Parasitical landlordism and the Marxist theory of rent

Along with bankers and capitalists, the landlord class is especially despised. They are regarded very much as greedy speculators, rack-renting owners, who force up rents at the earliest opportunity and cream off a section of the surplus-value created by the working class. It is clear why disdain for them is rising. In Britain alone, rents and housing costs account for up to a half – sometimes more – of the disposable income of working people, which has become an intolerable burden, especially for those who live in the capital.

This article was first published in Issue 20 of In Defence of Marxism theoretical magazine in Autumn 2017, to subscribe, click here.

In addition, the four million private leasehold homes in England are struggling with the spiralling cost of ground rents. “Leasehold houses are an absolute racket,” explains Sebastian O'Kelly of Leasehold Knowledge Partnership, “a means by which developers have managed to turn ordinary people’s homes into long-term investment vehicles for shadowy investors, often based offshore.” As homelessness rockets, the number of vacant properties is at a record level, held mostly for investment purposes. Even sections of capitalists squeal about the excessive cost of leases they are forced to pay for commercial property.

Feudal lords

Landlordism and landed property go back a long way, before the rise of capitalism. In fact, such property has its origins in feudalism, where land was the basis of all economic and political power. The measure of a person’s wealth was determined by one thing and one thing only: how much land they possessed. Land was the source of the surplus that the landed ruling class extracted through the exploitation of serf labour, which was inseparable from the land.

At that time, rent in kind and surplus-value were identical, and was the form in which unpaid surplus-labour was expressed. These feudal origins can even be discerned today, where, according to official sources, “The Crown is the ultimate owner of all land in England and Wales (including the Isles of Scilly): all other owners hold an estate in land.” This land is “held” by the Crown as freehold or leasehold, which according to the Land Registration Act of 2002, “derive from medieval forms of tenure”.

queen Image UK Parliament FlickrLandlordism and landed property go back a long way, before the rise of capitalism. In fact, such property has its origins in feudalism, where land was the basis of all economic and political power / Image: UK Parliament, Flickr

Britain’s big landowners today originate from the old aristocratic families of the past; among them are the 10th Duke of Buccleuch, the 12th Duke of Queensbury, the Duke of Northumberland, the Duke of Westminster, and the Prince of Wales. With four major estates, the Duke of Buccleuch is Europe's biggest private landowner and lives in the Drumlanrig family castle in Scotland. The Duke of Westminster owns a land portfolio worth £9.52 billion, and its Grosvenor Estate, dating back to 1677, in London alone, includes the well-to-do Belgravia and Mayfair districts. It is one of six “great estates” that own large swathes of the capital. Other property tycoons include David and Simon Reuben (worth £14 billion), who “made” nearly a billion pounds last year [Note: in 2016, the year before this article was written], Sir David and Sir Frederick Barclay (worth £7.2 billion), Christo Wiese (worth £4.62 billion), Nathan Kirsh (worth £3.97 billion), Baroness Howard de Walden and family (worth £3.73 billion), Ian and Richard Livingstone (worth £3.7 billion), Sir Henry Keswick and family (worth £3.26 billion), Edward and Sol Zakay (worth £3.25 billion), Mark Pears and family (worth £3.14 billion), Samuel Tak Lee and family (worth £2.73 billion). The billionaire list goes on.

These landowning parasites also rake in massive subsidies. In fact, Greenpeace confirmed that sixteen members of the British aristocracy are included in the top 100 list of those presently receiving EU subsidies, with £7.1 million being shared out between them alone last year. [Note, this article was written before the finalisation of the Brexit deal.]

This privileged landowning class evolved from a fusion of the old aristocracy and the newly-enriched bourgeoisie. Landed property in Britain has its roots in the Norman Conquest, but was later enhanced by the enclosures and destruction of the commons, and with it the destruction of the peasantry. In other words, today's monopoly in land ownership was originally a product of conquest, violence and plunder, through which the common people were robbed of their ties with the soil. The small occupiers of land were reduced to day-labourers and hirelings, which was an essential requirement for the development of capitalism.

According to a popular 17th Century rhyme:

“The law locks up the man or woman

Who steals a goose from off the common;

But leaves the greater villain loose

Who steals the common from the goose.”

