Mr. Bulgakov has completely failed to understand Marx’s theory of rent. He is convinced that he has shattered this theory by the two following arguments: (1) According to Marx, agricultural capital enters into the equalisation of the rate of profit, so that rent is created by a surplus profit that exceeds the average rate of profit. Mr. Bulgakov considers this to be false because the monopoly of land ownership eliminates free competition, which is necessary for the process of equalising the rate of profit. Agricultural capital does not enter into the process of equalising the rate of profit. (2) Absolute rent is merely a special case of differential rent, and it is erroneous to distinguish the one from the other. The distinction is based upon a completely arbitrary twofold interpretation of one and the same fact, namely, the monopoly ownership of one of the factors of production. Mr. Bulgakov is so convinced of the crushing effect of his arguments that he cannot refrain from pouring forth a stream of vehement words against Marx, such as petitio principii, [An argument based on the conclusion from a proposition that has still to be proved.—Ed.] non-Marxism, logical fetishism, Marx’s loss of capacity for mental flights, and so forth. And yet both those arguments are based on a rather crude error. The same one-sided vulgarisation of the subject which induced Mr. Bulgakov to raise one of the possible cases (diminishing productivity of additional investments of capital) to the level of the universal law of diminishing returns brings him in the present instance to employ the concept “monopoly” uncritically and to convert it into something universal. In doing so, he confuses the results which accrue under the capitalist organisation of agriculture from the limitedness of land, on the one hand, and from private property in land, on the other. These are two different things, as we shall explain.
“The condition, although not the source, of the appearance of ground-rent,” writes Mr. Bulgakov, “is the same as that which gave rise to the possibility of the monopolisation of land—the fact that the productivity of the land is limited, while man’s growing need for it is limitless” (I, 90). Instead of “the productivity of the land is limited”, he should have said, “land is limited”. (As we have shown, limitedness of the productivity of the land implies “limitedness” of the given technical level, the given state of the productive forces.) Under the capitalist system of society, the limitedness of land does indeed presuppose monopolisation of land, but of land as an object of economy and not as an object of property rights. The assumption of the capitalist organisation of agriculture necessarily includes the assumption that all the land is occupied by separate private enterprises; but it in no way includes the assumption that the whole of the land is the private property of those farmers, or of other persons, or that it is, in general, private property. The monopoly of landownership based on property rights and the monopoly of the land economy are two entirely different things, not only logically, but historically. Logically, we can quite easily imagine a purely capitalist organisation of agriculture in which private property in land is entirely absent, in which the land is the property of the state, or of a village commune, etc. In actual practice we see that in all developed capitalist countries the whole of the land is occupied by separate, private enterprises; but these enterprises exploit not only their own lands, but also those rented from other landowners, from the state, or from village communes (e.g., in Russia, where, as is well known, the private enterprises established on peasant communal lands are principally capitalist peasant enterprises). Not without reason did Marx, at the very beginning of his analysis of rent, observe that the capitalist mode of production meets in its first stages (and subordinates to itself) the most varied forms of landed property: from clan property[5] and feudal landed property down to the property of the peasant commune.
Thus, the limitedness of land necessarily presupposes only the monopolisation of the economy of the land (under the domination of capitalism). The question arises: what are the necessary consequences of this monopolisation in relation to the problem of rent? The limitedness of land results in the price of grain being determined by the conditions of production, not on the average land, but on the worst land under cultivation. This price of grain enables the farmer (= the capitalist entrepreneur in agriculture) to cover his cost of production and gives him the average rate of profit on his capital. The farmer on the better land obtains an additional profit, which forms differential rent. The question as to whether private property in land exists has nothing whatever to do with the question of the formation of differential rent, which is inevitable in capitalist agriculture even on communal, state, or non-private lands. The only consequence of the limitedness of land under capitalism is the formation of differential rent arising out of the difference in the productivity of various investments of capital. Mr. Bulgakov sees a second consequence in the elimination of free competition in agriculture when he says that the absence of this free competition prevents agricultural capital from participating in the formation of average profit. Obviously, he confuses the question of land cultivation with the right of property in land. The only thing that logically follows from the limitedness of land (irrespective of private property in land) is that the land will be entirely occupied by capitalist farmers; but it by no means follows that free competition among those farmers will necessarily be restricted in any way. Limitedness of land is a general phenomenon which inevitably leaves its impress upon the whole of capitalist agriculture. The logical unsoundness of confusing these different things is clearly confirmed by history. We shall not speak of England, where the separation of landownership from land cultivation is obvious, where free competition among farmers is almost limitless, where capital obtained from commerce and industry was and is invested in agriculture on the widest scale. But in all other capitalist countries (not withstanding the opinion of Mr. Bulgakov, who, following Mr. Struve, vainly strives to place “English” rent in a special category) the same process of the separation of landownership from land cultivation is actual, although in extremely varied forms (leases, mortgages). In failing to see this process (strongly emphasised by Marx), Mr. Bulgakov has failed to see the main thing. In all European countries, after the fall of serfdom, we see the decay of landownership based on social-estates, the mobilisation of landed property, the investment of merchant and industrial capital in agriculture, an increase in tenant farming and an increase in the mortgaging of land. In Russia also, despite the most pronounced survivals of serfdom, we see after the Reform[1] increased purchasing of land by peasants, commoners, and merchants, and increased leasing of privately-owned, state, and village communal lands, etc., etc. What do all these phenomena prove? They prove that free competition has entered agriculture—despite the monopoly of landed property and regardless of the infinite variety of its forms. In all capitalist countries at the present time, every owner of capital can invest his money in agriculture (by purchasing or leasing land) as easily, or almost as easily, as he can invest in any branch of commerce or industry.
