POLITICAL ECONOMY BY J. BROADHURST, ESQ. LONDON : HATCHARD AND SON, 187, PICCADILLY. 1842. LONDON : PRINTED BY C- ROWORTH AND SONS, BELL YARD, TEMPLE BAR. PREFACE. OUR writers on Political Economy are all agreed in admitting, that the acquirement of just views of value is an indispensable pre- liminary to a right understanding of nearly every other subject connected with the science. My first object in this work is to show that all these gentlemen have failed to acquire this preliminary knowledge, and have, in consequence, fallen into a long suc- cession of serious mistakes. I was in the rnidst of a work embracing all the principal questions in Political Economy, when the de- pression of our trade, the condition of our working classes, and the impatience of our northern manufacturers for free trade, in- duced me to divide my work into two parts, in order to publish one immediately in which the question about to come before parlia- ment might be discussed. In taking this course, I have been obliged to keep back much of that evidence which shows how little those who have written on Political Economy a2 269 IV PREFACE. understood it; for nearly every chapter I now keep back teems with evidence of the errors into which preceding writers have fallen. I flatter myself, however, that the four first chapters in this little volume will suffice to satisfy any intelligent and dis- passionate reader, that I am not guilty of misrepresentation, in declaring preceding writers to have wanted that fundamental knowledge which they describe as indis- pensable to a due understanding of this science. I have directed much attention to the work of Mr. Ricardo, because it has been most influential, and has led to the creation of an extensive school which has long borne the name of the author. Mr. Ricardo's mind was characterized by much quickness ; but this being attended by its usual con- comitant a deficiency in the power of re- y flection his work is stamped with a super- ^ ficial character. He was in general candid, and desirous only to arrive at truth, and though he rarely succeeded, his views often possessed the rare merit in these days of originality. Mr. Malthus was a writer of great talents, PREFACE. V but some of his notions were very objection- able, and his views of Value if possible more erroneous than those of Mr. Ricardo. These are the only original writers of this, and I believe of any country, who have ap- peared during the last half century, but Mr. Ricardo has had far the most success, and has left his name stamped on those leading principles of the science which now uni- versally prevail. It is curious to observe how~ confidently succeeding writers have adopted Mr. Ricardo's doctrines respecting value, seeing, by a private letter of his to Mr. Malthus inserted in the account pub- lished of the life of the latter that Mr. Ri- cardo felt that his own knowledge of value was unsatisfactory. In the portion of this volume referring to the topics which now occupy so much of public attention, I have dwelt less on the immediate causes of our commercial depres- sion than on those which are primary and more permanent. I hope to have shown that the immediate cause of the present distress amongst those of our manufacturers whose goods are made for foreign markets is over- speculation ; while that portion of our dis- VI PREFACE. tress which arises from a falling off in the demand for manufactured goods in the home markets is partly attributable to that cause, and partly to two unfavourable harvests. Excessive overtrading not being in my opi- nion a matter of accident, I have endeavoured to show that it is the effect of an amount of capital which is superabundant, because un- able to find at home a sufficiency of safe and profitable investments and have pointed out at the same time what I conceive to be the only remedy for this evil. The present con- dition of such of our operatives as are em- ployed in making goods for exportation, is of course the sole consequence of this over- trading. If we can succeed in diminishing this tendency to overtrading, we shall of course diminish the sum of suffering which it inflicts upon our operatives. My principal attention, however, as respects the present state of things, has been directed to the con- dition of our agricultural labourers, who, on an average of many years, have been, throughout the greater part of the empire, infinitely worse off than our manufacturing operatives, while I have shown their distress to be much more susceptible of amelioration. PREFACE. VII I beg the special attention to this portion of my work of those readers who, as land- holders, can so much influence the condition of our agricultural labourers. If rny facts be true, and my conclusions just, or approxi- mating to anything like justness, a fearful responsibility rests on those landholders who see the misery and vice that surround them, or which, in their absence, they know to dwell on their estates, and yet decline to take the necessary, but easy, steps for their removal. Let the religious portion of our landholders at least pause and meditate deeply on the means I propose for effecting so great a good, before they apathetically, or carelessly, reject them. Our agricultural population, though less educated, and more rude, than that in our great towns, is not less shrewd, and is better disposed. They have as much gratitude for favours, and sympathy for distress, as any class in the state, and may be made, as a whole, nearly every- thing we can wish. As long, however, as this great portion of the community con- tinues so ill off, its habits will be low, and its conduct highly improvident. There is doubt- less now much vice to be found amongst Vlll PREFACE. them ; the consequence, for the most part, of hopeless misery ; but after no small expe- rience, I believe there are amongst them also the germs of much goodness, particularly amongst the female portion, who are gene- rally characterized by excellent feelings ; and these they would be able to fix in their off- spring, if we gave to them hopes of a more comfortable existence. Stringent poor-law regulations do not cure improvidence. We have now tried two opposite modes of admi- nistering our poor-laws that which offers a premium on improvidence and idleness and, subsequently, one of considerable seve- rity and both modes have equally failed to raise either the habits, or wages, of any por- tion of the working classes. If my readers examine closely into the important facts referred to in this work, and find a body of unmistakeable evidence, tending to prove that there is a course yet open to us that will raise the condition of our whole rural population, let them in the name of all that is just and merciful, at once enter and pursue it till it bring us to the great result I so confidently anticipate. CONTENTS. CHAP. PAGE I. VALUE 1 II. PROFITS 61 III. TAXES ON RAW PRODUCE 118 IV. -TAXES ON OTHER COMMODITIES THAN RAW PRODUCE 141 V._ CONDITION OF OUR WORKING CLASSES 154 ITS INFLUENCE ON OUR SOCIAL SYS- TEM . . 238 . FREE TRADE CHAPTER I S^TX VALUE. UNIVERSITY OF SECTION I. IT is unfortunate that the word value is so often employed without any reference to exchange- able value. When I use the word I beg to be understood as referring always to exchangeable or marketable value ; for if in political economy we admit anything to be valuable, whose value is not ascertainable by exchange, we undertake to determine imaginary instead of exchange- able value. Water and air are highly useful, and, in our loose nomenclature, are called valua- ble ; but they have no exchangeable or market^ able value. Exchangeable value can only be ascertained by the operation of exchange. If A. freely exchange for B., A. is worth B. and B. is worth A.; consequently whatever alters the value of A. relative to B. equally alters the value of B. relative to A. Adam Smith asserted that corn and labour were Z VALUE. standards by which we could accurately value all other things ; thus asserting corn and labour to have an absolute value : but it has been hap- pily remarked that we might as justly talk of absolute height as of absolute value. Our laws have endeavoured to make gold a standard for measuring the value of silver ; happily the bul- lion merchant shields us from the evils which would otherwise flow from this enactment; for when either of these metals acquires a higher value in commerce, in relation to the other, than our laws are pleased to allow it, the bullion mer- chant exports the degraded metal to a better market. These metals are ever varying in re- lative value, because ever varying in relative cost and supply. We can no more really regulate the value of silver to gold than we can regulate the value of either of those metals to any other com- modity. So far all writers of the present day are agreed, but all of them assert or admit that in an early stage of society, the quantity of labour required to produce an article determines its exchangeable value. A. Smith, referring to the value of commodi- ties before the use of capital, says, " In that early " and rude state of society which precedes both " the accumulation of stock and the appropria- " tion of land, the proportion between the quan- " tities of labour necessary for acquiring different VALUE. 3 " objects seems to be the only circumstance " which 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' or two hours' " labour, should be worth double of what is " usually the produce of one day's or one hour's " labour." Upon this passage Mr. Ricardo observes, "that " this is really the foundation of the exchange- " able value of all things, excepting those which " cannot be increased by human industry, is a " doctrine of the utmost importance in political " economy; for from no source do so many errors, " and so much difference of opinion in that " science proceed, as from the vague ideas which " are attached to the word value." Ricardo, p. 4, 3rd edition. Mr. M'Culloch observes on this point, "It is " admitted on all hands that in the early stages " of society, before capital is accumulated, the " quantity of labour required to produce a com- " modity, and bring it to market, forms the only " principle by which its value is regulated." M'Culloch, p. 333, 3rd edition. Again he says, "It appears, therefore, inasmuch B2 4 VALUE. " as capital is nothing but the accumulated pro " duce of anterior labour, that its employment " cannot affect the principle which makes the tf exchangeable value of commodities depend on " the quantities of labour required for their pro- " duction. A commodity may be altogether " produced by capital, without the co-operation " of any immediate labour whatever; but, inas- " much as the value of this capital is regulated " and determined by the labour required for its " production, it is obvious that the value of the " commodities produced by its means must, at " bottom, be determined by this same labour : or " a commodity may be partly produced by capital, " and partly by immediate labour, and then its " exchangeable value will be proportioned to the ' ' sum of the two, or, which is still the same thing, " to the total quantity of labour bestowed upon " it. These principles are almost self-evident, " and it is not easy to see how they can be made " the subject of dispute or controversy ; but a " considerable difference of opinion is entertained " respecting the effects on value, of the employ- " ment of workmen by capitalists, and of fluc- " tuations in the rate of wages." M'Culloch, p. 334. Again, he says, " When the capital does not " belong to the labourer, the commodities which " he produces are divided into two specific por- VALUE. " tions, whereof one is the produce of the imme- " diate labour, and the other of the capital, or " accumulated labour laid out upon them. But " so long as the same quantity of labour is re- " quired for the production of commodities, their " value will continue constant, whether that la- " bour be supplied by one or by fifty individuals." M'Culloch, p. 335. Again, he says, " Hence it follows that the " circumstance of the accumulated labour or " capital, and the manual labour, required in pro- " duction, being furnished by different persons, " cannot affect the value of commodities. That " depends on the total quantity of every sort of " labour laid out, and not on those by whom it " is laid out. It now only remains to trace the " effects of fluctuations in the rates of wages and " profits on the value of commodities. When " this has been done, this subject will be ex- " hausted." p. 336. Now Mr. Ricardo's view of value, as thus ex- plained or modified by Mr. M'Culloch, is adopted by every subsequent writer, whether of this or of any other country, and it is so clearly stated that no one who attentively reads can fail fully to understand it. The reader has now then care- fully to compare this, the established view of value, with that which I am about to submit. Without dwelling on the admitted fact, that, in 6 VALUE. every stage of society, skilled labour has a higher value than unskilled labour, I submit that it can- not be true that a day's labour has always the same exchangeable value, or is always entitled to the same reward, or to the same quantity of equiva- lents. Thus, supposing venison to be the only food consumed, I deny that the hunter is al- ways entitled to the same quantity of equiva- lents in exchange for his venison, be its quan- tity ever so great or ever so small or that a hunter who had been accustomed to kill two deer a day, can get the same quantity of equivalents for his venison when he can no longer kill more than one deer a day. Supposing there are in a community a thousand deer hunters, and a thou- sand men whose business it is to produce or pro- cure what are then the equivalents of venison. In this case I cannot admit, when the daily quantity of venison falls off to one half, that this will command the same quantity of equi- valents as was previously obtained by a double quantity; because if this falling off in the supply of venison be permanent, venison being, according to my proposition, the only food con- sumed, there would soon be fewer persons to produce or procure the equivalents of venison, seeing there would be less food for their subsist- ence. Additional people might be set to work to kill deer, but so long as a man could kill only VALUE. one, instead of two deer a day, there would be a falling off in the supply of surplus Yood of that which had to support those who produced the various equivalents of venison, and conse- quently there would be fewer equivalents of veni- son produced. According to our writers, when hunters can no longer obtain more than half the usual quantity of game, this will exchange for as many equiva- lents as double the quantity did before, though the cost of such equivalents remains the same. Supposing these equivalents to be weapons and boats, I ask how their value can fluctuate with the success of hunters and fishermen, if regulated by the quantity of labour that produces them? If the quantity of labour bestowed on an article, whether in the form of immediate or anterior labour, determines, as our writers assert, its value the value of the equivalents of food could not be in any degree influenced by the quantity of food seeking equivalents. As, however, it is admitted that the value of food rises whenever more labour is required to obtain it, so the value of the equivalents of food must on that account fall, and consequently their value cannot be regu- lated by the quantity of labour required to produce them. Thus even before the creation of capital, the value of a commodity cannot be determined by 8 VALUE. the quantity of labour employed upon it; for if it were, a specific quantity of labour embodied in a commodity would have a value wholly abso- lute, and would then become a universal mea- sure of the value of all other commodities ; but those whose arguments go this length make every other commodity a universal measure of value, which is carrying absurdity to its utmost limits. It is clear, then, that in this early stage of society the quantity of labour embodied in any one commodity does not determine its value ; that those who then make boats and arrows are well or ill supplied with game accord- ing as the labour which procures it is more or less successful ; and that the hunters' and fishermen's good or ill success is as much felt by them as by those who produce the equivalents of food. VALUE. 9 SECTION II. We have now to show what regulates the value of a commodity, after capitalists have become separated from workmen. Mr. Ricardo and Mr. M'Culloch maintain, that even in this stage of society the quantity of labour employed on an article determines its value. Other writers, how- ever, have dissented from this proposition. The au- thor of the " Critical Dissertation on the Nature, Measures, and Causes of Value," says, that as dif- ferent classes of labour have different prices, this must influence the value of commodities ; and it is no answer to this objection to say, as Mr. Ri- cardo does, that, " the estimation in which dif- " ferent quantities of labour are held, comes soon " to be adjusted in the market with sufficient " precision for all practical purposes/' Some of the objections to the prevailing theory of value by the author of the Critical Dissertation are just; but while he points out only a part of the error, he proposes no substitute; he pulls down, but does not build up. Colonel Torrens has shown that Mr. Ricardo overlooked that portion of the cost of an article, which consists of the charges of retailers and merchants, which has no reference to labour. The only difference amongst writers on this sub- 10 VALUE. ject is confined then to one point, namely, whe- ther the value of a commodity is determined by its aggregate cost, or by the aggregate quantity of labour bestowed upon it. I shall now en- deavour to show that the exchangeable value of a commodity is neither determined by the aggre- gate quantity of labour bestowed upon it, nor by its aggregate cost. In a country that as yet cultivates only its best class of soil, it is admitted by all that the price of food, valued in any of its equivalents, will be that in the long run, which gives to the capitalists pro- ducing food, and to those who produce its equiva- lents, an equal reward. If the best soil in a coun- try I call A. be of worse quality than the best soil in a country I call B., the value of food is higher in A. than the value of food in B. ; consequently the value of the equivalents of food is higher in B. than in A., showing that their value is not determined by their cost. The exchangeable value of food, while only the best class of soil is under culture, is influenced, but not determined, by its cost. If its value were determined even then by its cost, that value would so rise when an inferior soil has to be cultivated, as to indem- nify the capitalists for cultivating a bad instead of a good soil. But indemnity to them would be injustice to all other producers, and would be equivalent to two permanent rates of profit, which VALUE. 11 it is admitted could not for any length of time exist. When an inferior soil has to be cultivated, the exchangeable value of food rises, but not to such an extent as to keep up the old rate of agri- cultural profits. These profits, it is admitted, then fall, but as they become neither higher nor lower than the profits of those who produce the equi- valents of food, it is clear that the value of food does not so rise when its production becomes permanently more expensive, as to indemnify the capitalists who produce it. It is manifest then that the exchangeable value of food could not rise at all that is, the exchangeable value of its equivalents could not fall in respect to food, if their value was determined by the amount of their cost ! If the general principle respecting value that now prevails were sound, under which it is as- serted that the value of an article rises in propor- tion as more labour is bestowed upon it, such principle must be false as respects the articles which proportionably, and consequently, fall. Once admit that A. falls, because B., with which it is exchanged, rises, while no less labour is bestowed in the meantime on A., and your general principle of value falls to the ground. If the capitalists who produce the equivalents of food are only getting the mere necessaries of life, food could not rise, without such capitalists being starved. If the value of A. can permanently fall from whatever cause because the value of 12 VALUE. B. permanently rises, the value of A. is not regu- lated by its cost. It is evidently because the profit portion of value is usually higher than is abso- lutely necessary to maintain the capitalists en- gaged in production, that those who produce by their capital the equivalents of food are enabled to lower the value of such equivalents when that of food rises. In practice then we find the value of the various equivalents of food as much influenced by the productiveness of agricultural labour, as by that of the labour employed on themselves. Thus, if one of the equivalents of food cost 20 shillings in raw material and labour, this is not its value or selling price. If 25 per cent, be the ordinary rate of profits, it will not in the long run sell for less than 25 shillings, making one-fifth of the value of a commodity consist of profit. But we have to add to this the profits of those engaged in the distribution of such equivalents. The principle which determines the value of food relative to other commodities, equally applies to any other commodity relative to its equiva- lents. Thus the value of calico relatively to broad cloth, is not determined by the cost of calico, though influenced by that circumstance. The value of calico in relation to broad cloth, is as much influenced by the productiveness of the labour that produces the broad cloth, as it is by the productiveness of the labour that raises the VALUE. 13 cotton wool, spins it into thread, and weaves it into calico. On the same principle the value of broad cloth in relation to calico, depends as much on the productiveness of the labour bestowed from first to last on the calico, as on the productiveness of the labour employed on the broad cloth. To render then the prevailing doctrine of value consistent, those who cling to it must maintain, that a change in the value of one article does not alter the value of that for which it is exchanged. Now this wonderful to say is just what Mr. Ricardo does. He asserts that, if, in consequence of increased facility in producing other commo- dities, cloth should exchange for a double quan- tity of them, we ought to say, that cloth retained its former value, while the commodities compared with it have fallen to half their former value. Yet Mr. Ricardo admits, that the value of a com- modity is that for which it can be exchanged ; while here he maintains that a commodity is not more va- luable though it exchanges for more of other com- modities ! He doubtless would not have fallen into these contradictions, if he had not persisted in maintaining that the value of every commodity is in proportion to the quantity of labour bestowed upon it, and persevering in this error, he could not allow that the value of an article fluctuates, while no change has taken place in the quantity of labour bestowed upon it ! Mr. M'Culloch has abandoned this portion of 14 VALUE. the Ricardo doctrine of value. He says, " If ' f A. rise, it must be in relation to something else, " as B., and if B. fall, it must be in relation to " something else, as A., so that it is obviously im- " possible to change the relation of A. to B. with- " out, at the same time, changing that of B. to A." Mr. M'Culloch here did not see what Mr. Ri- cardo did, namely, that if he allowed that when A. rises in value relatively to B., B. falls in value relatively to A., he cut away the ground on which he rested his grand proposition, that the value of a commodity is ever determined by the quantity of labour embodied in it; for if a change in the cost of A. alters not only its own value in relation to B., for which it is ex- changed, but also the value of B. relatively to that of A. ; though no change has taken place in the quantity of labour required to produce B. ; then not only the doctrine falls to the ground which asserts that the quantity of labour bestowed on an article regulates its value, but also that which affirms the cost of an article to regulate its value. Yet Mr. M'Culloch persists in main- taining this latter doctrine he maintains, in short, two doctrines which are irreconcileable. Mr. Malthus admits that the value of an article is not determined by its cost; but falls into the error of supposing that by combining labour with corn, the former may be made to measure the value of every other commodity ; and he founds VALUE. 