Until now we have looked at differential rent only as the result of different productivity from equal capital investments on equal stretches of land of different fertility. What fixed that rent was the gap between the yield of the capital invested in the worst land, the land that bears no rent, and the yield of the capital invested in better land. Here the capital investments lay side by side on different stretches of land, so that every fresh investment of capital went together with a more extensive cultivation of the soil, a widening of the area under cultivation. But in substance differential rent was nothing more than equal capitals put into the soil producing different amounts.
So can it make a difference whether sums of capital of different productivity are invested one after another on the same piece of land, or side by side on different pieces of land, provided only that the results are the same?
First, it cannot be denied that, as far as the formation of surplus profit goes, it is all the same whether £3 of production costs laid on an acre of land A yields 1 qr, so that £3 is both the production price of 1 qr and its governing market price, while £3 of production costs laid on an acre of land B yields 2 qrs and therewith a surplus profit of £3, £3 on an acre of land C yields 3 qrs and a surplus profit of £6, and £3 on an acre of land D yields 4 qrs and a surplus profit of £9; or whether the same result is reached by applying this £12 of production costs, that is £10 of capital, in the same order and with these same outcomes to one and the same acre. Each time the capital is £10, laid out in portions of £2 1/2 one after the other. Whether those portions go side by side onto 4 acres of different fertility or one after another onto a single acre, one portion yields no surplus profit because of what it produces, while the other portions yield a surplus profit in proportion to how far their yield stands above the yield of that rent-free investment.
The surplus profits, and the different rates of surplus profit on the different portions of capital value, are formed in the same uniform way under both methods. And rent is nothing but a form of this surplus profit, which is its substance. But the second method still runs into difficulties over the transformation of surplus profit into rent, over this change of form, which carries the surplus profit across from the capitalist farmer to the owner of the land.
Hence the stubborn resistance of English farmers to any official agricultural statistics. Hence the fight between them and the landowners over establishing what their capital investment has actually yielded, as Morton reports. Rent is fixed when the land is leased, and the surplus profits that spring from successive investment of capital then flow into the farmer's pocket for as long as the contract of tenancy lasts. Hence the farmers' fight for long leases, and, on the other side, the landlords' superior power multiplying contracts that can be cancelled every year (tenancies at will).
So it is clear from the outset: it makes no difference to the law of how surplus profit is formed whether equal capitals with unequal results are invested side by side on equal stretches of land, or one after another on the same piece of land. For the transformation of that surplus profit into ground-rent, though, it makes a significant difference. That second method confines this transformation within limits that are narrower on the one side and more fluctuating on the other.
Hence in countries of intensive cultivation (and by intensive cultivation we understand economically nothing but the concentration of capital on the same piece of land instead of its distribution over neighbouring stretches of land) the job of the assessor of rents becomes a very important, complicated and difficult profession, as Morton sets it out in his Resources of Estates. Where the soil has been improved more permanently, the artificially raised differential fertility of the land merges with its natural fertility once the lease runs out, and so the assessment of rent becomes the assessment of the differences in fertility between types of land in general. Where, on the other hand, the formation of surplus profit is determined by the size of the working capital, the level of the rent for a working capital of a given size is added to the average rent for the land, and it is made sure that the new farmer has enough capital to carry on cultivation in the same intensive manner.
In looking at differential rent II, a few more points still have to be brought out.
First. Its basis and its starting point — not only historically, but as far as its movement at any given moment is concerned — is differential rent I. That means lands of different fertility and location cultivated at the same time, side by side, and different parts of the total agricultural capital applied side by side to stretches of land of different quality.
Historically this goes without saying. In colonies the settlers have only a little capital to lay out; the work is done mainly by labour and by the soil. Each head of a family looks for a field of work of his own, for himself and his people, standing alongside those of his fellow settlers. And in farming proper this must be so even under pre-capitalist ways of producing. Where sheep are pastured, and in stock-raising generally as an independent branch, the land is exploited more or less in common, and from the outset that exploitation is extensive.
The capitalist way of producing grows out of earlier ways in which the means of production are, in fact or in law, the property of the tiller himself — in a word, out of farming carried on like a handicraft. By the nature of the case it is only gradually that the means of production are concentrated out of this, and turned into capital set against the immediate producers whom it turns into wage-labourers. Where the capitalist way of producing does show itself characteristically, it does so at first particularly in sheep pasture and stock-raising; but then not by concentrating capital on a relatively small stretch of land, rather by producing on a larger scale, so that there is a saving on keeping horses and on other production costs — in fact, though, not by putting more capital into the same soil.
It also lies in the natural laws of field cultivation that at a certain height of cultivation, and with the exhaustion of the soil that goes with it, capital — here meaning at the same time means of production already produced — becomes the decisive element in working the soil. As long as the land under cultivation is a relatively small stretch compared with the land not under cultivation, and the soil's strength is not yet used up (which is the case while stock-raising and a meat diet prevail, in the period before arable farming and a plant diet dominate), the new way of producing, only just beginning, stands opposed to peasant production above all through the extent of land cultivated on one capitalist's account — so once more through extensive use of capital over a larger stretch of ground. So it must be held fast from the outset that differential rent I is the historical foundation from which the start is made. On the other hand, the movement of differential rent II at any given moment occurs only on ground which itself in turn forms the variegated basis of differential rent I.
