Spring 1999

Capital, Volume 3

Parts 6 and 7



The question of land values and ground-rent is such a prominent question for the economy, for money-investors, and hence for traditional economists that it might seem odd that Marx leaves it to this final section of Part 3, almost an appendix to the work.  It figures here in the structure of the work, though, whereas it might be the point of departure for other economists, because in Marx's view land values and ground-rent in capitalist society are derivative of the circuit of industrial production (and thus the land-owner becomes a completely parasitical figure).  Now, Marx makes several assumptions here that he recognizes are not yet the case, but he claims are tendentially the cases.  The most important assumptions, it seems to me, are

1 - The capitalist mode of production "dominates all spheres of production and bourgeois society" -- particularly agriculture, but also the others -- "so that its preconditions, such as the free competition of capitals, their transferability from one sphere of production to another, an equal level of average profit, etc. are also present in their full development" (751).  [I think we have to put emphasis on the word "dominates" here.  It does not mean that all spheres actually are capitalist, but that they come under the influence or domination of capital?  It would be an interesting project to study what this “dominates” means.  In this specific case, I think it means that profits in agricultural production are governed by the general rate of profit that is determined primarily in industrial production.  It would be interesting too to extend this to a discussion of globalization in which the capitalist mode of production predominates throughout the world, even though there still exist many forms of noncapitalist production.]

2 - Through the processes of primitive accumulation, land becomes subject to the modern, legal conception of private property and that "landed property thus receives its purely economic form by the stripping away of all its former political and social embellishments and admixtures, in short all those traditional accoutrements that are denounced as uselessly and absurdly superfluous by the industrial capitalists themselves" (755).  In other words, in the process of primitive accumulation and the construction of modern private property, land becomes a commodity that can be freely exchanged and is stripped of the connections it had to family and community title.  [Here we can come back to another example of “dominates”: “The wealth of societies in which the capitalist mode of production prevails appears as an ‘immense collection of commodities.’”]

3 - There is a separation (at least a conceptual one) between the capitalist farmer and the land owner.  The capitalist farmer employs the workers and organizes production, renting the land from the land owner, who does nothing but collect rent.


Value of Land

These are (at least some of) the prerequisites for understanding the value of land and rent in capitalist society.  Let's start with the value of land, which is really secondary, and then go on to ground- rent, which turns out to be primary.  We should say first of all that land itself has no value: "the earth is not the product of labour, and thus does not have a value" (760).  This is a necessary consequence of the labor theory of value we got in the beginning of volume 1.  Now, Marx doesn’t mean by this that the earth does not produce and he even says that it is not an active agent of production.  Nonetheless, he claims, the earth itself does not have value and does not create value.  Read p. 955: “The earth, for example, is active . . . particular use-value of this material.”

            To say that land itself has no value, however, does not mean that it cannot be sold at a price: "we must keep in mind ... that the prices of things that have no value in and of themselves [such as land] ... may be determined by quite fortuitous combinations of circumstances.  For a thing to be sold, it simply has to be capable of being monopolized and alienated" (772).  In other words, modern property laws establish monopolies on land and allow these monopolies to be exchanged (alienated), so that land, although it has no value, can be sold at a price.  When we are talking about the value of land, therefore, we are not talking about the value of the earth as such but the value of monopolized portions of the earth, that is what landed-property is.

            Now, it's not quite right to say that all land has no value, because land can be worked and developed.  Value can be added to the land.  That is why Marx finds useful the distinction between terre-matière and terre-capital (757).  Terre-matière is what has no value in itself, but terre-capital does have value.  This improved land is in effect capital incorporated into the earth.  Any parcel of land is a hybrid of terre-matière and terre-capital.

            The question remains, however, how the price of land is determined since we have said that the price does not correspond to whatever value it might have.  With respect to other commodities, we said that the price of other commodities oscillated around its value and in general tended toward its value.  In the case of valueless commodities, like land, this cannot be the case.  The price or value of land is an irrational figure that derives from the rent of the property and the average interest rate, just as government securities have a fictive value that derives from the fixed and periodic revenue they pay.  Read p. 760 bottom: "If the average interest ... at 5 per cent" (760).  In other words, the price of the land is the annual rent of the land divided by the average annual interest.  200/.05=4,000.  "The price of land is nothing but the capitalized and thus anticipated rent" (944).


