Rent

In the early periods of society, the knowledge and capital of society were employed on fresh and fertile land.

Their surplus produce gives extraordinary high profits, and extraordinary high wages, and appears but little in the shape of rent.

While fertile land is in abundance, and may be had by whoever asks for it, nobody of course will pay a rent to a landlord. But it is not consistent with the laws of nature, and the limits and quality of the earth, that this state of things should continue. Diversities of soil and situation must necessarily exist in all countries. All land cannot be the most fertile: all situations cannot be the nearest to navigable rivers and markets. But the accumulation of capital beyond the means of employing it on land of the greatest natural fertility, and the greatest advantage of situation, must necessarily lower profits; while the tendency of population to increase beyond the means of subsistence must, after a certain time, lower the wages of labour.

The expense of production will thus be diminished, but the value of the produce, that is, the quantity of labour, and of the other products of labour besides corn, which it can command, instead of diminishing, will be increased. There will be an increasing number of people demanding subsistence, and ready to offer their services in any way in which they can be useful. The exchangeable value of food will, therefore, be in excess above the cost of production, including in this cost the full profits of the stock employed upon the land, according to the actual rate of profits, at the time being. And this excess is rent.

Nor is it possible that these rents should permanently remain as parts of the profits of stock, or of the wages of labour. If such an accumulation were to take place, as decidedly to lower the general profits of stock, and, consequently, the expenses of cultivation, so as to make it answer to cultivate poorer land; the cultivators of the richer land, if they paid no rent, would cease to be mere farmers, or persons living upon the profits of agricultural stock. They would unite the characters of farmers and landlords—a union by no means uncommon; but which does not alter, in any degree, the nature of rent, or its essential separation from profits. If the general profits of stock were 20 per cent and particular portions of land would yield 30 per cent on the capital employed, 10 per cent of the 30 would obviously be rent, by whomsoever received.

It happens, indeed, sometimes, that from bad government, extravagant habits, and a faulty constitution of society, the accumulation of capital is stopped, while fertile land is in considerable plenty, in which case profits may continue permanently very high; but even in this case wages must necessarily fall, which by reducing the expenses of cultivation must occasion rents. There is nothing so absolutely unavoidable in the progress of society as the fall of wages, that is such a fall as, combined with the habits of the labouring classes, will regulate the progress of population according to the means of subsistence. And when, from the want of an increase of capital, the increase of produce is checked, and the means of subsistence come to a stand, the wages of labour must necessarily fall so low, as only just to maintain the existing population, and to prevent any increase.

We observe in consequence, that in all those countries, such as Poland, where, from the want of accumulation, the profits of stock remain very high, and the progress of cultivation either proceeds very slowly, or is entirely stopped, the wages of labour are extremely low. And this cheapness of labour, by diminishing the expenses of cultivation, as far as labour is concerned, counteracts the effects of the high profits of stock, and generally leaves a larger rent to the landlord than in those countries, such as America, where, by a rapid accumulation of stock, which can still find advantageous employment, and a great demand for labour, which is accompanied by an adequate increase of produce and population, profits cannot be low, and labour for some considerable time remains very high.

It may be laid down, therefore, as an incontrovertible truth, that as a nation reaches any considerable degree of wealth, and any considerable fullness of population, which of course cannot take place without a great fall both in the profits of stock and the wages of labour, the separation of rents, as a kind of fixture upon lands of a certain quality, is a law as invariable as the action of the principle of gravity. And that rents are neither a mere nominal value, nor a value unnecessarily and injuriously transferred from one set of people to another; but a most real and essential part of the whole value of the national property, and placed by the laws of nature where they are, on the land, by whomsoever possessed, whether the landlord, the crown, or the actual cultivator.

Rent then has been traced to the same common nature with that general surplus from the land, which is the result of certain qualities of the soil and its products; and it has been found to commence its separation from profits, as soon as profits and wages fall, owing to the comparative scarcity of fertile land in the natural progress of a country towards wealth and population.

Having examined the nature and origin of rent, it remains for us to consider the laws by which it is governed, and by which its increase or decrease is regulated.