Landed property played a very important part in the emergence of capitalism. Although feudal in origin, it was transformed by the actions of capital, where rent in kind was transformed into money rent, the genesis of capitalist ground rent. “The transformation of rent in kind into money rent”, writes Marx, “that takes place at first sporadically, then on a more or less national scale, presupposes an already more significant development of trade, urban industry, commodity production in general and therefore monetary circulation.” (Capital. Vol.3, p.933)

feudal serfs Image public domainLanded property played a very important part in the emergence of capitalism. Although feudal in origin, it was transformed by the actions of capital, where rent in kind was transformed into money rent, the genesis of capitalist ground rent / Image: public domain

This is part of the overall process Marx describes as “primitive accumulation”, which destroyed the old relations, creating a propertyless proletariat on the one hand and a concentration of large landed estates on the other. These estates were leased out to tenant farmers and provided the basis for capitalist agriculture and the agrarian revolution of the 18th century, which in turn provided the food for the growing urban population.

With the development of industry and the growth of urban society, capitalist agriculture had to produce a greater output with a diminishing workforce of agricultural labourers. It succeeded in doing this through the introduction of new techniques to increase the productivity of labour, producing more with fewer and fewer ‘hands’. Without this growing agricultural surplus, there could be no division of labour, growth of industry or social wealth. Without it there could have been no Industrial Revolution.

As Marx explains, “nowhere in the world has capitalist production, since Henry VII, dealt so ruthlessly with the traditional relations of agriculture, adapting and subordinating the conditions to its own requirements.” (Theories of Surplus-Value, vol.2, p.237)

But this came with a price. As Marx noted, “If money... ‘comes into the world with a congenital bloodstain on one cheek,’ capital comes dripping from head to foot, from every pore, with blood and dirt.”

Land = Money

Today, land ownership is kept as a closely guarded secret. The UK Land Registries were created and designed to conceal ownership, not reveal it. “What we do know, however, is that the aristocracy and the Royal Family still play an important role in the ownership of our country. More than a third of land is still in the hands of aristocrats and traditional landed gentry”, explained a recent Country Life magazine. It reveals that some 36,000 people, 0.6 percent of the population, own more than half of rural land in England and Wales. In Scotland land ownership is even more extreme. In fact, Scotland has the most unequal land ownership in Western Europe, with just 432 powerful landlords owning 50 percent of the land, reserved mainly for such worldly pursuits as grouse shooting and stag hunting.

Landlordism is big business, as the figures above show. The landlord class is a part of the ruling class, who live off the fat of the land at the expense of the labour of others. Capitalist landed property is a source of massive wealth, not least through its monopoly, inflated values and means of speculation. For example, the Emperor Group exchanged contracts to acquire a property in Wardour Street, London, for £260m, reflecting a capital value of £2,896 per sq. ft. Such examples of astronomical property prices could be repeated many times over.

Historically, prior to the rise of capitalism, revenue from landed property was regarded as respectable income, while interest-bearing capital was associated with usury and very much frowned upon, especially by the Church. However, with the emergence of the capitalist mode of production, and the struggle between the aristocracy and the rising bourgeoisie, rent was regarded as unearned income accruing to a parasitic and idle class of landlords.

David Ricardo Image public domainsThe battle cry of the rising bourgeoisie against the old aristocracy was taken up by David Ricardo and Adam Smith, the leaders of the classical economists, in their theory of rent / Image: public domains

The battle cry of the rising bourgeoisie against the old aristocracy was taken up by David Ricardo and Adam Smith, the leaders of the classical economists, in their theory of rent. They demanded the abolition of the Corn Laws (introduced in 1815), which would undermine the landlords, enhance free trade and benefit the industrialists. Repeal of the Corn Laws would mean cheaper food, enabling them to reduce wages and so compete more effectively on the world market. “The interest of the landlord is always opposed to that of the consumer and manufacturer”, stated their champion Ricardo.

The bourgeois economists preached the principles of laissez faire, where everyone should be free to follow their own self-interest. Nevertheless, the landlords fought a rearguard battle to protect their sources of income. At this time, they dominated the House of Commons as well as the Lords. In this bitter struggle between these two sections of the ruling class, the landlord-dominated Parliament, out of revenge, hit back by linking up with the demands of the working classes for shorter hours and better conditions to pass the Factory Acts that placed restrictions on the hours of work. This hit the industrialists where it hurt most - in their pockets. They waged a systematic guerrilla war against these Acts, which they were eventually forced to grudgingly accept. In the end, however, the more wealthy industrial bourgeoisie won out. The Corn Laws were repealed by a Tory government under Peel with Whig (Liberal) support. This split the Tory Party, which was recreated under Benjamin Disraeli and transformed from a party of landowners into a party primarily of finance capital.

With the merging of landed, commercial and industrial interests, through inter-marriage and business, capitalist relations began to dominate agriculture. As a result, rent was as often collected by the rich capitalist or financier as it was by a member of the aristocracy or its agents. Now rent as an unearned income became “respectable”. Both landlord and capitalist, whose interests now merged, faced a common enemy in the increasing opposition from the working class, who were squeezed at both ends, from low wages and high rents.