15 his proposition on the assumption of this fact, that the value of labour rises or falls pari passu with that of corn. This fact is, however, false, as it is notorious that the value of labour is not determined by that of corn. But if it were, every thing else consumed or used by the labourer, so far from rising with the value of corn, would necessarily fall, as corn would not rise in value relatively to other commodities, without the value of these proportionably falling. But nothing can be more loose and unphilosophical than Mr. Mal- thus' ideas of value. He argues all along as if the introduction of money, as a general medium of exchange, alters the principles which regulate the relative value of commodities. At page 58 he says, " The introduction of a measure [money] " which determined the nominal and relative value " of commodities ....;" and at page 64 he ob- serves, " It has been already stated that all value " in exchange depends upon the power and will " to exchange one commodity for another, and " where by the introduction of a general measure " of value and medium of exchange, society has " been divided, in common language, into buyers " and sellers ; demand may be defined to be, the " will combined with the power to purchase, and " supply, the production of commodities combined " with the intention to sell them. In this state of " things, the relative values of commodities in " money, or their prices, are determined by the 1C VALUE. " relative demand for them, compared with the " supply of them ; and this law appears to be so " general, that probably not a single instance of " a change of price can be found which may not " be satisfactorily traced to some previous change " in the causes which affect the demand or sup- Now it is clear that the introduction of money did not and could not determine the relative value of other commodities ; and it is equally certain that the introduction of money did not and could not so alter the nature of exchanges as to make any distinction between those who go to market with money, and those who go to it with any other commodity, which would have existed in the absence of money. We do not alter the nature of commerce by the terms we are pleased to employ in describing it. In the absence of money, or of any general medium of exchange, it is clearly impossible to take any distinction between the holders of different commodities, so as to call one man a seller and the other a buyer. It alters not the nature of exchange, whether landlords, mortgagees, and public creditors, take to market money or commodities. So long as these persons are paid their rents, or their annual interest in money, they go to market with money; but if we suppose one of these persons paid in kind, or in goods instead of money, he would take to market, in quest of other things, such part of VALUE. 17 those goods as he did not wish to keep, or con- sume. The following remarks appear to me little less than childish : " Every exchange, therefore, must " imply, not only, the power and the will to give " some article in exchange for one more wanted, " but a reciprocal demand in the party possessing " the article wanted, for the article proposed to " be exchanged for it. " When this reciprocal demand exists, the rate " at which the exchange is made, or the portion " of one commodity which is given for an assigned " portion of the other, will depend upon the re- " lative estimation in which they are held by the " parties, founded on the desire to possess, and " the difficulty or facility of procuring posses- " SIQK"- Malthus, p. 53. Thus Mr. Malthus could find no principle by which the relative value of commodities is deter- mined, but in the varying fancies of mankind. Yet labour is a commodity, and Mr. Malthus himself maintains that its value varies with that of corn. Doubtless the value of a commodity is ever influenced by the proportion which its supply bears at the moment to the demand for it, and no one can suppose that the supply of any article in general demand is ever exactly proportioned to the demand for it, but we know, that in respect to all goods, not under the influence of monopoly, those engaged in supplying the public with any 18 VALUE. of them are not content to get less than the average rate of profits ; and that the rate of profits in all such businesses is ever tending to one com- mon level ; and that this principle, and this alone, regulates in the long run, the relative value of all commodities not under the influence of monopoly. To talk then, as Mr. Malthus here does, of the relative value of commodities being determined by the " relative estimation in which they are held " by the parties, founded on the desire to possess, " and the difficulty or facility of procuring pos- " session," is, to say the best we can of it, to talk of the effect instead of the cause. In endeavouring then to explain the principles which regulate exchanges, it is better to dwell less than writers usually do, on money or price, seeing that money circulates not at an arbitrary value, but, like any other commodity, at its real one. Regarding then the exchange of commo- dities under its simplest point of view, it is clear the relative value of two of them whose quantity is made to equal the demand, is not determined by their relative costs. No, the relative value of two such commodities is clearly influenced by the different rates of productiveness of all the dif- ferent classes of labour employed on articles in much demand. Why is this ? Because profit forms an important portion of the value of every article produced by the aid of capital, and conse- quently the relative value of calico and broad VALUE. 19 cloth is influenced by the cost of the food on which those who made the calico and broad cloth subsisted. Thus the profit portion of the market- able value of both calico and broad cloth is in- fluenced by the cost of food ; seeing that the average rate of profits in every country is in- fluenced by the productiveness of its agricultural labour. SECTION III. Mr. Ricardo, Mr. M'Culloch, and other writers, speak of real, as distinguished from exchangeable value ; asserting, that the latter is only the result of monopoly. But my reasoning has reference only to articles whose supply can be increased by the employment of more labour to food, or to its equivalents, in a country which as yet enjoys an abundant supply of the best class of soil. In such a country the value of no article is deter- mined by its own cost, such value being influenced by the cost of all the products of industry in much demand. If no improvement during the last half century had been made in the spinning of cotton, or if the steam-engine had not yet been rendered available, profits in every country would have been lower than they are at present. In this case, those who now raise food, whether in a new or an old country, would have got fewer c2 20 VALUE. equivalents for their food than they now obtain ; that is, the value of such equivalents would be higher than at present, and consequently the value of food would now be proportionably lower than at present. In order to maintain a distinction between ex- changeable value, and what our writers are pleased to call real value, Mr. M'Culloch says: "A " given quantity of labour is not therefore to be " considered in the same light as a given quantity " of its produce, or of commodities ; for, whether ee the quantity of commodities produced by a " fixed quantity of labour does, or does not, vary, " the value of that quantity in the estimation of " the producer is necessarily constant; and he will " always be disposed to exchange it for an equal " quantity or the produce of an equal quantity of " other men's labour. Suppose an individual " could produce two pecks of wheat by a day's "labour in 1820, and that he can now produce " only one peck by the same expenditure of la- " bour; this single peck will be deemed by him, " and every one else, of exactly the same real value " that the two pecks were before ; for it has cost " the same amount of sweat and toil to raise it ; " and it will consequently exchange for, or buy the " same quantity of such commodities as continue " to be produced by equal outlays of labour as in " 1820, that the two pecks did then. This doctrine boldly makes the value of food VALUE. 21 independent of the seasons, or of the nature of the soil under culture; that is, of the productiveness of agricultural labour, as well as of that of all other labour. If, (as Mr. M'Culloch asserts), after agri- cultural labour has become 100 per cent, less productive, one peck of wheat becomes as va- luable as two pecks of wheat were before, it fol- lows that the rate of agricultural profits does not fall when it becomes necessary to cultivate an inferior soil. But the same Mr. M'Culloch admits, that the average rate of profits does fall when an inferior soil has to be cultivated I This gentleman, indeed, goes so far as to assert, that the average rate of profits depends wholly on the productiveness of agricultural labour ! Now, one of these proposi- tions may be true, but not both. If the one peck of wheat be as valuable as the two pecks, after agricultural labour has become 100 per cent, less productive, then agricultural profits do not fall when an inferior soil has to be cultivated ! But who is to say what is the quantity of pro- duce, obtainable by a day's labour, which is more entitled than any other to be called the real value of a day's labour ? Take the case of hunters and fishermen in an early stage of society, and say, if you can, what is the quantity of fish and game, the produce of a day's labour, which deserves to be called the hunter's and fisherman's real ivages. If each fisherman take daily on an average in one year seven pounds of fish per day, and in the next 22 VALUE. year takes daily only six pounds of fish, which of these weights is to be called his real day's wages ? Mr. M'Culloch would probably reply, that the seven pounds of fish is his real wages, and that the six pounds would exchange for as many equivalents as the seven pounds of fish had done before. But if this were justice to the fisherman, it would be injustice to those whose labour supplied the equi- valents of fish. The value of a raw product rises when more labour is required to produce it, but not so much as to indemnify those whose labour or capital procures it; because an indemnification to that extent to them, would be an injustice to those who raise the equivalents of such product. It is not surprising to find Mr. Ricardo talking of the real value of labour, as contra-distinguished from its exchangeable value, seeing that he ever maintained the exchangeable value of every com- modity, not under the influence of a monopoly, to be in the long run wholly determined by the quantity of labour bestowed upon it: and in order to support this doctrine, asserting that after the cost of A. is diminished, and its value has consequently fallen relative to B., the value of B. does not rise relative to A. This is erroneous, but consistent doctrine; but Mr. M'Culloch is inconsistent in admitting that the value of B. rises relative to A., when the value of A. falls relative to B. ; while still maintaining Mr. Ricardo's main doctrine, which asserts the value of every com- VALUE. 23 modity to be determined by the quantity of labour required to produce it. The value of food, it is clear, cannot rise in proportion as more labour is required to raise it without the value of its equi- valents proportionably falling, as well as the pro- fits of those who produce them ; and if so unless we are prepared to maintain that agricultural profits can remain higher than other profits the average rate of profits must fall when an inferior soil has to be cultivated ; and in this case the one peck of wheat is not so valuable as the two. Colonel Torrens denies that profit forms any part of the natural value of a commodity, whilst he admits that capital is required to produce it. If capital be necessary to production, profit must be necessary to production, as, without profits, capitalists must starve. Colonel Torrens omits to say what is the ground of distinction which he here so broadly takes between wages and profits. Capital is now as necessary to the production of most commodities as labour, and capitalists and their families have as much right to expect sub- sistence from their outlay of capital, as workmen have to expect subsistence for their labour. The general rate then of wages fluctuates as well as the general rate of profits; so that I perceive not on what ground the cost of labour is to be included in the cost of an article, and the profit on the capital employed upon it excluded from the amount of its cost. 24 VALUE. Colonel Torrens in one place declares it absurd to say the value of an article consists of its cost, while just before he had affirmed that in an early stage of society the exchangeable value of venison is just what it has cost ! It may be important to those, who maintain the natural value of a commodity to be equivalent with its cost, to be able to show that profit forms no part of cost, but it is nothing to me, because I repudiate such a doctrine. Unless it can be shown that the equivalents of corn are not charged with the profits of the capitalists who contributed to their production, the theory is false which asserts that profit forms no part of the value of a commodity. Capital consists of commodities, the exchangeable value of which consists, not only of their cost, but of the profits of the capitalists who produced them. Thus the farmer cannot get equivalents for his surplus produce, unless he consent to buy them charged with the profits of the capitalists who were engaged in their direct production, or in their transmission and sale as merchants or dealers. VALUE. 25 SECTION IV. I will now try to give the reader a clear view of what regulates the relative value of commo- dities, by selecting the case of a new country which as yet cultivates only its best class of soil, because this is the simplest point of view in which the subject can be regarded. I will sup- pose that such a country has abundance of rich mines of the same quality which any capitalist may purchase for a trifle, just in the same way that any capitalist may purchase good land for a trifle. In a country so situated, landed rents will not have been created except in and near large towns. Thus both mines and land will now only yield the average rate of profits. Let us then suppose no legal monopolies having been created that those who raise food, and those who raise its various equivalents, are obtaining the same rate of profits, and that this is 30 per cent. The agricultural surplus now is large, because the first class of soil only is under culture. How then is the relative value of food and its principal equi- valents in the long run determined? Why the capitalists who raise the equivalents of the agri- cultural surplus, in order to ascertain the value of their equivalents, add to their cost the profits of the capital expended, according to what is at the time the ordinary rate of profits. What is this ? 26 VALUE. How is its amount ascertained ? The value of an article say broad cloth, in food, is ascertained only, A. Smith and Malthus say, by the higgling of the market ; farmers trying to get as much as they can in exchange for their agricultural sur- plus, while those who raise its various equivalents try to give as few of them as they can for such surplus. But as we must conclude that farmers are neither better or worse salesmen than those with whom they have to deal, the final result of this higgling must be determined in the long run by some general principle. This principle is the indisposition of every one to remain in a business which yields, on an average of years, less profit than other businesses equally respectable and agreeable. The amount of the agricultural sur- plus depends on the quality of the soil, the nature of the seasons, and the skill and industry with which the soil is cultivated. The supply of the equivalents of such surplus is influenced by the abundance of the raw products of which they consist, as well as by the degrees of skill and industry with which they are manufactured ; but their value is not determined by these causes, or by the facility of raising them ; it is evidently much influenced by the amount of the agricultural surplus. The following circumstances tend to lower the exchangeable value of any specific quantity of food viz. a more than ordinary good season an VALUE. 27 increase of agricultural skill, or of agricultural industry an increased cost of any of the equi- valents of food ; but the influence of an increased cost of any equivalent of food is proportioned to the demand for such equivalent ; thus, though it matters little to agriculturists what is the value of a very rare luxury, it is of great importance to agriculturists what is the value in food of those equivalents which come under the head of ne- cessaries. The following circumstances then tend to raise the value of food viz. the being compelled to cultivate an inferior soil a bad season want of agricultural skill or agricultural industry abund- ance of the raw products required in manu- factures, and the employment of much manu- facturing skill and industry. The regular action of these causes is, however, frequently interrupted, for short periods, by the difficulty of exactly ad- justing the supply of any article of commerce to the demand for it. The influence of this diffi- culty on the relative value of commodities is like the disturbing force of friction on mechanical powers. In the long run, however, like variety of seasons, it affects not the relative profits of the capitalists engaged in production. Thus, though the difficulty of exactly adjusting the supply of an article to the demand often makes, for a short period, the relative value of an article depend more on the proportion which its 28 VALUE. supply bears to the demand for it, than to any other circumstance, yet in the long run the value of every article whose quantity can be increased sufficiently by additional labour is determined by the circumstances I have pointed out. Whatever may be in any country the productiveness of its agricultural labour, it is clear that the value of food in gold and silver is influenced by the quantity of those metals, and this principle applies to every equivalent of food. If the value of an article were determined by the quantity of labour required to produce it, so long as that quantity did not vary, such article would be at all times an invariable standard by which we might accurately measure the value of all other articles. As, how- ever, it is clear that when A. requires more labour to produce it, not only its own value is altered, but that of all the products for which it is ex- changed, though the cost of producing these has, in the mean time, undergone no change; it is evident that the exchangeable value of an article, though influenced, is not determined by the quantity of labour required to produce it. Thus an increase in the quantity of labour re- quired to produce one article, is a misfortune which falls not wholly on the capitalists who raise or produce it, but is one that is equally divided amongst every class of capitalists engaged in the business of production. If this were not the case, profits in the different fields of invest- VALUE. 29 ment open to all capitalists would not, as it is admitted they are, be always tending to a com- mon rate. SECTION V. Whatever be the amount of the agricultural surplus, it has to be divided amongst several capi- talists, but not in equal shares. Colonel Torrens admits this, but nevertheless asserts that the dealers, or merchants engaged in exchanging and distributing commodities, are entitled for every purchase and sale they make to as high a rate of profit as the capitalist directly engaged in pro- ducing the commodities. He says, " Having thus " shown the manner in which mercantile indus- " try aids the production of wealth, it will be " expedient to explain the way in which it affects " the exchangeable value of the articles it is em- " ployed to convey and to transfer. " As the products of equal capitals are equi- " valent, if a manufacturer and farmer, without " the intervention of a third party, were to barter " their respective commodities, dividing equally " the cost of carriage ; then one hundred quarters " of corn raised by the latter, with an expendi- " ture of subsistence for fifty labourers, would 30 VALUE. " exchange for one hundred yards of cloth fabri- " cated by the former, with a like expenditure. " But if the barter were conducted through the " intervention of a dealer or merchant, the case " would be otherwise, and the one hundred quar- " ters of corn would no longer exchange for the " one hundred yards of cloth. The merchant " must receive the customary rate of profit upon " his capital, which always consists first, of the " things necessary to transport and preserve the " goods in which he deals ; and, secondly, in the " goods themselves. Supposing that his whole " capital is equal to subsistence for one hundred " labourers, then the farmer, in exchange for the " one hundred quarters of corn which he had " raised with a capital of fifty days' subsistence, " would receive no more than fifty yards of cloth, " or one half of that which the manufacturer had " fabricated with a capital of fifty days' subsist- " ence ; while, in like manner, the manufacturer " would receive in exchange for his one hundred " yards of cloth only fifty quarters of corn, or " half the produce of the equal capital employed " by the farmer. The reason is obvious. Two " capitals, each consisting of fifty days' subsist- " ence, are engaged in the direct production of " commodities, and one capital, equal to the other " two, or consisting of one hundred days' subsist- " ence, is employed in indirect production, or in " aiding, by the establishment of the divisions of VALUE. 31 " labour, the effective powers of agriculture and " manufactures. Now as the law of competition " will necessarily equalize the profits of stock, the " goods obtained must go in proportional parts to "the capitals which, whether directly or indi- " rectly, contributed to their production ; and, " therefore, when the exchanges are perfected, " the farmer and the manufacturer, whose joint " capitals amounted to subsistence for one hun- " dred, will possess between them fifty quarters " of corn, and fifty yards of cloth ; while the " dealer, whose single capital was one hundred " days' subsistence, will have for himself fifty " quarters of corn, with fifty yards of cloth. " But this proportional distribution of products " amongst the several capitalists engaged in the " work of production could not take place, unless " the dealer obtained from the farmer one hun- " dred quarters of corn for fifty yards of cloth, " while from the manufacturer he acquired one " hundred yards of cloth for fifty quarters of corn. " Hence, in the hands of the dealer, commodities " acquire an additional exchangeable value, which " is totally distinct from that which is determined " by the amount of capital directly employed in " their production, and which is regulated by the " customary rate of profit on the capital em- " ployed, combined with the expense of carriage." Torrens, p. 170. Either Colonel Torrens is unacquainted with 32 VALUE. practical affairs, or he wrote without reflection. He says a corn dealer who purchases a farmer's corn in order to sell it, is entitled to as high a rate of profit as the farmer who raised the corn, if the dealer have as much capital as the farmer engaged in this transaction. Now this is over- looking the period during which these equal capi- tals are engaged. The farmer does not turn any part of his capital more than once in the year, while some of it is not turned more than once in two and three years ; while the dealer who buys his corn often turns his capital ten, twenty, and even thirty times in the course of a year. If a corn dealer turns his capital twice only in the course of the year, he is not entitled in each transaction to the same rate of profit as the farmer ; because this would be to give him vir- tually double the rate of profit obtained by the farmer, which no one supposes possible. I need not fatigue the reader by going into detail on this point, as it is understood by every practical man. A retail dealer is doubtless entitled to charge as high a rate of profit as the capitalist who sup- plies him with goods, if he do not turn his capital more frequently, and he has to charge a profit on the amount of stock that is usually in hand. Many of the best shops now, however, deal in ready money, or get usually paid at the end of three months. A great corn dealer often buys VALUE. 