In arguing against Marx’s theory of differential rent, Mr. Bulgakov says that “all these differences [differences in the conditions of the production of agricultural products] are contradictory and may [our italics] mutually eliminate one another; as Rodbertus pointed out, distance may be counteracted by fertility, different degrees of fertility may be equalised by more intensive cultivation of the more fertile plots” (I, 81). A pity, indeed, that our strict scientist should have forgotten that Marx noted this fact and was able to appraise it not so one-sidedly. Marx wrote: ". . . It is evident that these two different causes of differential rent— fertility and location [of plots of land]—may work in opposite directions. A certain plot of land may be very favourably located and yet be very poor in fertility, and vice versa. This circumstance is important, for it explains how it is possible that bringing into cultivation the land of a certain country may equally well proceed from the better to the worse land as vice versa. Finally, it is clear that the progress of social production in general has, on the one hand, the effect of evening out differences arising from location [of plots of land] as a cause of ground-rent, by creating local markets and improving locations by establishing communication and transportation facilities; on the other hand, it increases the differences in individual locations of plots of land by separating agriculture from manufacturing and forming large centres of production, on the one hand, while relatively isolating agricultural districts [relative Vereinsamung des Landes] on the other” (Das Kapital, III, 2, S. 190).[6] Thus, while Mr. Bulgakov triumphantly repeats the long-known references to the possibility of the mutual elimination of the differences, Marx presents the further problem of the transformation of this possibility into reality and shows that, simultaneously with equalising influences, there are to be observed differentiating influences. The final result of these mutually contradictory influences is, as everyone knows, that in all countries plots of land differ considerably both in fertility and in location. Mr. Bulgakov’s objection merely reveals that he has not given any thought whatsoever to his observations.
Continuing his argument, Mr. Bulgakov says that the conception of the last and least productive investment of labour and capital is “employed uncritically by both Ricardo and Marx. It is not difficult to see what an arbitrary element is introduced by this conception: let the amount of capital invested in land be equal to 1Oa, and let each successive a represent a diminishing productivity; the total product of the soil will be A. Obviously, the average productivity of each a will be equal to A/10; and if the total capital is regarded as a single whole, then the price will be determined precisely by this average productivity” (I, 82). Obviously, we say in reply to this, behind his florid phrases about the “limited productivity of the land” Mr. Bulgakov failed to see a trifle: the limitedness of land. This limitedness, irrespective of the form of property in land, creates a certain kind of monopoly, i.e., since all the land is occupied by farmers, and since there is a demand for the whole of the grain produced on the whole of the land, including the worst land and the remotest from the market, it is clear that the price of grain is determined by the price of production on the worst land (or the price of production connected with the last and least productive investment of capital). Mr. Bulgakov’s “average productivity” is a futile exercise in arithmetic, for the limitedness of land prevents the actual formation of this average. For this “average productivity” to form and to determine the prices, every capitalist must, in general, not only be able to invest capital in agriculture (to the extent that free competition, as we have said, exists in agriculture), but he must be able at all times to establish new agricultural enterprises in addition to those already existing. If this were possible, there would be no difference whatever between agriculture and industry, and rent could not come into existence. But precisely because of the limitedness of land, this is not the case.
