CPI-ML New Democracy

A study note on  Transition of agriculture & Marxist problematic after publication of Capital (1867)

Dr Amitabha Chakrabarti

‘Philosophers  have hitherto only interpreted  the world in different ways; the point is to change it.’ – Marx

I dedicate this talk to the memories of our martyrs who have dedicated their lives to fight against the MNC–Corporate-State nexus of Forceful occupation of Land, Forest & Water bodies (Jal- Zamin –Jungal). To Those who have dedicated their lives for the emancipation of toiling masses.

(This paper was presented at Marx Bicentenary Meeting held in Kolkata on May 5, 2018)

The question of agricultural transition in ‘Capital’ is based primarily on Marx’s concept of the law of value and his analysis of ground rent. This study is mostly based on the experience of Western Europe with its classic form in England. Marx’s Studies on agricultural transition in places other than western Europe are less discussed. Kautsky in his famous writing on capitalism & agriculture talked about the relation between capital, precapital and noncapital within the capitalist society. He discussed on transition in some of the East European societies. Lenin praised Kautsky’s writing on this issue. An analysis of the relationship between agriculture and capital beyond West Europe is very important to understand the transition of agriculture in India.
The central concept of Marx’s work on capitalist transition of agriculture consists of: the law of value, equalization of rates of profit and ground rent. Marx investigated applicability of the general laws of capitalism to a fully capitalist agriculture. Marx considered “the specific conditions of production and circulation which arise from the investment of capital in agriculture” and agriculture was only one among a number of spheres of capitalist investment and production in a capitalist society.
Marx introduced the concept of rent defined in general in capitalist economies as surplus value in excess of average profit. Ground rent, however, is a particular form of rent based on land ownership. In discussing agricultural ground rent if we go through ‘Transformation of surplus profit into ground rent’ (Capital III: Part VI Ch-37) we find some important assumptions which has been nicely summarized by Wilfrid B Denis in his writing- Capital & Agriculture- A review of Marxist Problematics- ‘Marx operates from a number of working assumptions which are crucial. The first is that both agriculture and industry are fully capitalist. In both sectors surplus-value originates from identical relations of production. Marx also assumes, in this respect, the free movement of labour and capital between sectors, which means that the general tendency towards the equalization of the rate of profit exists in the economy as a whole. Secondly, he assumes a lower organic composition of capital in agriculture than in industry so that the production of value is higher in proportion to the capital invested in agriculture than in industry. Thirdly, he assumes that the supply of agricultural products is slightly inferior to demand. Fourthly, all agricultural production is wheat production and the production factors and costs for other agricultural commodities can be transformed into equivalents of wheat production. The final assumption is that the land owning class is separate from the capitalist farmers’.
Ground rent in a capitalist society is related to the equalization of rates of profit and its components, market price, market value and production price. Different levels of productivity in a sphere mean that individual commodities will have different values. Out of these individual values a general average value consisting of average costs plus average profit will be determined by the average conditions of production. Here the word average refers to the bulk of commodities produced under generally prevailing conditions. Marx in the ‘Genesis of capitalist ground rent’ (Capital III) said ‘The whole difficulty in analyzing rent, therefore, consists in explaining the excess of agricultural profit over average profit not the surplus value’. Marx warned that ‘there can be no talk of rent in modern sense’ in a society where capital does not perform the function of enforcing all surplus labour and appropriate directly all surplus value. Market value, or average value, forms the centre around which market prices fluctuate. These fluctuations depend on demand-supply factors. Average market value determines market prices when ordinary demand is met by a normal supply of commodities. Since similar commodities will have a common market price, a balanced demand-supply market means that commodities whose individual value is below average will realize extra value and extra profit. Commodities with above average individual value will be unable to realize a portion of their surplus value and will sell at a loss. This lost value is in fact transferred to commodities of below average value. Again, when supply exceeds demand, market price is determined by commodities produced in the best conditions so that even those commodities produced in average conditions sell at a loss. On the other hand, if demand exceeds supply, the commodities produced in the worst conditions determine market price so that all commodities produced in better conditions, including in this case commodities of average value, obtain more than their individual value.