33 thousands of quarters of corn without keeping it more than a few days. Further on, Colonel Torrens says, " As one half " of the dealer's business will consist in ex- " changing with the manufacturer corn for cloth, " in this one half of his capital will be employed. " But when one half of the dealer's capital, or " fifty days' subsistence, is employed in con- " veying and offering for exchange a quantity of " corn raised by an agricultural capital of fifty " days' subsistence, then the corn thus offered " is, in fact, the product of capitals of one hun- " dred days' subsistence, and, consequently, will " be worth double the quantity of cloth fabricated " by a capital of fifty days' subsistence." Tor- rens, p. 174. I have quoted the above paragraph, to show that I did not erroneously interpret Colonel Tor- rens's meaning, when I said he overlooked the different periods of time for which capitals are frequently required by those who produce goods, and by those who only deal in them. 34 VALUE. SECTION VI. We have now to examine the effects of fluc- tuations in the rate of wages on the value of commodities. Mr. Ricardo says, " If men em- " ployed no machinery in production but labour " only, and were all the same length of time " before they brought their commodities to mar- " ket, 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 " respect to each other, from any cause but an " addition or diminution of the quantity of labour " necessary to produce one or other of them, yet " compared with others not produced with the " same proportionate quantity of fixed capital, " they would vary from the other cause also " which I have before mentioned, namely, a rise " in the value of labour, although neither more " nor less labour were employed in the produc- " tion of either of them. Barley and oats would VALUE. 35 " continue to bear the same relation to each " other under any variation of wages. Cotton " goods and cloth would do the same, if they also " were produced 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 corn, each of the " machines at the end of the year will be of the " same value as the corn, for they will each be " produced by the same quantity 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 " cloth, and the owner of the other machine to " employ his also, with the assistance of one " hundred men, in making cotton goods, while " the farmer continues to employ one hundred " men as before in the cultivation of corn. Dur- " ing 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, will be the result of the " labour of two hundred men, employed for a " year ; or rather of the labour of one hundred " men for two years ; whereas the corn will be D2 36 VALUE. " produced by the labour of one hundred men for " one year, consequently if the corn be of the " value of 500/., the machine and cloth of the " clothier together ought to be of the value of " 1000/., and the machine and cotton goods of " the cotton manufacturer ought to be also of " twice the value of the corn. But they will be " of more than twice the value of the corn, for " the profit on the clothier's and cotton manu- " facturer's capital for the first year has been " added to their capitals, while that of the farmer " has been expended and enjoyed. On account " then of the different degrees of durability 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 at 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 5,000/. capital " were employed, and profits were 10/. per cent., " the value of each of the machines as well as of " the corn at the end of the first year would be " 5,500/. The second year the manufacturers " and farmer will again employ 5,000/. each in " the support of labour, and will therefore again VALUE. 37 " 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 5,000/. employed on labour, but they " must obtain a further sum of 550/. ; for the " profit on 5,500/. which they have invested in " machinery, and consequently their goods must " sell for 6,050/. Here then are capitalists em- " ploying precisely the same quantity of labour <( annually on the production of their commo- " dities, and yet the goods they produce differ in " value on account 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 corn is " not of the same value as these commodities, " because it is produced, as far as regards fixed " capital, under different circumstances." Ri- car do, page 28, 3d edition. To state absolutely, as Mr. Ricardo here does, that equal capitals always on an average of years produce products of equal value, is a strange error. Throughout Europe every class of culti- / vated soil yields rent, or more than the ordinary rate of profits ; consequently the products of equal capitals invested in agriculture, and in the making a machine, have usually very different values, inasmuch as both rent and profit have to 38 VALUE. be obtained from the products of the soil, while only profits have to be obtained from manufactur- ing products. But what could Mr. Ricardo mean by here supposing no fixed capital invested in agricul- ture? I never heard of agriculture being car- ried on without fixed capital. The common im- plements of husbandry are fixed capital. Horses are fixed capital. Then a farm requires a resi- dence, outbuildings for farming purposes, and usually fences, gates, ditches, and drains. If the farmer be a tenant, the value of his produce must be such as enables him to pay his landlord a profit on all those things ; and if he be a pro- prietor, the value of his corn must enable him to pay himself a profit on such fixed capital. Mr. Ricardo afterwards tells us that the relative value of commodities is not likely to be much affected by fluctuation in the value of immediate labour ; but adds, " it is not so with the other " great cause of the variation in the value of " commodities namely, the increase or dimi- " nution in the quantity of labour necessary to " produce them. If to produce the corn, eighty " instead of one hundred men should be required, " the value of the corn would fall 20 per cent., or " from 5,500/. to 4,400/. If to produce the cloth, " the labour of eighty instead of one hundred men " would suffice, cloth would fall from 6,050/. to " 4,950/." Ricardo, p. 33, 3d edition. VALUE. 39 If the value of corn were necessarily to fall 20 per cent, when produced by eighty instead of by one hundred men, this would add 20 per cent, to the profits of the capitalists, who raise the equi- valents of corn, while the profits of landholders would not rise at all, but would be permanently 20 per cent, below the profit of other capitalists ! As no one however can be found prepared to maintain that two rates of profit can be long main- tained in respect to employments free to all capitalists to engage in, it is clear that this illus- tration of Mr. Ricardo's is based on a serious error. If the value of corn must fall 20 per cent, be- cause it costs 20 per cent, less to raise corn, the converse of the proposition must be true ; and the value of corn must rise 20 per cent, when it be- comes necessary to employ one hundred and twenty men to raise the quantity of corn which one hun- dred produced before on better land. This indeed was Mr. Ricardo's opinion ; but I have shown that the amount of labour employed in raising corn, though influencing, does not regulate its value ; for if it did, the value of corn would so rise when the second class of soil is taken into cultivation, as to make such soil yield as high a rate of profits as was obtained by the proprietors of the first class of soil before the second was cultivated. If the value of corn does not rise in proportion to the expense of raising it, neither does the value 40 VALUE. of its equivalents rise in proportion to the expense of raising them. If it were to require 20 per cent, more to raise a specific quantity of broad- cloth, its exchangeable value would not rise in that proportion, because this would be to main- tain the profits of the manufacturers of broad- cloth at the old level, while the profits of all other capitalists must fall, because all, in exchanging their products for broad cloth, would find their value fallen 20 per cent., and thus two rates of profit would be permanently established, and this while every master clothier would be able to get 20 per cent, more profit than capitalists en- gaged in any other class of business ! It is only necessary to state such facts to show the full ex- tent of the error which runs through the Ricardo theory of value. Observe that I no where look to the immediate result of a change in the cost of an article, but at the effect in the long run. SECTION VII. Having shown that labour, though recently embodied in a commodity, does not regulate its value, I now submit, that labour long embodied in a commodity has yet less influence on its value. The longer the soil of any country has been reclaimed, the greater is the change in its VALUE. 41 value, and in that of its products. In vain you tell me that the value of food keeps rising in old countries because less fertile soils have to be successively cultivated, unless you can show that this change in the value of food does not change proportionably the value of everything for which it is exchanged. The value of labour itself falls until it reaches its minimum rate, as less fertile soils are brought into cultivation, because as pro- fits fall, wages usually fall. But the very writers who maintain that labour long embodied in an article has the same value that it had before it was so embodied, maintain elsewhere, and justly, that whatever raises the value of immediate la- bour and there is no value which changes more frequently lowers the value of commodities pro- duced by machinery or anterior labour ; a fact irre- concilable with the theory that labour long em- bodied in an article possesses the same value as a like amount of labour recently embodied in one. Experience shows that the value of the most avail- able capital that of the precious metals for in- stance is ever fluctuating ; while that of fixed capital varies in a much greater degree. The value, indeed, of fixed capital is often wholly de- stroyed by incidents which spring up in the pro- gress of civilization and science. Thus those of our countrymen who had invested circulating ca- pital in roads, appealed in vain to the legislature 42 VALUE. for redress when canals were about to be formed ; and our canal proprietors opposed without success the formation of rail-roads ; and this on the same ground that these novelties threatened to de- stroy the value of their fixed capital in canals. The value of circulating, or available capital, employed on products that are quickly consumed, undergoes usually little change, save that of acquiring an additional value equal to the exist- ing ordinary rate of profits ; while the value of capital that has become fixed is usually exposed to much diminution from the effect of time, or from wear and tear. While, then, it is an error to suppose the value of a commodity regulated by that of the labour recently employed on it, it is a greater error to believe the value of a commodity regulated by the labour that has long been em- bodied in it. SECTION VIII. I shall now examine that doctrine, in the 7th section of Mr. Ricardo's chapter on value, that has occasioned so much controversy. He says : " It is according to the division of the whole " produce of the land of any particular farm be- " tween the three classes, of landlord, capitalist, VALUE. 43 " and labourer, that we are to judge of the rise or " fall of rent, profit and wages, and not accord- " ing 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 " obtained 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, in- " stead of being doubled, were only increased one ' ' half ; if rent, instead of being doubled, were only " increased three-fourths, and the remaining in- " crease 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 in- " variable standard, by which to measure the value " of this produce, we should find that a less value " had fallen to the class of labourers and land- " lords, and a greater to the class of capitalists, " than had been given before. We might find, " for example, that though the absolute quantity " of commodities had been doubled, they were " the produce of precisely the former quantity of 44 VALUE. " labour. Of every hundred hats, coats, and " quarters of corn produced, if " The labourers had before ... 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 conse- " quence 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 " corn. 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 " wages of the labourer should be found to have " fallen, it will not the less be a real fall, because VALUE. 45 " they might furnish him with a greater quantity " of cheap commodities than his former wages. " 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 capital, on which the variations of money " have as much effect as on the value of produce, " if his machinery, 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 " produced it which it did before, and conse- " quently profits will still be at the same rate. " If, at the same time that he doubles the " quantity 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 capital employed to produce it will " also be of twice its former money- value ; and u therefore in this case, too, the value of the pro* " duce will bear the same proportion to the value " of the capital as it did before ; and although " the produce be doubled, rent, wages, and pro- 46 VALUE. " fits will only vary as the proportions vary, in " which this double produce may be divided "among the three classes that share it." Ricardo, p. 47, 3rd edition. It is inconceiveable how Mr. Ricardo could thus talk of profits and rents simultaneously rising, seeing that rents cannot rise without pro- fits falling. To refuse to admit, as Mr. Ricardo here does, that wages rise when the labourer gets more equivalents for his labour, simply because the capitalist is getting higher profits, is equal to denying that wages and profits are both high in certain countries; or that if the quantity of a product that has to be divided between capitalists and their work-people is increased, the share of both these classes cannot also be increased. Oh, says Mr. Ricardo, it is not by the absolute quantity of produce obtained by capitalists and labourers that we can correctly judge of the rate of profits and wages, but by the quantity of labour required to obtain that produce ! Now, either this proposition is absurd, or, when an inferior soil has to be cultivated, and thus more labour is required to raise a specific quantity of corn, profits and wages do not fall. But it is notorious that profits and wages do then fall. Wages, Mr. Ricardo says, 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, VALUE. 47 " hats, money, or corn." Thus, according to this writer, the real value of an article is not what it will fetch, but the amount of labour and capital employed upon it. If the marketable value of a cer- tain quantity of labour be not the equivalents for which it will exchange, Mr. Ricardo should have told us what is the value of such labour ! Until it can be shown by those who maintain that the value of a day's labour is not what it will fetch, what is the value of such labour, this doctrine which pretends to distinguish real from actual wages is an idle sophism. According to Mr. Ricardo and his school, if in two countries we will call A. and B., each as yet cultivating only its best class of soil, the soil in A. is better than the soil in B., the labourers in B. will get as high wages; that is, their labour will be as valuable as that employed in A. ; because the labourers in B. make as great exertions as the labourers in A. In other words, though the richer soil of A. yields more food to a specific quantity of labour, and the labourer gets more food and more comforts than the labourer in B., real wages in A. are not higher than real wages in B. ! This sort of reasoning might have amused the schools of earlier times, but that it should so long have been received unquestioned in ours, is as strange as it is af- flicting. If the quantity of labour employed on any commodity alone determined its value, an increase 48 VALUE. of its quantity unaccompanied by any increase of the quantity of labour employed upon it would not be accompanied with any increase of national value. This is just what our writers maintain, and this naturally, if their doctrine of value be sound. " 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. necessary to give effect to la- " hour." " 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 produce 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 " increasing, and even while its value is actually " diminishing ; 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 in the proportional quantity of la- " bour 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, VALUE. 49 " which always depends on the price of food, " clothing, 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 demand for labour ; in proper- " tion to the work to be done will be the demand for " those who are to do it." Ricardo, p. 89, 3rd edition. Here, then, we find Mr. Ricardo frankly avow- ing in strict consonance, however, with his lead- ing principle of value that though the effect of economizing labour in the production of an article be an increase in the quantity of that article, yet that not only no increase of national value is the consequence, but that a diminution in the quan- tity of national value may follow a fall in the cost of an article ! According to this doctrine, when Sir Richard Arkwright enabled us to spin cotton wool with less labour, or at less cost, the aggre- gate value of British capital was diminished by that event! The value or price of calico cer- tainly fell per yard when its cost was reduced ; but so much more calico was made, that, after a time, the aggregate value of our calico was much increased by this diminution in its cost per yard. But had it been otherwise that is, had the consumption of calico not increased at all when its cost became diminished, even this event would not have been accompanied by any dimi- 50 VALUE. nution in the aggregate of British capital, be- cause in proportion as the value of calico fell per yard, that of the commodities for which it was exchanged must have risen. If corn in any country were to be produced at less cost, its value per bushel would fall, but the value of the equivalents of corn would pro- portionably rise. But the certain consequence of diminishing the cost of corn per bushel would be a more rapid increase of the quantity of bushels annually produced, while this would beget a pro- portionate annual increase of the quantity of its equivalents, or of the commodities for which it is exchanged, and from this increase of food and its equivalents proceeds an increase in the sum both of national wealth and national value. If, on the other hand, more labour were to be required to produce a specific quantity of any of the equivalents of food, no increase of national value would result from such event, because in proportion as the cost and consequent value of any one commodity rises, in relation to others, the value of such others must proportionably fall. VALUE. 51 SECTION IX. If labour had what Mr. Ricardo calls a real value, distinct from its exchangeable or market- able value, this real value of labour would be absolute having no reference to the proportion which the supply of labour bears to the de- mand, a proposition which he did not venture to maintain. If the doctrine propounded towards the end of the paragraph I have just quoted from Mr. Ri- cardo were sound, investments for capital would be equally abundant in all countries, and equally profitable in other words, labour in all countries must be equally productive to be equally profit- able. It is one thing to say that " in proportion " to the work to be done will be the demand for " those who are to do it;" and another and very different thing to show that " in proportion to the " increase of capital will be the increase in the " demand for labour." The aggregate amount of capital in a nation may continue to increase, while the ordinary rate of profits continues to fall. Then a great portion of our producing capitalists are parsimonious, and thus an immense amount of capital is annually accumulated in this country out of the annual savings of these persons. Still the increase in the demand for labour does not keep pace with the increase of capital, while the E 2 52 VALUE. rate of profits continues to fall. The aggregate of British capital continues to increase, while the average rate of British profits continues to fall, and thus the demand for labour has fallen much below the supply of labour. Let us suppose two countries, A. and B. ; colo- nized at the same time, and under precisely the same circumstances, excepting that the soil in A. is more fertile than the soil in B. Com- mencing, then, with equal amounts of capital and labour, according to the terms of my pro- position, more food would be produced in A. than in B. Granted, cries Mr. Ricardo; but this additional food in A. not being the product of more labour than is required to produce the smaller quantity of food in B., this smaller quan- tity in B. would be as valuable as the larger quantity of food in A. ! But I have shown that the smaller surplus of food produced by an infe- rior soil does not acquire so great a value as the larger surplus of food obtained from a superior soil. I have shown that agricultural profits could not fall, if the produce of an acre of inferior soil was as valuable as the produce of an acre of su- perior soil, while it is admitted on all hands that agricultural as well as all other profits do fall when it becomes necessary to cultivate an infe- rior soil. If, then, the value of the smaller quan- tity of produce which an inferior soil yields is less than the value of the larger quantity of pro- VALUE. 53 duce which a superior soil yields to the same amount of labour and capital, profits would be higher in A. than in B., and if so, wages would be higher, or labour more valuable in A. than in B. There is nothing which has so much influence on the value of labour in a country as the or- dinary rate of profits, which I have already shown to be determined by the productiveness generally of labour. In old countries, however, which are thickly peopled, the value of labour is greatly influenced by the degree in which the working classes are civilized. This is practically illustrated in Ire- land, where, with a soil much superior to that of England, wages are lower than in England. The value of labour in Ireland is extremely depressed by the low civilization of its people. If the quantity of good soil in England were to be increased to-morrow, English labourers would only be benefited while their numbers remained below the new demand ; but their supply would soon again exceed, as now, the demand, and then wages would fall to their pre- sent level. The proportions, in short, into which the produce of labour and capital are divided between labourers and their employers depends in old countries very much on the degree in which the labouring* classes are civilized. When they 54 VALUE. are provident, and have been from infancy accus- tomed to decent comforts, they will marry late rather than early, and by doing so will obtain higher wages, while capitalists must then be con- tent, in consequence, to get lower profits. SECTION X. The Influence of Time on Value. Some rather idle discussion has had place re- lative to the influence of time on value. The author of the " Dissertation " says : " To these " causes we may add the effect of time on value. " If a commodity take more time than another " for its production, although no more capital and " labour, its value will be greater. The influence " of this cause is admitted by Mr. Ricardo, but " Mr. Mill contends, that time can do nothing ; " ' How then,' he asks, ' can it add to the value ? ' " ' Time/ he continues, ' is a mere abstract term. tf ' It is a word, a sound. And it is the very same " ' logical absurdity to talk of an abstract unit " ' measuring value, and of time creating it.' ' On these idle remarks of Mr. Mill, the author of the " Dissertation" observes : ff VALUE. 