When capital has accumulated, and labour fallen on the most eligible lands of a country, other lands less favourably circumstanced with respect to fertility or situation, may be occupied with advantage. The expenses of cultivation, including profits, having fallen, poorer land, or land more distant from markets, though yielding at first no rent, may fully repay these expenses, and fully answer to the cultivator. And again, when either the profits of stock or the wages of labour, or both, have still further fallen, land still poorer, or still less favourably situated, may be taken into cultivation. And, at every step, it is clear, that if the price of produce does not fall, the rents of land will rise. And the price of produce will not fall, as long as the industry and ingenuity of the labouring classes, assisted by the capitals of those not employed upon the land, can find something to give in exchange to the cultivators and landlords, which will stimulate them to continue undiminished their agricultural exertions, and maintain their increasing excess of produce.

In tracing more particularly the laws which govern the rise and fall of rents, the main causes which diminish the expenses of cultivation, or reduce the cost of the instruments of production, compared with the price of produce, require to be more specifically enumerated. The principal of these seem to be four: first, such an accumulation of capital as will lower the profits of stock; secondly, such an increase of population as will lower the wages of labour; thirdly, such agricultural improvements, or such increase of exertions, as will diminish the number of labourers necessary to produce a given effect; and fourthly, such an increase in the price of agricultural produce, from increased demand, as without nominally lowering the expense of production, will increase the difference between this expense and the price of produce.

The operation of the three first causes in lowering the expenses of cultivation, compared with the price of produce, are quite obvious; the fourth requires a few further observations.

If a great and continued demand should arise among surrounding nations for the raw produce of a particular country, the price of this produce would of course rise considerably; and the expenses of cultivation, rising only slowly and gradually to the same proportion, the price of produce might for a long time keep so much ahead, as to give a prodigious stimulus to improvement, and encourage the employment of much capital in bringing fresh land under cultivation, and rendering the old much more productive.

Nor would the effect be essentially different in a country which continued to feed its own people, if instead of a demand for its raw produce, there was the same increasing demand for its manufactures. These manufactures, if from such a demand the value of their amount in foreign countries was greatly to increase, would bring back a great increase of value in return, which increase of value could not fail to increase the value of the raw produce. The demand for agricultural as well as manufactured produce would be augmented; and a considerable stimulus, though not perhaps to the same extent as in the last case, would be given to every kind of improvement on the land.

A similar effect would be produced by the introduction of new machinery, and a more judicious division of labour in manufactures. It almost always happens in this case, not only that the quantity of manufactures is very greatly increased, but that the value of the whole mass is augmented, from the great extension of the demand for them, occasioned by their cheapness. We see, in consequence, that in all rich manufacturing and commercial countries, the value of manufactured and commercial products bears a very high proportion to the raw products; 10 whereas, in comparatively poor countries, without much internal trade and foreign commerce, the value of their raw produce constitutes almost the whole of their wealth. If we suppose the wages of labour so to rise with the rise of produce, as to give the labourer the same command of the means of subsistence as before, yet if he is able to purchase a greater quantity of other necessaries and conveniencies, both foreign and domestic, with the price of a given quantity of corn, he may be equally well fed, clothed, and lodged, and population may be equally encouraged, although the wages of labour may not rise so high in proportion as the price of produce.

And even when the price of labour does really rise in proportion to the price of produce, which is a very rare case, and can only happen when the demand for labour precedes, or is at least quite contemporary with the demand for produce; it is so impossible that all the other outgoings in which capital is expended, should rise precisely in the same proportion, and at the same time, such as compositions for tithes, parish rates, taxes, manure, and the fixed capital accumulated under the former low prices, that a period of some continuance can scarcely fail to occur, when the difference between the price of produce and the cost of production is increased.

In some of these cases, the increase in the price of agricultural produce, compared with the cost of the instruments of production, appears from what has been said to be only temporary; and in these instances it will often give a considerable stimulus to cultivation, by an increase of agricultural profits, without showing itself much in the shape of rent. It hardly ever fails, however, to increase rent ultimately. The increased capital, which is employed in consequence of the opportunity of making great temporary profits, can seldom if ever be entirely removed from the land, at the expiration of the current leases; and, on the renewal of these leases, the landlord feels the benefit of it in the increase of his rents.