That commodities can obtain more value than they embody brings us to Marx’s discussion of rent. Marx explained that ‘all ground rent is surplus value, the product of surplus labour’. Marx draws a distinction between differential and absolute rents. With the development of an average rate of profit in any sector, a special case of surplus profit arises when high productivity firms monopolize natural forces, such as waterfalls or natural land fertility, or rich ore deposits. In such cases, the increased productivity, and subsequent super profits arise neither from capital nor labour, but from “. . . the greater natural productiveness of labour bound up with the application of a force of Nature, but not a force of Nature that is at the command of all capital in the same sphere of production ….” (Capital III – Differential Rent: General Remarks) The use of such monopolized natural forces creates super profits which consist of ground rent. These are differential ground rents since they do not enter into the determination of production price but rather are based on it. In agriculture such rents accrue to all producers whose individual price of production is less than the average, as long as supply-demand factors are such that market values are not determined by the most favourable conditions.
With an average rate of profit in agriculture, there are three causes for productivity differentials and the subsequent differential rents. First is location in reference to access to markets and Second is natural fertility (‘Fertility although an objective property of the soil, always implies an economic relation’- Marx). Marx referred to these two sources of rent as differential rent I.
Differential rent lI depends on the intensity of production which itself depends on the investment of constant and variable capital- ‘Difference in distribution of capital (and ability to obtain credit) among tenants are added to the differences in fertility’. Yield on land of equal natural fertility and similar location will vary according to capital invested. These differential rents, which distinguish high from low productivity soils, do not determine agricultural prices. Rather they account for the distribution of surplus value within agriculture on the basis of an average price of production for agricultural commodities. In fact differential rents appear even within SCP as long as commodities are sold for a common average price on the market. Marx’s earlier assumption that demand for agricultural products slightly exceeds supply leads him to conclude that the land of worst quality in production determines market price, and that all other lands collect a differential rent. This is consistent with his earlier assumption that agriculture is capitalist so that land will be entered into or removed from production in direct response to demand fluctuations. Capitalist farmers who operate on soils of even less fertility than those determining market price will not obtain an average profit. Consequently they will invest their capital elsewhere. As indicated earlier, Marx assumed a lower organic composition in agriculture than in industry. Consequently the production of value and surplus value would be proportionally higher in the former. Assuming the free movement of capital to and from agriculture, this higher surplus value would be transferred to industrial and other capital through the development of the general rate of profit. Land ownership as private property, however, exists as a barrier to the free movement of value.
Capital can not be invested in agriculture without the consent of the land-owners. It is usually obtained in exchange for a share of the value produced. Consequently even land of the worst quality actually in production can collect rent. Such rent is absolute rent since it is not related to productivity but rather to simple entry upon the land for agricultural production. Absolute rent inflates market price in agriculture above production price and consequently removes from capital outside agriculture a part or all of the surplus value in excess of agricultural production price. Normally this excess would be transferred to non-agricultural capital through the equalization of the rate of profit. But ‘owing to the barrier raised by landed property’ market price has to rise to a level so that land can yield a surplus over the price of production. Land monopoly reduces the amount of value available for equalization of rates of profit in the economy as a whole and thus reduces the general rate of profit. By this way it hinders the equalization of rate of profit among capitals invested in land. The margins for absolute ground rent are agricultural production prices and market value. If market value falls to the level of production price, or if the organic composition reaches that of industry and rates of profit become similar, then there is no extra surplus-value to be appropriated as absolute rent in the sense of surplus above average profit. (The agricultural landowners then find its ownership of land as non profitable) Landowners, however, can still collect a revenue by creating a monopoly price which forces agricultural commodities to be sold not only above their production price but above their value. Such monopoly prices transfer value from other sectors to agriculture and again reduces the amount of value available for the equalization of rates of profit.