To proceed. Until now we have pursued our argument without taking into account the question of property in land; we have seen that this method was necessary for logical considerations, as well as for the reason that historical data show that capitalist agriculture emerged and developed under various forms of landownership. Let us now introduce this new condition. Let us assume that all land is privately owned. How will this affect rent? Differential rent will be collected by the landowner from the farmer on the basis of his right of ownership. Since differential rent is the surplus profit over and above the normal, average profit on capital, and since free competition in the sense of the free investment of capital in agriculture exists (is being created by capitalist development), the landowner will always find a farmer who will be satisfied with the average profit and who will give him the surplus profit. Private property in land does not create differential rent; it merely transfers it from the hands of the farmer to the hands of the landowner. Is the influence of private landownership restricted to that? Can we assume that the landowner will permit the farmer to exploit gratis the worst and most inconveniently located land, which only produces, the average profit on capital? Naturally, not. Landownership is a monopoly, and on the basis of this monopoly the landowner demands payment from the farmer for this land also. That payment will be absolute rent, which has no connection whatever with the difference in productivity of various investments of capital, and which has its genesis in the private owner ship of land. In accusing Marx of making an arbitrary, two fold interpretation of the same monopoly, Mr. Bulgakov did not take the trouble to consider that we are actually dealing with a twofold monopoly. In the first place, we have the monopoly (capitalist) of land economy. This monopoly originates in the limitedness of land, and is therefore inevitable in any capitalist society. This monopoly leads to the determination of the price of grain by the conditions of production on the worst land; the surplus profit obtained by the investment of capital on belier land, or by a more productive investment of capital, forms differential rent. This rent comes into being quite independently of private property in land, which simply enables the landowner to take it from the farmer. In the second place, we have the monopoly of private property in land. Neither logically nor historically is this monopoly inseverably linked with the previous monopoly.[2] There is nothing in this monopoly that is essential to capitalist society and to the capitalist organisation of agriculture. On the one hand, we can quite easily conceive of capitalist agriculture without private property in land; indeed, many consistent bourgeois economists have demanded the nationalisation of land. On the other hand, even in practice we meet with the capitalist organisation of agriculture without private ownership of land, e.g., on state and village-commune lands. Consequently, it is necessary to distinguish between these two kinds of monopolies, as well as to recognise that absolute rent, which is engendered by private property in land, exists side by side with differential rent.[3]
Marx explains the possibility of the formation of absolute rent from the surplus-value of agricultural capital by the fact that in agriculture the share of variable capital in the total composition of capital is above the average (a quite natural assumption in view of the undoubted backwardness of agricultural as compared with industrial technique). This being the case, it follows that the value of agricultural products, generally speaking, is higher than the cost of their production, and that surplus-value is higher than profit. The monopoly of private property in land, however, prevents this surplus from passing wholly into the process of equalising profits, and absolute rent is taken from this surplus.[4]
Mr. Bulgakov is greatly dissatisfied with this explanation and he exclaims: “What kind of thing is this surplus-value, which, like cloth or cotton, or some other commodity, can suffice or not suffice to cover a possible demand? In the first place, it is not a material thing, it is a concept, which serves to express a definite social relationship of production” (I, 105). This contrasting of a “material thing” to a “concept” is a striking example of the scholasticism which is now so freely offered in the guise of “criticism”. What would be the use of a “concept” of the share of the social product if there were not definite “material things” corresponding to that concept? Surplus-value is the money equivalent of the surplus product, which consists of a definite share of cloth, cotton, grain, and of all other commodities (the word “definite” must not, of course, be understood in the sense that science can concretely define that share, but in the sense that the conditions which, in general outline, define the dimensions of this share are known). In agriculture, the surplus product is larger (in proportion to the capital) than in other branches of industry, and this surplus (which does not enter into the equalisation of profit owing to the monopoly of private property in land) may, naturally, “suffice or not suffice to cover the demand” of the monopolist landowner.
We shall not burden the reader with a detailed exposition of the theory of rent which Mr. Bulgakov has created, as he modestly remarks, “by his own efforts”, “pursuing his own path” (I, 111). A few remarks will suffice to characterise this product of the “last and least productive investment” of professorial “effort”. The “new” theory of rent is brewed according to the ancient recipe: “What is worth doing at all is worth doing thoroughly”. Since free competition exists, then without any restrictions (although absolutely free competition has nowhere and at no time existed). Since monopoly exists, there is nothing more to be said. Consequently, rent is not taken from surplus-value, and not even from the agricultural product; it is taken from the product of non agricultural labour; it is simply a tribute, a tax, a deduction from the total social product, a promissory note in favour of the landlord. “Agricultural capital, with its profit, and agricultural labour, agriculture in general as a sphere of investment for capital and labour, are therefore a status in statu* [A state within a state.—Ed.] in the kingdom of capitalism.... All [sic!] definitions of capital, surplus-value, wages, and value generally are imaginary quantities when applied to agriculture” (I, 99).
