CHAPTER IV.

Effect of the Employment of Capital in Production, and of Variations in the Rates of Wages and Profits on Value—(1) When the Capitals employed in Production are of the same Degree of Durability; and (2) when they are of different Degrees of Durability—The action or influence of Natural Powers adds nothing to the Value of the Result—High Wages not injurious to Manufactures or Trade.

It is admitted on all hands, that in the earlier stages of society, before capital is accumulated, the quantities of labour required to produce commodities and bring them to market determine their value in exchange. But capital is merely that portion of the produce of industry that may be employed to support man, or to co-operate in production. It is the result of anterior labour embodied in, or represented by it; and when it is employed in the production of commodities, their value is determined by the total quantity of immediate and of prior labour, necessarily laid out upon them. Suppose an individual can, in a day, without the help of weapons, kill a deer; and that it requires a day’s labour to construct the weapons necessary to kill a beaver, and another day’s labour to kill it: it is evident, supposing the weapons to be worn out or rendered useless in killing the beaver, that the labour required to kill it would suffice to kill two deer, and that it is, therefore, worth twice as much. The durability of the implements, or of the capital employed in any undertaking, is, consequently, an element of the greatest importance in estimating the value of its produce. Had the weapons employed by the beaver hunter been more durable than has been supposed—had they served, for example, to kill twenty beavers instead of one—then, the Edition: current; Page: [276] labour required to kill a beaver being only one-twentieth part greater than that required to kill a deer, the value of the animals would have been regulated accordingly; and it is plain that, with every extension of the durability of the weapons, their values would be brought still nearer to equality.

It appears, therefore, inasmuch as capital is the result of anterior labour, that its employment does not affect the principle which makes the value of commodities depend on the quantities of labour required for their production. A commodity may be altogether produced by capital, without the co-operation of any immediate labour: inasmuch, however, as the value of capital is determined by the labour required for its production, it is obvious that the value of the commodities produced by its means is also, at bottom, determined by this same labour: or a commodity may be partly produced by capital, and partly by immediate labour, and then its exchangeable value will be proportioned to the sum of the two; or, which is still the same thing, to the total quantity of labour bestowed upon it. These principles are almost self-evident, and it is not easy to see how they can be made the subject of dispute or controversy; but considerable differences of opinion are entertained respecting the influence which the employment of workmen by capitalists, and of fluctuations in the rate of wages have over value.

It does not, however, seem that there is really much room for these differences. Suppose that some quantity of goods, a pair of stockings for example, freely exchanges for a pair of gloves, both articles being manufactured by independent workmen; it is easy to see that they would continue to preserve this relation, or to exchange for each other, provided the labour required for their production continue stationary, though the workmen were employed by a master-manufacturer. In the first case, it is true, as Adam Smith has observed, that the whole goods produced by the workmen belong to themselves, and that, in the second case, they have Edition: current; Page: [277] to share them with their employers. But it must be recollected, that in the first case the capital, that is, the food and instruments made use of in the production of the commodities, belongs also to the workmen, and that, in the latter case, it is furnished to them by other parties. The question then comes to be, Does the fact of labourers voluntarily agreeing to give a portion of the produce they have raised as an equivalent for the capital furnished to them by others, constitute a ground for raising the value of such produce? It is evident it does not. The profits of capital are only another name for the wages of prior labour, and make a part of the price of every article in the production of which capital has been usefully expended. But whether this capital belong to the labourer, or is supplied by another, is of no consequence. If the capital do not belong to him, the commodities which he produces will be divided into two portions, one representing the produce of his own labour, and the other of the capital, or prior labour, laid out upon them. But provided the same amount of labour be required for the production of commodities, their value will continue constant, whether that labour be supplied by one individual or by fifty, A shoemaker who makes shoes on his own account, obtains the same rate of profit on their sale that would accrue to a master shoemaker were he employed by the latter; for, besides possessing means adequate to maintain himself and his family until the shoes be disposed of, he must further be able to furnish himself with a workshop and tools, to advance money to the tanner for leather, and to provide for other outgoings. If, then, he did not, exclusive of the ordinary wages of his trade, realise a profit, or return for his capital, it would obviously be for his advantage to lodge it in a savings’ bank, or otherwise dispose of it, and to work as a journeyman on account of a master shoemaker; and it is plain, inasmuch as his shoes would not sell for a higher price than those of the capitalist, that he could not realise a greater profit did he continue independent.

