Theories of Surplus Value, Marx 1861
||619| At this stage we shall not examine Smith’s interesting account of how the rent of the principal vegetable food dominates all other strictly agricultural rents (stock raising, timber, industrial crops), because each of these branches of production can easily be transformed into one of the others. Adam Smith excludes rice from this, wherever it is the principal vegetable food, since rice fields (or bogs) are not convertible into grass land, wheat lands, etc. and vice versa.
[In Chapter XI, Book I] Adam Smith correctly defines rent as “the price paid for the use of land” ([O.U.P., Vol. I, p. 162; Garnier,] t, I, p. 299), the term land is intended to mean every power of nature as such, therefore also water, etc.
In contrast to Rodbertus’s peculiar notion, Smith, from the outset, enumerates the items of agricultural capital:
“The stock from which he furnishes the seed” (the raw material), “pays the labour, and purchases and maintains the cattle and other instruments of husbandry” ([O.U.P., Vol. I, p. 163; Garnier,] l.c.).
Now what is this price paid for the use of land?
“Whatever part of the produce or… of its price, is over and above this shame” (which pays for the capital advanced “together with the ordinary profits”), “he” (the landlord) “naturally endeavours to reserve to himself as the rent of his land” ([O.U.P., Vol. I, p. 163; Garnier,] l.c., p. 300).
This excess may “he considered as the natural rent of land” ([O.U.P., Vol. I, p. 163; Garnier,] l.c., p. 300).
Smith refuses to confuse rent with the interest on capital invested in the land.
“The landlord demands a rent even for unimproved land” ([O.U.P., Vol. I, p. 163; Garnier,] l.c., pp. 300-01).
and, he adds, even this second form of rent [i.e., the rent on the improved land] is peculiar in that the interest from the capital used on improvement is interest on a capital which has not been laid out by the landlord, but by the farmer.
“He” (the landlord) “sometimes demands rent for what is altogether incapable of human improvements” ([O.U.P., Vol. I, pp. 163-64; Garnier,] l.c., p. 301).
Smith stresses very strongly, that it is landed property, the landlord, who as landlord “demands the rent”. [Regarded] as a mere effluence of landed property, rent is monopoly price, this is perfectly correct, since it is only the intervention of landed property which enables the product to be sold for more than the cost-price, to be sold at its value.
“The rent of land considered as the price paid for the use of the land, is naturally a monopoly price” ([O.U.P., Vol. I, p. 164; Garnier,] l.c., p. 302).
It is in fact a price which is only enforced through the monopoly of landed property, and as a monopoly price, it differs from the price of the industrial product.
From the standpoint of capital—and capital dominates production—the cost-price only requires that the product should pay the average profit in addition to the capital advanced. In this case, the product, be it product of the land or any other product, can “be brought to market”.
“If the ordinary price is more than this, the surplus part of it will naturally go to the rent of the land. If it is not more, though the commodity may be brought to market, it can afford no rent to the landlord. Whether the price is, or is not more, depends upon the demand” ([O.U.P., Vol. I, p. 164; Garnier,] l.c., p. 303).
Why does rent enter into price differently from wages and profit? That is the question. Originally, Smith had resolved value correctly, into wages, profits and rents (apart from constant capital). But almost at once he takes the opposite course and identifies value with natural price (the average price determined by competition or the cost-price of the commodities) and builds up the latter from wages, profit and rent.
“These three parts seem either immediately or ultimately to make up the whole price” ([O.U.P., Vol. I, p. 55; Garnier,] l. I, ch. VI, p. 101).
“In the most improved societies, however, there are always a few commodities of which the price r e s o l v e s i t s e l f into two parts only, the wages of labour and the profits of stock; and a still smaller number, in which it consists altogether in the wages of labour. In the price of sea-fish, for example, one part pays the labour of the fishermen, and the other the profits of the capital employed in the fishery. Rent very seldom makes any part ||620| of it… In some parts of Scotland, a few poor people make a trade of gathering, along the sea-shore, those little variegated stones commonly known by the name of Scotch pebbles. The price which is paid to them by the stone-cutter, is altogether the wages of their labour; neither rent nor profit makes any part of it.
“But the whole price of any commodity must still finally resolve itself into some one or other or all of those three parts” ([O.U.P., Vol. I. pp. 56-57; Garnier,] l. I, ch. VI, pp. 103-04).
In these passages, the resolving of value into wages, etc. and the compounding of price from wages, etc., are jumbled together (this applies to Chapter VI in general which deals with “the Component Parts of the Price of Commodities”). (Natural price and market-price are for the first time discussed in Chapter VII).
Book I, Chapters I, II, III deal with the “division of labour”, Chapter IV with money. In these, as in the following chapters, value is determined in passing. Chapter V deals with the real and nominal price of commodities, with the transformation of value into price; “the Component Parts of the Price of Commodities” are considered in Chapter VI; the natural and market-price in Chapter VII. Then Chapter VIII deals with the wages of labour, Chapter IX with the profits of stock; Chapter X with the Wages and Profit in the different Employments of Labour and Stock; finally, Chapter XI with the Rent of Land.
But in this connection we want first to draw attention to the following: According to the passages cited above, there are commodities whose price consists solely of wages, others, whose price consists only of wages and profit, and finally a third group of commodities, whose price consists of wages, profit and rent. Hence:
“The whole price of any commodity must still … resolve itself into some one or other or all of those three parts.”
According to this, there would be no grounds for saying that rent enters into price in a different manner from profit and wages, but one could say that rent and profit enter into price in a different way from wages, since the latter always enters [into price], the former not always. Whence, then, the difference?
Moreover, Smith should have investigated, whether it is possible that the few commodities which only comprise wages, are sold at their value, or whether the poor people who gather the Scotch pebbles are not in fact the wage-labourers of the stone-cutters, who pay them only the usual wages for the commodity, in other words for a whole working-day, which apparently belongs to them, these people receive only as much as a worker in other trades, where part of the working-day forms profit and belongs not to him but to the capitalist. Smith should have either affirmed this or else asserted that in this case the profit only seems to be confounded with wages. He says himself:
“When those three different sorts of revenue belong to different persons, they are readily distinguished; but when they belong to the same, they are sometimes confounded with one another, at least in common language” ([O.U.P., Vol. I, p. 58; Garnier,] l. I, ch. VI, p. 106).
He nevertheless works out this problem in the following manner:
If an independent labourer (like those poor people of Scotland) uses only labour (without recourse to capital), if, altogether, he only employs his labour and the elements, then the price resolves itself solely into wages. If he employs a small capital as well, then the same individual receives wages and profit. If, finally, he employs his labour, his capital and his landed property, then he unites in his person the characters of landowner, farmer and worker.
{The whole absurdity of Smith’s approach comes to light in one of the final passages of Chapter VI, Book I:
“As in a civilised country there are but few commodities of which the exchangeable value arises from labour only” (here labour is identified with wages) “rent and profit contributing largely to that of the far greater part of them, so the annual produce of its labour” (here, after all, the commodities are the produce of labour, although the whole value of this produce does not arise from labour only) “will always be sufficient to purchase or command a much greater quantity of labour than what was employed in raising, preparing, and bringing that produce to market” ( [O.U.P., Vol. I, pp. 59-60; Garnier,] l.c., pp. 108-09).
The produce of labour [is] not equal to the value of this produce. On the contrary (one may gather) this value is increased by the addition of profit and rent. The produce of labour can therefore command, purchase, more labour, i.e., pay a greater value in labour, than the labour contained in it. This proposition would be correct if it ran like this:
| ||621| Smith says: | According to him himself, it should read: |
| “As in a civilised country there are but few commodities of which the exchangeable value arises from labour only, rent and profit contributing largely to that of the far greater part of them, so the annual produce of its labour will always be sufficient to purchase or command a much greater quantity of labour than what was employed in raising, preparing, and bringing that produce to market.” | “As in a civilised country there are but few commodities of which the exchangeable value resolves itself into wages only and since, for a far greater part of them, this value largely resolves itself into rent and profit, so the annual produce of its labour will always be sufficient to purchase or command a much greater quantity of labour than what had to be paid” (and therefore employed) “in raising, preparing, and bringing that produce to market.” |
(Here Smith returns again to his second conception of value, a concept of which he writes the following in the same chapter.
