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ON
THE PRINCIPLES
OP
POLITICAL. ECONOMY,
AND
TAXATION.
9
ON
THE PRINCIPLES
OF
POLITICAL. ECONOMY,
AND
TAXATION.
ON
THE PRINCIPLES
or
POLITICAL ECONOMY,
AMD
TAXATION.
BY DAVID RICARDO, ESQ.
THIRD EDITION.
LONDON:
JOHN MURBAY, ALBEMARL£<STRE£T.
1821.
G. WOODPAIX, PRIHTBJIy ANOBXM^OUJlT, IKINNBR-STRAT, LOtllK>tl<
PREFACE-
The produce of the earth — all that is derived from its surface by the united application of labour, oiachinery, and capital, is divided among three classes of the conununity; namely, the proprietor of the land, the owner of tiie stock or capital necessary for its cul- tivation, and the labourers by whose indus- try it is cultivated.
But in different stages of society, the pro- portions of the whole produce of the earth which win be allotted to each of these classes^ under the names of rent, profit, and wages, will be essentially different; depending ma^ly on the actual fertility of the soil, on the accu- mulation of capital and population, and on the skill, ingenuity, an.d instruments employ- ed in agriculture.
To determine the laws which regulate tjiis distribution, is the principal prQblem in Po- Htieal Economy: much as the science has heesBL improved by the writings of Turgot,
a
A1
Stuart, Smith, Say, Sismondi, and others, they afford very little satisfactory information respecting the natural course of rent, profit, and wages.
In 1815, Mr. Malthus, in his « Inquiry into the Nature and Progress of Rent," and a Fellow of University College, Oxford, in his " Essay on the Application of Capital to Land," presented to the world, nearly at the same moment, the true doctrine of rent; without a knowledge of which, it is impossible to understand the effect of the progress of wealth on profits and wages, or to trace satis- factorily the influence of taxation on differ- ent classes of the community; particularly when the commodities taxed are the produc- tions immediately derived from the surface of the earth. Adam Smith, and the other able writers to whom I have alluded, not having viewed correctly the principles of rent, have, it appears to me, overlooked many important truths, which can only be discovered after the subject of rent is thoroughly understood.
To supply this deficiency, abilities are re- quired of a far superior cast to any possessed by the writer of the following pages ; yet, after
vu
having given to this subject his best consi- deration— afiter the aid which he has derived from the works of the above-mentioned emi- nent writers — and after the valuable experi- ence which a few late years, abounding in iacts, have yielded to the present generation —it will not, he trusts, be deemed presump- tuous in him to state his opinions on the laws of profits and wages, and on the operation of taxes. If the principles which he deems cor- rect, should be found to be so, it will be for others, more able than himself, to trace them to all their important consequences.
The writer, in combating received opi- nions, has found it necessary to advert more particularly to those passages in the writings of Adam Smith from which he sees reason to differ ; but he hopes it will not, on that ac- count, be suspected that he does not, in com- mon with all those who acknowledge the im- portance of the science of Political Economy, participate in the admiration which the pro- found work of this celebrated author so justly excites.
The same remark may be applied to the excellent works of M. Say, who not only was
a2
the first, or among the first, of continental ivriterd, who justly appreciated and applied the principles of Smith, and who has done more than all othef continental writers taken together, to recommend the principles of that enli^tened and beneficial system to the na- tions of Europe ; but who has succeeded in placing the science in a more logical, and more instructive order ; and has enriched it by several discussions, original, accurate, and profound*. The respect, however, which the author entertains for the writings of this gen- tleman, has not prevented him from com- menting with that freedom which he thinks the interests of science require, on such pas* sages of the ^^ Economie Politique/^ as ap- peared at variance with his own ideas.
* Chap. XT. part i. '< Des D6bouch^" containsy in partica* lar, Bome very itaportant principles, which I believe were first explained b)' Ais distinguished writer.
ADVERTISEMENT
TO THB
THIRD EDITION.
Ik this Edition I have endeavoured to explain more fully than in the last, my opinion on the difficult subject of Value, and for that purpose have made a few additions to the first chapter, I have also in- serted a new chapter on the subject of Machinery, and on the effects of its improvement on the in- terests of the. different classes of the State. In the chapter on the Distinctive Properties of Value and Riches, I have examined the doctrines of M. Say on that important question, as amended in the fourth and last edition of his work. I have in the last chapter endeavoured to place in. a stronger point of view than before, the doctrine of the abi- lity of a country to pay additional money taxes, although the aggregate money value of the mass of its commodities should fall, in consequence either of the diminished quantity of labour required to produce its corn at home, by improvements in it»
husbandry, or jfrom its obtaining a part of its com at a cheaper price from abroad, by means of the exportation of its manufactured commodities. This consideration is of great importance, as it regards the question of the policy of leaving unrestricted the importation of foreign com, particularly in a country burthened with a heavy fixed money taxa^ tion, the consequence of an immense National Debt. I have endeavoured to shew, that the ability to pay taxes, depends, not on the gross money value of the mass of conunodities, nor on the net money value of the revenues of capitalists and landlords, but on the money valiie of each man's revenue, compared to the money value of the commodities ydiich he usually consumes.
MarcA 96, 1821.
CONTENTS.
CHAP. Paoi
I. On Value ; 1
II. On Rent 53
III. On the Rent of Mines 76
IV. On Naturaland Market Price 80
y. Off Wages 86
VI. On Prq/ks 107
VII. Off Foreign Trade 131
VIII. On Taxes l62
IX. Taxes on Raw Produce 169
X. Taxes on Rent 191
XL Tithes 195
XIL Lan^Tax 201
XIIL Taxes on Gold ; . . 214
XIV. Taxes on Houses 226
XV. Taxes on Profits 231
XVL Taxes on Wages 245
XVII. Taxes on other Commodities than Ram Pro-
duce 281
XVIII. Poor Rates 300
XIX. On SuddmCSkangesinthe Channels ^Trade 307
XX. Value and Riches^ their Distinctive Pro*
perties 320
XII
CHAP.
XXL
XXII.
XXIIL XXIV.
XXV.
XXVI.
XXVII.
XXVIII.
XXIX. XXX.
XXXI.
XXXII.
CONTENTS.
Paoi
Effects of Acmtnuiatioti on Profits and In-
terest 338
Bounties on Exportation and Prohibitions
of Importation 354
On Bounties on Production 380
Doctrine of Adam Smith concerning the
Rent of Land 388
On Colonial Trade 403
On Gross and Net Revenue 415
On Currency and Banks 421
On the comparative Value of Gold^ Com^ and Labour^ in Rich and in P^or
Countries ••• ••^•.•* 448
Taxes paid by the Producer » • 457
On the Influence of J)cmand and Supply
on Prices 460
On Machinery 466
Mr. MaUhu^s Opinions on Rent . • . • » 483
CHAPTER L
OJV VALUE.
SECTION I.
The value of a conmodity, or the quantity oj any other com^
modityfor *mhich it mil exchange^ depends on the relative
quantity of labour ixihich is necessary fyr its production,
and Tua on the greater or less compensation which is paid
for that labour.
It has been observed by Adam Smith, that " the word Value has two different meanings, and some- times 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. The things,'* he continues, " which have the greatest value in use, have frequently little or no value in exchange ; and, on the contrary, those which have the greatest value in exchange, have little or no value in use." Water and air are abun- dantly useful ; they are indeed indispensable to ex- istence, yet, under ordinary circumstances, nothing
B
2 ON VALUE. I^CHAP. I.
can be obtained in exchange for them. Gold, on the contrary, though of little use compared with air or water, will exchange for a great quantity of other goods.
Utility then is not the measure of exchangeable value, although it is absolutely essential to it. If a commodity were in no way useful, — in other words, if it could in no way contribute to oiu* gratification, — it would be destitute of exchangeable value, how- ever scarce it might be, or whatever quantity of la- hour might be necessary to procure it.
Possessing utility, commodities derive their ex- changeable value from two sources: from their scarcity, and from the quantity of labour required to obtain them.
There are some commodities, the value of which is determined by their scarcity alone. No labour *** can increase the quantity of such goods, and there- fore their value cannot be lowered by an increased
•
supply* Some rare statues and pictures, scarce books and coins, wines of a peculiar quality, which can be made only from grapes grown on a particular soil, of which there is a very limited quantity, are all of this description. Their value is wholly indepen- dent of the quantity of labour originally necessary to produce them, and varies with tlie varying wealth and inclinations of those who are desirous to pos- sess them.
SECT. 1-3 ON VALUE. S
These commodities, however, form a very small part of the mass of commodities daily exchanged in the market. By far the greatest part of those goods which are the objects of desire, are procured by labour; and they may be multipUed, not in one country alone, but in many, almost without any aa- signable limit, if we are disposed to bestow the labour necessary to obtain them.
In speaking then of commodities, of their ex- changeable value, and of the laws which regulate their relative prices, we mean always such ccmimo- dities only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint.
In the early stages of society, the exchangeable value of these commodities, or the rule which deter* mines how much of one shall be given in exchange for another, depends almost exclusively on the com- parative quantity of labour expended on each, -+-
" The real price of every thing,** says Adam Smith, " what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dis* pose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people.'* " Labour was the first price — the original purchase-money
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4 ON VALUE* [chap. U
that was paid for all things/* Again, " in that early and rude state of society, whicli precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour ne- cessary for acquiring different objects seems to be the oxdy circumstance >vhich can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually cost twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for, or be worth two deer. It is natural that what is usually the produce of two days', jor two hours' labour, should be worth double of what is usually the pro- duce of one day's, or one hour's labour*.'*
That this is really the foundation of the ex- changeable value of all things, excepting those . \ which cannot be increased by human industry, is a doctrine of the utmost importance in political . ' . I X economy ; for from no source do so many errors^ r *^y /,^^ * *^d so much difference of opinion in that science ;^ // 7\ proceed,, as from the vague ideas which are at- f '■ ' *'^ ' tached to the word value.
'» '' T i
>/ . Kf^Jif^^ If the quantity of labour realized in commodi^ ties, regidate their exchangeable value, every in- crease of the quantity of labour must augment the value of that commodity on which it. is exer- cised, as every diminution must lower it*.
* Book i. chap. 5.
SECT, I.J ON VALUE* S
Adam Smith, who so accurately defined the ori- ginal source of exchangeable value, and who was bound in consistency to maintain, that all things became more or less valuable in proportion as more or less labour was bestowed on their produc- tion, has himself erected another standard measure of value, and speaks of things being more or less valuable, in proportion as they will exchange for more or less of this sta&dard measure. Sometimes he speaks of com, at other times of labour, as a standard measure ; not the quantity of labour be- stowed on the production of any object, but the quantity which it can command in the market: as if these were two equivalent expressions, and as if because a man's labour had become doubly effi- cient, and he could therefore produce twice the quantity of a commodity, he would necessarily re- ceive twice the former quantity in exchange for it.
If this indeed were true, if the reward of j the labourer were always in proportion to what he produced, the quantity of labour bestowed,- on a commodity, and the quantity of labour I ^ . ^ .*.* " J^ which that commodity would purchase, would' * be equal, and either might accurately measure the variations of other things : but they are not equal ; the first is under many circumstances an invariable standard, indicating correctly the va- riations of other things ; the latter is subject to as many fluctuations as the commodities com- pared with it. Adam Smith, after most ably
>• i
6 ON VALUE* [chap. U
showing the insufficiency of a variable ;mediani, such as gold and silver, for the purpose of deter- mining the varying value of other things, has him-
A (A^ self, by fixing on com or labour, chosen a medium
^' L , \no less variable.
ra ^X^ ^ Gold and silver are no doubt subject to fluctua* ^'■^. ^^ /^tions, from the discovery of new and more abun- ^ 3^ *\ i<P dant mines ; but such discoveries are rare, and j./r^,'Ut their effects, though powerful, are limited to pe- riods of comparatively short duration. They are subject also to fluctuation, from improvements in the skill and machinery with which the mines may be worked ; as in consequence of such improve- ments, a greater quantity may be obtained with the same labour. They are further subject to fluc- tuation from the decreasing produce of the mines, after they have yielded a supply to the world, for a succession of ages. But from which of these sources of fluctuation is com exempted ? Does not that also vary, on one hand, from improve- ments in agriculture, from improved machinery and implements used in husbandry, as well as from the discovery of new tracts of fertile land, which in other countries may be taken into culti- vation, and which will aifect the value of com in every market where importation is free ? Is it not on the other hand subject to be enhanced in' value from prohibitions of importation, from increasing population and wealth, and the greater difficulty of obtaining the increased supplies, on account of
SECT. 1.3 ON VALUE. 7
»
the additional quantity of labour which the culti- vation of inferior lands requires ? Is not the value of labour equally variable j being not only affect- ed, as all other things are, by the proportion be- tween the supply and demand, which uniformly /\ varies with every change in the condition of the community, but also by the varying price of food< and other necessaries, on which the wages of la- • hour are expended ?
In the same country double the quantity of labour 4 jl_ , may be required to produce a given quantity of food / ^ / • -^ and necessaries at one time, that may be necessary \ *. at another, and a distant time; yet the labourer's v^, 'v.,.-^ reward may possibly be very little diminished. If ^', c't the labourer's wages at the former period, were a certain quantity of food and necessaries, he proba- bly could not have subsisted if that quantity had been reduced. Food and necessaries in this case will have risen 100 per cent, if estimated by the quantity of labour necessary to their production, ■ while they will scarcely have increased in value, if measured by the quantity of labour for which they will exchange.
The same remark may be made respecting two or more countries. In America and Poland, on the land last taken into cultivation, a year's labour of any given number of men, will produce much more com than on land similarly circumstanced in England. Now, supposing all other necessaries to
8 ON VALUE. [chap. I.
be equally cheap in those three countries, would it not be a great mistake to conclude, that the quantity of com awarded to the labourer, would in each country be in proportion to the facility of production ?
If the shoes and clothing of the labourer, could, by improvements in machinery, be produced by one fourth of the labour now necessary to their production, they would probably fall 75 per cent. ; but so far is it from being true, that the labourer would thereby be enabled permanently to consume four coats, or four pair of shoes, instead of one, that it is probable his wages would in no long time be adjusted by the effects of competition, and the stimulus to population, to the new value of the necessaries on which they were expended* If these improvements extended to all the objects of the labourer's consumption, we should find him probably at the end of a very few years, in posses- ion of only a small, if any, addition to his enjoy*- ments, although the exchangeable value of those commodities, compared with any other commodity, in the manufacture of which no such improvement were made, had sustained a very considerable re- duction ; and though they were the produce of a very considerably diminished quantity of labour.
It cannot then be correct, to say with Adam Smith, " that as labour may sometimes purchase ^ greater, and sometimes a smaller quantity of goods^
SECT. 1.3 ON VALUE. 9
it is their value which varies, not that of the labour which purchases them ;" and therefore, ** that la- bour alone never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared;" — but it is correct to say, as Adam Smith had previously said, ^* that the proportion between the quantities of labour ne-r cessaiy for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another ;" or in other words, that it is the comparative quantity of. com« modities which labour will produce, that deter- mines their present or past relative value, and not the comparative quantities of commodities, which are given to the labourer in exchange for his la- bour.
Two commodities vary in relative value, and we wish to know in which the variation has really taken place. If we compare the present value of one, with shoes, stockings, hats, iron, sugar, and all other commodities, we find that it will exchange for precisely the same quantity of all these thing3 as before. If we compare the other with the same commodities, we find it has varied w^th respect to them all : we may then with great probability infer that the variation has been in this commodity, and not in the commodities with which we have com- pared it. If on examining still more particularly into all the circumstances connected with the pro-
10 ON VALUE. [chap. I.
duction of these various commodities, we find that precisely the same quantity of labour and capital are necessary to the production of the shoes, stock- ings, hats, iron, sugar, &c. ; but that the same quantity as before is not necessary to produce the single commodity whose relative value is altered, probability is changed into certainty, and we are siue that the variation is in the single commodity : we then discover also the cause of its variation.
If I found that an ounce of gold would exchange for a less quantity of all the commodities above enumerated, and many others ; and if, moreover, I found that by the discovery of a new and more fertile mine, or by the employment of machinery to great advantage, a given quantity of gold could be obtained with a less quantity of labour, I should be justified in saying that the cause of the altera- tion in the value of gold relatively to other com- modities, was the greater facility of its production, or the smaUer quantity of labour necessary to ob- tain it. In like manner, if labour fell very consi- derably in value, relatively to- all other things, and if I found that its fall was in consequence of an abundant supply, encouraged by the great facility with which com, and the other necessaries of the labourer, were produced, it would, I apprehend, be correct for me to say that com and necessaries had fallen in value in consequence of less quantity of labour being necessary to produce them, and that this facility of providing for the support of the
8ECT. lO ON VALUE. 11
labourer had been followed by a fall in the value of labour. No, say Adam Smith and Mr. Malthus, in the case of the gold you were correct in calling its variation a fall of its value, because corn and labour had not then varied; and as gold would command a less quantity of them, as well as of all other things, than before, it was correct to say that all things had remained stationary, and that gold only had varied ; but when com and labour fall, things which we have selected to be our standard measure of value, notwithstanding all the variations to which we acknowledge they are sub- ject, it would be highly improper to say so ; the correct language will be to say, that com and la- bour have remained stationary, and all other things have risen in value*
Now it is against this language that I protest. I find that precisely, as in the case of the gold, the cause of the variation between com and other thin^ is the smaller quantity of labour necessary to produce it, and therefore, by all just reasoning, I am bound to call the variation of com and labour a fall in their value, and not a rise in the value of the things with which they are compared. If I have to hire a labourer for a week, and instead of ten shillings I pay him eight, no variation having taken place in the value of money, the labourer can probably obtain more food and necessaries^ with his eight shillings, than he before obtained for ten : but this is owing, not to a rise in the real value of
8
/
12
ON VALUE.
[chap. I.
/,»
his wages, as stated by Adam Smith, and more re- cently by Mr. Malthus, but to a fall in the value of the things on which his wages are expended, things perfectly distinct ; and yet for calling this a 1 fall in the real value of wages, I am told that I I adopt new and unusual language, not reconcileable with the true principles of the science. To me it appears that the unusual and, indeed, inconsistent language, is that used by my opponents.
Ai-
Suppose a labourer to be paid a bushel of com for a week's work, when the price of corn is 80^. per quarter, and that he is paid a bushel and a quarter when the price falls to 40^. Suppose, too, that he consumes half a bushel of corn a-week in his own family, and exchanges the remainder for other things, such as fuel, soap, candles, tea, sugar, salt, &c. &c. ; if the three-fourths of a bushel which I will remain to him, in one case, cannot procure him as much of the above commodities as half a bushel did in the other, which it will not, will labour have risen or fallen in value ? Risen, Adam Smith must say, because his standard is com, and the labourer receives more com for a week's labour. Fallen, must the same Adam Smith say, •** because the value of a thing depends on the power of pur- chasing other goods which the possession of that object conveys," and labour has a less power of purchasing such other goods*
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SECT. II.] ON VALUE. 13
SECTION 11.
