Transformation Of Surplus Value Into Ground Rent And The Question Of MSP: Here Too Our Self-Proclaimed “Marxist Thinker” Looks So Miserable! [3]

What The New Apologists Of Corporates Are And How They Fight Against Revolutionaries [Third Instalment]

Proletarian Reorganizing Committee, CPI (ML)

Originally published in ‘The Truth’ (Year 2, Issue 1, May 2021), this article is the third instalment of our reply to a criticism presented in ‘Ahwan’ magazine. The first and second instalments of this reply have been published in ‘The Truth’ (Issue 11-12) which can be read by clicking here (1st) and here (2nd).

The reply by ‘Yatharth’, to Ahwan’s criticism, published in its Issues 11-12 in Hindi can be accessed here (1st) and here (2nd).

The first, second and third instalment of the criticism by ‘Ahwan’ can be accessed here (1st), here (2nd), and here (3rd) respectively.

The rejoinder to their third instalment will be provided in the next issue of ‘Yatharth’ (Issue 13 – May 2021).

Who doesn’t know Mr. Abhinav Sinha, the self-proclaimed Marxist thinker? He requires no other introduction. When he discusses ground rent, he does it professorially. As a matter of fact, he looks promising but only on the face of it. When rigorously examined, this self-proclaimed “Marxist thinker” has been found to be culprit of having distorted Marx’s theory of Market price and ground rent etc. in more than one way. He stands accused of leading unmindful readers to a muddled understanding of Marx’s theory of transformation of surplus value into ground rent.

To make our criticism comprehensible to all, we have placed Marx’s presentation in plenty. We have however straight away begun with criticism of our self-proclaimed “Marxist thinker”. Readers will soon find that as he cannot precisely explain the conversion of individual values of commodities into prices of production, he compromises on Marx’s rigour to anyhow arrive at surplus profit and ground rent. In the nutshell, he can’t precisely arrive at ground rent from surplus profit. Therefore, in his ‘solicitous’ effort to analyse MSP (minimum support price) in the light of Marx’s theory of ground rent he does no other thing than theorising surplus profit itself as rent or ground rent. The irony of the thing is that he proudly labels his own muddled understanding as Marx’s. This is what we call the burden of being satisfied with some headlines bereft of substance which has found its way all along from politics and history to political-economy i.e., to the arena which we all know is known for finer theoretical intricacies. To completely refute ‘him’, however, one needs to examine his writings in totality which is not possible in just one stretch. But we are on it. Therefore, in this article, we have depended only on and hence confined ourselves to criticising as we have found ‘him’ in the article i.e. What is the Remunerative Prices or Minimum Support Price (MSP)? A Marxist Political-Economic Analysis. For the view point of our criticism, we find this article to be very important as it contains both – his deliberation on average profit, surplus profit, ground rent and also MSP. At the very outset, it can be said that while he looks miserable when he discusses formation of average profit and market price, he has failed altogether in establishing theoretical connection of ground rent with MSP. Rather, in his anxious attempts to do so he has further distorted Marx by treating surplus profit and rent as synonyms. The reasons of his failure are manifold but the chief reason is that he nowhere investigates concrete conditions as existing in India (such as predominant existence of small landed property, while Marx himself has invested a whole sub-chapter on this in capital volume III “metayage and peasant  proprietorship of land parcels” of the chapter 47, capital, volume III)[1] and shows complete disregard for other developments such as overproduction in general and economic crisis of permanent nature in particular that has set in long back in world capitalism that definitely seek to modify i.e. seek to apply in a modified manner the general propositions of Marx’s theory in modified manner   in a m  of Marx’s basic theory of average profit, surplus profit and ground rent, something about which Marx himself had written and cautioned his readers.[2]Therefore, on the one hand he is not rigorous, while on the other hand he shows he cannot discuss application of Marx’s theory in changed circumstances about which even Marx has mentioned.         

Examining His Paragraphs Leading to MSP

Here, we’ll try to quote him in full length as much as possible, and examine him paragraph by paragraph to avoid any confusion.

“The profitable remunerative price or MSP is actually a kind of a tribute (an extortion) charged by the rich capitalist farmers, kulaks and landlords from the society and whose guarantee, until now, has been assured by the Indian capitalist state.”

After this he discusses average rate of profit, market price and surplus profit etc (this we’ll shall take up later in this piece) and then he comes back to ground rent trying to connect it with MSP in the following manner.

“The process of the averaging of the rate of profit in agriculture gets disrupted because of the monopoly ownership of land. Marx has treated this monopoly ownership of land as distinct from the ownership of land by an entrepreneur capitalist farmer. This is monopoly ownership of land by a class of rentier capitalist landlord who himself is not engaged in farming. He receives ground-rent by renting the land. There are also many capitalist farmers who are rentier capitalist landowners as well and in so far as they are rentiers enjoying monopoly ownership of land, they play the same role of obstructing the free flow of capital and, therefore, formation of the prices of production. Then there is also a class of capitalist tenant farmers who take land on rent as an enterprising capitalist, invests capital, and out of the surplus-value that is generated, pays the rent to the monopoly landowner, and keeps the average profit to himself… The capitalist landowner extorts from the capitalist tenant farmer a part of his profit owing to his private monopoly ownership over the land. Now that we have understood this much, let’s move on.” (bold ours)

What exactly is he discussing? Is he discussing generalities or some concrete conditions existing in India’s agriculture? Although there seems to be no clarity, yet there is enough of it. This is his wily method by which he subtly smuggles his own understanding into Marx’s, of course with a purpose to leading the deliberation to prove his own pre-determined thesis. From one angle, it seems as if he is discussing some generalities, of course in the form of headlines, with regard to monopoly ownership of land or types of such land ownership and also about those who cultivate on rented land etc., while from another angle it looks like he is attempting to discuss India’s concrete conditions. So, an unmindful reader would take it both ways and develop an understanding which is muddled from the very beginning. But please mark that he does nowhere in this article openly and explicitly discuss India’s situation in particular and naturally handles no concrete question such as this: what type of landownership does predominantly exist in India? The above presentation also betrays his solicitous attempt to portray his own premise as Marx’s. On the whole, it means the way he presents the premise is not theoretically rigorous, nor is it consistent with that of Marx. Let us see what Marx says when he sets out to explain ground rent in capital volume III; let us see what he sets as the premise of his whole analysis. He writes:

“The analysis of landed property in its various historical forms is beyond the scope of this work. We shall be concerned with it only in so far as a portion of the surplus-value produced by capital falls to the share of the landowner. We assume, then …that agriculture is carried on by capitalists …The assumption that the capitalist mode of production has encompassed agriculture implies that it rules over all spheres of production and bourgeois society, i.e., that its prerequisites, such as free competition among capitals, the possibility of transferring the latter from one production sphere to another, and a uniform level of the average profit, etc., are fully matured. The form of landed property which we shall consider here is a specifically historical one, a form transformed through the influence of capital and of the capitalist mode of production, either of feudal landownership, or of small-peasant agriculture as a means of livelihood …” [p. 608, Ibid.]

 So, on the one hand, unlike our self-proclaimed “Marxist thinker” who discusses landlords, Marx discusses landed property; On the other hand,unlike those who treated the capitalist mode of production in agriculture, and the form of landed property corresponding to it, not as historical but rather as eternal categories, Marx treats capitalist mode of production and landed property corresponding to it, both as a historical category that grew on the soil of the previous mode of production and landed property corresponding to that.