What is rent?

Marx, in his analysis of the capitalist mode of production, was forced to take up the errors of the classical economists, including their confused exposition of rent and their failure to recognise the form of absolute rent. Marx spent a great deal of time analysing the subject, mainly because it was so central to the bourgeois economists of the time. Thus he spent 200 pages on the subject in the third volume of Capital and a sizable section of volume two of the Theories of Surplus-Value. In these works, he provides hundreds of examples to illustrate his numerous points and to challenge his opponents. His contribution reveals a meticulous approach to the subject.

das kapital Image public domainMarx regarded rent as secondary to the main issue, namely of how the surplus-value produced by the working class was creamed off and shared out amongst different wings of the ruling class / Image: public domain

Marx nevertheless regarded it as secondary to the main issue, namely of how the surplus-value produced by the working class was creamed off and shared out amongst different wings of the ruling class, rather than the key issue of how surplus-value originates in the first place. “The circumstances under which the capitalist has in turn to share a part of the surplus-labour or surplus-value which he has captured, with a third, non-working person, are only of secondary importance,” explained Marx. “It is also a fact of production, that, after the part of the value which is equal to constant capital is deducted, the entire surplus-value passes straight from the hands of the worker to those of the capitalist, with the exception of that part of the value of the product which is paid out as wages. The capitalist confronts the worker as the direct owner of the entire surplus-value, in whatever manner he may later be sharing it with the money-lending capitalist, landowner, etc.” (Theories of Surplus-Value, vol.2, p.152, emphasis in original.)

Marx also makes the point elsewhere in Capital: “The analysis of landed property in its various historical forms lies outside the scope of the present work. We are concerned with it only in so far as a portion of the surplus-value that capital produces falls to the share of the landowner.” (Capital, vol.3, p.751) He also adds, “Without this, our analysis of capital would not be complete.” (ibid, p.752)

So it was to complete his analysis of capitalist production that Marx embarked on his theory of rent. To begin with, Marx had to explain the concept of ground rent and where it came from. While in industry, all the factors of production – machines, raw materials, labour power – can be produced and reproduced, in agriculture, the basic material, the land, is limited in quantity. It is therefore a natural monopoly. Held by a class of landowners, under capitalism this class receives a rent from those who wish to lease the land, for a definite amount and definite period. Access is forbidden to the land until a rent is paid and the landlord exercises his right of ownership. Land is therefore also a property monopoly. The tribute for its use is called ground rent.

A “sybarite excrescence”, a parasite on capitalist production

It is clear that such revenue is unearned income as the landlord does no work to obtain it. He receives rent simply because he is the monopoly owner of the land and grants his permission for someone else to use it. Marx concludes that the payment the landlord receives cannot come from anywhere else but out of the product of unpaid labour, namely surplus-value. Of course, where else would these parasites get their share if not off the backs of the working class?

While they do not necessarily get their hands dirty in directly exploiting the workers, as the industrialists do, they contribute nothing to society and live at our expense. This unearned income is not direct, but indirect, through a third party. The landowner leases his land to a capitalist who works the land by employing wage labour. The wage workers employed produce surplus-value through their unpaid labour, which in turn finds its way into the pockets of the capitalist investor. But the capitalist is forced to share this surplus-value with the landowner in the form of ground rent. It is clear that rent can only come from the surplus-value created by the working class. As Marx explains:

“The capitalist who produces surplus-value – i.e., who extracts unpaid labour directly from the labourers, and fixes it in commodities, is, indeed, the first appropriator, but by no means the ultimate owner, of this surplus-value. He has to share it with capitalists, with landowners, etc., who fulfil other functions in the complex of social production. Surplus-value, therefore, splits up into various parts. Its fragments fall to various categories of persons, and take various forms, independent the one of the other, such as profit, interest, merchant's profit, rent, etc.” (Capital, vol.1, p.576)

Again:

“The capitalist is the direct exploiter of the workers, not only the direct appropriator, but the direct creator of surplus-labour. But since (for the industrial capitalist) this can only take place through and in the process of production, he is himself a functionary of this production, its director. The landlord, on the other hand, has a claim – through landed property (to absolute rent) and because of the physical differences of the various types of land (differential rent) – which enables him to pocket a part of this surplus-labour or surplus-value, to whose direction and creation he contributes nothing. Where there is a conflict, therefore, the capitalist regards him as a mere superfetation, a Sybarite excrescence, a parasite on capitalist production, the louse that sits upon him.” (Theories of Surplus-Value, vol.2, p.328)

Thus for Marx, surplus-value, produced by the working class, is divided up between the different sections of the ruling class in the form of “Rent, Interest and Profit”, the capitalist Holy Trinity, where rent is paid to the landlord, interest to the money-lender and profit to the industrial capitalist. Consequently, the struggle over the surplus is not simply one between the capitalist and the worker, as the capitalist also has to fight the landlord and the moneylender, all of whom are trying to maximise their cut at the expense of everyone else.