“The real value of all the different component parts of price, it must be observed, is measured by the quantity of labour which they can, each of them, purchase or command. Labour” (in this sense) “measures the value, not only of that part of price which resolves itself into labour” (should read: into wages) “but of that which resolves itself into rent, and of that which resolves itself into profit” ([O.U.P., Vol. I, p. 55; Garnier,] l. I, ch. VI, p. 100).
(In Chapter VI, the resolution of value into wages, profit and rent is still dominant. It is only in Chapter VII, on the natural price and market-price, that the compounding of the price from these constituent elements wins the upper hand.)
Hence: The exchangeable value of the annual product of labour consists not only of the wages of the labour employed in order to bring forth this product, but also of profit and rent. This labour however is only commanded or purchased with that part of the value which resolves into wages. It is thus possible to set into motion a much larger amount of labour, if a part of the profit and rent is used to command or purchase labour, i.e., if it is converted into wages. So it amounts to this: the exchangeable value of the annual product of labour resolves itself into paid labour (wages) and unpaid labour (profit and rent). If therefore a part of that part of the value which resolves itself into unpaid labour is converted into wages, one can purchase a greater quantity of labour than if one merely assigns that part of the value which consists of wages, to the purchase of new labour.)
Let us go back then:
“An independent manufacturer, who has stock enough both to purchase materials, and to maintain himself till he can carry his work to market, should gain both the wages of a journeyman who works under a master, and the profit which that master makes by the sale of that journeyman’s work. His whole gains, however, are commonly called profit, and wages are, in this case too, confounded with profit.
“A gardener who cultivates his own garden with his own hands, unites in his own person the three different characters of landlord, farmer, and labourer. His produce, therefore, should pay him the rent of the first, the profit of the second, and the wages of the third. The whole, however, is commonly considered as the earnings of his labour. Both rent and profit are, in this case, confounded with wages” ([O.U.P., Vol. I, p. 59; Garnier,] l. I, ch. VI, p. 108).
This is indeed confounded. Is not the whole “the earnings of his labour”? And are not, on the contrary, the conditions of capitalist production—in which, with the alienation of labour from its objective conditions, the worker, capitalist and landowner confront one another as different characters too—transferred to this gardener, so that the product of his labour or rather the value of the product is regarded, part of it as wages, in payment of his labour, part of it as profit, on account of the capital employed, and part of it as rent, as the portion due to the land or rather the proprietor of the land? Within capitalist production(it is) quite correct, when considering those conditions of labour in which these elements are not separated (in actual fact), to assume them to be separated and so to regard this gardener as his own ||622| journeyman and as his own landowner in one person. The vulgar conception however that wages arise from labour, but profit and rent—independently of the labour of the worker—arise out of capital and land as separate sources, not for the appropriation of alien labour, but of wealth itself, evidently creeps into Adam Smith’s writing already at this stage. In this fantastic fashion, the profoundest concepts intermingle with the craziest notions, such as the common mind forms in an abstract manner from the phenomena of competition.
Having first resolved value into wages, profits, rents, he then on the contrary compounds value out of wages, profit and rent, whose magnitudes are determined independently of value. Since Adam Smith has thus forgotten the origin of profit and rent correctly explained by himself, he is able to say:
“Wages, profit, and rent, are the three original sources of all revenue, a s w e l l a s of all exchangeable value” ([O.U.P., Vol. I, p. 57; Garnier,] l. I, ch. VI, p. 105).
In accordance with his own explanation, he should have said:
“The value of a commodity arises exclusively out of the labour (the amount of labour) which is embodied in this commodity. This value resolves itself into wages, profit and rent. Wages, profit and rent are the original forms in which the worker, the capitalist and the landlord participate in the value created by the labour of the worker. In this sense they are the three original sources of all revenue, although none of these so-called sources enters into the formation of the value.”
From the passages quoted it can be seen how in Chapter VI, on the “Component Parts of the Price of Commodities”, Adam Smith arrives at the resolution of price into wages, where only (immediate) labour enters into the production; into wages and profit, where, instead of the independent workman, a journeyman is employed by a capitalist (i.e., capital); and finally into wages, profit and rent, where “land” enters into the production besides capital and labour. In this latter case, however, it is assumed that the land is appropriated, that consequently alongside the worker and the capitalist, there is also a landowner (although he notes that it is possible for all three or two of these characters to be united in one person).
In Chapter VII, on natural price and market-price, rent (where land enters into the production) is presented as a component part of the natural price in exactly the same way as wages and profit. The following passages will show this:
(Book I, Chapter VII).
“When the price of any commodity is neither more nor less than what is sufficient to pay the r e n t o f the land, the wages of the labour, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may he called its natural price.
“The commodity is then sold precisely for what it is worth” ([O.U.P., Vol. I, p. 61; Garnier,] l.c., p. 111). (At the same time, it is stated here that the natural price is identical with the value of the commodity.)
“The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity, or the whole value of the rent, labour, and profit, which must be paid in order to bring it thither” ([O.U.P., Vol. I, pp. 61-62; Garnier,] l.c., p. 112).
“When the quantity of any commodity which is brought to market Jolts short of the effectual demand, all those who are willing to pay the whole value o f t h e r e n t, wages, and profit, which must be paid in order to bring it thither, cannot be supplied with the quantity which they want … the market price will rise more or less above the natural price, according as either the greatness of the deficiency, or the wealth and wanton luxury of the competitors, happen to animate more or less the eagerness of the competition” ([O.U.P., Vol. I, p. 62; Garnier,] l.c., p. 113).
“When the quantity brought to market exceeds the effectual demand, it cannot be all sold to those who are willing to pay the whole value of the rent, wages, and profit, which must be paid in order to bring it thither… The market price will sink more or less below the natural price, according as the greatness of the excess increases more or less the competition of the sellers, or according as it happens to be more or less important to them to get immediately rid of the commodity” ([O.U.P., Vol. I, pp. 62-63; Garnier,] l.c., p. 114).
“When the quantity brought to market is just sufficient to supply the effectual demand, and no more, the market price naturally comes to be … exactly …, the same with the natural price… The competition of the different dealers obliges them all to accept of this price, but does not oblige them to accept of less” ([O.U.P., Vol. I, p. 63; Garnier,] l.c., pp. 114-15).
||623| If, in consequence of the state of the market, his rent sinks below, or rises above, its natural rate, Adam Smith allows the landowner to withdraw his land or transfer it from the production of one commodity (such as wheat) to that of another (such as pasture for instance).
“If at any time it” (the quantity brought to market) “exceeds the effectual demand, some of the component parts of its price must be paid below their natural rate. I f i t i s r e n t, the interest of the landlords will immediately prompt them to withdraw a part of their land” ([O.U.P., Vol. I, p. 63; Garnier,] l.c., p. 115).
“If, on the contrary, the quantity brought to market should at any time fall short of the effectual demand, some of the component parts of its price must rise above their natural rate. I f i t i s r e n t, the interest of all other landlords will naturally prompt them to prepare more land for the raising of this commodity” ([O.U.P., Vol. I, p. 63; Garnier,] l.c., p. 116).
“The occasional and temporary fluctuations in the market price of any commodity fall chiefly upon those parts of its price which resolve themselves into wages and profit. That part which resolves itself into rent is less affected by them” ([O.U.P., Vol. I, p. 65; Garnier,] l.c., pp. 118-19).
“The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken, not upon every occasion indeed, but for any considerable time together” ([O.U.P., Vol. I, p. 68; Garnier,] l.c., p. 124).
“The market price of any particular commodity, though it may continue long above, can seldom continue long below, its natural price. Whatever part of it was paid below the natural rate, the persons whose interest it affected would immediately feel the loss, and would immediately withdraw either so much land, or so much labour, or so much stock, from being employed about it, that the quantity brought to market would soon he no more than sufficient to supply the effectual demand. Its market price, therefore, would soon rise to the natural price; this at least would he the case where there was perfect liberty” ([O.U.P., Vol. I, pp. 68-69; Garnier,] l.c., p. 125).
After this exposition of the subject in Chapter VII, it is difficult to see how Adam Smith can justify his proposition in Book I, Chapter XI, “Of the Rent of Land”, that rent does not always enter into price where appropriated land enters into production; how he can differentiate between the manner in which rent enters into price from that in which profit and wages enter into it, since in chapters VI and VII he has turned rent into a component part of the natural price, in just the same way as profit and wages. Now let us return to this Chapter XI (Book I).