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Hence it follows, that the circumstance of the accumulated labour or capital, and of the manual labour required in production, being supplied by different parties, has no influence over the value of the produce. That depends on the total quantity of every sort of labour laid out, and not on those by whom it is laid out. It now only remains to trace the influence of fluctuations in wages and profits on value. When this has been done, the subject will be exhausted.

To simplify this inquiry, it had best be divided into two branches: we shall therefore inquire, first, whether fluctuations in the rate of wages have any, and, if any, what influence over the values of commodities produced by the aid of capitals returnable in equal periods; and, second, whether these fluctuations have any, and, if any, what influence when the capitals employed are returnable in unequal periods.

The better to understand what follows, it may, perhaps, be useful to premise that when capitals, consisting of tools, machines, houses, &c., are said to be fixed or durable, their durability is the term used to express the period required for wearing them out, or during which they may be expected to last; and this, of course, varies according to the nature of the article. One machine may be capable of lasting twenty years, another fifteen, a third ten, and so on; while a granite dock or bridge may last for five hundred or a thousand years.

Circulating capital, or capital employed in the payment of wages, is said to be returnable in given periods, which are estimated from the time when the wages are advanced by the capitalist, to the time when he receives payment of the produce.

When it is said that different capitalists are placed under the same circumstances, it is meant that they employ fixed capitals of the same degree of durability, or circulating capitals returnable in equal periods.

I. Supposing, now, that they are in the latter situation, they will be equally affected by a rise or fall of wages. This Edition: current; Page: [279] proposition is self-evident, and must be assented to by every one. But were such the case, it is impossible that a variation of wages should occasion any variation in the value or price of commodities. Suppose, for example, that a hat, produced when wages are 2s. a-day, freely exchanges for a pair of boots; and let us suppose that, from some cause or other, wages rise to 3s.: the question is, will this rise of wages affect the value or price of hats and boots? It is obvious that it will not. The relation of A to B cannot vary, unless one of them be operated upon by some cause which does not extend its influence, or the same degree of influence, to the other. But fluctuations in the rate of wages are not of this description. They cannot be confined to one department. Competition never fails to elevate or depress their rate in different trades to what is really, when all things are taken into account, the common level. If wages in the hat trade sustain a permanent rise of 1s. a day, they will, in the end, unless restrictive regulations interpose, rise 1s. in every other business. It is, consequently, plain, that the hatter could not urge the circumstance of his paying higher wages to his workmen as a reason why the bootmaker should give him more boots than formerly in exchange for hats, for the bootmaker would have it in his power to reply, that the same rise of wages affected him to precisely the same extent. If, therefore, a hat were previously worth, or exchanged for a pair of boots, the one will continue to preserve this relation to the other, until some variation takes place in the quantities of labour required to produce them and bring them to market. So long as these quantities continue the same, wages may rise from 5s. to 10s., or they may fall from 5s. to 2s. a-day, without either the rise or the fall having the slightest influence over their value.

But it may, perhaps, be thought, that though the exchangeable value of commodities produced by the aid of capitals of equal degrees of durability may not be affected by fluctuations in the rate of wages, these fluctuations may, Edition: current; Page: [280] notwithstanding, affect their price, or value estimated in money. But if the variation in the rate of wages be real, and not nominal—that is, if the labourer get either a greater or less proportion of the produce raised by his exertions, or a greater or less quantity of money of the same value—this will not happen. Money is itself a commodity, whose value depends on the same principles that determine the value of other commodities. If the mine which supplies the gold and silver, of which money is made, be situated in the country, then it is clear that the rise of wages which affects other producers will affect those engaged in the production of gold and silver; and if these metals be imported from abroad, it is clear that no more of them will be obtained, in exchange for commodities produced by the dearer labour, than was previously obtained for those produced by the cheaper labour; for, if those who export commodities to foreign countries, and exchange them for gold and silver, were to obtain more of these metals after wages rose than previously, they would be, in so far, in a better situation than their neighbours at home, whose competition would speedily compel them to give the same quantity of goods produced by the dear labour, for that quantity of the precious metals they had obtained previously to the rise of wages.

