ספריית המאמרים
המדף של דוד ריקרדו
An Essay on Profits
by David Ricardo
1815
An Essay on the Influence of a low Price of Corn on the Profits of Stock;
shewing the Inexpediency of Restrictions on Importation:
With Remarks on Mr Malthus' Two Last Publications:
"An Inquiry into the Nature and Progress of Rent;" and
"The Grounds of an Opinion on the Policy of restricting the Importation of Foreign Corn"
By David Ricardo, Esq.
London: Printed for John Murray, Albemarle Street, 1815
INTRODUCTION
In treating on the subject of the profits of capital, it is
necessary to consider the princples which regulate the rise and
fall of rent; as rent and profits, it will be seen, have a very
intimate connexion with each other. The principles which regulate
rent are briefly stated in the following pages, and differ in a
very slight degree from those which have been so fully and so
ably developed by Mr Malthus in his late excellent publication,
to which I am very much indebted. The consideration of those
principles, together with those which regulate the profit of
stock, have convinced me of the policy of leaving the importation
of corn unrestricted by law. From the general principle set forth
in al Mr Malthus's publications, I am persuaded that he holds the
same opinion as far as profit and wealth are concerned with the
question; -- but, viewing, as he does, the danger as formidable
of depending on foreign supply for a large portion of our food,
he considers it wise, on the whole, to restrict importation. Not
participating with him in those fears, and perhaps estimating the
advantages of a cheap price of corn at a higher value, I have
come to a different conclusion. Some of the objections urged in
his last publication, -- "Grounds of an Opinion," &c. I have
endeavoured to answer; they appear to me unconnected with the
political danger he apprehends, and to be inconsistent with the
general doctrines of the advantages of a free trade, which he has
himself, by his writings, so ably contributed to establish.
ON THE INFLUENCE, &c.
Mr Malthus very correctly defines, "the rent of land to be that
portion of the value of the whole produce which remains to the
owner, after all the outgoings belonging to its cultivation, of
whatever kind, have been paid, including the profits of the
capital employed, estimated according to the usual and ordinary
rate of the profits of agricultural stock at the time being."
Whenever, then, the usual and ordinary rate of the profits of
agricultural stock, and all the outgoings belonging to the
cultivation of land, are together equal to the value of the whole
produce, there can be no rent.
And when the whole produce is only equal in value to the
outgoings necessary to cultivation, there can neither be rent nor
profit.
In the first settling of a country rich in fertile land, and
which may be had by any one who chooses to take it, the whole
produce, after deducting the outgoings belonging to cultivation,
will be the profits of capital, and will belong to the owner of
such capital, without any deduction whatever for rent.
Thus, if the capital employed by an individual on such land
were of the value of two hundred quarters of wheat, of which half
consisted of fixed capital, such as buildings, implements, &c.
and the other half of circulating capital, -- if, after replacing
the fixed and circulating capital, the value of the remaining
produce were one hundred quarters of wheat, or of equal value
with one hundred quarters of wheat, the neat profit to the owner
of capital would be fifty per cent or one hundred profit on two
hundred capital.
For a period of some duration, the profits of agricultural
stock might continue at the same rate, because land equally
fertile, and equally well situated, might be abundant, and
therefore, might be cultivated on the same advantageous terms, in
proportion as the capital of the first, and subsequent settlers
augmented.
Profits might even increase, because the population
increasing, at a more rapid rate than capital, wages might fall;
and instead of the value of one hundred quarters of wheat being
necessary for the circulating capital, ninety only might be
required: in which case, the profits of stock would rise from
fifty to fifty-seven per cent.
Profits might also increase, because improvements might take
place in agriculture, or in the implements of husbandry, which
would augment the produce with the same cost of production.
If wages rose, or a worse system of agriculture were
practised, profits would again fall.