We have seen that there rent is defined as the surplus which remains from the price of the product, after the expenses of the capitalist (farmer) plus the average profit have been paid.
In this Chapter XI, Smith makes a complete turn-about. Rent no longer enters into the natural price. Or, rather, Adam Smith takes refuge in an ordinary price which is as a rule different from the natural price, although we were told in Chapter VII, that the ordinary price can never, for any length of time, be below the natural price and that none of the component parts of the natural price can for any length of time, be paid below its natural rate and even less, not paid at all, as he now asserts in relation to rent. Neither does Adam Smith tell us whether the produce is sold below its value when it pays no rent, or whether it is sold above its value, when it pays rent.
Previously, the natural price of the commodity was
“the whole value of the rent, labour, and profit, which must be paid in order to bring it thither” [to market] ([O.U.P., Vol. I, pp. 61-62, Garnier,] l.c., p. 112).
Now we are told that:
“Such parts only of the produce of land can commonly be brought to market, of which the ordinary price is sufficient to replace the stock which must be employed in bringing them thither, together with its ordinary profits” ([O.U.P., Vol. I, p. 164; Garnier,] l.c., pp. 302-03).
The ordinary price is therefore not the natural price, and the natural price need not be paid, in order to bring these commodities to market.
||624| Previously we were told that if the ordinary price (that time, the market-price) were not sufficient to pay the whole rent (“the whole value of the rent,” etc.), land will be withdrawn until the market-price rises to the level of the natural price and pays the whole rent. Now, on the other hand:
“If the ordinary price is more than this” (sufficient to replace the stock together with its ordinary profits), “the surplus part of it will naturally go to the rent of the land. If it is not more, though the commodity may be brought to market, it can afford no rent to the landlord. Whether the price is, or is not more, depends upon the demand” ([O.U.P., Vol. 1, p. 164; Garnier,] l. I, ch. XI, p. 303).
Thus rent, from being a component part of the natural price suddenly turns into a surplus over the sufficient price,[a] a surplus whose existence or non-existence depends on the state of demand. But the sufficient price is that price which is required for the commodity to appear on the market, and therefore to be produced, thus it is the price of production of the commodity. For the price which is required for the supply of the commodity, the price which is required for it to come into existence at all, to appear as a commodity on the market, is of course its price of production or cost-price, That [is the condition] sine qua non of the existence of the commodity. On the other hand the demand for certain products of the land must always be such that their ordinary price pays a surplus over and above the price of production, that is, a rent. For others it may or may not be so.
“There are some parts of the produce of land for which the demand must always be such as to afford a greater price than what is sufficient to bring them to market; and there are others for which it either may or may not be such as to afford this greater price. The former must always afford a rent to the landlord. The latter sometimes may, and sometimes may not, according to different circumstances” ([O.U.P., Vol. I, pp. 164-65; Garnier,] l. I, ch. XI, p. 303).
So instead of the natural price we have the sufficient price here. The ordinary price, in turn, is different from this sufficient price. The ordinary price if it includes the rent is above the sufficient price. If it does not comprise rent it is equal to the sufficient price. It is even characteristic of the sufficient price that rent is excluded. The ordinary price is below the sufficient price, when it does not pay the average profit, in addition to replacing the capital. Thus the sufficient price is in fact the price of production or cost-price as abstracted by Ricardo from Adam Smith and as it indeed presents itself from the standpoint of capitalist production, in other words the price which, apart from the outlay of the capitalist, pays the ordinary profit; [it is] the average price brought about by the competition of capitalists in the different employments of capital. It is this abstraction based on competition which induces Adam Smith to confront his natural price with the sufficient price, although in his presentation of the natural price he on the contrary declares that in the long run only the ordinary price which pays rent, profit and wages, the component parts of the natural price, is sufficient. Since the capitalist controls the production of commodities, the sufficient price is [that] which is sufficient for capitalist production from the standpoint of capital and the price which is sufficient for capital does not include rent, but, on the contrary, excludes it.
On the other hand: This sufficient price is not sufficient for some products of the land. For them the ordinary price must be high enough to yield a surplus over and above the sufficient price, a rent for the landowner. For others it depends on the circumstances. The contradiction that the sufficient price is not sufficient—that the price which suffices to bring the product to market does not suffice to bring it to market—does not worry Adam Smith.
Although he does not turn back, even for one moment, to glance at chapters V, VI and VII, he admits to himself (not as a contradiction, but as a new discovery which he has suddenly hit upon), that with the sufficient price, he has overthrown his whole doctrine of natural price.
“Rent, it is to be observed, therefore” (in this extraordinarily naive fashion Adam Smith progresses from an assertion to its very opposite), “enters into the composition of the price of commodities in a different way from wages and profit. High or low wages and profit are the causes of high or low price ||625|; high or low rent is the effect of it. It is because high or low wages and profit must be paid, in order to bring a particular commodity to market, that its price is high or low. But it is because its price is high or low, a great deal more, or very little more, or no more, than what is sufficient to pay those wages and profit, that it affords a high rent, or a low rent, or no rent at all” ([O.U.P., Vol. I, p. 165; Garnier,] l.c., pp. 303-04).
Let us take the final proposition first. The sufficient price, the cost-price, which only pays wages and profit, excludes rent. If the product pays a great deal more than the sufficient price, then it pays a high rent. If it pays only a little more, then it pays a low rent. If it pays only exactly the sufficient price, then it pays no rent. It pays no rent if the actual price of the product coincides with the sufficient price, which pays profit and wages. Rent is always a surplus over and above the sufficient price. By its very nature, the sufficient price excludes rent. This is Ricardo’s theory. He accepts the concept of the sufficient price, the cost-price, from Adam Smith; but avoids Adam Smith’s inconsistency of differentiating it from the natural price, and sets it forth consistently. Having committed all these inconsistencies, Smith is sufficiently inconsistent to demand, for certain products of the land, a price which is higher than their sufficient price. But this inconsistency itself is in turn the result of a more correct “observation”.
The beginning of the passage is truly amazing in its naiveté. In Chapter VII Smith explained that rent, profit and wages enter equally into the corn position of the natural price, having first turned the dissolution of value into rent, profit and wages upside down and transformed it into the composition of value from the natural price of rent, profit and wages. Now he tells us that rent enters into “the composition of the price of commodities” differently from profit and wages. And in what way does it enter differently into that composition? By not entering into that composition at all. And here we are first given a true explanation of the sufficient price. The price of the commodities is dear or cheap, high or low, because wages and profit—their natural rates—are high or low. The commodity will not be brought to market, will not be produced, unless these high or low profits and wages are paid. They form the price of production of the commodity, its cost-price; and are thus in fact, the constituent elements of its value or price. Rent, on the other hand, does not enter into the cost-price, the price of production. It is not a constituent element of the exchangeable value of the commodity. It is only paid when the ordinary price of the commodity is above its sufficient price. Profit and wages as constituent elements of the price are causes of the price; rent, on the other hand, is only its effect, its result. It does not, therefore, enter into the composition of the price as an element, as do profit and wages. And this is what Smith calls entering into this composition in a different way from profit and wages. He does not appear to be in the slightest bit aware of the fact that he has thrown over his doctrine of natural price. For what was the natural price? The central point around which the market-price gravitated: the sufficient price, below which in the long run the product could not fall, if it were to be produced and brought to market.
Thus rent is now the surplus over the natural price, previously [it was] a component part of the natural price; now [it is the] effect, previously [it was] the cause, of price.
There is however no contradiction in Adam Smith’s assertion that for certain products of the land, the circumstances of the market are always such that their ordinary price must be above their sufficient price, in other words: that landed property has the power to force the price above that level which would be sufficient for the capitalist if he were not confronted by a counteracting influence.
||626| Having thus, in Chapter XI, thrown overboard chapters V, VI and VII, he calmly proceeds by saying that: he will now make it his business to consider 1. the produce of the land which always affords rent; 2. the produce of the land which sometimes affords rent and sometimes not; finally 3. the variations which take place, in the different periods of development of society, in the relative value, partly of these two sorts of produce compared with one another and partly in their relationship to manufactured commodities.
“Part I. Of the Produce of Land which always affords Rent.”