But if the value of money fluctuate, if it become more or less difficult of production, or if its supply be suddenly increased or diminished, then undoubtedly the rate of wages and the price of commodities will vary. But they will do so, not because the labourer gets a greater or less amount of wages, but because the value of the commodity, or standard, in which wages and prices are estimated, has varied. The wages of the work-people engaged in agriculture and manufactures, though commonly paid and rated in money, really consist of a portion of the produce raised by their labour: consequently, they are really high, when workmen get a comparatively large share of such produce, and low when they get a comparatively small share. It is necessary, Edition: current; Page: [281] however, to bear in mind that the condition of the workpeople does not depend nearly so much on the proportion of their earnings falling to their share, as on the positive magnitude of that share. Wherever industry is highly productive, a smaller share of its produce yields the labourer a large amount of necessaries and conveniences; and it is by this amount that his condition is to be determined. But though, in most other respects, of paramount importance, the condition or well-being of the labourers has nothing to do with inquiries in regard to value. And it is best in purely theoretical investigations, to consider wages as forming a certain proportion of the produce raised by labour—as being invariable, so long as this proportion continues unchanged—and as having really risen when it is increased, and really fallen when it is diminished.

The mistaking of fluctuations in the rate of money wages for fluctuations in the rate of real or proportional wages, has been the source of much error and misapprehension. A man whose wages are 1s. a day, must get 2s. to keep them at the same level, when the value of money declines a half; and the hat which sold for 10s. must then, for the same reason, sell for 20s. It is obviously false to call this a real rise, either of wages or prices; though this be generally done. The manufacturer who gives sixpence a-day more to his men, and who sells his goods at a proportionally higher price because of a fall in the value of money, rarely suspects there has been any such fall, and almost invariably concludes that the rise of wages has been the cause of the rise of prices, overlooking entirely the real cause of the rise of both—the decline in the value of the money or article in which wages and prices are estimated.

Even if it were true, which certainly it is not, that when money is constant in its value, a rise of wages occasions an equal rise in the money price of commodities, it would not benefit the producers. Commodities are always bought either by other commodities or by labour, and it Edition: current; Page: [282] is almost superfluous to add, that they can be bought by nothing else. Of what advantage, then, would it be to a capitalist, a cotton manufacturer, for example, to sell his cottons for an advance of 10 per cent. when wages rise 10 per cent., he being, at the same time, obliged to give so much more for every other article? When wages really rise, it is indifferent to the producers whether they sell the commodities they have to spare, and purchase those they have occasion for, at their former price, or whether they are all raised proportionally to the rise of wages.

This principle may be further illustrated by supposing an equal increase to take place in the labour required for the production of all sorts of commodities: under such circumstances, their marketable values would remain unaltered. Corn would not then exchange for greater quantities of muslin or broadcloth than it did before its increased expense of production; but each would cost more, because each would be the produce of a greater quantity of labour. Under these circumstances, the prices of commodities would remain stationary, while the wealth and comforts of society would be diminished. Every person would have to make greater exertions to obtain a given quantity of any single commodity; but as the expense of producing all commodities is, by the supposition, equally increased, it would not be necessary to make any greater exertions to obtain one than another, and their values, as compared with each other, would be totally unaffected.

But if an equal increase of the labour required for the production of commodities cannot alter their relation to each other, how is that relation to be altered by an equal increase of the wages paid for that labour? A real rise of wages affects the proportion in which the produce of industry (under deduction of rent) is divided between capitalists and labourers—diminishing the proportion belonging to the capitalists when they rise, and increasing it when they fall. Edition: current; Page: [283] But as these changes in the distribution of commodities neither add to nor take from the labour required to produce them and bring them to market, they do not affect either their cost or exchangeable value.

II. The reasons now brought forward to show that fluctuations in the rate of wages do not affect the value of commodities produced by capitals of the same durability, were first advanced by Mr. Ricardo. He, too, was the first to discover and analyse the influence of fluctuations in the rate of wages over the value of commodities, when the capitals employed in their production are not of the same durability. The results of his researches in this more difficult inquiry were still more important, and more at variance with received opinions; for besides showing that it is impossible for any rise of wages to raise the price of all commodities, Mr. Ricardo showed that in most cases a rise of wages leads to a fall in the price of some descriptions of commodities, and a fall of wages to a rise in the price of others.

