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Rent and landed property

Chapter · January 2012

DOI: 10.4337/9781848445376.00055

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 49. Rent and landed property
Erik Swyngedouw

The Marxist analysis of land rent is one of the most intricate, contested and debated
themes in the history of Marxist intellectual thought, not least because Marx never com-
pleted a full analysis of rent. The third volume of Capital and Theories of Surplus Value
offer the most systematic accounts of Marx’s theorization on rent. The contours of the
problematic are nevertheless clearly drawn. As Haila (1990) puts it, the main theoretical
questions related to the vexed problem of rent are (1) how does (the substance of) rent
emerge, that is, why does land have a price, expressed in the form of rent; why and how
does land rent vary over space and in time, (2) who or what are its agents, what are their
behavioural patterns and mutual social relations, and (3) what is the economic role of rent
in the process of capital accumulation and coordination?
The theoretical difficulty resides not only in explaining why land has an exchange value
but apparently no value (defined as socially necessary labour time), but also in accounting
for its apparent anomalous character in the process of capital accumulation. While land
rent constitutes a potentially major source of income for landowners, the private and
exclusive ownership of (and therefore monopoly over) land also obstructs the accumula-
tion of capital for which the payment of land rent constitutes a major drain on profits
(as both capitalists and workers need access to land for production and reproduction).
Competition for and the mobilization of land of different absolute, relative or relational
qualities plays a pivotal role both in allocating capital flows as well as in generating
extraordinary profits (as, for example, the real estate bubble during the period 2000–07
testifies).
Marx’s theory of rent, developed primarily with an eye towards agricultural land and
other (natural) resources, but which was subsequently extended to include urban or loca-
tional land rent, draws on, but radically reformulates, Ricardo’s classical theory of the
origin of and differences between agricultural land rents (Fine, 1979). For Ricardo, who
takes an embryonic marginalist position, the origin and the level of rent are determined
by the differential fertility (naturally given and/or socio-physically improved through
capital investment) of agricultural land. Farmers will keep cultivating new lands until
the point that the least fertile land will not yield profit. This ‘marginal’ land, for Ricardo,
generates no rent. The difference of yield between the more and the least fertile land con-
stitutes for him both the origin and magnitude of land rent. That difference accrues to
the landowner in the form of rent. In other words, for Ricardo, the origin of rent resides
fundamentally in the intrinsic, albeit possibly humanly transformed, characteristics of
the soil (its fertility). In his analysis, Ricardo necessarily abstracts away from the histori-
cally constituted process of the formation of private landownership. His theory was later
extended by Johann Heinrich von Thünen, who spatialized rent by including location in

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the analysis. For von Thünen, land rent is not only determined by the natural character-
istics (given or produced) of the soil, but also by the cost of location or, rather, the cost
of overcoming the distance and other obstacles (like topography) between the farm or
market and the particular plot of land. In the twentieth century, William Alonso would
bring this perspective to the theorization of urban land prices and use.
These classical theories of rent were radically revised and reformulated by Marx. For
Marx, value does not arise from the ‘natural’ characteristics of things. These characteris-
tics are a ‘free’ gift of nature. Value, in contrast, arises from the socially necessary labour
time required to produce a given commodity under capitalist social relations of produc-
tion. The starting point for Marx is that land – like interest on capital for the owner of
money-capital – is an entitlement to the landowner in return for surrendering the use of
that land to someone else. The fundamental relationship through which rents arises is a
social one, that is, between landowners, on the one hand, and those who wish to make use
of the land, on the other (Ball, 1977, 1985 ). As Marx put it: ‘[l]anded property is based on
the monopoly by certain persons over definite portions of the globe’ (Capital III, ch. 37).

