Section X.—: Application of some of the preceding Principles to the Distresses of the Labouring Classes since 1815, with General Observations.

It has been said that the distresses of the labouring classes since 1815 are owing to a deficient capital, which is evidently unable to employ all that are in want of work.

That the capital of the country does not bear an adequate proportion to the population; that the capital and revenue together do not bear so great a proportion as they did before 1815; and that such a disproportion will at once account for very great distress among the labouring classes, I am most ready to allow. Edition: current; Page: [414] But it is a very different thing to allow that the capital is deficient compared with the population; and to allow that it is deficient compared with the demand for it, and the demand for the commodities procured by it.* The two cases are very frequently confounded, because they both produce distress among the labouring classes; but they are essentially distinct. They are attended with some very different symptoms, and require to be treated in a very different manner.

If one fourth of the capital of a country were suddenly destroyed, or entirely transferred to a different part of the world, without any other cause occurring of a diminished demand for commodities, this scantiness of capital would certainly occasion great inconvenience to consumers, and great distress among the working classes; but it would be attended with great advantages to the remaining capitalists. Commodities, in general, would be scarce, and bear a high price on account of the deficiency in the means of producing them. Nothing would be so easy as to find a profitable employment for capital; but it would by no means be easy to find capital for the number of employments in which it was deficient; and consequently the rate of profits would be very high. In this state of things there would be an immediate and pressing demand for capital, on account of there being an immediate and pressing demand for commodities; and the obvious remedy would be, the supply of the demand in the only way in which it could take place, namely, by saving from revenue to add to capital. This supply of capital would, as I have before stated, take place just upon the same principle as a supply of population would Edition: current; Page: [415] follow a great destruction of people on the supposition of there being an immediate and pressing want of labour evinced by the high real wages given to the labourer.

On the other hand, if the capital of the country were diminished by the failure of demand in some large branches of trade, which had before been very prosperous, and absorbed a great quantity of stock; or even if, while capital were suddenly destroyed, the revenue of the landlords was diminished in a greater proportion owing to peculiar circumstances, the state of things, with the exception of the distresses of the poor, would be almost exactly reversed. The remaining capitalists would be in no respect benefited by events which had diminished demand in a still greater proportion than they had diminished the supply. Commodities would be every where cheap. Capital would be seeking employment, but would not easily find it; and the profits of stock would be low. There would be no pressing and immediate demand for capital, because there would be no pressing and immediate demand for commodities; and, under these circumstances, the saving from revenue to add to capital, instead of affording the remedy required, would only aggravate the distresses of the capitalists, and fill the stream of capital which was flowing out of the country. The distresses of the capitalists would be aggravated, just upon the same principle as the distresses of the labouring classes would be aggravated if they were encouraged to marry and increase, after a considerable destruction of people, although accompanied by a still greater destruction of capital which had kept the wages of labour very low. There might certainly be a great deficiency of population, compared with the territory and powers of the country, and it might be very desirable that it should be greater; but if the wages of labour were still low, notwithstanding the diminution of people, to encourage the birth of more children would be to encourage misery and mortality rather than population.

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Now I would ask, to which of these two suppositions does the present state of this country* bear the nearest resemblance? Surely to the latter. That a great loss of capital has lately been sustained, is unquestionable. During nearly the whole of the war, owing to the union of great powers of production with a great effectual consumption and demand, the prodigious destruction of capital by the government was much more than recovered. To doubt this would be to shut our eyes to the comparative state of the country in 1792 and 1813. The two last years of the war were, however, years of extraordinary expense, and being followed immediately by a period marked by a very unusual stagnation of effectual demand, the destruction of capital which took place in those years was not probably recovered. But this stagnation itself was much more disastrous in its effects upon the national capital, and still more upon the national revenue, than any previous destruction of stock. It commenced certainly with the extraordinary fall in the value of the raw produce of the land, to the amount, it has been supposed, of nearly one third. When this fall had diminished the capitals of the farmers, and still more the revenues both of landlords and farmers, and of all those who were otherwise connected with the land, their power of purchasing manufactures and foreign products was of necessity greatly diminished. The failure of home demand filled the warehouses of the manufacturers with unsold goods, which urged them to export more largely at all risks. But this excessive exportation glutted all the foreign markets, and prevented the merchants from receiving adequate returns; while, from the diminution of the home revenues, aggravated by a sudden and extraordinary contraction of the currency, even the comparatively scanty returns obtained from abroad found a very insufficient domestic demand, and the profits and consequent expenditure of merchants and manufacturers Edition: current; Page: [417] were proportionably lowered. While these unfavourable changes were taking place in rents and profits, the powerful stimulus which had been given to population by the continued demand for labour during the war, occasioned the pouring in of fresh supplies of labour, which, aided by the disbanded soldiers and sailors, and the failure of demand arising from the losses of the farmers and merchants, reduced generally both wages and profits, and left the country with a greatly diminished capital and revenue;—not merely in proportion to the alteration of the value of the currency, but in reference to the bullion value of its produce, and the command of this bullion value over labour, at the price at which it was actually employed. For the four or five years since the war, on account of the change in the distribution of the national produce, and the want of effectual consumption and demand occasioned by it, a check has been given to the rate of production, and the population, under its former impulse, has increased, not only faster than the demand for labour, but faster than the actual produce; yet this produce, though deficient, compared with the population, is redundant, compared with the effectual demand for it and the revenue which is to purchase it. Though labour is cheap, there is neither the power nor the will to employ it all; because not only has the capital of the country diminished, compared with the number of labourers, but, owing to the diminished revenues of the country, the commodities which those labourers would produce are not in such request as to ensure tolerable profits to the reduced capital.

But when profits are low and uncertain, when capitalists are quite at a loss where they can safely employ their capitals, and when on these accounts capital is flowing out of the country; in short, when all the evidence which the nature of the subject admits, distinctly proves that there is no effective demand for capital at home, is it not contrary to the general principles of political economy, is it not a Edition: current; Page: [418] vain and fruitless opposition to that first, greatest, and most universal of all its principles, the principle of supply and demand, to recommend saving, and the conversion of more revenue into capital? Is it not just the same sort of thing as to recommend marriage when people are starving and emigrating?

I am fully aware that the low profits of stock, and the difficulty of finding employment for it, which I consider as an unequivocal proof that the immediate want of the country is not capital, has been attributed to other causes; but to whatever causes they may be attributed, an increase in the proportion of capital to revenue must aggravate them. With regard to these causes, such as the cultivation of our poor soils, our restrictions upon commerce, and our weight of taxation, I find it very difficult to admit a theory of our distresses so inconsistent with the theory of our comparative prosperity. While the greatest quantity of our poor lands were in cultivation; while there were more than usual restrictions upon our commerce, and very little corn was imported; and while taxation was at its height, the country confessedly increased in wealth with a rapidity never known before. Since some of our poorest lands have been thrown out of cultivation; since the peace has removed many of the restrictions upon our commerce, and, notwithstanding our corn laws, we have imported a great quantity of corn; and since seventeen millions of taxes have been taken off from the people, we have experienced the greatest degree of distress, both among capitalists and labourers.

I am very far indeed from meaning to infer from these striking facts that restrictions upon commerce and heavy taxation are beneficial to a country. But the facts certainly show that, whatever may be the future effect of the causes above alluded to in checking the progress of our wealth, we must look elsewhere for the immediate sources of our present distresses. How far our artificial system, and particularly the changes in the value of our currency Edition: current; Page: [419] operating upon a large national debt, may have aggravated the evils we have experienced, it would be extremely difficult to say. But I feel perfectly convinced that a very considerable portion of these evils might be experienced by a nation without poor land in cultivation, without taxes, and without any fresh restrictions on trade.

If a large country, of considerable fertility, and sufficient inland communications, were surrounded by an impassable wall, we all agree that it might be tolerably rich, though not so rich as if it enjoyed the benefit of foreign commerce. Now, supposing such a country gradually to indulge in a considerable consumption, to call forth and employ a great quantity of ingenuity in production, and to save only yearly that portion of its revenue which it could most advantageously add to its capital, expending the rest in consumable commodities and personal services, it might evidently, under such a balance of produce and consumption, be increasing in wealth and population with considerable rapidity. But if, upon the principle laid down by M. Say, that the consumption of a commodity is a diminution of demand, the society were greatly and generally to slacken their consumption, and add to their capitals, there cannot be the least doubt, on the principle of demand and supply, that the profits of capitalists would soon be greatly reduced, though there were no poor land in cultivation; and the population would be thrown out of work and would be starving, although without a single tax, or any restrictions on trade.

The state of Europe and America may perhaps be said, in some points, to resemble the case here supposed; and the stagnation which has been so generally felt and complained of since the war, appears to me inexplicable upon the principles of those who think that the power of production is the only element of wealth, and, who consequently infer that if the means of production be increased, wealth will certainly increase in proportion. Now it is unquestionable Edition: current; Page: [420] that the means of production were increased by the cessation of war, and that more people and more capital were ready to be employed in productive labour; but notwithstanding this obvious increase in the means of production, we hear every where of difficulties and distresses, instead of ease and plenty. In the United States of America in particular, a country of extraordinary physical resources, the difficulties which have been experienced are very striking, and such certainly as could hardly have been expected. These difficulties, at least, cannot be attributed to the cultivation of poor land, restrictions upon commerce, and excess of taxation. Altogether the state of the commercial world, since the war, clearly shows that something else is necessary to the continued increase of wealth besides an increase in the means of producing.

That the transition from war to peace, of which so much has been said, is a main cause of the effects observed, will be readily allowed, but not as the operation is usually explained. It is generally said that there has not been time to transfer capital from the employments where it is redundant to those where it is deficient, and thus to restore the proper equilibrium. But such a transfer could hardly require so much time as has now elapsed since the war; and I would ask, where are the under-stocked employments, which, according to this theory, ought to be numerous, and fully capable of absorbing all the redundant capital, which is confessedly glutting the markets of Europe in so many different branches of trade? It is well known by the owners of floating capital, that none such are now to be found; and if the transition in question is to account for what has happened, it must have produced some other effects besides that which arises from the difficulty of moving capital. This I conceive to be a diminution of the demand compared with the supply of produce. The necessary changes in the channels of trade would be effected in a year or two; but the general diminution Edition: current; Page: [421] of demand, compared with the supply occasioned by the transition from such a war to a peace, may last for a very considerable time. The returned taxes, and the excess of individual gains above expenditure, which were so largely used as revenue during the war, are now in part, and probably in no inconsiderable part, saved. I cannot doubt, for instance, that in our own country very many persons have taken the opportunity of saving a part of their returned property-tax, particularly those who have only life-incomes, and who, contrary to the principles of just taxation, had been assessed at the same rate with those whose incomes were derived from realized property. This saving is quite natural and proper, and forms no just argument against the removal of the tax; but still it contributes to explain the cause of the diminished demand for commodities, compared with their supply since the war. If some of the principal governments concerned spent the taxes which they raised in a manner to create a greater and more certain demand for labour and commodities, particularly the former, than the present owners of them, and if this difference of expenditure be of a nature to last for some time, we cannot be surprised at the duration of the effects arising from the transition from war to peace.

The changes, however, which have taken place so generally must have operated very differently upon the different countries of the commercial world, according to the different circumstances in which they were placed; and it will be found generally, as the principles which have been laid down would lead us to expect, that those states which have suffered the most by the war have suffered the least by the peace. In the countries where a great pressure has fallen upon moderate or scanty powers of production, it is hardly possible to suppose that their wealth should not have been stopped in its progress during the war, or perhaps rendered positively retrograde. Such countries must have found relief from a state of Edition: current; Page: [422] things, which now allows them to accumulate capital, without which no state can permanently increase in wealth. But in those countries, where the pressure of the war found great powers of production, and seemed to create greater; where accumulation, instead of being checked, was accelerated, and where the vast consumption of commodities was followed by supplies which occasioned a more rapid increase of wealth than before, the effect of peace would be very different. In such countries it is natural to suppose that a great diminution of the demand compared with the supply, would decidedly check the progress of wealth, and occasion very general and severe distress, both to capitalists and the labouring classes. England and America come the nearest to the countries of this latter description. They suffered the least by the war, or rather were enriched by it, and they are now suffering the most by the peace.

It is certainly a very unfortunate circumstance that any period should ever have occurred in which peace should appear to have been, in so marked a manner, connected with distress; but it should always be recollected that it was owing to the very peculiar circumstances attending the late war that the contrast has been so striking. In the American and former wars it was very different; and, if the same exertions had been attempted, without the same powers of supporting them, that is, without the command of the greatest part of the commerce of the world, and a more rapid and successful progress in the use of machinery than was ever before known, we might have been in a state to have felt the greatest relief at the cessation of hostilities. When Hume and Adam Smith prophesied that a little increase of national debt beyond the then amount of it, would probably occasion bankruptcy; the main cause of their error was the very natural one, of not being able to see the vast increase of productive power to which the nation would subsequently attain. An expenditure, which would have absolutely crushed the country in 1770, Edition: current; Page: [423] might be little more than what was necessary to call forth its prodigious powers of production in 1816. But just in proportion to this power of production, and to the facility with which a vast consumption could be supplied, consistently with a rapid accumulation of capital, would be the distress felt by capitalists and labourers upon any great and sudden diminution of expenditure.