It must be admitted, that this proposition appears, when first stated, not a little paradoxical; but the paradox is in appearance only. On adverting to the means by which different classes of commodities are produced, it is immediately seen that no proposition can, apparently, be more reasonable, or consistent with probability; and it may be easily shown that there is none more certain.

Some commodities are almost exclusively produced by the expenditure of accumulated labour, or capital, and others by that of the immediate labour of man. Nearly the whole of the first class must consequently belong to capitalists, and the latter to labourers. Suppose a manufacturer has a highly durable machine worth 20,000l., which manufactures commodities without any, or with but little manual labour: in this case the goods produced by the machine form the profits of the capital vested in it; and their value in exchange, or Edition: current; Page: [284] their price rated in money must, therefore, vary with every variation in the rate of profit. If profits were at ten per cent., the goods annually produced by the machine must sell for 2,000l., with a small additional sum to cover its wear and tear; should profits rise to fifteen per cent., the price of the goods must rise to 3,000l., for otherwise the manufacturer would not obtain the common and average rate of profit; and if, on the other hand, profits should fall to five per cent., the price of the goods must, for the same reason, fall to 1,000l, If, therefore, it can be shown that a rise of wages reduces the rate of profits, it necessarily follows that it will also reduce the value and price of such commodities as are chiefly produced by machinery, or fixed capital of a considerable degree of durability, or by circulating capitals returnable at distant periods, and vice versá.

Now it is easy to show, supposing no variation takes place in the labour required for the production of commodities,1 that every rise of wages will reduce profits, and will, thereby, reduce the value of those commodities which are chiefly produced by fixed capital or machinery. It is plain, from what has been previously stated, that to whatever extent wages rise, no set of producers, whether their capitals be returnable in a day, a week, a year, or a hundred years, can obtain a larger share of the commodities produced by others belonging to the same class, that is, who have capitals returnable in the same periods as their own. This is evidently as impossible, as it is to change the relation of numbers by multiplying or dividing them by the same number; and, therefore, it is plain, that a rise of wages cannot raise the value of any one commodity as compared with all other commodities. But, if it cannot do this, it must lower profits. Suppose, to illustrate this principle, that wages really rise five or ten per cent., and that two manufacturers of the class who employ the least portion of capital in the payment of wages have each 10,000l.,Edition: current; Page: [285] of which they respectively lay out 9,000l. on durable machinery, and 1,000l. on the payment of wages: it is obvious, inasmuch as these manufacturers are affected by the rise of wages to precisely the same extent, that their products will continue to exchange for each other exactly as they did before it took place; and that, in fact, it will make an equivalent deduction from their profits. But if this rise of wages will not enable the manufacturers in question to obtain any larger share than formerly of the products belonging to others of their own class, still less, it is clear, can it enable them to obtain any larger share of the produce of any other class of manufacturers, who are all assumed to employ more labour in proportion to their machinery; and who, consequently, must be more affected by the rise of wages. There can, therefore, be no manner of doubt that, under the circumstances supposed, the profits of the manufacturers, and consequently of all other producers, will be reduced by this rise of wages; and whenever this reduction takes place, the value of the commodities, chiefly produced by the aid of fixed capital or machinery, will be diminished as compared with those chiefly produced by the hand.