Second. In the case of differential rent in form II, the differences in fertility are joined by differences in how capital (and creditworthiness) is distributed among the farmers. In manufacture proper, each branch of business soon settles into a minimum scale of undertaking of its own, and correspondingly a minimum of capital below which a single business cannot be carried on successfully. And in each branch there also settles into place a normal average amount of capital above that minimum, which the mass of producers must have at their disposal and do have. Anything above it can form extra profit; anything below it does not get even the average profit. Capitalist production takes hold of agriculture only slowly and unevenly, as can be seen in England, the classic country of capitalist production in agriculture. So far as no free corn import exists, or its effect is only limited because of its extent, the market price is determined by the producers who work on worse soil, that is, under conditions of production less favourable than the average. A large part of the total capital applied in agriculture, and available to agriculture at all, is in their hands.
It is true that the peasant, for example, puts a great deal of labour into his small parcel of land. But that labour stands alone, cut off from the objective conditions that make work productive — both the social ones and the material ones. It has been stripped of them.
This uneven development is what puts the genuinely capitalist farmers in a position to take a part of the surplus profit for themselves. That part would fall away — at least so far as this point is concerned — if the capitalist mode of production were as evenly developed in agriculture as it is in manufacture.
For now we look at one thing only: how surplus profit is formed under differential rent II. We do not yet worry about the conditions under which that surplus profit can be turned into ground-rent.
It is then clear that differential rent II is only a different expression of differential rent I, and comes to the same thing as it in substance. The differing fertility of different types of land counts under differential rent I only in so far as it makes capitals laid out on the land give unequal results, unequal products — whether the capitals are of the same size, or we compare them proportionally. Whether that inequality runs between different capitals laid out one after another on the same piece of land, or between capitals laid out on several pieces of land of different types, cannot make any difference to the difference in fertility or in its product, and so cannot make any difference to how differential rent is formed for the portions of capital laid out on the more fertile land. The land is still what shows differing fertility for the same capital investment; the only thing that changes is that here the same land does, for a capital laid out successively in different portions, what under form I different types of land did for the different equal-sized portions of society's capital laid out on them.
Take that same £10 of capital. In Table I it lay with different farmers, split into separate capitals of £2 1/2 each, one portion to an acre of each land type, A, B, C and D. Instead, put the whole of it onto one and the same acre of D, one portion after another. The first investment would then yield 4 qrs, the second 3, the third 2, the last 1 qr (or the same order reversed). The one qr that the poorest portion of capital supplies would then carry a price of £3. That price would yield no differential rent. It would fix the production price instead, and would keep fixing it for as long as there is still a need for wheat bearing a production price of £3. And since capitalist production is what we are supposing, the £3 has to include the average profit that a capital of £2 1/2 earns at all. So the other three portions of £2 1/2 each bring surplus profits, in keeping with how far their product differs, because that product is not sold at its own production price; it goes at the production price of the least productive investment of £2 1/2, an investment that yields no rent and whose product price the general law of production prices governs. Surplus profits would form here exactly as they do in Table I.
Here it shows itself again that differential rent II presupposes differential rent I. The minimum product that a capital of £2 1/2 yields, that is, yields on the worst land, is taken here as 1 qr. Suppose, then, that the farmer of land type D lays out, besides the £2 1/2 that yield him 4 qrs and for which he pays 3 qrs of differential rent, a further £2 1/2 on the same land that yield him only 1 qr, just as the same capital yields on the worst land A. In that case this would be a rentless capital investment, since it would yield him only the average profit. There would be no surplus profit there to turn itself into rent. On the other hand, this declining yield of the second capital investment on D would have no effect on the profit rate either. It would be the same as if £2 1/2 had been newly laid out on a further acre of land type A — something that in no way affects the surplus profit, and therefore not the differential rent, of land types A, B, C and D. For the farmer, though, this additional investment of £2 1/2 on D would have been just as advantageous as, on our supposition, the investment of the original £2 1/2 on the acre of D is to him, even though that one yields 4 qrs. If two further capital investments of £2 1/2 each give him an additional product of 3 qrs the first and 2 qrs the second, then a decline would again have taken place, compared with the yield of the first investment of £2 1/2 on D, which gave 4 qrs and hence a surplus profit of 3 qrs. But it would be only a decline in the level of surplus profit, and would affect neither the average profit nor the governing production price. That would be the case only if the extra production that yields these falling surplus profits made the production of A superfluous and so threw acre A out of cultivation. In that case the declining fertility of the additional capital investment on acre D would be bound up with a fall in the production price, for instance from £3 to £1 1/2, if acre B became the rentless land that governs the market price.