Further, Marx writes in Theory of Surplus Value that:

“From the standpoint of capitalist production, capital property does in fact appear as the “original” because capitalist production is based on this sort of property and it is a factor of and fulfils a function in capitalist production; this does not hold good of landed property. The latter appears as derivative, because modern landed property is in fact feudal property, but transformed by the action of capital upon it; in its form as modern landed property it is therefore derived from, and the result of capitalist production.” [p. 153, Theories of Surplus Value (Part II), Capital Vol IV, Progress Publishers (Reprinted by From Marx to Mao Digital Reprints)]

That’s why Marx criticises Ricardo as he ‘considers the position as it is and appears in modern society to be also the historically original situation’ where as he criticizes Rodbertus as he ‘instead of keeping to the modern form, cannot rid’ of his ‘memories of landownership’ i.e. takes it still as just the old untransformed feudal property. He says that Ricardo’s mistake of taking the present transformed landed property as one which is natural and original ‘is a delusion from which the bourgeois economists suffer in respect of all bourgeois economic laws’ for to them such laws all appear as natural laws and a historical primary. (ibid, as above)

We can see Marx taking note of it when he discusses small peasant proprietorship of land parcels.[3] And that’s precisely why, when Marx examines the impact and influence of capital on landed property as derived form of feudal property, he emphatically notes that capital “dissolves the connection between landownership and the land so thoroughly that the landowner may spend his whole life in Constantinople, while his estates lie in Scotland.” [p. 612, MECW Vol. 37, Capital Vol. III, Lawrence & Wishart Electric Book]

So, if we sum up the above short but important discussion, then following can be said:

We must discuss form of landed property as a historical form, derived from feudal property and ensure that we must not start with ‘capitalist landlords’. When we discuss the question of monopoly ownership of landed property as the premise of our discussion on ground rent, then we must emphatically note that the form of monopoly ownership of landed property that obstructs or disrupts the process of averaging of rates of profit or hinders the free flow of capital from one sphere of production to another is not that landed property in which bourgeoisie as a class have already got ‘territorialised’ themselves; is not the one in which ‘bourgeoisie as a class has already settled (‘on the land’) ; is not the one in which ‘capitalist mode of production has already completely entrenched itself’; is not the one with which ‘the bourgeoisie as a class has already become bound up on a broad, predominating scale; is not the one which the capital has completely subordinated to itself. If such a situation exists, the question of absolute ground rent will tend to disappear or will be generally assumed to not exist and if such a situation exists (India is a country where this situation exists) will certainly modify the general propositions of Marx’s basic theory of ground rent. Please note that the word ‘territorialisation’ of the bourgeoisie has been used by Marx himself in volume 2 of the Theories of Surplus Value and explained by Lenin in volume 13 of his Collected Works.   

Our self-proclaimed “Marxist thinker” no where tries to discuss landed property. He solicitously drives in his own peculiar way while discussing the premise of the discussion on ground rent. Actually, he discusses ‘rentier landlords’ and ‘capitalist landlords’ instead of landed property to bring grists to his own mill seeking to smuggle his own understanding into Marx’s. The motive is that he wants to anyhow prove that absolute ground rent exists in India and that this is being realised through government assured MSP.

Only this much on this. Let us move come to his next paragraph.  

“It is obvious that any capitalist farmer will invest in agriculture only if he gets at least the average profit or else he will invest in some other sector of production where he can get at least the average profit on the investment of his capital. However, if he gets only average profit on his investments in agriculture, then he will have to deduct the rent to pay the capitalist landowner from this average profit itself. But then he will prefer investing in some other sector. Consequently, a capitalist tenant farmer will invest capital in agriculture only if he receives a surplus-profit over and above the average profit. …Likewise, the monopoly landowner will not rent out its land if he/she does not get rent (which is nothing but the transformed form of surplus-profit) because, obviously, he is not there to do social service. And if the capitalist farmer does not get average profit, then he/she will invest their capital somewhere else. Therefore, in the capitalist system, under the conditions of the monopoly ownership of land, the price of agricultural produce must be high enough to ensure a surplus-profit over and above the average rate of profit.”

Does the above ‘solicitous’ explanation in any way reflect situation in India’s agriculture?

We can see that as he deliberately begins with setting aside the discussion on landed property proper and starts with a faulty (and of course wrong) understanding of predominant existence of rentier capitalist landlords in India as the basic premise of discussion on Marxist theory of ground rent, he now cannot keep the right track.

“But then how much should the surplus-profit be? Marx says that this surplus profit is possible only when the entire value created in the agricultural sector remains in the agricultural sector. That means that despite the low organic composition of capital in the agricultural sector, no part of this value is transferred to other sectors. We know that the organic composition of capital in agriculture is generally lower than the average organic composition in the industry and that in the entire economy and consequently the surplus value created in this sector, is more than the average profit. If this entire surplus-value remains in the agricultural sector then this will give the agricultural sector a surplus-profit over and above the average profit. Marx points out that under conditions of monopoly ownership of land in capitalism, the entire value produced in the agricultural sector remains in the agricultural sector and this ensures surplus profit due to lower organic composition of capital. This surplus-profit, originating due to monopoly ownership of land, is transformed into Absolute Ground Rent and goes to the capitalist landlord. Marx calls this the transformation of surplus-profit into rent.” (bold ours)

If in countries like India where more than 86% peasants belong to small and marginal category (poor peasantry category) and the rest is also largely and overwhelmingly dominated by middle peasants, and the peasant economy as a whole is free from any kind of bondage, personal dependence or thrall  to the landlords[4] arising from private monopoly ownership of landed property, nor does it carry the burden of overlordship or ; therefore, to say that absolute ground rent exists and goes to the capitalist landlords who in actuality don’t exist as capitalists from whom capitalist farmers rent land by paying ground rent, is to do a useless job describing something which is non-existent.

Secondly, insofar as a landed property gives rise to absolute rent or enables his owner to appropriate absolute rent as landed property acts a barrier to capital, the owner himself is not a capitalist or a capitalist farmer, though the rent he gets arises due to capitalist mode of production. And if capitalist is himself the owner of the landed property, it means that the capitalists as class has ‘territorialised themselves’ and ‘settled on the land’ and the landed property will now not act as a barrier to capital and not hinder the free flow of capital. So, in this case absolute rent cannot exists. Differential rent though will accrue. But we know differential rent is different from absolute rent primarily in this sense that it doesn’t by itself obstruct the conversion of the values of the commodities into prices of production of commodities i.e., doesn’t by itself disrupts the process of formation of average profit, is rather based on it[5]. It arises due to difference between less and more fertile land, favourable or unfavourable location as well as less and more productivity of the additional capital investment and doesn’t by itself obstruct the formation of average profit.

It means that in case of India, the words like “rentier capitalist landlords” or “capitalist landlords” accruing rent due to private monopoly on land are meaningless and don’t help rather distort the understanding of Marxist conception of a historical form of landed property enabling its owner to appropriate rent by acting as a barrier to capital. So far as the predominant existence of small peasant proprietorship is concerned, the form of landed property that exists in India on a predominating scale, in this case, too, absolute rent stands abolished and the differential rent goes to the state.[6] 

Does any category exist in India as capitalist landlord accruing absolute rent as our ‘great Marxist thinker’ wants us to believe? Similarly, in India does the category of capitalist farmer who rents land from rentier landlords to engage in capitalist farming? In India, there are capitalist landlords who were erstwhile feudal landlords and later forced as well as persuaded and finally remoulded to cultivate land by themselves on capitalist lines. So, there is no such category as capitalist landlords who make land available to capitalists to rent land for working on it on payment of absolute rent. If at all such a category exists it must be insignificant. So, the question of obstructing or hindering the free flow of capital by landed property and thus their acting as a barrier to capital doesn’t arise. So far as share cropping is concerned it is a different category[7] and we will take it up, if necessary, only later in a separate article.

Similarly, he writes that the surplus profit originating due to private monopoly of land is transformed into absolute ground rent and goes to capitalist landlord. He should have written originating solely due to private monopoly of land instead of just originating due to private monopoly of land. Why? Because, not only absolute rent but differential rent also arises due to monopoly ownership of land.The difference lies in this that the differential rent arises from, as Marx himself says, ‘the market-value (and everything said concerning it applies with appropriate modifications to the price of production)’ which ’embraces a surplus-profit for those who produce in any particular sphere of production under the most favourable conditions’ [p. 197, Ibid.] and this surplus profit goes to the landowner as rent (differential) only because of his monopoly of land (also see footnote no.5)

And lastly, the paragraph begins with a question (please see the question: But then how much should the surplus-profit be?), hence anyone will expect that the answer is present in the paragraph. But there is no answer as such.

Let us move to his next paragraph.