Adam Smith begins with the theory of population. The mean s of subsistence always create a demand for themselves. If the means of subsistence increase, then the people, the consumers of the means of subsistence, also increase. The supply of these commodities thus creates the demand for them.
“As men, like all other animals, naturally multiply in proportion to the means of their subsistence, food is always more or less in demand. It can always purchase or command a greater or smaller quantity of labour, and somebody can always be found who is willing to do something in order to obtain it” ([O.U.P., Vol. I, p. 165; Garnier,] l. I, ch. XI p. 305).
“But <why?> “land, in almost any situation, produces a greater quantity of food than what is sufficient to maintain all the labour necessary for bringing it to market, in the most liberal way in which that labour is ever maintained. The surplus, too, is always more than sufficient to replace the stock which employed that labour, together with its profits. Something, therefore, always remains for a rent to the landlord” ([O.U.P., Vol. I, p. 166; Garnier,] l.c., pp. 305-06).
This sounds quite physiocratic and contains neither proof nor explanation of why the “price” of these particular commodities pays a rent, a surplus over and above the “sufficient price”.
As an example he immediately refers to pasture and uncultivated pasture. Then follows the proposition on differential rent:
“The rent of land not only varies with its fertility, whatever be its produce, but with its situation, whatever be its fertility” ([ibid., p. 166] l.c., p. 133).
On this occasion rent and profit appear as mere surplus of the product, after that part of it has been deducted in kind which feeds the worker. (This is really the physiocratic view, which is based on the fact that in an agricultural country man lives almost exclusively on the agricultural product, and industry manufacture, itself appears as a rural side-line which uses the local product of nature.)
“A greater quantity of labour, therefore, must be maintained out of it[b]; and the surplus, from which are drawn both the profit of the farmer and the rent of the landlord, must be diminished” ([O.U.P., Vol. I, p. 166; Garnier,] l.c., p. 307).
The growing of corn must therefore yield a greater profit than pasture.
“A cornfield of moderate fertility produces a much greater quantity of food for man than the best pasture of equal extent.”
(Thus it is not a question of price here, but of the absolute quantity of food for man.)
“Though its cultivation requires much more labour, yet the surplus which remains after replacing the seed and maintaining all that labour, is likewise much greater.”
(Although corn costs more labour, the cornfield yields a larger surplus of food, after labour has been paid, than a meadow used for stock raising. And it is worth more, not because corn costs more labour, but because the surplus in corn contains more nourishment.)
“If a pound of butcher’s meat, therefore, was never supposed to be worth more than a pound of bread, this greater surplus” (because the same area of land yields more pounds of corn than meat) “would everywhere be of greater value,” <because it is assumed, that a pound of bread equals a pound of meat (in value), and that, after the workers have been fed, more pounds of bread than pounds of meat are left over from the same area of land> “and constitute a greater fund both for the profit of the farmer and the rent of the landlord” ([O.U.P., Vol. I, pp. 167-68; Garnier,] l.c., pp. 308-09).
Having replaced the natural price by the sufficient price, and declared rent to be the surplus over and above the sufficient price, Smith forgets altogether, that it is a question of price, and derives rent from the ratio between the amount of food yielded by agriculture and the amount of food consumed by the agricultural worker.
In point of fact—apart from this physiocratic interpretation—he postulates that the price of the agricultural product which supplies the principal food pays rent in addition to profit. This is the starting-point for his further arguments. With the extension of cultivation, the natural pastures become insufficient for stock raising and cannot satisfy the demand for butcher’s meat. Cultivated land has to be employed for this purpose. ||627| The price of meat therefore has to rise to the point where it pays not only the labour which is employed in stock raising, but also:
“the rent which the landlord, and the profit which the farmer, could have drawn from such land employed in tillage. The cattle bred upon the most uncultivated moors, when brought to the same market, are, in proportion to their weight or goodness, sold at the same price as those which are reared upon the most improved land. The proprietors of those moors profit by it, and raise the rent of their land in proportion to the price of their cattle.”
(In this passage Adam Smith correctly derives the differential rent from the surplus of the market-value over the individual value. In this case, however, the market-value rises, not because there is a transition from better to worse, but from less fertile to more fertile land.)
“It is thus that, in the progress of improvement, the rent and profit of unimproved pasture come to be regulated in some measure by the rent and profit of what is improved, and these again by the rent and profit of corn” ([O.U.P., Vol. I, pp. 168-69; Garnier,] pp. 310-11).
“But where there is no Local advantage of this kind, the rent and profit of corn, or whatever else is the common vegetable food of the people, must naturally regulate, upon the land which is fit for producing it, the rent and profit of pasture.
“The use of the artificial grasses, of turnips, carrots, cabbages, and the other expedients which have been fallen upon to make an equal quantity of land feed a greater number of cattle than when in natural grass, should somewhat reduce, it might be expected, the superiority which, in an improved country, the price of butcher’s meat naturally has over that of bread. It seems accordingly to have done so” etc. ([O.U.P., Vol. I, p. 171; Garnier,] l.c., p. 315).
Having thus set forth the relationship between rent yielded by pasture and by tilled land, Smith continues:
“In all great countries, the greater part of the cultivated lands are employed in producing either food for men or food for cattle. The rent and profit of these regulate the rent and profit of all other cultivated land. If any particular produce afforded less, the land would soon be turned into corn or pasture; and if any afforded more, some part of the lands in corn or pasture would soon be turned to that produce” ([O.U.P., Vol. I, pp. 172-73; Garnier,] l.c., p. 318).
Then he speaks of vineyards, fruit and vegetable gardens, etc
“The rent and profit of those productions, therefore, which require either a greater original expense of improvement in order to fit the land for them, or a greater annual expense of cultivation, though often much superior to those of corn and pasture, yet when they do no more than compensate such extraordinary expense, are in reality regulated by the rent and profit of those common crops” ([O.U.P., Vol. I, p. 176; Garnier,] pp. 323-24).
Then he passes on to sugar cultivation in the colonies [and] tobacco.
“It is in this manner that the rent of the cultivated land, of which the produce is human food, regulates the rent of the greater part of other cultivated land.”
“In Europe, corn is the principal produce of land, which serves immediately for human food. Except in particular situations, therefore, the rent of corn-land regulates in Europe that of all other cultivated land” ([O.U.P., Vol. I, p. 180; Garnier,] l.c., pp. 331-32).
Adam Smith then returns to the physiocratic theory, as interpreted by him, namely that food creates consumers for itself. [He asserts that] if corn were replaced by some other crop, which with the same amount of labour yielded a much greater quantity of food on the most common land, then
“the rent of the landlord, o r the sur plus quantity of food which would remain to him, after paying the labour, and replacing the stock of the farmer, together with its ordinary profits, would necessarily be much greater. Whatever was the rate at which labour was commonly maintained in that country, this greater surplus could always maintain a greater quantity of it, and, consequently, enable the landlord to purchase or command a greater quantity of it” ([O.U.P., Vol. I, p. 181; Garnier,] l.c., p. 332).
Adam Smith cites rice as an example.
“In Carolina … the planters, as in other British colonies, are generally both farmers and landlords, and rent, consequently, is confounded with profit” ([O.U.P., Vol. I, p. 181; Garnier,] l.c., p. 333).
||628| The rice field, however
“is unfit either for corn, or pasture, or vineyard, or, indeed, for any other vegetable produce that is very useful to men; and the lands which are fit for those purposes are not fit for rice. Even in the rice countries, therefore, the rent of rice lands cannot regulate the rent of the other cultivated land which can never be turned to that produce” ([O.U.P., Vol. I, pp. 181-82; Garnier,] l.c., p. 334).
Second example potatoes (Ricardo’s criticism of this has been mentioned earlier). If potatoes became the principal food, in place of corn,
“…the same quantity of cultivated land would maintain a much greater number of people; and the labourers being generally fed with potatoes, a greater surplus would remain after replacing all the stock, and maintaining all the labour employed in cultivation. A greater share of this surplus, too, would belong to the landlord. Population would increase, and rents would rise much beyond what they are at present” ([O.U.P., Vol. I, p. 182; Garnier,] l.c., p. 335).
A few more comments on wheaten bread, bread made of oatmeal, and on potatoes conclude the first section of Chapter XI.