Suppose that the numbers 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, &c., represent the various descriptions of capitals, classed according to the respective degrees of their average durability; that No. 1 represents that class of capitals which are wholly employed in the payment of wages, and which are most speedily consumed and reproduced; No. 2, that class which is next in durability; and so on until we come to No. 11, which represents that class of capitals which chiefly consist of highly durable machinery, and are longest in being consumed and reproduced. Let us further suppose that the commodities produced by the agency of these capitals are all yielding the same common and average rate of profit; and let us endeavour to discover what would, under these circumstances, be the influence of fluctuations in the rate of wages on the value of commodities. If wages rise, it is plain that the holders of the least durable Edition: current; Page: [286] capitals, (No. 1,) who may be supposed to use no machinery, will be more affected by the rise than the holders of the second class, (No. 2,) who may be supposed to employ some little machinery; and these again more than the holders of the third class, (No. 3,) and so on till we come to the holders of the capital of the highest degree of durability, (No. 11,) which may be supposed to consist almost wholly of very durable machinery; and who will, on that account, be comparatively little affected by the rise. Suppose, now, to illustrate the principle, that wages have so risen that the increased rate paid by the proprietors of the most durable capitals to the few labourers they employ—for they must employ a few to superintend their machinery—has reduced their profits one per cent.: there is obviously no mode in which these capitalists can indemnify themselves for this fall of profits; for, as they employ the fewest labourers, they are least of all affected by the rise of wages, the profits of all other capitalists being more reduced than theirs because of the greater number of their labourers. Thus, supposing the proprietors of the most durable capitals, or of No. 11, to employ a certain number of labourers; the proprietors of the next class, or of No. 10, to employ twice that number; and those of No. 9, three times that number, and so on; then, on the hypothesis that the rise of wages has reduced the profits of the most durable capitals, or No. 11, one per cent., it will have reduced those of No. 10 two per cent., those of No. 9 three per cent., and so on till we come to the least durable class, No. 1, whose profits will be reduced eleven per cent. It is plain, however, that this discrepancy in the rate of profit can only be of temporary duration. For the undertakers of those businesses in which either the whole or the greater portion of the capital is employed in paying the wages of labour, observing that their neighbours, who have laid out the greater portion of their capital on machinery, are less affected by the rise of wages, will immediately begin to withdraw from their own businesses, to engage in those that are more lucrative. The commodities Edition: current; Page: [287] produced by the most durable capitals, Nos. 7, 8, 9, 10, &c., will, therefore, become redundant, as compared with those produced by the least durable capitals, Nos. 1, 2, 3, 4, &c.; and this increase on the one hand, and diminution on the other, will sink the value of the former, compared with the latter, till they all yield the same rate of profit.

The value of the commodities produced by capital of the medium degree of durability, or by No. 6, would not be affected by the rise; for, whatever they lost in exchangeable value as compared with the commodities produced by the less durable capitals, they would gain as compared with those produced by the more durable capitals.

It has, however, been contended, that though the equalisation in the rate of profit now alluded to might be effected by the destruction of a portion of the less durable capital, or by the comparatively great accumulations that would henceforth be made by the holders of the more durable capitals, who are but little affected by the rise of wages, it could not be effected by such a transference of capital from the one class of businesses to the other, as has been supposed; for it is said, that the fixed stock, or machinery, belonging to the holders of capitals of the greatest degree of durability, being itself the produce of labour, it would not be possible to obtain this machinery at its former price after wages rose, so that the profits of the existing holders of Nos. 7, 8, 9, &c. could not be beaten down to a common level with those of the holders of the less durable capitals, by an influx of new competitors. But it is easy to see that this view of the matter is incorrect. Suppose, which is the strongest case for the argument we are combating, that the machines belonging to the capitalists of class No. 11. are made by the labourers employed by the capitalists of class No. 1: when wages rise, it is evident the machines and other commodities produced by No. 1 cannot rise in value, as compared with money, or any other commodity produced under different circumstances, until they are diminished, or the others increased in quantity. Edition: current; Page: [288] And hence there are two very sufficient reasons why the producers of the machines should not be disposed to sell them after wages rise; for, in the first place, if they sell them they will get no more for them than they got before the rise; and, in the second place, as the more lucrative businesses, or those that are least affected by the rise of wages, can only be carried on by means of machinery, they could not, if they sold the machines, transfer circulating capital to them, but would be compelled to continue in those businesses that had become relatively disadvantageous. Instead, therefore, of selling the machines, it may be fairly presumed that a considerable number of those by whom they are constructed would be tempted to employ them in the businesses for which they were intended, and would thus come into competition with the holders of the capitals Nos. 7, 8, 9, 10, &c., on the same footing that they stand, or with machines that have cost the same price as theirs; nor would this transference cease until the commodities produced on the least durable side of the scale had been so much diminished, and their value so much increased, as compared with those produced on the more durable side, that they were all brought to yield the same common and average rate of profit.

If wages, instead of rising, were to fall, the opposite effects would be produced. The holders of the capitals Nos. 1, 2, 3, &c., who employ a comparatively large proportion of labourers, deriving a greater advantage from the fall of wages than the holders of the capitals Nos. 7, 8, 9, &c., their profits would be raised above the level of the latter. In consequence, capital would begin to move from those businesses that employ the fewest to those that employ the greatest number of labourers; and the average equilibrium of profit would be restored by an increase of the value of the commodities produced by the most durable, as compared with those produced by the least durable capitals.

