Ground‐Rent and Capital Accumulation in Australia

• Published date: 01 June 2021
• Author: Nicolás Grinberg
• Date: 01 June 2021
• DOI: http://doi.org/10.1111/1467-8462.12392

The Australian Economic Review, vol. 54, no. 2, pp. 231–254 DOI: 10.1111/1467-8462.12392

Ground‐Rent and Capital Accumulation in Australia

Nicolás Grinberg*

Abstract

This paper presents an original estimation of

the size of the ground‐rent appropriated by

competing social subjects in the Australian

economy over the long term, and of several

economic variables necessary to accomplish

that measurement. The paper also assesses the

relative importance of ground‐rent in total

surplus‐value and the Australian process of

capital accumulation, finding that it consti-

tutes a significant portion. Finally, the paper

estimates the determinants of the ground‐rent

yielded by mining lands used to produced iron

ore and mineral coal during the recent

‘commodities price boom’, stressing the im-

portance of the location factor.

1. Introduction

It is widely recognised that Australia is well‐

endowed to produce primary commodities.

Between the mid‐nineteenth and late‐

twentieth century, the Australian economy

was the largest producer of wool, especially of

fine merino fibres. During the mid‐and late‐

nineteenth century it also enjoyed several gold

rushes and the beginning of a base‐metal

mining industry. Since the 1960s, it has

been undergoing a seemingly never‐ending

mineral‐resource boom. Unsurprisingly,

Australia is often called the ‘lucky country’.

Yet, despite the obvious importance that so‐

called natural resource rents have played in

the national economy, few attempts have been

made to measure them by heterodox econo-

mists. Available measurements are based on

neoclassical economic theory, thereby leaving

out of the estimation portions of those rents

appropriated through market deviations not

picked up by neoclassical price theory. All are

focused on the extractive industries, thus

overlooking portions of those rents not

considered as such by neoclassical production

theory. Against this backdrop, this paper

has three main goals. First, to present an

estimation of the long‐term evolution of the

size of the Australian ‘resource’rent based

on Marx's theory of ground‐rent. Second, to

estimate the portions respectively appropriated

by the owners of the natural conditions of

production and by other social subjects. Third, to

estimate the main determinants of the Australian

‘resource’rent during the recent period of

high primary‐commodity prices. In measuring

* CONICET, Argentina; UNSAM, Argentina.

Corresponding author: Grinberg, email <ngrinberg@un-

sam.edu.ar>.

© 2021 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research,

Faculty of Business and Economics

Published by John Wiley & Sons Australia, Ltd

those variables, the paper will also offer a

novel estimation of sectoral rates of profit

in Australia through large parts of the

period studied.

The paper is organised as follows. Section 2

discusses the determination of the capitalist

ground‐rent. Section 3 discusses the possible

state‐mediated forms taken by the process of

ground‐rent appropriation by others than the

owners of the natural conditions of labour in

national economies specialised in the produc-

tion of primary commodities. Section 4 offers

an estimation of the ground‐rent appropriated

in Australia by different social subjects and of

its relative weight in the national economy

between 1922 and 2014. Section 5 presents an

estimation of the determinants of the rent

accruing to mining lands used for iron ore

and coal production in Australia during

2002–2015. The paper closes with a brief

conclusion.

2. The Capitalist Ground‐Rent

In order to measure the size of the so‐called

‘resource’rents it is first necessary to ascertain

their social content; in other words, the quality

of this type of income as a social relation that

allocates a portion of the product of privately

performed social labour. For neoclassical eco-

nomics, rents are income above the supply price

or cost of any ‘factor of production’.Forall

‘factors’that can be reproduced, this would only

arise if competitive dynamics are somehow

restricted by non‐market forces. But, (virgin)

land cannot (yet) be produced; its supply is thus

‘fixed’. Hence, according to the theory, its

supply price is zero, and its retribution is pure

rent. Yet it can only command a price because it

is monopolised. Nobody would pay anything for

something that costs nothing to be produced and

is freely appropriable. Accordingly, to account

for the obvious differences in the size of rents

paid for the use of equally monopolised portions

of land, the theory needs to include a measure of

productivity. But, marginal productivity does

not determine prices under monopoly. As

always, the reason behind this contradictory

logic is found in neoclassical economic theory's

inversion of the issue; by transforming the

specifically human activity of consciously and

voluntarily appropriating nature to produce

objects useful for social reproduction, labour,

into a process of production through the

combinations of different ‘factors.’Moreover,

it transforms the non‐produced natural condi-

tions of human labour into one such factor,

‘land’(Marx 1981, pp. 953–1016; Iñigo‐Carrera

2017, pp. 32–6). From there to mixing ‘land’

with natural ‘resources’and considering these as

a stock of wealth with an intrinsic value, as most

measurements do, there is only a short step.

A different starting point is thus advisable. As

with any other type of income, the rent earned by

landowners thanks to their monopoly over

natural conditions of production is contained in

the prices of the commodities produced with

this means of production. However, as Ricardo

(1996[1817]) discovered and Marx (1981[1894])

elaborated, the prices of primary goods (that is,

agrarian, mining fishing and forest commodities)

are not regulated, as are those of non‐primary

commodities (that is, goods and services), by

normal conditions of production, but by marginal

ones; that is, by the least favourable natural

conditions that need to be used by industrial

capital to satisfy solvent social demand for such

products.

1

The prices of primary commodities

must allow the normal valorisation of capital

invested in those marginal natural conditions of

production or portions of land. Therefore, capital

operating in intra‐marginal lands—allowing

higher levels of labour productivity and lower

production costs—obtains extraordinary profits.

Competition to appropriate that extraordinary

surplus‐value transforms it into income for the

owner of the monopolised, non‐reproducible

natural conditions of production; ground‐rent.

In the case of agrarian commodities, where the

labour process consists of multiplying the

potentiality of a biological organism, and each

aliquot part of capital investment operates on the

same portion of (unchanged) land, differential

rent also arises in relation to the intensive

application of capital whenever equal‐size in-

vestments yield a differential (increasing or

decreasing) output. Moreover, differential rent

(‘extensive’type)alsoarisesinrelationtothe

geographical location of non‐reproducible natural

conditions required to carry out primary

232 The Australian Economic Review June 2021

© 2021 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research,

Faculty of Business and Economics