FORMS OF RENT

The owner of the land will not surrender ownership without proper recompense.
However, this understanding of the foundation of rent does not reveal anything about
the magnitude of land rent, the origin of landed property or the role of rent in capital
accumulation and coordination. Obviously, different pieces of land (whether natural,
agricultural or urban) have different and often competing uses, different prices and play,
depending on the social relations and struggles that are articulated around them, different
roles in different places and at different times.
Determining the magnitude of rent, however, remains theoretically complex and
empirically intractable. Marx basically distinguishes between four forms of rent: monop-
oly, absolute, differential rent I (DRI), and differential rent II (DRII) (Harvey, 1999).
These different, but interrelated, forms of rent, taken together, determine the magni-
tude of land rent. However, each form plays a different role and has a different origin,
although all are appropriated by the capitalist landowner. Monopoly rent, as the word
suggests, relates to the specific and unique characteristics of a particular piece of land.
Consider, for example, how the ownership of a waterfall (under historical-geographical
conditions in which hydro-power is an important means of production), a plot of land in
the officially designated Champagne region in France or an ice-cream stall near a summer
tourist attraction generate surplus profit for the owner by virtue of the unique character
of the land or location. Monopoly rents are basically redistributions of surplus value
between different forms of capital.
Absolute rent, in contrast, derives from the imperfect mobility of capital as a result
of fragmented and dispersed landownership. The latter leads to a situation – in contrast
to an otherwise unobstructed equalization of rates of profit across sectors – whereby the
organic composition of capital is lower in agriculture because rent takes a part of the
surplus value that would otherwise result from greater accumulation, a higher organic
composition and productivity increase. The classic example is agriculture where, histori-
cally speaking, the organic composition of capital (and hence productivity) was or still is

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lower than in other sectors. This lower value composition results in a situation whereby
agricultural products tend to trade above their price of production and, therefore, yield
absolute rent. Here again, absolute rent derives from the distribution of surplus value
from sectors with a higher to a lower organic composition of capital as a result of the
manner of equalization of rates of profit in a context of dispersed land ownership and
monopoly control over land, and the payment of rent as a condition of access to land
(Fine, 1979, 1980a).
Until the 1960s, most Marxist thought on rent focused on these two forms of rent. The
political implications of this were significant. Most Marxists, like Ricardo, considered
landownership as a historically archaic feudal remnant that, although transformed by
and incorporated into capitalism, constituted a drain on capital accumulation. It also
pitted landowners against both industrial capitalists and tenanted farmers. Landowners
were both parasitic on capital accumulation elsewhere and a formidable barrier to the
proper functioning of the law of value. Both absolute and monopoly rent expressed the
relative political-economic power positions and struggles between landowners and non-
owners over the appropriation of the surplus value produced.
This approach has changed since the late 1970s, when greater attention began to be
paid to the other two forms of rent that Marx identified. This was also a period during
which the theoretical and political attention shifted from a focus on agriculture to urban
land rent production and distribution (Scott, 1976). Indeed, the levels of DRI and DRII
derive from an entirely different process. These forms of rent refer to the way in which
the mobilisation of a particular piece of land affects the value of the commodities pro-
duced in or through it. In other words, DRI and DRII are strictly parallel to the role
of technological and organizational change in determining value as socially necessary
labour time (and play similarly important roles in inter-capitalist competition). While it
is still the landowner who is entitled to these rents, the origins of these parts of the total
land rent are very different. DRI is related to the absolute, relative or relational qualities
of land as a means of production: it refers to the ‘different qualities’ of land with ‘equal’
‘amounts of capital’ invested in it. These differing qualities are the result of given, but
usually historically produced, socio-natural differences between different plots of land
with respect to their ability to sustain the production of value when mobilized in a spe-
cific capital circulation process. Indeed, agricultural, resource or urban land of different
qualities requires different mobilizations of living labour to produce a given commodity
with a given magnitude of capital investment. Consider, for example, how oil wells differ
in terms of ease of oil extraction depending on, among others, geological conditions.
The difference in the average labour time it takes to produce a given quantity of, say, oil
or wheat as a result of differential quality of the land (ease of access or fertility) defines
the level of DRI. As such, Marx combines Ricardo’s theory of rent with his own theory
of value as socially necessary labour time. Rent here modifies or represents the mecha-
nism through which the law of value operates, even in a context of dispersed and private
monopoly ownership of land that obstructs the equalization of productivities over
time through competition and the capital accumulation process. The difference in DRI
between two pieces of agricultural land resides in the extra surplus value that is generated
by cultivating the more fertile (or better located) land.
DRII also derives from different qualities of land. However, in contrast to the dif-
ferences underpinning DRI (which assumes a given level of capital investment), DRII