“Therefore, if the monopoly ownership of land in agriculture is eliminated through the nationalization of land, then the worst land will generally receive only the average profit. However, the capital invested in production on all lands other than the worst land will fetch a surplus-profit too, because the market-prices are determined by the cost of production on the worst land. This is what Marx calls Differential Rent. Differential rent is of two types: first, which arises due to natural difference and second, which arises from the different magnitudes and intensities of capital investment. But for our present purpose, we do not need to go in elaborations about the two types of Differential Rent. Marx had criticized Ricardo for understanding only the Differential Rent but not the Absolute Rent which arises due to the monopoly ownership of land. The total surplus-profit (Absolute Rent and Differential Rent) that the capitalist tenant receives over and above the average profit, is transformed into Total Ground Rent and goes to the capitalist landlord. Marx had termed this the transformation of total surplus-profit into ground rent.” (bold ours)

Here, he discusses or defines differential rent in a peculiar manner. He first of all supposes that monopoly ownership of land must be eliminated before differential rent arises. It means that unless and until private ownership of land or monopoly of land is not eliminated through nationalisation [he can not think of measures (such as socialisation or collectivisation of agriculture) other than nationalisation which is a bourgeois measure] differential rent won’t come into being, while the fact is that differential rent exists in both the conditions whether private monopoly ownership of land exists or the private ownership in landed property is taken over by the state. Rather, the matter of fact is that without presupposing a monopoly in land ownership, whether private or state monopoly, no rent, whether absolute or differential, can ever exists even if surplus profit is accrued.

Marx says:

“But differential rent presupposes the existence of a monopoly in land ownership, landed property as a limitation to capital’, for without it surplus-profit would not be transformed into ground-rent nor fall to the share of the landlord instead of the farmer. And landed property as a limitation continues to exist even when rent in the form of differential rent disappears on soil A (on the worst soil -added by the present author). If we consider the cases in a country with capitalist production, where the investment of capital in the land can take place without payment of rent, we shall find that they are all based on a de facto abolition of landed property, if not also the legal abolition; this, however, can only take place under very specific circumstances which are by their very nature accidental.” (bold ours) [p. 737, Ibid.]

Marx further writes, explaining such cases:

“When the landlord is himself a capitalist, or the capitalist is himself a landlord… In this case he may himself manage his land as soon as market-price has risen sufficiently to enable him to get, from what is now soil A, the price of production, that is, replacement of capital plus average profit. But why? Because for him landed property does not constitute an obstacle to the investment of capital. He can treat his land simply as an element of Nature and therefore be guided solely by considerations of expansion of his capital, by capitalist considerations.” [p. 738, Ibid.]

Marx treats such cases as exception because of the premise he took in the beginning according to which ‘capitalist cultivation of the soil presupposes the separation of functioning capital from landed property.’

Marx writes that:

“Such cases occur in practice, but only as exceptions. Just as capitalist cultivation of the soil presupposes the separation of functioning capital from landed property, so does it as a rule exclude self-management of landed property.” [Ibid.]

 We shall see that in India this exception is the reality due to 1) territorialisation of the bourgeoisie in the land even when private ownership of land exists due to which landed property acting as a limitation or barrier to capital stand abolished, and 2) the predominance of existence (or presence) of small peasant proprietorship.

The incidence of this reality in India i.e. both the above cases, the main role has been played by the capitalist-landlord path of capitalist development in agriculture which took place from above i.e. by the Indian state. It slowly but steadily changed the old face of Indian agriculture by introducing a many-pronged policy of land reform (that also included tenancy and ownership rights reforms) tailored on the whole to mainly suit the future interests of erstwhile feudal landlords who were pressurised as well as persuaded to themselves become capitalist landlords and become the main agent of capitalist farming.

Let us now move to the next relevant paragraph.

“Thus, what is the basis of creation of surplus-profit in this way? It is the private monopoly ownership of a limited, natural resource of production (land) that can hinder the free flow of capital, disrupt the process of averaging of rates of profit and formation of the prices of production, and thus, gives rise to surplus-profit. This surplus-profit gets converted into rent due to the monopoly ownership. This is what we call Absolute Rent.”

So according to him, it is the private monopoly ownership of land that gives rise to surplus profit. We have seen that surplus profit arises even without it i.e. without private monopoly ownership of land. So, according to him, whenever there is a surplus profit, there is a ground rent.

Having so proved, he goes to say that as MSP is a government assured price above market price, so it is a surplus profit and as we have discussed just above, according to his own understanding of surplus profit, it automatically becomes ground rent.

“Now we can understand what is the system of profitable remunerative prices or MSP. …The MSP is nothing but a surplus-profit, which is created by the determination of prices by the government at a level that which ensures a surplus-profit over and above the average rate of profit, in order to serve the class interests of rich farmers and kulaks. The remunerative price or MSP is nothing but a surplus-profit or monopoly-rent imposed by the capitalist landowners, capitalist farmers, and capitalist tenant farmers on the entire society including the working masses and it originates due to the government’s monopoly over determination of prices. It is a type of a tribute extorted from the society and, therefore, is outright anti-people.” (bold ours)

See the word made bold by us. He just equates surplus profit with monopoly rent without any other consideration.

We know surplus profit is realised depending on how is the market value realised in normal circumstances so that it embraces surplus profit. Here normal circumstances are presupposed. Having this in mind if we say that MSP is surplus profit, an examination of its history and also a study of exceptional situations arising due to permanent situations of crisis and overproduction must be done to see if the Marx’s analysis needs to be applied with certain modification or not for it will affect the formation of average profit in the way Marx explains. We needn’t repeat that in the present day situation where monopoly has become the financial oligopoly and taken over the whole society, it is not average profit but maximum profit which is the law of modern day capitalism.  

Marx himself wrote about it:

“Our analysis has revealed how the market-value (and everything said concerning it applies with appropriate modifications to the price of production) embraces a surplus-profit for those who produce in any particular sphere of production under the most favourable conditions. With the exception of crises, and of overproduction in general, this applies to all market-prices, no matter how much they may deviate from market-values or market-prices of production. For the market-price signifies that the same price is paid for commodities of the same kind, although they may have been produced under very different individual conditions and hence may have different cost-prices. (We do not speak at this point of any surplus-profits due to monopolies in the usual sense of the term, whether natural or artificial.)” (bold ours) [p. 197, Ibid.]

So, we have seen how he arrives at MSP.

His Understanding Of The Formation Of Market Price

To say that ‘the market price deviates from the value of the commodity’ (this is so written by Abhinav in his abovementioned article[8]) is based on “the assumption that the commodities of the various spheres of production are sold at their value” as only on the basis of this assumption it implies that “their value is the centre of gravity around which their prices fluctuate, and their continual rises and drops tend to equalise.” [p. 176-177, Ibid.]

Later, on the question of how “the prices of production” are determined, Abhinav Sinha writes, ‘and the prices of production themselves are determined from the social value produced in different sectors of production and its redistribution among them due to competition and the averaging of the rates of profit.’ If we try to understand this, this is what we can mean from this: According to him, the prices of production are determined from the redistribution of social value produced in different sectors of production among them and this redistribution take place by competition and the averaging of the rates of profit.

Can it be called consistent with Marx’s analysis of determination of the prices of production? No, it is at best Ricardian presentation, modified by Marx to show that his assumption that commodities are sold at their values when correctly modified can be shown to have truths in the last [p. 183-184, Theories of Surplus Value (Part II), Capital Vol IV, Progress Publishers (Reprinted by From Marx to Mao Digital Reprints)] through other way round. But it is nonetheless Ricardian not a Marxian way of presenting or explaining the formation of market price. Like Ricardo, our ‘thinker’ also presupposes average rate of profit though he incessantly talks of redistribution of social value among spheres of production.

In the first place, Marx has nowhere concluded that competition compels to bring among the capitalists averaging of rate of profit and then this averaging of rates of profits leads to the determination of price of production. Marx has this to say about averaging of the rates of profit and how this is achieved.

“Competition of capitals can therefore only equalise the rates of profit” and “Competition achieves this equalisation by regulating average prices.” [p. 29-30, Ibid]

And Marx continues:

“Competition achieves this equalisation by regulating average prices. These average prices themselves, however, are either above or below the value of the commodity so that no commodity yields a higher rate of profit than any other.” [Ibid]

I hope that our Marxist thinker understand what ‘average prices, mean here. It is the market value of the commodity.

For Marx, how the conversion of this equalization of profits into a general rate of profit is brought about is important as for Marx it is the result and not the point of departer.