Whenever then, by the operation of the four causes above mentioned, the difference between the price of produce and the cost of the instruments of production increases, the rents of land will rise.

It is, however, not necessary that all these four causes should operate at the same time; it is only necessary that the difference here mentioned should increase. If, for instance, the price of produce were to rise, while the wages of labour, and the price of the other branches of capital did not rise in proportion, and at the same time improved modes of agriculture were coming into general use, it is evident that this difference might be increased, although the profits of agricultural stock were not only undiminished, but were to rise decidedly higher.

Of the great additional quantity of capital employed upon the land in this country, during the last twenty years, by far the greater part is supposed to have been generated on the soil, and not to have been brought from commerce or manufactures. And it was unquestionably the high profits of agricultural stock, occasioned by improvements in the modes of agriculture, and by the constant rise of prices, followed only slowly by a proportionate rise in the different branches of capital, that afforded the means of so rapid and so advantageous an accumulation.

In this case cultivation has been extended, and rents have risen, although one of the instruments of production, capital, has been dearer.

In the same manner a fall of profits and improvements in agriculture, or even one of them separately, might raise rents, notwithstanding a rise of wages.

It may be laid down then as a general truth, that rents naturally rise as the difference between the price of produce and the cost of the instruments of production increases.

It is further evident, that no fresh land can be taken into cultivation till rents have risen, or would allow of a rise upon what is already cultivated.

Land of an inferior quality requires a great quantity of capital to make it yield a given produce; and, if the actual price of this produce be not such as fully to compensate the cost of production, including the existing rate of profits, the land must remain uncultivated. It matters not whether this compensation is effected by an increase in the money price of raw produce, without a proportionate increase in the money price of the instruments of production, or by a decrease in the price of the instruments of production, without a proportionate decrease in the price of produce. What is absolutely necessary, is a greater relative cheapness of the instruments of production, to make up for the quantity of them required to obtain a given produce from poor land.

But whenever, by the operation of one or more of the causes before mentioned, the instruments of production become cheaper, and the difference between the price of produce and the expenses of cultivation increases, rents naturally rise. It follows therefore as a direct and necessary consequence, that it can never answer to take fresh land of a poorer quality into cultivation, till rents have risen or would allow of a rise, on what is already cultivated.

It is equally true, that without the same tendency to a rise of rents, occasioned by the operation of the same causes, it cannot answer to lay out fresh capital in the improvement of old land—at least upon the supposition, that each farm is already furnished with as much capital as can be laid out to advantage, according to the actual rate of profits.

It is only necessary to state this proposition to make its truth appear. It certainly may happen, and I fear it happens frequently, that farmers are not provided with all the capital which could be employed upon their farms, at the actual rate of agricultural profits. But supposing they are so provided, it implies distinctly, that more could not be applied without loss, till, by the operation of one or more of the causes above enumerated, rents had tended to rise.

It appears then, that the power of extending cultivation and increasing produce, both by the cultivation of fresh land and the improvement of the old, depends entirely upon the existence of such prices, compared with the expense of production, as would raise rents in the actual state of cultivation.

But though cultivation cannot be extended, and the produce of the country increased, but in such a state of things as would allow of a rise of rents, yet it is of importance to remark, that this rise of rents will be by no means in proportion to the extension of cultivation, or the increase of produce. Every relative fall in the price of the instruments of production, may allow of the employment of a considerable quantity of additional capital; and when either new land is taken into cultivation, or the old improved, the increase of produce may be considerable, though the increase of rents be trifling. We see, in consequence, that in the progress of a country towards a high state of cultivation, the quantity of capital employed upon the land, and the quantity of produce yielded by it, bears a constantly increasing proportion to the amount of rents, unless counterbalanced by extraordinary improvements in the modes of cultivation. 11