Labour of different qualities differently rexarded* This no cause qfvaricUion in the relative value of commodities.
In speaking, however, of labour, as being the foundation of all value, and the relative quantity of labour as almost exclusively determining the re- lative value of commodities, I must not be sup- posed to be inattentive to the different qualities of labour, and the difficulty of comparing an hour's or a day's labour, in one employment, with the same duration of labour in another. The estima- tion in which different qualities, of labour are held, comes soon to be adjusted in the market with suf- ficient precision for all practical purposes, and de- pends much on the comparative skill of the la- bourer, and intensity of the labour performed. The scale, when once formed, is liable to little variation. If a day's labour of a working jeweller be more valuable than a day's labour of a common labourer, it has long ago been adjusted, and placed in its proper position in the scale of value *.
* '* But 'though labour be the real measure of the exchange- able value of all commodities, it is not that by which their value is commonly estimated. It is often difficult to ascertain the proipprtion between two different quantities of labour. The tim* ipent ia tyiri^ ^iff^rent sorts of ^ork will not always alone *lfl(^ei:9i]DejJiit prajDortion. The diiF(^rent degrees of ^ardshig^
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14 ON VALUE. [chap. I.
In comparing therefore the value of the. same commodity, at different periods of time, the consi- deration of the comparative skill and intensity of labour, required for that particular commodity, needs scarcely to be attended to, as it operates equally at both periods. One description of labour at one time is compared with the same description of labour at another ; if a tenth, a fifth, or a fourth, has been added or taken away, an effect propor- tioned to the cause wiU be produced on the relative value of the commodity.
If a piece of cloth be now of the value of two pieces of linen, and if, in ten years hence, the or- dinary value of a piece of cloth should be four pieces of linen, we may safely conclude, that either more labour is required to make the cloth, or less to make the linen, or that both causes have ope- rated.
endured, and of ingenuity exercised, must likewise be taken into account. There may be more labour in an hour's hard work, than in two hour's easy business ; or, in an hour's appli- cation to a trade, which it costs ten years' labour to learn, than in a month's industry at an ordinary and obvious employment. But it is not easy to find any accurate measure, either of hard- ship or ingenuity. In exchanging, indeed, the different pro- ductions of different sorts of labour for one another, some allow- ance is commonly made for both. It is adjusted, however, not by any accurate measure, but by the higgling and bargaining of the market, according to that sort of rough equality, which though not exact, is sufficient for carrying on the business of common life.*' — Wealth of Nations, book i. chap. 10.
SECT. 11.3 ON VALUE. 15
As the inquiry to which I wish to draw the reader's attention, relates to the effect of the vari- ations in the relative value of commodities, and not in their absolute value, it wiU be of little im- portance to examine into the comparative degree of estimation in which the different kinds of human laboiu* are held. We may fairly conclude, that whatever inequality there might originally have been in them, whatever the ingenuity, skill, or time necessary for the acquirement of one species of manual dexterity more than another, it continues nearly the same from one generation to another ; or at least, that the variation is very inconsiderable from year to year, and therefore, can have little effect, for short periods, on the relative value of commodities.
" The proportion between the different rates both of wages and profit in the different employ* . ments of labour and stock, seems not to be much affected, as has already been observed, by the riches or poverty, the advancing, stationary, or declining state of the society. Such revolutions in the public welfare, though they affect the general rates both of wages and profit, must in the end af- feet them equally in all diflerent employments. The proportion between them therefore . must re- main the same, and cannot well be altered, at least for any considerable time, by any such revolu- tions ••"
• Wealth of Nations, book i. chap. 10.
16 ON VALUE. [chap, L
SECTION III.
Not only the labour applied immediately to commodities affect their valucy but the labour also which is bestowed on the implements^ tools^ aiid buildings^ with which such labaw* is assisted.
Even in that early state to which Adam Smith refers, some capital, though possibly ipade and ac- cumulated by the hunter himself, would be neces- sary to enable him to kill his game. Without some weapon, neither the beaver nor the deer could be destroyed, and therefore the value of tiiese ani- mals would be regulated, not solely by the time and labour necessary to their destruction, but also by the time and labour necessary for providing the hunter's capital, the weapon, by the aid of which their destruction was effected.
Suppose the weapon necessary to kill the beaver, was constructed with much more labour than that necessary to kill the deer, on account of the greater difficulty of approaching near to the former animal, and the consequent necessity of its being more true to its mark ; one beaver would naturally be of more value than two deer, and precisely for this reason, that more labour would, on the whole, be necessary to its destruction. Or suppose that the same quantity of labour was necessary to make both weapons, but that they were of very un-
•SECT. III.3 <>N VALUE. 'I7
equal durability; of the durable implement only a small portion of its value would be transferred to the commodity, a much greater portion of the value of the less durable implement would be re- alized in the commodity which it contributed to produce.
All the implements necessary to kill the beaver and deer might belong to one class of men, and the labour employed in their destruction might be furnished by another class ; still, thdr comparative prices would be in proportion to the actual labour bestowed, both on the formation of the capital, and on the destruction of the animals. Under di£* ferent circumstances of plenty or scarcity of ca- pital, as compared with labour, under different cir« cumstances of plenty or scarcity of the food and necessaries essential to the support of men, those who furnished an equal value of capital for either one employment or for the other, might have a half, a fourth, or an eighth of the produce ob- tained, the remainder being paid as wages to those who furnished the labour ; yet this division could not aflfect the relative value of these commodities» since whether the profits of capital were greater or less, whether they were 50, 20, or 10 per cent, or whether the wages of laboiur were high or low^ they would operate equally on both employments.
If we suppose the occupations of the society •extended, Uiat some provide canoes and tackle
c
18 ON VALUE. []CHAP, U
necessary for fishing, others the seed and rude machinery first used in agriculture, stiU the same principle would hold true, that the exchangeable value of the commodities produced would be in proportion to the labour bestowed on their pro- duction ; not on their immediate production only, but on all those implements or machines required to give efifect to the particular labour to which they were applied.
If we look to a state of society in which greater improvements have been made, and in which arts and commerce flourish, we shall still find that commodities vary in value conformably with this principle : in estimating the exchangeable value of stockings, for example, we shall find that their value, comparatively' with other things, depends on the total quantity of labour necessary to manu- facture them, and bring them to market. First, there is the labour necessary to cultivate the land ^ * y / on which the raw cotton is grown ; secondly, the labour of conve3dng the cotton to the coimtry where the stockings are to be manufactured, which includes a portion of the labour bestowed in building the ship in which it is conveyed, and which is charged in the freight of the gopds; thirdly, the labour of the spinner and weaver j fourthly, a portion of the labour of the engineer, smith, and carpenter, who erected the buildings and machinery, by the help of which they are made; fifthly, the labour of the retail dealer, and
tv^
•V* ^
SECT. III.] ON VALUE. 19
of many others, whom it is unnecessary further to particularize. The aggregate sum of these various kinds of labour, determines the quantity of other things for which these stockings will exchange^ while the same consideration of the various quan- tities of labour which have been bestowed on those other things, will equally govern the portion of them which will be given for the stockings.
To convince ourselves that this is the real foun«» dation of exchangeable value, let us suppose any improvement to be made in the means of abridg- ing labour in any one of the various processes through which the raw cotton must pass, before the manufactured stockings come to the market, to be exchanged for other things ; and observe the effects which will follow. If fewer men were required to cultivate the raw cotton, or if fearer sailors were employed in navigating, or shipwrights in constructing the ship, in which it was conveyed to us; if fewer hands were employed in raising the buildings and machinery, or if these, when raised, were rendered more efficient, the stockings would inevitably fall in value, and consequently com- mand less of other things. They would fall, be- cause a less quantity of labour was necessary to their production, and would therefore exchange for a smaller quantity of those things in which no such abridgment of labour had been made.
Economy in the use of labour never faUs to re-
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^0 ON VALUE. [chap. I.
duce the relative value of a commodity, whether the saving be in the labour necessary to the manu- facture of the commodity itself, or in that neces- sary to the formation of the capital, by the aid of which it is produced. In either case the price of stockings would fall, whether there were fewer men employed as bleachers, spinners, and weav- ers, persons immediately necessary to their manu- facture j or as sailors, carriers, engineers, and smiths, persons more indirectly concerned^ In the one case, the whole saving of labour would fall on the stockings, because that portion of la- bour wJEis wholly confined to the stockings; in the other, a portion only would fall on the stockings, the remainder being applied to all those other commodities, to the production of which the build- ings, machinery, and carriage, were subservient.
Suppose that in the early stages of society, the bows and arrows of the hunter were of equal va- lue, and of equal durability, with the canoe and implements of the fisherman, both being the pro- duce of the same quantity of labour. Under such circumstances the value of the deer, the produce of the hunter's day's labour, would be exactly equal to the value of the fish, the produce of the fisherman's day's labour. The comparative value of the fish and the game, would be entirely regu- lated by the quantity of labour realized in each; whatever might be the quantity of production, or iowever high or low general wages or profits might
SECT. III.3 ON VALUE. 21
be. If for exanlple the canoes and implements of the fisherman were of the value of 100/. and were calculated to last for ten years, and he employed ten men, whose annual labour cost lOOL and who in one day obtained by their labour twenty salmon : If the weapons employed by the hunter were also of 100/. value and calculated to last ten years, and if he also employed ten men, whose anilual labour cost lOOL and who in one day procured him ten deer; then the natural price of a deer would be two salmon, whether the proportion of the whole produce bestowed on the men who obtained it, were large or small. The proportion which might be paid for wages, is of the utmost importance in the question of profits; for it must at once be seen, that profits would be high or low, exactly in pro- portion as wages were low or high ; but it could not in the least afiect the relative value of fish and game, as wages would be high or low at the same time in both occupations. If the hunter urged the plea of his paying a large proportion, or the value of a large proportion of his game for wages, as an inducement to the fisherman to give him more fish in exchange for his game, the latter would state that he was equally afiected by the same cause; and therefore imder all variations of wages and profits, under all the efiects of accumu- lation of capital, as long as they continued by a day's labour to obtain respectively the same quan- tity of fish, and the same quantity of game, the
22 ON VALUE. [chap. I.
natural rate of exchange would be one deer for two salmon.
If with the same quantity of labour a less quan« tity of fish, or a greater quantity of game were ob- tained, the value of fish would rise in comparison with that of game. If, on the contrary, with the same quantity of labour a less quantity of game, or a greater quantity of fish was obtained, game would rise in comparison with fish.
If there were any other commodity which was ^^' * invariable in its value, we should be able to ascer- tain, by comparing the value of fish and game with this commodity, how much of the variation was to be attributed to a cause which affected the value of fish, and how much to a cause which afiected the value of game.
Suppose money to be that commodity. If a salmon were worth 1/. and a deer 2/. one deer would be worth two salmon. But a deer might become of the value of three salmon, for more labour might be required to obtain the deer, or less to get the salmon, or both these causes might operate at the same time. If we had this invari- able standard, we might easily ascertain in what degree either of these causes operated. If salmon continued to sell for 1/. whilst deer rose to 3/. we might conclude that more labour was required to
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8£CT. III.] ON VALUE. S3
obtain the deer. If deer continued at the same price of S/1 and salmon sold for 13^. 4k^ we might then be sure that less labour was required to ob^* tain the salmon; and if deer rose to 2/. 10^. and salmon fell to 16^. 8d. we should be convinced that both causes had operated in producing the altera^ tion of the relative value of these commodities.
No alteration in the wages of labour could pro- duce any alteration in the relative value of these commodities ; for suppose them to rise, no greater quantity of labour would be required in any of these occupations, but it would be paid for at a , ' higher price, and the same reasons which should* -^ make the hunter and fisherman endeavour to raise the value of their game and fish, would cause the owner of the mine to raise the value of his gold. ' ' This inducement acting with the same force on all ^ these three occupations, and the relative situation of those engaged in them being the same before and after the rise of wages, the relative value of game, fish, and gold, would continue unaltered. Wages might rise twenty per cent., and profits consequently fall in a greater or less proportion, without occasioning the least alteration in the rehu live value of these commodities.
Now suppose, that with the same labour and fixed capital, more fish could be produced, but no more gold or game, the relative value of fish would fall in comparison with gol4 ^r game. I(n instead of .
/i (
M ON VALUE. [chap. I.^ .
1
.* ; / '^'Wenty salmon, twenty-five were the produce of one j
.. . * clay's labour, the price of a salmon would be six- , . . 1^ teen shillings instead of a pound, and two salmon *
7) and a half, instead of two salmon, would be given . ,^ in exchange for one deer, but the price of deer would continue at 2L as before. In the same man- ner, if fewer fish could be obtained with the same capital and labour, fish would rise in comparative value. Fish then would rise or fall in exchangeable value, only because more or less labour was re- quired to obtain a given quantity j and it never could rise or fall beyond the proportion of the increased or diminished quantity of labour required.
If we had then an invariable standard, by which we could measure the variation in other commodi- ties, we should find that the utmost limit to which they could permanently rise, if produced under the circumstances supposed, was proportioned to the additional quantity of labour required for their pro- duction; and that unless more labour were re- quired for their production, they could not rise in any degree whatever. A rise of wages would not raise them in money value, nor relatively to any other commodities, the production of which re- quired no additional quantity of labour, which em- ployed the same proportion of fixed and circulating capital, and fixed capital of the same durability. If more or less labour were required in the produc- tion of the other commodity, we have already stated that this will immediately occasion an alteration in
8
I
SfiCT. TV.2 ON VALUE. 2^
its relative value, but such alteration is owing to the altered quantity of requisite labour, and not to the rise of wages.
SECTION IV.
4 •
The principle that the quantity of labour bestowed on thepro^ duction qfcommodities regulates their relative vatue, con- siderabhf modified by the employment of machinery and other Jl^xed and durable capital.
In the former section we have supposed the imple- ments and weapons necessary to kill the deer and salmon, to be equally durable, and to be the result of the same quantity of labour, and we have seen that the variations in the relative value of deer and salmon depended solely on the varying quantities of labour necessary to obtain them, — but in every state of society, the tools, implements, buildings, and machinery employed in different trades may be of various degrees of durability, and may require different portions of labour to produce them. The proportions, too, in which the capital that is to sup- port labour, and the capital that is invested in tools, machinery and buildings, may be variously com- bined. This difference in the degree of durabiUty of fixed capital, and this variety in the proportions in which the two sorts of capital may be combined, introduce another cause, besides the greater or less quantity of labour necessary to pxoduce commodi-
26 ON VALUE. [chap. I*
ties, for the variations in their relative value — this cause is the rise or fall in the value of labour.
The food and clothing consumed by the la- bourer, the buildings in which he works, the im- plements with which his labour is assisted, are all of a perishable nature. There is however a vast difference in the time for which these different capitals will endure: a steam-engine will last longer than a ship, a ship than the clothing of the labourer, and the clothing of the labourer longer than the food which he consumes.
According as capital is rapidly perishable, and requires to be frequently reproduced, or is of slow consumption, it is classed under the heads of cir- culating, or of fixed capital*. A brewer, whose buildings and machinery are valuable and durable, is said to employ a large portion of fixed capital : on the contrary, a shoemaker, whose capital is chiefly employed in the pajonent of wages, which ^e expended on food and clothing, commodities more perishable than buildings and machinery, is said to employ a large proportion of his capital as circulating capital.
It is also to be observed that the circulating capital may circulate, or be returned to its em-
^ A division not essential, and in which the line of demarca- tion cannot be accurately drawn.
SECT. IV.] ON VALUE. 27
ployer, in very unequal times. The wheat bought by a farmer to sow is comparatively a fixed capital to the wheat purchased by a baker to make into loaves. One leaves it in the ground, and can ob- tain no return for a year; the other can get it ground into flour, sell it as bread to his customers, and have his capital free to renew the same, or commence any other employment in a week.
Two trades then may employ the same amount of capital ; but it may be very differently divided with respect to the portion which is fixed, and that which is circulating.
In one trade very little capital may be employed as circulating capital, that is to say in the support of labour — it may be principally invested in ma- chinery, implements, buildings, &c. capital of a com- paratively fixed and durable character. In another trade the same amount of capital may be used, but it may be chiefly employed in the support of labour, and very little may be invested in implements, ma- chines, and buildings. A rise in the wages of la- bour cannot fail to afiect unequally, commodities produced under such different circmnstances.
Again two manufacturers may employ the same amount of fixed, and the same amount of circulat- ing capital ; but the durability of their fixed capitals may be very unequal. One may have steam-engines
28 ON VALUE. [^CHAP. I-
of the value of 10,000/., the other, ships of the same value.
If men employed no machinery in production but labour only, and were all the same length of time before they brought their commodities to market, the exchangeable value of their goods would be precisely in proportion to the quantity of labour employed.
If they employed fixed capital of the same value and of the same durability, then, too, the value of the commodities produced would be the same, and they would vary with the greater or less quantity of labour employed on their production.
But although commodities produced under similar circumstances, would not vary with re- spect to each other, from any cause but an ad- dition or diminution of the quantity of labour necessary to produce one or other of them, yet com- pared with others not produced with the same pro- portionate quantity of fixed capital, they would vary firom the other cause also which I have before men- tioned, namely, a rise in the value of labour, al- though neither more nor less labour were employed in the production of either of them. Barley and oats would continue to bear the same relation to each other under any variation of w^es. Cotton goods and cloth would do the same, if they also were produced
^
SECT. IV.'] ON VALUE. 29
under circumstances precisely similar to each other, but yet with a rise or fall of wages, barley might be more or less valuable compared with cotton goods, and oats compared with cloth.
Suppose two men employ one hundred men each for a year in the construction of two machines, and another man employs the same number of men in cultivating com, each of the machines at the end of the year will be of the same value as the com, for they will each be produced by the same quan- tity of labour. Suppose one of the owners of one of the machines to employ it, with the assistance of one hundred men, the following year in making doth, and the owner of the other machine to em- ploy his also, with the assistance likewise of one hundred men, in making cotton goods, while the farmer continues to employ one hundred men as before in the cultivation of com. Dining the second year they will all have employed the same quantity of labour, but the goods and machine together of the clothier, and also of the cotton manufacturer, wiU be the result of the labour of two hundred men, employed for a year j or, rather, of the laboiu* of one hundred men for two years ; whereas the com wfll be produced by the labour of one hundred men for one year, consequently if the com be of the value of 500/. the machine and cloth of the clothier to- gether, ought to be of the value of 1000/. and the machine and cotton goods of the cotton manufac- turer, ought to be also of twice the value of the com.