55 " The alleged absurdity, however, will dis- " appear, if we recur for a moment to the mental " operation implied in every creation of value. " The time necessary to produce a commodity " may, equally with the requisite quantity of " labour, be a consideration which influences the " mind in the interchange of useful or agreeable " articles. We generally prefer a present plea- " sure or enjoyment to a distant one, not superior to it in other respects. We are willing, even at " some sacrifice of property, to possess ourselves " of what would otherwise require time to pro- " cure it, without waiting during the operation ; " as of what would require labour, without per- " sonally bestowing the labour. If any article " were offered to us, not otherwise attainable, " except after the expiration of a year, we should " be willing to give something to enter upon the " present enjoyment. On the part of the capi- " talist, who produces and prepares these articles, " the time required for the purpose is evidently a " consideration which acts upon his mind. If " the article is wine, he knows that the quality is " improved by keeping; he is aware that the " same excellence cannot be imparted to any " wine, without the employment of capital for an " equal period ; and that people will be found to " give him the usual compensation rather than <4 employ their own capitals in producing a similar 56 VALUE. " result. Thus time is really a consideration " which may influence both buyers and sellers ; " nor is it necessary here to enter into any meta- " physical inquiry into its nature in order to prove " its effects." Critical Dissertation, p. 217. This is a striking specimen of the errors into which a clever but wholly metaphysical mind can fall. The writer had before him the notions of A. Smith and Mr. Malthus, who tell us the value of a commodity is determined by the higgling of those who attend the markets. Mr. Mill says, the value of an article is not increased by the grower having to house it a year in order to bring it to maturity, unless more labour be employed upon it, thus overlooking the different effects on the value of an article arising from the more or less of time the capital incorporated in it is occupied. To talk, as the author of the " Dissertation" and other writers do, of the value of commodities being influenced by certain mental operations, is in the last degree puerile. A. Smith would have us believe that those who buy and sell, when arrived in the market, enter into a calculation of the cost of the articles they purchase. A man may know what the commodities cost which he has produced, but what can he know of the cost of the commodities he buys. All that a trades- man can do is to retire from a business he is car- VALUE. 57 rying on in the best manner so soon as he finds it essentially less profitable than other businesses. If he does not take this course, additional capital will be withheld from such a business till it yields the ordinary rate of profits. A man's profits are influenced by seasons, by fashion, and by the supply of his commodities being well or ill adjusted to the demand; but these events have but a slight influence upon the ordinary rate of profits in any country on an average of a few years. The ordinary rate of profits is, on an average of a few years, deter- mined by the more or less facility with which the products of commerce are raised. The difficulty., however, of accurately adjusting the supply of articles in general use to the demand,, prevents profits from ever arriving at one common level ; whilst the influence of competition in respect to products whose supply can be increased to any extent by additional labour renders it impossible, as respects the capitalists who produce them, for one of them to get for any length of time a higher rate of profits than others. Mr. Ricardo says : " In Mr. Malthus' in- " quiry into the nature of rent he says that " independently of irregularities in the currency " of a country, and other temporary and acci- " dental circumstances, the cause of the high " comparative money price of corn, is its high 58 VALUE. " comparative real price, or the greater quantity " of capital and labour which must be employed " to produce it." " This/' observes Mr. Ricardo, " I apprehend, " is the correct account of all permanent variations " in price, whether of corn or of any other com- " modity. A commodity can only permanently " rise in price, either because a greater quantity " of capital and labour must be employed to " produce it, or because money has fallen in " value ; and, on the contrary, it can only fall in " price, either because a less quantity of capital " and labour may be employed to produce it, or " because money has risen in value." Ricardo, p. 507, 3rd edition. Now, putting money out of the question, and consequently the word price, see what this ad- mission amounts to. Why that if calico were to become more valuable owing to a defective crop of cotton, the things for which calico was exchanged would fall in value ! Here, then, out his own mouth we have a condemnation of his theory of value. But if his last observations were on the whole just, we should be unable to account for the high price of manufactures in new countries. Manufactured articles are dear in new countries, not merely because labour is there dear, but because profits are there high, and they are high because food the great necessary VALUE. 59 of life is cheap, and food is there cheap because agricultural labour is highly productive. I need say no more on the subject of value, yet I cannot take leave of it without a word in reply to Mr. Ricardo's strange assertion, that " the relative " value of any two commodities is determined by the " relative quantities of labour embodied in them." This is really preposterous, seeing that different classes of labour obtain at all times wholly different rates of wages. " Oh," says Mr. Ricardo, " but the " estimation in which different qualities of labour " are held, comes soon to be adjusted in the " market with sufficient precision for all practical " purposes, and depends much on the comparative " skill of the labourer, and the 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." Ricardo, p. 13, 3rd edition. Admitting this, the fact remains untouched, that the relative quantity of labour embodied in different bodies does not determine their relative value. But I do not admit his fact, I deny that the relative value of the different classes of labour has been long adjusted. It is, on the contrary, frequently varying. 60 VALUE. Throughout this discussion respecting the re- lative value of commodities taxes have never been once alluded to, yet we all know that taxes exist in every civilized country, and that they cannot exist without affecting the relative value of com- modities. 61 CHAPTER II. PROFITS. SECTION I. THE reader as he proceeds in this chapter will find how intimately it is connected with that which preceded it, and how impossible it is to understand the theory of profits without first fully comprehending that of value. If for the sake of simplification we for the present leave out of view the influence of taxation on value, it is apparent in such case that the value of an article is the cost of its production added to the profits of the capi- talists engaged in such production. I need not add that the profit part of the value of any article is that portion of its value which remains after the producing labour has been paid for. From these admitted facts, Mr. Ricardo rushed to the conclu- sion, that in the absence of taxation, the average rate of profits is determined by the average rate of wages, and that consequently profits cannot rise without wages falling, or profits be high without wages being low; thus overlooking the 62 PROFITS. productiveness of labour. Mr. M'Culloch is com- pelled to admit that the average rate of profits is influenced by the productive power of labour; but in doing so he impugns Mr. Ricardo's theory of value, while he, Mr. M'Culloch, still persists in affirming that theory to be just; for it is clear that the value of a commodity cannot be influ- enced by the productiveness of the labour that produced it, and yet be determined by the quantity of that labour. If the quantity of labour em- ployed on a steam engine determined its value, it would also determine the rate of the manufac- turer's profits; thus rendering that rate indepen- dent of the nature of the soil from which the most important of all the equivalents of steam engines is derived. It is however clear that manufac- turers get more food in exchange for their goods in a country whose soil is fine and plentiful all other things being equal than in one whose soil is either indifferent or scarce. All admit that when more labour is required to raise food, its exchangeable value rises. The profits then of those who make steam engines must fall when the cost of raising food becomes enhanced. No one can attentively read Mr. Ricardo's observations on profits without perceiving how much he is embarrassed by his theory of value. He says: " Supposing corn and manufactured " goods always to sell at the same price, profits " would be high or low in proportion as wages PROFITS. 63 " were low or high. But suppose corn to rise in " price because more labour is necessary to pro- " duce it, that cause will not raise the price of " manufactured goods in the production of which " no additional quantity of labour is required. If " then wages continue 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." JBicanfo, p. 108. I submit that though wages should not rise, the profits of manufacturers cannot remain the same if the price of corn rise from the cause stated; because a rise in the value of corn supposes a proportionate fall in the value of the equiva- lents of corn, and this could not happen without the profits of manufacturing capitalists falling. But the value of food will only rise in the long run to that point which readjusts profits, ren- dering the production of food as profitable, but not more so, than the production of its principal equivalents. Thus, the value of a steam engine, and the profit of the maker, fall when the value of food rises, though the quantity of labour required to make the engine remains undiminished. The price of labour has no real bearing on this ques- tion, seeing that a rise of wages equally affects the value of all goods produced by equal quantities of immediate labour; but it was uncandid in Mr. 64 PROFITS. Ricardo to assert absolutely that the price of labour will rise with the price of corn, seeing that in another place he admits the price of labour does not always rise with the price of corn. But it matters not what his opinion on this point was, as it is notorious that the price of labour is often highest in countries where the price of food is lowest. It is too admitted that when it becomes necessary in any country to cultivate an inferior soil, the average rate of profits falls ; thus the profits of those who cultivate the inferior soil par- take of this depression ; consequently the value of food then does not rise in proportion to its increased cost; in other words, farmers are not compensated, as Mr. Ricardo asserts them to be, for having to cultivate an inferior soil. To prove yet more clearly Mr. Ricardo's opinion on this point, I will now quote what he says in the third page of his chapter on profits. " If both " the manufacturer and farmer employed ten " men, on wages rising from 24/. to 25/. per annum " 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 manufac- " turer to obtain the same quantity of commodi^ " ties; but the farmer on new land would probably " be obliged to employ an additional man, and " therefore to pay an additional sum of 25/. for " wages; and the farmer on the old land would PROFITS. 65 " be obliged to pay precisely the same additional " sum of 25/. for rent; without which additional " labour, corn would not have risen, nor rent have " been increased. One will, therefore, have to " pay 2751. for wages alone, the other, for wages " and rent together; each 251. more than the manu- " facturer: for this latter 251. the farmer is com- " pensated 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 " further to elucidate it."Ricardo y p. 109, 3rd edition. If the farmer is compensated for having to em- ploy an additional labourer by an increased price of his produce one equal to an additional 251. expended on labour, out of what fund is that sum to be drawn, seeing that in the absence of different rates of profit, it can neither be taken from those who raise food, nor from those who raise its equiva- lents? Again, I repeat, the value of food cannot rise without the value of its equivalents propor- tionately falling; so that the farmer cannot be compensated unless he throw the expense of this additional labourer on those capitalists who pro- duce the equivalents of food. If the farmer is compensated for having to pay 251. more for raising a specific quantity of corn, this article must rise in price to that extent, but this would F 66 PROFITS. be to create two rates of profit in businesses open to any capitalists to enter; which is an absurdity, and an admitted absurdity. Mr. Ricardo thus goes on : " It has been al- " ready remarked, that if the labour of ten men " will, on land of a certain quality, obtain 180 " quarters of wheat, and its value be 4/. per " quarter, or 720/. ; and if the labour of ten addi- " tional men will on the same or any other land " produce only 170 quarters in addition, wheat " would rise from 4/. to 4/. 4*. Sd. ; for 170, 41. to " 4/. 4s. Sd. In other words, as for the 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/. 4s. Sd. In the same manner it might " be shown, that if the labour of ten additional " men would only produce 160 quarters, the price " would further rise to 4/. 10s. ; if 150, to 4/. 16s., " &c. &c." Ricardo, p. 110, 3rd edition. After this no one can doubt that Mr. Ricardo went the length of affirming that the price of corn always rises in proportion to the increase of its cost. But if such were the fact, agricultural pro- fits could never fall, however poor the soils brought into culture ! In the same strain he thus proceeds : PROFITS. 67 . " But when 180 quarters were produced " on the land paying no rent, and its " price was 4/. per quarter, it is sold "for 720 " And when 170 quarters were produced " on the land paying no rent, and the " price rose to 4/. 4s. 8d., it still sold "for 720 " So 160 quarters at 41. 10*. produce . . 720 " And 150 quarters at 4/. 16s. produce the " same sum of 720 " Now it is evident, that if out of these equal " values, the farmer is at one time obliged to pay " wages regulated by the price of wheat at 4/., " and at other times at higher prices, the rate of " his profits will diminish in proportion to the rise " in the price of corn. " In this case, therefore, I think it is clearly " demonstrated that a rise in the price of corn, " which increases the money wages of the la- " bourer, diminishes the money value of the "farmer's profits." Ricardo, p. Ill, 3rd edi- tion. Now Mr. Ricardo held that a rise of wages is not followed by a rise in the price of commodities; for, says he, a rise of wages is ever general, or not confined to one class of production. It is not * 2 68 PROFITS.. then on the ground of a rise of wages that the price of food can be enhanced. The quantity of currency remaining the same, the price of food can only rise, according to Mr. Ricardo, because more labour is required to raise a specific quantity of food; but if the price of food is to rise so as to compensate the farmer for its increased cost, this must be at the expense of those capi- talists who raise or obtain the equivalents of food ; thus creating two rates of profits in businesses open to all capitalists to enter ; a state of things which it is admitted on all sides could not occur or occurring, could not continue. Mr. Ricardo immediately afterwards thus pro- ceeds: " It will be seen, then, that whatever " rise may take place in the price of com, in con- " sequence of the necessity of employing more " labour and capital to obtain a given additional " quantity of produce, such rise will always be " equalled in value by the additional rent, or " additional labour employed ; so that whether "corn sells for 4/., 4/. 10*., or 51. Zs.'IQd., the " farmer will obtain for that which remains to " him, after paying rent, the same real value. " Thus we see, that whether the produce be- " longing to the farmer be 180, 170, 160, or 150 " quarters, he always obtains the same sum of " 72,01. for it ; the price increasing in an inverse " proportion to the quantity. PROFITS. 69 " Rent, then, it appears, always falls on the " consumer, and never on the farmer ; for if " the produce of his farm should uniformly be " 180 quarters, with the rise of price, he would " retain the value of a less quantity for himself, " and give the value of a larger quantity to his " landlord ; but the deduction would be such as " to leave him always the same sum of 720/." Ricardo, p. 112, 3rd edition. Here then is a distinct and absolute declara- tion that rent, or an enhanced cost of food, falls not on profits. If this doctrine be sound, it must equally apply to the principal equivalents of food. Thus, if the costs of all, or any, of the principal equivalents of food, were also to be enhanced, profits would not fall ; the whole burthen of the increased cost would fall on the consumers ge- nerally; and thus profits in a country abounding with the best class of soil would not be higher than in one possessing an inferior soil, and thus profits in an old and densely peopled country, compelled to cultivate poor soils, would be as high as in a new country still possessing plenty of the best class of soil ; for Mr. Ricardo admits, that the average rate of profits in a country does not depend on the absolute supply of its available capital. Putting then taxation out of view, what can determine the ordinary rate of profits but the productiveness of the labour that raises the com- 70 PROFITS. modities in general demand ? No, says Mr. Ri- cardo, the average rate of profits has nothing to do with the productiveness of labour, for we see in the case of corn that the farmer has always the same fixed amount with which to pay profits and wages ! Surely, absurdity cannot be carried further than this ; and yet it relates to the basis of the whole science of political economy, and has hitherto passed current. In his anxiety to develope fully his doctrine, Mr. Ricardo thus goes on : " It will be seen, too, " that in all cases, the same sum of 7201. must " be divided between wages and profits. If the " value of the raw produce from the land exceeds " this value, it belongs to rent, whatever may be " its current. If there be no excess, there will " be no rent. Whether wages or profits rise or " fall, it is this sum of 7201. from which they " must both be provided. On the one hand, " profits can never rise so high as to absorb so " much of this 7201. that enough will not be left " to furnish the labourers with absolute neces- " saries ; on the other hand, wages can never rise " so high as to leave no portion of this sum for " profits." Ricardo, p. 113, 3rd edition. The error here consists in supposing, that the rate of rents can essentially rise while the same sum or the 7201. remain for division between the tenant and his labourers. On the contrary, PROFITS. 71 the sum which remains to be divided between profits and wages be the produce of the superior soil what it may, is reduced whenever an inferior soil is taken into cultivation ; and is determined, not by the fertility of the superior soil, but by that of the inferior one ; so that those who cultivate this, may for doing so get as high a rate of profits as the tenants who cultivate best soil ; or any other class of capitalists. But may I not here ask, what it was that gave to a certain quantity of food the value of 7201. ? The cost of the food ? No ; because the price of the food is never identical with its cost, and is influenced as much by the cost of other things as by its own cost. What then regulates the rate of such profits? Until the Ricardo school answer, and answer correctly, this question, it cannot tell us what determines either value, or the average rate of profits, and when it does answer it cor- rectly it must reject Mr. Ricardo's doctrines of value, profits, and rent. " In the natural advance of society, the wages " of labour will have a tendency to fall, as far as " they are regulated by supply and demand ; for " the supply of labourers will continue to increase " at the same rate, whilst the demand for them will " increase at a slower rate. If, for instance, wages " were regulated by a yearly increase of capital, " at the rate of 2 per cent., they would fall when " it accumulated only at the rate of 1^ per cent 72 PROFITS. " They would fall still lower when it increased " only at the rate of 1 or \ per cent., and would " continue to do so until the capital became sta- " tionary, when wages also would become sta- " tionary, 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 commodities on which they are expended." Ricardo, p. 95, 3rd edition. The price of labour cannot be regulated by the supply of, and demand for labour, if it be regu- lated, as Mr. Ricardo here asserts, by the prices of the commodities on which it is expended. The price of a thing may be influenced by seve- ral circumstances, but while so influenced, it cannot be regulated by one of them. It is noto- rious that the price of labour is not determined by the price of food, labour being often dearest in countries where food is cheapest ; while the price of labour is low where the price of food is high. The price of labour is clearly influenced both by the proportion which the supply of labour bears to demand ; and by the degree in which labour is productive in every great class of pro- ductive industry. Immediately after, Mr. Hicardo thus proceeds : " As population increases, these necessaries will PROFITS. 73 " 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 wages were " expended rose, the labourer would be doubly " affected, and would be soon totally deprived of " subsistence." Ricardo, p. 96, 3rd edition. Labourers cannot continue to get less money wages than suffice for the bare subsistence of their families; but it does not follow because wages cannot permanently descend below the lowest point in the scale, they cannot perma- nently fall below higher points of such scale. On the contrary, recent history proves that the rates of wages are very different in new and old coun- tries ; and we have every reason to believe that the labourers in North America will, for ages to come, enjoy much higher wages than those of Europe. When the productive power of agricul- tural labour continues to fall, there is no limita- tion to the fall of wages, save that of the quan- tity of food and necessaries absolutely required for the bare subsistence of the people; or that high civilization that makes the supply of labour better accommodate itself to the diminished de- mand. The same principle applies to profits. As well might we say that because profits cannot long fall below the point compatible with the decent subsistence of capitalists and their fami- lies, profits cannot fall at all ; this being to assert 74 PROFITS. that profits must ever be high; which is just what Mr. Ricardo does say respecting wages, when he is pressed in the defence of his theory of profits. Compelled, however, to admit that wages may fall, or money wages not rise, when the price of food rises, he tries hard to shield his doctrine of profits from the pressure of this fact. "It may be " said 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 neces- " sary consequence, as the labourers may be con- " tented 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 reduction. If " so, the fall of profits may be checked ; 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 occa- " sioning or having been preceded by a rise in " wages." Ricardo, p. 117, 3rd edition. This is backing out of his former reiterated proposition, " that the price of labour is deter- " mined by the price of food." To state that a rise in the price of food must sooner or later raise the money price of labour, is only to say that the price of food may influence the price of labour ; PROFITS. 