On D the product would now be 4 + 1 + 3 + 2 = 10 qrs, where before it came to 4 qrs. But the price of a qr, which B governs, would have dropped to £1 1/2. The gap between D and B comes to 10 - 2 = 8 qrs, and at £1 1/2 per qr that is £12, while the money rent on D used to be £9. Bear this in mind. Counted by the acre, the amount of rent would have gone up by 33 1/3 per cent, even though the rate of surplus profit was falling on the two extra capitals of £2 1/2.
Here you can see how very tangled the combinations become once differential rent is in play, and above all where form II is taken together with form I. Ricardo, by contrast, handles it one-sidedly and as though it were a simple matter. Take the case above: the market price that governs falls, and at the same time rent on the more fertile lands rises, so that the absolute product and the absolute surplus product both grow. (With differential rent I in a descending line, the relative surplus product can grow, and with it the rent per acre, even when the surplus product per acre in absolute terms stays level or even shrinks.) Yet the fertility of the capital investments made one after another on the same soil falls away, even though a large part of them lands on the more fertile soils. Looked at from one side, for product and for production prices alike, the productivity of labour has gone up. Looked at from the other side it has gone down, because the rate of surplus profit falls, and so does the surplus product per acre, for the different capital investments on the same land.
Differential rent II, with successive capital investments yielding less each time, would necessarily mean a dearer production price and an absolute fall in productivity only if those capital investments could be made on the worst land A and nowhere else. If an acre of A gave 1 qr for a capital investment of £2 1/2, at a production price of £3, and a further £2 1/2 — £5 laid out in all — brought the acre's total product to only 1 1/2 qrs, then the production price of those 1 1/2 qrs is £6, and of the single quarter £4. On this footing, any fall in productivity as the capital investment grows would be a relative cut in the product per acre, whereas on the better types of land it is only a cut in the excess surplus product.
The nature of the case, though, means that as intensive cultivation develops — that is, as capital is invested successively on the same soil — it is predominantly the better types of land where this happens, or where it happens to a higher degree. (The permanent improvements that turn previously unusable land into usable land are not what we are speaking of.) So the falling yield of successive capital investments must work mainly in the way just described. The better land is chosen for it because it offers the best prospect that the capital spent on it will pay off: it holds the most natural elements of fertility, and these only need to be put to use.
When cultivation in England was made more intensive still after the Corn Laws were repealed, a great deal of former wheat land was turned to other uses, cattle pasture in particular, while the fertile stretches best suited to wheat were drained and improved in other ways; the capital for wheat-growing was thus concentrated on a narrower area.
In this case — and here every surplus rate that can lie between the highest surplus profit of the best land and the product of the rentless land A comes together with an absolute increase of the surplus product per acre, not a relative one — the newly formed surplus profit (possibly rent) does not represent a portion of earlier average profit turned into rent, a portion of the product that formerly represented average profit. It is additional surplus profit, which changed out of that form into rent.
By contrast, only in the case where demand for corn grew so far that the market price rose above the production price of A, so that on A, B or any other type of land the surplus product could be supplied only at a price above £3 — only in this case would a fall in the result of an additional capital investment on any of the types A, B, C, D go together with a rise in the production price and in the governing market price. In so far as this settled in for a longer stretch and called forth no cultivation of additional A land (of at least A's quality), and no other developments brought about a cheaper supply, then, with other circumstances unchanged, wages would rise because bread had become dearer and the rate of profit would fall accordingly. In this case it would make no difference whether the increased demand were met by bringing in worse land than A or by an additional capital investment, on whichever of the four types of land that happened. Differential rent would rise together with a falling rate of profit.
This one case, in which the declining yield of capital added later to types of land already under cultivation can lead to a rise in the production price, a fall in the rate of profit and the formation of a higher differential rent — for under the given circumstances rent would rise on every type of land, exactly as if worse land than A now governed the market price — this one case Ricardo stamped as the only case, the normal case, and reduced the whole formation of differential rent II to it.
The same would also hold if only land of type A were tilled and successive capital investments on it were not matched by a proportionate increase in the product.
So here, with differential rent II, differential rent I is lost sight of entirely.
There is one exception: the supply from the land types already under cultivation is not enough, and so the market price stands permanently above the production price — either until new, additional, worse land is taken into cultivation, or until the whole product of the additional capital laid out on the various land types can only be delivered at a higher production price than the one that governed before. Once that case is set aside, a proportionate decline in the productivity of the additional capitals leaves the governing production price and the profit rate untouched. Three further cases are then possible.
(a) If the additional capital placed on any of the land types A, B, C or D yields only the rate of profit fixed by A's production price, then no surplus profit is formed by it, and therefore no possible rent either — no more than if additional land of type A had been tilled.
(b) If the additional capital yields a higher product, then a new surplus profit — a potential rent — is formed as a matter of course, provided the governing price stays the same. But that is not necessarily the case: it is not, namely when this extra production throws land A out of cultivation and with that out of the series of competing land types. In that case the governing production price falls. The profit rate would rise if this went together with a fall in wages, or if the cheaper product enters as an element into constant capital. Had the increased productivity of the additional capital occurred on the best land types, C and D, then how far the formation of increased surplus profit (and therefore of increased rent) would go together with the fall in price and the rise in the profit rate would depend entirely on the level of that increased productivity and on the amount of capital newly added. The profit rate can rise even without any fall in wages, through a cheapening of the elements of constant capital.