It is abundantly certain, therefore, that no rise of wages can ever occasion a general rise of prices, and no fall of wages Edition: current; Page: [289] a general fall of prices; but, supposing the productiveness of industry, or the quantity of labour required to produce commodities, to continue stationary, a rise of wages, instead of occasioning a general rise of prices, will occasion a general fall of profits; and a fall of wages, instead of reducing prices, will occasion a general rise of profits. Owing, however, to the different and ever-varying degrees of the durability of the machinery, or fixed capital, employed in production, and the varying relation which the portion of capital employed as wages, or in the payment of immediate labour, bears to the whole capital employed, it is very difficult to determine, à priori, the extent to which any given fluctuation in the rate of wages will affect the rate of profit, and the value of commodities. But when due pains are taken, this may be approximated with sufficient accuracy for practical purposes; and the following three cases will briefly, and we hope satisfactorily, elucidate the manner in which fluctuations in the rate of wages always operate, and the method to be followed in estimating their influence over profits and prices.

1. If all commodities were produced by immediate labour, or by capital employed in the payment of wages, it is obvious, supposing the productiveness of industry not to vary, that every rise of wages would cause an equal fall of profits. A capitalist who employs 1,000l. in the payment of wages, must, if profits are at 10 per cent., sell the commodities for 1,100l. But when wages rise 5 per cent., or to 1,050l., he would not be able to sell his commodities for more than 1,100l.: for money is itself a commodity; and as, by the supposition, all commodities are produced by immediate labour, the rise of wages would affect the producers of money in the same way that it affected the producers of other things. In this case, therefore, it is plain that every rise of wages will equally sink profits, and every fall of wages will equally raise them.

2. If all commodities were produced, one-half by immediate labour, and the other half by capital, profits would only Edition: current; Page: [290] fall to half the extent that wages rose. Suppose a capitalist employs 500l. in the payment of wages, and 500l. as a fixed capital, when profits are at 10 per cent., the commodities produced must, as before, sell for 1,100l. If wages rose 5 per cent., the capitalist would have to pay 525l. as wages, and would, consequently, only retain 75l. as profits. In this case, therefore, a rise of wages to the extent of 5 per cent. would, because of the employment of equal quantities of capital and immediate labour in the production of commodities, only sink profits 21/2 per cent.

3. If all commodities were produced by capital of a very high degree of durability, capitalists, it is obvious, would not be sensibly affected by a rise of wages, and profits would, of course, continue nearly as before.

Now, suppose that commodities, instead of being wholly produced by immediate labour, as in the first case; or wholly by equal quantities of immediate labour and of capital, as in the second; or wholly by fixed capital, as in the third,—are partly produced in the one mode, and partly in the other; and let us see what effect an increase of 5 per cent. in the rate of wages would have on their values, supposing, as before, that the productiveness of industry continues constant. To facilitate this inquiry, let us distinguish these three descriptions of commodities by the Nos. 1, 2, and 3. Now, it is evident that the rise of wages has affected No. 1 21/2 per cent. more than it has affected No. 2, and 5 per cent. more than it has affected No. 3. No. 1 must, therefore, as compared with No. 2, have risen 21/2 per cent. in exchangeable value, and as compared with No. 3, it must have risen 5 per cent.; No. 2 must have fallen 21/2 per cent. as compared with No. 1, and risen 21/2 per cent. as compared with No. 3; and No. 3 must have fallen 5 per cent. as compared with No. 1, and 21/2 per cent. as compared with No. 2. If wages, instead of rising, had fallen, the same effects would obviously have been produced, but in a reversed order. The proprietors of the commodities of Edition: current; Page: [291] the class No. 1 would gain 5 per cent. by the fall; those of No. 2 would gain 21/2 per cent.; and those of No. 3 nothing; and the marketable values of these commodities would be adjusted accordingly.1