75 but so long as wages are found in new countries very high where food is very cheap, and low in old countries where food is dear, we are not jus- tified in asserting that the price of labour is determined by that of food or that a rise in the price of food must be attended by a rise in the price of labour. It is obvious that when there is less food to exchange for its equivalents, there is less food to divide between the capitalists and their work- people who produce those equivalents ; and there- fore though the price of labour should not rise at all, the rate of profits must fall when the price of food rises owing to more labour being required to raise it. Sincerely do I wish that facts corresponded with Mr. Ricardo's theory, or that the rate of wages was always determined by the price of necessaries ; but I need but to refer to the evidence of Mr. Ricardo to show how entirely facts are opposed to this theory. It is notorious that wages, as well as profits, gradually fall from a very high to a very low rate, as infe- rior soils are successively cultivated. Admit- ting then, in his chapter on wages, that they may not rise at all when the price of food rises, it was surely undesirable to complicate unneces- sarily the question of profits with that of wages. In the present case it was unpardonable, because 76 PROFITS. Mr. Ricardo maintains that a rise of wages does not enable a capitalist to raise the price of his products. Mr. Ricardo, then, has brought for- ward no reason whatever for showing that when a farmer has to pay 25/. a year additional for having to employ an additional labourer, he can be compensated by raising the price of his pro- ducts to that extent, seeing that this would give to farmers a higher rate of profit than is obtain- able by other producing capitalists. Mr. Ricardo' s theory of profits, then, amounts to this that however diminished the productive power of agricultural labour has become, there is the same amount of produce to divide between the farmers and their labourers. If this were true, it must be equally true, that after the pro- ductive power of agricultural labour has become ever so much diminished there is the same quan- tity of food to divide between the master manu- facturer and his workpeople as there was before the productive power of agricultural labour be- came diminished ; because it is admitted on all hands that profits are ever tending to one level, and Mr. Ricardo and his followers maintain that when the price of labour rises, it rises equally in all branches of production. Now what is this but asserting that w r hen a specific quantity of labour produces less food that is, when the supply of food bears a less pro- PROFITS. 77 portion to demand, there is as much food for the mass of the people as there was when the supply of food bore a greater proportion to the demand ? for we must recollect that whatever be the rate of profits, if profits were paid in food, the capi- talists and their families to whom such food is first paid could consume themselves directly but a small portion of it. " Rent then, it appears, always falls on the " consumer and never on the farmer; for if the " produce of his farm should uniformly be 180 " quarters, with the rise of price he would retain " the value of a less quantity for himself, and " give the value of a larger quantity to his land- " lord, but the DEDUCTION would be such as to leave " him always the same sum of 720 ! ! Ricardo, p. 113, 3rd edition. If a tenant hold land which uniformly produces 180 quarters, or any other fixed quantity, the effect of the country being compelled to cultivate an inferior soil is to raise this tenant's rent, and to lower his own profits, unless it is to be contended that he can continue to enjoy a higher rate of profits than other capitalists, and this in respect to a channel of investment open to any capitalist to enter. Either this absurdity must be main- tained, or the equal absurdity must be contended for, that the profits of those who raise the equiva- lents of food do not fall when the value of food rises from its cost being increased. Or, is it to be 78 PROFITS. contended, that those who cultivate an inferior soil are content to get a lower rate of profits than the tenants who cultivate the superior soils? In this case, the price of food would rise in proportion to the cost of raising it, thus throwing all the loss of profit, resulting from the increased cost of food, on the capitalists who produce the equivalents of food, and thus establishing permanently two rates of profit one for farmers and another for all other capitalists! As Mr. Ricardo was not prepared to go this length, his theory of profits has nothing to rest on. Mr. Ricardo persists to the last in contending that profits cannot fall unless wages rise. It is however clear, that capitalists cannot cultivate an inferior soil, or one that yields less produce to a specific quantity of labour, than the soil or soils previously cultivated, and yet receive the old rate of profits ; because it is admitted, that farmers cannot secure for themselves a higher rate of profits than other capitalists, by throwing the whole loss, resulting from the country being compelled to cultivate an inferior soil, on the capitalists who raise the equivalents of food. To some readers, I fear, I am repeating principles ad nauseam, but I trust in being excused, when it is recollected how great a reputation Mr. Ricardo acquired, and how long his doctrines have remained unquestioned. In another place, Mr. Ricardo says: "Thus PROFITS. 79 " 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 " necessaries for the labourers on that land, or " with that capital which yields no rent." Ri- cardo, p. 128, 3rd ed. Now, he had just before said that the sum a tenant has to divide between himself and his labourers is ever the same, consequently that his profits are not diminished so long as the rate of wages does not rise. Supposing these wages not to rise when it becomes necessary to cultivate an inferior soil, how is the old rate of profits to be kept up, seeing that this inferior soil produces less surplus produce? If profits depended wholly on the cost of food on any soil, and not at all as is here substan- tially asserted on the cost of its most important equivalents, then, while a saving of agricultural labour must increase the average rate of profits, a saving of manufacturing labour would have no such effect! This is to deny that the average rate of profits is ever influenced by the productiveness of manufacturing and mining labour, or in short, by the cost of the principal equivalents of food. If this were true, the most important mechani- cal inventions for saving labour in the produc- tion of the various equivalents of food, would not, pro tanto y dimmish their cost, and thus not 80 PROFITS. increase the average rate of profits; a proposition which needs only to be stated to be rejected. Nothing can be more contradictory than Mr. Ricardo's two following propositions, placed as they are in juxtaposition: First "We have " seen that the price of corn is regulated by the " quantity of labour necessary to produce it, with " that portion of capital which pays no rent :" Secondly " IVe have seen too that all manufac- " tured commodities rise or fall in price, in pro- " portion as more or less labour becomes necessary " to their production." It is only necessary to substitute the word value here for price, to see at once the flat contradiction which the first of these propositions offers to the second; for, if the value of corn relative to its equivalents is determined by its cost, the value of the equivalents of corn relative to corn, cannot be determined by their cost, seeing that the value of corn cannot rise without that of its equivalents proportionately falling ; and this, though the cost of the equivalents is not in the meantime at all diminished. Once more I repeat, if the quantity of labour required to raise a specific quantity of food on the only soil under culture in a country, deter- mined there the value of food, that value would so rise, when an inferior soil is taken into cultiva- tion, as to enable such soil to yield as high a rate of profits as the first or superior class of soil did PROFITS. Si before the inferior one was brought into cultiva- tion. But this is obviously impossible so long as the supply of the inferior soil equals the demand, because the profits of those who cultivate it can- not exceed the ordinary rate of profits, and it is now admitted at all hands, that the ordinary rate of profits falls whenever an inferior soil is taken into cultivation. If, when it becomes necessary to cultivate in any country, its second class of soil, the value of food so rose as to enable that soil to yield as high a rate of profits as the first class of soil yielded before the second was brought into cultivation, the proprietors of the second class of soil would be getting a higher rate of profits than those who raised the equivalents of food, which every writer admits to be impossible so long as the supply of the inferior soil equals the demand, and can be bought by any one at a low price. Still the value of food rises when an inferior soil is brought into cultiva- tion, because without such rise, the ordinary rate of profits, or the value of the equivalents of food, could not fall ; whereas, it is admitted, that profits in all employments do fall when an inferior soil has to be taken into cultivation. Thus, though the value of corn rises per bushel when that of its equivalents falls, agricultural, as well as all other profits fall, when it becomes necessary to cultivate an inferior soil. So long as the supply of soil equals the demand, 82 1 110 FITS. food remains one of those commodities which can be increased in quantity by the application of additional labour, yet its value or price, even when not taxed, much exceeds that of the labour em- bodied in it. If the value of food, before the creation of rent, was determined by its cost, agri- culture could only then yield such an amount of produce as sufficed for the bare subsistence of the agricultural classes, and no other class that of fishermen excepted could exist. There would, in that case, be no class of society but that directly engaged in procuring its own food. An inferior soil could never be cultivated, if the best soil only sufficed to subsist those who cultivate it. As, how- ever, a fine soil yields a much greater amount of food than is required for the subsistence of the families connected with its culture, inferior soils can be cultivated ; for, though these yield a smal- ler surplus, or less profit than the superior soils, so long as the former yield a decent subsistence to the capitalists and labourers who reclaim and cultivate them, they are sure in the course of time to be cultivated. As what I have just stated is not disputed, the value of no one thing can be determined by its own cost, while such value is influenced by the cost of the things for which it is .exchanged. If the equivalents of food were always sold at their necessary price that is, for the cost of the labour bestowed upon them, plus so much profit as PROMTS. ,S3 yielded a bare subsistence to the capitalists and their families, the value of such equivalents could not permanently fall when an inferior soil is taken into cultivation; but profit being an ingredient of their value, and one that usually exceeds a mini- mum amount, it falls when an inferior soil has to be cultivated. The ordinary, or average rate of profits in a country, falling as population becomes more dense, and as the profits of a capitalist have to be added to the labour cost of his products, before we get at their value, this, though influenced, is not determined by the quantity of labour employed. The minimum value of every product that on which its continued production depends is what suffices to subsist those who take part in its pro- duction ; but there is no maximum either to the value of labour, or to that of profits, save that prescribed by the productiveness of labour. When the only land cultivated is of the highest class of fertility, the value of a specific quantity of food that is, of a bushel of corn, or a pound of meat, is usually low ; but the cultivator is amply compensated by the great quantity of bushels of corn and pounds of meat he obtains from a specific quantity of labour. In a new country, tolerably well governed, and where any one can buy good land for a trifle, we 1 find the rate of trading and manufacturing profits G2 84 PROFITS. very high ; while, in old countries, manufacturing profits are lower proving that the value of the equivalents of food is not determined by the quantity of labour bestowed upon them. Precisely the same thing happens in respect to food. Its value, like that of its equivalents, is influenced, but not de- termined even before the creation of landed rents by the quantity of labour bestowed upon it. The superior soil yielding a much greater amount of food than is required to subsist the agricultural classes, it is not necessary, when an inferior soil is taken into cultivation, that the value of food should so rise as to render the smaller surplus which it yields as valuable as the greater surplus obtainable from a superior soil. The value of food then, though influenced, can- not be determined by either the quantity or cost of the labour bestowed upon it, until the ordinary rate of profits has fallen to a minimum, or to that which is absolutely required for the subsistence of the landholders and their families. The culture of new and inferior soils stops only when its surplus pro- duce is insufficient to afford a decent subsistence to the capitalists. Below this point agricultural profits cannot fall, or falling to, cannot long continue at, it. The same principle applies to those who produce the equivalents of food ; they must be enabled to subsist by such commerce, or it will cease. PROFITS. 85 Doubtless if, while the productive power of labour remains unchanged, its price rises, such rise of wages is equivalent to a fall of profits. It needs no argument to bring us from such pre- mises to such conclusion, but this fact has no bearing on the question before us, which is this does an increase in the quantity of labour re- quired to produce an article in general demand, proportionably raise its price, and thus compen- sate the capitalists who employ that labour ? or, does the average rate of profits fall when more labour is required to produce a specific quantity of any commodity in general demand ? In trying to answer this question, I fear the repetition of the arguments I have indulged in may have wea- ried some readers, but they must recollect that others require to have subjects placed before them in every possible light ; while the great reputation of Mr. Ricardo, and the school of writers he founded, makes me desirous to render my objec- tions to their doctrines as clear as possible. If any reader does not yet see his way, let him observe the consequences which result from the converse of the last proposition. Let him sup- pose labour in some great branch of production to become more productive, as happened after Sir R. Arkwright had facilitated the spinning of cotton wool. Putting out of view the special advantages which for a short time Sir R. Ark- wright obtained by the aid of his patent, or legal 86 PROFITS. monopoly, cotton spinners have not, subsequently to that invention, obtained a higher rate of profits than other people. The additional profit obtained by spinning cotton twist at a less cost, was divided amongst the different classes who lived on profits, and by the consumers. The consumers living on fixed money incomes were benefited, because money rose in value in relation to calico. Let us keep this in view ; for if the increased profit which results from lessening the cost of a commodity cannot be exclusively enjoyed by the capitalists who produce it, so no single class of producing capitalists can be wholly compensated by a rise in the price of their goods when the labour em- ployed on them becomes less productive ! Mr. M'Culloch while admitting that the ordi- nary rate of profits is influenced by the productive power of labour will do well to explain how he can still cling to Mr. Ricardo's theory of value, which maintains the exchangeable value of every commodity to be determined by the quantity of labour required to raise it, and that while the value of food is thus determined by its own cost, that of the things for which it is exchanged is equally determined by their own cost. PROFITS. S7 SECTION III. Mr. Ricardo was the first to maintain that an increase in the price of iabour is taken out of profits, because a rise of wages being, according to him, always general, it is in vain that a producing capitalist tries to throw off the burthen of having to pay higher wages on other producing capitalists, seeing that these are all subjected to the same increase of charge. Now, in the first place, the rate of wages does not in any country tend to one level, the price of agricultural or unskilled labour being little af- fected by the alterations which are continually occurring in manufacturing wages. Then, there are some products into whose value little imme- diate labour enters. Thus, when manufactur- ing wages rise, while agricultural wages remain stationary events of frequent occurrence we cannot doubt that the value of manufactured products rises relative to that of agricultural products ; but not to such an extent as to com- pensate the manufacturing capitalists, because they could not be compensated, or escape wholly the effect of a rise of wages, unless they could obtain a higher rate of profits than other capital- ists in businesses open to all capitalists to enter, which all writers admit to be impossible. A 88 PROFITS. rise of manufacturing wages is followed by such a rise in the price of manufactured goods as keeps manufacturing profits as high but not higher than those obtained in other businesses. Whether then manufacturing wages rise, or agricultural labour becomes less productive, profits generally equally fall. The following is at first sight less objectionable than other of Mr. Ricardo's doctrines ; but a little reflection shows it to be equally unsound : "The " effects produced on profits would have been " the same, or nearly the same, if there had been " any 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 de- " mand more wages ; and whatever increases " wages necessarily reduces profits. But sup- " pose the price of silks, velvets, furniture, and " any other commodities not required by the la- " bourer, 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 ; silks and velvets are " not consumed by the labourer, and therefore "cannot raise wages." Ricardo, p. 118, 3rd edition. I submit that if landholders have to give more of their food, or of their money rents, for silks, P 110 FITS. 89 velvets, and furniture, they have less food or money to give for the other equivalents of food and money, and consequently, the profits of those who produce the other equivalents of food and money must fall. SECTION IV. Mr. M'Culloch, in his chapter on the " Cir- " cumstances which determine the average rate " of profits," says: " It will facilitate the acqui- " sition of clear and precise ideas respecting the " circumstances which determine the average rate " of profit in different employments, as that term " is commonly understood, if we confine our atten- " tion in the first place, to those that determine " profits in agriculture, both because the latter ' ' admit of being accurately measured, and because " they may be taken as representing profits in " other businesses. Agriculture is a branch of in- " dustry that must be carried on at all times, and " under all circumstances ; but it would not be " carried on, if it did not, on an average, yield as " great a return to the capital vested in it as other " businesses; nor would these other businesses be " carried on, if they yielded a less return than is 90 PROFITS. " derived from agriculture: it necessarily follows, " therefore, that the returns obtained from agri- " cultural industry, or agricultural profits, may, " in ordinary cases, be considered as identical " with the returns or profits obtained from other " businesses. Whenever, for example, the ave- " rage return to an outlay of capital or labour " worth 100 quarters of wheat, employed in the " cultivation of the soil, amounts to 110 quarters, " we may safely infer that 100/. employed in manu- " factures is also yielding 110/. : for a regard to " their own interest will not permit those engaged in " such departments to prosecute them for less profit " than is obtained in agriculture; and the compe- " tition of the agriculturists will not permit them " to obtain more." " Taking then, as we are entitled to do, agricul- " tural profits as a standard of all other profits, " let us suppose that a landlord employs a capital " equal in value to 10,000 quarters, or 10.000/., " in the cultivation of an estate; that he expends " 5,000 quarters, or 5,000/. of this capital in seed, " in the keeping of horses, and in defraying the " wear and tear of implements and machines; " and 5,000 quarters, or 5,000/., in paying the " wages of his labourers. Suppose, now, that the " return obtained by this landlord is 1 2,000 quar- " ters, or 12,000/., of which 10,000 quarters or " 10,000/. go to replace his capital, and 1,000 " quarters, or 1,000/. to pay his taxes, and 1,000 PROFITS. 91 " quarters, or 1,000/. as profits, being ten per cent. " on the capital employed. It is plain from this " case, (and this case is, in point of principle, the " actual case of all cultivators,) that the rate of " profit may be increased in three but only " in one or other of three ways, viz. (1) by a " fall of wages, (2) a fall of taxes, or (3) an in- " creased productiveness of industry." " Thus, it is obvious, (1) that if wages were " reduced from 5,000 to 4,000 quarters, profits, " supposing other things to be invariable, would " be increased from 1,000 to 2,000 quarters, or " from 10 to 20 per cent. : if, (2) the burden of " taxation were reduced from 1,000 to 500 quarters " profits would be increased from 1,000 to 1,500 " quarters, or from 10 to 15 per cent. : and, if (3) " owing to the introduction of an improved sys- " tern of agriculture, the return to a capital of " 10,000 quarters were increased from 12,000 to " 13,000 quarters, profits, supposing wages still " to amount to 5,000 and taxes to 1,000 quarters, " would be increased to 2,000 quarters, or to 20 " per cent." Here, we again perceive this writer labouring under the old error of supposing that when agricultural labour becomes less productive, agricultural capitalists are indemnified by a pro- portionate rise in the price of agricultural pro- ducts; and thus, he here maintains the converse of that proposition, or gravely assures us that: 92 PROFITS. " If the return to 10,000 quarters were increased " from 12 to 13,000 quarters, profits, supposing " wages still to amount to 5000, and taxes to 1,000 " quarters, would be increased to 2,000, or to 20 " per cent." This is to suppose that the increased quantity of corn, resulting from a specific quantity of agri- cultural labour becoming more productive, not to fall in value, to suppose in short, that agricultural capitalists can continue to obtain higher profits than other capitalists, whenever agricultural labour becomes more productive. What is it then that prevents cotton spinners from getting higher profits than other capitalists, seeing that they have rendered cotton spinners' labour so much more productive ? These are the absurdities into which the disciples of Mr. Ricardo have allowed them- selves to be dragged! What two things can be more irreconcilable than this, Mr. M'Culloch's view of profit, with his and Mr. Ricardo's view of value, which asserts the value of every commodity to be determined by the cost of its production ; seeing, that according to this doctrine, the value of the 13,000 should not be greater than that of the 12,000 quarters, because each of these quantities of corn is the product of equal quantities of labour ! How are we to reconcile this equal rise in the value, as well as the quantity of corn obtained by the same quantity of labour, with what we find in Mr. M'CulloctTs chapter on the " Effect of PROFITS. 93 " fluctuations in wages and profits on value:" he there says : " In thus endeavouring to trace the " real value of all descriptions of non-monopolized " commodities to the quantity of labour required " for their productions, it is not meant to deny " that a very large portion of the useful or desira- " ble qualities of such commodities may be the " result of the action or labour of natural agents : " but it is, as I formerly stated, the peculiar and " distinguishing feature of natural agents, or " powers, that they render their services gratuit- " ously. Whatever is done by them, is done " without fee or reward. And thence, though " their assistance and co-operation be necessary " to the production of every species of useful and " desirable articles, they add nothing to its value. " This is a quality that can be communicated only " by the labour of man, or by the instrumentality " of that capital that has been appropriated or " accumulated by his labour. In estimating the " value of a quantity of corn, for example, we " include only the labour of the individuals em- " ployed, as ploughmen, reapers, thrashers, &c., the " value of the corn used as seed, and the value of " the services rendered by the horses and instru- " ments made use of in the different operations. " Nothing whatever is set down on account of the " aid derived from the vegetative powers of nature, " and the action of the sun and showers; for though " without them the crop could not be obtained, 94 PROFITS. " and our utmost exertions would be altogether " fruitless, yet, as they are the free gift of Provi- " dence, they add nothing to the value of the " produce, that is, they add nothing to Its power of <' exchanging for , or buying labour, or other things " produced by the intervention of labour." M'Culloch, p. 352. Yet Mr. M'Culloch assures us that the rate of the cultivator's profit becomes doubled when the return on 10,000 quarters of corn is increased from 12,000 to 13,000 quarters; seeing that the cultivator's profits could not be increased at all, unless the 13,000 was more valuable than the 12,000 quarters. The reader must have long perceived how endless and important are the mistakes in the prevailing system of political economy that has resulted from erroneous views of value. If the natural fertility of the soil, and the nature of the seasons, do not influence the exchangeable value both of food and its equivalents, they cannot influence the ordinary rate of profits ; and those who raise the equivalents of food would then get as high a rate of profits when the soil cultivated is bad, as they do when it is good. But Mr. M'Culloch admits that the average rate of profits falls when an inferior soil is taken into cultivation, an event which could not happen if the natural powers of the soil did not influence both value and profits. PROFITS. 