30 ON VALUE, [chap. I.
But they will be of more than twice the value of the com, for the profit on the clothier's and cotton ma- nufacturer's capital for the first year has been added to their capitals, whUe that of the fanner has been expended and enjoyed. On account then of the difierent degrees of diu*ability of their capitals, or, which is the same thing, on account of the time which must elapse before one set of commodities can be brought to market, they will be valuable, not exactly in proportion to the quantity of labour bestowed on them, — they will not be as two to one, but something more, to compensate for the greater length of time which must elapse before the most valuable can be brought to market.
Suppose that for the labour of each workman 50/. per annum were paid, or that 5000/. capital were employed and profits were 10 per cent., the value of each of the machines as well as of the com, at the end of the first year, would be 5,500/. The second year the manufacturers and farmer will again em- ploy 5000L each in the support of labour, and will therefore again sell their goods for 5,500/., but the men using the machines, to be on a par with the farmer, must not only obtain 5,500/., for the equal capitals of 5000L employed on labour, but they must obtain a further sum of 550/. j for the profit on 5,500/. which they have invested in machinery, and consequenty their goods must sell for 6,050/. Here then are capitalists employing precisely the same quantity of labour annually on the production of
SECT, IV.] ON VALUE. 31
their commodities* and yet the goods they produce differ in vahie on accowit of the different quantities of fixed capital, or accumulated labour, employed by each respectively. The cloth and cotton goods are of the same value, because they are the produce of equal quantities of labour, and equal quantities of fixed capital ; but com is not of the same value as these commodities, because it is produced, as far as regards fixed capital, under different circum- stances.
But how will their relative value be affected by a rise in the value of labour ? It is evident that the relative values of cloth and cotton goods will under- go no change, for whataffects one must equally affect the other, under the circumstances supposed: neither will the relative values of wheat and barley undergo any change, for they are produced under the same drcumAances as far as fixed and circulating capital are concerned ; but the relative value of com to cloth, or to cotton goods, must be altered by a rise of labour.
There can be no rise in the value of labour with- out a fall of profits. If the com is to be divided between the farmer and the labourer, the larger the proportion that is given to the latter, the less will remain for the former. So if cloth or cotton goods be divided between the workman and his employer, the larger the proportion given to the
ft
former, the less remains for the latter. Suppose
32 ON VALUE, [chap. 1.
then, that owing to a rise of wages, profits fall from 10 to 9 per cent., instead of adding 550L to the common price of their goods (to 5,5001} for the profits on their fixed capital, the manufacturers would add only 9 per cent, on that sum, or 495/., consequently the price would be 5,995/. instead of 6,050/. As the com would continue to sell for 5,500/., the manufactured goods in which more fixed capital was employed, would fall relatively to corn or to any other goods in which a less portion of fixed capital entered. The degree of alteration in the relative value of goods, on account of a rise or fall of labour, would depend on the proportion which the fixed capital bore to the whole capital employed. All commodities which are produced by very valuable machinery, or in very valuable buildings, or which require a great length of time before they can be brought to market, would fall in relative value, while all those which were chiefly produced by labour, or which would be speedily brought to market would rise in relative value.
The reader, however, should remark, that this cause of the variation of commodities is compara- tively slight in its efiects. With such a rise of wages as should occasion a fall of one per cent, in profits, goods produced under the circumstances I have supposed, vary in relative value only one per cent. ; they fall with so great a fall of profits from 6,050/. to 5,995/1 The greatest effects which could be produced on the relative prices of these
SECT. IV.] ON VALUE. $3
•
goods from a rise of wages, could not exceed 6 or 7 per cent ; for profits could not, probably, under any circiunstances, admit of a greater general and permanent depression than to that amount.
Not so with the other great cause of the varia- tion in the value of commodities, namely, the in- crease or diminution in the quantity of labour necessary to produce them. If to produce the com, eighty, instead of one hundred men, should be required, the value of the com would fall SO per cent, or from 5,500/. to 4,400/. If to produce the doth, the labour of eighty instead of one hun- dred men would suffice, cloth would fall from 6,0501. to 4,950/1 An alteration in the permanent rate of profits, to any great amount, is the effect of causes which do not operate but in the course of years; whereas alterations in the quantity of la- bour necessary to produce commodities, are of daily occurrence. Every improvement in ma- chinery, in tools, in buildings, in raising the raw material, saves labour, and enables us to produce the commodity to which the improvement is ap- plied with more facility, and consequently its value alters. In estimating, then, the causes of the varia- tions in the value of commodities, although it would be wrong wholly to omit the consideration of the efiect produced by a rise or fall of labour, it would be equally incorrect to attach much importance to it; and consequently, in the subsequent part of
34 ON VALUE* £CHAP. I.
this work, though I shall occasionally refer to this cause of variation, I shall consider all the great variations which take place in the relative value of commodities to be produced by tlie greater or less quantity of labour which may be required from time to time to produce them.
It is hardly necessary to say, that commodities which have the same quantity of labour bestowed on their production, will differ in exchangeable value, if they cannot be brought to market in the same time.
Suppose I employ twenty men at an expense of 1000/. for a year in the production of a commo- dity, and at the end of the year I employ twenty men again for another year, at a further expense of 10002. in finishing or perfecting the same com- modity, and that I bring it to market at the end of two years, if profits be 10 per cent., my commo- dity must sell for 2,310^; for I have employed 1000/. capital for one year, and 2,100/. capital for one year more. Another man employs precisely the same quantity of labour, but he employs it all in the first year; he employs forty men at an ex- pense of 2000/., and at the end of the first year he sells it with 10 per cent, profit, or for 2,SOO{1 Here then are two commodities having pre- cisely the same quantity of labour bestowed on them, o^e of which sells for 2,310/^ — ^the other for 2,200/.
SECT. IV.3 ON VALUE. $5
This case appears to difier from the last, but is, in fact, the same. In both cases the superior price of one commodity is owing to the greater length of time which must elapse before it can be brought to market. In the former case the ma* chinery and cloth were more than double the value of the com, although only double the quantity of labour was bestowed on them. In the second case, one commodity is more valuable than the other, although no more labour was employed on its production. The difierence in value arises in both cases from the profits being accumulated as capital, and is only a just compensation for the time that the profits were withheld.
It appears then that the division of capital into different proportions of fixed and circulating ca- pital, employed in different trades, introduces a considerable modiiScation to the rule, which is of universal application when labour is almost exclu- sively employed in production ; namely, that com- modities never vary in value, unless a greater or less quantity of labour be bestowed on their pro- duction, it being shown in this section that without any variation in the quantity of labour, the rise of its value merely will occasion a fall in the ex- changeable value of those goods, in the production of which fixed capital is employed; the larger the amount of fixed capital, the greater will be the
m.
d2
S6 ON VALUE. [chap. I.
SECTION V-
T^e principle that value does not vary with the rise or fatt of wages^ modified also by the unequal durability of capital^ and by the unequal rapidity with which it is returned to its employer.
In the last section we have supposed that of two equal capitals in two different occupations, the proportions of fixed and circulating capitals were unequal, now let us suppose them to be in the same proportion but of unequal durability. In proportion as fixed capital is less durable, it ap- proaches to the nature of circulating capital. It will be consumed and its value reproduced in a shorter time, in order to preserve the capital of the manufacturer. We have just seen, that in pro- portion as fixed capital preponderates in a manu- facture, when wages rise, the value of commodities produced in that manufacture, is relatively lower than that of commodities produced in manufac- tures where circulating capital preponderates. In proportion to the less durability of fixed capital, and its approach to the nature of circulating capital, the same efiect will be produced by the same cause.
If fixed capital be not of a durable nature, it will require a great quantity of labour annually to
SECT, v.] ON VALUE. 37
keep it in its original state of efficiency; but the labour so bestowed may be considered as really expended on the commodity manufactured, which must bear a value in proportion to such labour. If I had a machine worth 20,000/. which with very litde labour was efficient to the production of commodities, and if the wear and tear of such ma- chine were of trifling amount, and the general rate of profit 10 per cent., I should not require much more than 2000/. to be added to the price of the goods, on account of the employment of my ma- chine; but if the wear and tear of the machine were great, if the quantity of labour requisite to keep it in an efficient state were that of fifty men annually, I should require an additional price for my goods, equal to that which would be obtained by any other manufacturer who employed fifty men in the production of other goods, and who used no machineiy at all.
But a rise in the wages of labour would not equally affect commodities produced with machineiy quick- ly consumed, and commodities produced with machineiy slowly consumed. In the production of the one, a great deal of labour would be conti- nually transferred to the commodity produced— in the other very littie would be so transferred. 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, and would proportionaUy elevate tiiose which were pro-
V
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38 ON VALUE. [chap. !♦
duced with capital more perishable. A faU of wages would have precisely the contrary effect.
I have already said that fixed capital is of various degrees of durability — suppose now a machine which could in any particular trade . be employed to do the work of one hundred men for a year, and that it would last only for one year. Suppose too, the machine to cost 5000/., and the wages annually paid to one hundred men to be 5000/., it is evident that it would be a matter of indifference to the ma- nufacturer whether he bought the machine or em- ployed the men. But suppose labour to rise, and consequently the wages of one hundred men for a year to amount to 5,500/., it is obvious that the ma^ nufacturer would now no longer hesitate, it would be for his interest to buy the machine and get his work done for 5000A But will not the machine rise in price, will not that also be worth 5,500/. in consequence of the rise of labour ? It would rise in price if there were no stock employed on its con- struction, and no profits to be paid to the maker of it. If for example, the machine were the produce of the labour of one hundred men, working one year upon it with wages of 50/. each, and its price were consequently 5000/. ; should those wages rise to 55 A, its price would be 5,500/., but this cannot be the case; less than one hundred men are employed or it could not be sold for 5000/., for out of the 5000/, must be paid the profits of stock which employed the men. Suppdge then t|;iarj)iJly eighty-five men were, enj- ployed at au expense of 50k, each, or 4,250i/»- p^r
SECT. V.3 ON VALUE. 39
annum, and that the 750L which the sale of the machine would produce over and above the wagep advanced to the men, constituted the profits of the engineer's stock. When wages rose 10 per cent, he would be obliged to employ an additional ca- pital of 4s^L and would therefore employ 4,675/. in- stead of 4,250/., on which capital he would only get a profit of 325L if he continued to sell his machine for 5000/. ; but this is precisely the case of all ma- nufacturers and capitalists ; the rise of wages afiects them all. If therefore the maker of the machine should raise the price of it in consequence of a rise of wages, an unusual quantity of capital would be employed in the construction of such machines, till their price afforded only the common rate of profits*. We see then that machines would not " L p, rise in price, in consequence of a rise of wages. ^ *
The manufacturer, however, who in a general rise of wages, can have recourse to a machine which shall not increase the charge of production on his
* We here see why it is that old countries are constantly im- pelled to employ machinery, and new countries to employ labour. With ever)' difficulty of providing for the maintenance of men, labour necessarily rises, and with every rise in the price of la- \ hour, new temptations are offered to the use of machinery. This difficulty of providing for the maintenance of men is in constant operation in old countries, in new ones a very great increase in the population may take place without the least rise in the wages ' - of labour. It may be as easy to provide for the 7 th, 8th, and dth million of men as for the 2d, 3d, and 4th. .
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a * 4. V
40 ON VALUE. [chap. I.
commodity, would enjoy peculiar advantages if he could continue to charge the same price for his goods ; but he, as we have already seen, would be obliged to lower the price of his commodities, or capital would flow to his trade till his profits had sunk to the general level. Thus then is the public benefited by machinery: these mute agents are always the produce of much less labour than that which they displace, even when they are of the same money value. Through their influence, an increase in the price of provisions which raises wages will affect fewer persons ; it will reach, as in the above instance, eighty-five men instead of a hundred, and the saving which is the consequence, shows itself in the reduced price of the commodity manufactured. Neither machines, nor the commodities made by them, rise in real value, but aU commodities made by machines fall, and fall in proportion to their durability.
It will be seen, then, that in the early stages of society, before much machinery or durable capital is used, the commodities produced by equal capitals will be nearly of equal value, and will rise or fall only relatively to each other on account of more or less labour being required for their production ; but after the introduction of these expensive and du- rable instruments, the commodities produced by the emplo3anent of equal capitals will be of very un- equal value ; and although they will still be liable
SECT, VI.3 ON VALUE, 41
to rise or fall relatively to each other, as more or less labour becomes necessary to their production, they will be subject to another, though a min6r va- riation, also, from the rise or fall of wages and profits. Since goods which sell for 5000/. may be the pro- duce of a capital equal in amount to that from which are produced other goods which sell for 10,000/., the profits on their manufacture will be the same ; but those profits would be unequal, if the prices of the goods did not vary with a rise or fall in the rate of profits.
It appears, too, that in proportion to the durabi- lity of capital employed in any kind of production, the relative prices of those commodities on which such durable capital is employed, will vary inversely as wages ; they will fall as wages rise, and rise as wages fall ; and, on the contrary, those which are produced chiefly by labour with less fixed capital, or with fixed capital of a less durable character than the medium in which price is estimated, will rise as wages rise, and fall as wages fall.
SECTION VI.
On an invariable measure of value.
When commodities varied in relative value, it would be desirable to have the means of ascertain- ing which of them fell and which rose in real value, and this could be effected only by comparing them
V
/'
42 ON VALUE. [chap. I.
one after another with some invariable standard measure of value, which should itself be subject to none of the fluctuations to which other commodi- ties are exposed. Of such a measure it is impos- sible to be possessed, because there is no commo- dity which is not itself exposed to the same vari- ations as the things, the value of which is to be iviW ascertained j that is, there is none which is not ]^ subject to require more or less labour for its pro- / / duction. But if this cause of variation in the value
/ - '^ * -
^c^^ t.^ X 'qj^ a medium could be removed — if it were possible .* Cif^'^ "^ ^^^ ^ *^^ production of our money for instance,
the same quantity of labour should at all times be / required, still it would not be a perfect standard or invariable measure of value, because, as I have already endeavoured to explain, it would be sub- ject to relative variations from a rise or fall of wages, on account of the different proportions of fixed ca- pital which might be necessary to produce it, and to produce those other commodities whose alteration • -.♦ ^ of value we wished to ascertain. It might be sub- '*' "-^ ject to variations too, from the, same cause, on ac- count of the different degrees of durability of the fixed capital employed on it, and the commodities to be compared with it— or the time necessary to bring the one to market, might be longer or shorter than the time necessary to bring the other com- modities to market, the variations of which were to be determined ; all which circumstances disqualify any commodity that can be thought of from being a perfectly accurate measure of value.
»• .*^
SECT. VI.3 ON VALUE. 43
If, for example, we were to fix on gcUd as a standard, it is evident that it is but a commodity ob* tained under the same contingencies as evei^ other commodity, and requiring labour and fixed capital to produce it. Like every other commodity, im» provements in the saving of labour might be ap- plied to its production, and consequently it might &11 in relative value to other, things merely on ac- count of the greater &cility of producing it.
• ..A
If we suppose this cause of variation to be re- ^
moved, and the same quantity of labour to be al- . ' ways required to obtain the same quantity of gold, ^ ^
still gold would not be a perfect measure of value, \ ] by which we could accurately ascertain the varia* tions in all other things, because it would not be produced with precisely the same combinations of fixed and circulating capital as all other things j nor with fixed capital of the same diu'ability ; nor would it require precisely the same length of time, /
bef<Nre it could be brought to market. It would be )% ^^ • ^ a perfect measure of value for all things produced*^^^*^ *•' under the same circumstances precisely as itself, but for no others. If, for example, it were produced under the same circumstances as we have supposed necessary to produce cloth and cotton goods, it would be a perfect measure of value for those things, but not so for com, for coals, and other commodities produced with either a less or a greater prc^ortion of fixed capital, because, as we have shown, every alteration in the permanent rate
44 ON VALUE. [chap. I.
of profits would have some effect on the relative value of all these goods, independently of any al- teration in the quantity of labour employed on their production. If gold were produced under the same circumstances as com, even if they never changed, it would not, for the same reasons, be at all times a perfect measure of the value of cloth and cotton goods. Neither gold then, nor any other commodity, can ever be a perfect measure of value for all things ; but I have already remarked, that the effect on the relative prices of things, from a variation in profits, is comparatively slight ; that by far the most important effects are produced by the varying quantities of labour required for production ; and therefore, if we suppose this important cause of variation removed from the production of gold^ we shall probably possess as near an approxima- tion to a standard measiue of value as can be the- oretically conceived. May not gold be considered as a commodity produced with such proportions of the two kinds of capital as approach nearest to the average quantity employed in the production of most commodities ? May not these proportions be so nearly equally distant from the two extremes, the one where little fixed capital is used, the other where little labour is employed, as to form a just mean between them ?
If, then, I may suppose myself to be possessed of a standard so nearly approaching to an invari- able one, the advantage is, that I shall be enabled
SECT. VI.J ON VALC7E. 4fS
to speak of the variations of other things, without embarrassing m3rself on every occasion with the consideration of the possible alteration in the value of the medium in which price and value are estimated.
To £iciUtate» then, the object of this enquiry, although I iuUy allow that money made of gold is subject to most of the variations of other things, I shall suppose it to be invariable, and therefore all alterations in price to be occasioned by some alteration in the value of the commodity of which I may be speaking.
Before I quit this subject, it may be proper to observe, that Adam Smith, and all the writers who have followed him, have, without one exception that I know of, maintained that a rise in the price of labour would be uniformly followed by a rise in the price of all commodities. I hope I have succeeded in showing, that there are no grounds for such an opinion, and that only those commodi- ties would rise which had less fixed capital employed upon them than the medium in which price was estimated, and that all those which had more, would positively fall in price when wages rose. On the contrary, if wages fell, those commodities only would &11, which had a less proportion of fixed capital employed on them, than the medium in which price was estimated; all those which had morcy would positively rise in price.
46 ON VALUE* [chap. I.
It is necessary for me also to remark, that I have not said, because one commodity has so much lat>our bestowed upon it as will cost 1000^ and another so much as will cost SOOOL that therefore one would be of the value of 1000/. and the other of the value of 2000/. but I have said that their value will be to each other as two to one, and that in those proportions they will be exchanged. It is of no importance to the truth of this doctrine^ whether one of these commodities sells for 1,1002. and the other for 2,200/., or one for 1,500/L and the other for 3000/. ; into that question I do not at present enquire ; I affirm only, that thdr relative values will be governed by the relative quantities of labour bestowed on their production *•
* Mr. Malthiu remarks on this doctrine, '^ We have the power indeed, arbitrarily, to call the labour which has been employed upon a commodity its real value, but in so doing, we use words in a different sense from that in which they are customarily used ; we confound at once the very important distinctioii be* tween cost and value ; and render it almost impossible to .explain with clearness, the main stimulus to the production of wealth, which in fact depends upon this distinction."
Mr. Malthus appears to think that it is a part of my doe- trine, that the cost and value of a thing should be the same ^— it is, if he means by cost, " cost of production" inchiding profits. In the above passage, this is what he does not meaOf and therefore he has not clearly understood me.