Thus, then, it appears, inasmuch as any commodity taken for a standard by which to estimate the values of other commodities must itself be produced by capital returnable in a certain period, that when wages rise, the commodities produced by less durable capitals than that which produces the commodity taken for a standard will rise in value, while those produced by more durable capitals will fall; and conversely when wages are reduced. Suppose, as before, that the Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, and 11, represent capitals of corresponding degrees of durability. If a commodity produced by the least durable capital, No. 1, which may be supposed to be wholly employed in the payment of wages, be taken for a standard, all commodities produced by the other and more durable capitals, would fall in value when wages rose; and if we suppose those produced by No. 2 to decline 1 per cent., those produced by No. 3 would decline 2 per cent., those produced by No. 4, 3 per cent., and so on until we arrive at No. 11, which will have fallen 10 per cent. If, on the other hand, a commodity, produced by the most durable capital, No. 11, and which may be supposed to consist wholly of highly durable machinery, be made the standard, when wages rise, all the commodities produced by the other less durable capitals would also rise; and if those produced by No. 10, rose 1 per cent., those produced by No. 9 would rise 2 per cent., and those produced by No. 1, 10 per cent. If a commodity, produced by a capital of the medium degree of durability, as No. 6, and which may be supposed to consist half of circulating capital employed in the payment of wages, and half of fixed capital or machinery, be taken as a standard, Edition: current; Page: [292] the commodities produced by the less durable capitals, Nos. 5, 4, 3, 2, and 1, will rise with a rise of wages, on the former hypothesis, the first, or No. 5, 1 per cent., the second, or No. 4, 2 per cent., &c.; while those produced by the more durable capitals, Nos. 7, 8, 9, 10, and 11, will fall, the first, or No. 7, 1 per cent., the second, or No. 8, 2 per cent., &c., exactly the reverse of the other.

But it is to be observed, that these conclusions are all strictly theoretical, and are intended merely to illustrate principles. The varieties of capital employed in the production of commodities differ in every possible way, and are perpetually changing. But supposing that some general conclusion could be come to, or that allowance were made for the influence of disturbing causes, it would be found, speaking generally, that when wages rose, those commodities that are produced by less durable capitals than the commodity selected to serve as a standard, would rise in value, while those produced by more durable capitals would fall. And as money, which is all but universally taken as a standard by which to estimate prices, is usually produced by capitals of about the medium degree of durability, it follows that the influence of variations of wages on prices, will, on the whole, be confined within very narrow limits, the rise in those mainly produced by hand labour being balanced by the fall in those principally produced by machinery. And this is the case with the bulk of commodities.

In thus endeavouring to trace the value of all descriptions of non-monopolised commodities to the quantity of labour required for their production, it is not meant to deny that a very large portion of the useful or desirable qualities of such commodities may be, and, in fact, always is, the result of the action or influence of natural agents. But it is, as was formerly stated, the peculiar and distinguishing feature of natural agents, or powers, that they render their services Edition: current; Page: [293] gratuitously. And hence, though their assistance and co-operation be necessary to the production of every variety of articles for which there is a demand, they add nothing to their value. This is a quality that can be communicated only by the labour of man, or by means of the capital that has been appropriated or accumulated by his labour. In estimating the value of a quantity of corn, for example, we include only the labour of the work-people employed, as ploughmen, reapers, thrashers, &c., with the corn used as seed, and the services rendered by the horses and instruments made use of in the different operations. Nothing is set down to account of the vegetative powers of nature, and the influences of the sun and showers; for though without them the crop could not be obtained, and our utmost exertions would be altogether fruitless, yet, as they are the free gift of Providence, they add nothing to the cost or value of the produce, or to its power of exchanging for or buying labour, or other things produced by the intervention of labour.

And such is uniformly the case. When corn is ground, or flax or cotton is spun, or anchors or cannon are forged, by the aid of wind or water-mills or steam-engines, the action of the wind and water, and the expansive force of the steam, though powerful and most efficient, is entirely ignored in estimating the value of the work that has been performed. And hence it is that the value of all industrial results, how much soever they may owe to natural powers, is in no degree dependent on them; but wholly depends on the labour and capital necessarily expended or employed in bringing them about.

It may be thought, perhaps, that this conclusion is at variance with what is observed to take place in the production of certain descriptions of commodities. Thus, if a cask of new wine be kept for a definite period, or till it arrive at maturity, it will acquire a higher value; now, as the change produced in the wine is entirely brought about by the operation of natural agents, and as, without the change, the wine would Edition: current; Page: [294] have no higher value, it has been contended that this is a case in which the labour of natural agents is plainly productive of an increased value. But it is easy to see that this is a mistake. The cask of wine is a capital, or is the result or embodiment of the labour employed in cultivating, gathering, pressing, and otherwise preparing the grapes from which it has been made. But to give time for the processes of fermentation, decomposition, &c., to effect the desired changes in the wine, it is necessary that it should be laid aside until they are completed. The producer or merchant would not, however, employ capital in this way, unless it were to yield him the same return that is derived from capital employed in other businesses. And hence it follows, that though the processes carried on by nature render the wine more desirable, or bestow on it a greater degree of utility, they add nothing to its value; the additional value which it acquires being a consequence of the profit accruing on the capital required to enable the processes to be carried on.