(c) Suppose the extra capital is invested while surplus profits are falling, yet in a way that still leaves its product over and above what the same capital yields on soil A. Then, so long as the bigger supply does not displace soil A from cultivation, fresh surplus profits are formed under all circumstances, and that formation can happen on D, C, B and A all at once. If instead the worst soil, A, is forced out of tillage, the production price that governs drops, and whether the surplus profit put in money - and with it the differential rent - rises or falls turns on how the lower price of a quarter stands to the larger number of quarters that make up the surplus profit. Yet in any case something odd shows up here: as capital is invested again and again with falling surplus profits, the production price can fall instead of having to rise, which is not how it looks at first glance.
These additional capital investments with declining extra yields answer exactly to the case in which four new independent capitals of £2 1/2 each would be invested on land types whose fertility lies between A and B, between B and C, and between C and D, yielding 1 1/2 qrs, 2 1/3 qrs, 2 2/3 qrs and 3 qrs respectively. On all these land types, surplus profits — potential rents — would form for all four additional capitals, even though the rate of surplus profit would have fallen, compared with what the same capital invested on the better land in each case would give. And it would be all one whether these four capitals were invested on D and so on, or distributed between D and A.
Now we reach an essential difference between the two forms of differential rent.
Keep the production price fixed, and keep the differences between the soils fixed. Under differential rent I, as the total rental grows, the average rent per acre can rise, and so can the average rate of rent on capital. But an average is only an abstraction. The real level of rent, taken per acre or against the capital, stays the same here.
By contrast, under the same assumptions, the rent per acre can rise even though the rate of rent on the capital laid out stays the same.
Suppose production doubles because £5 is invested on each of A, B, C and D instead of £2 1/2 — £20 of capital in all instead of £10 — with the relative fertility held constant. That would be exactly the same as if 2 acres of each of these types of land were tilled instead of 1, at unchanged cost. The profit rate would stay the same, and so would its relation to surplus profit, or to rent.
If A now bore 2 qrs, B 4 qrs, C 6 qrs and D 8 qrs, the production price would still be £3 per qr, because this increase is owed not to doubled fertility on an unchanged capital but to the same proportionate fertility on a doubled capital. The 2 qrs from A would now cost £6, just as 1 qr cost £3 before. Profit would have doubled on all four types of land — but only because the capital laid out doubled. Rent would have doubled in the same proportion: 2 qrs for B instead of 1, 4 for C instead of 2, 6 for D instead of 3, and the money rents for B, C and D £6, £12 and £18. Money rent per acre would have doubled just as the product per acre did — and so would the price of land, which is that money rent capitalized. Reckoned this way, corn rent and money rent rise, and the price of land with them, because the measure they are reckoned on, the acre, is a piece of land of constant size.
Reckoned instead as a rate of rent against the capital laid out, no change has taken place in the proportionate level of rent. The total rental of £36 stands to the capital of £20 laid out as the rental of £18 stood to the capital of £10. The same holds for each type of land's money rent against the capital laid out on it: on C, £12 of rent to £5 of capital, as before £6 of rent to £2 1/2 of capital. No new differences arise here between the capitals laid out. What does arise is new surplus profit, merely because the additional capital is invested on one of the rent-bearing types of land, or on all of them, with the same proportionate product. If the doubled investment were made on C alone, the differential rent between C, B and D reckoned on capital would stay the same; for if its mass doubles on C, so does the capital laid out.
From this it follows that, with the production price staying the same, the rate of profit staying the same and the differences staying the same — and therefore the rate of surplus profit, or of rent, measured against the capital, also staying the same — the rent per acre, in corn and in money, can rise, and with it the price of land.
The same thing can happen with falling rates of surplus profit, and therefore of rent — that is, with a falling productivity of the additional capital investments that still bear rent. If the second investments of £2 1/2 had not doubled the product, but B's total product had risen only to 3 1/2 qrs, C's to 5 and D's to 7, then the differential rent on B for the second £2 1/2 of capital would be only 1/2 qr instead of 1, on C 1 instead of 2, and on D 2 instead of 3. The proportions between rent and capital for the two successive investments would come out as follows:
Although the rate of relative productivity of capital had fallen, and with it the rate of surplus profit reckoned on capital, corn and money rent would still have risen: for B from 1 to 1 1/2 qrs (£3 to £4 1/2), for C from 2 to 3 qrs (from £6 to £9), for D from 3 to 5 qrs (from £9 to £15). In that case the differences on the additional capitals, set against the capital invested on A, would have narrowed; the production price would have held steady, but rent per acre, and with it the land price per acre, would have risen.
We now turn to the combinations of differential rent II, which takes differential rent I as its basis.