On this account there is reason to doubt the policy of raising the supplies of a long and expensive war within the year, a policy which has been recommended by very able writers. If the country were poor, such a system of taxation might completely keep down its efforts. It might every year positively diminish its capital, and render it every year more ruinous to furnish the same supplies; till the country would be obliged to submit to its enemies from the absolute inability of continuing to oppose them with effect. On the other hand, if the country were rich, and had great powers of production, which were likely to be still further called forth by the stimulus of a great effective consumption, it might be able to pay the heavy taxes imposed upon it, out of its revenue, and yet find the means of adequate accumulation; but if this process were to last for any time, and the habits of the people were accommodated to this scale of public and private expenditure, it is scarcely possible to doubt that, at the end of the war, when so large a mass of taxes would at once be restored to the payers of them, the just balance of produce and consumption would be completely destroyed, and a period would ensue, longer or shorter, according to circumstances, in which a very great stagnation would be felt in every branch of productive industry, attended by its usual concomitant general distress. The evil occasioned by imposing a tax is very rarely compensated by the taking it off. We should constantly keep in mind that the tendency to expenditure in individuals has most formidable antagonists in the love of indolence, and in the desire of Edition: current; Page: [424] saving, in order to better their condition and provide for a family; and that all theories founded upon the assumption that mankind always produce and consume as much as they have the power to produce and consume, are founded upon a want of knowledge of the human character and of the motives by which it is usually influenced.

It will be said, perhaps, that as the capital of the country compared with its population has been diminished since the war, partly by the unrecovered destruction which it sustained during the last two years of the contest, and still more by the sudden want of demand which occurred on its termination; how is the lost capital ever to be recovered, except by accumulation? Now it is perfectly true that the recovery and increase of our capital can take place in no other way than by accumulation. But in looking to this most desirable object, it is absolutely necessary that we should listen to the dictates of those great general laws which seldom fail to direct us in the right course. If population were ever so deficient in a state compared with its territory, yet, if the wages of labour still continued very scanty, and the people were emigrating, the great general laws of demand and supply would instruct us that some previous change in the state of things was necessary, before we ought to wish for an increased proportion of marriages, which in fact, under the actual circumstances, would not accomplish the object aimed at. In the same manner, if a portion of our capital be destroyed, and yet the profits of the remainder are low, and accompanied with frequent losses, and a tendency to emigrate, surely the great general laws of demand and supply cannot more clearly shew us that something else is wanted before we can accumulate with effect.

What is now wanted in this country is an increased national revenue,—an increase in the exchangeable value of the whole produce estimated in bullion,—and in the command of this bullion over labour. When Edition: current; Page: [425] we have attained this, which can only be attained by increased and steady profits, we may then begin again to accumulate, and our accumulation will then be effectual. But if, instead of saving from increased profits, we save from diminished expenditure; if, at the very time that the supply of commodities compared with the demand for them, clearly admonishes us that the proportion of capital to revenue is already too great, we go on saving from our revenue to add still further to our capital, all general principles concur in shewing that we must of necessity be aggravating instead of alleviating our distresses.

But how, it will be asked, are we to obtain this increase of revenue? What steps are we to take in order to raise the exchangeable value of the whole produce, and prepare the way for the future saving which is acknowledged to be necessary? These questions I have endeavoured to answer in the latter Sections of this very long Chapter On the immediate Causes of the Progress of Wealth, where it has appeared that a union of the means of distribution with the powers of production is absolutely necessary to create an adequate stimulus to the continued increase of wealth; and that the three causes, which, by favouring distribution, tend most to keep up and increase the exchangeable value of the whole produce, are, the division of landed property, the extension of domestic and foreign trade, and the maintenance of such a proportion of unproductive consumers as is best adapted to the powers of production.

The mention of these causes is alone sufficient to shew that they are much less within our immediate controul than the common process of accumulation. If it were true that, in order to employ all that are out of work, and to create at the same time a sufficient market for what they produce, it is only necessary that a little more should be saved from the revenue and added to the capital of the country, I am fully persuaded that this species of charity would not want contributors, and that a change would soon be Edition: current; Page: [426] wrought in the condition of the labouring classes. But when we know, both from theory and experience, that this proceeding will not afford the relief sought for, and are referred to an increase in the exchangeable value of the whole produce as the only cause which can restore a healthy and effective demand for labour, it must be allowed that we may be at a loss with respect to the first steps which it would be advisable to take, in order to accomplish what we wish.

Still, however, it is of the utmost importance to know the immediate object which ought to be aimed at; that if we can do but little actually to forward it, we may not, from ignorance, do much to retard it. With regard to the first main cause which I have mentioned, as tending to increase the exchangeable value of the national produce, namely the division of landed property, I have given my reasons for thinking that, in the actual and peculiar state of this country, the abolition of the law of primogeniture would produce more evil than good; and there is no other way in which a different division of land could be effected, consistently with an adequate respect for the great fundamental law of property, on which all progress in civilization, improvement, and wealth, must ever depend. But if the distribution of wealth to a certain extent be one of the main causes of its increase, while it is unadvisable directly to interfere with the present division of land in this country, it may justly become a question, whether the evils attendant on the national debt are not more than counterbalanced by the distribution of property and increase of the middle classes of society, which it must necessarily create; and whether by saving, in order to pay it off, we are not submitting to a painful sacrifice, which, if it attains its object, whatever other good it may effect, will leave us with a much less favourable distribution of wealth? By greatly reducing the national debt, if we are able to accomplish it, we may place ourselves perhaps in a more safe position, and this no doubt is a most important consideration; but grievously will Edition: current; Page: [427] those be disappointed who think that, either by greatly reducing or at once destroying it, we can enrich ourselves, and employ all our labouring classes.

With regard to the second main cause of an increase in the exchangeable value of the whole produce—namely, the extension of domestic and foreign trade, it is well known that we can by no means command either of these at pleasure, but we may do much to impede both. We cannot indeed reasonably attribute any sudden deficiency of trade to causes which have been of long duration; yet there can be little doubt that our commerce has been much impaired by unnecessary restraints, and that much benefit might be derived from the removal of them. While it is necessary to raise a large sum by taxation for the expenses of the government and the payment of the interest of the national debt, it would by no means be advisable to neglect so fair and fruitful a resource as the customs. In regulating these taxes, it is also natural that those foreign commodities should be taxed the highest, which are either of the same kind as the native commodities which have been taxed, or such as, for special reasons of health, happiness, or safety, it is desirable to grow largely at home. But there seems to be no reason for the absolute prohibition of any commodities whatever; and there is little doubt that, upon this principle, a much greater freedom might be given to foreign commerce, at the same time that a greater revenue might be derived from the customs. I have already stated, in more places than one, why, under all the circumstances of the case, I think it desirable that we should permanently grow nearly our own consumption of corn. But I see no sufficient cause why we should permanently prefer the wines of Portugal and the silks of London to the wines and silks of France. For the same reason that more British capital and labour is even now employed in purchasing claret than would be employed in attempting to make it at home, we might fairly expect that, in the case of an extended trade with France, Edition: current; Page: [428] more British capital would be employed in purchasing the wines and silks of France, than is now employed in purchasing the wines of Portugal and making the silks of Spitalfields and Derby.

At the same time it should be remarked that, in looking forward to changes of this kind, it is always incumbent upon us, particularly in the actual situation of our people, to attend to the wise caution suggested by Adam Smith. Fully convinced of the benefits of unrestrained trade, he observes, that, “The case in which it may sometimes be a matter of deliberation how far, and in what manner, it is proper to restore the free importation of foreign goods, after it has been for some time interrupted, is, when particular manufactures, by means of high duties and prohibitions upon all foreign goods which can come into competition with them, have been so far extended as to employ a great multitude of hands. Humanity may in this case require that the freedom of trade should be restored only by slow gradations, and with a good deal of reserve and circumspection. Were these high duties and prohibitions taken away all at once, cheaper foreign goods of the same kind might be poured so fast into the home market as to deprive all at once many thousands of their ordinary employment and means of subsistence.”* The caution here given by Adam Smith certainly applies in a very marked manner to the silk trade; and, however desirable it may be (and it is so most unquestionably) to open the trade with France, a sudden and incautious admission of a large quantity of French silks would tend to aggravate, instead of to relieve the present distresses of our working classes.

In all cases where, under peculiar circumstances, the distress of the country would be aggravated by the opening of certain trades, which had before been subject to restrictions, the exchangeable value of the whole produce estimated in labour, would for a time Edition: current; Page: [429] be diminished. But, in general, as I have endeavoured to shew in the 8th Section of this Chapter, the natural and permanent tendency of all extension of trade both domestic and foreign, is to increase the exchangeable value of the whole produce. This is more especially the case when, instead of changing the channels of commerce, we are able to make large and distinct additions to them. The good is then unalloyed by partial and temporary evil. This better distribution of the produce of the country, this better adaptation of it to the wants and tastes of the consumers, will at once give it a greater market value, and at once increase the national revenue, the rate of steady profits, and the wages of labour.

With regard to the third cause of an increase in the exchangeable value of the whole produce, the maintenance of unproductive consumers—though many have no power to be of use in this respect, others may do something; and it must certainly be advantageous that the truth, whatever it may be, relating to the effects of unproductive consumers, should be fully known, that we may not aim at what will obstruct the progress of wealth, and clamour at what is calculated to advance it. Whatever it may be thought advisable to do respecting the diminution of unproductive consumers, with a view to the placing ourselves in a safer position, we shall be led to proceed with more deliberation, if we are not hurried on by the impression that, by this diminution, we are affording immediate relief to the labouring classes.

It is also of importance to know that, in our endeavours to assist the working classes in a period like the present, it is desirable to employ them in those kinds of labour, the results of which do not come for sale into the market, such as roads and public works. The objection to employing a large sum in this way, raised by taxes, would not be its tendency to diminish the capital employed in productive labour; because this, to a certain extent, is exactly what is wanted; but it might, perhaps, have the effect of Edition: current; Page: [430] concealing too much the failure of the national demand for labour, and prevent the population from gradually accommodating itself to a reduced demand. This however might be, in a considerable degree, corrected by the wages given. And altogether I should say, that the employment of the poor in roads and public works, and a tendency among landlords and persons of property to build, to improve and beautify their grounds, and to employ workmen and menial servants, are the means most within our power and most directly calculated to remedy the evils arising from that disturbance in the balance of produce and consumption, which has been occasioned by the sudden conversion of soldiers, sailors, and various other classes which the war employed, into productive labourers.

If by the operation of these three causes, either separately or conjointly, we can make the supply and demand bear a more advantageous proportion to each other, so as to increase the exchangeable value of the whole produce, the rate of profits may then permanently rise as high as the quality of the soil in cultivation combined with the actual skill of the cultivators will allow, which is far from being the case at present. And as soon as the capitalists can begin to save from steady and improving profits, instead of from diminished expenditure, that is, as soon as the national revenue, estimated in bullion, and in the command of this bullion over labour, begins yearly and steadily to increase, we may then begin safely and effectively to recover our lost capital by the usual process of saving a portion of our increased revenue to add to it.

It is, I believe, the opinion of many persons, particularly among the mercantile classes, that nothing would so soon and so effectively increase the revenue and consumption of the country as a free issue of paper. But in holding this opinion, they have mistaken the nature of the great advantage which the national wealth may sometimes unquestionably derive Edition: current; Page: [431] from a fall in the value of the currency. The specific effect of this fall is to take away property from those who have fixed incomes, and give a greater command over the produce of the country to those who buy and sell. When the state of the national expenditure is such that there is a difficulty of supplying it, then whatever tends to throw a greater proportion of the produce into the hands of capitalists, as it must increase the power of production, must be just calculated to supply what is wanted. And, though the continuation of the act of restriction beyond the immediate necessity of the case, can hardly be considered in any other light than that as an act of positive injustice towards the possessors of fixed incomes; yet there is little doubt that the fall in the value of money, and the facility of credit which it occasioned, acting in the way described, must have contributed greatly to that rapid recovery of vast capital destroyed, which, in the same degree, never probably occurred in the history of any nation before.

But, if we were now to make similar issues of paper, the effect would be very different. Perhaps a sudden increase of currency and a new facility of borrowing might under any circumstances, give a temporary stimulus to trade, but it would only be temporary. Without a large expenditure on the part of the government, and a frequent conversion of capital into revenue, the great powers of production acquired by the capitalists, operating upon the diminished power of purchasing possessed by the owners of fixed incomes, could not fail to occasion a still greater glut of commodities than is felt at present; and experience has sufficiently shewn us, that paper cannot support prices under such circumstances. In the history of our paper transactions, it will be found that the abundance or scantiness of currency has generally followed and aggravated high or low prices, but seldom or never led them; and it is of the utmost importance to recollect that, at the end of the war, the prices failed before the contraction of the currency began. It was, in fact, the Edition: current; Page: [432] failure of the prices of agricultural produce, which destroyed the country banks, and shewed us the frail foundations on which the excess of our paper-currency rested. This sudden contraction no doubt aggravated very greatly the distresses of the merchants and of the country; and for this very reason we should use our utmost endeavours to avoid such an event in future; not, however, by vain efforts to keep up prices by forcible issues of paper, in defiance at once of the laws of justice and the great principles of supply and demand, but by the only effectual way, that of steadily maintaining our paper of the same value with the coin which it professes to represent, and subjecting it to no other fluctuations than those which belong to the precious metals.