95 I need hardly observe, that Mr. M'Culloch falls into a like mistake regarding the effect on profit of a fall in the price of labour, when he says : " Thus it is obvious, that if wages were reduced " from 5000 to 4000 quarters, profits, supposing " other things to be invariable, would be increased " from 1000 to 2000 quarters, or from 10 to 20 " per cent." This is supposing all the profit derivable from a fall of agricultural labour to be enjoyed ex- clusively by agricultural capitalists ! If this doc- trine were sound, the effect of diminishing the cost of an article would not be a fall of its price ; but it is admitted on all sides, that when any article not enjoying a monopoly costs less, its price is reduced. Thus it is in vain we attempt to understand profits till we have made ourselves acquainted with value. 96 PROFITS. SECTION V. So long as the supply of land in a well-governed country is abundant, and of pretty good quality, profits and wages are both high. A commerce of this kind, in which every one may gain much, supposes somewhere a large surplus, and such is ever yielded to culture by a sufficient supply of good soil. Doubtless the comfort of the people, and the profits of the capitalists, are more influenced by the cost of food than by that of any other com- modity. Fuel stands next in the list of neces- saries. The quicker the consumption of a neces- sary the more important it is that its cost should be small. A commodity may be generally useful, or in general demand, but if it be of slow con- sumption, its cost has little influence on profits or on the comforts of the people. Great as is the quantity of food raised in any large territorial country in any one season, nearly the whole of it is consumed within the brief space of a year. The cost of all products influences profits, but this influence is of small amount as regards those products which, though in general demand, are of slow consumption. A warming-pan, or a grate, is to be found in every comfortable cottage in England ; but, on account of its great durability, its cost has PROFITS. 97 little influence on the comfort of the people, or on the average rate of profits. A full supply of but moderately good soil is much more important both as respects profits and wages than an insufficient supply of soil, however excellent its quality. The average quality of British soil under culture is high, but British profits are low, because our supply of land fitted for culture is below the demand. So long as the productiveness of labour remains the same, profits certainly fall when wages rise; but the condition of certain new countries proves that high profits may accompany high wages; that where there is much surplus food to divide be- tween capitalists and their labourers, both may receive much food, and much of its equivalents. A sudden rise, or fall, in the demand for labour, raises or lowers its price ; but these events have i rp , ^** i i <*--ns6&Z**/ only a temporary effect ee- old commodities as at present constituted, because in them the supply of unskilled labour ever tends to excess; and unskilled labourers do not usually get more wages in the long run, than is required for the poor maintenance of their families. Thus if the staple of British soil were now to be made by Almighty power of somewhat better quality, or its quantity rendered somewhat more extensive, we know by experience that unless the civilization of the people were in the meantime raised at no distant period the price of our unskilled labour would not be higher H 98 PROFITS. than at present. It is now evidently influenced in different parts of the empire by the degree in which the working classes are civilized ; that is, by the proportion which their supply bears to the demand. In Ireland, which possesses by far the richest soil in the empire, the rate of wages is lower than in any other part of the United King- dom. In new countries, where wages are high, profits are also high. SECTION VI. Mr. Ricardo says : " In all cases, commodities " rise because more labour 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 com- " position." Ricardo, p. 117, 3rd edition. It is admitted that the tendency of profits to fall is often happily checked by successive im- provements of machinery applied to the pro- duction of necessaries. But as an improvement of machinery checks the fall of profits by the saving it effects in the quantities of food and necessaries consumed by labourers, it matters not PROFITS. 99 as regards principle whatever it may do as respects degree in what class of production labour is saved. The practical result of econo- mizing manufacturing labour being a saving of food and necessaries, such saving is identical with an increase, pro tanto, of the agricultural surplus ; and thus the distinction taken by Mr. Ricardo between jewellery, silks, and other goods, is idle. The question to be solved here, is this : would an essential saving of the labour now employed in raising such luxuries as silks, jewellery, and vel- vets, increase the average rate of our profits ? Mr. Ricardo says not; and as Mr. M'Culloch and other writers pass over this opinion without remark, I conclude they acquiesce in it. But if Mr. Ricardo be right, I ask what would become of the food and necessaries which paid for the labour saved in the production of silks, jewellery, and velvets? The food and necessaries so saved would not be destroyed : they would be sent to market in quest of equivalents, just the same as any other portion of the agricultural surplus. If the quan- tity of labour required to raise a specific quantity of luxuries in much demand were increased, more food would be required to subsist the additional labourers employed on them. In other words, while the productive power of the labour which raises the equivalents of food was diminished, that of agricultural labour not being increased, landholders would get fewer equivalents for their H2 100 PROFITS. surplus food, and the ordinary rate of profits would consequently fall. Mr. Malthus says, that in an advanced stage of society the value of a commodity is determined by its cost, plus the ordinary amount of profit on the capital employed upon it; but this is to state what is the value of a commodity not what de- termines it. I have clearly shown that the value of an article is determined, not by its own cost, not by that of the article for which it is ex- changed, but by the facility with which the aggregate of commodities is produced. Thus the value of one hundred yards of calico is neither determined by its own cost, nor by that of the velvet for which it freely exchanges, because the profit part of the price of both these articles is influenced quite as much by the productive power of agricultural labour as by the productive power of the labour that produced themselves. Mr. Ricardo says, " that in all countries, and " in all times, profits depend on the quantity of " labour requisite to provide necessaries for the " labourers on that land, or with that capital " which yields no rent." Ricardo, p. 128, 3rd edition. If he had been content to affirm that the ave- rage rate of wages is influenced by the cost of raising food on the soil, or by the agricultural capital which yields no rent, he would have stated an unexceptionable proposition; but to PROFITS. 101 assert, as he here does, that profits are not in- fluenced by the facility of raising the various equivalents of food, is preposterous. We need but to glance at the immense amounts of coal, iron, copper, and tin, raised at home; and of cotton wool, sheep's wool, hides, silk, sugar, tea, wines, timber, flax, dyes, &c. &c., imported from abroad, to be satisfied that British profits are much influenced by the cost of producing the equivalents of British food. But all these absur- dities evidently flow out of the prevailing theory of value, which asserts the value of every article to be determined by the quantity of labour re- quired to produce it. There is, however, a further error attributable to this doctrine, to which I have not yet alluded. It overlooks the expenditure of those who live on rents. Landed proprietors receive their rents in money, but the intervention of money does not alter at all the nature of rent, which is ever a portion of the net produce of the soil. If landed rents were paid in kind, we all know that only a very minute portion of them could be consumed directly by the landlords and their families. Now, whether rents be paid in money or produce, the food, which the landed proprietors cannot with their families directly consume, is equally sent to market in search of equivalents. Who then can doubt that the value of such equivalents is in- fluenced by the annual quantity of the food which 102 PROFITS. passes under the name of rent ? Let us suppose only two classes of soil under culture in a country we will call A. ; and two classes of soil only under culture in another country we will call B. Let us further suppose that while the second class of soil in A. and B. are of a like quality, and equally abundant, the first class of soil in A. is superior to the first class of soil in B. In this case more surplus food will be sent to market in quest of equivalents in A. than in B., supposing the quan- tity of such soil to be alike in each country, and if so, the value of such equivalents will be higher in A. than in B., and consequently the ordinary rate of profits will be higher in A. than in B. It is on this principle that when a luxury in much demand can be raised by less labour, those who live on rents have more to expend on other equi- valents of food ; and as this raises their value or price, it raises the profits of those who produce them ; consequently the average rate of profits is raised when a luxury in much demand is pro- duced by less labour. This view of the subject would alone suffice to destroy the prevailing doctrine, which asserts, that 4< in all countries and in all times, profits " depend on the quantity of labour requisite to " provide necessaries for the labourers on that 11 land, or with that capital which yields no rent? PROFITS. 103 SECTION VII. I must now beg the reader's attention to Mr. Ricardo's observation on another important point respecting profits. He says, " 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 17 per cent., a constantly diminishing rate, " we should expect that the whole amount of " profits received by those successive owners of " capital would be always progressive; that it " would be greater when the capital was 200,000/. " than when 100,000/.; still greater when 300,000/.; " and so on increasing, though at a diminishing " rate, with every increase of capital. This pro- " gression, however, is only true for a certain "time: thus 19 per cent, on 200,000/. is more "than 20 on 100,000/.; again 18 per cent, on " 300,000/. is more than 19 per cent, on 200,000/.; " but after capital has accumulated to a large " amount and profits have fallen, the further " accumulation diminishes the aggregate of pro- " fits. Thus, suppose the accumulation should " be 1,000,000/., and the profits 7 per cent., the 104 PROFITS. " whole amount of profits will be 70,000/. ; now " if an addition of 100,000/. capital 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 " capital, so long as stock yields any profit at all, " without its yielding not only an increase of " produce, but an increase of value. By em- " ploying 100,000/. additional capital, no part " of the former capital will be rendered less " productive. The produce of the land and la- " bour of the country must increase and its value " will be raised, not only by the value of the " addition which is made to the former quantity " 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." Ricardo, p. 124, 3rd edition. The diminished amount of agricultural pro- duce, resulting from a bad season, may possess a greater value than the larger quantity which follows a good one; but the diminished harvest which follows a bad season is not attended by an increase of national value, seeing that in propor- tion as the value of food rises after a bad harvest, that of the equivalent for which it is exchanged, proportionately falls. PROFITS. 105 Whatever permanently increases the aggregate amount of agricultural products, increases, after a time, the aggregate of such of the equivalents of those products as can be increased by the employment of more labour ; but I cannot admit that the aggregate of national value is necessarily increased " by the new value given to the whole " produce of the land, a bad harvest, or even by " the increased difficulty of producing the last " portion of it," because any increased value given to the produce of the soil from such a cause as this, is just so much taken from those com- modities, for which agricultural produce is ex- changed. In asserting that" By employing 100,000/. " additional capital, no part of the former capital " will be rendered less productive," Mr. Ricardo appears to me to have written without reflection, allowing himself again to be carried away by his main theory of value ; for nothing can be more obvious than that, in an old and densely peopled country, increased competition amongst producing capitalists, resulting from a deficiency of invest- ments, leads to a fall in the average rate of profits; though the aggregate of profits may continue to increase with that of capital. 106 PROFITS. SECTION VIII. Doctor Chalmers, in the language of the old economists, asserts that food is all important, while its equivalents are of little or no moment. He says, " It is forgotten of each trade, and each " manufacturer, that it furnishes and can furnish, " nothing but its own proper and peculiar arti- " cles; and that, abstracting from the use and " enjoyment of these, every other associated " benefit is comprehended in the equivalent which " is paid for them. All that the wine trade of " Portugal, for example, furnishes to our nation " is wine; and in reference either to the public t( revenue which arises from it, or to the private " revenue wherewith it both enriches the capi- " talists and supports the labourers employed in " it, these are yielded, not most assuredly by the " wine, but by the price given for the wine. The " wine trade is but the channel through which " these flow, and not the source in which they " originate. But, notwithstanding, there is yet a " mystic power ascribed to the wine trade, as if " part of the nation's glory and the nation's " strength were linked with the continuance of "it; and hence a legislature, tremulously alive " to the state of our relations with Portugal, lest " the wine trade should be destroyed. Now " though, from the interruption of these relations, PROFITS. 107 " or from any other cause, the wine trade, on the " one side, were destroyed, the counterpart " wealth, on the other side, would not be de- " stroyed. It would remain with its owners, to " be expended by them on the purchase of some " new luxury in place of the wine ; by the natural " price of which, the same return could be made " to capitalists and labourers, and by a tax on " which, the same- revenue might be secured to " government as before. " It must be obvious that employment in agri- " culture is not an indefinite resource for an in- " definite population seeing that it must stop " short at the land which refuses to yield the " essential food of its direct and secondary la- " bourers. And it should be equally obvious, " that as little is employment in manufactures an " indefinite resource seeing that the definite " quantity of food raised can only sustain a cer- " tain and definite number of labourers. The " latter position seems, on the first announcement, " to carry its own evidence along with it; yet " there is a certain subtle imagination in its way, " which we have attempted to dispose of. Our " argument rests on the veriest truism that a " manufacture is creative of nothing beyond its " own products. But truism though it is, it has " been strangely overlooked, not only in the de- " vices of the charitable, but both in the policy of " statesmen, and in the doctrinal schemes of the 108 PROFITS. " economists. Yet we think a sufficient expla- " nation can be given, both of the manner in " which the perverse misconception at first arose, " and of the obstinacy wherewith it still lingers " and keeps its ground amongst us." Chalmers, p. 54, 2d edition. It is a strange objection to bring against " each trade and each manufacture, that it furnishes and can furnish nothing but its own proper and peculiar articles, and that abstracting from the use and enjoyment of these, every other asso- ciated benefit is comprehended in the equiva- lent which is paid for them" seeing the remark applies as much to surplus food as to its equiva- lents; for such surplus could have neither use nor value, if equivalents could not be found for it. On the contrary, the more and better the equi- valents of surplus food, the more useful and valuable is such surplus. It is too late in the day to pretend that the food sent to market, or that which exceeds the direct consumption of the agricultural classes, is a whit more valuable than the equivalents for which it is exchanged. Dr. Chalmers' remarks are besides not candid, as it is notorious that our commercial treaty with Portugal was not so much estimated on account of the Portuguese wine obtained through it, as for the extensive trade it enabled us to carry on with Spain and Brazil. It is impossible to doubt that the more skill and industry are em- PROFITS. 109 ployed on the equivalents of food, the higher the profits, and the greater the enjoyments of the whole community; that, in short, whatever cheapens the cost of raising the equivalents of food is equal to an increase, to that extent, of the agricultural sur- plus; while whatever increases the cost of raising the equivalents of food is virtually so much deducted from the value of the agricultural surplus. If we could not import more of the raw products, which become after further labour has been applied to them the most important of the equivalents for our agricultural surplus, we must either do without such equivalents, as in the case of our climate not being fitted for their growth, or, by growing them at home, we must raise proportion- ably less food. If we could not import cotton wool, we could not have it, because we could not grow it. If on the contrary, we had to grow all the fine sheep's wool and hemp that we consume, we should grow less food, while we should have a less aggregate of coarse and fine wool than we now grow and import. If we could not import wine, we must grow more barley, and consequently less bread corn, and get withal an inferior liquor. Thus we increase our surplus food by importing wine, fine wool, flax, cotton, &c., &c., from abroad. If Dr. Chalmers' arguments be worth anything, Sir Richard Arkwright's improvement in the spin- ning of cotton wool was not a national benefit ; nor could any other of our ingenious contrivances 1JO PROFITS. for economizing manufacturing labour, be a na- tional benefit. Dr. Chalmers asserts in one place, that the foreign equivalents of our food are not wealth ; while, in another, he maintains that the manufactured goods with which we purchase those foreign articles are wealth! If the manu- factures we raise for exportation come under the head of wealth, it is solely on account of the foreign articles for which they exchange; the more of the foreign equivalents, and the better their quality, obtainable for a specific quantity of our manufactures, the more valuable are these manufactures to us. Ah, says Dr. Chalmers, but " these manufactured goods would remain with " us, though we did not purchase such wines." Remain with us for what purpose? They would not be produced. Dr. Chalmers forgets that if we did not send our manufactured goods abroad to pay for foreign goods, we must pay for these with gold and silver, which metals we must pur- chase by our manufactured goods, while the market for these in the countries that export the precious metals is very limited. So long as the nations that export wines, precious metals, cottons, hemp, dyes, &c., &c., &c., do not want food, those things can only be had in exchange for manufac- tured articles. PROFITS. 1 1 1 SECTION IX. Food is very cheap in many countries in which the people are very poor. The reason of this is that the working classes cannot be comfortable unless the price of unskilled labour be rather high relative to that of food; yet this will not be the case unless the supply of investments be abun- dant, the middle classes numerous, wealthy, industrious and parsimonious ; and life and pro- perty secure. In this country, which has long possessed an abundant supply of capital, we can scarcely appreciate the difficulties which were formerly opposed to its accumulation when all the soil was appropriated in immense masses, and there was scarcely any middle class of society. There was then little available capital, little industry, and little skill, employed in the produc- tion of the equivalents of food ; and the compara-, tively little surplus food which was then produced, went for the most part to subsist soldiers and idle retainers; persons who instead of helping to main- tain the laws, set them at naught, while they ministered nothing to the comforts and refinements of society ; and instead of increasing capital, annually destroyed it. The upper classes are sometimes disposed to accumulate capital, but they are scarcely ever fitted for the business of production. Thus we see in certain countries. 112 PROFITS. where land is abundant, little manufacturing industry, and that ill conducted, and this because the laws have been long unfavourable to the creation of a numerous middle class of society. In no countries where the soil was early distri- buted in great masses, would it have become well cultivated, had it not been for the emancipation of the people, the creation of a middle class, and the variety of beautiful and exquisite commodi- ties that class produced by the united efforts of skill, industry, and parsimony. Hence followed the power of enjoying many luxuries, or raising- many taxes for carrying on war. It is indeed impossible in a country where the soil is appro- priated in considerable masses to separate high cultivation from great manufacturing industry; or a large surplus of food from a great amount and variety of the equivalents of food. The value of the equivalents of food being influenced by the following circumstances, so are both manufacturing and agricultural profits ; First, by the productive power of the labour that raises the raw products embodied in the equiva- lents of food ; secondly, by the amount of skill employed in the production or obtainment of such equivalents; thirdly, by the productive power of agricultural labour. Supposing then the cost of raising the equivalents of food to be subject to no alteration, the profit portion of their value, or price, would be high, or low, according to the PROFITS. 