Until now we have looked at differential rent only as the result of different productivity from equal capital investments on equal stretches of land of different fertility. What fixed that rent was the gap between the yield of the capital invested in the worst land, the land that bears no rent, and the yield of the capital invested in better land. Here the capital investments lay side by side on different stretches of land, so that every fresh investment of capital went together with a more extensive cultivation of the soil, a widening of the area under cultivation. But in substance differential rent was nothing more than equal capitals put into the soil producing different amounts.
So can it make a difference whether sums of capital of different productivity are invested one after another on the same piece of land, or side by side on different pieces of land, provided only that the results are the same?
First, it cannot be denied that, as far as the formation of surplus profit goes, it is all the same whether £3 of production costs laid on an acre of land A yields 1 qr, so that £3 is both the production price of 1 qr and its governing market price, while £3 of production costs laid on an acre of land B yields 2 qrs and therewith a surplus profit of £3, £3 on an acre of land C yields 3 qrs and a surplus profit of £6, and £3 on an acre of land D yields 4 qrs and a surplus profit of £9; or whether the same result is reached by applying this £12 of production costs, that is £10 of capital, in the same order and with these same outcomes to one and the same acre. Each time the capital is £10, laid out in portions of £2 1/2 one after the other. Whether those portions go side by side onto 4 acres of different fertility or one after another onto a single acre, one portion yields no surplus profit because of what it produces, while the other portions yield a surplus profit in proportion to how far their yield stands above the yield of that rent-free investment.
The surplus profits, and the different rates of surplus profit on the different portions of capital value, are formed in the same uniform way under both methods. And rent is nothing but a form of this surplus profit, which is its substance. But the second method still runs into difficulties over the transformation of surplus profit into rent, over this change of form, which carries the surplus profit across from the capitalist farmer to the owner of the land.
Hence the stubborn resistance of English farmers to any official agricultural statistics. Hence the fight between them and the landowners over establishing what their capital investment has actually yielded, as Morton reports. Rent is fixed when the land is leased, and the surplus profits that spring from successive investment of capital then flow into the farmer's pocket for as long as the contract of tenancy lasts. Hence the farmers' fight for long leases, and, on the other side, the landlords' superior power multiplying contracts that can be cancelled every year (tenancies at will).
So it is clear from the outset: it makes no difference to the law of how surplus profit is formed whether equal capitals with unequal results are invested side by side on equal stretches of land, or one after another on the same piece of land. For the transformation of that surplus profit into ground-rent, though, it makes a significant difference. That second method confines this transformation within limits that are narrower on the one side and more fluctuating on the other.
Hence in countries of intensive cultivation (and by intensive cultivation we understand economically nothing but the concentration of capital on the same piece of land instead of its distribution over neighbouring stretches of land) the job of the assessor of rents becomes a very important, complicated and difficult profession, as Morton sets it out in his Resources of Estates. Where the soil has been improved more permanently, the artificially raised differential fertility of the land merges with its natural fertility once the lease runs out, and so the assessment of rent becomes the assessment of the differences in fertility between types of land in general. Where, on the other hand, the formation of surplus profit is determined by the size of the working capital, the level of the rent for a working capital of a given size is added to the average rent for the land, and it is made sure that the new farmer has enough capital to carry on cultivation in the same intensive manner.
In looking at differential rent II, a few more points still have to be brought out.
First. Its basis and its starting point — not only historically, but as far as its movement at any given moment is concerned — is differential rent I. That means lands of different fertility and location cultivated at the same time, side by side, and different parts of the total agricultural capital applied side by side to stretches of land of different quality.
Historically this goes without saying. In colonies the settlers have only a little capital to lay out; the work is done mainly by labour and by the soil. Each head of a family looks for a field of work of his own, for himself and his people, standing alongside those of his fellow settlers. And in farming proper this must be so even under pre-capitalist ways of producing. Where sheep are pastured, and in stock-raising generally as an independent branch, the land is exploited more or less in common, and from the outset that exploitation is extensive.
The capitalist way of producing grows out of earlier ways in which the means of production are, in fact or in law, the property of the tiller himself — in a word, out of farming carried on like a handicraft. By the nature of the case it is only gradually that the means of production are concentrated out of this, and turned into capital set against the immediate producers whom it turns into wage-labourers. Where the capitalist way of producing does show itself characteristically, it does so at first particularly in sheep pasture and stock-raising; but then not by concentrating capital on a relatively small stretch of land, rather by producing on a larger scale, so that there is a saving on keeping horses and on other production costs — in fact, though, not by putting more capital into the same soil.
It also lies in the natural laws of field cultivation that at a certain height of cultivation, and with the exhaustion of the soil that goes with it, capital — here meaning at the same time means of production already produced — becomes the decisive element in working the soil. As long as the land under cultivation is a relatively small stretch compared with the land not under cultivation, and the soil's strength is not yet used up (which is the case while stock-raising and a meat diet prevail, in the period before arable farming and a plant diet dominate), the new way of producing, only just beginning, stands opposed to peasant production above all through the extent of land cultivated on one capitalist's account — so once more through extensive use of capital over a larger stretch of ground. So it must be held fast from the outset that differential rent I is the historical foundation from which the start is made. On the other hand, the movement of differential rent II at any given moment occurs only on ground which itself in turn forms the variegated basis of differential rent I.
