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Special pages :
Ground Rent (Notes)
| Author(s) | Karl Marx |
|---|---|
| Written | 1861 |
Printed according to the manuscript
First published in: Marx-Engels Gesamtausgäbe, Abt. II, Bd. 2, Berlin, 1980
Published in English for the first time in Marx-Engels Collected Works, Volume 19
1) We have already seen that
in order to understand ground rent correctly two things must be distinguished from [...][1]
1) Firstly, the portion paid to the landowner for improvements made to the land, i.e. for the capital invested in and merged with it. This is the [...] interest. Whether I have invested 1,000 thalers in a cotton-machine or in [...] canals on the land is immaterial to the source of the income [...] I derive from these 1,000 thalers. For that is and remains the interest on capital productively used.
2) Secondly, the form which the ground rent [assumes] as a money rent. Supposing a plot of land brings in 20 thalers rent annually. Suppose further that the land[owner sells] this plot of land, i.e. that he sells the annual ground rent of 20 thalers. How is the purchase price of the ground rent or the plot of land [fixed?...] The land only has value in so far as these 20 thalers [...] are taken into account.
The question thus is:
How much capital must I pay the landowner [in order] to purchase an annual rent of 20 thalers? In other words the question is: how large a capital is required to yield 20 thalers annually in our [...] social conditions? To answer this question I have to know the rate of interest in general and how much interest on average a capital of [...]
If the rate of interest is 5% this means that the 100 thalers I invest bring in 5 thalers interest. The question is:
If 100 thalers yield 5 thalers annually how large a capital must I have to produce 20 thalers annually? If 100 thalers bring in 5 thalers annually, then 400 thalers yield 20 thalers interest p.a.
Thus, if the rate of interest stands at 5%, the landowner will sell a plot of land that brings in 20 thalers p.a. for 400 thalers. In 20 years the purchaser would have replaced his capital. 20x20 = 400.
Thus, the farmer pays 20 thalers rent p.a., but the [purchaser] who has bought the land for 400 thalers receives 20 thalers rent p.a. In his eyes the 20 thalers which the farmer pays him are nothing but interest paid to him on the 400 thalers which he has laid out as the purchase price of the land. In many regions the capital invested in land may yield a lower interest than the capital invested in other branches of industry. It is therefore possible that capital invested in land may only bring in 2 1/2%> while if employed in trade or industry, it [...] In that event, a plot of land yielding [20 thalers] rent p.a. would be [sold] for 800 thalers instead of 400. [The purchaser] will then need 40 years to recover his capital. If a farmer pays out [...] rent of 20 thalers p.a. for a morgen[2] of land, it may very easily be that the landlord who receives these 20 thalers only [...] 2 1/2 thalers.
[A high or] low level of ground rent bears no [relation to] the high or low interest which capital [...] on the purchase of the ground rent, i.e. of the land [...]
[...] furthermore, that the land has a price, that it can be sold because there is such a thing as ground rent and not the other way round, i.e. that there is such a thing as ground rent because a price is paid for the land.
[...] in general that the price of the land is [nothing] but capitalised ground rent. What is meant by capitalised ground rent} It means that I regard ground rent as the interest on the capital invested in the purchase of the land. The rent on a morgen of land may be 20 thalers; but for the man who buys the land the 20 thalers can never be more than the 5 or 3 or 2 1/2%, i.e. the going rate of interest on capital. If interest rates are 5%, I can recover my capital in 20 years. Thus, in order to capitalise the ground rent, i.e. to exchange it for capital, it must be multiplied by the number of years it takes, at the prevailing rate of interest, to replace the capital, to restore it to the lender.
c) The sale of land presupposes ground rent and hence does not explain it.
3) Thirdly.
Ground rent is the annual sum paid to the landowner by the farmer or the manufacturer of the products of the earth. If a manufacturer, an industrial capitalist, is to invest his money in farming, it must bring him on average the same profits as any other industry. Otherwise no capitalist would cultivate the land. If the farmer, i.e. the manufacturer of farm produce, lays out a sum of 100 thalers annually to cultivate the land, to buy seed and manure, to make good the damage caused by the wear and tear to the instruments of labour or to replace them, to pay wages, etc., he will need to obtain 110 thalers from the sale of his produce, as interest and profit. Whatever the sale of his produce yields over and above 110 thalers goes to the landowner and constitutes the ground rent. Thus, if he obtains 120 thalers, the ground rent is equal to 10 thalers. Thus, ground rent is equal to the surplus of the market price of the produce of the land over its price of production. The price of production here includes the farmer’s interest and profit.
Where does this surplus of the market price of the produce of the land over its price of production come from? What is it that enables the manufacturer of farm produce, apart from receiving interest and profit, paying wages and meeting the other costs of production, also to pay ground rent to the man who leases the land to him? How does it come about that the selling price of farm produce is sufficiently high to yield a rent in addition to the wages, interest and profit—something which is not the case in other branches of industry?
In the first place, it cannot be argued that this arises from the special productivity of agriculture or of the soil itself. Nor can it be said to stem from the fact that the land is limited in extent. To assert that agriculture is more productive than any other industry might mean nothing beyond the fact that in no other industry is it possible to extract more produce at the same cost. But, since the price of a product is governed basically by the cost of its production, this would imply that the price of farm produce should be lower than that of all the other products—a fact which cannot possibly help to explain the surplus of its market price over the price of production.
We come now to the question of the limited area of land.[3]