In reference to the main doctrine inculcated in the latter part of this work, namely, that the progress of wealth depends upon proportions; it will be objected, perhaps, that it necessarily opens the way to differences of opinion relating to these proportions, and thus throws a kind of uncertainty over the science of political economy which was not supposed to belong to it. If, however, the doctrine should be found, upon sufficient examination, to be true; if it adequately accounts for things as they are, and explains consistently why frequent mistakes have been made respecting the future, it will be allowed that such objectors are answered. We cannot make a science more certain by our wishes or opinions; but we may obviously make it much more uncertain in its application, by believing it to be what it is not.

Though we cannot, however, lay down a certain rule for growing rich, and say that a nation will increase in wealth just in the degree in which it saves from its revenue, and adds to its capital: yet even in the most uncertain parts of the science, even in those parts which relate to the proportions of production and effective consumption, we are not left without guides; and if we attend to the great laws of demand and supply, they will generally direct us into the Edition: current; Page: [433] right course. It is justly observed by Mr. Ricardo that “the farmer and manufacturer can no more live without profit than the labourer without wages. Their motive for accumulation will diminish with every diminution of profit, and will cease altogether when their profits are so low as not to afford them an adequate compensation for their trouble, and the risk which they must necessarily encounter in employing their capital productively.”* Mr. Ricardo applies this passage to the final and necessary fall of profits occasioned by the state of the land. I would apply it at all times, throughout all the variable periods which intervene between the first stage of cultivation and the last. Whenever capital increases too fast, the motive to accumulation diminishes, and there will be a natural tendency to spend more and save less. When profits rise, the motive to accumulation will increase, and there will be a tendency to spend a smaller proportion of the gains, and to save a greater. These tendencies, operating on individuals, direct them towards the just mean, which they would more frequently attain if they were not interrupted by bad laws or unwise exhortations. If every man who saves from his income is necessarily a friend to his country, it follows that all those who spend their incomes, though they may not be absolute enemies, like the spendthrift, must be considered as failing in the duty of benefiting their country, and employing the labouring classes, when it is in their power; and this cannot be an agreeable reflection to those whose scale of expenditure in their houses, furniture, carriages and table, would certainly admit of great retrenchment, with but little sacrifice of real comfort. But if, in reality, saving is a national benefit, or a national disadvantage, according to the circumstances of the period; and, if these circumstances are best declared by the rate of profits, surely it is a case in which individual interest needs no extraneous assistance.

Edition: current; Page: [434]

Saving, as I have before said, is, in numerous instances, a most sacred private duty. How far a just sense of this duty, together with the desire of bettering our condition so strongly implanted in the human breast, may sometimes, and in some states of society, occasion a greater tendency to parsimony than is consistent with the most effective encouragement to the growth of public wealth, it is difficult to say; but whether this tendency, if let alone, be ever too great or not, no one could think of interfering with it, even in its caprices. There is no reason, however, for giving an additional sanction to it, by calling it a public duty. The market for national capital will be supplied, like other markets, without the aid of patriotism. And in leaving the whole question of saving to the uninfluenced operation of individual interest and individual feelings, we shall best conform to that great principle of political economy laid down by Adam Smith, which teaches us a general maxim, liable to very few exceptions, that the wealth of nations is best secured by allowing every person, as long as he adheres to the rules of justice, to pursue his own interest in his own way.

Still it must be allowed that this very doctrine, and the main doctrines of the foregoing work, all tend to shew, as was stated in the Introduction, that the science of political ecomony bears a nearer resemblance to the sciences of morals and politics, than to the science of mathematics. But this truth, though it detracts from its certainty, does not detract from its importance. While the science of political economy involves some of the questions which have the nearest connection with the well-being of society, it must always be a subject of the highest interest. The study of it is calculated to be of great practical use, and to prevent much positive evil. And if its principles be carefully founded on an experience sufficiently extended, we have good reason to believe, from what they have already done, that, when properly applied, they will rarely disappoint our just expectations.

Edition: current; Page: [435]

There is another objection which will probably be made to the doctrines of the latter part of this work, which I am more anxious to guard against. If the principles which I have laid down be true, it will certainly follow that the sudden removal of taxes will often be attended with very different effects, particularly to the labouring classes of society, from those which have been generally expected. And an inference may perhaps be drawn from this conclusion in favour of taxation. But the just inference from it is, that taxes should never be imposed, nor to a greater amount, than the necessity of the case justifies, and particularly that every effort should be made, consistently with national honour and security to prevent a scale of expenditure so great that it cannot proceed without ruin, and cannot be stopped without distress.

Even if it be allowed that the excitement of a prodigious public expenditure, and of the taxation necessary to support it, operating upon extraordinary powers of production, might, under peculiar circumstances, increase the wealth of a country in a greater degree than it otherwise would have increased; yet, as the greatest powers of production must finally be overcome by excessive borrowing, and as increased misery among the labouring classes must be the consequence, whether we go on or attempt to return, it would surely have been much better for the society if such wealth had never existed. It is like the unnatural strength occasioned by some violent stimulant, which, if not absolutely necessary, should be by all means avoided, on account of the exhaustion which is sure to follow it.

In the Essay on Population I have observed, that “In the whole compass of human events, I doubt if there be a more fruitful source of misery, or one more invariably productive of disastrous consequences, than a sudden start of population from two or three years of plenty, which must necessarily be repressed by the first return of scarcity, or even of average crops.”*Edition: current; Page: [436] The great demand for labour which took place during the war must have had an effect precisely of a similar kind, only aggravated by duration; and as this is a state of things which cannot in its nature continue, it is obviously the duty of all governments, if they have any regard for the happiness of their subjects, to avoid all wars and excessive expenditure as far as it is possible; but if war be unavoidable, so to regulate the necessary expenditure as to occasion the least pressure upon the people during the contest, and the least convulsion in the state of the demand at the termination of it. We may have good reason to lament that such taxation and consumption should ever have taken place, and that so great an impetus, which could only be temporary, should have been given to the wealth and population of the country; but it is a very different question, what is the best remedy now that the evil has been incurred? If the population had made a start during a few years of plenty, we should surely make great efforts to prevent, by importation, the misery which would be occasioned by the sudden return of average crops. If the human body had been subjected to a very powerful stimulus, we should surely be cautious not to remove it too suddenly. And, if the country had been unfortunately subjected to the excitement of a long continuance of excessive expenditure, it surely must be against all analogy and all general principles, to look for the immediate remedy of it in a great and sudden contraction of consumption.

There is every reason to believe that the working classes of society would be severely injured by attaining the object which they seem so ardently to wish for. To those who live upon fixed incomes, the relief from taxation is a great and unmixed good; to the mercantile and trading classes it is sometimes a good and sometimes an evil, according to circumstances; but to the working classes, no taking off of taxes, nor any degree of cheapness of corn, can compensate a want of demand for labour. If the general demand for labour Edition: current; Page: [437] fail, particularly if the failure be sudden, the labouring classes will be wretched in the midst of cheapness; if the demand for labour be considerable, they will be comparatively rich in the midst of dearness.*

To state these facts is not to favour taxes; but to give one of the strongest reasons against them; namely, that they are not only a great evil on their first imposition, but that the attempt to get rid of them afterwards, is often attended with fresh suffering. They are like those injudicious regulations of the mercantile system noticed by Adam Smith, which, though acknowledged to be pernicious, cannot be removed without producing a greater evil for an interval of considerable length.

Theoretical writers are too apt, in their calculations, to overlook these intervals; but eight or ten years, recurring not unfrequently, are serious spaces in human life. They amount to a serious sum of happiness or misery, according as they are prosperous or adverse, and leave the country in a very different state at their termination. In prosperous times the mercantile classes often realize fortunes, which go far towards securing them against the future; but unfortunately the working classes, though they share in the general prosperity, do not share in it so largely as in the general adversity. They may suffer the greatest distress in a period of low wages, but cannot be adequately compensated by a period of high wages. To them fluctuations must always bring more evil than good; and, with a view to the happiness of the great mass of society, it should be our object, as far as possible, to maintain peace, and an equable expenditure.

the end.

Edition: current; Page: [438]Edition: current; Page: [439]*

Wealth of Nations, Book I. ch. v.

†

It is true that Adam Smith has also defined value (Book I. ch. iv.) as the power of purchasing; but it is clear from the context, and from the whole tenor of his work, that he meant the power of purchasing which a commodity derives from causes peculiar to itself, and which depend upon the cost of procuring it. This limitation is most essential; but it has not been generally made.

*

That this is what is commonly meant by value, every practical man perfectly well knows. If, for instance, the question is asked what is the value of corn, no one ever supposes it to mean, what is the relation or proportion which it bears to oil, or wine, or hides, or cloth, or linen, or to other commodities generally, but what will it cost to any one desirous of purchasing it, or giving an equivalent for it. Now of this, the quantity of other commodities which it will exchange for, can give no idea, unless their cost happens to be previously known; but the cost of obtaining money, or its value, is always known, or at least easily ascertained, being clearly indicated by the money price of labour in each country. It is on this account, that the object of the question is, in almost every instance, sufficiently answered by a reference to the money price of the article concerning which the inquiry is made. (See three lectures on the cost of obtaining money, by N. W. Senior, Esq.)

*

TO THE EDITOR OF THE MONTHLY MAGAZINE.

Feb. 19

.

sir,

I shall esteem it as a particular favour if you will allow me to correct an erroneous paragraph which appeared in your obituary for last month. Daniel Malthus, Esq. is there mentioned as the translator of some pieces from the French and German. I can say, from certain knowledge, that he did not translate them; nor was he born to copy the works of others.—Whatever he wrote was drawn from the original and copious source of his own fine understanding and genius; but, from his character, which was so singularly unostentatious, as to shun everything that might attract notice, it will probably never be known as his.

I am, Sir, yours, &c.

Robert Malthus.

*

“But though it is by no means to be wished that any dependent situation should be made so agreeable, as to tempt those who might otherwise support themselves in independence; yet as it is the duty of society to maintain such of its members as are absolutely unable to maintain themselves, it is certainly desirable that the assistance in this case should be given in the way that is most agreeable to the persons who are to receive it. An industrious woman who is left a widow with four or five children that she has hitherto brought up decently, would often gladly accept of a much less sum, than the family would cost in the work-house, and with this assistance added to her own exertions, might in all probability succeed in keeping herself and her children from the contamination of a society that she has surely just reason to dread. And it seems peculiarly hard upon old people, who perhaps have been useful and respectable members of society, and in their day, “have done the state some service,” that as soon as they are past their work, they should be obliged to quit the village where they have always lived, the cottage to which time has attached them, the circle of their friends, their children and their grand-children, and be forced to spend the evening of their days in noise and unquietness among strangers, and wait their last moments forlorn and separated from all they hold dear.”

“It is an old saying that home is home, be it ever so homely; and this sentiment certainly operates very strongly upon the poor. Out of the reach of most of those enjoyments that amuse the higher ranks of society, what is there that can attach them to life, but their evening fire-side with their families in a house of their own; joined to the consciousness that the more they exert themselves the better they shall support the objects of their affection. What is it but a sentiment of this kind that tempts many who have lived in the ease and luxury of service, to forego these advantages, to marry, and submit to the labour, the difficulties, the humbler condition and hard fare, that inevitably attend the change of situation? And surely no wise legislature would discourage these sentiments, and endeavour to weaken this attachment to home, unless indeed it were intended to destroy all thought and feeling among the common people, to break their spirit, and prepare them to submit patiently to any yoke that might be imposed upon them.”

*

An Essay on the Principle of Population, as it affects the Future Improvement of Society: with Remarks on the Speculations of Mr. Godwin, M. Condorcet, and other Writers. 1798. (Anon.)

An Investigation of the Cause of the Present High Price of Provisions, containing an Illustration of the Nature and Limits of Fair Price in Time of Scarcity, and its Application to the particular Circumstances of this country. (3rd Edit.) 1800.

An Essay on the Principle of Population, or a View of its past and present effects on human happiness, with an Enquiry into our prospects respecting the future removal or mitigation of the evils which it occasions. (A new Edit. very much enlarged,) 1803.

A Letter to Samuel Whitbread, on his proposed Bill for the Amendment of the Poor Laws. 1807.

A Letter to Lord Grenville, occasioned by some Observations of his Lordship on the East India Company’s Establishment for the Education of their Civil Servants. (1813.)

Observations on the Effects of the Corn Laws, and of a Rise or Fall in the Price of Corn on the Agriculture and General Wealth of the Country. 1814. (3rd Edit. 1815.)

The Grounds of an Opinion on the Policy of restricting the Importation of Foreign Corn; intended as an Appendix to the “Observations on the Corn Laws.” 1815.

An Inquiry into the Nature and Progress of Rent, and the Principles by which it is regulated. 1815.

Statements respecting the East India College, with an Appeal to Facts in Refutation of the Charges lately brought against it in the Court of Proprietors. 1817.

