Capital Vol. III Part VI
Transformation of Surplus-Profit into Ground-Rent

Chapter 41. Differential Rent II. First Case: Constant Price of Production

The assumption here implies that the market-price is regulated as before by the capital invested in the worst soil A.

I. If the additional capital invested in any one of the rent-bearing soils — B, C, D — produces only as much as the same capital upon soil A, i.e., if it yields only the average profit at the regulating price of production, but no surplus-profit, then the effect upon the rent is nil. Everything remains as before. It is the same as though an arbitrary number of acres of A quality, i.e., of the worst soil, has been added to the cultivated area.

II. The additional capitals yield additional produce proportional to their magnitude on every one of the various soils; in other words, the volume of production grows according to the specific fertility of each soil type — in proportion to the magnitude of the additional capital. In Chapter XXXIX, we started with the following Table I:

TABLE I

 Type of soil Acres Capital £ Profit £ Price of Prod. £ Output Qrs Selling price £ Proceeds £ Rent Rate of Surplus profit Qrs £ A 1 2½ ½ 3 1 3 3 0 0 0 B 1 2½ ½ 3 2 3 6 1 3 120% C 1 2½ ½ 3 3 3 9 2 6 240% D 1 2½ ½ 3 4 3 12 3 9 360% Total 4 10 12 10 30 6 18

This is now transformed into:

TABLE II

 Type of soil Acres Capital £ Profit £ Price of Prod. Output Qrs Selling price £ Proceeds £ Rent Surplus profit Qrs £ A 1 2½ + 2½=5 1 6 2 3 6 0 0 0 B 1 2½ + 2½=5 1 6 4 3 2 2 6 120% C 1 2½ + 2½=5 1 6 6 3 18 4 12 240% D 1 2½ + 2½=5 1 6 8 3 24 6 18 360% Total 4 20 20 60 12 36

It is not necessary in this case that the investment of capital be doubled in all soils, as in the table. The law is the same so long as additional capital is invested in one, or several, of the rent-bearing soils, no matter in what proportion. It is only necessary that production should increase upon every soil in the same ratio as the capital. The rent increases here merely in consequence of an increased investment of capital in the soil, and in proportion to this increase. This increase in produce and rent in consequence of, and proportionately to, the increased outlay of capital is just the same as regards the quantity of produce and rent, as when the cultivated area of the rent-bearing plots of land of the same quality had been increased and taken under cultivation with the same outlay of capital as that previously invested in the same types of soils. In the case of Table II, for instance, the result would remain the same, if the additional capital of £2½ per acre were invested in an additional acre of B, C and D.

Furthermore, this assumption does not imply a more productive investment of capital, but only an outlay of more capital upon the same area with the same success as before.

All relative proportions remain the same here. Of course, if we do not consider the proportional differences, but consider the purely arithmetic ones, then the differential rent may change upon the various soils. Let us assume, for instance, that additional capital has been invested only in B and D. The difference between D and A is then = 7 qrs whereas previously it was = 3, the difference between B and A = 3 qrs, whereas previously it was = 1; that between C and B = -1, whereas previously it was = +1, etc. But this arithmetic difference, which is decisive in differential rent I in so far as it expresses the difference in productivity with equal outlays of capital, is here quite immaterial, because it is merely a consequence of different additional investments of capital, or of no additional investment, while the difference for each equal portion of capital upon the various plots of land remains unchanged.

III. The additional capitals yield surplus-produce and thus form surplus-profit, but at a decreasing rate, not in proportion to their increase.

TABLE III

 Soil Acres Capital £ Profit £ Price of Prod. £ Output Qrs Selling price £ Proceeds £ Rent Rate of Surplus profit Qrs £ A 1 2½ ½ 3 1 3 3 0 0 0 B 1 2½ + 2½ = 5 1 6 2 + 1½ = 3½ 3 10½ 1½ 4½ 90% C 1 2½ + 2½ = 5 1 6 3+2=5 3 15 3 9 180% D 1 2½ + 2½ = 5 1 6 4 + 3½ = 7½ 3 22½ 5½ 16½ 330% 17½ 3½ 21 17 51 10 30