In analysing rent, Marx also made a distinction between what he called differential rent and absolute rent.

Absolute and differential rent

In industry, super profits are made by those companies that have a higher productivity than the average. They produce goods above the average socially-necessary labour-time. In agriculture, this can also be the case, when the productivity of some land is more fertile and productive than others, and some more accessible than others, allowing it to produce super profits and thus to command a higher rent than the less favourable or productive land. The payment for these advantages is called differential rent. Ricardo wrongly considered it to be the only form of rent. However, Marx explains that the landlord also receives a basic minimum rent which must be paid for all land, even the worst kind. This is called absolute rent.

In this case, produce grown under these unfavourable conditions will still receive the average rate of profit. How come? Clearly, land, if it is to be used, must be able to produce a surplus from which the landlord can collect a rent. Therefore, even capital invested in the worst land must yield the average rate of profit, otherwise, under capitalism, there would be no economic reason to cultivate it. The income the landlord will get will depend ultimately on the demand and supply for the land. Even on the worst land he will receive an absolute rent – but nothing more. Such rents arise from monopoly in the ownership of land, and will continue to exist as long as private ownership exists.

scotland rural Image public domainThe income the landlord will get will depend ultimately on the demand and supply for the land. Even on the worst land he will receive an absolute rent – but nothing more. Such rents arise from monopoly in the ownership of land, and will continue to exist as long as private ownership exists / Image: public domain

Of course, ground rent is not ‘produced’ by the land. A piece of waste land does not “produce” anything – not an atom of rent. This rent can only arise from the production of the labour-power engaged in agriculture, namely the workers on the land. It is paid from the surplus-value that they create. But is of a special type, not subject to the equalisation of profit, as we will explain later.

As explained, differential rent is the rent paid for the advantages that accrue from the higher productivity of land. Some pieces of land are better located than others, which can be more isolated or inaccessible. Other areas have different fertility, so that from richer soils, the same investment can produce better results. Some land possesses greater natural resources, such as access to water, woodland, quarry or coal mines. Again, land located near a market saves costs, such as transport, which lowers the general costs of production. Agricultural products from these areas are therefore sold at prices above the price of production. But this higher price ends up in the pocket of the landlord in the form of differential rent, which arises from monopoly in the use of land. The capitalist investor will of course continue to receive the average rate of profit, but the difference will go to the landlord. Wherever there exists a private monopoly of land, there will also exist opportunities for racketeering landlords to make a quick buck.

However, if agricultural prices fall below a certain level, the land will become unprofitable. At that point rent vanishes from certain plots of land. They cease to be cultivated, until prices once again rise.

In his analysis Marx asks what lies behind the division of the surplus-value which is shared out between the different branches of industry and between the different kinds of capital?

Before Marx can answer this question in the third volume of Capital, he first has to explain the formation of a general rate of profit. This is closely related to the rate of surplus-value, namely the degree of exploitation. Of course, the capitalists and their apologists do not recognise “surplus-value” – which comprises all new value created by the workers by appropriated by the exploiters – and avoid this unpleasant term, as it only serves to reveal the underlying reality of capitalist exploitation. Instead, they talk about the more acceptable term of ‘profit’, which is very dear to them. After all, it is the reason for their existence and the driving force of their system. They have no interest in the ratio between the surplus they produce and the wages they pay out, i.e., the rate of surplus-value, but are instead deeply concerned with the ratio between the surplus they get and the total capital they employ. This is the rate of profit.

The rate of profit and the rate of surplus value

This rate of profit can be defined as the ratio of surplus-value (s) to total capital, which is made up of constant capital (c) and variable capital (v). In short, the rate of profit = s/(c+v).