One can therefore sum up this section, which deals with the product of land which always pays a rent, as follows: after postulating the rent of the principal vegetable food, it sets forth how this rent regulates the rent of cattle-breeding, wine-growing, market gardening, etc. There is nothing about the nature of rent itself, except the general thesis that, provided rent exists, its amount is determined by fertility and situation. But this only relates to differences in rents, differences in the magnitude of rents. But why does his product always pay a rent? Why is its ordinary price always higher than its sufficient price? Smith leaves price out of account here and reverts to the physiocratic theory. What runs through it, however, is that the demand is always so great because the product itself creates the demand, [since it creates] its own consumers. Even provided that this were so it is incomprehensible why the demand should rise above the supply and thus force the price above the sufficient price. But there is here a secret recollection of the image of the natural price which includes rent as well as profit and wages and which is paid when supply corresponds with demand.
“When the quantity brought to market is just sufficient to supply the effectual demand, and no more, the market price naturally comes to be … exactly … the same with the natural price” ([O.U.P., Vol. I, p. 63; Garnier,] l.c., p. 114).
It is however characteristic that Adam Smith nowhere in this section states this clearly. In opening Chapter XI, he had just said that rent does not enter into price as a component part. The contradiction was too conspicuous.
“Part II: Of the Produce of Land which sometimes does, and sometimes does not, afford Rent.”
It is actually only in this section that the general nature of rent is first discussed.
“Human food seems to he the only produce of land, which always and necessarily affords some rent to the landlord.” (Why “always” and “necessarily”, has not been shown.) “Other sorts of produce sometimes may, and sometimes may not, according to different circumstances” ([O.U.P., Vol. I, p. 183; Garnier,] l.c., p. 337).
“After food, clothing and lodging are the two great wants of mankind.
“Land, in its original rude state, can afford the materials of clothing and lodging to a much greater number of people than it can feed.” As a result of this “superabundance of those materials” in proportion to the number of people the land can feed, i.e., in proportion to the population, these materials “cost” little or nothing. A large part of these “materials” lies around unused and useless “and the price of what is used is considered as equal only to the labour and expense of fitting it for use.” This price however affords “no rent to the landlord”. On the other hand, where the land is in an improved state, the number of people whom “it can feed”, i.e., the population, is greater than the quantity of those materials which it supplies, at least “in the way in which they require them, and are willing to pay for them”. There is a relative “scarcity” of these materials “which necessarily augments their value” … “there is frequently a demand for more than can be had.” More is paid for them than “the expense of bringing them to market. Their price, therefore, can always afford some rent to the landlord” ([O.U.P., Vol. I, p. 184; Garnier,] l.c., pp. 338 to 339).
||629| Here therefore an explanation of rent [is] derived, from the excess of demand over the supply which can be provided at the sufficient price.
The original materials of clothing were the furs and skins “of the larger animals”. Among nations of hunters and shepherds, whose food consists chiefly of the flesh of animals, “every man, by providing himself with food, provides himself with the materials of more clothing than he can wear “. Without foreign trade, the greater part of them would be thrown away as useless. Through the additional demand provided by foreign trade, the price of this surplus of materials is raised “above what it costs to send them” to be sold. This price “affords, therefore, some rent to the landlord”. Through its market in Flanders, English wool thus added “something to the rent of the land which produced it” ([O.U.P., Vol. I, pp. 184-85; Garnier,] l.c., pp. 339-40).
Foreign trade here raises the price of an agricultural by-product to such an extent, that the land which produces it can yield some rent.
“The materials of lodging cannot always be transported to so great a distance as those of clothing, and do not so readily become an object of foreign commerce. When they are superabundant in the country which produces them, it frequently happens, even in the present commercial state of the world, that they are of no value to the landlord.” Thus a stone quarry in the neighbourhood of London may yield a rent, whereas in many parts of Scotland and Wales, it may not. Similarly with timber. “In a populous and well-cultivated country” it will provide a rent, but “in many parts of North America” it will rot on the ground. The landowner would be glad to get rid of it. “When the materials of lodging are so superabundant, the part made use of is worth only the labour and expense of fitting it for that use. It affords no rent to the landlord, who generally grants the use of it to whoever takes the trouble of asking it. The demand of wealthier nations, however, sometimes enables him to get a rent for it” ([O.U.P., Vol. I, pp. 185-86; Garnier,] l.c., pp. 340-41).
Countries are populated, not in proportion to the “number of people whom their produce can clothe and lodge, but in proportion to that of those whom it can feed. When food is provided, it is easy to find the necessary clothing and lodging. But though these are at hand, it may often be difficult to find food. In some parts of the British Dominions, what is called a house may be built by one day’s labour of one man.” Among savage and barbarous nations, a hundredth of the labour of a whole year will be sufficient to provide them with what they require in clothing and lodging. The other 99 hundredths [are] often necessary to provide them with the food they need. “But when, by the improvement and cultivation of land, the labour of one family can provide food for two, the labour of half the society becomes sufficient to provide food for the whole.” The other half can then satisfy the other wants and fancies of mankind. The principal objects of those wants and fancies are clothing, lodging, household furniture, and what is called luxury. The desire for food is limited. Those other desires are unlimited. Those who possess a surplus of food “are always willing to exchange the surplus”. “The poor, in order to obtain food”, exert themselves to satisfy those “fancies” of the rich, and, moreover, compete with one another in their endeavours. The number of workmen increases with the quantity of food, i.e., in proportion to the progress of agriculture. [The nature of] their “business admits of the utmost subdivisions of labour”; the quantity of materials which they work up therefore increases even more rapidly than their numbers. “Hence arises a demand for every sort of material which human invention can employ, either usefully or ornamentally, in building, dress, equipage, or household furniture; for the fossils and minerals contained in the bowels of the earth, the precious metals, and the precious stones.
“Food is, in this manner, not only the original source of rent, but every other part of the produce of land which afterwards affords rent, derives that part of its value from the improvement of the powers of labour in producing food, by means of the improvement and cultivation of land” ([O.U.P., Vol. I, pp. 186-88; Garnier,] l.c., pp. 342-45).
What Smith says here, is the true physical basis of Physiocracy, namely, that the creation of surplus-value (including rent) always has its basis in the relative productivity of agriculture. The first real form of surplus-value is surplus of agricultural produce (food) , and the first real form of surplus labour arises when one person is able to produce the food for two. Otherwise this has nothing to do with the development of rent, this specific form of surplus-value, which presupposes capitalist production.
Adam Smith continues:
The other parts of the produce of the land (apart from food), which later afford rent, do not afford it always. The demand for them, even in the most cultivated countries, is not always great enough, “to afford a greater price than what is sufficient to pay the labour, and replace, together with its ordinary profits, the stock which must be employed in bringing them to market. ||630| Whether it is or is not such, depends upon different circumstances” ([O.U.P., Vol. I, p. 188; Garnier,] l,c., p. 345).
Here therefore again: Rent arises from the demand being greater than the supply at the sufficient price which only includes wages and profits, but no rent. What else does this mean, but that the supply at the sufficient price is so great that landed property cannot offer any resistance to the equalisation of capitals or labour? That therefore, even though landed property exists legally, it does not exist in practice, or cannot be effective as such in practice? Adam Smith’s mistake is that he fails to recognise that if landed property sells [products] above the sufficient price, it sells [them] at their value. His positive point, compared with Ricardo, is that he realises it depends on the circumstances, whether or not landed property can assert itself economically. It is therefore essential to follow this part of his argument step by step. He begins with the coal mine, then goes over to timber and then returns to the coal mine, etc. Accordingly we shall let him start with timber.
The price of wood varies with the state of agriculture, for the same reasons as does the price of cattle. When agriculture was in its infancy, forests were dominant and a sheer nuisance to the landowner, who would gladly give it to anyone for the cutting. As agriculture advances, there is clearance of forests, partly through the expansion of tillage, partly through the increase in herds of cattle, which eat up, gnaw at, roots and young trees. “These” [cattle] though they do not increase in the same proportion as corn, which is altogether the acquisition of human industry, yet multiply under the care and protection of men.” The scarcity of wood, thus created, raises its price. Hence it can afford so high a rent that tilled land (or land that could be used for tillage) is converted into woodland. This is the case in Great Britain. The rent of wood can never, for any length of time, rise above that of corn or pasture, but it may reach that level ([O.U.P., Vol. I, pp. 189-90; Garnier,] l.c., pp. 347-49).