Principles of Political Economy considered, with a view to their practicable application, 1820. (2nd. Edit. 1836.)

The Measure of Value Stated and Illustrated, with an Application of it to the Alteration in the Value of the English Currency since 1790. 1823.

Definitions in Political Economy, preceded by an Enquiry into the Rules which ought to guide Political Economists in the Definition and Use of their Terms. 1827.

A Summary View of the Principle of Population. 1830. (From the Supplement to the Encyclopedia Britannica.)

*

“Life is, generally speaking, a blessing independent of a future state. It is a gift which the vicious would not always be ready to throw away, even if they had no fear of death. The partial pain, therefore, that is inflicted by the Supreme Creator, while he is forming numberless beings to a capacity of the highest enjoyments, is but as the dust of the balance in comparison of the happiness that is communicated; and we have every reason to think, that there is no more evil in the world than what is absolutely necessary as one of the ingredients in the mighty process.” 8vo. edit. Essay on Population, page 391.

†

“The sorrows and distresses of life form another class of excitements, which seem to be necessary by a peculiar train of impressions, to soften and humanize the heart, to awaken social sympathy, to generate all the Christian virtues, and to afford scope for the ample exertion of benevolence. The general tendency of an uniform course of prosperity is rather to degrade, than exalt the character. The heart that has never known sorrow itself will seldom be feelingly alive to the pains and pleasures, the wants and wishes of its fellow beings. It will seldom be overflowing with that warmth of brotherly love, those kind and amiable affections, which dignify the human character, even more than the possession of the highest talents. Talents, indeed, though undoubtedly a very prominent and fine feature of mind, can by no means be considered as constituting the whole of it. There are many minds which have not been exposed to those excitements that usually form talents, that have yet been vivified to a high degree by the excitements of social sympathy. In every rank of life, in the lowest as frequently as in the highest, characters are to be found, overflowing with the milk of human kindness, breathing love towards God and man; and though without those peculiar powers of mind called talents, evidently holding a higher rank in the scale of beings than many who possess them. Evangelical charity, meekness, piety, and all that class of virtues, distinguished particularly by the name of Christian virtues, do not seem necessarily to include abilities; yet a soul possessed of these amiable qualities, a soul awakened and vivified by these delightful sympathies, seems to hold a nearer commerce with the skies than mere acuteness of intellect.” Essay on Population, 8vo. edit. chap. xix. p. 372.

*

“It is probable, that having found the bow bent too much one way, I was induced to bend it too much the other, in order to make it straight. But I shall always be quite ready to blot out any part of the work which is considered, by a competent tribunal as having a tendency to prevent the bow from becoming finally straight, and to impede the progress of truth. In deference to this tribunal I have already expunged the passages which have been most objected to, and I have made some few further corrections, of the same kind, in the present Edition. By these alterations, I hope, and believe, that the work has been improved, without impairing its principles. But I still trust, that whether it is read with or without these alterations, every reader of candour must acknowledge that the practical design uppermost in the mind of the writer, with whatever want of judgment it may have been executed, is to improve the condition, and increase the happiness of the lower classes of society.” Vol. iii. p. 428. 5th Edition of an Essay on Population.

*

The first ministry of Lord Melbourne.

*

It must be allowed, however, that the theory of the Bullionists, though too exclusive, accounted for much the largest proportion of the phenomena in question; and perhaps it may be said with truth that the Bullion Report itself was more free from the error I have adverted to than any other work that appeared.

*

Wealth of Nations, Book II. c. iii. pp. 15—18, 6th edit.

†

Book IV. c. iii. p. 250.

*

Quarterly Review, No. xxix. Art. viii.

*

Measures calculated to terminate in a rise in the value of money might be little felt in a country without a national debt; but with a large money amount to be paid annually to public creditors, they might occasion a distribution of property most unfavourable to production.

*

Wealth of Nations, B. IV. c. ii. p. 190. 6th edit.

*

The reader will understand that when the term the Economists is used, it is intended to apply to the French economists, of the school of Quesnay. In order the better to mark the distinction from other economists, without circumlocution, italics are used.

*

Traité d’Econ. Polit. Liv. I. c. xiii. 5th edit.

†

Id. Ib. p. 148.

*

Traité d’Econ. Polit. pp. 150, 151.

†

Livre I. c. ii. p. 229.

‡

Tome I. p. 7.

*

Cours d’Econ. Pol. Tome I. p. 99.

†

Id. Ib. p. 100.

*

In my little work on the “Definitions in Political Economy,” published in 1827, I defined wealth to be “The material objects necessary, useful, or agreeable to man, which have required some portion of human industry to appropriate or produce. The latter part was added, in order to exclude air, light, rain, &c.; but there is some objection to the introduction of the term industry or labour into the definition, because an object might be considered as wealth which has had no labour employed upon it. A diamond accidentally found on the sea shore might have a high value; and the fruit at the top of a tree must be considered by the savage as necessary or agreeable to him, before he will make the exertions required to obtain it.

*

There can hardly be a more important inquiry in political economy than that which traces the effects of different proportions of productive labour, and personal services in society; but this inquiry cannot be conducted without the application of different terms to these two different kinds of labour; and the distinction made by Adam Smith appears to me to be the simplest and the most convenient.

*

The annual produce of the land and labour of any country, can be increased in its value by no other means than by increasing either the number of its productive labourers, or the productive powers of those labourers who had before been employed. (Wealth of Nations, B. II. c. iii.) This is the general doctrine of the work.

*

Vol. v. note xx.

†

The application of Adam Smith’s distinction, is in this, as in most other cases, preeminently clear. The merchant’s clerk increases his master’s wealth. He adds a value to the subject on which his labour is bestowed, for if he did not, he would not be employed. The same thing cannot be said of the Government clerk; however useful or necessary his services may be, he contributes nothing to the fund from whence be derives his remuneration. He lives at the expense of his employers, the nation at large, and is paid out of a tax or duty, not out of a profit or reproduction.

Ed.

*

Robertson’s America, Vol. iii. Book vii. page 215.

†

Ibid. page 252.

*

Book I, ch. v. p. 55; 6th edit.

*

Hume very reasonably doubts the possibility of William the Conqueror’s revenue being £400,000 a year, as represented by an ancient historian, and adopted by subsequent writers.

*

Adam Smith defines the value of an object in exchange to be, “the power of purchasing other goods, which the possession of that object conveys.” Book I. ch. iv. p. 42; 6th edit.

*

There has been no more fruitful source of error in the very elements of political economy, than the not distinguishing between the power of purchasing generally, and the power of purchasing arising from intrinsic causes; and it is of the highest importance to be fully aware that, practically, when the rise or fall in the value of a commodity is referred to, its power of purchasing arising from extrinsic causes is always excluded.

*

There may be sometimes a comparatively small quantity of certain commodities ready for sale, but if a large supply is soon expected, the desire to sell will be great, and the prices low. On the other hand, there may be a comparatively large quantity of the commodities ready for sale, yet if a future scanty supply is looked forward to, the dealers will not be anxious for an immediate sale, and the prices may be high.

*

Sir Edward West seems to think, that a demand in posse cannot be called demand; but it does not appear to me that there is any impropriety in so applying the term; and it is quite certain that if there were not a greater intensity of demand in posse than in esse, no failure of supply could raise prices. In reality prices are determined by the demand in posse compared with the supply in esse.

*

Adam Smith says, that “when the quantity of any commodity which is brought to market falls short of the effectual demand, all those who are willing to pay the whole value of the rent, wages, and profits, which must be paid in order to bring it thither, cannot be supplied with the quantity which they want. Rather than want it altogether some of them will be willing to give more.” Now this willingness, on the part of some of the demanders, to make a greater sacrifice than before, in order to satisfy their wants, is what I have called a greater intensity of demand. As no increase of price can possibly take place, unless the commodity be of such a nature as to excite in a certain number of purchasers this species of demand, and as this species of demand must always be implied whenever we speak of demand and supply as determining prices, I have thought that it ought to have a name. It is essentially different from effectual demand, which, as defined by Adam Smith, is the quantity wanted by those who are willing and able to pay the natural price; and this demand will of course generally be the greatest when the natural price is the least. But the increased intensity of demand, when actually called forth, uniformly implies an increased value offered, compared with the quantity of the commodity supplied, and is equally applicable to an article which is accidentally scarce, and one which has increased in its natural price. It is invariably and exclusively the intensity of demand, and not the effectual demand, which is referred to, when it is said, and correctly, that the prices of commodities vary as the demand directly, and the supply inversely.

*

Of course it must often happen that an increased intensity of demand, and an increased extent of demand go together. In fact, an increased intensity of demand, when not occasioned by an increased difficulty of production, is the greatest encouragement to an increase of produce and consumption.

*

Wealth of Nations, B. I. ch. vii. p. 74, 6th edit.

*

Though it is quite true, as will appear in the next chapter, that rent has little effect in determining the prices of raw produce, yet, in almost all commodities, a part of the price is resolvable into rent. The reason is, that the same kinds of products which sell for exactly the same prices, have a very different quantity and value of rent in them; but the greater is the value of the rent, the less is the value of the labour and profits; and therefore the varying value of rent in commodities has but little effect on their prices.

*

One of the two main elements of the cost of production, namely, the rate of profits, is peculiarly variable and pre-eminently dependent on supply and demand. Under the greatest variations in the rates of wages, we may suppose many commodities still to require in their production the same quantities of labour of the same kind; but under great variations in the rate of profits, we cannot suppose that any commodities should still require for their production the same amount of profits.

*

The labour worked up in a commodity is the principal cause of its value, but it will appear in this chapter that it is not a measure of it. The labour which a commodity will command is not the cause of its value, but it will appear in the next chapter to be the measure of it.

*

Nothing appears to me more essential, in an “Inquiry into the nature and causes of the Wealth of Nations,” than to have the means of distinguishing between the rise of one commodity and the fall of another.

†

Book I. ch. v.

*

Book I. ch. v. p. 44, 6th edit.

†

P. 54.

‡

Book I. ch. xi. p. 303.

*

P. 17, 3rd edit.

*

“Every rise of wages, therefore, or, which is the same thing, every fall of profits, would lower the relative value of those commodities which were produced with a capital of a durable nature.” P. 37, 3rd edit.

*

P. 37, 3rd edit.

†

In a case of this kind brought forward in the first edition, Mr. Ricardo distinctly allows that a change in the relative values of two commodities might take place to the extent of 68 per cent. from the fall of profits, without any change having taken place in the relative quantities of labour employed on each.

*

In this discussion, I have assumed money to be obtained in the way suggested by Mr. Ricardo; in which case the results will be as I have described, and as he has allowed in his third edition (p. 45); but his money, as we shall see, is not so constituted as to be a proper measure of value. In reality, all commodities obtained by the same quantity of labour fall with a fall of profits.

*

Book I. ch. 6.

†

We may measure the value which the element of profits gives to a commodity by labour, as I have said in another place; but how we can say that more labour has been employed upon a commodity, merely because it must be kept longer before it is brought to market, is what I cannot understand.

*

Mr. Ricardo, at the conclusion of the sixth section of his first chapter, has the following passage: “It is necessary for me to remark that I have not said, because one commodity has so much labour employed upon it as will cost £1000, and another so much as will cost £2000, that therefore one would be of the value of £1000, and the other of £2000; but I have said that their value will be to each other as 2 to 1, and that in these proportions they will be exchanged. It is of no importance to the truth of this doctrine, whether one of these commodities sells for £1100, and the other for £2200, or one for £1500, and the other for £3000; into that question I do not at present inquire: I affirm only that their relative values will be governed by the relative quantities of labour bestowed on their production.” It is on this view of relative value, that all Mr. Ricardo’s calculations in the rest of his book depend, without any modifications, although in two previous sections he had acknowledged that considerable modifications were necessary. My object in the present section has been to show that the relative values of commodities are not only not governed, but are very far from being governed, by the relative quantities of labour bestowed on their production, as stated in the passage quoted: and, in the passage itself, it is positively denied, that because a commodity has so much labour bestowed upon it as will cost £1000, that therefore it is of the value of £1000. Mr. Ricardo did not fall into the unaccountable error of calling labour profits, and of confounding the accumulated labour actually worked up in fixed capitals and materials with the profits upon such capitals and materials, things totally distinct.

*

I cannot help thinking, that if a certain interpretation of a particular term is at once the most usual, and the most useful, it may justly be considered as the most correct, and the one which ought to be adopted in a proper nomenclature.

In all the successful instances of entirely new nomenclatures in any science, it is their obvious and pre-eminent utility, which makes up for the disadvantage of their novelty.

*

The reader should be aware that this refers only to a particular period, from about 1444 to 1509, when wheat seems to have been unusually plentiful, and low in value. Taking a century earlier, wheat was of about the same value as at present, and a century later it was of much higher value, and the labourer was much worse off than at present.

*

It is said that under Hyder Ally and Tippoo Sultan, ⅔ of the produce were often taken as rent. If this were general, much fertile land might be kept out of cultivation, and the labourer might be paid miserably, although the productiveness of labour on the poorest land cultivated was great.

*

“The word value, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods, which the possession of that object conveys. The one may be called value in use, the other value in exchange.” Book I. ch. iv. p. 42, 6th edition.