113 degree in which agricultural labour was more or less productive. Thus it is, that when a nation is compelled to cultivate an inferior soil, the value of the equivalents of food falls, because profits fal- ling, the profit portion of the price of these equiva- lents falls. Thus the value of the equivalents of food fluctuating with the cost of food, so do the profits of those who raise such equivalents. In the same way the average rate of profits in any country is influenced by the more or less of skill employed on its manufactured articles by the having, or not having, good and cheap fuel by an inland or maritime position by the presence or absence of good navigable rivers by every- thing in short calculated to influence the cost of raising or transmitting commodities. Influencing, as all these circumstances do, the average rate of profits, they influence it less than does a full supply of good soil, or of even pretty good soil. Manufacturing skill is greater in Great Britain than in the United States of America, while our position is more maritime, our labour cheaper, and most of our soil better ; yet the average rate of profits is lower in Great Britain than in the United States ; and would be more so, if those States were not annually sup- plied with a larger amount of British capital than they are with British labourers; and exposed periodically to great losses by a fraudulent system of banking. It is then impossible to attribute i 114 PROFITS. the higher profits obtainable in the United States, where wages are so high, to any other cause than a better supply of soil. It has been said that profits are lower in Great Britain than in the United States, because the supply of available capital is much greater here than in those States. The average rate of profits in any country is not determined by the absolute supply of its capital, but by the proportion which it bears to profitable investment, and to labour ; consequently, if we had yet an abundant supply of good land, our profits would be as high as in America at the present moment, but we should then have far less available capital than we have now, because capital of that class would be quickly absorbed in profitable investments. The capital annually created in the United States, as well as that sent there from Europe, would, in the absence of a vicious system of banking, be quickly and profitably absorbed. The present condition of the United States is purely the result of human folly, and human wickedness, but of a character which does not come within the scope of this chapter. I may, however, even in this place observe, that, as no country ever less wanted factitious capital than the United States, in no country is an ill regulated paper currency so inexcusable. In some old countries the productive power of the soil is great, and the price of food low, while PROFITS. 115 wages are low, and available capital small. Hun- gary is an instance, but her laws are bad, and so ill administered as to prevent the creation of a middle class of one fitted to enter bene- ficially on a course of manufacturing industry. The case is different in new countries tolerably well governed, and where the price of land is low. As in such countries the supply of pro- fitable investments more than equals the supply of available capital, this, after being created, is rapidly absorbed ; for however great the annual accumulation of available capital whose character is not factitious, the supply of profitable invest- ments is yet greater. So long as a country is tolerably well governed, and possesses a sufficient supply of even tolerably good land, which any one can purchase for a trifle, it will enjoy a high ordinary rate of profits. If, then, I am asked in what good soil differs from most other commodities, I answer in the degree of its importance. So long as the supply in any country that is well governed of a high class of soil remains abundant, those who raise the equivalents of its produce, obtain as large a return for the use of their capital as those who reclaim and cultivate the soil. The aggre- gate, however, of national profits depends not on the supply of this or that article, but on a great supply of all those that are in general use. The average rate of profits would in no i2 116 PROFITS. country be diminished if it ceased to produce pictures and statues ; because the food and cloth- ing given to those who produce those luxuries would, in their absence, be exchanged for more of other equivalents. It is different with those commodities which are in more general demand. If I am right then in my premises, the average rate of profit in a nation is determined by the average productiveness of the various classes of la- bour that it sets to work, either at home or abroad. Admitting the predominant importance of agri- cultural labour, it must be recollected that agri- cultural profits are found in the equivalents of the agricultural surplus, and that supposing this surplus a fixed quantity, its value is determined by the quantity and quality of the commodities for which it will exchange. It is then to fall into a grave error to suppose with Doctor Chalmers that the average rate of profits in any country is determined by the productiveness of any parti- cular class of labour ; or with Mr. Ricardo, that the average rate of profits is determined by the cost of raising food on any particular class of soil. All that can be truly affirmed is, that the productive power of agricultural labour has more influence on the aggregate of profits than any other single class of labour. I cannot close this chapter on profit without begging the reader's attention to the distinction between a great price, and a great cost. A PROFITS. 117 great cost supposes much labour employed, and usually, though not always, much food consumed on the subsistence of that labour. An article, however, may sell for a great price, while both little labour and little food have been expended on it. Thus the works of a first-rate artist may have cost him little labour, though the value of his products is very great. There is this dif- ference then between a high price proceeding from a high cost, and a high price proceeding from the unrivalled excellence of the article. In the first case, more labour has to be em- ployed, more food consumed to produce the article, which is equal to a diminution of the agricultural surplus. In the second case, there is no increase of labour no increased consumption of food, for a first-rate artist does not consume more food than an indifferent artist ; and the food and necessaries which the first-rate artist cannot consume supposing him paid in food and necessaries instead of money he transfers to those who administer to his wants, or he ex- changes it for money, and lets it accumulate as capital. Then the price of the equivalents of food is increased by a high rate of profit proceeding from a low cost of food. ( 118 ) CHAPTER III. TAXES ON RAW PRODUCE. As one of the effects of taxes on raw produce is to increase its cost, and thus affect value and profits, a tax of this kind here claims our atten- tion. This chapter will be found to test severely the received doctrines of value. Mr. Ricardo thus opens his chapter on Taxes on raw Produce : " Having in a former part of " this work established, I hope satisfactorily, the " principle, that the price of corn is regulated by " the cost of its production on that land exclu- " sively which pays no rent, it will follow that " whatever may increase the cost of production " will increase the price ; whatever may reduce " it, will lower the price. The necessity of cul- " tivating poorer land, or of obtaining a less return " with a given additional capital on land already " in cultivation, will inevitably raise the exchange- " able value of raw produce. The discovery of " machinery, which will enable the cultivator to TAXES ON RAW PRODUCE. 119 " obtain his corn at a less cost of production, will " necessarily lower its exchangeable value. Any " tax which may be imposed on the cultivator, " whether in the shape of land-tax, tithes, or a " tax on the produce when obtained, will increase " the cost of production, and will therefore raise " the price of raw produce. " If the price of raw produce did not rise so as " to compensate the cultivator for the tax, he would " naturally quit a trade where his profits were " reduced below the general level of profits ; this " would occasion a diminution of supply until the " unabated demand should have produced such a " rise in the price of raw produce, as to make the " cultivation of it equally profitable with the in- " vestment of capital in any other trade. " A rise of price is the only means by which he " could pay the tax, and continue to derive THE " USUAL AND GENERAL PROFITS from this cmploy- " ment of his capital. He could not deduct the " tax from his rent, and oblige his landlord to pay " it, for he pays no rent. He would not deduct " it from his profits, for there is no reason why he " should continue in an employment which yields " small profits, when all other employments are " yielding greater. There can then be no ques- " tion, but that he will have the power of raising " the price of raw produce BY A SUM EQUAL TO " THE TAX. " A tax on raw produce would not be paid by 120 TAXES ON RAW PRODUCE. " the landlord ; it would not be paid by the " farmer; but it would be paid in an increased " price by the consumer." Ricardo, p. 168, 3rd edition. If a producing capitalist, when his produce is taxed, could always throw such tax off himself on the consumer, a farmer could do the same thing, and for the same object, when compelled to cultivate an inferior soil, and thus profits ac- cording to this notion would never fall. It appears to have wholly escaped the attention of Mr. Ricardo and his school, that the power of a government to raise taxes depends on the power of the country to raise food and necessaries, and is limited by this power. Now strange to say, the very writers who assert that the price of food rises when an inferior soil has to be cultivated, so as to indemnify those who undertake its culture, admit that the ordinary rate of profits then falls. I submit, that if after a tax is laid on raw pro- duce say food the capitalists who produce it have the power of raising its price by a sum equal to the tax, two rates of profit would be estab- lished one for those who raise food, and another and lower one for those who raise its equivalents. Now, though two rates of profit might be created, all writers admit they could not exist for any length of time. If those who raise corn could, after it became TAXES ON RAW PRODUCE. 121 taxed, so raise its price as to compensate themselves for such tax, I ask how the producing capitalist, the price of whose goods fell in proportion as that of corn rose, can be compensated ? By throwing the tax on the consumer, says Mr. Ri- cardo ! But raising the value of food, by propor- tionately lowering the value of all its equivalents, is creating two rates of profits. A tax on food of course affects all the consumers of food who pay for it in money, because money, as a commo- dity, falls in value in relation to food, just as all the other equivalents of food fall in value in rela- tion to food, when that of food rises. The inter- vention of money for facilitating the exchange of other commodities having gone to complicate and mystify commerce, I will here try to simplify the reader's view of commercial exchanges, by sup- posing a country to produce within its own limits all the products it uses or consumes, including its currency, which I will suppose to consist wholly of silver. In this case it is plain that if food were taxed, and rose in consequence in value, that of silver would fall in the same proportion relative to food, like the other equivalents of food ; supposing no greater quantity of labour to be in the mean- time required to produce any of such equiva- lents. All persons then living on fixed money incomes would suffer by this tax, because their money, being one of the equivalents of food, 12*2 TAXES ON RAW PRODUCE. would, according to Mr. Ricardo's theory, fall in value to the full extent of the tax. In this way, and in this only, are those consumers who live on fixed money incomes made to contribute to a tax on food. I have then to learn how, if food rises in value in proportion to the amount of the tax imposed upon it, those who raise the equiva- lents of food are to be compensated that is, how their profits are to be kept at the same rate as that of those who raise food ? How could a master miner, working a lead mine, ask more silver for his lead from a master miner working a silver mine, seeing that the rise in the value of food would affect equally both these capitalists ? It is plain then that a tax on food falls on profits as well as on fixed money incomes. Thus the capi- talists who raise the equivalents of food, would be doubly taxed first as tradesmen by their profits being reduced, next as consumers. I have here supposed the currency to consist wholly of silver obtained at home; but it can make no real difference to the question whether the silver be raised at home or imported from abroad ; seeing that, if the goods exported to purchase foreign silver, had fallen at home, in respect to food, so would the silver imported ; because no importer of silver could long get a higher rate of profits than those who make the goods that are exported to exchange for silver. Thus when calico falls here relative to food, it TAXES ON RAW PRODUCE. 123 falls abroad relative to foreign products, or those who make calicos for foreign markets would get higher profits than those who make calicos for the home market, which we all know could not happen. A tax then on food falls both on profits and on fixed money incomes. Professional people too, as a class, are compelled in the long run to con- tribute to a tax on food ; because, as a class, they are well or ill paid according as profits are high or low ; seeing that more people will enter trade, and fewer professions, when these yield a less reward to the same capital than trade, making, however, allowance for the estimation on account of salubrity or gentility in which different pro- fessions and trades are regarded. We must also except from the rule those rare talents which free their possessors from the levelling pressure of competition. Hence, notwithstanding the low average rate of profits in this country, our physi- cians, surgeons, lawyers, writers, and artists, whose talents raise them above the rest of their class, are better paid than are the same classes in countries where the average rate of profits is much higher than in Great Britain ; and this because the demand for things of high excel- lence is greater in Great Britain than it is in any other country. With these exceptions, the effect of taxing food is injurious to all classes in a state, save those who living on taxes get their money 124 TAXES ON RAW PRODUCE. incomes raised in proportion as prices rise. Mr. Ricardo says, that landlords do not contribute to such a tax; but if I am right in affirming that the value of money falls when that of food rises, they cannot escape the tax unless they are able to raise their rents ; but a rise of landed rents can never spring out of a tax on food. Landed rents result, excepting in and near towns, from differ- ence in the fertility of different classes of soil, or from an increased demand for food which cannot be adequately supplied. As, however, the im- position of a tax on food neither increases the dif- ference between soils, nor that between the demand for food, and its supply, the landlord's proportion of the gross produce of the soil is not increased by the imposition of a tax on food, while the net produce which has to be divided between landlords, tenants, and labourers is di- minished when part of it is taken by the govern- ment to be paid to other classes of the com- munity. A tax on food then affects those classes not engaged in the business of production, because the value of the commodity in which their in- comes are paid falls as that of food rises, and consequently every man living on a fixed money income feels the effect of a tax on food. Thus even a large portion of those who live on taxes cannot escape the imposition of further taxation, because paid their dividends and salaries in a commodity TAXES ON RAW PRODUCE. 120 whose value has fallen in relation to that of the primary necessary of life. The value of a pro- duct rises after being taxed, just as it does after the cost of raising it is increased ; but only to that point which adjusts the average rate of pro- fits; a lower one than that which previously ex- isted being created. How, indeed, is it possible for the capitalists who raise the necessaries of life, to retain as large a share of them, after a portion of them has been forcibly taken by go- vernment to subsist other classes who take no part in the production of such necessaries ? It may be said, that the services of soldiers, sailors, and tax-gatherers are full equivalents for the neces- saries those classes consume. The existence of these persons is necessary, in the same way as law or physic is necessary; but it is not the less an evil. A poor man with a large, and all but starving family, must have an apothecary when ill, but the having to pay for physic and medical attendance deprives his family, that can ill afford it, of a portion of its food and necessaries. Doubt- less no part of the food and necessaries thus taken from the classes that raise them is lost by this transaction ; but that which is thus taken from those whose labour produces food and its material equivalents is transferred to classes who take no part in the work of production. What the apo- thecary obtains from a labourer the latter loses. It may equally be said, that the food and ne- 126 TAXES ON RAW PRODUCE. cessaries consumed by judicial administrators, soldiers and policemen, are not lost to the nation, though taken by the force of authority from those who raise them. The having to maintain such functionaries is assuredly an evil, though a much less evil than anarchy ; but the expense of sub- sisting these persons acts on classes immediately concerned in the business of production and com- merce, precisely the same as if the cost of pro- ducing necessaries was increased. If mankind by being less vicious could live together in harmony without judicial establishments, armies, and po- lice, the expense in consequence saved would be so much gained in material comforts by the producing classes. Then, while profits, as now, would tend to a common level, this would be high or low according to the nature of the soil and seasons, the skill and industry of the people, the quantity of those raw products below the earth's surface which are considered necessaries of life ; and the small amount of taxes. Oh, says Mr. Ricardo, " If the price of raw " produce did not rise so as to compensate the " cultivator for the tax, he would naturally quit " a trade where his profits were reduced below " the general level of profits." Doubtless he would, but this is no answer to me who assert that the general level of profits falls when food is taxed, as it does when an inferior soil has to be cultivated, and that in neither of these cases is TAXES ON RAW PRODUCE. 127 it possible to keep up the old rate of profits, be- cause in both less of the products of industry remains for those who raise them. Mr. Ricardo afterwards says, that " A tax how- " ever on raw produce, and on the necessaries " of the labourer, would have another effect it " would raise wages. From the effect of the " principle of population on the increase of man- " kind, wages of the lowest kind never continue " much above that rate which nature and habit " demand for the support of the labourers. This " class is never able to bear any considerable " proportion of taxation ; and consequently, if " they had to pay Ss. per quarter in addition for " wheat, and in some smaller proportion for other " necessaries, they would not be able to subsist " on the same wages as before, and to keep up " the race of labourers. Wages would inevitably " and necessarily rise; and, in proportion as they " rose, profits would fall. Government would " receive a tax of Ss. per quarter on all the corn " consumed in the country, a part of which would " be paid directly by the consumers of corn ; the " other part would be paid indirectly by those " who employed labour, and would affect profits " in the same manner as if wages had been raised " from the increased demand for labour compared " with the supply, or from an increasing diffi- " culty of obtaining the food and necessaries re- " quired by the labourer. 128 TAXES OX RAW PRODUCE. " In as far as the tax might affect consumers, " it would be an equal tax, but in as far as it " would affect profits, it would be a partial tax ; " for it would neither operate on the landlord nor " on the stockholder, since they would continue " to receive, the one the same money rent, the " other the same money dividends as before. A " tax on the produce of the land then would ope- " rate as follows : " 1st. It would raise the price of raw produce " by a sum equal to the tax, and would " therefore fall on each consumer in propor- " tion to his consumption. " 2ndly, It would raise the wages of labour " and lower profits." Ricardo, p. 173, 3rd edition. The influence of a tax on wages has nothing to do with the question before us, which is whether the price of wheat, after it is taxed, will so rise in price as to remunerate the farmers for the tax. Supposing, for the sake of argument, that the price of labour rises when that of wheat rises, this event, though lowering profits generally, would not at all tend to readjust the balance of profits, by remunerating those whose goods had fallen in value that wheat might so rise in value, as to wholly remunerate the growers of wheat for having in the first instance to pay the tax. But what can be more preposterous than to affirm, as Mr. Ricardo here does, that labourers can in no TAXES ON RAW PRODUCE. 129 case bear a tax on wheat of 8s. the quarter unless their wages rose, seeing that this is equal to as- serting that money wages in a new country must rise as wheat rises, whereas the fact is, money wages fall in new countries in the long run as food rises. But we find the best refutation of all Mr. Ricardo here says of the effect of taxing raw produce in his own chapter on profits, where the reader will remember he says, " In the natural " advance of society, the wages of labour will " have a tendency to fall, as far as they are regu- " lated by supply and demand ; for the supply " of labourers will continue to increase at the same " rate, whilst the demand for them will increase at " a slower rate. If) for instance, wages were regu- " lated by a yearly increase of capital, at the rate "ofl per cent, they would fall when it accumulated " only at the rate of 1^- per cent. This would fall " still lower when it increased at the rate of \ or ^ " per cent, and would continue to do so until capital " became stationary, and be only sufficient to " keep up the number of the actual population." Ricardo, p. 95, 3rd edition. It appears, then, on his own showing, that though money wages must rise with the price of food, if real wages had fallen previously to a minimum rate, or to that amount required for the actual subsistence of the people, they may fall immensely before they reach this the lowest point in the scale. This is practically illustrated in 130 TAXES ON RAW PRODUCE. the difference of American and Irish wages. Yet he after this assures his readers that " from the " effect of the principle of population on the in- " crease of mankind, wages of the lowest kind (( never continue much above that which nature and " habit demand for the support of the labourers." Now seeing how high the ordinary rate of wages is in North America long has been and long will be we must conclude that Mr. Ricardo deduced his conclusions rather from conjecture than from facts. But he says, speaking of the effect of a tax on wheat : " In as far as the tax might affect con- " sinners, it would be an equal tax, but in as far " as it would affect profits, it would be a partial " tax ; for it would neither operate on the land- " lord nor on the stockholder, since they would " continue to receive, the one the same money " rent, the other the same money dividends as " before." Why he here describes those whose incomes consist of landed rents and dividends as living on profits, I am at a loss to imagine. It would be equally difficult to explain how, when wheat rises to the full extent of any tax imposed on it, those whose incomes are paid to them in money, which as a commodity falls in value in common with the other equivalents of wheat, can escape the operation of such a tax. After some just remarks on the events which influence wages, Mr. Ricardo says, speaking of TAXES ON RAW PRODUCE. 