According to the returns lately made to the Board of Agriculture, the average proportion which rent bears to the value of the whole produce, seems not to exceed one fifth; 12 whereas formerly, when there was less capital employed, and less value produced, the proportion amounted to one fourth, one third, or even two fifths. Still, however, the numerical difference between the price of produce and the expenses of cultivation, increases with the progress of improvement; and though the landlord has a less share of the whole produce, yet this less share, from the very great increase of the produce, yields a larger quantity, and gives him a greater command of corn and labour. If the produce of land be represented by the number six, and the landlord has one fourth of it, his share will be represented by one and a half. If the produce of land be as ten, and the landlord has one fifth of it, his share will be represented by two. In the latter case, therefore, though the proportion of the landlord’s share to the whole produce is greatly diminished, his real rent, independently of nominal price, will be increased in the proportion of from three to four. And in general, in all cases of increasing produce, if the landlord’s share of this produce do not diminish in the same proportion, which though it often happens during the currency of leases, rarely or never happens on the renewal of them, the real rents of land must rise.

We see then, that a progressive rise of rents seems to be necessarily connected with the progressive cultivation of new land, and the progressive improvement of the old: and that this rise is the natural and necessary consequence of the operation of four causes, which are the most certain indications of increasing prosperity and wealth—namely, the accumulation of capital, the increase of population, improvements in agriculture, and the high price of raw produce, occasioned by the extension of our manufactures and commerce.

On the other hand, it will appear, that a fall of rents is as necessarily connected with the throwing of inferior land out of cultivation, and the continued deterioration of the land of a superior quality; and that it is the natural and necessary consequence of causes, which are the certain indications of poverty and decline, namely, diminished capital, diminished population, a bad system of cultivation, and the low price of raw produce.

If it be true, that cultivation cannot be extended but under such a state of prices, compared with the expenses of production, as will allow of an increase of rents, it follows naturally that under such a state of relative prices as will occasion a fall of rents, cultivation must decline. If the instruments of production become dearer, compared with the price of produce, it is a certain sign that they are relatively scarce; and in all those cases where a large quantity of them is required, as in the cultivation of poor land, the means of procuring them will be deficient, and the land will be thrown out of employment.

It appeared, that in the progress of cultivation and of increasing rents, it was not necessary that all the instruments of production should fall in price at the same time; and that the difference between the price of produce and the expense of cultivation might increase, although either the profits of stock or the wages of labour might be higher, instead of lower.

In the same manner, when the produce of a country is declining, and rents are falling, it is not necessary that all the instruments of production should be dearer. In a declining or stationary country, one most important instrument of production is always cheap, namely, labour; but this cheapness of labour does not counterbalance the disadvantages arising from the dearness of capital; a bad system of culture; and, above all, a fall in the price of raw produce, greater than in the price of the other branches of expenditure, which, in addition to labour, are necessary to cultivation.

It has appeared also, that in the progress of cultivation and of increasing rents, rent, though greater in positive amount, bears a less, and lesser proportion to the quantity of capital employed upon the land, and the quantity of produce derived from it. According to the same principle, when produce diminishes and rents fall, though the amount of rent will always be less, the proportion which it bears to capital and produce will always be greater. And, as in the former case, the diminished proportion of rent was owing to the necessity of yearly taking fresh land of an inferior quality into cultivation, and proceeding in the improvement of old land, when it would return only the common profits of stock, with little or no rent; so, in the latter case, the high proportion of rent is owing to the impossibility of obtaining produce, whenever a great expenditure is required, and the necessity of employing the reduced capital of the country, in the exclusive cultivation of its richest lands.

In proportion, therefore, as the relative state of prices is such as to occasion a progressive fall of rents, more and more lands will be gradually thrown out of cultivation, the remainder will be worse cultivated, and the diminution of produce will proceed still faster than the diminution of rents.

If the doctrine here laid down, respecting the laws which govern the rise and fall of rents, be near the truth, the doctrine which maintains that, if the produce of agriculture were sold at such a price as to yield less net surplus, agriculture would be equally productive to the general stock, must be very far from the truth.

With regard to my own conviction, indeed, I feel no sort of doubt that if, under the impression that the high price of raw produce, which occasions rent, is as injurious to the consumer as it is advantageous to the landlord, a rich and improved nation were determined by law, to lower the price of produce, till no surplus in the shape of rent anywhere remained; it would inevitably throw not only all the poor land, but all, except the very best land, out of cultivation, and probably reduce its produce and population to less than one tenth of their former amount.