SECT. VII.] ON VALUE. 47
SECTION VIL
Different effects from the alteration in the value of numey^ ike medium in which price is always expressed^ or Jrom the alteration in the value of the commodities which money purchases.
Although I shall, as I have akeady explained^ have occasion to consider money as invariable in value, for the purpose of more distinctly pointing out the causes of relative variations in the value of other things, it may be useful to notice the diffe- rent effects which will follow from the prices of goods being altered by the causes to which I have already adverted, namely, the different quantities of labour required to produce them, and their being altered by a variation in the value of money itself.
Money, being a variable commodity, the rise of money - wages will be frequently occasioned by a fall in the value of money. A rise of wages from this cause will, indeed, be invariably ac- companied by a rise in the price of commo- ^ties; but in such cases, it will be found that labour and all commodities have not varied in re- gard to each other, and that the variation has been confined to money.
Mon^, from its being a commodity obtained
48 ON VALUE. [chap. I.
from a foreign country, from its being the general medium][of exchange between all civilized coun- tries, and from its being also distributed among those countries in proportions which are ever changing with every improvement in commerce and machinery, and with every increasing diiOSculty of obtaining food and necessaries for an increasing population, is subject to incessant variations. In stating the principles which regulate exchangeable value and price, we should carefully distinguish between those variations which belong to the com- modity itself, and those which are occasioned by a variation in the medium in which value is esti- mated, or price expressed.
A rise in wages, from an alteration in the value of money, produces a general efiect on price, and for that reason it produces no real efiect whatever on profits. On the contrary, a rise of wages, from the circumstance of the labourer being more libe- rally f ewarded, or from a difficulty of procuring the necessaries on which wages are expended, does not, except in some instances, produce the efiect of raising price, but has a great efiect in lowering profits. In the one case, no greater proportion of the annual labour of the country is devoted to the support of the laboiu^ers; in the other case, a larger portion is so devoted.
It is according to the division of the whole pro-
SECT. VII.] ON VALUK. 49
duce of the land of any particular farm, between the three classes of landlord, capitalist, and la- bourer, that we are to judge of the rise or fall of rent, profit, and wages, and not according to the value at which that produce may be estimated in a medium which is confessedly variable.
It is not by the absolute quantity of produce ob- tained by either class, that we can correctly judge of the rate of profit, rent, and wages, but by the quantity of labour required to obtain that produce. By improvements in machinery and agriculture, the whole produce may be doubled ; but if wages, rent, and profit be also doubled, these three will bear the same proportions to one another as before, and neither could be said to have relatively varied. But if wages partook not of the whole of this increase ; if they, instead of being doubled, were only increased one-half; if rent, instead of being doubled, were only increased three-fourths, and the remaining increase went to profit, it would, I apprehend, be correct for me to say, that rent and wages had fallen while profits had risen ; for if we had an invariable standard by which to measure the value of this produce, we should find that a less value had fallei^ to the class of labourers and landlords, and a grater to the class of capitalists, than had been given before. We might find, for example, that though the ab- solute quantity of commodities had been doubled,
£
50 ON VALUE. [chap. I.
they were the produce of precisely the former quantity of labour. Of every hundred hats, coate, and quarters of com produced, if
The labourers had oefore 25 The landlords ... 25 And the capitalists . . 50
100:
And if, after these commodities were double the quantity, of every 100
The labourers had only . 22 The landlords .... 22 And the capitalists . 56
100:
In that case I should say, that wages and rent had fallen and profits risen ; though, in consequence of the abundance of commodities, the quantity paid to the labourer and landlord would have increased in the proportion of 25 to 44. Wages are to be estimated by their real value, viz. by the quantity of labour and capital employed in producing them, and not by their nominal value either in coats, hats, money, or com. Under the circumstances I have just supposed, commodities would have fallen to half their former value, and if money had not varied, to half their former price also. If then in this medium, which had not varied in value, the
SECT. Vir.] ON VALUE. 51
wages of the labourer shduld be found to have fallen, it will not the less be a real fall, because they might furnish him with a greater quantity of cheap commodities than his former y^Bjges.
The variation in the value of money, however great, makes no difference in the rate of profits $ for suppose the goods of the manufacturer to rise from 1000/. to 2000/., or 100 per cent., if his ca- pital, on which the variations of money have as much effect as on the value of produce, if his ma- chinery, buildings, and stock in trade rise also 100 per cent., his rate of profits will be the same, and he will have the same quantity, and no more, of the produce of the labour of the country at his command.
If, with a capital of a given value, he can, by economy in labour, double the quantity of pro- duce, and it fall to half its former price, it will bear the same proportion to the capital that pro- duced it which it did before^ and consequently profits will still be at the same rate.
If, at the same time that he doubles the quan- tity of produce by the employment of the same capital, the value of money is by any accident lowered one half, the produce will sell for twice the money value that it did before ; but the capi- tal employed to produce it will also be of twice
e2
52 ON VALUE. [chap. I.
its former money value ; and therefore in this case too, the value of the produce will bear the same proportion to the value of the capital as it did be- fore ; and although the produce be doubled, rent, wages, and profits will only vaiy as the proportions vary, in which this double produce may be divided among the three classes that share it
CHAPTER II
ON RENT*
It remains however to be considered, whether the appropriation of land, and the consequent creation of rent, will occasion any variation in the relative value of commodities, independently of the quan- tity of labour necessary to production. In order to understand this part of the subject, we must en- quire into the nature of rent, and the laws by
which its rise or fall is regulated.
*
Rent is that portion of the produce of the earth, which is paid to the landlord for the use of the original and indestructible powers of the soil. It is often, however, confounded with the interest and profit of capital, and, in popular language, the term is applied to whatever is annually paid by a far- mer to his landlord. If, of two adjoining farms of the same extent, and of the same natural fertility, one had all the conveniences of farming buildings, and, besides, were properly drained and manured, and advantageously divided by hedges, fences and walls, while the other had ncme of these advanta- ges, more remuneration would naturally be paid for the use of one, than for the use of the other ; yet in both cases this remimeration would be called rent. But it is evident, that a portion only of the
54 ON RENT. f CHAP, II.
money annually to be paid for the improved farm, would be given for the original and indestructible powers of the soil ; the other portion would be paid for the use of the capital which had been employ- ed in ameliorating the quality of the land, and in erecting such buildings as were necessary to seciire and preserve the produce. Adam Smith some- times speaks of rent, in the strict sense to* which I am desirous of confining it, but more often in the popular sense, in which the term is usually employ- ed. He tells us, that the demand for timber, and its consequent high price, in the more southern countries of Europe, caused a rent to be paid for forests in Norway, which could before afford no rent. Is it not, however, evident, that the person who paid what he thus calls rent, paid it in considera- tion of the valuable commodity which was then stand- ing on the land, and that he actually repaid hunself with a profit, by the sale of the timber ? If, indeed, after the timber was removed, any compensation were paid to the landlord for the use of the land, for the purpose of growing timber or any other produce, with a view to future demand, such com- pensation might justly be called rent, because it would be paid for the productive powers of the land j but in the case stated by Adam Smith, the com- pensation was paid for the liberty of removing and selling the timber, and not for the liberty of grow- ing it. He speaks also of the rent of coal mines, and of stone quarries, to which the same observa- tion applies— that the compensation given for the
CHAP. 11.3 OX RENT. 65
mine or quarry, is paid for the value of the coal or stone which can be removed from them, and has no connection with the original and indestructible powers of the land. This is a distinction of great importance, in an enquiry concerning rent and pro- fits ; for it is found, that the laws which regulate the progress of rent, are widely different from those which regulate the progress of profits, and seldom operate in the same direction. In all improved countries, that .which is annually paid to the land- lord, partaking of both characters, rent and profit, is sometimes kept stationary by the effects of oppo- sing causes ; at other times advances or. recedes, as one or the other of these causes preponderates. In the future pages of this work, then, whenever I speak of the rent of land, I wish to be understood as speaking of that compensation, which is paid to the owner of land for the use of its original and indestructible powers.
On the first settling of a country, in which there is an abundance of rich and fertile land, a very small proportion of which is required to be cultivated for the support of the actual population, or indeed can be cultivated with the capital which the popu- lation can command, there will be no rent ; for no one would pay for the use of land, when there was an abundant quantity not yet appropriated, and, therefore, at the disposal of whosoever might choose to cultivate it.
56 ON RENT. I^CHAP. II*
, On the common principles of supply and de- mand, no rent could be paid for such land, for the reason stated why nothing is given for the use of air and water, or for any other of the gifts of na- ture which exist in boundless quantity. With a given quantity of materials, and with the assistance of the pressure of the atmosphere, and the elastici- ty of steam, engines may perform work, and abridge human labour to a very great extent ; but no charge is made for the use of these natural aids, because they are inexhaustible, and at every man's disposal. In the same manner the brewer, the distiller, tlie dyer, make incessant use of the air and water for the production of their commodities ; but as the supply is boundless, they bear no price*. If all land had the same properties, if it were unlimited in quantity, and uniform in quality, no charge could be made for its use, unless where it possessed pecu- liar advantages of situation. It is only, then, be- cause land is not unlimited in quantity and uni-
* '^ The earthi as we have already seen, is not the only agent of nature which has a productive power ; but it is the only one, or nearly so, that one set of men take to themselves, to the ex- clusion of others ; and of which, consequently, they can appro- priate the benefits. The waters of rivers, and of the sea, by the power which they have of giving movement to our machines,^ carrying our boats, nourishing our fish, have also a productive power ; the wind which turns our mills, and even the heat of the sun, work for us ; but happily no one has yet been able to say, the ' wind and the sun are mine, and the service which they ren- der must be paid for/ "— £co«om/e Politique, par J. B* Say, voL ii. p. 12i.
CHAP. II.] ON RKNT* 57
form in quality, and because in the progress of po- pulation, land of an inferior quality, or less advan- tageously situated, is called into cultivation, that rent is ever paid for the use of it* When in the progress of society, land of the second degree of fertility is taken into cultivation, rent immediately commences on that of the first quality, and the amoimt of that rent will depend on the difierence in the quality of these two portions of land.
When land of the third quality is taken into cul- tivation, rent immediately commences on the second, and it is regulated as before, by the dijBTerence in their productive powers. At the same time, the rent of the first quality wUl rise, for that must al- ways be above the rent of the second, by the dif- ference between the produce which they yield with a given quantity of capital and labour. With every step in the progress of population, which shall oblige a country to have recourse to land of a worse quality, to enable it to raise its supply of food, rent, on aU the more fertile land, will rise.
Thus suppose land — ^No. 1, 2, S, — ^to yield, with an equal employment of capital and labour, a net produce of 100, 90, and 80 quarters of com. In a new country, where there is an abundance of fer- tile land compared with the population, and where therefore it is only necessary to cultivate No. 1, the whole net produce wiU belong to the cultiva- tor, and will be the profits of the stock which he ad- vances. As soon as population had so far increased
58 ON BSKT. [chap. H.
as to make it necessary to cultivate No. 2, from which ninety quarters only can be obtained after sup- porting the labourers, rent would commence on No. 1 ; for either there must be two rates of profit on agricultural capital, or ten quarters, or the value of ten quarters must be withdrawn from the pro- duce of No. 1, for some other purpose. Whether the proprietor of the land, or any other person, cultivated No. 1, these ten quarters would equally constitute rent ; for the cultivator of No. 2 would get the same result with his capital, whether he cultivated No. 1, paying ten quarters for rent, or continued to cultivate No. 2, paying no rent. In the same manner it might be shown that when No. 3 is brought into cultivation, the rent of No. 2 must be ten quarters, or the value of ten quarters, whilst the rent of No. 1 would rise to twenty quarters ; for the cultivator of No. S would have the same profits whether he paid twenty quarters for the rent of No. 1, ten quarters for the rent of No. 2, or cultivated No. 3 free of all rent.
It often, and, indeed, commonly happens, that before No. 2, 3, 4, or 5, or the inferior lands are cultivated, capital can be employed more produc- tively on those lands which are already in cultiva- tion. It may perhaps be found, that by doubling the original capital employed on No. 1, though the produce will not be doubled, will not be increased by 100 quarters, it may be increased by eighty-five quarters, and that this quantity exceeds what could
CHAP. II.3 ON KJ&NT. SQ
be obtained by employing the same capital, on land .No. 3.
In such case^ capital will be preferably employed on the old land^ and will equally create a rent; for rent is always the difference between the pro- duce obtained by the employment of two equal quantities of capital and labour. If, with a capital of lOOOiL, a tenant obtain 100 quarters of wheat from his land, and by the employment of a second capital of 1000/., he obtain a further return of eighty-five, his landlord would have the power at the expiration of his lease, of obliging him to pay fifteen quarters, or an equivalent value for additio- nal rent ; for there cannot be two rates of profit. If he is satisfied with a diminution of fifteen quar- ters in the return for his second 1000/., it is because no employment more profitable can be found for it. The common rate of profit would be in that pro- portion, and if the original tenant reftised, some other person would be found willing to give all which cgiceeded that rate of profit to the owner of the land from which he derived it.
In this case, as well as in the other, the capita last employed pays no rent. For the greater pro- ductive powers of the first 1000/., fifteen quarters is paid for rent, for the employment of the second 1000/. no rent whatever is paid. If a third 1000/. be employed on the same land, with a return of seventy-five quarters, rent will then be paid for the
60 ON RENT. [chap. 11.
second 1000/., and will be equal to the difference between the produce of these two, or ten quarters; and at the same time the rent of the first 1000/. will rise from fifteen to twenty-fi ve quarters j while the last 1000/. will pay no rent whatever.
If, then, good land existed in a quantity much more abundant than the production of food for an increasing population required, or if capital could be indefinitely employed without a diminished re- turn on the old land, there could be no rise of rent j for rent invariably proceeds from the emplojrment of an additional quantity of labour with a propor- tionally less return.
The most fertile, and most favorably situated, land will be first cultivated, and the exchangeable value of its produce will be adjusted in the same manner as the exchangeable value of all other com- modities, by the total quantity of labour necessary in various forms, from first to last, to produce it, and bring it to market. When land of ai\ inferior quality is taken into cultivation, the exchangeable value of raw produce wiU rise, because more labour is required to produce it.
The exchangeable value of all commodities, whether they be manufactured, or the produce of the mines, or the produce of land, is always regu- lated, not by the less quantity of labour that will suffice for their production under circumstances
CHAP.II.]. ON RENT. 6l
highly fiivorable^ and exclusively enjoyed by those who have peculiar facilities of production ; but by the greater quantity of labour necessarily bestowed on their production by those who have no such fa- cilities ; by those who continue to produce them under the most unfavorable circumstances ; mean- ing— by the most unfavorable circumstances, the most unfavorable .under which the quantity of produce required, rendei's it necessary to carry on the production.
Thus, in a charitable institution, where the poor are set to work with the funds of benefactors, the general prices of the commodities, which are the produce of such work, will not be governed by the peculiar faciUties afforded to these workmen, but by the common, usual, and natural difficulties, which every other manufacturer \nll have to en- counter. The manufacturer enjoying none of these facilities might indeed be driven altogether from the market, if the supply afforded by these favored workmen were equal to all the wants of the com- munity ; but if he continued the trade, it would be only on condition that hie should derive from it the usual and general rate of profits on stock ; and that could only happen when his commodity sold for a price proportioned to the quantity of labour be- stowed on its production*.
* Has not M* Saj forgotten, in the following passage, that it is the cost of production which ultimately regulates price ? " The produce of labour employed on the land has this peculiar
62 ON RENT. [chap. IT.
It is true, that on the best land, the satne pro- duce would still be obtained with jthe same labour as before, but its value would be enhanced in con- sequence of the diminished returns obtained by those who employed fresh labour and stock on the less fertile land. Notwithstanding, then, that tlie advantages of fertile over inferior lands are in no case lost, but only transferred from the cultivator, or consumer, to the landlord, yet, since more labour is required on the inferior lands, and since it is from such land only that we are enabled to fiunish our- selves with the additional supply of raw produce.
property, that it does not become more dear by becoming more scarce, because population always diminishes at the same time that food diminishes^ and cMisequently the quantity of diese pro- ducts demanded^ diminishes at the same time as the quantity st^ plied. Besides, it ia not observed that com is more dear in those places where there is plenty of uncultivated land, than in com- pletely cultivated countries. England and France were much more imperfectly cultivated in the middle ages than they are now; they produced much less raw produce: nevertheless from all that we can judge by a comparison with die value of odier thingi, com was not sold at a dearer price. If the produce was less, so was the population ; the weakness of the demand compensated the feebleness of the supply/' Vol. ii. SS8. M. Say being im- pressed with the opinion that the price of commodities is regu- lated by the price of labour, and justly sapposiftg that charitable institutions of all sorts tend to increase the populatioo beyond what it otherwise would be, and therefore to lower wages, say«, *^ I suspect that the cheapness of the goods, which come from England, is partly caused by the numerous charitable institutions which exist in that country." vol. ii. 277. This is a consistent opinion in one who maintains that wages regulate price.
CHAP. 11.] ON R£NT« 63
the comparative value of that produce will continue permanently above its former level, and make it exchange for more hats, cloth, shoes, &c. &c. in the production of which no such additional quan* tity of labour is required.
The reason then, why raw produce rises in com- parative value, is because more labour is employed in the production of the last portion obtained, and not because a rent is paid to the landlord. The " value of com is regulated by the quantity of labour bestowed on its production on that quality of land, or with that portion of capital, which pays no rent. Com is not high because a rent is paid, but a rent is paid because com is high; and it has been justly observed^ that no reduction would take place in the price of com, although landlords should forego the whole of their rent. Such a measure would only enable some farmers to live like gentle- men, but would not diminish the quantity of labour necessary to raise raw produce on the least produc- tive land in cultivation.
Nothing is more coounon than to hear of the ad- vantages which the land possesses over every other source of usefid produce, on account of the surplus which it yields in the form of rent. Yet when land is most abundant, when most productive, and most fertile, it yields no rent j and it is only when its powers decay, and less is yielded in return for la- bour, that a share of the original produce of the
64 ON RENT. I^CHAP. II.
more fertile portions is set apart for rent. It is sin- gular that this quality in the land, which should have been noticed as an imperfection, compared with the natural agents by which manufacturers are assisted, should have been pointed put as con- stituting its peculiar pre-eminence. If air, water, the elasticity of steam, and the pressure of the at- mosphere, were of various qualities ; if they could be appropriated, and each quality existed only in moderate abundance, they, as well as the land, would afibrd a rent,^ as the successive qualities were brought into use. With every worse quality em- ployed, the value of the commodities in the manu- facture of which they were used, would rise, because equal quantities of labour would be less productive. Man Would do more by the sweat of his brow, and nature perform less; and the land would be no longer pre-eminent for its limited powers.