*

When it is said that the exchangeable value of a commodity is determined by its power of purchasing other goods, it may most reasonably be asked, what goods? It would be absolutely impossible to apply all goods as a measure.

*

The quantity of goods which a commodity will command, does not ascertain the difficulty of getting possession of it.

†

Book I. ch. v. p. 54, 6th edit.

*

Book I. ch. xi. p. 291, 6th edit.

*

Mr. Ricardo, in the first edition of his work (page 11) has given the following description of an invariable measure of value. “If any one commodity could be found, which now, and at all times required precisely the same quantity of labour to produce it, that commodity would be of unvarying value, and would be eminently useful as a standard by which the variations of other things might be measured. Of such a commodity we have no knowledge, and consequently are unable to fix on any standard of value. It is, however, of considerable use towards attaining a correct theory, to ascertain what the essential qualities of a standard are, that we may know the causes of the variations in the relative values of commodities; and that we may be enabled to calculate the degree in which they are likely to operate.”

Nothing can be more just and satisfactory than this passage; but unfortunately it was given up.

*

Principles of Political Economy, ch. I. sec. vi. p. 44, 3rd. edition.

*

The obvious defect of such a measure is, that, whether applied to commodities produced under the same circumstances as itself, or to any others, it can never measure the variations to which they are subject occasioned by the general rise or fall of profits, because it must itself necessarily vary in that respect precisely as they do.—Ed.

*

Principles of Political Economy, ch. vii. p. 143, 3rd edit.

†

Practically in countries where a large part of the currency consists of paper, the actual influx of bullion is continually checked by an increased issue of bank notes and bills of exchange; but as long as there is no difference between paper and gold, the effect in lowering the value of money is precisely the same. Repeated experience appears to have shewn us that in the case of a brisk demand, no difficulty is ever found in furnishing the means of a considerable rise of prices in some classes of commodities, without any tendency to a fall in others. Currency is always at hand. The important question is, whether the exchanges can be maintained under such prices; and we know too well that they have often risen higher than the exchanges would allow so as to keep paper and gold together.

*

I have always considered the first part of Mr. Ricardo’s chapter (vii) on foreign trade as essentially erroneous; but the greater part of the chapter is not only new, but unquestionably true, and of the highest importance.

†

Mercantile men are too apt to measure the value of money in different countries by the difference in the exchanges, which merely measures the rate at which the money of one country exchanges for the money of another, and has little to do with the elementary cost of money, or the difficulty of obtaining it in each country, or even with the power of purchasing the mass of those commodities which are least liable to change in their cost of production. Of all commodities, those which are exported are the most liable to changes in the cost of their production, and are therefore the last which should be referred to with any view to a measure of the value of money.

In my first publication on rent in the shape of a pamphlet, which appeared in 1815, two years before the first edition of Mr. Ricardo’s work came out, the following passage occurs in a note:

“The precious metals are always tending to a state of rest, or such a state of things as to make their movement unnecessary. But when this state of rest has been nearly attained, and the exchanges of all countries are nearly at par, the value of the precious metals in different countries estimated in corn and labour, or in the mass of commodities, is far indeed from being the same. To be convinced of this, it is only necessary to look at England, France, Poland, Russia, and India, when the exchanges are at par.”

In reality, the quantity of money in each country is determined by the quantity wanted to maintain its general exchanges at par; and the greater are the advantages of any country in regard to its exportable commodities, the more money will it retain, and the higher will be the price of its corn and labour, when its exchanges are at par. If England should lose her advantages in this respect, her corn and labour would fall to the level of the rest of Europe, in spite of any corn laws that could be imagined.

*

Ch. vii. p. 156, 3rd edit.

*

I cannot, however, agree with him in thinking that all land which yields food must necessarily yield rent. The land covered with wood which is successively taken into cultivation in new colonies for the production of food, may only pay profits and labour. A fair profit on the capital employed, including, of course, the payment of labour, will always be a sufficient inducement to cultivate. But, practically, the cases are very rare, where land is to be had by any body who chooses to take it, and it is true perhaps universally, that all appropriated land which yields food in its natural state, yields a rent, whether cultivated or uncultivated.

*

Vol. ii. p. 124, 2nd edit. In his 5th edition, vol. ii. p. 346, he describes the subject anew, but he does not seize the right view of it. He still considers the price of the produce of land which occasions rent too much as the result of a common monopoly.

†

Vol. i. p. 49. M. de Sismondi, in his later work, Nouveaux Principes d’Economie Politique, has given a different and more correct view of rent.

*

Vol. iv. p. 134.

*

Vol. iii. p. 212.

*

Book I. c. xi. p. 255, 6th edit.

†

It is however certain that, if either these materials be wanting, or the skill and capital necessary to work them up be prevented from forming, owing to the insecurity of property or any other cause, the cultivators will soon slacken in their exertions, and the motives to accumulate and to increase their produce will greatly diminish. But in this case there will be a very slack demand for labour: and, whatever may be the nominal cheapness of provisions, the whole body of labourers will not really be able to command such a portion of the necessaries of life, including, of course, clothing, lodging, &c. as will occasion an increase of population.

*

Mr. Ricardo has supposed a case (p. 490, third edit.) of a diminution of fertility of one-tenth, and he thinks that it would increase rents by pushing capital upon less fertile land. I think, on the contrary, that in any well cultivated country it could not fail to lower rents, by occasioning the withdrawing of capital from the poorest soils. If the last land before in use would do but little more than pay the necessary labour, and a profit of 10 per cent. upon the capital employed, a diminution of a tenth part of the gross produce would certainly render many poor soils no longer worth cultivating, and would therefore reduce rents.

*

Mr. Ricardo observes, (p. 492, third edit.) in answer to this passage, that, “given the high price, rent must be high in proportion to abundance and not scarcity,” whether in peculiar vineyards or on common corn lands. But this is begging the whole of the question. The price cannot be given. By the force of external demand and diminished supply the produce of an acre of Champaigne grapes might permanently command fifty times the labour that had been employed in cultivating it; but, supposing the labourers employed in cultivation to live upon the corn they produce, no possible increase of external demand or diminution of supply could ever enable the produce of an acre of corn to command permanently so many labourers as it would support: because in that case the labourer would be absolutely without the means of supporting a family, and keeping up the population.

*

Yet this distinction does not appear to Mr. Ricardo to be well founded! c. xxxi. p. 492, 3rd edit.

†

It is extraordinary that Mr. Ricardo (p. 486) should have sanctioned these statements of M. Sismondi and Mr. Buchanan. Strictly, according to his own theory, the price of corn is always a natural or necessary price, and, independent of agricultural improvements, the natural and necessary condition of an increased supply of produce. In what sense then can he agree with these writers in saying, that it is like that of a common monopoly, or advantageous only to the landlords, and proportionably injurious to the consumers?

*

After what had been said and written on the subject of rent, I confess I was a good deal surprised that Colonel Perronet Thompson should come forward with a pamphlet, entitled “The True Theory of Rent, in opposition to Mr. Ricardo and others,” and should state that the simple cause of rent is every where the same as that which gives rise to the rent of the vineyard which produces Tokay. The statement is the more remarkable in Colonel Thompson, as in the course of his pamphlet he acknowledges the truth of the main results of the new theory; which are,

First, That in a progressive country with gradations of soil, which is the state of almost every known country, the actual average price of corn is a necessary price, or the price necessary to obtain the actual amount of the home supply under the existing state of agricultural skill, and existing value of money.

Secondly, That no degree of monopoly could make land which produces the food on which the people live yield a rent, if it did not yield a greater produce than was sufficient to support the cultivators.

Thirdly, That the ordinary price of corn is so strictly limited that it cannot by possibility continue so high as to prevent the ordinary money wages of the labouring classes from purchasing more corn than is required to support the individuals actually employed.

Now, it is unquestionably true, First, that the price of Tokay is not a necessary price. The same quantity would be produced, although the price were considerably lower. Secondly, That neither the purchasers of Tokay, nor the cultivators of it, live upon the produce. And Thirdly, That there is no limit to the price of Tokay, but the tastes and fortunes of a few opulent individuals.

How then can it possibly be said with truth, that the simple cause of rent is every where the same as that which gives rise to the rent of the vineyard which produces Tokay; and how entirely inapplicable is a reference to Tokay as an illustration of the true theory of rent.

With regard to the grand fallacy on which Colonel Thompson dwells so much, it is obvious that the incautious language in which the new doctrine of rent has been sometimes announced, does not affect its substance. The errors arising from this cause had been pointed out in the first edition of this work long before Colonel Thompson entered upon the question.

†

After what has been stated respecting the constancy of the value of labour in the last chapter, it will be understood that whenever I speak of high or low wages, or of the rise or fall of wages, I always mean to refer to their greater or less amount, or to the increase or diminution of the quantity of necessaries, &c. awarded the labourer, or of the money wherewith he purchases those necessaries, and which is variable in its value.

It would, perhaps, have been better, in order to avoid ambiguity, always to have applied these latter terms to wages, instead of the former ones, but the expressions high and low wages, and the rise and fall of wages, being so constantly used in common conversation, and being always understood in the sense in which I explain them, the retaining them is not likely to create confusion in the mind of the reader.

*

If, commencing with a new colony the increase of population did not create a demand for more food than could be produced with the same profits from the richest lands, no rent could arise, and no inferior land could be taken into cultivation.

†

Mr. Ricardo quite misunderstood me, when he represents me as saying that rent immediately and necessarily rises or falls with the increased or diminished fertility of the land. (p. 489, 3d edit.) How far my former words would bear this interpretation the reader must judge: but I certainly could not be aware that they would be so construed. Having stated three causes as necessary to the production of rent, I could not possibly have meant to say that rent would vary always and exactly in proportion to one of them. I distinctly stated, indeed, that in new colonies, the surplus produce from the land, or its fertility, appears but little in the shape of rent. Surely he expressed himself more inadvertently while correcting me, by referring to the comparative scarcity of the most fertile land as the only cause of rent, (p. 490, 3d edit.) although he has himself acknowledged, that without positive fertility, no rent can exist. (p. 491.) If the most fertile land of any country were still very poor, such country would yield but very little rent, however scarce such land might be; and if there were no excess of necessaries above what are required for the maintenance of the cultivators, there would be no excess of price.

*

The immediate motive for the cultivation of fresh land can only be the prospect of employing an increasing capital to greater advantage than on the old land.

†

When a given value of capital yields smaller returns, whether on new land or old, the loss is generally divided between the labourers and capitalists, and wages and profits fall at the same time. This is quite contrary to Mr. Ricardo’s language. But the wages we refer to are totally different. He speaks of the mere labour cost of producing the necessaries of the labourer; I speak of the necessaries themselves. The reader will be aware that when corn wages have fallen, the value of corn has risen, owing to a greater intensity of demand for it, or the power and will to purchase it by the sacrifice of a greater quantity of labour.

*

This view of the subject includes all the different kinds of rent referred to by Mr. Jones, in his late valuable account of the state of rents, and the various modes of paying labour in different parts of the world. Whether the labourer is paid in money, in produce, or by a portion of land which he is to work himself with a part of his labour, while he gives the other part to his lord, the foundation of rent is exactly the same, depending always upon the value of the excess of what the whole of the lord’s land produces, above that which under the actual circumstances is received by the cultivators, and the amount of rent which can be received from a given extent of land will rise according to all the different degrees of fertility above that which will only support the actual cultivators.

*

Penal Code, Staunton, p. 158. The market-rate of interest at Canton is said, however, to be only from twelve to eighteen per cent. Id. note XVII.

*

Mr. Ricardo has observed (p. 499, 3rd edit.) in reference to the second cause which I have here stated, as tending to raise rents, “that no fall of wages can raise rents; for it will neither diminish the portion, nor the value of the portion of the produce which will be allotted to the farmer and labourer together.” And yet in reality there is no other rise in the value of corn, but that which is accompanied by a fall in the corn wages of labour. The fact is, that the value allotted to the farmer and labourer together, measured in labour, or money of a fixed value, is very far from remaining the same. All his calculations are built upon the fundamental error of omitting the consideration of profits in estimating the value of wages, and thus making the value of labour rise, instead of making it constant. The value obtained by a given quantity of labour, or the value allotted to the farmer and labourer together, must always fall with the fall of profits. If it does not in Mr. Ricardo’s money, it is precisely because his money is so constructed as to vary with the article it measures. The high corn wages of America will finally go to rent, not to profits. If labourers were permanently to receive the value of half a bushel of wheat a day, none but the richest lands could pay the expense of working them. An increase of population, and a fall of very high corn wages are absolutely necessary to the cultivation of poor land. How then can it be said that a fall of wages is not one of the causes of a rise of rents?

*

Properly speaking, facility of production in necessaries can only be temporary where there are gradations of land as far as barrenness, except when capital is prevented from increasing by the want of power or will to save, arising from bad government. It may then be permanent. But though corn will, in that case, cost but little labour, the labour which it will command, or its value, will be comparatively high.

†

This cause is partly included in the preceding ones; but as it frequently occurs, and has a different origin, it is worth while to consider it separately, and trace its practical operation.