So far we have only discussed capitalist ground rent, that is agricultural surplus value in excess of average profits. But appropriation of surplus labour in agriculture can also take the form of labour rent, rent in kind and money rent. The transformation of rent in kind to money rent presupposes ‘a considerable development of commerce, of urban industry, of commodity production in general, and thereby of money circulation’. These forms of ground rent are the dominant form of appropriation of surplus labour in pre-capitalist epochs. Unlike capitalist rent, they are the equivalent of capitalist profit and do not refer to an excess over profit. Where peasant smallholding develops under the CMP, it is possible for smallholders to own their land and pay no rent. When they purchase land, the price of land and the interest paid is deducted from their surplus labour, which is the equivalent of the capitalist average profit since the smallholder is not concerned with average profit. Cost of land, therefore, appears as a deduction from smallholders’ surplus labour, in contrast to capitalist farmers where it is an excess above average profit. In both cases the price of land includes differential rents I, and that part of II which is fixed to the land. The expenditure of money capital for purchase of land by small landholders decrease their capital in production, it reduces their means of production. According to Marx this contradicts capitalist mode of production, it subjects the small peasants to moneylenders. Because land is a commodity with a price, the illusion often exists that land has value and thus partly determines prices of agricultural commodities. But the only case when rent and the price of land which is capitalized rent can influence such prices is that of absolute rent. This occurs either when a lower organic composition of capital in agriculture produces value above production price and market conditions allow landowners to appropriate this excess value, or, through monopoly prices. Such absolute rent represents a blockage of the equalization of rates of profit. The evolution of agriculture in the capitalist mode of production from Marxist viewpoint is essentially an analysis of the distribution of value, among fractions of capital and a landowning class, based on the law of value.
Marx generalized and abstracted from the first indications of capitalist industrialization of agriculture in Britain to their pure form, leading him to predict the eventual disappearance of simple commodity agriculture under the onslaught of large scale mechanized production and the predominance of wage labour. Apart from this analysis, some of Marx’s earlier writings also clearly indicate his expectations regarding the inherent and impending expansion of capitalism through the destruction of pre-capitalist modes of production. A number of authors have integrated his analysis of ground rent to his expectations regarding the disappearance of SCP agriculture. These studies, even if they have clarified and re-explained Marx’s analysis of ground rent, have not contributed significantly to it, and have tended to emphasize the disintegration of SCP agriculture. Kautsky said industrial capital comes to dominate agriculture and proletarianize the peasants on location. This prediction of the development of a capitalist agriculture corresponded in fact to the available statistics on British agriculture at the time of Kautsky’s writing. For Lenin growing differentiation within the peasantry would eventually dissolve peasant agriculture. The growing concentration of ownership of land and means of production fosters the development of an agrarian bourgeoisie among the rich peasants and the proletarianization of the remaining peasants. Frequently there is a notion that differentiation within SCP will always lead to the development of an agrarian or agricultural bourgeoisie and proletariat. There is an attempt to identify in agriculture identical economic and social developments as in industry and commerce. “Thus the fundamental principle of this logic … is not the unity but the uniformity of the world, … the idea of the general movement towards ‘development,’ ‘realization,’ ‘maturity,’ in one word, identification. All that does not belong in thecategories of the CP, is thought to be precapitalist and will (must) disappear.” (Wilfrid B Denis) These notions of differentiation and identical development are still used today.
The major weakness of this approach is that it made transformation into dogma. A certain differentiation undoubtedly take place within agriculture itself as some SCP farmers expand while others are forced to sell out. But to predict the imminent dissolution of SCP agriculture, as well as other forms of non-capitalist production do not corroborate concrete social conditions. Such predictions reflect a very incomplete analysis of the various forms of value production and distribution in SCP and CMP and their relationship. They also fail to consider the specificity and the potential for resistance and adaptation by simple commodity producers, as well as the interplay of economic factors affecting both SCP agriculture and capital generally.