Second. In the case of differential rent in form II, the differences in fertility are joined by differences in how capital (and creditworthiness) is distributed among the farmers. In manufacture proper, each branch of business soon settles into a minimum scale of undertaking of its own, and correspondingly a minimum of capital below which a single business cannot be carried on successfully. And in each branch there also settles into place a normal average amount of capital above that minimum, which the mass of producers must have at their disposal and do have. Anything above it can form extra profit; anything below it does not get even the average profit. Capitalist production takes hold of agriculture only slowly and unevenly, as can be seen in England, the classic country of capitalist production in agriculture. So far as no free corn import exists, or its effect is only limited because of its extent, the market price is determined by the producers who work on worse soil, that is, under conditions of production less favourable than the average. A large part of the total capital applied in agriculture, and available to agriculture at all, is in their hands.
It is true that the peasant, for example, puts a great deal of labour into his small parcel of land. But that labour stands alone, cut off from the objective conditions that make work productive — both the social ones and the material ones. It has been stripped of them.
This uneven development is what puts the genuinely capitalist farmers in a position to take a part of the surplus profit for themselves. That part would fall away — at least so far as this point is concerned — if the capitalist mode of production were as evenly developed in agriculture as it is in manufacture.
For now we look at one thing only: how surplus profit is formed under differential rent II. We do not yet worry about the conditions under which that surplus profit can be turned into ground-rent.
It is then clear that differential rent II is only a different expression of differential rent I, and comes to the same thing as it in substance. The differing fertility of different types of land counts under differential rent I only in so far as it makes capitals laid out on the land give unequal results, unequal products — whether the capitals are of the same size, or we compare them proportionally. Whether that inequality runs between different capitals laid out one after another on the same piece of land, or between capitals laid out on several pieces of land of different types, cannot make any difference to the difference in fertility or in its product, and so cannot make any difference to how differential rent is formed for the portions of capital laid out on the more fertile land. The land is still what shows differing fertility for the same capital investment; the only thing that changes is that here the same land does, for a capital laid out successively in different portions, what under form I different types of land did for the different equal-sized portions of society's capital laid out on them.
Take that same £10 of capital. In Table I it lay with different farmers, split into separate capitals of £2 1/2 each, one portion to an acre of each land type, A, B, C and D. Instead, put the whole of it onto one and the same acre of D, one portion after another. The first investment would then yield 4 qrs, the second 3, the third 2, the last 1 qr (or the same order reversed). The one qr that the poorest portion of capital supplies would then carry a price of £3. That price would yield no differential rent. It would fix the production price instead, and would keep fixing it for as long as there is still a need for wheat bearing a production price of £3. And since capitalist production is what we are supposing, the £3 has to include the average profit that a capital of £2 1/2 earns at all. So the other three portions of £2 1/2 each bring surplus profits, in keeping with how far their product differs, because that product is not sold at its own production price; it goes at the production price of the least productive investment of £2 1/2, an investment that yields no rent and whose product price the general law of production prices governs. Surplus profits would form here exactly as they do in Table I.
Here it shows itself again that differential rent II presupposes differential rent I. The minimum product that a capital of £2 1/2 yields, that is, yields on the worst land, is taken here as 1 qr. Suppose, then, that the farmer of land type D lays out, besides the £2 1/2 that yield him 4 qrs and for which he pays 3 qrs of differential rent, a further £2 1/2 on the same land that yield him only 1 qr, just as the same capital yields on the worst land A. In that case this would be a rentless capital investment, since it would yield him only the average profit. There would be no surplus profit there to turn itself into rent. On the other hand, this declining yield of the second capital investment on D would have no effect on the profit rate either. It would be the same as if £2 1/2 had been newly laid out on a further acre of land type A — something that in no way affects the surplus profit, and therefore not the differential rent, of land types A, B, C and D. For the farmer, though, this additional investment of £2 1/2 on D would have been just as advantageous as, on our supposition, the investment of the original £2 1/2 on the acre of D is to him, even though that one yields 4 qrs. If two further capital investments of £2 1/2 each give him an additional product of 3 qrs the first and 2 qrs the second, then a decline would again have taken place, compared with the yield of the first investment of £2 1/2 on D, which gave 4 qrs and hence a surplus profit of 3 qrs. But it would be only a decline in the level of surplus profit, and would affect neither the average profit nor the governing production price. That would be the case only if the extra production that yields these falling surplus profits made the production of A superfluous and so threw acre A out of cultivation. In that case the declining fertility of the additional capital investment on acre D would be bound up with a fall in the production price, for instance from £3 to £1 1/2, if acre B became the rentless land that governs the market price.