*

According to Pitkin’s Statistical View of the United States, (p. 112, 2nd ed.) the average price of the bushel of wheat for eleven years, from 1806 to 1816 inclusive, at the principal places of exportation, was rather above 1½ dollars, or 54 shillings per quarter; and, according to Fearon’s Sketches, common labour was above a dollar a day.

The state of things in 1821 was essentially different, and shews how much the value of money in any country depends upon the demand and supply of produce. Corn and labour, it is said, had fallen at that time one half. The former high prices were no doubt in part owing to paper, but before the war with England, for seven years out of the eleven referred to, silver and paper were at par, and during this period wheat at the ports of the Eastern States was above 50 shillings a quarter. A rise in the price of corn, and other sorts of raw produce in an exporting country with plenty of good land, enables it to purchase money with a smaller quantity of labour, which is likely to render it cheap, or to make the money price of labour high.

*

During the period alluded to, corn rose far beyond what was necessary to defray the increased expense of freight, insurance, &c., occasioned by the war. The cause of the rise was therefore, independent of the increased cost of importation. It doubtless originated in the profuse expenditure of the state, and the increased activity of commercial and manufacturing industry at the time.—Ed.

*

According to the calculations of Mr. Colquhoun, the value of our trade, foreign and domestic, and of our manufactures, exclusive of raw materials, is nearly equal to the gross value derived from the land. In no other large country probably is this the case.—Treatise on the Wealth, Power, and Resources of the British Empire, p. 96.

*

This would in fact be a fall in the corn wages of labour, though it might be made up to the labourer by the comparative cheapness of some other articles, and more constant employment for all the members of his family.

*

Rents may be said to have a tendency to rise, when more capital is ready to be laid out upon the old land, but cannot be laid out without diminished returns. When profits fall in manufactures and commerce from the diminished price of goods, capitalists will be ready to give higher rents for old farms.

*

This, it must be recollected, is upon the supposition above adverted to, that the farmer has had the means and the will to employ all the capital, both fixed and circulating, which can be applied at the actual rate of profits.

†

To the honour of Scotch cultivators it should be observed, that they have applied their capitals so very skilfully and economically, that at the same time that they have prodigiously increased the produce, they have increased the landlord’s proportion of it. The difference between the landlord’s share of the produce in Scotland and in England is quite extraordinary—greater than can be accounted for by the absence of tithes and poor’s-rates. It must be referred therefore to superior skill and economy, and improvements in cultivation.—See Sir John Sinclair’s valuable Account of the Husbandry of Scotland; and the General Report, published in 1813 and 14—works replete with the most useful and interesting information on agricultural subjects.

*

See Evidence before the House of Lords, given by Arthur Young, in the Report respecting the corn laws, 1814, p. 66.

†

In that state of things where land is in great abundance, and rents very low, the capital, and particularly the fixed capital employed, is generally very inconsiderable. Mr. Ricardo, in illustrating his doctrine of rent, has supposed a capital of £3000 employed with low corn wages to obtain a produce worth £720, before the commencement of rent. But this is so directly contrary to the real state of things before rent has commenced, as to destroy all just illustration. In the present advanced state of cultivation under a large mass of rents, a capital of £1000 is considered as adequate to obtain the above value of produce. It was the very disproportionate amount of capital, with the low corn wages assumed, which enabled Mr. Ricardo to contemplate an extraordinary rise of rents, occasioned exclusively by a transfer from profits. This apparent result was further assisted by the adoption of a money as his measure of value, which, (as I have already shown, p. 124-125) must necessarily vary with the commodity which it was to measure. When all labour, all raw products, and many manufactured products had risen in his money, he still supposed his money to remain of the same value, whereas it had in fact fallen in value from the fall of profits, without which fall the appearances he contemplates could not possibly take place.

*

The only practical exception is in the case of importing foreign corn, the effects of which will be considered more particularly in the next section, and a subsequent part of this chapter.

*

This is an instance of the incidental causes of the high or low value of money prevailing over the necessary cause just in an opposite direction to that noticed in the last section. Profits unquestionably fell after the war, and the value of money ought to have fallen, and the money price of labour to have risen; but the rise in the value of money, owing to the slackness of the circulation, the withdrawing of much paper, and the comparative want of demand for corn and labour, combined with the diminished money value of our exported commodities, quite overcame the natural effects of the fall of profits, and occasioned a decided rise in the value of money.

*

It should be recollected, however, that both the results here contemplated will be essentially affected by taxes which fall on the land.

*

The reader will be aware from what was said in the last chapter, that, though in speaking of the relation between the price of the produce and its money cost at any given time, money is always a correct measure; yet that in speaking of the price of the produce without such reference, it is necessary that the existing value of money should be expressed, or understood; and I trust that the reader will allow of the latter, when the meaning is clear from the context. As I measure the value of money by labour, the price of the produce under the existing value of money is exactly equivalent to the expression value of the produce. In reality it may be said, that in the natural and ordinary state of things, it is the actual value of the produce, or its actual power of commanding labour, which is necessary to the supply of the actual produce. In these cases it might be better at once to use the term value instead of price; but I fear it would not yet be so readily understood.

*

Principles of Political Economy, ch. ii. p. 54. This passage was taken from the first edition. It is altered in the second and third; but not sufficiently to make it true. In the third, (p. 56) the passage is as follows: “It is only then because land is not unlimited in quantity and uniform in quality, and because in the progress of population land of an inferior quality, or less advantageously situated, is called into cultivation, that rent is ever paid for the use of it.” Now it is quite obvious, as stated above, that if land as fertile as the best were merely limited in quantity, without being different in quality, it would, in the progress of population, yield altogether a much higher rent than the same quantity of land would with gradations of soil.

*

B. I. ch. v. p. 53, 6th ed.

*

Among these exceptions, the period since the war of the French revolution forms an important one.

*

Adam Smith notices the bad effects of high profits on the habits of the capitalist. They may perhaps sometimes occasion extravagance; but generally, I should say, that extravagant habits were a more frequent cause of a scarcity of capital and high profits, than high profits of extravagant habits.

*

Wealth of Nations, Book I. c. xi. p. 394. 6th edit.

†

Mr. Ricardo in his 3rd edit. (c. xxiv. p. 399.) allows that the landlord has a remote interest in improvements; but still dwells without sufficient reason on the interval of injury which he sustains.

‡

Ibid.

*

In an article of the Edinburgh Review, on Mr. Jones’ Theory of Rent, the reviewer alludes to the error of Mr. Ricardo in regard to the effects of agricultural improvements on the rents of the landlords; and says, “Had Mr. Jones been the first to point out this mistake of Mr. Ricardo, and to rectify it, he would have done some little service to the science.” For the first rectification of the mistake, a reference is made to what had been published twelve months previously to the appearance of Mr. Jones’ work, in the second edition of Mr. M‘Culloch’s Political Economy.

Now as the reviewer was so ready to accuse Mr. Jones of not knowing what had been done by others, he should not himself have been ignorant that the mistake had been rectified in this work, not merely twelve months, but nearly twelve years before, that is, in 1820, before Mr. Ricardo’s 3rd edit. came out.

*

If, partly from indolence, and partly from the want of demand for labour, which is the great parent of indolence in these countries, the labourer works only two or three days in the week, wages, though they may be low in reference to the condition of the labourer, may be high in reference to the outgoings of the capitalist.

*

Mr. Ricardo always seems to assume, that increased difficulties thrown in the way of production will be overcome by increased price, and that the same quantity will be produced as would have been produced if no increased difficulty had occurred. But this is quite an unwarranted assumption.

*

Principles of Political Economy, ch. i. p. 49, 3rd edit.

†

Id. p. 50.

‡

Reports from the Lords on the Corn Laws, p. 66.

*

It is specifically this unusual application of common terms which has rendered Mr. Ricardo’s work so difficult to be understood by many people. It requires indeed a constant and laborious effort of the mind to recollect at all times what is meant by high and low rents, and high or low wages. In other respects, it has always appeared to me that the style in which the work is written, is perfectly clear. It is never obscure, but when either the view itself is erroneous, or terms are used in an unusual sense.

*

Mr. Ricardo thought that it would fall to 10s., because he supposes the same amount of labour and capital to yield double the amount of corn. But as according to his own supposition, 90 quarters, instead of 120, will pay the six labourers, it is obvious that the price of the quarter will only fall to 13s. 4d.: and the values of the whole produce, and of the rent vary accordingly.

*

Mr. Ricardo by his proposed division of the produce has assumed that the demand is such as to occasion the produce to be so divided; and then the results stated will follow. But in reality if the labour on the land were to become at once doubly productive, there would certainly be a glut of corn, and the division of the produce would be very different from that which he has supposed.

*

Colonel Torrens concludes the second edition of his Treatise on a Free Corn Trade with the following passage: “The class of land proprietors have not any more than the capitalists and labourers an interest in imposing restrictions on the importation of foreign corn.” If this be so, the identity of the interests of landlords and of the state is even more complete than I had ventured to express it.

*

Princ. of Polit. Econ. ch. ii. p. 63, 3rd edit.

*

That is, supposing the gradations were towards worse machinery, some of which it was necessary to use, as in the case of land, but not otherwise. The reason why manufactures and necessaries will not admit of comparison in regard to rents is, that necessaries, in a limited territory; are always tending to the same exchangeable value, whether they have cost little or much labour; but manufactures, if not subjected to an artificial monopoly, must fall in value with the facility of producing them. We cannot therefore suppose the price to be given; but if we could, facility of production would, in both cases, be equally a measure of relief from labour.

*

Wealth of Nations, Vol. I. book i. p. xi. pp. 248—250. 6th ed.

†

Princ. of Polit. Econ. ch. xxiv. p. 398. 3rd edit.

*

Vol. ii. p. 212.

*

The Schedule D. included every species of professions. The whole amounted to three millions, of which the professions were considered to be above a million.

†

It must always be recollected, that the national profits, or the increase of value to the nation obtained by the capitals employed on the land, must be considered as including rents as well as the common agricultural profits.

*

Under similar circumstances, with respect to agricultural skill, &c., it is obvious that land of the same degree of barrenness could not be cultivated, if by the prevalence of prudential habits the labourers were very well paid; but to forego the small increase of produce and population arising from the cultivation of such land, would, in a large and fertile territory, be a slight and imperceptible sacrifice, while the happiness which would result from it to the great mass of the population, would be beyond all price.

†

Princ. of Polit. Econ. chap. vi. p. 124, 3rd edit.

The truth of this opinion depends upon the question whether upon increasing the capital of a country in a certain proportion, profits will be diminished in a greater proportion. It is probable that this would be the case if accumulation were pushed to a very great extent, as in the ratio assumed in Mr. Ricardo’s instance, which is of course taken at random. For the purpose merely of illustration, I am inclined to think, however, that as one very large class of society lives upon the profits of stock, accumulation would cease from the want of power or motive to save, before the general income derived from capital was actually diminished.

*

Mr. Ricardo himself was an instance of what I am stating. He became, by his talents and industry, a considerable landholder; and a more honourable and excellent man, a man who for the qualities of his head and heart more entirely deserved what he had earned, or employed it better, I could not point out in the whole circle of landholders.

It is somewhat singular that Mr. Ricardo, a considerable receiver of rents, should have so much underrated their national importance; while I, who never received, nor expect to receive any, should probably be accused of overrating their importance. Our different opinions, under these circumstances, may serve at least to show our mutual sincerity, and afford a strong presumption, that to whatever bias our minds may have been subjected in the doctrines we have laid down, it has not been that, against which perhaps it is most difficult to guard, the insensible bias of situation and interest.

*

It must always be recollected, that a plenty of labour, if that labour be employed, always tends to increase the competition for money, and raise its value.

*

Wealth of Nations, Book i. ch. viii. p. 130, 6th edit.

*

Wealth of Nations, B. i. ch. x. part i. p. 152, 6th edit.

†

Id. p. 161.

*

Wealth of Nations, B. i. ch. vi. p. 71, 6th edit.

†

Id. ch. vii. p. 108.

*

Polit. Econ. c. v. p. 86, 3rd edit.

*

We might with almost as much propriety define the natural rate of profits to be that rate which would just keep up the capital without increase or diminution. This is in fact the rate to which profits are constantly tending.

*

Wealth of Nat. Book I. chap. viii. p. 114. 6th edit.

*

In new countries, such as the United States, the funds for the maintenance of labour are so ample, and are increasing so rapidly, that for a considerable time the prudential check to early marriages may hardly be necessary.

*

See Section IV. of this chapter.

*

Eden’s State of the Poor. Table, vol. iii. p. 79. In this table, a deduction is made for 2/9 for the quarter of middling wheat of eight bushels, which is too much.

†

Tracts on the Corn Trade, Supp. p. 199.

*

Tracts on the Corn Trade, p. 50.

*

It is most fortunate for the country and the labouring classes of society, that the bill which passed the House of Commons, for taking from their parents the children of those who asked for relief, and supporting them on public funds, did not pass the House of Lords. Such a law would have been the commencement of a new system of poor laws beyond all comparison worse than the old.

*

This view of the subject was stated by me above thirty years ago in the quarto edition of the Essay on Population, p. 421, and by Mr. Ricardo in his 3rd edition, p. 475.