These are circumstances which are more or less at all times
in operation -- they may retard or accelerate the natural effects
of the progress of wealth, by rising or lowering profits -- by
increasing or diminishing the supply of food, with the employment
of the same capital on the land.(1*)
We will, however, suppose that no improvements take place in
agriculture, and that capital and population advance in the
proper proportion, so that the real wages of labour, continue
uniformly the same; -- that we may know what peculiar effects are
to be ascribed to the growth of capital, the increase of
population, and the extension of cultivation, to the more remote,
and less fertile land.
In this state of society, when the profits on agricultural
stock, by the supposition, are fifty per cent the profits on all
other capital, employed either in the rude manufactures, common
to such a stage of society, or in foreign commerce, as the means
of procuring in exchange for raw produce, those commodities which
may be in demand, will be also, fifty per cent.(2*) If the
profits on capital employed in trade were more than fifty per
cent capital would be withdrawn from the land to be employed in
trade. If they were less, capital would be taken from trade to
agriculture.
After all the fertile land in the immediate neighbourhood of
the first settlers were cultivated, if capital and population
increased, more food would be required, and it could only be
procured from land not so advantageously situated. Supposing then
the land to be equally fertile, the necessity of employing more
labourers, horses, &c. to carry the produce from the place where
it was grown, to the place where it was to be consumed, although
no alteration were to take place in the wages of labour, would
make it necessary that more capital should be permanently
employed to obtain the same produce. Suppose this addition to be
of the value of ten quarters of wheat, the whole capital employed
on the new land would be two hundred and ten, to obtain the same
return as on the old; and, consequently the profits of stock
would fall from fifty to forty-three per cent or ninety on two
hundred and ten.(3*)
On the land first cultivated, the return would be the same as
before, namely, fifty per cent or one hundred quarters of wheat;
but, the general profits of stock being regulated by the profits
made on the least profitable employment of capital on
agriculture, a division of the one hundred quarters would take
place, forty-three per cent or eighty-six quarters would
constitute the profit of stock, and seven per cent or fourteen,
quarters, would constitute rent. And that such a division must
take place is evident, when we consider that the owner of the
capital of the value of two hundred and ten quarters of wheat
would obtain precisely the same profit, whether he cultivated the
distant land, or paid the first settler fourteen quarters for
rent.
In this stage, the profits on, all capital employed in trade
would fall to forty-three per cent.
If, in the further progress of population and wealth, the
produce of more land were required to obtain the same return, it
might be necessary to employ, either on account of distance, or
the worse qualIty of land, the value of two hundred and twenty
quarters of wheat, the profits of stock would then fall to
thirty-six per cent or eighty on two hundred and twenty, and the
rent of the first land would rise to twenty-eight quarters of
wheat, and on the second portion of land cultivated, rent would
now commence, and would amount to fourteen quarters.
The profits on all trading capital would also fall to
thirty-six per cent.
Thus by bringing successively land of a worse quality, or
less favourably situated into cultivation, rent would rise on the
land previously cultivated, and precisely in the same degree
would profits fall; and if the smallness of profits do not check
accumulation, there are hardly any limits to the rise of rent,
and the fall of profit.
If instead of employing capital at a distance on new land, an
additional capital of the value of two hundred and ten quarters
of wheat be employed on the first land cultivated, and its return
were in like manner forty-three per cent or ninety on two hundred
and ten; the produce of fifty per cent on the first capital,
would be divided in the same manner as before forty-three per
cent or eighty-six quarters would constitute profit, and fourteen
quarters rent.
If two hundred and twenty quarters were employed in addition
with the same result as before, the first capItal would afford a
rent of twenty-eight; and the second of fourteen quarters, and
the profits on the whole capital of six hundred and thirty
quarters would be equal, and would amount to thirty-six per cent.