Differential Rent

Marx's theory of differential rent focuses on the difference that a certain piece of land has over other piece of land for the purposes of production.  The difference of one piece of land over another determines a surplus profit (a profit above the general rate of profit) for the one who produces on that land.  Generally, Marx presents this difference of land as resulting from a monopolized natural force associated with that land, such as a waterfall that will provide power for a mill: "The surplus profit that arises from this use of the waterfall thus arises not from the capital but rather from the use by capital of a monopolizable and monopolized natural force.  Under these conditions, the surplus profit is transformed into ground-rent" (785 top).  The differential rent, then, arises from the production advantage associated with the particular monopoly of that land, or in specific quantitative terms "it always arises from the difference between the individual production price of the particular capital which has the monopolized natural force available to it and the general production price for capital invested in the sphere of production in question" (785 bottom).  In other words, if a flour mill that can be powered by a waterfall can produce flour at £100 less per month than a flour mill that buys coal for a steam engine, then the plot of land with the waterfall will rent for £100 more than the plot of land without it.  That £100 per month is the difference that defines differential rent.  We should note that the waterfall does not have any value (since it is not produced by labor), but is rather an "irrational expression": "the waterfall does not itself have value but ... its price is simply the reflection of the surplus profit extracted" (787) -- surplus profit being that profit above what the production processes without that monopoly produce.

            The operative concept here is the monopoly of natural forces.  The steam power of a steam engine is also a natural force, just as natural as the waterfall.  The difference is that steam power is not monopolizable.  Any capitalist can build one and buy coal.  The waterfall in contrast is the monopoly of the one who owns the land.  A very important corollary of this monopoly is its fixed location.  Read p. 784 bottom: “the natural force that can be monopolized in this way is always chained to the earth.”  David Harvey makes a great deal of this fact in Limits to Capital.  Harvey argues that Marx pays too much attention to time and not enough to space.  Marx often assumes a smooth space over which capital moves without barriers to equalize profit and so forth.  This fact of the differences of geography, of being chained to the earth runs counter to that, poses important barriers.

            The differential theory of rent tries to explain the differences of rents above the minimum rent.  Marx assumes in much of the explanation that the worst land pays no ground-rent, but that need not be true.  He calls the rent for the land with no special advantage, the worst land, absolute rent.


Trinity Formula

Part 7 is a good conclusion to the 3 volumes -- not so much as a summary of the whole, but rather as a demonstration of the difference between Marx’s approach and that of the classical economists.  As such, it might also be seen as a good transition to the so-called volume 4, Theories of Surplus Value, which does consist primarily of critiques of the previous economic theories.  Through the entire book Marx has been trying to present the inner connections of things and now he contrasts that to the mystified way the traditional economics has presented them.

            So the trinity formula is the traditional economic notion of the 3 principle sources of income or revenue in society: for an income one must have either capital, land, or labor.

·Read: "Capital-profit (or better still ... characters and mere things" (968-69). 

This is the false appearance of bourgeois ideology.  This ideology tells us there are three fountains of value: the value that is produced by labor is returned in the wage, the value produced by capital returned in profit, and the value produced by the earth is return in ground-rent.

            This trinity is a mystification first because it imagines that these things, capital and earth, produce value when only labor produces value.  At several points in the book – in particular in the section on the real subsumption – Marx has critiqued the appearance that capital is the source of value not labor as a mystification.  Here he comes back to that point again: "Capital thereby already becomes a very mystical being, since all the productive forces of social labour appear attributable to it, and not to labour as such, as a power springing froth from its own womb" (966).  The source of value is misrecognized.  Only labor produces value and it is the real source of all three incomes.  Read p. 965: “Landed property, capital and wage-labour are therefore . . . as its ultimate source.”

            This trinity is a mystification second because it makes the capitalist relations of production appear natural and eternal.  Read p. 964 "If labor and wage-labour thus coincide . . . elements of the production process" (964).  Means of production separated from capital is relatively easy to understand, as is earth separated from landed property.  Pause a minute to consider, though, what labor is conceptually separated from waged-labor.  Obviously wage-labor is not a natural and eternal social form, but what is the general category labor that is?  The general point is that the capitalist mode of production and its component parts are not natural and eternal. 

            These are two projects of demystification that Marx has pursued from the beginning of volume 1: recognizing labor as the source of all value; and recognizing the capitalist mode of production as a historical and transitory, not natural and eternal social and economic form.

            In all of this "the threads of the inner connection get more and more lost" (967) and they are eclipsed by appearances: that capital not labor produces value, for instance.  You might remember the phrase “inner connection” from preface of Volume 1: "Of course the method of presentation must differ in form from that of inquiry.  The latter has to appropriate the material in detail, to analyse its different forms of development and to track down their inner connection" (102).  (I wonder if we could say that this inner connection this essential layer of the process of the whole sphere of value, which we have seen throughout is foundation but also invisible and ungraspable.  Everything is more or less determined by value but we can never get a hold of it.  It's not price, it's not profit, it's not the wage -- even though in one way or another they are all determined by the value produced.)