On D the product would now be 4 + 1 + 3 + 2 = 10 qrs, where before it came to 4 qrs. But the price of a qr, which B governs, would have dropped to £1 1/2. The gap between D and B comes to 10 - 2 = 8 qrs, and at £1 1/2 per qr that is £12, while the money rent on D used to be £9. Bear this in mind. Counted by the acre, the amount of rent would have gone up by 33 1/3 per cent, even though the rate of surplus profit was falling on the two extra capitals of £2 1/2.
Here you can see how very tangled the combinations become once differential rent is in play, and above all where form II is taken together with form I. Ricardo, by contrast, handles it one-sidedly and as though it were a simple matter. Take the case above: the market price that governs falls, and at the same time rent on the more fertile lands rises, so that the absolute product and the absolute surplus product both grow. (With differential rent I in a descending line, the relative surplus product can grow, and with it the rent per acre, even when the surplus product per acre in absolute terms stays level or even shrinks.) Yet the fertility of the capital investments made one after another on the same soil falls away, even though a large part of them lands on the more fertile soils. Looked at from one side, for product and for production prices alike, the productivity of labour has gone up. Looked at from the other side it has gone down, because the rate of surplus profit falls, and so does the surplus product per acre, for the different capital investments on the same land.
Differential rent II, with successive capital investments yielding less each time, would necessarily mean a dearer production price and an absolute fall in productivity only if those capital investments could be made on the worst land A and nowhere else. If an acre of A gave 1 qr for a capital investment of £2 1/2, at a production price of £3, and a further £2 1/2 — £5 laid out in all — brought the acre's total product to only 1 1/2 qrs, then the production price of those 1 1/2 qrs is £6, and of the single quarter £4. On this footing, any fall in productivity as the capital investment grows would be a relative cut in the product per acre, whereas on the better types of land it is only a cut in the excess surplus product.
The nature of the case, though, means that as intensive cultivation develops — that is, as capital is invested successively on the same soil — it is predominantly the better types of land where this happens, or where it happens to a higher degree. (The permanent improvements that turn previously unusable land into usable land are not what we are speaking of.) So the falling yield of successive capital investments must work mainly in the way just described. The better land is chosen for it because it offers the best prospect that the capital spent on it will pay off: it holds the most natural elements of fertility, and these only need to be put to use.
When cultivation in England was made more intensive still after the Corn Laws were repealed, a great deal of former wheat land was turned to other uses, cattle pasture in particular, while the fertile stretches best suited to wheat were drained and improved in other ways; the capital for wheat-growing was thus concentrated on a narrower area.
In this case — and here every surplus rate that can lie between the highest surplus profit of the best land and the product of the rentless land A comes together with an absolute increase of the surplus product per acre, not a relative one — the newly formed surplus profit (possibly rent) does not represent a portion of earlier average profit turned into rent, a portion of the product that formerly represented average profit. It is additional surplus profit, which changed out of that form into rent.
By contrast, only in the case where demand for corn grew so far that the market price rose above the production price of A, so that on A, B or any other type of land the surplus product could be supplied only at a price above £3 — only in this case would a fall in the result of an additional capital investment on any of the types A, B, C, D go together with a rise in the production price and in the governing market price. In so far as this settled in for a longer stretch and called forth no cultivation of additional A land (of at least A's quality), and no other developments brought about a cheaper supply, then, with other circumstances unchanged, wages would rise because bread had become dearer and the rate of profit would fall accordingly. In this case it would make no difference whether the increased demand were met by bringing in worse land than A or by an additional capital investment, on whichever of the four types of land that happened. Differential rent would rise together with a falling rate of profit.
This one case, in which the declining yield of capital added later to types of land already under cultivation can lead to a rise in the production price, a fall in the rate of profit and the formation of a higher differential rent — for under the given circumstances rent would rise on every type of land, exactly as if worse land than A now governed the market price — this one case Ricardo stamped as the only case, the normal case, and reduced the whole formation of differential rent II to it.
The same would also hold if only land of type A were tilled and successive capital investments on it were not matched by a proportionate increase in the product.
So here, with differential rent II, differential rent I is lost sight of entirely.
There is one exception: the supply from the land types already under cultivation is not enough, and so the market price stands permanently above the production price — either until new, additional, worse land is taken into cultivation, or until the whole product of the additional capital laid out on the various land types can only be delivered at a higher production price than the one that governed before. Once that case is set aside, a proportionate decline in the productivity of the additional capitals leaves the governing production price and the profit rate untouched. Three further cases are then possible.
(a) If the additional capital placed on any of the land types A, B, C or D yields only the rate of profit fixed by A's production price, then no surplus profit is formed by it, and therefore no possible rent either — no more than if additional land of type A had been tilled.
(b) If the additional capital yields a higher product, then a new surplus profit — a potential rent — is formed as a matter of course, provided the governing price stays the same. But that is not necessarily the case: it is not, namely when this extra production throws land A out of cultivation and with that out of the series of competing land types. In that case the governing production price falls. The profit rate would rise if this went together with a fall in wages, or if the cheaper product enters as an element into constant capital. Had the increased productivity of the additional capital occurred on the best land types, C and D, then how far the formation of increased surplus profit (and therefore of increased rent) would go together with the fall in price and the rise in the profit rate would depend entirely on the level of that increased productivity and on the amount of capital newly added. The profit rate can rise even without any fall in wages, through a cheapening of the elements of constant capital.