For our Mr. Moneybags, the capitalist, what he spends on wages (variable capital) and what he spends on raw materials and machines (constant capital) are all simply costs of production, and the surplus he gets above these costs is his profit. As far as the capitalists are concerned it is that simple.

 organise big bag Image public domainFor our Mr. Moneybags, the capitalist, what he spends on wages (variable capital) and what he spends on raw materials and machines (constant capital) are all simply costs of production, and the surplus he gets above these costs is his profit. As far as the capitalists are concerned it is that simple / Image: public domain

But different factors determine the rate of profit, not least the rate of surplus-value. For example, a capitalist invests £100,000, of which £90,000 is spent on raw materials, etc., and £10,000 on wages. If the rate of surplus-value (exploitation) is 100 percent, the profit will be equal to the amount spent on wages, namely £10,000. However, if the rate of surplus-value is increased to 150 per cent, the profit goes up accordingly to £15,000. The rate of profit will be 10 percent when the rate of surplus-value is 100 percent and 15 per cent when it is 150 per cent.

This is based on one single cycle of production. But if the turnover of capital is increased so that two cycles are completed in the same time as before, then (assuming 100 per cent rate of surplus-value) the capitalist will get a profit £10,000 twice and therefore make a profit of £20,000 on his capital of £100,000, which is a rate of profit of 20 per cent. This increased turnover has doubled his rate of profit.

Another factor can have an important effect on the rate of profit, which is the ratio between variable and constant capital. Sticking with a rate of surplus-value of 100 per cent, with a single turnover, the capitalist instead invests only £70,000 on raw materials, etc., and £30,000 on wages. With a rate of surplus-value of 100 per cent, the surplus will equal the wages of £30,000, and the capitalist will make a £30,000 on an investment of £100,000, which is a 30 per cent rate of profit. This ratio between variable and constant capital is called the organic composition of capital.

Through competition, the capitalist attempts to undercut his rivals and increase his share of the market. He therefore introduces new techniques and labour-saving machinery, which reduces his costs and allows him to produce at a lower labour-time per product in relation to the socially average labour-time which determines the market price. He thus makes a super profit. But this only lasts until his competitors follow suit and also invest in the new techniques, cancelling out the old advantage. As more advanced technology is introduced, more is invested in constant capital (machinery, etc.) than in relation to variable capital (wages), resulting in a higher organic composition of capital. This produces a tendency for the rate of profit to fall, although there are countervailing factors that also cut across this process. While the profit rate tends to fall, the total amount of profit does not necessarily decline as the total capital probably increases.

Clearly in different industries, the average organic composition differs widely for technical reasons, with some industries being more labour intensive than others. Wages can form a large part of the total costs, as for example in mining raw materials from the earth. Does this mean that the rate of profit in labour intensive industries is exceptionally high compared to the rest? In practise, this is not the case. But why is this?

The reason for this state of affairs is the powerful tendencies that bring about the equalisation of the rate of profit. While different industries can temporarily create a high rate of profit compared to the rest, this cannot be long-lasting. The capitalists who invest their money are seeking to maximise their returns. Should industry A earn less than industry B, then the capitalists in A would take out their money and invest it in B. But what would then happen? More goods would be produced in B and less in A, creating overproduction in one area and under-production in another. There would be a glut here and scarcity there, causing a fall in the price of products where there is a glut and increased prices where there is scarcity. With capital moving from one to the other in pursuit of higher profits, this would change the rate of profit between the two industries, eventually leading to an equalisation of the profit rate. This tendency operates across capitalist production and in all industries.

This tendency for capital to be distributed between different branches of industry results in all capitals earning an equal rate of profit, or an average rate of profit. This is due to the competition between capitals and the effects of supply and demand on prices. Marx therefore explains that in a developed capitalist economy, each capital does not appropriate the surplus-value produced by its ‘own’ workforce, but appropriates a part of the total social surplus-value according to the proportion of the total capital it represents. So commodities do not necessarily sell at their values but at a price which equals their cost plus the average rate of profit. Marx calls this the price of production. Thus the selling price of commodities can be represented as c + v + p, where p is the average rate of profit.

Therefore, as commodities tend to exchange at their price of production, each capital would receive a proportion of the total surplus-value equal to the capital used (constant and variable) regardless of their proportions (the organic composition of capital). The sum total of prices of production is always equal to the sum total of values. No extra surplus-value is created or destroyed.

“But this process takes place behind his [the capitalist’s] back. He does not see it, he does not understand it, and it does not in fact interest him”, explained Marx. (Capital, vol.3, p.268)

This conclusion that commodities tend to exchange at their price of production may seem to contradict the theory of value, where we are told that the value of a commodity is determined by the socially-necessary labour-time involved in its production. This is the basis of the law of value. But there is no contradiction. Marxist theory has never said that commodities always exchange at their values. It explains that only through the fluctuations of price above and below the value of a commodity, do they tend to exchange at their value. This is broadly true of simple commodity production, but this law needs to be modified to bring it into line with the realities of fully developed capitalist production. Such a development does not negate the law of value, but builds upon it, revealing that in fully developed capitalism, commodities tend to exchange at their prices of production.