Marx thus writes this –

“On the other hand, it may be said that wherever an average profit, and therefore a general rate of profit, are produced — no matter by what means — such an average profit cannot be anything but the profit on the average social capital, whose sum is equal to the sum of surplus-value. Moreover, the prices obtained by adding this average profit to the cost-prices cannot be anything but the values transmuted into prices of production. Nothing would be altered if capitals in certain spheres of production would not, for some reason, be subject to the process of equalization. The average profit would then be computed on that portion of the social capital which enters the equalization process. it is evident that the average profit can be nothing but the total mass of surplus-values allotted to the various quantities of capital proportionally to their magnitudes in their different spheres of production. It is the total realized unpaid labour, and this total mass, like the paid, congealed or living, labour, obtains in the total mass of commodities and money that falls to the capitalists.” [p. 172-173, MECW Vol. 37, Capital Vol. III, Lawrence & Wishart Electric Book]

So, further 

“the really difficult question is this: how is this equalization of profits into a general rate of profit brought about, since it is obviously a result rather than a point of departure?” [Ibid.]


“the average profit determining the prices of production must always be approximately equal to that quantity of surplus-value which falls to the share of individual capital in its capacity of an aliquot part of the total social capital.” [p. 178, Ibid.]

And further

“What competition, first in a single sphere, achieves is a single market-value and market-price derived from the various individual values of commodities. And it is competition of capitals in different spheres, which first brings out the price of production equalizing the rates of profit in the different spheres. The latter process requires a higher development of capitalist production that the previous one.” [p. 179, Ibid.]

If we take Mr Sinha’s explanation to be true, then it will mean that the average prices that will be calculated on the basis of so-called averaging of the rates of profit will be equal to the value of the commodity. This is what Marx refutes throughout. He writes this:

Thus, if the commodities were sold at their values or if the average prices of the commodities were equal to their values, then the rate of profit in the various spheres would have to vary a great deal. In one case it would be 50, in others 40, 30, 20, 10, etc. Taking the total volume of commodities for a year in sphere A, for instance, their value would be equal to the capital advanced in them plus the unremunerated labour they contain. Ditto in spheres B and C. But since A, B and C contain different amounts of unpaid labour, for instance, A more than B and B more than C, the commodities A might perhaps yield 3 S (S=surplus-value) to their producers, B=2 S and C=S. Since the rate of profit is determined by the ratio of surplus-value to capital advanced, and as on our assumption this is the same in A, B, C, etc., then ||451| if C is the capital advanced, the various rates of profit will be 3S/C, 2S/C, S/C. Competition of capitals can therefore only equalise the rates of profit, for instance in our example, by making the rates of profit, equal to 2S/C , 2S/C , 2S/C , in the spheres A, B, C. A would sell his commodity at 1 S less and C at 1 S more than its value. The average price in sphere A would be below, and in sphere C would be above, the value of the commodities A and C.” [p. 28, Theories of Surplus Value (Part II), Capital Vol IV, Progress Publishers (Reprinted by From Marx to Mao Digital Reprints)]

Here let us try to understand what does it mean by “regulating average prices” and how does it occur.

Marx writes this:

“… the capital of the capitalist class, is regarded as one magnitude on which the whole of surplus-value [is] calculated, irrespective of the sphere in which it has been created. In this aggregate capital the periods of turnover, etc. are equalised; In that case every section of the aggregate capital would in accordance with its magnitude participate in the aggregate surplus-value and draw a corresponding part of it. And since every individual capital is to be regarded as shareholder in this aggregate capital, it would be correct to say first that its rate of profit is the same as that of all the others [because] capitals of the same size yield the same amount of profit; secondly, and this arises automatically from the first point, that the volume of profit depends on the size of the capital, on the number of shares the capitalist owns in that aggregate capital. Competition among capitals thus seeks to treat every capital as a share of the aggregate capital and correspondingly to regulate its participation in surplus-value and hence also in profit. Competition more or less succeeds in this by means of its equalisations (we shall not examine here the reason why it encounters particular obstacles in certain spheres). But in plain language this just means that the capitalists strive (and this striving is competition) to divide among themselves the quantity of unpaid labour—or the products of this quantity of labour—which they squeeze out of the working class, not according to the surplus-labour produced directly by a particular capital, but corresponding firstly to the relative portion of the aggregate capital which a particular capital represents and secondly according to the amount of surplus-labour produced by the aggregate capital. The capitalists, like hostile brothers, divide among themselves the loot of other people’s labour which they have appropriated so that on an average one receives the same amount of unpaid labour as another.” [p. 29, Ibid.]

Thus, “competition achieves this equalisation by regulating average prices. These average prices themselves, however, are either above or below the value of the commodity so that no commodity yields a higher rate of profit than any other. It is therefore wrong to say that competition among capitals brings about a general rate of profit by equalising the prices of commodities to their values. On the contrary it does so by converting the values of the commodities into average prices, in which a part of surplus-value is transferred from one commodity to another, etc. The value of a commodity equals the quantity of paid and unpaid labour contained in it. The average price of a commodity equals the quantity of paid labour it contains (materialised or living) plus an average quota of unpaid labour. The latter does not depend on whether this amount was contained in the commodity itself or on whether more or less of it was embodied in the value of the commodity.” [p. 29-30, Ibid.]

This is how matter stands in Marx’s analysis. The last line is very important and we must properly understand it and hence will take it up and its significance once again later. As for now, I can say only this that unless we understand that the quota of unpaid labour that every capitalist receives (under the regime of market price or average price as such), needn’t necessarily be embodied in the commodity itself and that it can be embodied also in the value of the commodity, it will be difficult for us to grasp the basic understanding of formation of Market Price, and its role in formation of surplus profit and of course finally in understanding the ground rent.     

Therefore, we see that he looks very promising and correct, in line with Marx’s, but the moment one goes deeper and tries to see him in finer details, most of the time an inconsistency will immediately appear whose overall impact is that Marxism is robbed of its main substance as a science of dialectics.

Marx wrote about A. Smith like this: Adam Smith, as we saw above, first correctly interprets value and the relation existing between profit, wages, etc. as component parts of this value, and then he proceeds the other way round, regards the prices of wages, profit and rent as antecedent factors and seeks to determine them independently, in order then to compose the price of the commodity out of them. The meaning of this change of approach is that first he grasps the problem in its inner relationships, and then in the reverse form, as it appears in competition. [p. 106, Ibid.]

The same applies to our self-proclaimed Marxist thinker Abhinav Sinha who understands the formation of market price not from what happens in the core of Marxist analysis, but from what it appears in competition, otherwise he wouldn’t have said that the averaging of the rates of profit brings about the existence of the market price.  

On the whole we can see that Mr. Abhinav Sinha, our self-proclaimed “Marxist thinker”, just keeps repeating that the price of production determines the market price, but nowhere explains, not even in the remotest sense, how does it precisely determine the market price, except reproducing some headlines many of which are of course correct. He doesn’t precisely understand the role of competition in the determination of market price in the way Marx does. He never mentions average prices or market value of commodities whose regulating effect or result is averaging of the rates of profit. He doesn’t not do it even once, let alone explaining it. So, if he doesn’t understand the true process of formation of market price, his understanding about ground rent automatically becomes doubtful.     

When Marx deals with the Problem in ascertaining rent, he puts it even more succinctly like this:

“If we start from the correct principle that the value of commodities is determined by the labour-time necessary for their production (and that value in general is nothing other than materialised social labour-time) then it follows that the average price of commodities is determined by the labour-time required for their production. This conclusion would be the right only if it had been proved that average price equals value. But I showed that just because the value of the commodity is determined by labour-time, the average price of the commodities (except in the unique case in which the so-called individual rate of profit in a particular sphere of production, i.e., the profit determined by the surplus-value yielded in this sphere of production itself, [is] equal to the average rate of profit on total capital) can never be equal to their value although this determination of the average price is only derived from the value which is based on labour-time.” [p. 34, Ibid.]

Some More Discussion Of Marxist Way Of Defining Premises Of Discussion On Ground Rent

Marx in his introduction to the chapter “Transformation Of Surplus Value Into Ground Rent” [p. 608, MECW Vol. 37, Capital Vol. III, Lawrence & Wishart Electric Book] clearly says that while explaining this transformation he will consider only the specific historical form of landed estate, the one which is transformed according to need and through the influence of capital, where in a portion of surplus value produced by capital falls to the share of the landowner. So, Marx sets outs with this assumption that that like in manufacture the capitalist mode of production also dominates in agriculture i.e. agriculture is carried on by capitalists who differ from manufacturing capitalists only in the manner capital and wage labour set in motion by this capital are invested. So, he presupposes three things 1) a class of landowners having monopoly over land and appropriating rent by virtue of having this monopoly 2) land is available for those class of capitalists or farmers who want to invest capital and wage labour for working the land 3) the capitalist production is so much developed and matured that capital whether employed in agriculture or Industry draws average profit for without having attained this level ground rent as discussed by Marx which is nothing but the excess over this average profit i.e. surplus profit (the part of the surplus value produced by capital that is in excess over average profit) can’t be realised.  