Thus in fact, the rent of woodland is by nature identical with that of pasture. It belongs therefore in this category, although wood does not serve for food. The economic category does not depend on the use-value of the product, but on whether or not it is convertible into arable land and vice versa.
Coal mines. Smith observes correctly, that the fertility or in-fertility of mines in general depends on whether the same quantity of labour can extract a larger or a smaller amount of mineral from the mine. Infertility can offset the favourable situation, so that such mines cannot be exploited at all. On the other hand, an unfavourable situation can offset the fertility, so that despite its natural fertility, such a mine cannot be exploited. This is in particular the case where there are neither good roads, nor shipping ([O.U.P., Vol. I, pp. 188-89; Garnier,] l.c., pp. 346-47).
There are mines whose produce just reaches the sufficient price. Hence they pay profit for the entrepreneur but no rent. They can therefore be worked only by the landowner himself. In this way he gets “the ordinary profit of the capital which he employs”. There are many mines of this type in Scotland. These could not be exploited in any other way.
“The landlord will allow nobody else to work them without paying some rent, and nobody can afford to pay any” ([O.U.P., Vol. I, p. 188; Garnier,] l.c., p. 346).
Here Adam Smith has correctly defined under what circumstances land which has been appropriated pays no rent, namely where landowner and entrepreneur are one person. He has already told us earlier that this is so in the colonies.
A farmer cannot cultivate the land there because he cannot pay any rent. But the owner can cultivate it with profit, although it does not pay him a rent. This is the case, for example, in the colonies in Western America, because new land can always be appropriated. The land as such is not an element that offers resistance, and the competition of landowners who cultivate the land themselves is here in fact competition between workers or capitalists. The position of coal mines, or mines in general, is different in the supposed circumstances. The market-value, as determined by the mines which supply their product at this value, yields a smaller rent, or no rent at all but just covers the cost-price in the case of mines that are less fertile or less favourably situated. These mines can only be worked by persons for whom the resistance of landed property and the consequent exclusion of others from the land, does not exist, because they are landowners and capitalists in one person; [this] only happens where in fact landed property disappears as an independent element opposed to capital. The position differs from that of the colonies in that: in the latter, the landowner cannot prohibit the exploitation of new land by anyone. In the former he can do so. He only gives himself the permission to exploit the mine. This does not enable him to draw a rent, but it does enable him to exclude others and to invest his capital in the mine, with profit.
What Adam Smith writes about the regulation of rent by the most fertile mine, I have already commented on, when discussing Ricardo and his polemic. Here only one proposition needs to be stressed:
“The lowest price” (previously sufficient price) “at which coals can be sold for any considerable time, is, like that of all other commodities, the price which is barely sufficient to replace, together with its ordinary profits, the stock which must be employed in bringing them to market” ([O.U.P., Vol. I, p. 191; Garnier,] l.c., p. 350).
It is evident that the sufficient price has taken the place of the natural price, Ricardo regards them as identical, and rightly so.
||631| Smith maintains,
that the rent of coal mines is much smaller than that of agricultural products: while with the latter the rent commonly amount to one third [of the gross produce), in coal mines a fifth is a very great rent, and a tenth the common rent. Metal mines are not so dependent on their situation, since [their products] are more easily transported and the world market is therefore open to them. Their value, therefore, is more dependent on their fertility than their situation, while with coal mines, the opposite is the case. The products of the most distant metal mines compete with one another. “The price, therefore, of the coarse, and still more that of the precious metals, at the most fertile mines in the world, must necessarily more or less affect their price at every other in it” ([O.U.P., Vol. I, pp. 191-92; Garnier,] l.c., pp. 351-52).
“The price of every metal, at every mine, therefore, being regulated in some measure by its price at the most fertile mine in the world that is actually wrought, it can, at the greater part of mines, do very little more than pay the expense of working, and can seldom afford a very high rent to the land-lord. Rent accordingly, seems at the greater part of mines to have but a small share in the price of the coarse, and a still smaller in that of the precious metals. Labour and profit make up the greater part of both” ([O.U.P., Vol. I. p. 192; Garnier,] l.c., pp. 353-54).
Adam Smith correctly sets forth here the case presented in Table C.
When speaking of rent in connection with precious metals. Adam Smith again gives his interpretation of the sufficient price, which he puts in the place of the natural price. Where he speaks of non-agricultural industry, he has no need for this, since the sufficient and the natural price coincide here, according to his original explanation namely that it is the price which repays the capital outlay plus the average profit.
“The lowest price at which the precious metals can be sold … during any considerable time, is regulated by the same principles which fix the lowest ordinary price of all other goods. The stock which must commonly be employed, the food, clothes, and lodging, which must commonly be consumed in bringing them from the mine to the market, determine it. It must at least he sufficient to replace that stock, with the ordinary profits” ([O.U.P., Vol. I, p. 195; Garnier,] l.c., p. 359).
With regard to precious stones, he observes that:
“The demand for the precious stones arises altogether from their beauty. They are of no use but as ornaments; and the merit of their beauty is greatly enhanced by their scarcity, or by the difficulty and expense of getting them from the mine, Wages and profit accordingly make up, upon most occasions, almost the whole of the high price. Rent comes in but for a very small share, frequently no share; and the most fertile mines only afford any considerable rent” ([O.U.P., Vol. I, p. 197; Garnier,] l.c., p. 361).
There can only be a differential rent here.
“As the price, both of the precious metals and of the precious stones, is regulated all over the world by their price at the most fertile mine in it, the rent which a mine of either can afford to its proprietor is in proportion, not to its absolute, but to what may be called its relative fertility, or to its superiority over other mines of the same kind. If new mines were discovered as much superior to those of Potosi as they were superior to those of Europe, the value of silver might be so much degraded as to render even the mines of Potosi not worth the working” ([O.U.P., Vol. 1, p. 197; Garnier,] l.c., p. 362).
The products of the less fertile precious metal and precious stone mines carry no rent, because it is always the most fertile mine which determines market-value and ever more fertile new mines are being opened up—the line is always in the ascending direction, Hence they are sold below their value, merely at their cost-price.
“A produce, of which the value is principally derived from its scarcity, is necessarily degraded by its abundance” ([O.U.P., Vol. I, p. 198; Garnier,] l.c., p. 363).
Then Adam Smith’s argument again goes somewhat wrong.
“It is otherwise in estates above ground. The value, both of their produce and of their rent, is in proportion to their absolute, and not to their relative fertility. The land which produces a certain quantity of food, clothes, and lodging, can always feed, clothe, and lodge a certain number of people; and whatever may be the proportion of the landlord” (the very question is whether he takes any share of the produce, and in what proportion) ||632| “it will always give him a proportionable command of the labour of those people, and of the commodities with which that labour can supply him” ([O.U.P., Vol. I, p. 198; Garnier,] l.c., pp. 363-64).
“The value of the most barren lands is not diminished by the neighbourhood of the most fertile. On the contrary, it is generally increased by it. The great number of people maintained by the fertile lands afford a market to many parts of the produce of the barren, which they could never have found among those whom their own produce could maintain.”
(But only if it does not produce the same product as the fertile lands in its neighbourhood; only if this product of the barren lands does not compete with that of the more fertile. In this case Adam Smith is right and indeed, this is of importance to the way in which the total amount of rent from different kinds of natural products may increase in consequence of the fertility of the land which yields food.)
“Whatever increases the fertility of land in producing food, increases not only the value of the lands upon which the improvement is bestowed” (it may reduce this value and even destroy it), “but contributes likewise to increase that of many other lands, by creating a new demand for their produce” or, rather by creating a demand for new products.” ([O.U.P., Vol. I, p. 198; Garnier,] l.c., p. 364.)
But in all this, Adam Smith does not offer any explanation for absolute rent, which he presupposes to exist for land that produces food. He is correct when he observes that it does not necessarily exist for other lands, mines, for instance, because they are always available in such relatively unlimited quantities (in comparison with demand), that landed property cannot offer any resistance to capital [so that] even if it exists in a legal sense, it does not exist in the economic sense.