The analysis of the transition to the CMP must begin with the identification of the dominant pre-capitalist relations of production and their composing social classes. Since, by definition a mode consists of two classes, therefore at the level of interaction with capital two or more modes means that four or more classes are in contact. The ensuing class alliances play a determining role in the outcomes of the class antagonisms existing in the various modes. Survival of pre-capitalist forms helps capital to extract surplus, they are simply integrated into the CMP. The extent and speed of this integration depends very much on class struggle and alliances.
In the case of peasant agriculture in underdeveloped countries the appropriation of surplus labour is carried out by the local dominating class (unlike industry the surplus extraction from direct producer occurs outside the field of production- in a interlocked market) which then loses some or most of it to merchant capital (circulating capital), depending on the relative strength of each. The law of value is operative mostly at the international level but only within capitalism. Consequently when exchanges occur between pre-capitalist production and capital, prices of pre-capitalist products are not determined by the law of value. Rather they are determined by historically established power relations in the form of unequal exchange.
The relative strength of each determines market prices, rather than economic laws. The actual linkages between non-capitalist producers and capital are relations of unequal exchange. In other words, prices are set at the whim of the capitalists (finance capital & its domestic allies), independently of any economic laws.
Surplus, in an economic sense refers to a relation between a producer and a non-producer where value is appropriated by the latter. Here we have an inadequate integration of Marx’ law of value into the framework. This also indicates a shift away from the analysis of economic laws of capitalism based on the labour theory of value in Marx’s Capital.
Marx has explained that in all cases of ‘conquest’ the conquering people subjugates the conquered “Under its own mode of production (e.g. English in Ireland in this century and partly in India) or it leaves the old mode intact and contents itself with a tribute or a reciprocal interaction takes place where by something new, a synthesis arises (the Germanic conquests, in part)” – A contribution to the critique of Political Economy. ‘Reciprocal interaction’ ‘with something new, a synthesis’ can explain the inadequate integration of Marx’s law of value into a framework.
Marx was aware of the progressive historical character of capitalism but he was also aware of the contradictory character of capitalism. Marx knew capitalism could sustain and strengthen archaic social forms. In 1847 he wrote ‘Direct slavery is as much the pivot of bourgeois industry as machinery credits etc. without slavery you have no cotton; without cotton you have no modern industry…. slavery is an economic category of greatest importance. In his writing on American Civil war Marx wrote: the slave south grew and developed simultaneously with the monopoly of English cotton industry on the world market. While discussing about Ireland Marx told: England struck down manufacturers of Ireland, depopulated her cities ‘every time Ireland was about to develop industrially she was crushed and reconverted into a agricultural land.’ The same manuscript documents the underdevelopment of Irish agriculture itself consequent upon English absentee landlordism. This may be a preamble to study another phase of Marxist understanding on transition in agriculture.
In ’80s famous Marxist scholar Haruki Wada drew our attention on Marx’s study on agricultural question of Russia after publication of Capital I in 1867. I am not going into the details of that period of economic study by Marx. That has been discussed in the collection ‘Late Marx and the Russian Road’ edited by Teodor Shanin. (Monthly Review Press)
Capital Vol. 1 unleashed the radical interpretation of political economy. It was built on the classical ‘theory of value’ and analyzing it led to surplus value. It was a dialectical negation of political economy. Capital has also opened up several questions regarding the development of Marxist thought that has developed later on. The materialist epistemology of Capital did not fit with Marx’s saying ‘The country that is more developed industrially’ ‘only (to) show the less developed, the image of its own future’. This understanding of Marx taken from contemporary British capitalist economy in the era of Darwinism was reflection of ‘evolutionism’ at societal level. The dialectical epistemology of Marx and evidence from his vast study contradicted this unilinear understanding. Here is an example of alternative pathway of development discussed by Marx ‘…the plebians of ancient Rome. They were originally free peasants, each tilling his own plot on his own behalf. In the course of Roman history they were expropriated….what happened? The Roman proletarians became not wage labourers,…what unfolded alongside them was not a capitalist but a slave mode of production.’ It is very interesting here to note that free peasants expropriated from their means of production does not necessarily lead to capitalism, there should be some more historical conditions.