In Marx analysis of ground rent a correct understanding of landed property is very necessary. So, Marx defines it as this: It is a property based on the monopoly by certain persons over definite portions of the globe, as exclusive spheres of their private will to the exclusion of all others. And accordingly, Marx defines his task. He says, – With this in mind, the problem is to ascertain the economic value, that is, the realisation of this monopoly on the basis of capitalist production. [p. 609-610, Ibid.]

Private monopoly over land has a legal basis, too. It comes in the form of legal power of those having this monopoly. There are two questions here. First, how does this legal power per se help in economic realisation of this monopoly? Secondly, how did this legal power originate or arise? With regard to the first question, Marx says, “With the legal power of these persons to use or misuse certain portions of the globe, nothing is decided. The use of this power (with a purpose of realising economic value of this monopoly over land) depends wholly upon economic conditions, which are independent of their will. The legal view itself only means that the landowner can do with the land what every owner of commodities can do with his commodities.” With regard to the second question Marx says that in the ancient world this legal view of free private ownership of land arose with/after the dissolution of the then organic order (an order characterised by a harmonious relationship between or among the people with their whole – by the present author) of society and in the modern times/world it arose when capitalist production came in existence and developed. Marx also says that in Asia, this legal view of free private ownership of land was imported by Europeans. [see p. 610, Ibid.]

Now, what happens to the existing juridical forms of landed property with the introduction of capitalist production or capitalist mode of production? Marx examined this, too in great detail. Inasmuch as the capitalist mode of production presupposes the separation of the direct producers from their position as mere accessories to the land (in the form of vassals, serfs, slaves, etc.), and, on the other hand, the expropriation of the mass of the people from the land, the monopoly of landed property, as a historical premise, poses no difficulty in continuing as ever before as the basis of the capitalist mode of production. This is just as in all previous modes of production which were based on the exploitation of the masses in one form or another. The problem arose in another sense. The old existing form of landed property didn’t suit the incipient capitalist mode of production. So, capital when it penetrates in agriculture, it first of all creates and secures for itself a suitable form of landed property. This is achieved, as Marx says, by subordinating agriculture to capital, by transforming feudal landed property, clan property or small peasant property in mark communes etc. into the economic form corresponding to the requirements of this mode of production, no matter in how many divergent juristic forms the landed property previously expressed itself. [see p. 611, Ibid.]

What were the results of this transformation? There were obviously many results, minor as well as major. Marx says that 1) capital “transforms agriculture from a mere empirical and mechanical self-perpetuating process employed by the least developed part of society into the conscious scientific application of agronomy, in so far as this is at all feasible under conditions of private property“. Here the sentence which has been made bold by me clearly says that the existence of private ownership of land in particular and also existence of private property in general poses difficulties in the fullest capitalist development[9]The extraction of monopoly rent is one such problem  2) capital “divorces landed property from the relations of dominion and servitude, on the one hand, and, on the other, totally separates land as an instrument of production from landed property and landowner — for whom the land merely represents a certain money assessment which he collects by virtue of his monopoly from the industrial capitalist, the capitalist farmer”. It means that capital, by divorcing landed property from the relation of dominion and servitude and thus separating the land and the landowner, makes the land able to realise its existence as an instrument of production. In this form land merely represents a sum of money which the landowner collects from those who invest capital in land. 3) capital “dissolves the connection between landownership and the land so thoroughly that the landowner may spend his whole life in Constantinople, while his estates lie in Scotland.” it means that the connection between landownership and the land is thoroughly shaken and the presence of landowner near his own landed property even for merely collecting the rent is not at all required 4) capital thus help landed property receive “its purely economic form by discarding all its former political and social embellishments and associations, in brief all those traditional accessories, which are denounced, as we shall see later, as useless and absurd superfluities by the industrial capitalists themselves, as well as their theoretical spokesmen, in the heat of their struggle with landed property.” It means that landed property is freed from all its earlier forms in which it maintained its relations with the realm of dominion and servitude by carrying with itself a bunch of traditional accessories such as serfs, vassals and slaves who are now freed and realise their existence as direct producers.[10] 5) capital leads to “rationalising of agriculture, on the one hand, which makes it for the first time capable of operating on a social scale, and the reduction ad absurdum of property in land, on the other, are the great achievements of the capitalist mode of production. Like all of its other historical advances, it also attained these by first completely impoverishing the direct producers.” [p. 611-612, Ibid.] Here, it means capital’s penetration leads to socialised operation (operation on a social basis) of agriculture as opposed to its old form of empirical and self-perpetuating form. It, on the other hand leads to reduction ad absurdum of property in land. It means that in its earlier forms landed property had turned useless to the point of absurdity which capital by rationalising agriculture does away and thus as a result brings the landed property to social use.[11]

How does capitalist farming enrich the landowner? It enriches him in two ways, not in just one way. It is not just only the ground rent and its general movement which enriches him. Apart from this, the interest on the capital investments made by the capitalist in the land also enriches him. How? We know that when a capitalist or a capitalist farmer rents a land, he fixes or incorporates capital in it to make it a perfect instrument of production i.e. he transforms it from a mere piece of land into land-capital. Capital so incorporated in land may be 1) of transient nature, the one that is used to improve the fertility and chemical composition of the land etc. It naturally goes with the ordinary production processes in agriculture and hence is exclusively invested by the capitalist or capitalist farmer, or 2) of a more permanent nature, the one that is used to build drainage canals and farm buildings or for levelling of land etc. It is also in the main and in some spheres of production exclusively invested by the capitalist or capitalist farmer. By its very nature, such capitals, either of transient nature or of more permanent nature, belong to the category of fixed capitals, are invested by the capitalist and together with the interests on such capitals, they are finally pocketed by the landowner. Marx writes – “These investments improve the land, increase its output, and transform the land from mere material into land-capital when the cultivation is carried on more or less rationally. A cultivated field is worth more than an uncultivated one of the same natural quality…As soon as the time stipulated by contract has expired the improvements incorporated in the soil become the property of the landowner as an inseparable feature of the land. In the new contract made by the landowner he adds the interest for capital incorporated in the land to the ground-rent itself. And he does this whether he now leases the land to the capitalist farmer who made these improvements or to some other farmer. His rent is thus inflated; and should he wish to sell his land its value is now higher. He sells not merely the land but the improved land, the capital incorporated in the land for which he paid nothing. Quite aside from the movements of ground-rent itself, here lies one of the secrets of the increasing enrichment of landowners, the continuous inflation of their rents, and the constantly growing money-value of their estates along with progress in economic development. Thus, they pocket a product of social development.” [p. 613-614, Ibid.]

Can we say from the above description that the interest on such capital as incorporated in the land, either in the transient manner or more permanently, by the capitalist constitute an addition to ground rent? Yes, it does but through the next contract where in the landowner makes new contract after the expiry of the existing one. But it certainly does not constitute the actual ground-rent which is paid to the landowner solely for his permission of use of the land as such for the actual source of ground rent lies with landowner’s monopoly over that piece of land, be it in a natural or cultivated state. So, ground rent and the interest on the fixed capital incorporated in the land are two separate things. This interest however may constitute an addition to the ground rent but only when the existing contract expires and a new contract is made. So long as the contract or lease lasts, this interest falls into the hands of the capitalists and nothing of it goes to add the landowner’s ground rent which is slated to be paid annually or otherwise as per the contract. Thus, it only ultimately passes into the pocket of the landowner i.e., after the expiry of the existing contract.   

Later, while differentiating between ground rent and interests on capital invested in land Marx writes that landed property differs from other kinds of property in that it appears superfluous and harmful at a certain stage of development, even from the point of view of capitalist mode of production.

What is ground rent? It is the manner in which landed property expresses itself in the capitalist mode of production. 