It has sometimes been contended that, after capital has been accumulated, the value of commodities is no longer, as in the early stages of society, determined by the quantities of labour required to bring them to market, but by the quantities of capital required for that purpose. At bottom, however, this theory is but nominally different from that just explained; for capital, being merely the accumulated produce of anterior labour, its value, like that of every thing else, is estimated by the quantity of labour required for its production. In this respect, too, there is no difference, as has been already shown, between the work of labourers and that of machines. A labourer is himself a portion of the national capital, and may, without impropriety, be considered, in theoretical investigations of this sort, (which merely regard his physical, and have no reference to his mental and moral powers,) in the light of a machine which it has required a certain outlay of labour to construct; the wages which he earns are a remuneration for Edition: current; Page: [295] his services, and, if we may so speak, yield him, at an average, only the common and ordinary rate of profit on his capital, exclusive of a sum to replace its wear and tear, or which is the same thing, to supply the place of old and decayed labourers with new ones. Whether, therefore, a commodity has been produced by the expenditure of a capital which it cost a certain quantity of labour to provide, or has been produced by the expenditure of that labour directly upon it, is of no moment: in either case, it is produced by exactly the same amount of labour, or, if it should be deemed a better phrase, of capital. In so far as their purely physical powers are concerned, and it is such only that are now in question, men are to be looked upon as capital, or are to be considered in the same point of view as the tools or engines with which they perform their tasks; and to say that the value of commodities depends on the quantities of capital expended on their production, is not to contradict, but is, in fact, only another way of expressing the identical proposition we have been endeavouring to illustrate.

The principles previously laid down, serve to explain certain phenomena, for which it was formerly difficult to account. Thus, it was supposed that countries where wages were low, must be peculiarly well suited for the establishment and prosecution of manufactures, and that they could hardly fail to make rapid advances, compared with those established in countries where wages were high. Experience, however, has shown that such is very rarely the case, the manufactures of countries with high wages having frequently continued to maintain for indefinite periods a decided ascendency over those where wages have been comparatively reduced. And we have seen how this is explained. In old-settled and well-peopled countries where wages are high, profits are usually low; and wherever this is the case, all those articles that are to a considerable extent, or principally, produced by the aid of fixed Edition: current; Page: [296] capital or machinery, are nvariably cheaper than where wages are lower; while those articles that are principally produced by manual labour, or circulating capital, are invariably dear; and conversely when wages are low and profits high. And such is in fact the case. The principal articles of export from countries where industry is but little advanced or wages low, usually consist of raw products or articles principally the work of the hand, assisted by the rudest varieties of machinery; whereas the exports of countries where industry is far advanced and wages high, consist for the most part of the products of those departments in which the most improved and powerful machinery is largely employed.

In illustration of these statements, we may refer to the cotton manufactures of India and England. In the former the wool is grown on the spot, wages are extremely low, and the natives who have been engaged in the business from the remotest ages, had attained to the greatest perfection in it, producing fabrics of the greatest beauty, and of the most admirable texture and fineness. And yet, undismayed by these circumstances, a people in the North Atlantic Ocean, with high wages, and importing the wool at a heavy expense from India itself and America, undertakes the manufacture of cotton, and succeeds, by the employment of highly perfect machinery, in producing better and cheaper cotton goods than those of India, destroying indeed the manufacture in the latter, and rendering the Hindoos their best customers. This extraordinary achievement shows what may be effected by those who have sagacity to press natural agents into their service, and how little they have to fear from the competition of such as are comparatively destitute of these all-powerful allies.

That low rate of profit which frequently obtains in old settled countries, is no doubt in various respects disadvantageous, and every effort should be made to remove or weaken the causes whence it proceeds. But whatever may be its Edition: current; Page: [297] other effects, the high wages with which it is commonly associated have little or no influence in depressing manufactures or trade.1

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