(See p. 641 on house rent.) |632||
||641| See p. 632. On house rent Adam Smith says:
“Whatever part of the whole rent of a house is over and above what is sufficient for affording this reasonable profit” (to the builder) “naturally goes to the ground-rent; and where the owner of the ground, and the owner of the building, are two different persons, it is in most cases, completely paid to the former. In country houses, at a distance from any great town, where there is a plentiful choice of ground, the ground-rent is scarcely any thing, or no more than what the space upon which the house stands, would pay employed in agriculture.” (Book V, Chapter II.)
In the case of the ground-rent of houses, situation constitutes just as decisive a factor for the differential rent, as fertility (and situation) in the case of agricultural rent.
Adam Smith shares with the Physiocrats, not only the partiality for agriculture and the landlord, but also the view that they are particularly suitable objects of taxation. He says:
“Both ground-rents, and the ordinary rent of land, are a species of revenue, which the owner in many cases enjoys, without any care or attention of his own. Though a part of this revenue should be taken from him, in order to defray the expenses of the State, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land are, therefore, perhaps, the species of revenue, which can best bear to have a peculiar tax imposed upon them” (Book V, Ch. II).
The considerations which Ricardo (p. 230) advances against Adam Smith’s views on the subject, are very philistine. |641||
||632| “Part III, Of the variations in the Proportion between the respective Values of that sort of Produce which always affords Rent, and of that which sometimes does, and sometimes does not, afford Rent.” ([Garnier,] Book I, Vol. II, Ch. XI.)
“In a country naturally fertile, but of which the far greater part is altogether uncultivated, cattle, poultry, game of all kinds, etc., as they can be acquired with a very small quantity of labour, so they will purchase or command but a very small quantity.” ([O.U.P., Vol. I, p. 212; Garnier,] Vol. II, p. 25.)
The peculiar manner in which Adam Smith mixes up the measuring of value by the quantity of labour, with the price of labour or the quantity of labour which a commodity can command, is evident from the above quotation, and especially from the following passage, which also shows how it has come about that at times he elevates corn to the measure of value.
“In every state of society, in every stage of improvement, corn is the production of human industry. But the average produce of every sort of industry is always suited, more or less exactly, to the average consumption; the average supply to the average demand. In every different stage of improvement, besides, the raising of equal quantities of corn in the same soil and climate, will, at an average, require nearly equal quantities of labour; or, what comes to the same thing, the price of nearly equal quantities; the continual increase of the productive powers of labour, in an improved state of cultivation, being more or less counterbalanced by the continual increasing price of cattle, the principal instruments of agriculture. Upon all these accounts, therefore, we may rest assured, that equal quantities of corn will in every state of society, in every state of improvement, more nearly represent, or be equivalent to, equal quantities of labour, than equal quantities of any other part of the rude produce of land. Corn, accordingly … is, in all the different stages of wealth and improvement, a more accurate measure of value than any other commodity or set of commodities… Corn, besides, or whatever else is the common and favourite vegetable food of the people, constitutes, in every civilised country, the principal part of the subsistence of the labourer… The money price of labour, therefore, depends much more upon the average money price of corn, the subsistence of the labour, than upon that of butcher’s meat, or of any other part of the rude produce of land. The real value of gold and silver, therefore, the real quantity of labour which they can purchase or command, depends much more upon the quantity of corn which they can purchase or command, than upon that of butcher’s meat, or any other part of the rude produce of land” ([O.U.P., Vol. I, pp. 213-14; Garnier,] l.c., pp. 26-28).
When comparing the value of gold and silver, Adam Smith once more sets forth his views on the sufficient price and notes ||633| expressly that it excludes rent:
“A commodity may be said to be dear or cheap not only according to the absolute greatness or smallness of its usual price, but according as that price is more or less above the lowest for which it is possible to bring it to market for any considerable time together. This lowest price is that which barely replaces, with a moderate profit, the stock which must be employed in bringing the commodity thither. It is the price which affords nothing to the landlord, of which rent makes not any component part, but which resolves itself altogether into wages and profit” ([O.U.P., Vol. I, p. 243; Garnier,] Vol. II, p. 81).
“The price of diamonds and other precious stones may, perhaps, be still nearer to the lowest price at which it is possible to bring them to market, than even the price of gold” ([O.U.P., Vol. I, p. 244; Garnier,] Vol. II, p. 83).
There are three sorts of raw products ([O.U.P., Vol. I, p. 248; Garnier,] Vol. II, p. 89). The first, whose increase is almost, or entirely, independent of human industry; the second, which can be increased in proportion to the demand; the third, upon whose increase human industry only exercises a “limited or uncertain” influence.
First sort: Fishes, rare birds, different sorts of game, almost all wild-fowl, in particular the birds of passage, etc. The demand for these increases greatly with wealth and luxury.
“The quantity of such commodities, therefore, remaining the same, or nearly the same, while the competition to purchase them is continually increasing, their price may rise to any degree of extravagance” ([O.U.P., Vol. I, pp. 248-49; Garnier,] Vol. II, p. 91).
Second sort: “It consists in those useful plants and animals, which, in uncultivated countries, nature produces with such profuse abundance, that they are of little or no value, and which, as cultivation advances, are therefore forced to give place to some more profitable produce. During a long period in the progress of improvement, the quantity of these is continually diminishing, while, at the same time, the demand for them is continually increasing. Their real value, therefore, the real quantity of labour which they will purchase or command, gradually rises, till at last it gets so high as to render them as profitable a produce as any thing else which human industry can raise upon the most fertile and best cultivated land. When it has got so high, it cannot well go higher. If it did, more land and more industry would soon be employed to increase their quantity” ([O.U.P., Vol. I, pp. 250-51; Garnier,] Vol. II, pp. 94-95). So, for instance, with cattle.
“Of all the different substances, however, which compose this second sort of rude produce, cattle is, perhaps, that of which the price, in the progress of improvement, rises first to this height” ([O.U.P., Vol. I, p. 252; Garnier,] Vol. II, pp. 96-97). “As cattle are among the first, so perhaps venison is among the last parts of this sort of rude produce which bring this price” (i.e., that price which makes it worth while cultivating the soil in order to feed them). “The price of venison in Great Britain, how extravagant soever it may appear, is not near sufficient to compensate the expense of a deer park, as is well known to all those who have had any experience in the feeding of deer” ([O.U.P., Vol. I, p. 256; Garnier,] Vol. II, p. 104).
“Thus, in every farm, the offals of the barn and stable will maintain a certain number of poultry. These, as they are fed with what would otherwise be lost, are a mere save-all; and as they cost the farmer scarce any thing, so he can afford to sell them for very little.” While this supply is sufficient, poultry [is] as cheap as butcher’s meat. With the growth of wealth, the demand grows, and consequently the price of poultry [rises] above that of butcher’s meat, until “it becomes profitable to cultivate land for the sake of feeding them” ([O.U.P., Vol. I, p. 257; Garnier,] Vol. II, pp. 105-06). Thus in France, etc.
The hog, like poultry, is “originally kept as a save-all.” It lives on refuse. In the end the price rises until land must be cultivated specifically for its food ([O.U.P., Vol. I, pp. 258-59; Garnier,] Vol. II, pp. 108-09).
Milk, dairy farming ([O.U.P., Vol. I, p. 259, et. seq.; Garnier,] Vol. II, p. 110, et. seq.). (Butter, cheese ibid.)
According to Adam Smith, the gradual rise in the price of these raw products only proves that, little by little, they are becoming products of human industry, while previously, they were practically only products of nature. Their transformation from products of nature into products of industry is itself the result of the advance of cultivation, which is increasingly limiting the scope of the spontaneous productions of nature. On the other hand, under less developed conditions of production, a large part of these products was sold below its value. The commodities are sold at their value (hence the rise in prices), as soon as they cease to be a by-product and become an independent product of some branch of agriculture.
“The lands of no country, it is evident, can ever be completely cultivated and improved, till once the price of every produce, which human industry is obliged to raise upon them, has got so high as to pay for the expense of complete improvement and cultivation. In order to do this, the price of each particular produce must be sufficient, first, to pay the rent of good corn land, as it is that which regulates the rent of the greater part of other cultivated land; and, secondly, to pay the labour and expense of the farmer as well as they are commonly paid upon good corn land; or, in other words, to replace with the ordinary profits the stock which he employs about it. This rise in the price of each particular produce must evidently ||634| be previous to the improvement and cultivation of the land which is destined for raising it” “… those different sorts of rude produce … have become worth, not only a greater quantity of silver, but a greater quantity of labour and subsistence than before. As it costs a greater quantity of labour and subsistence to bring them to market, so, when they are brought thither, they represent or are equivalent to a greater quantity” ([O.U.P., Vol. I, pp. 261-62; Garnier,] Vol. II, pp. 113-15).