Now, what will happen to ground rent if the tenant himself is not an industrial capitalist? Marx writes – We are not speaking now of conditions in which ground-rent, the manner of expressing landed property in the capitalist mode of production, formally exists without the existence of the capitalist mode of production itself, i.e., without the tenant himself being an industrial capitalist, nor the type of his management being a capitalist one.” [p. 619, Ibid.] So, ground rent can’t appear as ground rent as such if the tenant is not an industrial capitalist or if his management is not on capitalist line. In other words, we can interpret from this that the tenant must be placed in a position that enables him to draw average profit from his capital investment.

This is how Marx himself places the historical view of the premises in which ground rent must be discussed. In the light of above discussion, let’s discuss a few situations:

  1. When the tenant is a small farmer who doesn’t invest in wage labour, nor does he invest much in constant capital and work mainly with his own hands and instruments of labour. He thus in paying ground rent will face the danger of losing not only a part of his profit i.e., his own surplus labour (to which he is entitled as the owner of his own instruments of labour), but also a part of his wages or his necessary labour which he would have otherwise received for the same amount of labour. Not only that, he also faces the danger of losing his small capital which he for the most part incorporate in the land through his own labour or his own instruments of labour. But such a situation doesn’t exist today. Now a days when capitalist mode of production has a complete sway over all spheres of production including agriculture, one will seldom find even a small peasant engaged in agriculture only on the basis of his own instruments of labour. He is but forced to use machinery that is in use in his time for different activities involved in agriculture from tilling to harvesting and even after that, for which he can’t do without some capital investment. And if he can’t manage, he will have to leave his position of being a farmer.
  2. If the tenant is a simple peasant capitalist who hires wage workers to work his rented land but his management can be hardly said to be precisely running on capitalist lines and hence only occasionally draws average profit due to tough competition and manipulation of market by big industrial monopoly capitalists who often force the peasant capitalist to draw a profit lower than average profit or force them to sell without any profit and sometimes even below the cost of production, even forced to dispense with a part of the value of fixed capital that he invests for the improvement of the land. The result is that such a peasant capitalist who is not cushioned by other means (such as profit coming from his investment in other spheres of production as is the case with the industrial capitalists who have also invested in agriculture) against this eventuality is ruined after a few more chances that he takes in pursuit of a better result next time. His economic position is such he also can’t switch over to investments in spheres of production because of so many reasons ranging from lack of sufficient capital which stands already depleted due to above discussed situations as also the lack of cushion if an extremely odd situation arrives to lack of overall expertise to tackle risks in capital investment. Even if he happens to be the owner of land, happens to have a monopoly of the land that he works, even in this favourable situation, he won’t survive for umpteen years or any period of time. The deepest ever economic crisis in particular and conditions of overproduction in agriculture general won’t let him draw average profit. At most he can draw for some time some profit from his investment in the land which will be often equal to or even less than the rent he would have to otherwise pay to the landowner. In India, many strata of upper middle and rich peasants except for those who have grown into and established themselves as industrial capitalists make this description a quite living experience before our eyes.
  3. When the tenant is the monopoly capitalist as is going to be the case if the new farm laws are successfully implemented in India. In such a case the whole thing will turn upside down. The landowner whether small, medium or big, will be dethroned from the position of being the free landowners and the tenant (the monopolists) will take possession of their land in the end utilising the favourable forces and powers that the laws provide them with. We know the provisions of the new farm laws of India are such that establish supremacy of the monopolists over the landowner whose land will be under a contract favourable to monopolists and not to the landowner. It will not only hinder the peasant capitalists from taking advantage of the monopoly over his land in the end but instead will lead to establishment of the biggest monopoly who will i) expropriate and dispossess the landowners themselves utilizing the various provisions of the laws as also by other laws that are in the pipeline having the same teeth and intent in the favour of the monopolists ii) also monopolize the whole market of agriculture sector and produce, given their giant size and strength. Thus, in this situation the monopoly capitalist as the tenant presents altogether a different scenario. This situation Marx couldn’t have visualised in his time. Even in Russia at the time of October Revolution, such a situation didn’t exist.
  4. It is only when the tenant is an industrial-commercial capitalist whose management of farm and other business is run well on capitalist lines with requisite expertise, it makes an altogether a different case. This is the most suitable case according to Marx’s analysis. But today it can’t go alone because of involvement of corporates (big monopoly capital) in agriculture who are pressurising the state to go for laws that allows their take over of agriculture. Such super rich thin section[12] also faces a tough competition but he is well supported and cushioned by profits being accrued by them from other spheres, by their connection with the monopolists and is not likely to be ruined and so can persist in the race. He can also change the destination of his capital investment quite easily and frequently due to his having acquired an expertise in this field which the peasants bourgeoisie with lesser fortunes don’t have.

In India, such capitalist farmers that engage in capital on the basis of payment of rent are in fact not present. The fact is that here in India peasants have their own land and are free from any type of bondages arising from the landed property. In India there are rich and big peasants but overwhelming majority is that of the small, poor and marginal peasants. The overwhelming part of the rest between the poor and the rich peasants is dominated by middle peasants, lower middle and upper middle. In India, even the small, marginal or poor peasants are now free from embellishments of landed property. If they want to invest capital in their plots no one is going to hinder it. Similarly middle and rich peasants are also free to invest capital whenever they want to expand their capital. There is no hinderance other than the lack of capital and misfortune unleashed upon them by the unfaithful market.

So, in totality, the case as exists in India is such that on the one hand the capitalist mode of production has already been “territorialised” and on the other hand the predominant land ownership is small peasant proprietorship already having experienced the ruin of capitalist farming. India is at a stage where the bourgeois mode of production has already entrenched itself in landed property and has a complete sway over the over agriculture from top to bottom (and now its second phase i.e. corporate phase if we at call it by a such name)… when the private property has become far more bourgeois than feudal, …when the bourgeoisie as class has already become bound up with landed property on a broad, predominating scale, has already been territorialised itself, settled on the land, fully subordinated landed property to itself, then land is like any other capital, an instrument of production, a condition of production as in Industry.

So, in India, landed property cannot draw absolute rent as the existing land ownership doesn’t appear or act as a barrier to capital. So far as the differential rent is concerned in this condition it goes to state. But this sphere of production can still draw surplus profit in the same manner as in industry establishment of monopoly draws surplus profit. For example, C2 plus 50% is a surplus profit itself. But now if corporate takes over agriculture, and a monopoly of big finance capital in agriculture is established, then we know that the surplus profit accruing to rich peasants will not be abolished as our self-proclaimed “Marxist thinker” want to have us believe; it will rather be taken over and made to give way to maximum profit accruing to these financial monopolies that by then would have monopolised the agriculture. We know monopoly strives for maximum profit, not just profit, super profit or surplus profit. So here the surplus profit will take the form of maximum profit in case if monopolisation of agriculture is completed. And we know if proletarian revolution doesn’t occur, the new farm laws, that are intended towards it, will certainly lead to its establishment. It is even a bigger, a much bigger tribute. But it is not absolute rent. It is outrightly a burden on people and there is no doubt about this. Surplus profit, whoever accrues it, must not be supported.

So, to conclude, we can say:

  1. India, with the territorialisation of bourgeoisie as class in land having been completed, the basis of absolute rent has vanished and hence urge for nationalisation is also gone among peasants. However, the proletariat if it comes to power may resort to it, but only as a measure just equivalent to a socialist measure, just for creating a ground for collectivisation of agriculture, as something that would instantly take us to go for full steam socialisation of agriculture,
  2. Mere nationalisation of land has obvious limitations. Even if landed property is taken over by the state along with retention of capitalist mode of production, the landed property goes to become the property of the whole capitalist class that owns the land though the bourgeois state, and then differential rent would still remain but will go to state. This in essence is the condition already existing in India.
  3. If, however the landed property becomes socialised i.e., becomes the property of the whole working people, then the whole basis of rent, whether absolute or differential, will be abolished.