In the case of this third assumption, it is again immaterial whether the additional second investments of capital are uniformly distributed among the various soils or not; whether the decreasing production of surplus-profit takes place proportionately or not; whether the additional investments of capital are all in the same rent-bearing type of soil, or whether they are distributed equally or unequally among rent-bearing plots of land of varying quality. All these circumstances are immaterial for the law that is to be developed. The only assumption is that additional investments of capital yield surplus-profit upon any one of the rent-bearing soils, but in decreasing proportion to the amount of the increase in capital. The limits of this decrease, in the table before us, are between 4 quarters = £12, the output from the first outlay of capital on the best soil D, and 1 quarter = £3, the output from the same outlay of capital in the worst soil A. The output from the best soil in case of the investment of capital I constitutes the top limit, and the output from the same outlay of capital in the worst soil A, which yields neither rent nor surplus-profit, is the bottom limit of output, which successive investments of capital yield upon any of the soil types producing surplus-profit with decreasing productivity of successive investments of capital. Just as assumption II corresponds to the case in which new plots of the same quality are added from the better soils to the cultivated area, in which the quantity of any one of the cultivated soils is increased, so assumption III corresponds to the case in which additional plots are cultivated whose various degrees of fertility are distributed among soils ranging from D to A, i.e., from the best to the worst soils. If the successive outlays of capital are made exclusively in soil D, they may include the existing differences between D and A, then differences between D and C, and likewise between D and B. If they are all made in soil C, then only differences between C and A, and C and B; if exclusively in B, then only differences between B and A.

But this is the law: The rent increases absolutely upon all these soils, even if not in proportion to the additional capital invested.

The rate of surplus-profit, considering both the additional capital and the total capital invested in the soil, decreases; but the absolute magnitude of the surplus-profit increases; just as the decreasing rate of profit on capital in general is, in the main, accompanied by an increase in the absolute amount of profit. Thus the average surplus-profit of a capital invested in B = 90% on the capital, whereas it was = 120% for the first outlay of capital. But the total surplus-profit increases from 1 qr to 1½ qrs, or from £3 to £4½. The total rent — considered by itself rather than in relation to the doubled magnitude of the advanced capital — has risen absolutely. The differences in rents from various soils and their relative proportions may vary here; but this variation in differences is a consequence, not cause, of the increase in rents in relation to one another.

IV. The case in which additional investments of capital in the better soils yield more produce than the original ones requires no further analysis. It goes without saying that under this assumption the rent per acre will increase, and proportionately more than the additional capital, no matter in which kind of soil the outlay has been made. In this case, the additional investment of capital is accompanied by improvements. This includes the cases in which an additional outlay of less capital produces the same or a greater effect than an additional outlay of more capital did formerly. This case is not quite identical with the former one, and the distinction is important in all investments of capital. For instance, if 400 yields a profit of 40, and 200 employed in a certain form yields a profit of 40, then the profit has risen from 10% to 20%, and to that extent it is the same as though 50 employed in a more effective form yields a profit of 10 instead of 5. We assume here that the profit is associated with a proportional increase in output. But the difference is that I must double the capital in the one case, whereas in the other, the effect I produce is doubled with the capital employed hitherto. It is by no means the same whether I produce: 1) the same output as before with half as much living and materialised labour, or 2) twice the output as before with the same labour, or 3) four times the former output with twice the labour. In the first case, labour — in a living or materialised form — is released, and may be employed otherwise; the power to dispose of capital and labour increases. The release of capital (and labour) is in itself an augmentation of wealth; it has exactly the same effect as though this additional capital has been obtained by accumulation, but it saves the labour of accumulation.

Assume that a capital of 100 has produced an output of ten metres. The 100 includes constant capital, living labour and profit. Thus a metre costs 10. Now, if I can produce 20 metres with the same capital of 100, then a metre costs 5. If, on the other hand, I can produce 10 metres with a capital of 50, then a metre likewise costs 5, and should the former supply of commodities suffice a capital of 50 is released. If I have to invest a capital of 200 in order to produce 40 metres, then a metre also costs 5. The determination of value, and also the price, does not permit any difference to be discerned here; no more than the amount of output proportional to the outlay of capital. But in the first case, additional capital is saved [In the German 1894 edition this reads: capital is released. — Ed.] to be used perhaps to double production if necessary; in the second case, capital is released, [Ibid.: additional capital is saved. — Ed.] in the third case, the increased output can only be obtained by augmenting the invested capital, although not in the same proportion as when the increased output was to have been supplied by the old productive power. (This belongs in Part I.)

From the viewpoint of capitalist production, the employment of constant capital is always cheaper than that of variable capital, not as regards increasing the surplus-value, but rather as regards reducing the cost-price — and saving of costs even in the element creating surplus-value, in labour, performs this service for the capitalist and makes profit for him so long as the regulating price of production remains the same. This presupposes, in fact, the development of credit and an abundance of loan capital corresponding to the capitalist mode of production. On the one hand, I employ £100 additional constant capital, if £100 is the output of five labourers during the year; on the other hand, £100 in variable capital. If the rate of surplus-value = 100%, then the value created by the five labourers = £200; on the other hand, the value of £100 constant capital = £100 and as capital it is perhaps = £105, if the interest rate = 5%. The same sums of money express very different values, from the viewpoint of the output they produce, depending on whether they are advanced to production as magnitudes of value of constant or of variable capital. Furthermore, as regards the cost of the commodities from the viewpoint of the capitalist, there is also this difference, that of the £100 constant capital only the wear and tear enters into the value of the commodity in so far as this money is invested in fixed capital, whereas the £100 invested in wages must be completely reproduced in the commodity.