*

It has lately been stated, that spade cultivation will yield both a greater gross produce and a greater neat produce. I am always ready to bow to well established experience; but if such experience applies in the present case, one cannot sufficiently wonder at the continued use of ploughs and horses in agriculture. Even supposing however that the use of the spade might, on some soils, so improve the land, as to make the crop more than pay the additional expense of the labour, taken separately; yet, as horses must be kept to carry out dressing to a distance and to convey the produce of the soil to market, it could hardly answer to the cultivator to employ men in digging his fields, while his horses were standing idle in his stables. As far as experience has yet gone, I should certainly say, that it is commerce, price and skill, which will cultivate the wastes of large and poor territories—not the spade.

No inference whatever in regard to the cultivation of a large country can be drawn from what may be done on a few acres in the immediate neighbourhood of houses and manure.

*

State of the Poor, vol. iii. p. xli.

*

State of the Poor, vol. iii. p. lxxxix.

†

Ibid. vol. iii. p. lx.

*

The year 1597 seems to have been an extraordinary dear one, and ought not to be included in so short an average. If an average were taken of the five years beginning with 1598, the labourer would appear to earn about 5/7 of a peck; and, on an average of ten years, from the same period, he would earn about ⅘ of a peck. During the five years from 1594 to 1598 inclusive, the price of wheat seems to have been unusually high from unfavourable seasons.

*

Eden’s State of the Poor, vol. i. p. 32.

†

Ibid. p. 33.

‡

Ibid, p. 36. 42.

*

Eden’s State of the Poor, vol. iii. p. xxv. et seq.

†

Eden’s State of the Poor, Table of Prices, vol. iii.

*

Mr. Hallam, in his valuable Work on the Middle Ages, has overlooked the distinction between the reigns of Edward III. and Henry VI. with regard to the state of the labouring classes. The two periods appear to have been essentially different in this respect.

*

The nominal price of labour rose from about 1½d. or 2d. to 4d. or 4¼d. If we combine these proportions of 3 to 8, and 4 to 9 together, and correct the result by the diminution of the quantity of metal contained in the same nominal sum in the latter period, which was in the proportions of 1l. 17s. 6d. to 1l. 2s. 6d., or of 5 to 3, it will appear that the bullion price of labour rose nearly in the proportion of from 2 to 3, and consequently that the value of silver fell nearly in the proportions of from 3 to 2.

†

The rise in the bullion price of labour, while the bullion price of corn was falling, proved not only, that the English labourer could command a greater quantity of corn than usual, but that at the same time there was a great demand for labour, and all who were willing to work might be employed, two events which do not always go together, but which when they do, are most favourable to the labouring classes.

*

As the regulation passed in April, the year 1651 is not included in the average.

†

Encyclopædia Brit. Supp. Artic. Corn Laws, where a table is given with the 1/9 deducted.

‡

Eden’s State of the Poor, vol. iii. p. 98.

*

Windsor Table, deducting 1/9.

†

Eden’s State of the Poor, vol. iii. p. 104.

‡

Philosoph. Trans. for 1798. Part i. p. 176.

§

Annals of Agriculture, No. 270, p. 88.

*

Vol. i. p. 385.

*

Annals of Agriculture, No. 271, p. 215.

†

Deducting 1/9 from the prices in the Windsor Table. Arthur Young deducts another 9th for the quality; but this is certainly too much, in reference to the general average of the kingdom to which the latest tables apply. I have therefore preferred adhering all along to the Windsor prices; and the reader will make what allowances he thinks fit for the quality, which, according to Mr. Rose, is not much above the average.

‡

Annals of Agriculture, No. 271, p. 215 and 216.

§

Windsor Table, Supp. to Encyclopædia Brit. Art. Corn Laws.

*

In many cases the apparent fall has been in the proportion of 15 to 10, and even greater. In the North Riding of Yorkshire wages of the same description are said to have fallen from 3s. 6d. to 2s. and 2s. 3d. (Agricultural Report, Merry, p. 112.) In Shropshire from 2s. 4d. to 1s. 6d. (White, p. 24.) In Northamptonshire, Leicestershire, and Nottinghamshire, from 15s. and 18s. to 10s. since 1824. (Buckly, p. 398.) In Scotland, harvest wages from 2s. 6d. and 2s. to 1s. 6d. and 1s., and from 15s. and 12s. to 10s. and 8s. 6d. (Oliver, pp. 128 and 126.) Generally in the Lowlands the principal portion of the wages of labour is paid in kind, and the money value of that portion must therefore fall with the fall in the price of corn. The part paid in money has fallen, but not in proportion. In a private account which I received some years ago from the stewartry of Kircudbright, where the wages were all paid in money, it appears that from 1811 to 1822 the fall of summer wages was from 22d. to 15d., and of winter wages from 18d. to 1s.

*

It is a very curious fact, that the bullion price of corn continued unusually low in France from 1444 to 1510. (Garnier’s Richesse des Nations, vol. ii. p. 184.) just during the same period that it was low in England. Adam Smith is inclined to attribute this fall and low price to a deficiency in the supply of the mines, compared with the demand; (B. i. ch. xi.) but this solution in no respect accounts for the rise of the bullion price of labour in England, at the time that the bullion price of corn was falling. Nothing can account for this fact, but a relative plenty of corn compared with labour—a state of things which has little to do with the mines. The low prices in France were probably connected with the abolition of villanage, and an extended cultivation in the reign of Charles VII. and his immediate successors, after the ravages of the English were at an end.

*

Wealth of Nations, b. i. c. xi. p. 313.

*

The increase of the funds for the maintenance of labour would however have some effect soon, by diminishing mortality, both among those rising to the age of puberty, and the full grown labourers.

†

Annals of Agriculture, No. 271. pp. 215 and 216.

*

Under all ordinary circumstances, more labour may be set in motion, before any increase of population has taken place.

†

This is frequently noticed in the Agricultural Report.

*

It happens not very unfrequently, that the rise in the price of agricultural produce greatly exceeds this. Mr. Tooke in his Details of the High and Low Prices, supposes that, owing to a rise in the price of wheat from about 48s. a quarter to 75s. in 1795 and 1796, with a rise of other agricultural produce nearly in proportion, the farmers and landlords, after an allowance made for every probable deduction, must have divided between them a net additional profit of 12 to 14 millions per annum, and a still greater profit in 1800 and 1801, pp. 303 and 305, 2nd edit.

*

This, though rather differently worded, is Mr. Ricardo’s proposition, but he has applied it incorrectly, as will be seen in a subsequent section.

*

It is necessary to qualify the position in this way, because, with regard to the main products of agriculture, it might easily happen that all the parts were not of the same value. If a farmer cultivated his lands by means of domestics living in his house whom he found in food and clothing, his advances might always be nearly the same in quantity and of the same high value in use; but in the case of a glut from the shutting up of an accustomed market, or a season of unusul abundance, a part of the crop might be of no value either in use or exchange, and his profits could by no means be determined, by the excess of the quantity produced, above the advances necessary to produce it, as before shewn, page 264.

*

The reader will recollect that wages always refer to quantity, unless otherwise particularly expressed, and profits to proportion.

*

Estimate of the strength of Great Britain, ch. vii. p. 115.

†

Ibid. ch. vii. p. 120.

*

Annals of Agriculture, No. 270, pp. 96, and 97, and No. 271, p. 215. Mr. Young expresses considerable surprise at these results, and does not seem to be sufficiently aware, that the number of years purchase given for land has nothing to do with prices, but expresses the abundance or scarcity of moveable capital compared with the means of employing it.

*

Wealth of Nations, Book I. ch. xi. p. 309, 313, 6th edit.

†

Annals of Agriculture, No. 270, p. 89.

*

It ought to be allowed that Adam Smith, in speaking of the effects of accumulation and competition on profits, naturally means to refer to a limited territory, a limited population, and a limited demand; but accumulation of capital under these circumstances involves every cause that can affect profits.

†

The reader is aware of the corrections to be made for fixed capital.

*

It is to be observed, that the various causes which practically affect profits, and which the author has enumerated in this section, are all reducible to one or the other of the two grand distinctions which are treated of in the two foregoing sections.—For instance, agricultural improvements, or increased personal exertions on the part of the labourer, whereby a larger produce is obtained with the same amount of labour, clearly belong to what he has denominated the limiting principle of profits, whilst the various circumstances which affect the value of the same quantity of produce, the labour employed being also the same, belong to the regulating principle of profits.—Ed.

†

Principles of Political Economy, ch. vi. p. 108, 3rd edit.

‡

Id. p. 128.

*

Principles of Political Economy, ch. vi. p. 111, 3rd edit.

*

Mr. Ricardo often uses the terms quantity of labour, and quantity of labour and capital, to express the same thing. Generally, when on the subject of profits, he means the quantity of labour and capital, although it must be allowed that machinery and materials of different kinds cannot be estimated and compared by quantity. The true condensed expressions in regard to the advances on which profits are estimated must be (as it has appeared) either the quantity of labour, or the value of the capital. They are equivalent, and give the same results.

*

This balance necessarily takes place, as we have said, in the elementary cost of the varying wages of a given number of men, which always remains the same.

*

It has sometimes been said that profits depend entirely upon the productiveness of labour. If by productiveness of labour be meant what the words usually mean, and what they certainly ought to mean, namely the quantity of produce obtained by a given quantity of labour, every day’s experience shews that the statement is quite unfounded. If the words be intended to mean productiveness of value then no doubt profits depend upon the productiveness of labour. This truth is involved in the very definition of profits, namely the excess of the value of the produce above the value of the advances, or of a given quantity of labour advanced. It is exactly what has been here inculcated, but the usual and correct meaning of terms must not be changed on particular occasions.

*

The estimate here made must of course be quite conjectural; but if the soil were very fertile, and a large part of the value of the mercantile and manufacturing products of the profits of fixed capital, the conjecture is probably not beyond the truth. In England at present the value of the annual produce would purchase the labour of double the number of families actually existing in the country, if paid at the price of common agricultural labour.

†

This is what I did in my former edition of this work.

*

In comparing the wealth of the United States of America with almost any other country, we should underrate her wealth, unless we made an allowance both for the large quantity of corn awarded to the labourer and the high money price of labour, or low value of money, which enables the American labourer to command so much foreign produce.

In comparing England with the countries on the continent an allowance for the lower value of money would be sufficient.

*

Essay on the Principle of Population.

*

See Lord Lauderdale’s Chapter on Parsimony, in his Inquiry into the Nature and Origin of Public Wealth, ch. iv, p. 198, 2d edit. Lord Lauderdale appears to have gone as much too far in deprecating accumulation, as some other writers in recommending it. This tendency to extremes is one of the great sources of error in political economy, where so much depends upon proportions.

*

Mr. Mill, in a reply to Mr. Spence, published in 1808, has laid down very broadly the doctrine that commodities are only purchased by commodities, and that one half of them must always furnish a market for the other half. The same doctrine appears to be adopted in its fullest extent by the author of an able and useful article on the Corn Laws, in the supplement to the Encyclopædia Britannica, which has been referred to a previous chapter. These writers do not seem to be aware of what is unquestionably true, that demand is always determined by value, and supply by quantity. Two bushels of wheat are double the quantity of one in regard to supply; but in numerous cases, two bushels will not make so great a demand as one bushel.

*

The variations which take place in the general rate of profits being common to all commodities, will not of course affect their relative values; that is, whether commodities universally rise to a higher price, or sink to a lower one, or even fall below their cost, they will continue to bear the same proportion to each other as they did before. But no one would ever think of saying, that the demand for them (in the ordinary sense of the word) was the same in both cases. When, therefore, Mr. Mill explains the equality of demand and supply to consist in this;—“that goods which have been produced by a certain quantity of labour, exchange for goods which have been produced by an equal quantity of labour,” (Elements of Polit. Econ. 3rd edit. p. 239.) he uses the term demand in a sense quite different from that which is usually meant by it. The demand and supply, as he understands them, may be equal to each other, when, owing to a general slackness of trade, the mass of goods are selling at a price very much below their ordinary costs of production; or when, in consequence of unusual briskness, they are selling very much above their costs; that is, when, according to Adam Smith, and to the accustomed language of society, the supply would be said, either greatly to exceed the demand, or to fall considerably short of it.

Throughout the chapter from which the foregoing passage is taken, Mr. Mill uses the term demand, as if it were synonymous with extent of consumption. By an increase or diminution of the demand, he means to refer simply to the greater or less quantity of goods bought or sold. What is usually meant by it, is, the rise or fall in the value of any given quantity of them.

An error, not to the same extent, but somewhat similar in kind, pervades the writings of Col. Torrens.—He represents effectual and profitable demand as consisting in the power of exchanging commodities for a greater quantity of the ingredients of capital than have been expended in their production. (Essay on Wealth, p. 360.) This view of demand, though nearer to the truth than the foregoing one, is nevertheless incorrect. The chief ingredients of capital, and frequently by far the largest, are food and clothing; and this Col. Torrens admits, since he represents the costs of production, as consisting in the advance of a given number of quarters of corn and suits of clothing. Now, although a man should sell his commodity for more corn and clothing than it has cost him, he may, notwithstanding, find himself in this predicament, that, the corn and clothing when obtained, may not, owing to a change in their relation to labour, command the services of the same number of men as were employed in the production of the commodity for which they have been exchanged; in which case the apparent profit would be greatly reduced, or might even disappear altogether. It is then in vain for us to measure the demand for a commodity by the quantity of any other commodity which can be had in exchange for it, since we must at last resort to labour as the only standard of the real value of every thing, and of the effectual demand for it.—Ed.