Supposing that the nature of man was so altered, that he
required double the quantity of food that is now necessary for
his subsistence, and consequently, that the expenses of
cultivation were very greatly increased. Under such circumstances
the knowledge and capital of an old society employed on fresh and
fertile land in a new country would leave a much less surplus
produce; consequently, the profits of stock could never be so
high. But accumulation, though slower in its progress, might
still go on, and rent would begin just as before, when more
distant or less fertile land were cultivated.
The natural limit to population would of course be much
earlier, and rent could never rise to the height to which it may
now do; because, in the nature of things, land of the same poor
quality would never be brought into cultivation; -- nor could the
same amount of capital be employed on the better land with any
adequate return of profit.(4*)
The following table is constructed on the supposition, that
the first portion of land yields one hundred quarters profit on a
capital of two hundred quarters; the second portion, ninety
quarters on two hundred and ten, according to the foregoing
calculations.(5*) It will be seen that during the progress of a
country the whole produce raised on its land will Increase, and
for a certain time that part of the produce which belongs to the
profits of stock, as well as that part which belongs to rent will
increase; but that at a later period, every accumulation of
capital will be attended with an absolute, as well as a
proportionate diminution of profits, -- though rents will
uniformly increase. A less revenue, it will be seen, will be
enjoyed by the owner of stock, when one thousand three hundred
and fifty quarters are employed on the different qualities of
land, than when one thousand one hundred were employed. In the
former case the whole profits will be only two hundred and
seventy, in the latter two hundred and seventy five; and when one
thousand six hundred and ten are employed, profits will fall to
two hundred and forty-one and a half.(6*)
This is a view of the effects of accumulation which is
exceedingly curious, and has, I believe, never before been
noticed.
It will be seen by the table, that, in a progressive country,
rent is not only absolutely increasing, but that it is also
increasing in its ratio to the capital employed on the land; thus
when four hundred and ten was the whole capital employed, the
landlord obtained three and a half per cent; when one thousand
one hundred-thirteen and a quarter per cent; and when one
thousand eight hundred and eighty-sixteen and a half per cent.
The landlord not only obtains a greater produce, but a larger
share.
TABLE, shewing the Progress of Rent and Profit under an assumed
Augmentation of Capital
Capital estimated to quarters of wheat [200, 210, 220, 230, 240,
250, 260, 270]
Profit per cent [50, 43, 36, 30, 25, 20, 15, 11]
Neat produce to quarters of wheat after paying the cost of
production on each capital. [100, 90, 80, 70, 60, 50, 40, 30]
Profit of 1st portion of land in quarters of wheat. [100, 86, 72,
60, 50, 40, 30, 22]
Rent of 1st portion of land in quarters of wheat. [none, 14, 28,
40, 50, 60, 70, 78]
Profit of 2nd portion of land in quarters of wheat. [ - ,90, 76,
63, 52 1/2, 42, 31 1/2, 23]
Rent of 2nd portion of land in quarters of wheat. [ - , none, 14,
27, 37 1/2, 48, 58 1/2, 67]
Profit of 3rd portion of land in quarters of wheat. [ - , - , 80,
66, 55, 44, 33, 24]
Rent of 3rd portion of land in quarters of wheat. [ - , - , none,
14, 25 36, 47, 56]
Profit of 4th portion of land in quarters of wheat. [ - , - , - ,
70, 57 1/2, 46, 34 1/2, 25.3]
Rent of 4th portion of land in quarters of wheat. [ - , - , - ,
none, 12 1/2, 24, 35 1/2, 44.7]
Profit of 5th portion of land in quarters of wheat. [ - , - , - ,
- , 60, 48, 36, 26.4]
Rent of 5th portion of land in quarters of wheat. [ - , - , - , -
, none, 12, 24, 33.6]
Profit of 6th portion of land in quarters of wheat. [ - , - , - ,
- , - , 50, 37 1/2, 27 1/2]
Rent of 6th portion of land in quarters of wheat. [ - , - , - , -
, - , none, 12 1/2, 22 1/2]
Profit of 7th portion of land in quarters of wheat. [ - , - , - ,
- , - , - , 40, 27.6]
Rent of 7th portion of land in quarters of wheat. [ - , - , - , -