In 1853 Marx worked on Oriental Despotism and Asiatic mode of production. We find them in his writings in New York Tribune in 1853 to Grundrisse (1857) but in the phase of ‘Capital’ (1867) unilinear model of transition to capitalism was in the fore. The global heterogeneity of societal forms were again conceptualized by Marx after his Capital (1867) reflecting new evidence and developments in 1870s.
In this aspect there is a strong relationship between Marx’s thought & Russian connection. In 1870-71 Marx started learning Russian language to study the Russian economic writings from original. His wife wrote to Engels: he has begun to study Russian as if it was a matter of life & death. He started reading writings of radical Russian scholars, Flerovskii & famous ‘populist’ scholar Chernyshevskii writings were at the top. In 1877 and more specifically in 1881 he criticized his own writings as ‘suprahistorical’ more so in relation to Russian peasant commune. The ‘populists’ challenged the propagation of liberal idea that western capitalism shall lead to the bright future of Russia, they also stood for the ability of Russia bypassing the stage of west European capitalism. The revolutionary populists put their trust on class war as described by Chernyshevskii as war of ‘peasants, part time wage workers & wage workers’. The attitude of revolutionary populists to Russian peasant commune moulded their world view. Unlike Western Europe about three fifth of the arable of European Russia was under the hand of peasant & Cossack communes. The diversity of wealth within the commune depended upon the ownership of livestock, nonagricultural properties & land from noncommunal sources. Chernyshevskii thought them as the effective agricultural organization for post revolutionary Russia along with the publicly owned industry plus some private industry. The strongest attack against populists came from ‘The Black repartition’ group led by Plekhanov, Axelrod, Zasulich etc. who by 1883 left their populism and accepted Marxism and scientific socialism. They started considering peasant communes as a sign of backwardness. They considered its removal to clear the way for proletariat and their revolutionary struggle. Interestingly Marx branded them as ‘Russian capitalism admirers’. After Fenian revolution (1848) Marx considered Ireland’s separation from England as inevitable. In 1867 he defined Irish independence with setting up protective tariff against England, agrarian revolution as Ireland’s major needs. By 1870 he concluded: ‘The decisive blow against the ruling class in England (and this blow is decisive for the working men all over the world) is to be struck not in England but only in Ireland.’ Marx always had his sympathy with fighters & revolutionaries. This attitude was present in his Russian studies as well.
Marx in his first edition of Capital Vol. 1 was highly critical of economic ideas of populists (Mentioned in one of its footnote). In first & second German edition of capital Marx wrote: ‘The expropriation of the agricultural producers, of the peasant, from the soil, is the basis of the whole process. The history of this expropriation, in different countries, assumes different aspects, and runs through its various phases in different orders of succession, and at different periods. In England alone, which we take as our example, does it have the classic form’. In the French edition it is changed ‘….it has been accomplished in a final form only in England…..but all other countries in western Europe are going through the same movement.’ It implies that the English form of expropriation as mentioned in Capital is a west European phenomenon, non west Europe (Russia or East Europe) may follow a different path of evolution. Later on Marx was found to quote only from this French edition of Capital. This change was intimately related to Marx’s study on Russia’s agricultural economy.