Here it is once more evident, how Smith is only able to use value as determined by the quantity of labour it [value] can buy, in so far as he confuses it with value as determined by the quantity of labour required for the production of the commodities.
Third sort: This is the raw product,
“in which the efficacy of human industry, in augmenting the quantity, is either limited or uncertain” ([O.U.P., Vol. I, p. 262; Garnier,] Vol. II, p. 115).
Wool and raw hides are limited by the number of large and small cattle that are kept. But the first by-products already have a large market, while the animal itself does not yet have this. The market for butcher’s meat is almost always confined to the inland market. Wool and raw hides, even in the rude beginnings [of cultivation], are in most cases already sold in foreign markets. They are easily transported and furnish the raw material of many manufactured goods. They may thus find a market in countries which are more developed industrially when the industry in the country where they are produced does not yet require them.
“In countries ill cultivated, and therefore but thinly inhabited, the price of the wool and the hide bears always a much greater proportion to that of the whole beast, than in countries where, improvement and population being further advanced, there is more demand for butcher’s meat.” The same applies to “tallow”, In the progress of industry and population, the rise in price of cattle affects the carcase more than the wool or hide. For with the increase in industry and population of a country, the market for meat expands, whereas that for the by-products already previously extended beyond the boundaries of the country. But with the development of industry in the country itself, the price for wool, etc., will nevertheless also rise somewhat. ([O.U.P., Vol. I, pp. 263-64; Garnier,] Vol. II, pp. 115-19).
Fish. ([Garnier,] Vol. II, pp. 129-30.) If the demand for fish rises, then its supply requires more labour. “The fish must generally be sought for at a greater distance, larger vessels must be employed, and more expensive machinery of every kind made use of.” “.., it will generally be impossible to supply the … extended market, without employing a quantity of labour greater than in proportion to what had been requisite for supplying the narrow and confined one.” “The real price of this commodity, therefore, naturally rises in the progress of improvement” ([O.U.P., Vol. I, p. 270; Garnier,] Vol. II, p. 130).
Here Adam Smith therefore determines the real price by the quantity of labour necessary for the production of the commodity.
According to Adam Smith, the real price of vegetable food (corn, etc.) must fall in the course of civilisation.
“The extension of improvement and cultivation, as it necessarily raises more or less, in proportion to the price of corn, that of every sort of animal food, so it as necessarily lowers that of, I believe, every sort of vegetable food. It raises the price of animal food; because a great part of the land which produces it, being rendered fit for producing corn, must afford to the landlord and farmer the rent and profit of corn land. It lowers the price of vegetable food; because, by increasing the fertility of the land, it increases its abundance. The improvements of agriculture, too, introduce many sorts of vegetable food, which requiring less land, and not more labour than corn, come much cheaper to market. Such are potatoes and maize… Many sorts of vegetable food, besides, which in the rude state of agriculture are confined to the kitchen garden, and raised only by the spade, come, in its improved state, to be introduced into common fields, and to be raised by the plough; such as turnips, carrots, cabbages, etc.” ([O.U.P., Vol. I, pp. 278-79; Garnier,] Vol. II, pp. 145-46).
Adam Smith sees that the price of manufactured commodities in general has fallen wherever
“the real price of the rude materials either does not rise at all, or does not rise very much” ([O.U.P., Vol. I, p. 280; Garnier,] p. 149).
On the other hand, he asserts that the real price of labour, i.e., wages, has risen with the progress in production. Hence also, according to him, the prices of commodities do not necessarily rise because of a rise in wages, or the price of labour, although wages [form] “a component part of the natural price” and even of the “sufficient price” or the “lowest price at which commodities can be brought to market”. So how does Adam Smith explain this? By a fall in profits? No. (Although he assumes that the general rate of profit falls in the course of civilisation.) Or of rent? No again. He says:
“In consequence of better machinery, ||635| of greater dexterity, and of a more proper division and distribution of work, all of which are the natural effects of improvement, a much smaller quantity of labour becomes requisite for executing any particular piece of work; and though, in consequence of the flourishing circumstances of society, the real price of labour should rise very considerably, yet the great diminution of the quantity,” requisite for each particular article[c], “will generally much more than compensate the greatest rise which can happen in the price.” ([O.U.P., Vol. I, p. 280; Garnier,] Vol. II, p. 148.)
Thus the value of the commodities falls, because a smaller quantity of labour is required to produce them; the value moreover falls although the real price of labour rises. If here the real price of labour means the value [of labour], then the profit must fall, if the price of the commodity falls as a result of the fall in its value. If, on the other hand, it means the quantity of the means of subsistence received by the worker, then the Smithian thesis is correct even where profit is rising.
The extent to which Adam Smith uses the correct definition of value, wherever he actually analyses [facts] can be seen at the end of the chapter where he examines why woollen cloths were dearer in the 16th century, etc.
“It cost a greater quantity of labour to bring the goods to market. When they were brought thither, therefore, they must have purchased, or exchanged for the price of, a greater quantity” ([O.U.P., Vol. I, p. 284; Garnier,] Vol. II, p. 156).
The mistake here consists only in the use of the word price.
Conclusion of the Chapter. Adam Smith concludes his chapter on rent with the observation that
“every improvement in the circumstances of the society tends, either directly or indirectly, to raise the real rent of land.”
“The extension of improvement and cultivation tends to raise it directly. The landlord’s share of the produce necessarily increases with the increase of the produce.” The “rise in the real price of those parts of the rude produce of land, which is first the effect of the extended improvement and cultivation, and afterwards the cause of their being still further extended” for instance the rise in the price of cattle, raises, firstly, the real value of the landlord’s share, but also the proportion of that share, because: “That produce, after the rise in its real price, requires no more labour to collect it than before. A smaller proportion of it will, therefore, be sufficient to replace, with the ordinary profit, the stock which employs that labour. A greater proportion of it must consequently belong to the landlord” ([O.U.P., Vol. I, pp. 285-86; Garnier,] Vol. II, pp. 158-59).
In exactly the same way Ricardo explains the increase in the proportion of rent, as the price of corn rises on the more fertile land, only this rise in price is not the result of improvement, and therefore leads Ricardo to the opposite conclusion from Adam Smith.
Adam Smith says that the landlord moreover benefits from every development of the productive power of labour in manufacture.
“Whatever reduces the real price of the latter” [i.e., manufactured goods] “raises that of the former” [i.e., of agricultural produce]. Furthermore, with every increase of the real wealth of the society, the population increases; with the population increases the demand for agricultural produce and consequently the capital employed in agriculture; “and the rent increases with the produce”. On the other hand all circumstances which hinder the growth of general wealth, will have the opposite effect and lead to a fall in rent and hence a decrease in the real wealth of the landowners ([O.U.P., Vol. I, pp. 286-87; Garnier,] Vol. II, pp. 159-60).
From this Adam Smith concludes that the interests of the landlord are always in harmony with the “general interest of society”. This also applies to the labourers ([O.U.P., Vol. I, pp. 287-88; Garnier,] Vol. II, pp. 161-62). But Adam Smith is honest enough to make the following distinction:
“The order of proprietors may perhaps gain more by the prosperity of the society than that of labourers; but there is no order that suffers so cruelly from its” [society’s] “decline” [as do the labourers] ([O.U.P., Vol. p. 288; Garnier,] Vol. II, p. 162).
The interests of the capitalists (manufacturers and merchants), on the other hand, are not identical with the
“general interest of the society… ” “The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public.” [The dealers are]… an order of men, whose interest ||636| is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it” ([O.U.P., Vol. I, pp. 289-90; Garnier,] Vol. II, pp. 163-65). |636|| .
[a] The term “prix suffisant” (sufficient price) is used in the French translation of the Wealth of Nations from which Marx quotes.—Ed.
[b] i.e., out of the product of the land situated at a greater distance from the market.—Ed.
[c] “requisite for each particular article” inserted by Garnier in the French version.—Ed.