Marx dealing with an example writes: “With the abolition of landed property and the retention of capitalist production, this excess profit arising from the difference in fertility would remain. If the state appropriated the land and capitalist production continued, then rent from II, III, IV would be paid to the state, but rent as such would remain. If landed property became people’s property, then the whole basis of capitalist production would go, the foundation on which rests the confrontation of the worker by the conditions of labour as an independent force” [p. 103-104, Theories of Surplus Value (Part II), Capital Vol. IV, Progress Publishers (Reprinted by From Marx to Mao Digital Reprints)]


“…differential rent is linked with the regulation of the market-price and therefore disappears along with the price and with capitalist production. There would remain only the fact that land of varying fertility is cultivated by social labour and, despite the difference in the amount of labour employed, labour can become more productive on all types of land. But the amount of labour used on the worse land would by no means result in more labour being paid for [the product] of the better land as now with the bourgeois. Rather would the labour saved on IV be used for the improvement of III and that saved from III for the improvement of II and finally that saved on II would be used to improve I. Thus, the whole of the capital eaten up by the landowners would serve to equalise the labour used for the cultivation of the soil and to reduce the amount of labour in agriculture as a whole.”[p. 105-106, Ibid.]

This is what will be achieved with the socialisation of agriculture under the proletarian state.

It also means that if tribute or surplus profit is to be abolished in totality, it can be done only under the proletarian state or Socialism. If someone is happy that the financial monopoly will do away with this, he is not only ignorant, but also a traitor.  

Absolute rent is surplus profit over and above the market price, where as differential rent is the difference between Market price and the value of the produce grown on favoured land. So, price rise above the market price is due to absolute rent and not due to differential rent. Marx clearly writes that “the view that rent (as a surcharge over the Market Price) arises from the monopoly price of agricultural products, the monopoly price being solely due to the landowners possessing the monopoly of the land. According to this concept, the price of the agricultural product is constantly above its value. There is a surcharge of price and the law of the value of commodities is breached by the monopoly of landed property.” [p. 162, Ibid.] (bracket ours)

But why does it arise from the monopoly of landed property? Marx writes that “Rent arises out of the monopoly price of agricultural products, because supply is constantly below the level of demand or demand is constantly above the level of supply.” [Ibid.]But why does supply not rise to the level of demand? And what will happen if the supply surpasses demand? Here comes into it the role of exceptions like overproduction and economic crisis. In capitalism it will work with different and opposite results. Under capitalism in crisis and burdened with overproduction, the market price will have lesser average profit. It may sometimes fall below value (cost of production) and sometimes even below cost-price of commodities. Although it doesn’t exclude occasional rise in prices to earlier usual level i.e. one that used to ensure average profit. It means under a capitalist regime that is too much afflicted with overproduction and economic crisis, the market prices will keep very low for the farmers, while on the other hand it will at the same act as a lever for the monopolists and financial speculators  who control and manipulate the market to go for extract maximum profit by establishing monopoly price regimes once after the produce of the farmers are bought at the cheapest rate at the time of harvest, using their mechanism of control over the state. 

In case of India, where the bourgeoisie are already ‘territorialised’ in landed property exclusively subordinating it, the question of absolute rent has vanished long back. In India, capitalist relation of production in agriculture didn’t come as the complete destruction of old feudal relations but in the form of remoulding of the old relations on new bourgeois lines. So, as mass confiscation of the feudal landed properties didn’t occur, the question of lack of sufficient capital was always haunting, and it was solved by raising indirect taxes, taking loans from within or from abroad, through extreme exploitation of labour and poor peasants’ property. This whole process took not much time and we see that around 1980s and onwards Indian capital grows big both in agriculture and industry.

In this whole period as mentioned just above, before the acute crisis in agriculture surfaced, MSP rose only occasionally above the market price of agriculture produce.[13] So, we can conclude that 1) average rate of profit was being realised 2) MSP was not a surplus profit except for a few occasions when the market price plummeted. The capital formation in agriculture was thus brought not by assuring surplus profit but through average profit. What we see after this is that agrarian crisis surfaces in the 1990s and poor marginal peasants followed by lower middle peasants in some cases started committing suicides. Before it could be handled, the crisis started affecting well off peasants too. Then came the recommendation of Swaminathan Commission in 2007-08 that gave a new meaning and dimension to MSP (C2 + 50%) which guarantees a surplus profit over and above the market price which has been regularly plummeting since long. MSP in this new form is certainly a surplus profit, a tribute. But in 2004 itself the government intention was to do away with it while bringing new corporate tools like forward trading, futures and contract farming in place so as to assure the rich peasants high market prices by stabilising the market price. Even in 2021, this demand hasn’t been met and as Modi government has inaugurated the second phase of capitalist farming with the introduction of new farm laws opening the gate for corporate to take control of it, there is no chance of allowing the rich peasants to enjoy surplus profit anymore and in its place corporate monopoly pricing will be established.

[1] Here I am unable to hold back by temptation of quoting Marx in a huge way as they constitute the most important part of this chapter.  see these words of Marx–

“This form of landed property presupposes, as in the earlier older forms, that the rural population greatly predominates numerically over the town population, so that, even if the capitalist mode of production otherwise prevails, it is but relatively little developed, … In the nature of things, the greater portion of agricultural produce must be consumed as direct means of subsistence by the producers themselves, the peasants, and only the excess above that will find its way as commodities into urban commerce. No matter how the average market-price of agricultural products may here be regulated, differential rent, an excess portion of commodity-prices from superior or more favourably located land, must evidently exist here much as under the capitalist mode of production. …The assumption here is generally to be made that no absolute rent exists, i.e., that the worst soil does not pay any rent …precisely under this form where the price of land enters as a factor in the peasant’s actual cost of production … because in the course of this form’s further development either the price of land has been computed at a certain money-value, in dividing up an inheritance, or, during the constant change in ownership of an entire estate, or of its component parts, the land has been bought by the cultivator himself, largely by raising money on mortgage; and, therefore, where the price of land, representing nothing more than capitalised rent, is a factor assumed in advance, and where rent thus seems to exist independently of any differentiation in fertility and location of the land.” (bold ours) [p. 791, MECW Vol. 37, Capital Vol. III, Lawrence & Wishart Electric Book]


“For, absolute rent presupposes either realised excess in product value above its price of production, or a monopoly price exceeding the value of the product. But since agriculture here is carried on largely as cultivation for direct subsistence, and the land exists as an indispensable field of employment for the labour and capital of the majority of the population, the regulating market-price of the product will reach its value only under extraordinary circumstances. But this value will, generally, be higher than its price of production owing to the preponderant element of living labour, although this excess of value over price of production will in turn be limited by the low composition even of non-agricultural capital in countries with an economy composed predominantly of land parcels.” [p. 791-792, Ibid.]

Further —

“For the peasant owning a parcel, the limit of exploitation is not set by the average profit of capital, in so far as he is a small capitalist; nor, on the other hand, by the necessity of rent, in so far as he is a landowner. The absolute limit for him as a small capitalist is no more than the wages he pays to himself, after deducting his actual costs. So long as the price of the product covers these wages, he will cultivate his land, and often at wages down to a physical minimum. As for his capacity as land proprietor, the barrier of ownership is eliminated for him, since it can make itself felt only vis-à-vis a capital (including labour) separated from land-ownership, by erecting an obstacle to the investment of capital.” [Ibid.]

“It is true, to be sure, that interest on the price of land – which generally has to be paid to still another individual, the mortgage creditor — is a barrier. But this interest can be paid precisely out of that portion of surplus-labour which would constitute profit under capitalist conditions. The rent anticipated in the price of land and in the interest paid for it can therefore be nothing but a portion of the peasant’s capitalised surplus-labour over and above the labour indispensable for his subsistence, without this surplus-labour being realised in a part of the commodity-value equal to the entire average profit, and still less in an excess above the surplus-labour realised in the average profit, i.e., in a surplus-profit.” [Ibid.]

“For the peasant parcel holder to cultivate his land, or to buy land for cultivation, it is therefore not necessary, as under the normal capitalist mode of production, that the market-price of the agricultural products rise high enough to afford him the average profit, and still less a fixed excess above this average profit in the form of rent. It is not necessary, therefore, that the market-price rise, either up to the value or the price of production of his product. This is one of the reasons why grain prices are lower in countries with predominant small peasant land proprietorship than in countries with a capitalist mode of production. One portion of the surplus-labour of the peasants, who work under the least favourable conditions, is bestowed gratis upon society and does not at all enter into the regulation of price of production or into the creation of value in general. This lower price is consequently a result of the producers’ poverty and by no means of their labour productivity.” [Ibid.]

