise in market prices. That may result in more fertile soil being cultivated that previously was excluded because of its distance from markets. Alternatively, the advantage of location of inferior soil may outweigh the disadvantage of its poorer quality.

Even if market prices do not rise, more remote, but more fertile soils may be brought into cultivation, if transport is improved, so that large quantities can be shipped more quickly and at much lower cost. That was seen in Capital II, where the introduction of new railway lines to large cities, led to the decline of former areas of supply and the development of new areas in their place.

“To sum up, then, the contradictory influences of location and fertility, and the variableness of the location factor, which is continually counterbalanced and perpetually passes through progressive changes tending towards equalisation, alternately carry equally good, better or worse land areas into new competition with the older ones under cultivation.” (p 769)

Land may also be brought into cultivation, because it was previously considered inferior, as a consequence of its chemical composition, or physical characteristics. But, as science and technology develops, the means of overcoming these problems is established and often relatively cheaply, so that what is then fertile soil can be utilised.

“In this way, light soil types in France and in the eastern counties of England, which were regarded as inferior at one time, have recently risen to first place.” (p 769)

Where land has been held communally, large tracts remained uncultivated for a variety of reasons. The nature of peasant farming often created no great demand for the bringing into cultivation of such areas. As a result, they are often brought into cultivation not on the basis of which land was most fertile, but on the basis of when the landed aristocracy was able to steal these lands away from their communal owners.

Factors such as the growth of population, affecting demand, and of the progress in the development of capital, which both stimulates demand and makes possible investment, influence the extension of cultivation. But, in addition, it is influenced by general business conditions, and the size of the capital market.

In other words, if credit is tight, and interest rates are high, it will be necessary for above average profits to be made to entice new investment. Where interest rates are low and credit is readily available, the opposite will apply.

“Better soil than hitherto cultivated would in fact be excluded from competition solely on the basis of unfavourable location, or if hitherto insurmountable obstacles to its employment existed, or through chance.” (p 770)

For one thing, there is also the cost of clearing land, before it can be brought into cultivation, and this must be justified by the returns.

“As soon as this soil then actually enters into competition, the market-price will fall once more to its former level, assuming other conditions to be equal, and the new soil will then yield the same rent as the corresponding old soil.” (p 771)

It is not necessary that the market prices rise, for this additional land to be brought into cultivation or that absent such a rise in price that this new land be rent free. What is required is that there be adequate demand at the current price to absorb the additional supply. Marx gives the example of houses.

A builder may lease a piece of land on which he builds houses to rent. Whether all these houses pay rent to the builder will depend upon whether there is sufficient demand from tenants. But, even if some or all of the houses remain vacant, the land will still pay rent, i.e. the builder will have to pay rent to the landowner.

“Just as successive investments of capital in a certain piece of land may bring a proportional surplus and thereby the same rent as the first investment, so fields of the same quality as those last cultivated may bring the same proceeds for the same cost. Otherwise it would be altogether inexplicable how fields of the same quality are ever brought successively under cultivation; it seems that either it would be necessary to take all together, or rather not a single one of them, in order not to bring all the remaining ones into competition. The landlord is always ready to draw a rent, i.e., to receive something for nothing. But capital requires certain conditions to fulfil his wish. Competition between pieces of land does not, therefore, depend upon the landlord desiring them to compete, but upon the capital existing which seeks to compete with other capitals in the new fields.” (p 771)

In other words, this expansion is explicable in terms of the same process that causes a general accumulation of capital. The amount of absolute rent must be small Marx says, because of the limit to which the value of agricultural products exceeds their price of production, and this difference is reduced with the development of agriculture. The effect of absolute rent is more marked in extractive industries, Marx claims, because, apart from fixed capital, all the capital used is variable capital, so that the value of its output exceeds the price of production by a wide margin.


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