In the last decade of his study Marx wrote about 30000 pages on Russian agriculture without any finalized text. In 1881 in response to Zasulich’s question on Russian peasant commune Marx tried to answer in a letter (with 4 drafts) which remained unpublished and unknown for long period. In the draft of ‘Letter of Zasulich’ Marx stated: The historical situation of Russian ‘rural commune’ is without parallel! …. while it has in common landownership the (natural) basis of collective appropriation, its historical context- the contemporaneity of capitalist production- provides it with readymade material for huge scale common labour. It is therefore able to incorporate the positive achievements of the capitalist system without having to pass under its harsh tribute …… it may thus become the direct starting point of the economic system towards which modern society is tending.
In ‘Writings on Paris Commune’ an unpublished work of Marx from his notebook on Paris commune (published in 1934) Marx mentions ‘What threatens life of Russian commune is neither a historical inevitability nor a theory, it is state oppression, and by capitalist intruders whom the state has made powerful at the peasants expense.’ This state after 1861 ‘placed the Russian commune in abnormal economic conditions, its tax demands which transformed the commune into ‘a kind of inert matter easily exploited by trade, landowners and usurers’. He also said that this state fostering a new form of capitalist enterprise ‘in no way developing the productive premises of agriculture, is the best suited to facilitate and precipitate the theft of its fruits by unproductive middleman. In this way, it helped to enrich a new capitalist vermin which is sucking the already depleted blood of the rural commune.’ Marx then speaks about the Russian revolution against the ‘conspiracy of powerful interests’ which will ensure the ‘unfettered rise of rural commune, the latter will soon develop as a regenerating element of Russian society and element of superiority over the countries enslaved by capitalist regime.’ ( italics –author) Here Marx is not talking about revolution in Western Europe or of the capitalist world, he is talking about the element of superiority of Russia over capitalist regime. This is in condriction to Marx’s saying ‘The country that is more developed industrially’ ‘only (to) show the less developed, the image of its own future’.
Marx has mentioned several types of community: the Asiatic commune, the polis of the Greek and Roman world, the Germanic community, the Slav commune, and so on. These communes in time became the foundation or at least the starting point for the more complex socio-economic systems. Having discussed the primitive commune and the Asiatic, Slav, classical and Germanic forms that together make up the ‘primary’ or ‘archaic’ stage of society, we now come to the ‘secondary formation’. This includes the Asiatic society based on the ‘general slavery of the East’, the classical society based on slavery under private law, and the feudal society based on serfdom, Semi Asiatic society etc. So there is no unilinear evolution of society. This transition is marked by the appearance of clearly exploitative relationships, social classes and the State.
Engels said: “According to the materialist conception of history, the ultimately determining element in history is the production and reproduction of real life. More than this neither Marx nor I have ever asserted. Hence if somebody twists this into saying that the economic element is the only determining one he transforms the proposition into a meaningless, abstract, senseless phrase. The economic situation is the basis, but the various elements of the superstructure – political forms of the class struggle and its results, to wit: constitutions established by the victorious class after a successful battle, etc., juridical forms, and even the reflexes of all these actual struggles in the brains of the participants, political, juristic, philosophical theories, religious views, and their further development into systems of dogmas – also exercise their influence upon the course of the historical struggles and in many cases preponderate in determining their form. There is an interaction of all these elements, in which, amidst all the endless host of accidents (that is, of things and events whose inner interconnection is so remote or so impossible of proof that we can regard it as non-existent, as negligible), the economic movement finally asserts itself as necessary. Otherwise the application of the theory to any period of history would be easier than the solution of a simple equation of the first degree.” (Letter to J. Bloch, Sept. 1890)
Therefore while understanding transition in agriculture though economic condition remains the basis but ensuing class alliances can also play a determining role in the outcomes of the class antagonisms (‘political forms of class struggles and its results’), they ‘exercise their influence upon the course of the historical struggles and in many cases preponderate in determining their form’ existing in the various modes. The dialectical relationship between base and superstructure in understanding transition in agriculture should always be remembered.