[2] See chapter 10, Capital, volume III, Marx writes – Our analysis has revealed how the market-value (and everything said concerning it applies with appropriate modifications to the price of production) embraces a surplus-profit for those who produce in any particular sphere of production under the most favourable conditions. With the exception of crises, and of overproduction in general, this applies to all market-prices, no matter how much they may deviate from market-values or market-prices of production. For the market-price signifies that the same price is paid for commodities of the same kind, although they may have been produced under very different individual conditions and hence may have different cost-prices. (We do not speak at this point of any surplus-profits due to monopolies in the usual sense of the term, whether natural or artificial)”. [p. 197, Ibid.] Please see the words, made bold by us. These words of Marx reveal that Marx’s analysis needs to be modified in the conditions of crises and overproduction and more so when we of late have been in a state of permanent economic crisis and overproduction has become an untreatable disease.

[3] see footnote no. 1.

[4] 1982 NSS data or figure for share cropping say that just 3.99% of the total operational area and 6.21% of total holding is under share cropping. If we calculate from this data the figure in percentage of share cropping of landlords’ land it will be even smaller.

[5] Marx writes that: “it is evident that this rent is always a differential rent, for it does not enter as a determining factor into the general production price of commodities, but rather is based on it. It invariably arises from the difference between the individual production price of a particular capital having command over the monopolised natural force, on the one hand, and the general production price of the total capital invested in the sphere of production concerned, on the other… It would not alter matters one bit if the capitalist himself should be the owner… in such a case, (he will#) pocket as before the surplus-profit in his capacity as (land) owner, and not in his capacity as capitalist ..this does not arise from the absolute increase in the productiveness of employed capital, or labour appropriated by it, since this can only reduce the value of commodities; it is due to the greater relative fruitfulness of specific separate capitals invested in a certain production sphere, as compared with investments of capital which are excluded from these exceptional and natural conditions favouring productiveness. For instance, if the use of steam should offer overwhelming advantages not offered by the use of water-power, despite the fact that coal has value and the water-power has not, and if these advantages more than compensated for the expense, then, the water-power would not be used and could not produce any surplus-profit, and therefore could not produce any rent.” [p. 640, MECW Vol. 37, Capital Vol. III, Lawrence & Wishart Electric Book]

“the natural force is not the source of (this#) surplus-profit, but only its natural basis, Were it not for the fact that the various values are averaged out into prices of production, and the various individual prices of production into a general price of production regulating the market, the mere increase in productivity of labour through utilisation of the waterfall would merely lower the price of commodities produced with the aid of this waterfall, without increasing the share of profit contained in these commodities. Similarly, on the other hand, this increased productivity of labour itself would not be converted into surplus-value were it not for the fact that capital appropriates the natural and social productivity of the labour used by it as its own… the private ownership of the waterfall in itself has nothing to do with the creation of the surplus-value (profit) portion, and therefore, of the price of the commodity in general, which is produced by means of the waterfall. This surplus-profit would also exist if landed property did not exist”; for instance, if the land on which the waterfall is situated were used by the manufacturer as unclaimed land. Hence landed property …is not the cause of the creation of such surplus-profit, but is the cause of its transformation into the form of ground-rent, and therefore of the appropriation of this portion of the profit, or commodity-price, by the owner of the land or waterfall.” [Ibid.]

[6] see footnote no. 1.

[7] Marx writes about it thus: “It is a transitory form from the original form of rent to capitalist rent. Under it, the manager farmer furnishes labour (his own or another’s) and also a portion of working capital, and the landlord furnishes, aside from land, another portion of working capital (e.g., cattle), and the product is divided between tenant and landlord in definite proportions which vary from country to country.” [p. 789, Ibid.]

From Marx’s writing, its following features can be discerned 1) Here farmer lacks sufficient capital and hence can’t afford investment required for complete capitalist management. So, he is not a capitalist farmer. 2) On the other hand, the share appropriated by the landlord does not bear the pure form of rent. It may include i) interest on the capital advanced by him and an excess rent or ii) it may also absorb practically the entire surplus-labour of the farmer, or leave him a greater or smaller portion of this surplus-labour. But, iii) it essentially doesn’t include rent that appears as the normal form of surplus-value in general. 3) the sharecropper, whether he employs his own or another’s labour, lays claim to a portion of the product not in his capacity as labourer, but as possessor of part of the instruments of labour, as his own capitalist. 4) the landlord claims his share not exclusively as a landowner but also as lender of capital.

[8] He writes that the market-price deviates from the value of the commodity because of the different conditions of production prevailing in various sectors and regions and due to the competition among different capitals.” Just a paragraph later, he writes that “the market-price keeps fluctuating around the centre of gravity of the prices of production, due to the changing equations of demand and supply.” So, in a way he confuses value with the centre of gravity of the prices of production.

[9] This is one reason that the theorists of capitalism or capitalist production at least theoretically advocate abolition of free private ownership in landed property and opt for handing it over to its own capitalist state i.e. nationalization of landed property as opposed to private ownership which abolishes the absolute ground rent as we shall see it later.   

[10] Here Marx portrays the most radical role of capital, depict what capital can do to old form of landed property in pursuit of the form of landed property most suitable to itself. It however doesn’t mean that capital can perform such a role anywhere and anytime in an unrestricted manner. After what happened in French Revolution of 1848 in particular and all revolutions and revolts of that period in general and especially after Paris Commune and Russian Revolution, the bourgeoisie of the world nowhere show any such radical behaviour, let alone performing their radical role. However, they are true to their historical mission of transforming the whole world in their own image by adopting compromising methods vis-à-vis feudal and landed gentry i.e. retaining most of the old form as far as possible while resorting to slow and steady, reformist rather than revolutionary way of capitalist development, adopting the method of state reforms from above rather than letting it be effected from below by the masses. 

[11] In this process, however, while capital frees the serfs, slaves and vassals to become able to exist as direct producers by shedding off their old status and this shows the radical role of capital, nevertheless capital impoverishes them again to the point of absurdity so much so that it finally goes against the expansion of capital itself and in this sense the landed property transformed by the influence and need of capital into the form most suitable to capitalist production finally turns into a property ad absurdum which now can only be done away with by a proletarian revolution which will socialise the whole agriculture which is otherwise already operated on social scale but for the benefit of capital through private appropriation of the fruits of socially operated agriculture.

[12] which together with simple peasant bourgeoisie constitute what we call rich peasants or kulaks. So naturally, in India, our observation is that what we call the class of rich peasant comprises both peasant bourgeoise as well as rural bourgeoisie i.e. industrial-commercial bourgeoisie having large modern farms as well as other business all well run on developed capitalist lines. Com. Mukesh Aseem has well described this as: A thin uppermost stratum of rich farmers has now metamorphosed into small-medium capitalists passing through the stages of being agri-entrepreneurs dabbling into agro-processing industries, seed-fertiliser-pesticide sellers, petrol-diesel dealers, brick kiln owners, tractor-bike-agricultural implements dealers, etc to commission agents and directors of cooperative sugar mills and cooperative banks. Their interests are now completely aligned to corporate capitalist class. The farmer producer companies being newly formed now are also controlled by this stratum. This section cannot remain stuck with the demand for purchase guarantee at assured remunerative prices since the agriculture produce is raw material for them and lower prices of these are in their own interest. They only need some protection from big capital which the government is ready to offer them. Hence they are bound to break away from this movement at some stage but after creating some panic in the ranks.” (see TT, No. 12, Postscript II. Bold by the present author)

[13] This has been well explained by comrade Mukesh Aseem in his article From MSP To Purchase Guarantee”. He writes: “As the name itself denotes about the history of its genesis, Minimum Support Price (MSP) was a measure of support to ensure minimum price to farmer producers in case the market prices went below the level of MSP. That implies an assumption at that time that the prices usually remain above this level. However, if the prices in the open market went below this level owing to increased supply, MSP would act as an emergency insurance policy for the farmers enabling them to avoid losses by selling to government at this price so that farmers will not be discouraged from growing cereals like wheat, paddy, etc. It was never a guarantee of buying whole produce by the government and the government procurement mechanism was initially designed only to cater to the needs of the Public Distribution System (PDS) and later also the Buffer Stocks. Such is the initial history of MSP.”(refer to TT 12) I would ask readers to go through this article once again 

One thought on “Transformation Of Surplus Value Into Ground Rent And The Question Of MSP: Here Too Our Self-Proclaimed “Marxist Thinker” Looks So Miserable! [3]

Add yours

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Create a website or blog at

Up ↑