If the surplus produce which land affords in the form of rent be an advantage, it is desirable that, every year, the machinery newly constructed should be less efficient than the old, as that would undoubt- edly give a greater exchangeable value to the goods manufactured, not only by that machinery but by all the other machinery in the kingdom; and a rent would be paid to aU those who possessed the most productive machinery*.
♦ " In agriculture too," says Adam Smith, " nature labours along witli man ; and though her labour costs no expense, its
CHAP, n.3 OK RBNT. 65
The rise of rent is always the efiect of the increas- ing wealth of the country, and of the difficulty of
produce has its value, 83 well as that of the most expensive work- man." The labour of nature is paid, not because she does much, but because she does little. In proportion as she becomes nig- gardly in her gifts, she exacts a greater price for her work. Where she is munificently beneficent, she always works gratis. ** The labouring cattle employed in agriculture, not only occa- sion, like the workmen in manufactures, the reproduction of a value equal to their own consumption, or to the capital which em- ploys them, together with its owner's profits, but of a much greater value. Over and above the capital of the farmer and all its profits, they regularly occasion the reproduction of the rent of the landlord. This rent may be considered as the produce of those powers of nature, the use of which the landlord lends to the farmer. It is greater or smaller according to the supposed extent of those powers, or in other words, according to the sup- posed natural or improved fertility of the land. It is the work of nature which remains, after deducting or compensating every thing which can be regarded as the work of man. It is seldom less than a fourth, and frequently more than a third of the whole produce. No equal quantity of productive labour employed in manufactures, can ever occasion so great a reproduction. In them nature does nolhing, man does aU; and the reproduction must always be in proportion to the strength of the agents that occasion it. The ciHpital employed in agriculture, therefore, not only pute into motion a greater quantity of productive labour than any equal capital employed in manufactures, but in propor- tion tooy to the quantity of the productive labour which it em* ploys, it adds a much greater value to the annual produce of the land and labour of the country, to the real wealth and revenue of its inhabitants. Of all the ways in which a capftal can be em* ployed, it is by far the most advantageous to the society,"— Book IL chi^. V. p. 15.
Does nature nothing for man in manufactures ? Are the
F
66 OK RENT. [chap. II.
providing food for its augmented population. It is a symptom, but it is never a cause of wealth ; for wealth often increases most rapidly while rent is either stationary, or even falling. Rent increases most rapidly, as the disposable land decreases in its productive powers. Wealth increases most rapidly in those countries where the disposable land is most
powers of wind and water, which move our machinery, and assist navigation, nothing ? The pressure of the atmosphere and the elasticity of steam, which enable us to work the most stupendous engines — are tliey not the gifts of nature ? to say nothing of the effects of the matter of heat in softening and melting metals, of the decomposition of the atmosphere in the process of dying and fermentation. There is not a manufacture which can be mentioned, in which nature does not give her assistance to man, and give it too, generously and gratuitously.
In remarking on the passage which I have copied from Adam Smith, Mr. Buchanan observes, ** I have endeavoured to show, in the observations on productive and unproductive labour, con- tained in the fourth volume, that agriculture adds no more to the national stock than any other sort of industry. In dwelling on the reproduction of rent as so great an advantage to society, Dr. Smith does not reflect that rent is the effect of high price, and that what the landlord gains in this way, he gains at the expense of the community at large. There is no absolute gain to the society by the reproduction of rent ; it is only one class profiting at the expense of another class. The motion of agriculture yield- ing a produce, and a rent in consequence, because nature con- curs with human industry in the process of cultivation, is a mere fancy. It is not from the produce, but from the price at which the produce is sold, that the rent is derived ; and this price is
■
got not because nature assists in the production, but because it is the price which suits the consumption to the supply.
CHAP. 11.3 ON RENT. Qj
fertile, where importation is least restricted, and where through agricultural improvements, produc- tions can be multipUed without any increase in the proportional quantity of labour, and where conse* quently the progress of rent is slow.
If the high price of com were the efiect, and not the cause of rent, price would be proportionally in* fluenced as rents were high or low, and rent would be a component part of price. But that com which is produced by the greatest quantity of labour is the regulator oi the price of com ^ and rent does not and cannot enter in the least degree as a conv- ponent part of its price*. Adam Smith, therefore, cannot be correct in supposing that the original rule which regulated the exchangeable value of commodities, namely, the comparative quantity of labour by which they were produced, can be at all altered by the appropriation of land and the pay- ment of rent. Raw material enters into the com- position of mo8t commodities, but the value of that raw material, as well as com, is regulated by the productiveness of the portion of capital last em« ployed on the land, and pajdng no rent ;. and there- fore rent is not a compcment part of the price of [ties.
to't iiMrf;!
We have been hitherto considering the effects of
, * Th« dewrly understanding this principle is, I am persuaded, of Ihe utmost iniportaiice to the science of political economy.
68
QH RENT* £CHAP% II.
the natural progress of wealth and population on rent, in a country in which the land is of variously productive powers ; and we have seen, that with every portion of additional capital which it becomes necessary to employ on the land with a less pro- ductive return, rent would rise. It follows from the same principles, that any circumstances in the society which should make it unnecessary to employ the same amount of capital on the land, and which should therefore make the portion last employed more productive, would lower rent. Any great re- duction in the capital of a country, which should -materially diminish the funds destined for the maintenance of labour, would naturally have this effect. Population regulates itself by the funds which are to employ it, and therefore always in- creases or diminishes with the increase or diminu- tion of capital. Every reduction of capital is there- fore necessarily followed by a less effective demand for com, by a fall of price, and by diminished cul- tivation. In the reverse order to that in which the accumulation of capital raises rent, will the dimi- nution of it lower rent. Land of a less unproduc- tive quality will be in succession relinquished, the exchangeable value of produce will fall, and land of a superior quality will be the land last cultivated, and that which will then pay no rent.
The same effects may however be produced, when the wealth and population of a country are increas- ed, if that increase is accompanied by such marked
CHAP. II.J ON KENT. 69
improvements in agriculture, as shall have the same efiect of diminishing the necessity of cultivating the poorer lands, or of expending the same amount of capital on the cultivation of the more fertile por- tions.
If a million of quarters of com be necessary for the support of a given population, and it be raised on land of the qualities of No. 1, S, 3 ; and if an improvement be afterwards discovered by which it can be raised on No. 1 and 2, without employing Na 3, it is evident that the immediate effect must be a fall of rent ; for No. 2, instead ofNo. 3, will then be cultivated wthout paying any rent; and the rent of No. 1, instead of being the difference be- tween the produce of No. 3 and No. 1, will be the dif&rence only between No. 2 and 1. With the same population, and no more, there can be no de- mand for any additional quantity of corn ; the ca- pital and labour employed on No. 3 will be devoted to the production of other commodities desirable to the community, and can have no effect in raising rent, unless the raw material from which they are made cannot be obtained without employing capi- tal less advantageously on the land, in which case No. 3 must again be cultivated.
It is undoubtedly true, that the fall in the rela- tive price of raw produce, in consequence of the improvement in agriculture, or rather in conse- quence of less labour being bestowed on its pro- duction, would naturally lead to increased acumu.
70 ON RENT, [chap. II.
latdon } for the profits of stock would be greatly augmented. This accumulation would lead to an increased demand for labour, to higher wages, to an increased population, to a further demand for raw produce, and to an increased cultivation. It is only, however, after the increase in the popula- tion, that rent would be as high as before ; that is to say, after No. 3 Was taken into cultivation. A considerable period would have elapsed, attended with a positive diminution of rent.
But improvements in agriculture are of tSffO kinds : those which increase the productive powers of the land, and those which enable us, by improv- ing our machinery, to obtain its produce with less labour. They both lead to a fall in the price of raw produce j they both affect rent, but they do f not efiect it equally. If they did not occasion a fall in the price of raw produce, they would not be im- provements; for it is the essential quality of an improvement to diminish *the quantify of labour be- fore required to produce a commodity ; and this diminution cannot take place without a fall of its price or relative value.
The improvements which increased the produc- tive powers of the land, are such as the more skil- ful rotation of crops, or the better choice of manure. These improvements absolutely enable us to obtain the sameproduce from a smaller quantity of land. Iff by the introduction of a course of turnips, I can feed my sheep besides raising my com, the land on which
CHAP. 11*3 OK RENT. 71
the ftheep were before fed becomes unnecessary, and the same quantity of raw produce is raised by the employment of a less quantity of land. If I dis- cover a manure which will enable me to make a piece of land produce 20 per cent, more com, I may withdraw at least a portion of my capital from the most unproductive part of my farm. But, as I before observed, it is not necessary that land should be thrown out of cultivation, in order to reduce rent : to produce this effect, it is sufficient that suc- cessive portions of capital are employed on the same land with different results, and that the por- tion which gives the least result should be with- drawn. If, by the introduction of the turnip husban- dry, or by the use of a more invigorating manure, I can obtain the same produce with less capital, and without distiurbing the difference between the productive powers of the successive portions of ca- > pital, I shall lower rent i for a different and more productive portion will be that which will form the standard from which every other will be reckoned. If, for example, the successive portions of capital yielded 100, 90, 80, 70 ; whilst I employed these four portions, my rent would be 60, or the differ- ence between
70 and 100 = SO'
70 and 90 = 20 f whilst the produce
70 and SO = 10 V would be S40
60
72 ON RENT. [chap. II.
and while I employed these portions, the rent would remain the same, although the produce of each should have an equal augmentation. If, instead of 100, 90, 80, 70, the produce should be increased to 125, 115, 105, 95, the rent would still be 60, or the difierence between
95 and. 125= SO 95 and 115= 90 I ^^»l8t the produce 95 and 105 = 10 V would be increased
440
But with such an increase of produce, without an increase of demand*, there could be no motive for employing so much capital on the land ; one portion would be withdrawn, and consequently the last portion of capital would yield 105 instead of 95, and rent would fall to SO, or the difference between
105 and 125 = 20 '^ whilst the produce will be still f 125 105 and 115 = 10 f adequate to the wants
~ r population, for it would be
J qarters, or ^ ^^
* I hope I am not understood as undervaluing the importance of all sorts of improvements in agriculture to landlords — their immediate effect is to lower rent; but as they give a great stimulus to population, and at the same time enable us to cul- tivate poorer lands, with less labour, they are ultimately of im- mense advantage to landlords. A period however must elapse, during which they are positively injurious to him. . ^
/ ' ' ' '
CHAP. II-3 ON RENT. 78
the demand being only for 340 quarters.— But there are improvements which may lower the rela- tive value of produce without lowering the corn rent, though they will lower the money rent of land. Such improvements do not increase the productive powers of the land ; but they enable us to obtain its produce with less labour. They are rather di- rected to the formation of the capital applied to the land, than to the cultivation of the land itself. Improvements in agricultural implements, such as the plough and the thrashing machine, economy in the use of horses employed in husbandry, and a better knowledge of the veterinary art, are of this nature. Less capital, which is the same thing as less labour, will be employed on the land ; but to obtain the same produce, less land cannot be cul- tivated. Whether improvements of this kind, how- ever, affect com rent, must depend on the question, whether the difference between the produce ob- tained by the employment of different portions of capital be increased, stationary, or diminished. If four portions of capital, 50, 60, 70, 80, be employ- ed on the land, giving each the same results, and any improvement in the formation of such capital should enable me to withdraw 6 from each, so that they should be 45, 55, 65, and 7^, no alteration would take place in the com rent ; but if the im- provements were such as to enable me to make the whole saving on that portion of capital, which is least productively employed, com rent would im- mediately fall, because the difference betwee^i the
5;
74 ON RENT* [^CHAP. H.
capital most productive, and the capital least pro^ ductive, would be diminished ; and it is this differ- ence which constitutes rent.
Without multiplying instances, I hope enough has been said to show, that whatever diminishes the inequality in the produce obtained from successive portions of capital employed on the same or on new land, tends to lower rent ; and that whatever in- creases that inequality, necessarily produces an op- posite effect, and tends to raise it*
In speaking of the rent of the landlord, we have rather considered it as the proportion of the pro* duce, obtained with a given capital on any given farm, without any reference to its exchangeable value ; but since the same cause, the difficulty of production, raises the exchangeable value of raw produce, and raises also the proportion of raw pro- duce paid to the landlord for rent, it is obvious that the landlord is doubly benefited by difficulty of production* First he obtains a greater share, * and secondly the conunodity in which he is paid is of greater value*.
* To make this obvious, and to show the degrees in which corn and money rent will vary, let us suppose that the labour of ten men will, on land of a certain quality, obtain 180 quarters of wheat, and its value to be 4/. per quarter, or 720/. ; and Uiat the labour of ten additional men will, on the same or any other land, produce only 170 quarters in addition; wheat would rise from 4Z. to 4d. 4«. 8d. for 170 : 180 : : 4/, : 4/. 4j. Sd.; or, as in the pro- duction of 170 quarters, thelabourof 10 men is necessary in one
CHAP, n.3 ON RENT. ' 75
case, and only of 9*44 in the other, the rise would be as 9.44 to 10, or as 4/. to 4/. 4«. Sd. If 10 men be further employed, and the return be
160, the price will rise to £4 10 0
150, 4 16 0
140, 5 210
Now if no rent was paid for the land which yielded 180 quar- ters, when corn was at 4/. per quarter, the value of 10 quarters would be paid as rent when only 170 could be procured, which, at 41. 4*. W. would be 42/. 7s. id. . J '. j^ 4^
20 qre. when 160 were prodaced, which at «f 4 10 0 would be j£90 0 0
50qrs 150 4 16 0 144 0 0
40 qn 140 5 S 10 205 13 4
5100^ rlOO
SOOf aod money rent hi the jSlS in the proportion of 1300 4 proportion of ]^340
V400> V485
CHAPTER IIL
ON THE RENT OF, MINES.
The metalsy like other things, are obtained by la- bour. Nature, indeed, produces them ; but it is the labour of man which extracts them from the bowels of the earth, and prepares them for our ser- vice.
Mines, as well as land, generally pay a rent to their owner ; and this rent, as weU as the rent of land, is the effect, and never the cause of the high value of their produce.
If there were abundance of equally fertile mines, which any one might appropriate, they could yield no rent j the value of their produce would depend on the quantity of labour necessary to extract the metal from the mine and bring it to market.
But there are mines of various qualities, affording very different results, with equal quantities of labour. The metal produced from the poorest mine that is worked, must at least have an exchangeable value, not only sufficient to procure all the clothes, food, and other necessaries consumed by those employed in working it, and bringing the produce to market.
CUAP. III.] ON tI[E rent of MINES. 77
but also to aflford the common and ordinary profits to him who advances the stock necessary to carry on the undertaking. The return for capital from the poorest mine paying no rent, would regulate the rent of all the other more productive mines. ^ This mine is supposed to yield the usual profits of stock. All that the other mines produce more than * this» will necessarily be paid to the owners for rent. Since this principle is precisely the same as that which we have already laid down respecting land, it will not be necessary further to enlarge on it.
It will be sufficient to remark, that the same ge- neral rule which regulates the value of raw produce and manufactured commodities, is applicable also to the metals ; their value depending not on the rate of profits, nor on the rate of wages, nor on the rent paid for mines, but on the total quantity of labour necessary to obtain the metal, and to bring it to market.
Like every other commodity, the value of the metals is subject to variation. Improvements may be made in the implements and machinery used in mining, which may considerably abridge labour; new and more productive mines may be discovered, in which, with the same labour, more metal may be obtained ; or the facilities of bringing it to market may be increased. In either o£ these cases the metals would fall in value, and would therefore ex- change for a less quantity of other things. On the
78 ON THE RENT OF MINKS. [CHAP, in.
Other hand, from the increasing difficulty of obtain- ing the metal, occasioned by the greater depth at which the mine must be worked, and the accumu- lation of water, or any other contingency, its value compared with that of other things, might be con- siderably increased.
It has therefore been justly observed, that how- ever honestly the coin of a country may conform to its standard, money made of gold and silver is still liable to fluctuations in value, not only to ac- cidental and temporary, but to permanent and na- tural variations, in the same manner as other com- modities.
By the discovery of America and the rich mines in winch it abounds, a very great efifect was pro- duced on the natural price of the precious metals. This eSed is by many supposed not yet to have terminated. It is probable, however, that aU the ef- fects on the value of the metals, resulting from the discovery of America have long ceased ; and if any fall has of late years taken place in their value, it is to be attributed to improvemoits in the mode of working the mines.
From whatever cause it may have proceeded, the efiect has been so slow and gradual^ that Httle prac- tical inconvenience has been felt from gold and sil- ver being the general medium in which the value of all other things is estimated. Though undm^t-
CHAP* 111.3 ON THE RENT OF MINES. 79
edly a variable measure of value, there is probably no commodity subject to fewer variations. This and the other advantages which these metals pos- sess, such as their hardness, their malleability, their divisibility, and many more, have justly seciured the preference every where given to them, as a stand- ard for the money of civilized countries.
If equal quantities of labour, with equal quan- tities of fixed capital, could at all times obtain, fr(Hn that mine which paid no rent, equal quantities of gold, gold would be as nearly an invariable measure of value, as we could in the nature of things possess. The quantity indeed would enlarge with the demand, but its value would be invari- able, and it would be eminently well calculated to measure the varying value of all other things. I have already in a former part of this work consider- ed gold as endowed with this uniformity, and in the following chapter I shall continue the supposi- tion. In speaking therefore of varjdng price, the variation will be always considered as being in the commodity, and never in the medium in which it is estimated.
CHAPTER IV.
ON NATURAL AND MARKET PRICE.
In making labour the foundation of the value of commodities, and the comparative quantity of la- bom* which is necessary to their production, the rule which determines the respective quantities of goods which shall be given in exchange for each other, we must not be supposed to deny the acci- dental and temporary deviations of the actual or market price of conunodities from this, their pri- mary and natural price.
In the ordinary course of events, there is no com- modity which continues for any length of time to be supplied precisely in that degree of abundance, which the wants and wishes of mankind require, and therefore there is none which is not subject to accidental and temporary variations of price.