In the case of colonists, and independent small producers in general, who have no access to capital at all or only at high interest rates, that part of the output which represents wages is their revenue, whereas for the capitalist it constitutes an advance of capital. The former, therefore, regards this expenditure of labour as the indispensable prerequisite for the labour-product, which is the thing that interests him above all. But, as regards his surplus-labour, after deducting the necessary labour, it is evidently realised in the surplus-product; and as soon as he can sell the latter, or use it for himself, he looks upon it as something that cost him nothing, because it cost him no materialised labour. It is only the expenditure of the latter which appears to him as alienation of wealth. Of course, he tries to sell as high as possible; but even a sale below value and below the capitalist price of production still appears to him as profit, unless this profit is anticipated by debts, mortgages, etc. For the capitalist, on the other hand, the investment of both variable and constant capital represents an advance of capital. The relatively larger advance of the latter reduces the cost-price, and in fact the value of the commodities, everything else being equal. Hence, although profit arises only from surplus-labour, consequently only from the employment of variable capital, it may still seem to the individual capitalist that living labour is the most expensive element in his price of production which should be reduced to a minimum before all else. This is but a capitalistically distorted form of the fact that the relatively greater use of congealed labour, as compared with living labour, signifies an increase in the productivity of social labour and a greater social wealth. From the viewpoint of competition, everything appears thus distorted and turned topsy-turvy.

Assuming prices of production to remain unchanged, the additional investments of capital in the better soils, that is, in all soils from B upward may be made with unaltered, increasing, or decreasing productivity. For soil A this would only be possible under the conditions assumed by us, if productivity remains the same — whereby the land continues to yield no rent — and also if productivity increases; a portion of the capital invested in A would then yield rent, while the remainder would not. But it would be impossible if productivity on A were to decrease, for then the price of production would not remain unchanged, but would rise. Yet in all these cases, i.e., whether the surplus-product yielded by the additional investments is proportional to the latter or is greater or smaller than this proportion — whether, therefore, the rate of surplus-profit on the capital remains constant, rises or falls, when this capital increases, the surplus-product and the corresponding surplus-profit per acre increases, and hence also the potential rent in grain and money. The growth in the mere quantity of surplus-profit or rent, calculated per acre, that is, an increasing quantity calculated on the basis of some constant unit — in the present case on a definite quantity of land such as an acre or a hectare — expresses itself as an increasing ratio. Hence the magnitude of the rent, calculated per acre, increases under such circumstances simply in consequence of the increase in the capital invested in the land. This takes place, to be sure, assuming the prices of production remain the same, and, on the other hand, regardless of whether the productivity of the additional capital remains unaltered, or whether it decreases or increases. The latter circumstances modify the range in which the magnitude of rent per acre increases but not the existence of this increase itself. This is a phenomenon peculiar to differential rent II, and distinguishing it from differential rent I. If the additional investments of capital were made successively in space, side by side in new additional soil of corresponding quality, rather than successively in time in the same soil, the quantity of the rental would have increased, and, as previously shown, so would the average rent from the total cultivated area, but not the magnitude of the rent per acre. Given the same result so far as quantity and value of total production and surplus-product are concerned, the concentration of capital upon a smaller area of land increases the amount of rent per acre, whereas under the same conditions, its dispersion over a larger area, all other conditions being equal, does not produce this effect. But the more the capitalist mode of production develops, the more does the concentration of capital upon the same area of land develop, and, therefore, the more does the rent, calculated per acre, increase. Consequently, given two countries in which the prices of production are identical, the differences in soil type are identical, and the same amount of capital is invested — but in the one country more in the form of successive outlays upon a limited area of land, whereas in the other more in the form of co-ordinated outlays upon a larger area — then the rent per acre, and thereby the price of land, would be higher in the first country and lower in the second, although the total rent would be the same for both countries. The difference in magnitude of rent could thus not be explained here to be a result of a difference in the natural fertility of the various soils, nor a result of a difference in the quantity of employed labour, but solely a result of different ways in which the capital is invested.

When we refer to surplus-product here, this should always be understood to mean that aliquot part of the output which represents surplus-profit. Ordinarily, we mean by excess product or surplus-product that portion of the output which represents the total surplus-value, or in some cases that portion which represents the average profit. The specific meaning which this term assumes in the case of rent-bearing capital gives rise to misunderstanding, as previously pointed out.