So, now everything is clear: both capitalists and wage- workers in agriculture are imaginary quantities. But if Mr. Bulgakov at times wanders into the clouds, he, at others, argues not altogether irrationally. Fourteen pages farther on we read: “The production of agricultural products costs society a certain quantity of labour; that is the value of these products.” Excellent. Consequently, at least the “definition” of value is not altogether an imaginary quantity. Farther ’we read: “Since production is organised on a capitalist basis, and since capital stands at the head of production, the price of grain will be determined by the price of production, that is, the productivity of the given labour and capital invested will be calculated according to average social productivity." Fine! Consequently, the “definitions” of capital, surplus-value, and wages are not altogether imaginary quantities. Consequently, free competition (although not absolutely free) exists; for unless capital could flow from agriculture into industry and vice versa, “the calculation of productivity according to average social productivity” would be impossible. Again: “The monopoly in land causes price to rise above value to the limits permitted by market conditions.” Excellent! But where has Mr. Bulgakov seen that tribute, taxes, promissory notes, etc., are dependent upon market conditions? If the monopoly causes price to rise to the limits permitted by market conditions, then the only difference between the “new” theory of rent and the “old” is this: the author, pursuing “his own path”, failed to understand the difference between the influence of the limitedness of land and the influence of private property in land, on the one hand, and the connection between the concept “monopoly” and the concept “the last and least productive investment of labour and capital”, on the other. Is it surprising, therefore, that seven pages farther on (I, 120) Mr. Bulgakov should completely lose sight of “his own” theory and argue about the “method of distributing this [agricultural] product among the landowner, the capitalist farmer, and the agricultural labourers”? A brilliant finale to a brilliant criticism! A remarkable outcome of the new Bulgakov theory of rent, which, henceforth, will enrich the science of political economy!
[1] The Reform of 1861 which abolished serfdom in Russia.—Tr.
[2] It is hardly necessary to remind the reader that we are dealing here with the general theory of rent and the capitalist organisation of agriculture; we do not, therefore, concern ourselves with facts like th antiquity and widespread character of private property in land, or the undermining of the last-mentioned form of monopoly, and partly of both its forms, by overseas competition, and so forth. —Lenin
[3] In the second part of Volume II of Theories of Surplus-Value (Theorien über den Mehrwert, II. Band, If. Theil), published in 1905, Marx gives an explanation of absolute rent which confirms the correctness of my interpretation (particularly in regard to the two forms of monopoly). The following passages from Marx pertain to this interpretation: “If land were an unlimited element, not only in relation to capital and to population, but in actual fact, i.e., if it were as ‘unlimited’ as ‘air and water’, if it ‘existed in unlimited quantities’ quotations from Ricardo], then the appropriation of land by one per son could not in practice in any way exclude the appropriation of land by another person. In that case, private (as also ‘public’ and state) property in land could not exist. If, in addition, the land every where were of the same quality, no rent could be obtained for it.... The crux of the matter is—if land in relation to capital existed as a natural element, then capital in the sphere of agriculture would operate in the same way as it does in every other sphere of industry. There would then be no property in land and no rent.... On the other hand, if land is: (1) limited; and (2) appropriated—if property in land is a condition for the emergence of capital—and that is precisely the case in countries where capitalist production is developing; and in countries where this condition did not formerly exist (as in old Europe), capitalist production itself creates it, as in the United States— then land does not represent a field of activity accessible to capital in an elementary way. That is why absolute rent exists, apart from differential rent” (pp. 80-81).[7] Marx definitely draws a distinction here between the limitedness of land and the fact that land is private property. (Author’s note to the 1908 edition.—Ed.) —Lenin
[4] We desire to say in passing that we have considered it necessary to deal in particular detail with Marx’s theory of rent because we find that the interpretation Mr.. P. Maslov gives of it is also incorrect ("The Agrarian Question”, in Zhizn, Nos. 3 and 4, 1901). In that article, he regards the diminishing productivity of successive investments of capital, if not as a law, then at all events as the “usual” and as it were normal phenomenon, which he links with differential rent, and he rejects the theory of absolute rent. Mr. P. Maslov’s interesting article contains many true remarks concerning the Critics, but it suffers greatly from the author’s erroneous theory just referred to (while defending Marxism, he has not taken the trouble to define clearly the difference between “his own” theory and that of Marx), as well as from a number of careless and utterly unjust assertions, as, for example, that Mr. Berdyaev “is completely liberating himself from the influence of bourgeois authors” and is distinguished for his “consistent class point of view, maintained without sacrificing objectivity”; that “in many respects Kautsky’s analysis is in places ... tendentious”; that Kautsky “has completely failed to indicate in what direction the development of the productive forces in agriculture is proceeding”; and so forth. —Lenin
[5] Clan property—the land owned by the clan.
[6] See Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 635-36.
[7] See Karl Marx, Theorien über den Mehrwert, II, S. 80-81, Berlin, 1923.
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