(c) Suppose the extra capital is invested while surplus profits are falling, yet in a way that still leaves its product over and above what the same capital yields on soil A. Then, so long as the bigger supply does not displace soil A from cultivation, fresh surplus profits are formed under all circumstances, and that formation can happen on D, C, B and A all at once. If instead the worst soil, A, is forced out of tillage, the production price that governs drops, and whether the surplus profit put in money - and with it the differential rent - rises or falls turns on how the lower price of a quarter stands to the larger number of quarters that make up the surplus profit. Yet in any case something odd shows up here: as capital is invested again and again with falling surplus profits, the production price can fall instead of having to rise, which is not how it looks at first glance.
These additional capital investments with declining extra yields answer exactly to the case in which four new independent capitals of £2 1/2 each would be invested on land types whose fertility lies between A and B, between B and C, and between C and D, yielding 1 1/2 qrs, 2 1/3 qrs, 2 2/3 qrs and 3 qrs respectively. On all these land types, surplus profits — potential rents — would form for all four additional capitals, even though the rate of surplus profit would have fallen, compared with what the same capital invested on the better land in each case would give. And it would be all one whether these four capitals were invested on D and so on, or distributed between D and A.
Now we reach an essential difference between the two forms of differential rent.
Keep the production price fixed, and keep the differences between the soils fixed. Under differential rent I, as the total rental grows, the average rent per acre can rise, and so can the average rate of rent on capital. But an average is only an abstraction. The real level of rent, taken per acre or against the capital, stays the same here.
By contrast, under the same assumptions, the rent per acre can rise even though the rate of rent on the capital laid out stays the same.
Suppose production doubles because £5 is invested on each of A, B, C and D instead of £2 1/2 — £20 of capital in all instead of £10 — with the relative fertility held constant. That would be exactly the same as if 2 acres of each of these types of land were tilled instead of 1, at unchanged cost. The profit rate would stay the same, and so would its relation to surplus profit, or to rent.
If A now bore 2 qrs, B 4 qrs, C 6 qrs and D 8 qrs, the production price would still be £3 per qr, because this increase is owed not to doubled fertility on an unchanged capital but to the same proportionate fertility on a doubled capital. The 2 qrs from A would now cost £6, just as 1 qr cost £3 before. Profit would have doubled on all four types of land — but only because the capital laid out doubled. Rent would have doubled in the same proportion: 2 qrs for B instead of 1, 4 for C instead of 2, 6 for D instead of 3, and the money rents for B, C and D £6, £12 and £18. Money rent per acre would have doubled just as the product per acre did — and so would the price of land, which is that money rent capitalized. Reckoned this way, corn rent and money rent rise, and the price of land with them, because the measure they are reckoned on, the acre, is a piece of land of constant size.
Reckoned instead as a rate of rent against the capital laid out, no change has taken place in the proportionate level of rent. The total rental of £36 stands to the capital of £20 laid out as the rental of £18 stood to the capital of £10. The same holds for each type of land's money rent against the capital laid out on it: on C, £12 of rent to £5 of capital, as before £6 of rent to £2 1/2 of capital. No new differences arise here between the capitals laid out. What does arise is new surplus profit, merely because the additional capital is invested on one of the rent-bearing types of land, or on all of them, with the same proportionate product. If the doubled investment were made on C alone, the differential rent between C, B and D reckoned on capital would stay the same; for if its mass doubles on C, so does the capital laid out.
From this it follows that, with the production price staying the same, the rate of profit staying the same and the differences staying the same — and therefore the rate of surplus profit, or of rent, measured against the capital, also staying the same — the rent per acre, in corn and in money, can rise, and with it the price of land.
The same thing can happen with falling rates of surplus profit, and therefore of rent — that is, with a falling productivity of the additional capital investments that still bear rent. If the second investments of £2 1/2 had not doubled the product, but B's total product had risen only to 3 1/2 qrs, C's to 5 and D's to 7, then the differential rent on B for the second £2 1/2 of capital would be only 1/2 qr instead of 1, on C 1 instead of 2, and on D 2 instead of 3. The proportions between rent and capital for the two successive investments would come out as follows:
Although the rate of relative productivity of capital had fallen, and with it the rate of surplus profit reckoned on capital, corn and money rent would still have risen: for B from 1 to 1 1/2 qrs (£3 to £4 1/2), for C from 2 to 3 qrs (from £6 to £9), for D from 3 to 5 qrs (from £9 to £15). In that case the differences on the additional capitals, set against the capital invested on A, would have narrowed; the production price would have held steady, but rent per acre, and with it the land price per acre, would have risen.
We now turn to the combinations of differential rent II, which takes differential rent I as its basis.