The whole of Marx’s Capital is an attempt to strip capitalism down to its fundamentals in order to lay bare the main laws that govern the system. “In theory, we assume that the laws of the capitalist mode of production develop in their pure form. In reality, this is only an approximation…” explained Marx (Capital, vol.3, p.275). The capitalist mode of production outlined in Capital does not exist in the real world, as it is an abstraction, which allows us to see more clearly the real processes. All the secondary features are stripped away or ignored. They are not important. However, when we apply the general laws to the real world, we need to modify these laws according to the other tendencies at work. This is the only way to develop a scientific understanding.

The emergence of monopoly capitalism, for instance, modifies and mangles the laws of capitalism with the syphoning off of monopoly profits, namely profits above the average rate of profit, at the expense of society, from the general pool of surplus-value. While the monopolies syphon off excess profits, this is only a matter of distribution. They do not add anything extra. The share of profit is limited by the total amount of surplus-value produced in society, which in the final analysis is produced by the number of hours worked by productive workers, namely the total quantity of labour expended. As soon as you have the total mass of surplus-value or the total mass of profit, the only way monopoly profits can be obtained is simply by the transfer of surplus-value from the other branches of production, i.e., redistribution in the process of circulation. A rise in monopoly profits means a corresponding drop in the rate of profit of other sectors of the economy. The sum of prices of production must accordingly be equal to the sum of values. “The sum of the profits for all the different spheres of production must accordingly be equal to the sum of surplus-values, and the sum of prices of production for the total social product must be equal to the sum of its values”, explains Marx (Capital, vol.3, p.273)

Housing crisis

In Capital, Marx is dealing with ground rent, which is part of the surplus-value created in capitalist agriculture. This is not exactly the same as the rent commonly used in payment for housing. This is by-and-large payment for a part of the use-value of a commodity, namely a house. But with a chronic shortage of housing, landlords can charge an exorbitant rent for their private dwellings. Additionally, council housing rents over the years have covered the costs of the original house many times over and are simply paid to cover the ongoing extortionate interest charges on the loans from the banks and building societies used to build the houses in the first place.

hong kong skyscrapers Image public domainwith a chronic shortage of housing, landlords can charge an exorbitant rent for their private dwellings / Image: public domain

Here is where the moneylenders get their pound of flesh from a worker’s rent. My own council house was built in 1929, probably for a few hundred pounds in labour and materials. This amount over the years has been repaid in rent several times over. In my old rent card, which was later abolished, it used to give a detailed breakdown of every pound paid in rent. I recall it stated that nearly 90 per cent of my rent went to ‘interest charges’, i.e., the moneylenders.

The constant rise in ground rent leads to a continual rise in the price of land. With the scarcity of housing in towns and cities, property speculators are buying up property as soon as it becomes vacant. These speculators are not only super-rich individuals, but giant property corporations which can move around billions of pounds in disposable assets. These properties are often left empty as the chronic shortage and rising demand simply pushes up the value of houses and apartments. This results in ordinary people being priced out of such housing in our so-called ‘property owning democracy’.

Building land commands considerably higher prices than agricultural land due to the ‘differential rent’ arising from its location. Sites in or near towns which are suitable locations for housing estates, high rise flats, office and commercial buildings, factories, etc., are limited and in great demand. No wonder supermarket chains and businesses have left the high street and relocated in out-of-town shopping centres, while a growing number of town centres are run-down.

So what, might we ask, is the value of land? If the value of a commodity is defined by the amount of socially necessary labour-time involved in its production, land must have zero value as it is not a product of human labour. It has no value any more than air, light or the wind. Marx gives the example of virgin forest, where there has been no labour expended upon it. It is a gift of nature. Nevertheless land, as we know, can attract a very high price. Therefore, things can have a price without having any value.

“The prices of things that have no value in and of themselves – either not being the product of labour, like land, or which at least cannot be reproduced by labour, such as antiques, works of art by certain masters, etc. – may be determined by quite fortuitous combinations of circumstances. For a thing to be sold, it simply has to be capable of being monopolised and alienated,” explained Marx. (Capital, vol.3, p.772)

In other words, where a monopoly of private land ownership has not been established, land has neither ‘value’ nor price. It is the monopoly ownership that brings with it a price, i.e., a claim to an income. What we are dealing with here are monopoly prices.