131 the price of food, that " a high price is by no " means incompatible with an abundant supply ; " the price is permanently high, not because the " quantity is deficient, but because there has " been an increased cost in producing it." Ri- cardo, p. 179, 3rd edition. This is a strange proposition to come from a philosopher, seeing that when we talk either of an abundant, or of a deficient supply of any great product, we speak comparatively ; for no one pretends to draw a line that accurately divides abundance from deficiency. If the supply of money be diminished, the price of corn rises, and this though its supply bears its old proportion to demand; but how the supply of corn can bear the same relation to the number of consumers, after more labour is required to produce it, I can- not guess. I do not pretend to define the exact point at which the supply of food is abundant, or that at which it ceases to be so ; but it is clear that the supply of food becomes less abundant when more labour is required to produce a speci- fic quantity of it. Mr. Ricardo afterwards says : " A tax on corn " does not necessarily diminish the quantity of " corn, it only raises its money price ; it does " not necessarily diminish the demand compared " with the supply of labour ; why then should it " diminish the portion paid to the labourer ? Sup- " pose it true that it did diminish the quantity K 2 132 TAXES ON RAW PRODUCE. " given to the labourer, in other words that it did " not raise his money wages in the same propor- " tion as the tax raised the price of the corn which " he consumed ; would not the supply of corn " exceed the demand ? would it not fall in price? " and would not the labourer thus obtain his " usual portion ? In such case, indeed, capital " would be withdrawn from Agriculture ; for if " the price were not increased by the whole amount of " the tax, agricultural profits would be lower than " the general level of profits, and capital would " seek a more advantageous employment. In " regard then to a tax on raw produce, which is " the point under discussion, it appears to me that " no interval, which could bear oppressively on " the labourer, would elapse between the rise in " the price of raw produce and the rise in the " wages of the labourer ; and, that therefore, no " other inconvenience would be suffered by this " class, than that which they would suffer from " any other mode of taxation ; namely the risk " that the tax might infringe on the funds des- " tined for the maintenance of labour, and might " therefore check or abate the demand for it." Ricardo, p. 182, 3rd edition. The new demand for labour created by a tax on food, when the produce of such tax is expended at home, may raise the money price of labour pari passu with that of food ; but in this case, those who produce the equivalents of food TAXES ON RAW PRODUCE. 133 would be in a still worse situation, for the great body of consumers would escape this tax, which would then have to be borne by them, the pro- ducers of the equivalents of food, and the remain- der by the consumers, while farmers as producing capitalists would not be taxed at all, and would thus be getting a higher rate of profits than other people. Whether money wages do, or do not rise when a raw product is taxed, it is clear that it cannot be wholly thrown on the consumers, for these, when not engaged in the business of production, are only made to contribute to a tax on any raw product, by the value of the commodity in which their incomes are paid falling in value in propor- tion as the taxed product rises in value. As, however two rates of profit cannot long continue in businesses open to all capitalists, it is evident that the price of a taxed product rises in the long- run only to that point which gives to those who raised the taxed article, as high a rate of profits as other people. Then, if profits generally, or the ordinary rate of profits, falls in consequence of taxation, wages after a time will fall, for the demand for labour is always slackened by a fall in the rate of profits. Landlords may be inciden- tally re-imbursed for increased taxation by an increased price of food that is, by a scarcity of the better soils but such rise of rent has nothing to do with taxation. Landed rents are created 134 TAXES ON RAW PRODUCE. the moment a country is compelled to cultivate its second class of soil, and they are increased per acre whenever it is compelled to cultivate a yet inferior soil, and this whether food be, or be not, taxed. Whether money wages do, or do not, rise when food becomes taxed, such an event assuredly lowers profits. Doubtless the capitalists who administer to the wants of those who live on taxes obtain a profit ; but whatever is directly consumed by those who live on taxes is so much taken from the rest of the community. Doubtless the capital accumulated by one portion of a community is obtained from the expenditure of other classes; but it is puerile to assimilate this mutually beneficial commerce to the imposition of a tax on raw produce, which forcibly takes a portion of the products raised by the producing classes to give it to those which take no part in the business of production. Thus if we suppose the commerce of a country to be carried on wholly by barter, we at once perceive, that in proportion as government forcibly takes food from the agricultural classes, these have less to offer for the equivalents of food, while those to whom such food in the shape of taxes is finally given, can offer but a small part of it for equiva- lents, seeing that they directly consume much of it themselves. This is particularly the case with the lower functionaries of government, or with soldiers and sailors, whose consumption is nearly confined TAXES ON RAW PRODUCE. 135 to food and necessaries. Thus, though a rise of wages should not follow the imposition of a tax on food, profits fall, seeing that less food falls to the share of those who live on profits after a por- tion of the agricultural surplus is forcibly taken to subsist persons who take no part in the business of production. The following is perhaps the strangest passage in Mr. Ricardo's work. " The fourth and last " objection which remains to be noticed : That " by raising the price of raw produce, the prices of " all commodities into which raw produce enters, " will be raised,, and that therefore, we shall not " meet the foreign manufacturer on equal terms " in the foreign market. " In the first place, corn and all home commo- " dities could not be materially raised in price " without an influx of the precious metals ; for " the same quantity of money could not circulate " the same quantity of commodities, at high as at " low prices, and the precious metals never could " be purchased with dear commodities. When (f more gold is required, it must be obtained " by giving more, not fewer commodities in ex- " change for it. Neither could the want of money " be supplied by paper, for it is not paper which " regulates the value of gold as a commodity, but " gold that regulates the value of paper. Unless " then the value of gold could be lowered, " no paper could be added to the circulation 136 TAXES ON RAW PRODUCE. " without being depreciated. And that the value " of gold could not be lowered, appears clear, " when we consider that the value of gold as a " commodity must be regulated by the quantity of " goods which must be given to foreigners in " exchange for it. When gold is cheap comrao- " dities are dear ; and when gold is dear commo- " dities are cheap, and fall in price. Now as no " cause is shown why foreigners should sell their " gold cheaper than usual, it does not appear " probable that there would be any influx of " gold. Without such an influx there can be no " increase of quantity, no fall in its value, no rise " in the general price of goods. " The probable effect of a tax on raw produce " would be to raise the price of raw produce, and " of all commodities in which raw produce entered, " BUT NOT IN ANY DEGREE PROPORTIONED TO THE " TAX ; while other commodities in which no raw " produce entered, such as articles made of the " metals and the earths, would fall in price ; so " that the same quantity of money as before would " be adequate to the whole circulation." Ricardo, p. 186, 3rd edition. How are we to reconcile what this most incon- sistent of writers here says namely, " that the " probable effect of a tax on raw produce would " be to raise the price of raw produce and of all " commodities, in which raw produce enters, but " not in any degree proportioned to the tax, &c., TAXES ON RAW PRODUCE. 137 " &c.," with what he says in the commencement of the chapter namely, that " if the price of raw " produce did not rise so as to compensate the cultiva- " tor for the tax, he would naturally quit a trade " where his profits were reduced below the general " level of profitsr p. 169. This fitful and wayward writer, forgetting fre- quently in one page what he has said in another, falls into that continual see-saw of opinions which so strongly characterizes his work. If, as Mr. Ri- cardo here asserts, the value of money does not fall when food is taxed, how is a tax on food to be thrown on the consumer ? and not being so thrown, who pays the tax, if it be true, as he as- serts, that the price of food so rises after it is taxed as to remunerate the capitalists who pro- duce it ? It must then fall exclusively on the ca- pitalists who raise or obtain the equivalents of food, and then two rates of profit are established one for those who raise food and another for those who raise all its equivalents, with the ex- ception of the precious metals. Now, I put it to any man of common sense who has in the smallest degree turned his attention to political economy, to say if it be possible for absurdity to be carried further than it is here by Mr. Ricardo. Mr. Ri- cardo was a man of considerable talents, but having got wrong on the elementary question of value, he breaks fairly down when he attempts to discuss any question having relation to value. 138 TAXES ON RAW PRODUCE. Thus, if those who live on money incomes do not contribute to a tax imposed on food, they are not affected by that rise in the price of food which results in a country that is compelled to cultivate an inferior soil ; yet in this case Mr. Ricardo as- sures us the price of food so rises as to remunerate those who raise food enabling them to enjoy, notwithstanding a falling off in the productive- ness of agricultural labour, the previous rate of profits. In the case then, of a country's having to cultivate an inferior soil, the whole weight of taxation falls on those who raise the equivalents of food, with the single exception of those who raise or obtain the precious metals. If these be raised at home, they would not, according to Mr. Ricardo, fall in value with the other equivalents of food ; while I have shewn it makes no real difference to this portion of the subject whether the precious metals be primarily obtained at home or abroad. Again I ask, if absurdity can be car- ried further ? Yet Mr. Ricardo founded a school of political economists which bears his name, and with the single exception of Mr. Jones, succeed- ing writers laud his doctrines to the skies, or silently adopt them. It seems never to have occurred to Mr. Ricardo, or his school, that a rise in the value of food, by lowering profits, may become one of the leading causes of a nation's manufacturing supremacy ; for it is this fall of profits in old countries which TAXES ON RAW PRODUCE. 139 enables them to keep down manufactures in new ones. If an island immediately contiguous to, and as large as our own, was to rise to-morrow out of the sea, covered with an excellent soil, which any British subject might purchase at al- most a nominal price per acre, our manufacturing supremacy would probably be destroyed, because not only would the price of our labour greatly rise, but also the ordinary rate of our profits. Thus a rise in the value of food, so far from being always unfavourable to manufacturing industry, may be highly favourable to it. This is proved in prac- tice, for nations that have a plentiful supply of food export few manufactured goods, but usually import them largely, and ought to do so. It is in short, the high profits which prevail in new countries, compared with those existing in old ones, which prevent the former succeeding as manufactures, quite as much as the dearness of their own labour. The high price of labour in new countries cannot be alone the cause of their not manufacturing goods for export, because they often export annually much food and other raw products obtained from agriculture. As food be- comes in such countries dearer from their having to cultivate inferior soils, profits at length so fall that capitalists are content to raise both food and its equivalents for low profits, and when this period arrives, and only then, can these countries hope to export any considerable quantity of ma- 140 TAXES ON RAW PRODUCE. nufactured goods. Thus if the benefit of the great mass of consumers in a new country were alone consulted, it would let in manufactures at very low duties, their capitalists confining their speculations principally to agriculture and com- merce; exporting raw produce to those nations which unite great manufacturing skill and capital to a low rate of profit. These, however obvious, are new and important views respecting the most interesting questions in political economy, and will, I hope, lead to sounder maxims than those which have so long prevailed. ( 141 ) CHAPTER IV. TAXES ON OTHER COMMODITIES THAN RAW PRODUCE. MR. RICARDO thus commences his chapter on this subject : " On the same principle that a tax on " corn would raise the price of corn, a tax on " any other commodity would raise the price of " that commodity. If the commodity did not rise " by a sum equal to the tax, it would not give, the " same profit to the producer which he had before, " and he would remove his capital to some other em- " ployment. " The taxing of all commodities, whether they " be necessaries or luxuries, will, while money " remains at an unaltered value, raise their prices " by a sum equal to the tax." Ricardo, p. 281, 3rd edition. I need here say nothing in reply to the first sentence in the above paragraph, as I have ex- hausted the question in the previous chapter. What he means in the second paragraph by saying that "the taxing of all commodities, whe- 142 TAXES ON OTHER COMMODITIES " ther they be necessaries or luxuries, will, while " money remains at an unaltered value, raise their " prices by a sum at least equal to the tax," I am at a loss to imagine, seeing it is impossible for all other articles but money to rise in va- lue without the value of money proportionably falling. He afterwards says, " A tax on the manufac- " tured necessaries of the labourer would have " the same effect on wages as a tax on corn, " which differs from other necessaries only by " being the first and most important on the list ; " and it would produce precisely the same effects " on the profits of stock and foreign trade. But " a tax on luxuries would have no other effect " than to raise their price. It would fall wholly " on the consumer, and could neither increase " wages nor lower profits." Ibid. I have shown in another place that any sensible increase in the cost of a luxury in great demand is calculated to lower, in a densely peopled coun- try, both wages and profits, because calculated to diminish substantially the agricultural surplus ; for if, in the absence of money, landholders are compelled to give more food and necessaries for any article in much demand, they have less food and necessaries to send to market for other things, for the payment of landed rents in money, or the existence of such rents, neither alters nor modi- THAN RAW PRODUCE. 143 fies the principles which regulate the exchange of agricultural produce with its various equivalents. The final effect is the same, whether the agricul- tural surplus be diminished, or more labour be required to produce the equivalents of food. The imposition, then, of a tax on any luxury in much demand, being substantially the same as if the amount of such tax was forcibly taken in kind from the agricultural surplus, profits generally fall, as they do when it becomes necessary to cul- tivate an inferior soil. Thus, when a tax is im- posed on a luxury in much demand, more of the landed proprietor's income that is, more of that food which falls to his share, whether he receive it in kind or in money has to be given by him for such luxury, if he persist in consuming the same quantity of it, and thus he has less food to give for other things ; or he consumes less of the luxury after it is taxed than he did before, in which last case the tax is defeated. It has been said that the final distribution of the great mass of a nation's food is the same the subsistence of the people ; and that, though we may choose to call some labour productive, and some unproductive, the food and necessaries ob- tained by the labourer are equally consumed, whether given to the final recipients by the land- lords, or by the government. I submit that the difference between these two modes of appro- 144 TAXES ON OTHER COMMODITIES priating surplus food is highly important. When expended by the agricultural classes in the pur- chase of luxuries, this fund of surplus food re- mains unmortgaged; so that the whole of it is an uncharged fund on which future taxes may be raised ; but the quantity of surplus annual food, which, under the operation of a tax already im- posed, has to be paid over to the government, cannot be as a whole taxed again. I say as a whole, because some taxes are raised on many of the individuals who derive their incomes from government ; but all the food actually consumed by soldiers, sailors, and other functionaries of the State, is so much abstracted from the great source of taxation, and goes to diminish to that extent its power of yielding further taxes. In other words, even indirect taxes in so far as they are effective are a mortgage on the incomes of those on whom they are levied, and have all the con- sequences of a mortgage. Mr. Ricardo, however, was of a different opi- nion, and says, " Taxes which are levied on a " country for the purpose of supporting war, or " for the ordinary expenses of the State, and " which are chiefly devoted to the support of un- " productive labourers, are taken from the pro- " ductive industry of the country ; and every " saving which can be made from such expenses " will be generally added to the income, if not " to the capital, of the contributors. When, for THAN RAW PRODUCE. 145 " the expenses of a year's war, twenty millions " are raised by means of a loan, it is the twenty " millions which are withdrawn from the produc- " tive capital of the nation. The million per an- " num which is raised by taxes to pay the inte- " rest of this loan, is merely transferred from " those who pay it to those who receive it, from " the contributor to the tax to the national cre- " ditor. The real expense is the twenty millions, " and not the interest which must be paid for it. " Whether the interest be or be not paid, the " country will neither be richer nor poorer." Ricardo, p. 283, 3rd edition. I submit that the converse of this proposition is true, and that instead of the 2Q,000,000/. being everything to the public in an old, wealthy, but densely peopled country like this, the million or annual interest of the 20,000,000/. alone affects the public. I come to this conclusion from ob- serving in this country the effect of too much competition amongst producing capitalists, flowing as it does, out of the supply of available capital exceeding the supply of investments. The effect is a low rate of profit which, though of little con- sequence to great capitalists, is annually and ex- tensively ruinous to an immense body of small capitalists, and I have shown in the preceding chapter that profits are generally lowered by tax- ation. Yet Mr. Ricardo says, " By cancelling " the national debt, one man's income might be L 146 TAXES ON OTHER COMMODITIES " raised from WOOL to 1500/., but another man's " would be lowered from 1500/. to WOOL These " two mens' incomes now amount to 2500/. they " would amount to no more then. If it be the " object of government to raise taxes, there " would be precisely the same taxable capital " and income in the one case as in the other. It " is not, then, by the. payment of the interest on the " national debt that a country is distressed, nor is it " by the exoneration from payment that it can be " relieved. It is only by saving from income, and " retrenching in expenditure, that the national " capital can be increased ; and neither the in- " come would be increased, nor the expenditure " diminished by the annihilation of the national " debt"Ricardo, p. 285, 3rd edition. If this doctrine were sound, it would follow, that, however much is forcibly taken from the fund which primarily belongs to the producing classes, to be given to other classes not engaged in the business of production, that which re- mained would be as great in amount as it was before anything was so abstracted from it, which is an absurdity. Doubtless a bad season, or the being compelled to cultivate an inferior soil, in- jures all classes; while a tax on commodities only takes them from some classes to give them to other classes of the State. But the effect in both cases is the same on the ordinary rate of profits; as in both, it falls : for I have shown that THAN RAW PRODUCE. 147 when the goods of a producing capitalist are taxed, he cannot for any length of time be remu- nerated by a proportionate rise in their price without creating two rates of profit, or doing in- justice to the capitalists whose goods remain untaxed, by making them pay the whole of the sum levied on the taxed goods. When a fall of profits is brought about by tax- ation, it may be said that what is taken from producing capitalists is given to soldiers, sailors, and public creditors, in the form of dividends, and that thus what is lost by some classes of a community through taxation is gained by other classes. I. admit this but I say there are limits to this system by which the unproductive classes are subsisted by the productive classes, and these limits are found between the maximum and mini- mum rates of profits ; for the producing classes must also be subsisted, and unless they are com- fortably subsisted, a great number of the smaller capitalists will annually be ruined, and thus pro- duction will be checked. Let us now take the case of landed proprietors living wholly on their rents. Suppose one of these to possess an estate which yields him a net income of 200/., and that he already pays half of this in taxes. Surely this estate, after having this annual public charge imposed on it, is not so capable of yielding further taxes to the State, unless we suppose its whole annual income to be L2 148 TAXES ON OTHER COMMODITIES taken by the State, and nothing to be left for the subsistence of the proprietor and his family. I am really ashamed of submitting such truisms as these to the reader, but they are the proper an- swers to Mr. Ricardo and his school. M. Say, Mr. Ricardo tells us, writes as follows : " Melon says that the debts of a nation are " debts due from the right hand to the left, by " which the body is not weakened. It is true " that the general wealth is not diminished by " the payment of the interest on arrears of the " debt. The dividends are a value which passes " from the hand of the contributor to the national " creditor : whether it be the national creditor or " the contributor who accumulates or consumes " it is, I agree, of little importance to the society; " but the principal of the debt what has become " of that ? It exists no more. The consump* " tion which has followed the loan has annihi- " lated a capital which will never yield any " further revenue. The society is deprived, not " of the amount of interest, since that passes from " one hand to the other, but of the revenue from " a destroyed capital. This capital, if it had " been employed productively by him who lent " it to the State, would equally have yielded him " an income, but that income would have been " derived from a real production, and would not *' have been furnished from the pocket of a fellow " citizen." Say, vol. ii. p. 357. " This," says THAN RAW PRODUCE. 149 Mr. Ricardo, " is both conceived and expressed " in the true spirit of the science." Ricardo, p. 283, 3rd edition. One is not surprised to find M. Say lauded in this way by Mr. Ricardo, seeing that M. Say inconsiderately adopts Mr. Ricardo's doctrines. We hear not one word of complaint on the part of these, or of any other writers, of the quantity of capital destroyed in a country like this by its excessive quantity creating too much com- petition, or lost to it by being sent to rival countries in search of higher profits ; but they see no inconvenience in a great weight of taxa- tion to small producing capitalists ; no, all they lament as the consequence of taxation is the loss of a portion of national capital whose supply much exceeds that of profitable investments. Then again mark the inconsistency of Mr. Ri- cardo : " A country which has accumulated a