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derives from ‘differential capital investments’ in pieces of land of ‘equal quality’. In other
words, the fertility of agricultural land can be enhanced (and over time greatly so) by
capital investment (fertilization, soil engineering, new crops and so on); similarly, the
productive capacity of urban land can be improved by new investments in the built envi-
ronment. This form of investment is strictly speaking identical to other forms of capital
investment in the form of technological or organizational improvements in the produc-
tion process. To the extent that capital investment in the labour process reduces the
socially necessary labour time, extra surplus value is generated. Marx defines this surplus,
made possible by the sinking of capital into land, as DRII.
In sum, while rent accrues to the landowner by virtue of the monopoly ownership
of land, the magnitude of land rent (and hence the price of land) is composed of four
distinct components: monopoly and absolute rent, and DRI and DRII. It is empirically
extraordinarily difficult to disentangle these four parts in the actual determination and
movement of land prices (and controversy over their exact role and status keeps raging),
but, analytically speaking, they are both clearly distinct and of fundamental importance
in understanding land rent and its role in the capital accumulation process.
It is now also possible to extend the above analysis to locational rent. Urban land rents
(those related to the built environment) are forms of locational rent par excellence. The
existence of urban rent (that accrues to the owners of houses, factories, infrastructure
and the like) too is rooted in a specific social relationship, that is, the private ownership
of land. While absolute rent and DRII are identical to the examples above, concern-
ing agricultural land, DRI takes a slightly different form. While DRI as defined above
derives from the socio-natural differences of plots of land, DRI in the case of urban rent
relates primarily to ‘locational’ differences. The latter refer to the position of a particu-
lar plot of land in relation to all other possible positions and/or to its position within a
larger geographical configuration (Swyngedouw, 1992). This locational rent in the case
of production, that is, the superior qualities of a particular place to engage a labour
process that requires a lower socially necessary labour time than another location and
so generates surplus profit, is exactly the source of surplus profit that Marx defines as
DRI. What is intriguing here is that ‘superior location’ does not derive from ‘naturally’
given conditions but, entirely, from historically and socio-spatially produced conditions.
The historically-geographically produced conditions place a specific location in a dis-
tinctive (advantageous or disadvantageous) position vis-à-vis other places. Consider, for
example, the difference in rent (or land price) between a central Manhattan location, on
the one hand, and a rival location on the outskirts of, say, Cairo, on the other. In sum,
urban DRI derives from the accrued advantages that have been produced over time as
the collective outcome of many successive rounds of capital investments in space and
its associated uneven development. These collectively or socially produced ‘locational’
effects have a great (and, over time, an increasing) effect on land rents, something
that can be cashed in ‘freely’ by the landowner, irrespective of his or her own capital
investment in the land.
It follows that all manner of individual investments, collective interventions or state
policies directly affect the magnitude of DRI. In addition, this opens up a vast terrain of
possible trade-offs or choices for capitalists. For example, they can decide either to invest
in superior technologies or to relocate to cheaper locations (or do both simultaneously).
Much of the changing geographies of capital accumulation and its associated dynamic

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mosaic of uneven geographical development derive exactly from the space/technology

trade-offs that capitalists make on a daily basis (Harvey, 1999).