“Landed property presupposes that certain persons enjoy the monopoly of disposing of particular portions of the globe as exclusive spheres of their private will to the exclusion of all others. Once this is given, it is a question of developing the economic value of this monopoly, i.e. valorizing it, on the basis of capitalist production.” (Capital, vol.3, p.753)

However, insofar as ‘socially-necessary’ labour-time has been expended on a land's improvement – for instance with drainage, fertilisers, fencing, etc. – then it does indeed contain a value in the true sense of the word. That is the only exception.

The price of land

So what determines the price of land? While it has zero value because it is not a product of labour, it certainly has a price, which is determined by the income that it can bring annually. “The price of land is nothing but the capitalised and thus anticipated rent”, explains Marx (Capital, vol.3, p.944). The price reflects the fact that land has a limited supply and certain prime spots can be very advantageous to a capitalist, allowing him to cut costs and undercut his competitors.

Let us take an example of how the price of land is arrived at. The capitalist who buys a title to land, purchases the means to appropriate a definite amount of surplus-value. Let us suppose this amount is £500 a year.

forest Image public domainWhile land has zero value because it is not a product of labour, it certainly has a price, which is determined by the income that it can bring annually / Image: public domain

Of course, where he invests his money depends upon the return he will get back. This incidentally is how a general rate of interest is formed as investors scramble around trying to out bid one another for the most profitable outlets for their cash, causing prices to be brought down to a general level. Let us say for the sake of argument this prevailing rate of interest is 5 per cent. Then an investor can get an extra £500 a year for lending a sum of £10,000.

For sure, he can invest his cash in land and take a slice of rent instead. But he clearly won't invest £10,000 if he is only going to get back £250, when he can get a return of £500 by lending it directly or leaving it in a bank. Similarly, nobody will lend money to get £250 if they can get £500 by leasing a piece of land.

Therefore, if the rate of interest is 5 percent, the price of land with a rent of £500 per annum will be £10,000. That means an investor with £10,000 could either lend his money and get £500 a year or buy a piece of land and also get £500 a year. In this case, the price is simply the capitalised rental. It follows that if the interest rate falls, the price of land goes up. In our example, if the interest rate falls to 2.5 per cent, the price of the land will double to £20,000, as there would be no difference between investing in land or leaving the money in the bank – both pay an income of 2.5 per cent. Therefore, the price is fixed at the amount which would bring an equivalent income if lent out or deposited in a bank at a set rate of interest.

Thus, land has a price, which is often extortionate. But it has no value as the price represents no expenditure of labour-time. That is why Marxists regard the price of land as fictitious capital. It simply allows the capitalist investor to syphon off a proportion of the surplus-value from the rest of society.

The entrenched monopoly nature of land ownership introduces all kinds of peculiarities. For instance, the monopoly prevents the free movement of capital from industry to agriculture. While individual capitalists can lease land, they are nevertheless faced with a landowning class whose economic interests are tied to renting, which guarantees them a steady income. They are a rentier class. It is their purpose in life. They will not relinquish their monopoly ownership of land for this reason. This then becomes a barrier to capital. While capital could freely enter and leave every sphere of industry, it cannot freely enter agriculture.

Technically, agriculture is on a lower level than industry, where the organic composition of capital is lower. Where the same amount of capital is invested, more surplus-value is produced in agriculture than industry. If capital was able to move freely between agriculture and industry, the rate of profit would be equalised through competition. But this is blocked by the monopoly ownership of land. Therefore, agricultural products are sold at prices above the price of production. As explained, the excess obtained goes into the pockets of the landlord in the form of rent.

A function of monopolies under capitalism is to prevent the equalisation of the rate of profit by restricting the flow of capital between different sectors of the economy. This in essence is the role of monopolised landed property. Marx himself explains this qualitative difference between industry and agriculture.

“Why, in contrast to other commodities whose value is above their cost-price, competition between capitals does not reduce the value of agricultural products to their cost-price,” he asks, “The question already contains the answer. Because, according to the presupposition, this can only happen in so far as the competition between capitals is able to effect such an equalisation, and this in turn can only occur to the extent that all the conditions of production are either directly created by capital or are equally elementally at its disposal as if it had created them. With land this is not the case, because landed property exists and capitalist production starts its career on the presupposition of landed property, which is not its own creation, but which was already there before it. The mere existence of landed property thus answers the question. All that capital can do is to subject agriculture to the conditions of capitalist production... Since landed property exists, capital must however leave the excess of value over cost-price to the landowner.” (Theories of Surplus-Value, vol.2, p.243)

Clearly, Marx had no feelings for the ‘moneybags’ industrialist, but he had even less for the parasitic landlord:

“This rent is characterised... by the palpable and complete passivity displayed by the owner, whose activity consists simply in exploiting advances in social development (particularly in the case of mines), towards which he does not contribute and in which he risks nothing, unlike the industrial capitalist; finally, by the prevalence of a monopoly price in many cases, and particularly the most shameless exploitation of poverty (for poverty is a more fruitful source for house-rent than the mines of Potosi ever were for Spain); the tremendous power this gives landed property when it is combined together with industrial capital in the same hands enables capital practically to exclude workers engaged in a struggle over wages from the very earth itself as their habitat. One section of society here demands a tribute from the other for the very right to live on the earth, just as landed property in general involves the right of the proprietors to exploit the earth's surface, the bowels of the earth, the air and thereby the maintenance and development of life.” (Capital, vol.3, p.908-9)

Surplus-value is not created in circulation or through financial transactions, but in production. Profit is nothing more than the unpaid labour of the working class, which is expropriated by the capitalists, but the capitalist is forced to relinquish a share to the other bloodsuckers – the landlords, financiers and moneylenders. The landlords simply exploit their monopoly position to extract a portion of the surplus-value produced by the working class. They do not create the cake, but they nevertheless take a slice of it. No doubt, they are very busy shifting around pieces of paper and making phone calls, but they add nothing to the wealth of society.

Nationalise the land!

Over time, the distinction between the landlord, moneylender and capitalist has become blurred. Their activities have become merged. Compared to the past, the capitalist no longer personally supervises production, but delegates this role to professional managers. They have become simply coupon-clippers, limited to buying stocks and shares without any direct involvement in running a business. They are constantly looking for shortcuts to make money, which is their overriding ambition.

In their rush to make money they are keen to take advantage of every opportunity as it arises. As soon as convenient, they abandon their role in production and become mere rentiers. They increasingly turn away from investing in industry and real production and prefer to make profits instead through speculation in a ‘casino capitalism’. Trillions are now invested in ‘derivatives’, which are fictitious capital, not based on the production of real wealth. The banks have become international monopolies, ‘too big to fail’. Finance capital has become dominant and is a clear example of the parasitism of modern-day capitalism.

rent strike Image Alisdare Hickson FlickrThe solution to the ‘land question’ is its nationalisation, together with the banks and building firms / Image: Alisdare Hickson, Flickr

Giant monopolies straddle the globe and use their economic muscle to extract monopoly profits, reduce their taxes and collude with pliant governments. They have a multitude of investments across the board - but especially in land, property and finance. In this twilight of the capitalist system, investment in productive industry has all but dried up, as the ruling class engages in novel ways to make their money, mainly through speculation and property wheeling and dealing. In the capitals of the world, properties are acquired not for use but purely for speculative gain. Likewise, they plunder and loot the state through privatisations, one of the greatest robberies in history. These bloodsuckers have become a colossal fetter on the development of the productive forces. These facts are further confirmation of the parasitic and senile nature of twenty-first century capitalism.

Marx’s theory of rent still retains its relevance, especially in this epoch of crisis. We are faced not with underproduction on a capitalist basis, but overproduction of agricultural products and commodities generally. Capitalist farmers are paid to deliberately keep land fallow so as to keep prices high. There is no need for world hunger if food production could be organised rationally. The solution to the ‘land question’ is its nationalisation, together with the banks and building firms. A socialist agriculture would be part of a national plan of production, where the giant monopolies would be taken out of the hands of the billionaire class and run democratically in the interests of the majority. Production for need would therefore supersede production for profit. Rent in all its forms would disappear, as would landlords and capitalists. The last word, however, will go to the communist Gerrard Winstanley:

“In the beginning of time God made the earth... Not one word was spoken at the beginning that one branch of mankind should rule over another, but selfish imaginations did set up one man to teach and rule over another... Landowners either got their land by murder or theft... And thereby man was brought into bondage, and became a greater slave than the beasts of the field were to him.

“The earth is to be planted and the fruits reaped and carried into barns and storehouses by the assistance of every family. And if any man or family want corn or other provision, they may go to the storehouses and fetch without money. If they want a horse to ride, go into the fields in summer, or to the common stables in winter, and receive one from the keepers, and when your journey is performed, bring him where you had him, without money. If any plant food or victuals, they may either go to the butchers' shops, and receive what they want without money - or else go to the flocks of sheep, or herds of cattle, and take and kill what meat is needful for their families, without buying and selling.

“That which is yet waiting on your part to be done is this, to see the oppressor's power to be cast out with his person; and to see that the free possession of the land and liberties be put into the hands of the oppressed commoners of England.”