            The final chapter on classes is very disappointing, of course, because the manuscript drops off just as it gets started, but it does give a few elements to think about.  The question is “What makes a class?” and Marx begins as a mystified point of departure with the trinity formula of three classes.  So the initial question is “What makes wage-laborers, capitalists and landowners the formative elements of the three great social classes?”  The trinity formula suggests the three classes are distinguished by their revenues or the sources of their incomes, but Marx has already dealt with that mystification. 

            Marx suggests a second answer to what makes a class in the first paragraph.  Read p. 1025: “The owners of mere labor-power . . . capitalist mode of production.”  So perhaps we could say that a class is defined by what it owns.  This is perhaps an improvement – and this is as far as we get here – but I think Marx would have to invert this relationship to get a satisfactory answer to the question “What is a class?”  In other words, rather than the owners of capital, land, and labor-power, the classes are bearers of capital, land, and labor-power.  The capitalist class is the personification or expression of the economic category capital, the landowning class the personification of monopolized earth, the working class of labor-power.  As Marx says, “this class articulation does not emerge in pure form” (1025) and the real boundaries get blurred.  But however messy the social articulation looks these would be the boundaries that underlie it.  Now, the obvious and crucial question is what does it mean to bear, personify, or express an economic category?  An interesting question.

            Let me give an example of this in terms of Gramsci’s critique of traditional intellectuals.  (This is a famous brief section of the Prison Notebooks that poses a distinction between traditional and organic intellectuals.)  Gramsci claims that most intellectuals view themselves as belonging to a separate class, a class of intellectuals, such that, for example, a contemporary philosopher might think of him- or herself closer to Aristotle that to Bill Gates or the sweatshop worker.  After all, the philosopher spends all day in dialogue with Aristotle and other intellectuals, and has nothing to do with Bill Gates or the worker.  What would it mean, however, for intellectuals to be a class?  What economic category do they bear or personify?  Gramsci says that intellectuals in fact are not a class.  Traditional intellectuals might think they are, but in fact traditional intellectuals (often without being conscious of this fact) act as ideological support for the hegemonic social class.  Marx often describes the function of political economists this way.  Read p. 969 bottom: “This formula . . . corresponds to the   this into a dogma.”  But Gramsci extends it to all intellectuals.  So, intellectuals are not a separate class, but they can function as part of classes.  Organic intellectuals are intellectuals who function organically (like various organs of a body) with a specific class.  Capital has its organic intellectuals; labor has its organic intellectuals too.  Now, we should be able to see that these intellectuals that Gramsci calls organic are in fact explicitly bearers, personifications, or expressions of economic categories. 

            An interesting consequence of this notion of class is that it allows for some people to be confused or blurred personifications (perhaps of more than one class contradictorily).  Also we can imagine that some people are bearers of no economic category and thus belong to no class.


The Capitalist Mode of Production

            As a kind of summary, let’s look at a passage where Marx gives the two characteristic traits that mark the capitalist mode of production.  Read p. 1019 bottom: “Firstly.  It produces its products . . . appears as wage-labor.”  (Here again note dominant and determining.)  So the fact of commodity production is not a characteristic trait, but the fact that labor-power is a commodity is.  The dominant character of commodity as product also implies reification and fetishism.  Read 1020 bottom: “What is also implied . . . capitalist mode of production.”

            The second distinctive trait is surplus value.  Read p. 1020 bottom: “The second thing that . . . decisive motive of production.”  Now, we should be careful here that the production of surplus value itself is not characteristic of capital, but rather the production of surplus value as the direct object and decisive motive of production.  Insurance fund, read p.986 bottom: “This is also the only part . . . capitalist mode of production.”  Read p. 958 top: “Surplus labor in some form must always remain . . . one section of society.”  “It is one of the civilizing aspects of capital . . . slavery, serfdom, etc.”



This leads Marx to take up the Hegelian distinction between the realm of necessity and the realm of freedom.  The alternative social use of surplus value in the postcapitalist mode of production will be a step toward the realm of freedom.  Read 958 middle: “Thus on the one hand . . . devoted to material labor.” 

Freedom is nonwork.  Read p. 958-959: “The realm of freedom . . . material production proper.”

Read p. 959 middle: “The true realm of freedom . . . basic prerequisite.”  What is this nonwork in the realm of freedom?  It is not inactivity.  It is the development of human powers as an end in itself.