RENT AND CAPITAL ACCUMULATION

Now that we have summarized Marx’s theory of the origins and magnitude of land rent
and some of its applications, we are in a position to explore the vital but highly contradic-
tory roles that land rent plays in the capital accumulation process. Land rent constitutes
a drain on capital accumulation in the sense that, while value is generated through the
labour process, rent is appropriated by the landowner purely by virtue of ownership of
the land. From this vantage point, landownership is fundamentally parasitic. Moreover,
it pits landed capital against productive capital, often resulting in frenzied inter-capitalist
struggles between landowners and other capitalists. However, this parasitic function is
complemented by a series of vitally important functions of landownership.
First, landownership serves a decidedly ideological function as it helps to legitimize
the commodification and private ownership of everything as the basis of and for social
organization. Although landownership constitutes a barrier for capital accumulation
(productive capital would be more profitable if it did not have to surrender some of its
profits to landowners), ownership of land (in the form of resources, farmland, housing
and the like) is one of the pillars of a system of generalized commodification and private
ownership of means of production and reproduction. Second, land rent also plays pow-
erful economic and regulatory roles in capital accumulation. The rent relation orders the
uses of land and organizes the spatial division of labour through its influence in allocat-
ing different moments, activities and socio-technical forms of production to different
places and, as such, land rent organizes and regulates the landscapes of production and
consumption. Third, through this allocation mechanism, land rent helps to coordinate
capital investment by assigning different forms of capital to distinct locations and activi-
ties, producing an unequal and uneven spatial division of labour. Finally, rent mediates
and helps to regulate the distribution of investment across interest-bearing, productive
and landed capital.
All this turns land rent into one of the most powerful and contradictory aspects of the
political economy of capitalism. Not only does it pit landed capital against productive
and interest-bearing capital (and its associated intra-class conflicts) but it also shapes the
conflicts between land for reproductive use (in housing or subsistence agriculture), land
for resource exploitation (or ecological reserve), land as a form of capital investment (for
landowners), land as a productive asset (comparable to other means of production) and
land as a form of fictitious capital that circulates as a purely financial asset (for financial
capital).
This complex set of contradictions points to the need for the state (or another extra-
economic configuration) to regulate and coordinate the uses of land so that, of all the
diverse means of production and reproduction, land is among the most tightly regulated
and intensely contested. Not only is landownership (that is, what one can do with one’s
land) often strictly regulated by the state through zoning, building codes, planning and
so on, the state is itself an active agent in land markets (particularly through zoning,
infrastructure planning and construction, public investment in urban development,

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appropriation laws and the like). Needless to say, an intense social struggle unfolds over
land use, land rights and access to land. Small changes in the rules governing land can
have an extraordinary impact on the level of rent and, consequently, on profits generated
through landownership.

RENT, FINANCE AND FICTITIOUS CAPITAL

In recent years, attention has moved to the increasing role of land rent (as claims on
future value) and the role of land as a financialized asset. As David Harvey (1974, 1978)
argues, titles to land are functioning increasingly as forms of fictitious capital, compa-
rable (albeit not identical) to other financial assets. Rent has become one of the possible
forms of generating future claims on value, and land titles have become integral parts of
financial capital investment portfolios. Land markets increasingly function as markets in
(paper) titles to future returns and they have become an integral part of, often speculative,
fictitious capital circulation and accumulation. Arguably, this is the fully developed capi-
talist form of the mobilization of land. While ultimately still grounded in the formation
of absolute, monopoly, DRI and DRII forms of rent, there is a complex and dynamic
relation at work under capitalism that combines the continuous production and trans-
formation of locational rents (for example, through speculative real estate urban rede-
velopment), the production of temporary monopoly rents (cashing in on design, climate,
amenities, ‘cultural capital’ and the like), the involvement of the state in producing geo-
graphical configurations that enhance DRI for specific locations and so on. The financial
crisis starting in 2007 undoubtedly arose out of the extraordinary speculative carousel
of increasing rents while turning these promises into fictitious capital assets through
complex derivative financial instruments. As with all forms of fictitious capital formation,
these speculative carousels are sustained as long as the promises for securing future value
entitlements are maintained. The recent history of global capitalism conclusively shows
how land and land rent play a pivotal role in capital accumulation while intensifying the
very contradictions that are the signature hallmark of mature capitalism.

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