It IS only in consequence of such variations, that capital is apportioned precisely, in the requisite abundance and no more, to the production of the different commodities which happen to be in de- mand. With the rise or fall of price, profits are elevated above, or depressed below their general level, and capital is either encouraged to enter into, or is warned to depart from the particular employ- ment in which the variation has taken place
CHAP. IV.] ON NATURAL AND MARKET PRICE. 81
Whilst every man is free to employ his capital where he pleases, he will naturally seek for it that employment which is most advantageous ; he will naturally be dissatisfied with a profit of 10 per cent.» if by removing his capital he can obtain a profit of 15 per cent. This restless desire on the part of all the employers of stock, to quit a less profitable for a more advantageous business, has a strong ten- dency to equalize the rate of profits of all, or to fix them in such proportions, as may in the estimation of the parties, compensate for any advantage which one may have, or may appear to have over the other. It is perhaps very difficult to trace the steps by which this change is efiected : it is probably eflect* ed, by a manufacturer not absolutely changing his employment, but only lessening the quantity of capital he has in that employment. In all rich countries, there is a number of men forming what is called the monied class ; these men are engaged in no trade, but live on the interest of their money, which is employed in discounting bills, or in loans to the more industrious part of the community. The bankers too employ a large capital on the same objects. The capital so employed forms a circula- ting capital of a large amount, and is employed, in larger or smaller proportions, by all the diflerent trades of a country. There is perhaps no manufac- turer, . however rich, who limits his business to the extent that his own funds alone will allow : he has always some .portion of this floating capital, increas-^ ing or dinmushing according to the activity of the
G
g2 ON NATURAL AND [CHAP. lY.
demand for his commodities. When the demand for silks increases, and that for cloth diminishes, the clothier does not remove with his capital to the silk trade, but he dismisses some of his workmen, he discontinues his demand for the loan from bank- ere and monied men ; whUe the case of the silk manufacturer is the reverse : he wishes to employ more workmen, and thus his motive for borrowing is increased : he borrows more, and thus capital is transferred from one employment to another, with- out the necessity of a manufacturer discontinuing his usual occupation. When we look to the mar- kets of a large town, and observe how regularly th^ are supplied both "with home and foreign commodi- ties, in the quantity in which they are required, under all the circumstances of varying deiAand, arising from the caprice of taste, or a change in the amount of population, without often producing either the effects of a glut from a too abundant sup- ply, or an enormously high price from the supply being unequal to the demand, we must confess that the principle which apportions capital to each trade in the precise amount that it is required, is more active than is generally supposed.
A capitalist, in seeking profitable employment for his funds, wiU naturally take into consideration all the advantages which one occupation possesses over another. He may therefore be willing to fore- go a part of his money profit, in consideration of the security, cleanliness, ease, or any other real or
CHAP. IV.] -MARKET P^ICE. 8^
fancied advantage which one employment may pos- sess over another.
If from a consideration of these circumstances^ the profits of stock should be so adjusted, that in one trade they were 20, in another 25, and in another SO per cent., they would probably continue per- manently with that relative difference, and with that difference only ; for if any cause should ele- vate the profits of one of these trades 10 per cent, either these profits would be temporary, and would soon again fall back to their usual station, or the profits of the others would be elevated in the same proportion.
The present time appears to be one of the ex- ceptions to the justness of this remark. The ter- mination of the war has so deranged the division which before existed of employments in Europe, that every capitalist has not yet found his place in the new division which has now become necessary.
Let us suppose that all commodities are at their natural price, and consequently that the profits of capital in all employments are exactly at the same rate, or differ only so much as, in the estimation of the parties, is equivalent to any real or fancied ad- vantage which they possess or forego. Suppose now that a change of fashion should increase the demand for silks, and lessen that for woollens j their natural price, the quantity of labour necessary to
G 2
84
ON NATURAL AND [CHAP. IV.
their production, would continue unaltered, but the market price of silks would rise, and that of woollens would fall ; and consequently the profits of the silk manufacturer would be above, whilst those of the woollen manufacturer would be below, the general and adjusted rate of profits. Not only the profits, but the wages of the workmen, would be affected in these employments. This increased demand for silks would however soon be supplied, by the transference of capital and labour from the wool- len to the silk manufacture ; when the market pri- ces of silks and woollens would again approach their natural prices, and then the usual profits would be obtained by the respective manufacturers of those commodities.
It is then the desire, wliich every cafHtalist has, of diverting his funds from a less to a more profit- able employment, that prevents the market price of commodities from continuing for any length of time either much above, or much below their natu- ral price. It is this competition which so adjusts the changeable value of commodities, that after pay- ing the wages for the labour necessary to their pro- duction, and all other expenses required to put the capital employed in its original state of efficiency, the remaining value or overplus will in each trade be in proportion to the value of the capital employed.
In the 7th chap, of the Wealth of Nations, all that concerns this question is most ably treated.
CHAP. IV.] MARKET PRICE. 85
Having fully acknowledged the temporary effects which, in particular employments of capital, may be produced on the prices of commodities, as well as on the wages of labour, and the profits of stock, by accidental causes, without influencing the general price of commodities, wages, or profits, since these eflfects are equally operative in all stages of society, we will leave them entirely out of our consideration, whilst we are treating of the laws which regulate natural prices, natural wages and natural profits, ef- fects totally independent of these accidental causes. In speaking then of the exchangeable value of commodities, or the power of purchasing possessed by any one commodity, I mean always that pow- er which it would possess, if not disturbed by any temporary or accidental cause, and which is its na-* tiural price.
CHAPTER V,
{•
ON WAGES.
Labour, like all other things which are purchased and sold, and which may be increased or diminish- ed in quantity, has its natural and its market price. The natural price of labour is that price which is necessary to enable the labourers, one ¥rith another, to subsist and to perpetuate their race, without' either increase or diminution.
The power of the laboiurer to support himself, and the family which may be necessary to keep up the number of labourers, does not depend on the qixantity of money which he may receive for wages, but on the quantity of food, necessaries, and con- veniences become essential to him from habit, which that money will purchase. The natural price of labour, therefore, depends on the price of the food necessaries, and conveniences required for the sup- port of the labourer and his family. With a rise in the price of food and necessaries, the natural price of labour will rise ; with the fall in their price, the natural price of labour will fall.
With the progress of society the natural price of labour has always a tendency to rise, because one of the principal commodities by which its natural
CHAP, V.J ON WAGES. 87
price is regulated, has a tendency to become dearer, from the greater difficulty of producing it As, however, the improvements in agriculture, the dis- covery of new markets, whence provisions may be imported, may for a time counteract the tendency to a rise in the price of necessaries, and may even occasion their natural price to fall, so wiU the same causes produce the correspondent effects on the natural price of labour.
The natural price of all commodities, excepting raw produce and labour, has a tendency to fall, in the progress of wealth and population ; for though, on one hand, they ate enhanced in real value, from the rise in the natural price of the raw material of which they are made, this is more than counter- balanced by the improvements in machiAery, by the better division and distribution of labour, and by the increasing skill, both in science and arti of the producers.
The market price of labour is the price which is really paid for it, from the natural operation of the proportion of the supply to the demand ; labour is dear when it is scarce, and cheap when it is plenti- ful. However much the market price of labour may deviate from its natural price, it has, like com- modities, a tendency to conform to it.
It is when the market price of labour exceeds its natural price, that the condition of the labourer is
88 ON WAGES. [chap. V.
flourishing and happy, tliat he has it in liis power to command a greater proportion of the necessaries and enjoyments of life, and therefore to rear a heal- thy and numerous family. When, however, by the encouragement which high wages give to the in- crease of population, the number of labourers i& increased, wages again faU to their natural price, and indeed from a re-action sometimes fall below it.
When the market price of labour is below its natiu-al price, the condition of the labourers is most wretched: then poverty deprives them of those comforts which custom renders absolute necessaries. It is'only after their privations have reduced their number, or the demand for labour has increased, that the market price of labour will rise to its na- tural price, and that the labourer will have the moderate comforts which the natural rate of wages will aflTord.
Notwithstanding the tendency of wages to con- form to their natural rate, their market rate may, in an improving society, for an indefinite period, be constantly above it*; for no sooner may the impulse, ivhich an increased capital gives to a new demand for labour be obeyed, than another increase of ca- pital may produce the same eifect ; and thus, if the increase of capital be gradual and constant, the de- mand for labour may give a continued stimulus to an increase of people.
CHAP, v.] ON WAGES. 89
Capital is that part of the wealth of a country which is employed in production, and consists of food, clothing, tools, raw materials, machinery, &c« necessaiy to give effect to labour.
Capital may increase in quantity at the same time that its value rises. An addition may be made to the food and clothing of a country, at the same time that more labour may be required to pro- duce the additional quantity than before ; in that case not only the quantity, but the value of capital will rise.
Or capital may increase without its value increas- ing, and even while its value is actually diminish- ing ; not only may an addition be made to the food and clothing of a country, but the addition may be made by the aid of machinery, without any increase, and even with an absolute, diminution ii) the pro- portional quantity of labour required to produce them. The quantity of capital may increase, while neither the whole together, nor any part of it singly, will have a greater value than before, but may actually have a less.
In the first case, the natural price of labour, which always depends on the price of food, clo- thing, and other necessaries, will rise; in the second, it will remain stationary, or fall ; but in both cases the market rate of wages will rise, for in proportion to the increase of capital will be the increase in the
.e *
90 ON WAGES. [chap. V.
demand for labour ; in proportion to the work to be done will be the demand for those who are to do it.
In both cases too the market price of labour will rise above its natural price ; and in both cases it will have a tendency to conform to its natural price, but in the first case this agreement will be most speedily effected. The situation of the labourer will be improved, but riot much improved ; for tlie increased price of food and necessaries will absorb a large portion of his increased wages; consequent- ly a small supply of labour, or a trifling increase in the population, will soon reduce the market price to the then increased natural price of labour.
In the second case, the condition of the labourer .will be very greatly improved ; he will receive in- creased money wages, without having to pay any increased price, and perhaps even a diminished price for the commodities which he and his family con- sume ; and it will not be till after a great addition has been made to the population, that the market price of labour will again «ink to its then low and reduced natural price.
Thus, then, with every improvement of society, with every increase in its capital, the market wages of labour will rise ; but the permanence of their rise will depend on the question, whether the na- tural price of labour has also risen ; and this again
CHAPi V.J ON WAGES. 91
will depend on the rise in the natural price of those necessaries on which the wages of labour are ex- pended.
It is not to be understood that the natural price of labour, estimated even in food and necessaries, is absolutely fixed and constant It varies at differ- ent times in the same country, and very materially difiers in different countries*. It essentially de- pends on the habits and customs of the people. An English labourer would consider his wages un- der their natural rate, and too scanty to support a family, if they enabled him to purchase no other food than potatoes, and to live in no better habitation than a mud cabin ; yet these moderate demands of nature are often deemed sufficient in countries where " man's life is cheap,** and his wants easily satisfied. Many of the conveniences now enjoyed in an English cottage, would have been thought luxuries at an earlier period of our history.
* " The shelter and the clothing which are indispensable in one country may be no way necessary in another ; and a labour- er in Hindostan may continue to work with perfect vigour, though receiving, as his natural wages, only such a supply of covering as would be insufficient to preserve a labourer in Russia from • perishing. Even in countries situated in the same climate, difierent habits of living will often occasion variations in the na- tural price o£ labour, as considerable as those which are produ- ced by natural causes/' — p. 68. An Essay on the ExtemMl Corn Trade, by IL Torrens, Esq.
The wixole of this subject is most ably illustrated by Colonel Torrenst
92 ON WAGES. [chap* V.
From manufactured oommodities always falling, and raw produce always rising, with the progress of society, such a disproportion in their relative value is at length created, that in rich coun- tries a labourer, by the sacrifice of a very small quantity only of his food, is able to provide libe- rally for all his other wants.
Independently of the variations in the value of mo- ney, which necessarily affect money wages, but which we have here supposed to have no operation, as we have considered money to be uniformly of the same value, it appears then that wages are subject to a rise or fall from two causes :
1st. The supply and demand of labourers.
2dly. The price of the commodities on which the wages of labour are expended.
In different stages of society, the accumulation of capita], or of the means of employing labour, is more or less rapid, and must in all cases depend on the productive powers of labour. The productive powers of laboiu* are generally greatest when there is an abundance of fertile land : at such periods ac- cumulation is oflen so rapid, that labourers cannot be supplied with the same rapidity as capital.
It has been calculated, that under favourable circumstances population may be doubled in twen- ty-five years j but under the same favourable cir-
CHAP. y«3 ^^ WAGES. gs
cumstances, the whole capital of a country might possibly be doubled in a shorter period. In that case, wages during the whole period would have a tendency to rise, because the demand for labour would increase still faster than the supply.
In new settlements, where the arts and knowledge of countries far advanced in refinement are intro- duced, it is probable that capital has a tendency to increase faster than mankind : and if the deficien- cy of labourers were not supplied by more popu- lous countries, this tendency would very much raise the price of labour. In proportion as these coun- tries become popidous, and land of a worse quality is taken into cultivation, the tendency to an increase of capital diminishes ; for the surplus produce re- nutining, after satisfying the wants of the existing population, must necessarily be in proportion to the facility of production, viz. to the smaller num- ber of persons employed in production. Although, then, it is probable, that under the most favoiurable circumstances, the power of production is still great- er than that of population, it will not long continue so; for the land being limited in quantity, and difiering in quality, with every increased portion of capital employed on it, there will be a decreased rate of production, whilst the power of population continues always the satne.
In those coimtries where there is abundance of fertUe land, but where, from the ignorance, indo-
94 ON WAGES. [chap. V*
lence, abd barbarism of the inhabitants, they are exposed to all the evils of want and famine, and where it has been said that population presses against the means of subsistence, a very different remedy should be applied from that which is neces- sary in long settled countries, where, from the di- minishing rate of the supply of raw produce, all the evils of a crowded population are experienced. In the one case, the evil proceeds from bad govern- ment, from the insecurity of property, and from a want of education in all ranks of the people. To be made happier they require only to be better go- verned and instructed, as the augmentation of ca- pital, beyond the augmentation of people, would be the inevitable result. No increase in the population can be too great, as the powers of production are stm greater. In the other case, the population in- creases faster than the funds required for its sup-* port. Every exertion of industry, unless accom- panied by a diminished rate of increase in the population, will add to the evil, for production cannot keep pace with it.
With a population pressing against the means of subsistence, the only remedies are either a reduc- tion of people, or a more rapid accumulation of ca- pital. In rich countries, where all the fertile land is already cultivated, the latter remedy is neither very practicable nor very desirable, because its ef- fect would be, if pushed very far, to render all classes equally poor. But in poor countries^ where
CHAP. V.3 ON WAG£S. Off
there are dbundant means of production in store, from fertile land not yet brought into cultivation, it is the only safe and efficacious means of removing the evil, particularly as its effect would be to elevate all classes of the people.
The friends of humanity cannot but wish that in aU countries the labouring classes should have a taste for comforts and enjo3rments, and that they should be stimulated by all legal means in their ex- ertions to prociue them. There cannot be a better security against a superabundant population. In those countries, where the labouring classes have the fewest wants, and are contented with the cheapest food, the people are exposed to the great- est vicissitudes and miseries. They have no place of refuge firom calamity ; they cannot seek safety in a lower station ; they are already so low, that they can fall no lower. On any deficiency of the chief article of their subsistence, there are few sub- stitutes of which they can avail themselves, and dearth to them is attended with almost all the evils of famine.
In the natiual advance of society, the wages of Is^our will have a tendency to fall, as far as they are regulated by supply and demand ; for the sup- ply of labourers will continue to increase at the same rate, whUst the demand for them wiU increase at a slower rate. If, for instance, wages were re- gulated by a yearly increase of capital, at the rate
96 ON WAGES. [chap. V.
of 2 per cent., they would fall when it accumulated only at the rate of 1 J per cent. They would fall still lower when it increased only at the rate of 1, or i per cent., and would continue to do so until the capital became stationary, when wages also would become stationary, and be only sufficient to keep up the numbers of the actual population. I say that, under these circumstances, wages would fall, if they were regulated only by the supply and demand of labourers ; but we must not forget, that wages are also regulated by the prices of the com- modities on which they are expended.
As population increases, these necessaries will be constantly rising in price, because more labour will be necessary to produce them. If, then, the money wages of labour should fall, whilst every commodity on which the wages of labour were expended rose, the labourer would be doubly affected, and would be soon totally deprived of subsistence. Instead, therefore, of the money wages of labour falling, they would rise ; but they woidd not rise sufficiently to enable the labourer to purchase as many comforts and necessaries as he did before the rise in the price of those commodities. If his annual wages were before 24/., or six quarters of com when the price was 4/. per quarter, he would probably receive only the value of five quarters when com rose to 5L per quarter. But five quarters would cost 25/.; he would therefore receive an addition in his money wagesi though with that addition he would be un-
\
CHAP. V.3 ON WAGES. 97
able to furnish himself with the same quantity of com and other commodities, which he had before consumed in his family.
Notwithstanding, then, that the labourer would be really worse paid, yet this increase in his wages would necessarily diminish the profits of the manu* facturer; for his goods would sell at no higher price, and yet the expense of producing them would be increased. This, however, will be con- sidered in our examination into the principles which regulate profits.
It appears, then, that the same cause which raises rent, namely, the increasing difficulty of pro- viding an additional quantity of food with the same proportional quantity of labour, will also raise wages ; and therefore if money be of an unvarying value, both rent and wages will have a tendency to rise with the progress of wealth and population.
But there is this essential difierence between the rise of rent and the rise of wages. The rise in the money value of rent is accompanied by an increased share of the produce ; not only is the landlord's money rent greater, but his com rent also ; he will have more com, and each defined measure of that com will exchange for a greater quantity of all other goods which have not been raised in value. The fate of the labourer will be less happy; he will receive more money wages, it is tme, but his com
H
Qg ON WAGES. [chap. V.
wages will be reduced j and not only his command of com, but his general condition will be deteriora- ted, by his finding it more diflScult to maintain the market rate of wages above their natural rate. While the price of com rises 10 per cent, wages will always rise less than 10 per cent, but rent wiB always rise more; the condition of the labourer will generally decline, and that of the limdlord will always be improved.
When wheat was at 4*1. per quarter, suppose the labourer's wages to be 24/. per annum, or the value of six quarters of wheat, and suppose half his wages to be expended on wheat, and the other halii or 12/., on other things. He would receive
2«. 14tf. ) (4:1 4j. 8rf. ) (5.83 qrs.
t5l. lOt. f when wheat ^4/. lOs. f or the 15J66 qre.
26/. Ss. t was at j 4/. 16«. t value of j 5.50 qrs.
27l.Ss.6d) isl^s.lOd.) (5.83 qrs.
He would receive these wages to enable him to live just as well, and no better, than before j for when corn was at 4/. per quarter, he would ex- pend for three quarters of com, at 4/. per quar- ter 12/.
and on other things 12/.
24/.
When wheat .was 4/. 4«. 8</., three quarters, which he and his family consumed, would cost
him .... 12/. 14^.
other things not altered in price . . 12^
24/. 14j«
CHAP. V.y ON WAGES. 99
When at 4L 10*., three quarters of wheat woidd
cost 13/. 105.
and other things 12/.
951. 10s. When at 4/. 16*., three qrs^ of wheat 14/. 8*. Other things 12/.
>*mimm^m»tm
26/. 8*. When at 51. 2*. lOd. three quarters of wheat
would cost tSL 8*» 6A
Other things I2/L
27/. 8*. 6rf.