*

Princ. of Polit. Econ. ch. xxi. p. 343, 3rd edit.

*

Edinburgh Review, No. LXIV. p. 471.

*

This answer of the author will hardly be thought satisfactory. For if the allegation set up be a true one, it certainly falls within the limits of the question. The proper answer is, that it is not a true one. If the idle were to produce, it could only be by means of a larger accumulation, that is, of the conversion of more revenue into capital. But this, though it might make some alteration in the channels of demand, could not possibly increase the sum total of the demand. Ed.

*

Prin. of Polit. Econ. ch. xxi. p. 361, 2nd edit.

*

Edinburgh Review, No. lxiv. p. 471.

*

Theoretical writers in Political Economy, from the fear of appearing to attach too much importance to money, have perhaps been too apt to throw it out of their consideration in their reasonings. It is an abstract truth that we want commodities, not money. But, in reality, no commodity for which it is possible to sell our goods at once, can be an adequate substitute for a circulating medium, and enable us in the same manner to provide for children, to purchase an estate, or to command labour and provisions a year or two hence. A circulating medium is absolutely necessary to any considerable saving; and even the manufacturer would get on but slowly, if he were obliged to accumulate in kind all the wages of his workmen. We cannot therefore be surprised at his wanting money rather than other goods; and, in civilized countries, we may be quite sure that if the farmer or manufacturer cannot sell his products so as to give him a profit estimated in money, his industry will immediately slacken. The circulating medium bears so important a part in the distribution of wealth, and the encouragement of industry, that it is hardly ever safe to set it aside in our reasonings, and all attempts at illustration, by supposing advances of a certain quantity of corn and clothing, instead of a certain quantity of money, which every year practically represents a variable quantity of corn, cannot fail to lead us wrong.

*

The reader must already know, that I do not share in the apprehensions of Mr. Owen about the permanent effects of machinery. But I am decidedly of opinion, that on this point he has the best of the argument with those who think that accumulation ensures effectual demand.

*

Parsimony, or the conversion of revenue into capital, may take place without any diminution of consumption, if the revenue increases first.

*

By this expression I mean such a degree of permanence as to be called the ordinary rate of profits.

*

Capital is withdrawn only from those employments where it can best be spared. It is hardly ever withdrawn from agriculture. Nothing is more common, as I have stated in the Chapter on Rent, than increased profits, not only without any capital being withdrawn from the land, but under a continual addition to it. Mr. Ricardo’s assumption of constant prices would make it absolutely impossible to account theoretically for things as they are. If capital were considered as not within the pale of demand and supply, the very familiar event of the rapid recovery of capital would be quite inexplicable. The amount of capital employed on the land during the revolutionary war, was prodigiously increased owing to the great increase of profits; and although many merchants and manufacturers were occasionally subjected to great losses, yet the high rate of profits generally seemed more than to balance them; and there cannot be a doubt of the increase both of mercantile and manufacturing capitals.

*

Ricardo’s Princ. of Polit. Econ. ch. xxi. p. 342, 3rd edit.

*

Susmilch, vol. iii. p. 60. Essay on Population, vol. i. p. 459. edit. 5th. In foreign states very few persons live in the country who are not engaged in agriculture; but it is not so in England.

†

Population Abstracts, 1811.

*

Essai Politique sur la Nouvelle Espagne, tom. iii. l. iv. c. ix. p. 28.

†

Id. p. 36.

‡

Id. p. 28.

*

Humboldt’s Nouvelle Espagne, tom. iii. l. iv. c. ix. p. 38.

*

Id. tom. i. l. ii. c. v. p. 358.

*

Essai Politique sur la Nouvelle Espagne, tom. iii. l. iv. c. ix. p. 56.

†

Nouvelle Espagne, tom. ii. l. ii. c. vii. p. 37.

‡

Tom i. l. ii. c. vi. p. 429.

*

Nouvelle Espagne, tom. i. liv. ii. c. v. pp. 355 et 356.

*

Nouvelle Espagne, tom. iii. liv. iv. c. ix. p. 12.

*

Nouvelle Espagne, tom ii. l. iii. c. viii. p. 342.

*

Tom. iii. l. iv. c. ix. p. 89.

*

Tom. iii. l. iv. c. x. p. 178.

*

In applying labour as a rough measure of wealth, or in measuring value in Ireland we must remember, as before intimated, that we must take the price of the labour which is actually, and with average constancy engaged, and not the price at which it may be occasionally offered by a half employed population. The caution which Adam Smith has given about the labour of cotters, already referred to in this work, must be particularly attended to.

*

There is nothing so favourable to effectual demand as a large proportion of the middle classes of society.

*

Considering the manner in which I have expressed myself here, it appears to me not a little extraordinary that I should sometimes have been classed with Mr. Sismondi as an enemy to machinery. If the reader will direct his attention to what I have said, I think he must allow that it is hardly possible to say more with truth. To maintain that the same extent of benefit will result in all cases, and that there never can be the least difficulty in finding new employments for capital at the same profits, does appear to me, I own, an assertion equally contradicted by all just theory, and universal experience.

*

Essays, vol. i. p. 293.

*

Wealth of Nations, Vol. ii. B. iii. ch. iii. p. 115. 6th edit.

*

Book I. ch. xi.

*

Princ. of Polit. Econ. ch. xx. p. 349.

*

Sect. III. of this chapter.

*

Nouveaux Principes d’Economie Politique, tom, i. p. 120. I agree with M. Sismondi in some of his principles respecting consumption and demand; but I do not think that the view which he takes of the formation of national revenue, on which all increase of consumption and demand depends, is just; and I can by no means go with him in the fears which he expresses about machinery, and still less in the opinion which he holds respecting the necessity of a frequent interference on the part of government to protect individuals, and classes, from the consequences of competition. With regard to population, he has misunderstood my work more than I could have expected from so able and distinguished a writer. He says, that my reasoning is completely sophistical, because I have compared the virtual increase of population with the positive increase of food. But surely I have compared the virtual increase of population with the virtual increase of food; and the positive increase of population with the positive increase of food; and the greater part of my book is taken up with the latter comparison. Practically M. Sismondi goes much farther than I do in his apprehensions of a redundant population, and proposes to repress it by all sorts of strange means. I never have recommended, nor ever shall, any other means than those of explaining to the labouring classes the manner in which their interests are affected, by too great an increase of their numbers, and of removing or weakening the positive laws which tend to discourage habits of prudence and foresight.

*

From what has been here said, the reader will see that I can by no means agree with Mr. Ricardo, in his chapter On Gross and Net Revenue. I should not hesitate a moment in saying, that a country with a neat revenue from rents and profits, consisting of food and clothing for five millions of men, would be decidedly richer and more powerful, if such neat revenue were obtained from seven millions of men, rather than five, supposing them to be equally well supported. The whole produce would be greater; and the additional two millions of labourers would some of them unquestionably have a part of their wages disposable. I agree, however, with Mr. Ricardo, in approving all saving of labour and inventions in machinery; but it is because I think that their tendency is to increase the gross produce and to make room for a larger population and a larger capital. If the saving of labour were to be accompanied by the effects stated in Mr. Ricardo’s instance, I should agree with M. Sismondi and Mr. Owen in deprecating it as a great misfortune.

Mr. Ricardo, in his last edition, allows in a note that he has perhaps expressed himself too strongly on this subject, and that the labourer may have some portion of the net produce of the country; but he has not altered the text.

*

It is perhaps just possible to conceive a passion for menial service, which would stimulate landlords to cultivate lands in the best way, in order to support the greatest quantity of such attendants. This would be the same thing as the passion for population adverted to in a former section. Such a passion, to the extent here supposed, may be possible; but scarcely any supposition can be less probable.

†

It is not, however, in political economy alone that so much depends upon proportions, but throughout the whole range of nature and art.

‡

This was strikingly illustrated in the predictions, during the late war, of the abundant wealth which would be the immediate result of a peace.

*

This was written in 1820. Imperious circumstances have since brought on a reform of a more sudden and extensive nature than prudence would have perhaps suggested, if the time and the circumstances could have been commanded. Yet it must be allowed, that all which has been done, is to bring the practical working of the constitution nearer to its theory. And there is every reason to believe, that a great majority of the middle classes of society, among whom the elective franchise has been principally extended, must soon see that their own interests, and the interests and happiness of those who are dependent upon them, will be most essentially injured by any proceedings which tend to encourage turbulence and shake the security of property. If they become adequately sensible of this most unquestionable truth, and act accordingly, there is no doubt that the removal of those unsightly blots, of those handles, which, with a fair show of reason, might at any time be laid hold of to excite discontents and to stir up the people, will place the British Constitution upon a much broader and more solid base than ever.

*

It appears to me that if the two first sentences in Mr. Ricardo’s Chapter on Foreign Trade were well founded, there would be no intercourse between nations.

†

This, however, will not necessarily happen. The greater temptation offered to consumption may induce some persons to spend what they otherwise would have saved, and in many cases the wealth of the country, instead of suffering by this change, will gain by it. The increased consumption, as far as it goes, will occasion an increase of market prices and profits, and this increase of profits will soon restore the capital which for a short time had been diverted from its destined office.

*

The importation of bullion is not necessary to a rise of prices; for, there is no necessary connection between a given quantity of money and a given scale of prices.—If a certain quantity of money be exchanged for a certain quantity of goods, their price is of course represented by that money; but if the money is exchanged for one half only of the goods at a time, the whole quantity of goods will be worth twice the money; and if the money be exchanged for one third the goods at a time, their total price will be equal to three times the amount of the money. The quantity of goods, and the quantity of money may therefore remain the same, and prices may rise or fall notwithstanding.

This is fully exemplified by what occurs when there is a deficiency or an excess of any one commodity which is of very extensive consumption.—Take corn as an instance.—The total money value of a scanty crop is known to be much more, and the total money value of a super-abundant crop much less, than that of an ordinary crop, while the prices of other things remain the same. In this case, it is obvious, that the price of the whole produce, agricultural and manufactured together, (or its value estimated in money) will be either greater or less than ordinary, even though there shall be no greater or less quantity of money in circulation. And this is very easily explained. Those who have to pay dearer or cheaper for their corn, have no doubt less or more to spend on other things. But, to counterbalance this, the farmers means of purchasing other things are increased or diminished in the very same proportion. If I have a commodity, which, from being in great request, rises fron £10 to £20, the purchaser must forego his demand for other things to the extent of £20 instead of £10; but my demand for other things is increased from £10 to £20. All this may take place, and indeed is constantly taking place, without a shilling being added to the circulation.—Ed.

*

Princ. of Polit. Econ. ch. vii. p. 138, 2nd edit.

*

Princ. of Pol. Econ. ch. vii. p. 132, 2d edit.

*

Wealth of Nations, vol. ii. b. ii. ch. ii. p. 19, 6th edit.

*

The demand created by the productive labourer himself can never be an adequate demand, because it does not go to the full extent of what he produces. If it did, there would be no profit, consequently no motive to employ him. The very existence of a profit upon any commodity presupposes a demand exterior to that of the labour which has produced it. Ed.

*

The effect of obliging a cultivator of a certain portion of rich land to maintain two men and two horses for the state, might in some cases only induce him to cultivate more, and create more wealth than he otherwise would have done, while it might leave him personally as rich as before, and the nation richer; but if the same obligation were to be imposed on the cultivator of an equal quantity of poor land, the property might be rendered at once not worth working, and the desertion of it would be the natural consequence. An indiscriminate and heavy tax on gross produce might immediately scatter desolation over a country, capable, under a better system, of producing considerable wealth.

*

By effectual consumption is meant, a consumption by those who are able and willing to pay such a price for produce, as will effect the continuation of its supply without a fall of profits not required by the state of the land.

*

In a country with a large public debt, there is no duty which ought to be held more sacred on the part of the administrators of the government than to prevent any variations of the currency beyond those which necessarily belong to the varying value of the precious metals. I am fully aware of the temporary advantages which may be derived from a fall in the value of money; and perhaps it may be true that a part of the distress during the last year, though I believe but a small part, was occasioned by the measure lately adopted, for the restoration of the currency to its just value. But some such measure was indispensably necessary; and Mr. Ricardo deserves the thanks of his country for having suggested one which has rendered the transition more easy than could reasonably have been expected. This was written in 1820.

*

It is a contradiction in terms, to say that labour is redundant compared with capital, and that capital is at the same time redundant compared with labour:—but it is no contradiction in terms to say that both labourers and capital may be redundant, compared with the means of employing them profitably. I have never maintained the former position, though I have been charged with so doing; but the latter has been so fully established by experience, that I am surprized at the pertinacity with which theoretical writers continue to refuse their assent to it.

*

This was written in 1820.

*

Wealth of Nations, Book iv. ch. vii. p. 202, 6th edit.

*

Princ. of Polit. Econ ch. vi. p. 127.

*

Vol. ii. p. 170. 4th edit.

*

When there is no demand for labour, however low the price of food may be, the labouring classes can only obtain it by charity.