In proportion as corn became dear, he would re- ceive less com wages, but his money wages would always^ increase, whilst his enjoyments, on the above supposition, would be precisely the same. But as other commodities would be raised in price in pro- portion Bs raw produce entered into their composi- tion, he would have more to pay for some of them. Although his tea, sugar, soap, candles, and house rent, would probably be no deai-er, he would pay more for his bacon, cheese, butter, linen, shoes, and doth ; and therefore, even with the above increase of wages, his situation would be comparatively worse. But it may be said that I have been considering the effect of ws^es on price, on the supposition that gold, or the metal from which money is made» is trhe produce of the country in which wages varied ; and that the consequences which I have deduced
H 2
100 ON WAGES. [chap, V.
agree little with the actual state of things, because gold is a metal of foreign production. The cir- cumstance, however, of gold being a foreign pro- duction, will not invalidate the truth of the argu- ment, because it may be shewn, that whether it were found at home, or were imported from abroad, the effects ultimately and, indeed, immediately would be the same.
When wages rise, it is generally because the in- crease of wealth and capital have occasioned a new demand for labour, which wUl infallibly be attended wiih an increased production of commodities. To circulate these additional commodities, even at the same prices as before, more money is required, more of this foreign commodity from which money is made, and which can only be obtained by impor- tation. Whenever a commodity is required in greater abundance than before, its relative value rises comparatively with those commodities with which its purchase is made. If more hats were wanted, their price would rise, and more gold would be given for them.. If more gold were required, gold would rise, and hats would fall in price, as a greater quantity of hats and of all other things would then be necessary to purchase the same quantity of gold. But in the case supposed, to say that com- modities will rise, because wages rise, is to affirm a positive contradiction ; for we iSbrst say that gold will rise in relative value in consequence of demand, and secondly, that it will fall in relative value be- cause prices will rise, two effects which are totally
CHAP. V.J ON WAGES* 101
incompatible with each other. To say that com- modities are raised in price, is the same thing as to say that money is lowered in relative value j for it is by commodities that the relative value of gold is estimated. If then all commodities rose in price, gold could not come from abroad to purchase those dear commodities, but it would go from home to be employed with advantage in purchasing the comparatively cheaper foreign commodities. It ap- pears, then, that the rise of wages will not raise the prices of commodities, whether the metal from which money is made be produced at home or in a foreign country. AU commodities cannot rise at the same time without an addition to the quantity of money. This addition could not be obtained at home, as we have already shewn ; nor could it be imported from abroad. To purchase any additional quantity of gold from abroad, commodities at home must be cheap, not dear. The importation of gold, and a rise in the price of all home-made commodi- ties witli which gold is purchased or paid for, are eflects absolutely incompatiable. The extensive use of paper money does not alter this question, for paper money conforms, or ought to conform, to the value of gold, and therefore its value Is influen- ced by such causes only as influence the value of that metal.
These then are the laws by which wages are re- gulated, and by which the happiness of far the great- est part of every community is governed. Like all other contracts, wages should be left to the fair and
102 OV WAGES. [chap. V.
free coiupetition of the market, and should never be K^ntroUed by the interference of the legislature.
The clear and direct tendency of the poor laws, is in direct opposition to these obvious principles : it is not, as the legislature benevolently mtended^ to amend the condition of the poor, but to deterio- rate the condition pf both poor and rich } instead of making the poor ridi, they are calculated U} make the rich poor ; and whilst the present laws ^re in force, it is quite in the natural order of things that the fund for the maintenance of the poor should progressively increase, till it has absorbed a}l the net revenue of the country, or at least so much of it as the state shall leave to us, after satis- fying its own never failing demands for the public expenditure*.
^his pernicious tendency of these laws is no longer a mystery, since it has been fully developed by the abl^ hand of Mr. Malthus j and every fnend to the jpoor must ardently wish for their abolition. UnjEQrtunately, however, they have been so long es- t^dblished, and the habits of the poor have been so
* With Mr. Buchanan in the following passage, if it refers to temporary states of misery, I so far agree, that '^ the great evil of the labourer's condition is poverty, arising eidier from a scarcity of food or of work ; and in all countries, laws without nyipber have been enacted for his relief. But there are miseries ID the social state which legislation cannot relieve; and it is useful therefore to know its limits, that we may not, by aiming at what is impracticable, miss the good which is really ia our power." — Buchanan^ page 61.
CHAP. V\2 ON WAGES. lOS
formed upon their operation, that to eradicate them vnth safety frmn our political system, requires the most cautious and skilful management. It is agreed by all who are most friendly to a repeal of these laws, that if it be desirable to prevent the most overwhelming distress to those for whose ben^t they were erroneously enacted, their abolition should be efiected by the most gradual steps.
It is a truth which admits not a doubt, that the comforts and well-being of the poOT cannot be permanently secured without some regard on their part, or some effort on the part of the legislature, to regulate the increase of thdr numbers, and to render less frequent among them early and impro- vident marriages. The operation of the system of poor laws has been directiy contrary to this. They have rendered restraint superfluous, and have in- vited imprudence, by offering it a portion of the wages of prudence and industry*.
• The progress of knowledge manifested upon this subject in the House of Commons since 1796, has happily not been very small, as may be seen by contrasting the late report of the com- mittee on the poor laws, and the following sentiments of Mr. Pitt, in that year.
** Let us," said he, " make relief in cases where there are a number of children a matter of right and honour, instead of a groun dof opprobrium and contempt. This will make a large fa- mily a blessing, and not a curse ; and this will draw a proper line of distinction between those who, are able to provide for themselves by their labour, and those who, after having enrich- ed their country with a number of children, have a claim upon
104 ON WAGES. fCHAP. ¥•
The nature of the evil points out the remedy. By gradually contracting the sphere of the poor laws \ by impressing on the poor the value of inde- pendence, by teaching them that they must look not to systematic or casual charity, but to their own exertions for support, that prudence and fore- thought are neither unnecessary nor unprofitable virtues, we shall by d^rees approach a sounde and more healthful state.
No scheme for the amendment of the poor laws merits the least attention, which has not their abo- lition for its ultimate object ; and^ he is the best friend to the poor, and to the cause of humanity, who can point out how this end can be attained with the most security, and at the same time with the least violence. It is not by raising in any man- ner different from the present, the fund from which the poor are supported, that the evil can be mitiga- ted. It would not only be no improvement, but it would be an aggravation of the distress which we wish to see removed, if the fund were increased in amount, or were levied according to some late pro- posals, as a general fund from the country at large. The present mode of its collection and application has served to mitigate its pernicious effects. Each parish raises a separate fund for the support of its own poor. Hence it becomes an object of more in- terest and more practicability to keep the rates low,
its assistance for support."— Hcrz/sarf/'^ Parliamentary Histortf^ vol. 32, page 710,
CHAP. V,] ON WAGES. 105
than if one general fund were raised for the relief of the poor of the whole kingdom. A parish is much more interested in an economical collection of the rate, and a sparing distribution of relief, *when the whole saving will be for its own benefit, than if hundreds of other parishes were to partake of it.
It is to this cause, that we must ascribe the fact of the poor laws not having yet absorbed all the net revenue of the country ; it is to the rigour with which they are appUed, that we are indebted for their not having become overwhelmingly oppressive. If by law every human being wanting support could be sure to obtain it, and obtain it in such a degree as to make life tolerable comfortable, theory would lead us to expect that all other taxes together would be light compared with the single one of poor rates. The principle of gravitation is not more certain than the tendency of such laws to change wealth and power into misery and weakness ; to call away the exertions of labour from every object, except that of providing mere subsistence ; to confound all in- tellectual distinction ; to busy the mind continually in supplying the body's wants; until at last all classes should be infected with the plague of uni- versal poverty. Happily these laws have been in operation during a period of progressive prosperity, when the funds for the maintenance of labour have regularly increased, and when an increase of popu- lation would be naturally called for. But if our progress should become more slow j if we should
106 OK WAGE& [chap. V.
attain the staticmaiy state, fiom which I trust we are yet far distant, then will the pernicious nature of these laws become more manifest and alarming; and then* too, wiU their removal be obstructed by many additionsd difficulties.
CHAPTER VL
ON PROFITS.
The profits of stock, in different employments, hav- ing been shewn to bear a proportion to each other, and to have a tendency to vary all in the same de- gree and in the same direction, it remains for us to consider what is the cause of the permanent varia- tions in the rate of profit, and the consequent per- manent alterations in the rate of interest.
We have seen that the price* of com is regula- ted by the quantity of labour necessary to produce it, with that portion c£ capital which pays no rent* We have seen, too, that all manufactured commodi- ties rise and faU in pri<^, in proportion as more or less labour becomes necessary to their production. Neither the fanner who cultivates that quantity of land, which regulates price, nor the manu&cturer, who manu&ctures goods, sacrifice any portion of the produce for rent. The whole value of their commoditieB is divided into two portions only : one constitutes the profits of stock, the other the wages c^ labour.
* The reader is desired to bear in mindi that for the purpose of making the subject more clear, I consider money to be inva- riable in value, and therefore every variation of price to be refer- able to an alteration in the value of the commodity.
108 ON PROFITS. I^CHAP. VI.
Supposing com and manufactured goods always to sell at the same price, profits would be high or low in proportion as wages were low or high. But suppose com to rise in price because more labour is necessary to produce it ; that cause will not raise the price of manufactured goods in the production of which lio additional quantity of labour is required. If, then, wages continued the same, the profits of manufacturers would remain the same ; but if, as is absolutely certain, wages should rise with the rise of corn, then their profits would necessarily fall.
If a manufacturer always sold his goods for the same money, for 1000/., for example, his profits would depend on the price of the labour necessary to manufacture those goods. His profits would be less when wages amounted to 800/. than when he paid only 600/. In proportion then as wages rose, would profits fall. But if the price of raw produce would increase, it may be asked, whether the fanner at least would not have the same rate of prdSts, al- though he should pay an additional sum for wages ? Certainly not : for he will not only have to pay, in common with the manufacturer, an increase of wages to each labourer he employs, but he will be obliged either to pay rent, or to employ an addi- tional number of labourers to obtain the same pro- duce ; and the rise in the price of raw produce will be proportioned only to that rent, or that addi- tional number, and will not compensate him for the rise of wages.
CHAP, VI.] ON PROFITS^, lOQ
If both the manufacturer and farmer employed ten men, on wages rising from 34/. to 25L per an- nimi per man, the whole sum paid by each would be 250/. instead of 240/. This is, however, the whole addition that would be paid by the manu- facturer to obtain the same quantity of commodi- ties J but the farmer on new land would probably be obliged to employ an additional man, and there- fore to pay an additional sum of 25/. for wages ; and the fanner on the old land would be obliged to pay precisely the same additional sum of 25/. for rent ; without which additional laboiu*, com would not have risen, nor rent have been increased. One will therefore have to pay 275/. for wages alone, the other, for wages and rent together ; each 25/. more than the manufacturer : for this' latter 25/. the farmer is compensated by the addition to the price of raw produce, and therefore his profits still conform to the profits of the manufacturer. As this proposition is important, I will endeavour still fiuther to elucidate it.
«
We have shewn that in early stages of society, both the landlord's and the labourer's share of the value of the produce of the earth, would be but small ; and that it would increase in proportion to the progress of wealth, and the difficulty of procu- ring food. We have shewn, too, that although the value of the labourer's portion will be increased by the high value of food, his real share will be dimin- ished ; whilst that of the landlord will not only be
1 10 ON PROFITS. [chap. VI.
raised in value, but will also be increased in quan- tity.
The remaining quantity of the produce of the land^ after the landlord and labourer are paid, necessarily belongs to the fanner, and constitutes the profits of his stock. But it may be alleged, that though as society advances, his proportion of the whole produce will be diminished, yet as it will rise in value^ he, as well as the landlord and labour- er, may, notwithstanding, receive a. greater value.
It may be said for example, that when com rose from 4/. to 10/., the 180 quarters obtained from the best land would sell for 1800/. instead of 7S0/.$ and, therefore, though the landlord and labourer be proved to have a^ greater value for rent and wages, still the value of the fanner's profit might also be augmented* This^ however, is impossible, as I shall now endeavour to shew.
In the first place, the price of com would rise only in proportion to tiie increased difficulty of growing it on land of a worse quality. '
It has been already remarked, that: if jbhe labour of tea men wili. on laaid of a cert^ist quality, ob^- tain 180 quarters of wheat, and its value be 4/. per quarter, or 720/. ; and if the Id^our of ten a^li- tional men, will on the same or any other land pro- duce only 170 quarters in addition^ wheat would
CHAP. VI.] ON PROFITS. Ill
rise from 4/. to 4/. 4^. Sd. ; for I7O: 180: :4/. : 4/. 4^. Sd. In other words, as for th€ production of 170 quarters, the labour of ten men is neces- sary, in the one case, and only that of 9*44 in the other, the rise would be as 9*44 to 10, or, as 4/* to 4/. 45* 8^ In the same manner it might be shewn, that if the labour of ten additional men would only produce I60 quarters, the price would further rise to 4/. 10^. ; if 150, to 4/. 16^. &c. &c.
But when ISO quarters were produced on the land paying no rent, and its price was 4iL per quarter, it is sold for . • « jf7S0
And when I70 quarters were produced on the biid paying no rent,, and the price rose to 4^ 4& Sd. it still sold for . • • 720
So 160 quarters at 4/. lOs^ produce . . • 7^
And 150 quarters at 4/. 16^. produce the
same sum of . * 720
Now it is evident, tioiat if out of tihese equal va- lues^ the farmer i&atone time obliged to pay wages feguiated by* the price of wheat at 4/., and.at other tinea at higher prices^ tlie rate of his profits will dimindbh in proportikm to the rise in the price of corn.
Jm iim case* therefore^ I think it. is dearly de- mmstrsiei that ar rise in the price of com, which increases the money wages of the labourer, d&aii- niahes the money value of the farmer's profits.
■ /* m - . „
• ■-'•'» ..mm. •' ^
114i ON PROFITS. ' [chap.. VI.
rise of wages*. If the fanner gets no additional value for the com which remains to him after pay- ing rent, if the manufacturer gets no additional value for the goods which he manufactures, and if both are obliged to pay a greater value in wages, can any point be more clearly established than that profits must fall, with a rise of wages?
The farmer then, although he pays no part of his landlord's rent, that being always regulated by the price of produce, and invariably falling on the consumers, has however a very decided interest in keeping rent low, or rather in keeping the natural price of produce low. As a consumer of raw pro- duce, and of those things into which raw produce enters as a component part, he will, in common with all other consumers, be interested in keeping the price low. But he is most materially con- cerned with the high price of com as it affects wages. With every rise in the price of com, he will have to pay out of an equal and unvarying sum of 72OL an additional sum for wages to the ten men whom he is supposed constantly to em- ploy. We have seen in treating on wages that they invariably rise with the rise in the price of
* The reader is aware, that we are leaving out of our consider- ation the accidental variations arising from bad and good sea* sonsy or from the demand increasing or diminishing by anj sud- den effect on the state of population. We are speaking of the natural and constant, not of tlie accidental and fluctuating price of corn.
«HAP. Vr.] OM PROFITS* 115
raw produce. On a basis assumed for the purpose c^ calculation, page 99» it will be seen that if when wheat is at 4/L per quarter, wages should be 34^ per annum.
^ £• $• dm £• $• dm
wages would
Now, of the unvarying fund of 790/. to be dis- tributed between labourers and farmers,
Jum 4* dm JEm Sm at* $• dm
iSO O 0
i7S 0 0
.III »«^u,« < 255 0 >«;„ ,.^.5— < to5 0 0
^56 0 0
.445 15 *
will receive \ ^^ ^ r will receive
* The 180 quarters of com would be divided in the following proportions between landlords, farmers, and labourers, with the above-named variations in the value of conu
Price per qr. Rent Profit. Waf;es. TotaL
£. M. d. In Wheat Id Wheat
4 0 0 None. ISOqrs.
4 4 8 10 qn. 111.7
4 10 0 SO 103.4
4 16 0 30 95
5 S 10 40 86.7
and, under the same circumstances, money rent, wages, and profit, would be as follows :
Price per qr. Rent Profit Wages. Total.
j£. 9. d. £. 9, 4. •£. «. d. jC. 9. d. £. «. d.
4 0 0 None. 48000 240 00 720 00
4 4 8 42 7 6 473 0 0 247 0 0 762 7 6
4 10 0 90 0 0 465 0 0 255 0 0 810 0. 0
4 16 0144 00 45600 264 00 86400
5 2 10 205 13 4 445 15 0 274 5 O 925 13 4
"l2
1X6 on PROFITS. . Z^^^* V^
And supposing that the original capital of the far- mer was 3000/., the profits of his stock being in the first instance 480/. would be at the rate of l6 per cent. When his profits feU to 473/. they would be at the rate of 15.7 per cent.
4f65l. .... 15.5
456/. . . . • 15-2 445/. . * . . • 14.8
But the rate of profits will fall still more, be- cause the capital of the farmer, it must be recol- lected, consists in a great me^asure of raw produce, such as his corn and hay-ricks, his unthreshed wheat and barley, his horses and cows, which would all rise in price in consequence of the rise of pro- duce: His absolute profits would fall from 480/. to 445/. 155.; but if from the cause which I have just stated, his capital should rise from 3000/. to 3200/. the rate of his profits would, when com was at SI. 2s. lOrf. be under 14 per cent.
If a manufacturer had also employed 3000L in his business, he would be obliged in consequence of the rise of wages, to increase his capital, in order to be enabled to carry on the same business. If his commodities sold before for 720/. they would continue to sell at the same price ; but the wages of labour, which were before 240/. would rise when com was at 5/. 2s. lOd. to 274/. 5s. In the first case he would have a balance of 480/. as profit on 3000/^, in the second he would have a profit only
CHAP. VI.] ON PROFITS. Hy
of 445/. 155., on an increased capital/ and there- fore his profits would conform to the altered rate of those of the farmer.
There are few commodities idiich are not more or less affected in their price by the rise of raw produce, because some raw material from the land enters into the composition of most commoditities. Cotton goods, linen, and cloth, will all rise in price with the rise of wheat ; but they rise on ac- count of the greater quantity of labour expended on the raw material from which they are made, and not because more was paid by the manufac* turer to the laboiurers whom he employed on those commodities.
In all cases, commodities rise because more la- bour is expended on them, and not because the labour which is expended on them is at a higher value. Articles of jewellery, of iron, of plate, and of copper, would not rise, because none of the raw produce from the surface of the earth enters into their composition.
It may be sdd that I have taken it for granted, that money wages would rise with a rise in the price of raw produce, but that this is by no means a necessary consequence, as the labourer may be contented with fewer enjoyments. It is true that the wages of labour may previously have been at a high level, and that they may bear some reduc-
118 ON PROFITS* f CHAP. VK
tion. If so, the fall of profits will be checked j but it is impossible to conceive that the money price of wages should fall, or remain stationary with a gradually increasing price of necessaries ; and therefore it may be taken for granted that, under ordinary circumstances, no permanent rise takes place in the price of necessaries, without occasioning, or having been preceded by a rise in wages.
The effects produced on profits would have beeit the same, or nearly the same, if there had been hay rise in the price of those other necessaries, besides food, on which the wages of labour are expended. The necessity which the labourer would be under of paying an increased price for such necessaries, would oblige him to demand more wages ; and whatever increases wages, ne* ^essarily reduces profits. But suppose the price of silks, velvets, furniture, and any other com- modities, not required by the labourer, to rise in consequence of more labour being expended on them, would not that affect profits? Certainly not : for nothing can affect profits but a rise in wages J silks and velvets are not consumed by the labourer, and therefore cannot raise wages.
•
It is to be understood that I am speaking of pro- fits generally. I have already remarked, that the market price of a commodity may exceed its na- tural or necessary price, as it may be produced in
CHAP. VI J ON PROFITS. II9
less abundance tiian the new demand for it requires; TWs, however, is but a temporary effect. The high profits on capital employed in producing that com- modity, will naturally attract capital to that trade; and as soon as the requisite funds are supplied^ and the quantity of the commodity is duly increased, its price will fall, and the profits of the trade will conform to the general level. A fall in the general rate of profits is by no means incompatible with a partial rise of profits in particular employments. It is through the me- quality of profits, that capital is moved from one emplojrment to another. Whilst then general pro- fits are falling, and gradually settling at a lower level in consequence of the rise of wages, and the increasing difficulty of supplying the increasing population with necessaries, the profits of the farmer may, for an interval of some little duratiout be above the former level. An extraordinary sti- mulus may be also given for a certain time, to a particular branch of foireign and colonial tcade ; but the admission of this fact by no means invali-* dates the theory, that profits depend on high or low wages, wages on the price of necessaries, and the price of nece^iparies chiefly on the price of food, because all other requisites may be increased al- most without limit.
It should be recollected that prices always vary in the market, and in the first instance, through the comparative state of demand and supply* Al*
120 ON PROFITS. j^CHAP, VI.
though cloth could be furnished at 40^. per ydrd^ and give the usual profits of stock, it may rise to 60 or 80^. from a general change of ^hion, oit from any other cause which should suddenly and unexpectedly increase the demand, or diminkh the Supply of it. The makers of cloth will for a time have unusual profits, but capital will naturally flow to that manufacture, till the supply and demand are again at their fair level, when the price of cloth will again sink to 40^., its natural or necessary price. In the same manner, with every increased demand for com, it may rise so high as to affi>rd more than the general profits to the farmer. If there be plenty of fertile land, the price of com wiU again fall to its former standard, after the re- quisite quantity of capital has been employed in producing it, and profits will be as before ; but if there be not plenty of fertile land, if, to produce this additional quantity, more than the usual quan- tity of capital and labour be required, cofn will aot fall to its former level. Its natural price will be raised, and the farmer, instead of obtaining per- manently larger profits, will find himself obliged to be satisfied with the diminished rate which is the inevitable consequence of the rise of wages, pro^ duced by the rise of necessaries.
The natural tendency of profits then is to fall ; for, in the progress of society and wealdi, thd ad- ditional quantity of food required is obtained by the sacrifice of more and more labour. Thia ten-
CSAF. VI.3 ON PROFITO. 121
dehcy, this gravitation as it wer6 of profits, is hap- pily checked at n^eated intervfils.by the improve- ments in machinery, connected with the produc- tion of hecessaries, as well as by discoveries in tlie 9cience of agriculture which enable us to relinquish a portion of labour before required, and therefore to lower the price of the prime necessary of the labourer. The rise in the price of necessaries and in the wages of labour is however limited ; for as soon as wages should be equal (as in the case formerly stated) to 720/., the whole receipts of the farmer, there must be an end ol* accumulation ; for no capital can then yield any profit whatever^ and no additional labour can be demanded, and conse- quently population will have reached its highest point. Long indeed before this period, the very low rate of profits will have arrested all accumula- tion, and almost the whole produce of the coimtry, after paying the labourers, will be the property of the owners of land and the receivers of tithes and taxes.
' Thus, taking the former very imperfect basis as the grounds of my calculation, it would appear that when com was-at 20/. per quarter, the whole aet income of the country would belong to the land- lords, for then the same quantity of laboiur that was aiiginally necessary to produce 180 quarters, would be necessary to produce 36 ; since 20/. : 4/. : : 180 : S6. The farmer then, who produced 180 quarters, (if any such there were^ for the cid and new eapi-
122 ON PROFITS. [chap. VI.
tal eixiployed on the land would be so blended, that it could in no way be distinguished,) would sell the
180 qn. at 20/. per qn or . . . . ^S600
/- to landlord for rent, being the ^
the yalue of 144 qrs. < difference between 86 and ^ 2880
( 180 qrs. 3 -—
S6 qrs. ^ 720
the value of 36 qrs. to labourers ten in number . • 720
leaving nothing whatever for profit.
I have supposed that at this price of 90L the labourers would continue to consume three quarters each per an« num or .•••••• . ^60
And that on the other commodities they would expend • • • • 12
72 for each labourer. And therefore ten labourers would cost 720/. per annum.
In all these calculations I have been desirous only to elucidate the principle, and it is scarcely neces* sary to observe, that my whole basis is assumed at random, and merely for the purpose of exemplifi- cation. The results though difierent in degree, would have been the same in principle, however accurately I might have set out in stating the differ- ence in the number of labourers necessary to ob- tain the successive quantities of com required* by an increasing population, the quantity consumed by the labourer's family, &c. &c. My object has been to simplify the subject, and I have therefore made no allowance for the increasing price of the other necessaries, besides food of the labourer ; an increase which would be the consequence of the
GHAP. VI.3 ON PROFITS. 123
•
increased value of the raw materials from which they are made, and which would of course further increase wages, ami lower profits.
I have already said, that long before this state of prices was become permanent, there would be no motive for accumulation ; for no one accumulates but with a view to make his accumulation pro-* ductive, and it is only when so employed that it operates on profits. Without a motive there could be no accumulation, and consequently such a state of prices never could take place. The farmer and manufacturer can no more live without profit, than the labourer without wages. Their motive for ac* cumulation will diminish with every diminution of profit, and will cease altogether when their profits are so low as not to afford them an adequate com- pensation for their trouble, and the risk which they must necessarily encounter in employing their ca- pital productively.
I must, again observe, that the rate of profits would fall much more rapidly than I have estimated in my calculation : for the value of the produce being what I have stated it under the circumstances supposed, the value of the farmer's stock would be greatly increased from its necessarily consisting of many of the commodities which had risen in value. Before com could rise from 4/. to 12/. his capital would probably be doubled in exchangeable value, and be worth 6000/. instead of SOOO/. If then his profit were 180/*, or 6 per cent, on his .original ca*
124 ON PROFITS, fCHAP. VI.
J)ital, profits would not at that time be really at a higher rate than 3 per cent ; for 6OOO/. at 3 per cent, gives 180/. ; and on those terms only could a new farmer with 6OOO/. money in his pocket enter into the farming business.
Many trades would derive some advantage, more or less, from the same source. The brewer, the distiller, the clothier, the linen manufacturer, would be partly compensated for the diminution o£ their profits, by the rise in the value of their stock of raw and finished materials ; but a manufacturer of hardware, of jewellery, and of many other commo- dities, as well as those whose capitals uniformly consisted of money, would be subject to the whole fall in the rate of profits, without any compensa- tion whatever.
We should also expect that, however the rate of the profits of stock might diminish in consequence of the accumulation of capital on the land^ and the rise of wages, yet that the aggregate amount of profits would increase. Thus supposing that, with repeated accumulations of 100,000/., the rate of profit should fall from 20 to 19, to 18, to 1 7 per cent., a constantly diminishing rate, we should ex- pect that the whole amount of profits received by those successive owners of capital would be always progressive ; that it would be greater when the ca- pital was 200,000/., than when 100,000/.; still greater when 300,000/.; and so on, increasing, though at a diminishing rate, with every increase
CHAP. VI.]| ON PROFITS^ 125
of capital. This progression however is only true for a certain time : thus 19 per cent, on @00,OOOA is more than 20 on 100,000/. ; again 18 per cent* on 300,000/1 is more than 19 per cent, on 200,000/. j but after capital has accumulated to a large amoimt, and profits have fallen, the further accumulation diminishes the aggregate of profits. Thus suppose the accumulation should be 1,000,000/., and the profits 7 pel* cent, the whole amount of profits will be 70,000/. J now if an addition of 100,000/. capi- tal be made to the million, and profits should fall to 6 per cent., 66,000/. or a diminution of 4,000/, will be received by the owners of stock, although the whole amount of stock will be increased from 1,000,000/. to 1,100,000/.
There can, however, be no accumulation of ca<^ pital, so long as stock yields any profit at all, with* out its yielding not only an increase of produce^ but an increase of value. By employing 100,000/* additional capital, no part of the former capital will be rendered less productive. The produce of the land and labour of the country must increase, and its value will be raised, not only by the value of the addition which is made to the fonner quan- tity of productions, but by the new value which is given to the whole produce of the land, by the in- creased difficulty of producing the last portion of it. When the accumulation of capital, however^ becomes very great, notwitibstanding this increased value^ it wilji be so distributed that a l^ss value
I
126 ON PROFITS. [chap. VI.
than before will be appropriated to pr(^ts» while that which is devoted to rent and wages will be in- creased. Thus with successive additions of lOOyOOOi^ to capital, with a fall in the rate of profits, from 30 to 19, to 18, to 17 per cent. &c. the produc- tions annually obtained will increase in quantity, and be of more than the whole additional value, which the additional capital is calculated to pro- duce. From S0,000/. it wiU rise to more than 39fOOOL and then to more than 57,000/. and when the capital employed is a million, as we before supposed, if 100,000/. more be added to it, and the aggregate of profits is actually lower than before, more than 6,000/. will nevertheless be added to the revenue of the country, but it will be to the revenue of the landlords and labourers ; they wiU obtain more than the additional produce, and will from their situation be enabled to encroach even on the former gains of the capitalist Thus, sup- pose the price of com to be 4/. per quarter, and that therefore, as we before calculated, of eveiy 730/. remaining to the farmer afler payment of his rent, 480/. were retained by him, and 240A were paid to his labourers j when the price rose to 6L per quarter, he would be obliged to pay his la- bourers 300/. and retain only 420/. for profits : he would be obliged to pay them 300/. to enable them to consume the same quantity of necessaries as be- fore, and no more. Now if the capital employed were so large as to yield a hundred thousand times 720A or 72,000,000/. the aggregate of profits would
CHAP* Vl^i ON PROFITS. 127
be 48,000,000/. when wheat was at 4/. per quarter; and if by employing a larger capital, 105,000 times 720/. were obtained when wheat was at 6A, or 75,600,000/:, profits would actually fall from 48,000,000/- to 44,100,000/. or 105,000 times 420/1, and wages would rise from 24,000,000/. to 31,500,000/. Wages would rise because more la- bourers would be employed, in proportion to capi- tal ; and each labourer would receive more money wages ; but the condition of the labourer, as we have already shewn, would be worse, inasmuch as he would be able to command a less quantity of the produce of the coimtry. The only real gain- ers would be the landlords ; they would receive higher rents, first, because produce would be of a higher value, and secondly, because they would have a greatly increased proportion of that produce.
Although a greater value is produced, a greater proportion of what remains of that value, afler pay- ing rent, is consumed by the producers, and it is this, and this alone, which regulates profits. Whilst the land yields abundantly, wages may temporarily rise, and the producers may consume more than their- accustomed proportion; but the stimulus which will thus be given to population, will speed- ily reduce the labourers to their usual consump- tion. But when poor lands are taken into culti- vation, or when more capital and labour are ex- pended on the old land, with a less return of pro- duce, the efiect must be permanent, A greater
7
128 ON PROFITS, [chap. VI,
proportion of that part of the produce which re- mains to be divided, after paying rent, between the. owners of stock and the labourers, will be ap- portioned to the latter* Each man may, and pro- bably will, have a less absolute quantity ; but as more labourers are employed in proportion to the whole produce retained by the farmer, the value of a greater proportion of the whole produce will be absorbed by wages, and consequently the value of a smaller proportion will be devoted to prc^ts. This will necessarily be rendered permanent by the laws of nature, which have limited the productive powers of the land.
/ Thus we again arrive at the same conclusion / which we have before attempted to establish : — that in all countries, and all times, profits depend on the quantity of labour requisite to provide ne- cessaries for the labourers, on that land or with that capital which yields no rent. The effects then of accumulation will be different in different coun- tries, and will depend chiefly on the fertility of the land. However extensive a country may be where tlie land is of a poor quality, and where the im- portation of food is prohibited, the most moderate accumulations of capital will be attended with great reductions in the rate of profit, and a rapid rise in rent J and on the contrary a small but fertile coun- try, particularly if it freely permits the importation of food, may accumulate a large stock of capital without any great diminution in the rate of profits.
CHAP- VI.]] ON PROFITS. Igjj
or any great increase in the rent of land. In the Chapter on Wages, we have endeavoured to shew lliat the money price of commodities would not be raised by a rise of wages, either on the supposition that gold, the standard of money, was the produce of this country, or that it was imported from abroad. But if it were otherwise, if the prices of commodi- ties were permanently raised by high wages, the proposition would not be less true, which asserts that high wages invariably affect the employers of labour, by depriving them of a portion of their real profits. Supposing the hatter, the hosier, and the shoemaker, each paid 10/. more wages in the ma- nufacture of a particular quantity of their commo- dities, and that the price of hats, stockings, and shoes, rose by a sum sufficient to repay the manu- ^ facturer the 10/. ; their situation would be no bet- ter than if no such rise took place. If the hosier sold his stockings for 110/. instead of 100/., his profits would be precisely the same money amount as before ; but as he would obtain in exchange for this equal sum, one tenth less of hats, shoes, and every other commodity, and as he could with his former amount of savings employ fewer labourers at the increased wages, and purchase fewer raw materials at the increased prices, he would be in no better situation than if his money profits had been really diminished in amount, and every thing had remained at its former price. Thus then I have endeavoured to shew, first, that a rise of wages would not raise the price of commodities,
K
ISO ON PROFITS. [chap. VI,
but would invaiiably lower profits ; and secondly, that if the prices of all commodities could be raised, still the effect on profits would be the same ; and that in fact the value of the medium only in which prices and profits are estimated would be lowered.
CHAPTER VII.
ON FOREIGN TRADE.
No extension of foreign trade will immediately in- crease the amount of value in a country, although it will very powerfully contribute to increajse the mass of commodities, and therefore the sum of en«> joyments. As the value of all foreign goods is measured by the quantity of the produce of our land and labour, which is given in exchange for them, we ^ould have no greater value, if by the discoveiy of new markets, we obtained double the quantity of foreign goods in exchange for a given quantity of our's. If by the purchase of English goods to the amount of 1000/1, a merchant can ob- tain a quantity of foreign goods, which he can sell in the English market for 1,200/., he will obtain 20 per cent, profit by such an employment of his capital ; but neither his gains, nor the value of the commodities imported, will be increased or dimi- nished by the greater or smaller quantity of foreign goods obtained. Whether, for example, he im- ports twenty-five or fifty pipes of wine, his interest can be no way aflfected, if at one time the twenty- five pipes, and at another the fifty pipes, equally sell for 1,200/. In either case his profit wiU be limited to 200/., or 20 per cent, on his capital ;
K 2
n
132 ON FOREIGN TRADE. [^CHAP, VII.
and in eitjier case the same value will be imported into England, If the fifty pipes sold for more than 1,200/., the profits of this individual merchant would exceed the general rate of profits, and ca^ pital would naturally flow into this advantageous trade, till the fall of the price of wine had brought every thing to the former level.
9 •
V ♦
It has indeed been contended, that the great profits which are sometimes made by particular merchants in foreign trade, will elevate the gene- ral rate of profits in the country, and that the ab- straction of capital from other employments, to partake of the new and beneficial foreign com- merce, will raise prices generally, and thereby in- crease profits. It has been said, by high autho- rity, that less capital being necessarily devoted to the growth of com, to the manufacture of cloth, hats, shoes, &c. while the demand continues the same, the price of these commodities will be so increased, that the farmer, hatter, clothier, and shoemaker, will have an increase of profits, as well as the foreign merchant*.
They who hold this argument agree with me, that the profits of di£Perent employments have a tendency to conform to one another ; to advance and recede together. Our variance ccmsists in this : They contend, that the equality of profits
* See Adam Smith, book i. chap. 9.
CHAP. VII.] ON FOREIGN TRADE. 133
will be brought about by the general rise of pro- fits ; and I am of opinion, that the profits of the favoured trade will speedily subside to the general level-
For, first, I deny that less capital will necessa- rily be devoted to the growth of com, to the ma- nufacture of cloth, hats, shoes, &e. unless the demand for these commodities be diminished; and if so, their price will not rise. In the piu:- chase of foreign commodities, either the same, a larger, or a less portion of the produce of the land and labour of England will be employed. If the «ame portion be so employed, then will the same demand exist for cloth, shoes, com, and hats, as before, and the same portion of capital will be de- voted to their production. If, in consequence of the price of foreign commodities being cheaper, a less portion of the annual produce of the land and labour of England is employed in the purchase of foreign commodities, more will remain for the pur- chase of other things. If there be a greater de- mand for hats, shoes, com, &c. than before, which there may be, the consumers of foreign commo- dities having an additional portion of their revenue disposable, the capital is also disposable with which the greater value of foreign commodities was be- fi>re purchased ; so that with the increased demand for com, shoes, &c. there exists also the means of procuring an increased ^pply, and therefore nei- ther prices nor profits can perraanently rise. If
lS4f ON POREIGM TRADE. [[CHAP. VII.
more of the produce of the land and labour of England be employed in the purchase of foreign commodities^ less can be employed in the purchase of other things, and therefore fewer hats, shoes, &c. will be required. At the same time that ca- pital is liberated from the production of shoes, hats, &c. more must be employed in manuifacturing those commodities with which foreign commodities are purchased ; and consequently in all cases the demand for foreign and home commodities toge- ther, as far as regards value, is limited by the revenue and capital of the country. If one in- creases, the other must diminish. If the quantity of wine, imported in exchange for the same quan- tity of English commodities, be doubled, the people of England can either consume double the quan- tity of wine that they did before, or the same quantity of wine and a greater quantity of English commodities. If my revenue had been 1000/., with which I purchased annually one pipe of wine for 100/. and a certain quantity of English com- modities fbr 900/. } when wine fell to 50/. per pipe, I might lay out the 50/. saved, either in the purchase of an additional pipe of wine, or in the purchase of more English commodities. If I bought more wine, and every wine-drinker did the same, the foreign trade would not be in the least