, - , - , none, 12.4]
Profit of 8th portion of land in quarters of wheat. [ - , - , - ,
- , - , - , - , 29.7]
1st period, 2nd ditto, 3rd ditto, 4th ditto, 5th ditto, 6th
ditto, 7th ditto, 8th ditto
When the whole capital employed is [200, 410, 630, 860, 1100,
1350, 1610, 1880]
Whole amount of rent received by landlords to quarters of wheat
[none, 14, 42, 81, 125, 180, 248 1/2, 314 1/2]
Whole amount of profits to quarters received by owners of stock
[100, 176, 228, 259, 175, 270, 241 1/2, 205 1/2]
Profits per cent on the whole capital [50, 43, 36, 30, 25, 20,
15, 11]
Rent per cent on the whole capital [ - , 3 1/2, 6 3/4, 9 1/3, 11
1/2, 13 1/4, 15 1/2, 16 1/3]
Total produce to quarters of wheat, after paying the cost of
production [ 100, 190, 270, 340, 400, 450, 490, 520]
Rent(7*) then is in all cases a portion of the profits
previously obtained on the land. It is never a new creation of
revenue, but always part of a revenue already created.
Profits of stock fall only, because land equally well adapted
to produce food cannot be procured; and the degree of the fall of
profits, and the rise of rents, depends wholly on the increased
expense of production:
If, therefore, in the progress of countries in wealth and
population, new portions of fertile land could be added to such
countries, with every increase of capital, profits would never
fall, nor rents rise.(8*)
If the money price of corn, and the wages of labour, did not
vary In price in the least degree, during the progress of the
country in wealth and population, still profits would fall and
rents would rise; because more labourers would be employed on the
more dIstant or less fertile land, in order to obtain the same
supply of raw produce; and therefore the cost of production would
have increased, whilst the value of the produce continued the
same.
But the price of corn, and of all other raw produce, has been
invariably observed to rise as a nation became wealthy, and was
obliged to have recourse to poorer lands for the production of
part of its food; and very little consideration will convince us,
that such is the effect which would naturally be expected to take
place under such circumstances.
The exchangeable value of all commodities, rises as the
difficulties of their production increase. If then new
difficulties occur in the production of corn, from more labour
being necessary, whilst no more labour is required to produce
gold, silver, cloth, linen, &c. the exchangeable value of corn
will necessarily rise, as compared with those things. On the
contrary, facilities in the production of corn, or of any other
commodity of whatever kind, which shall afford the same produce
with less labour, will lower its exchangeable value.(9*) Thus we
see that improvements in agriculture, or in the implements of
husbandry, lower the exchangeable value of corn;(10*)
improvements in the machinery connected with the manufacture of
cotton, lower the exchangeable value of cotton goods; and
improvements in mining, or the discovery of new and more abundant
mines of the precious metals, lower the value of gold and silver,
or which is the same thing, raises the price of all other
commodities. Wherever competition can have its full effect, and
the production of the commodity be not limited by nature, as in
the case with some wines, the difficulty or facility of their
production will ultimately regulate their exchangeable
value.(11*) The sole effect then of the process of wealth on
prices, independently of all improvements, either in agriculture
or manufactures, appears to be to raise the price of raw produce
and of labour, leaving all other commodities at their original
prices, and to lower general profits In consequence of the
general rise of wages.
This fact is of more importance than at first sight appears,
as it relates to the interest of the landlord, and the other
parts of the community. Not only is the situation of the landlord
improved, (by the increasing difficulty of procuring food, in
consequence of accumulation) by Obtaining an increased quantity
of the produce of the land, but also by the increased
exchangeable value of that quantity. If his rent be increased
from fourteen to twenty-eight quarters, it would be more than
doubled, because he would be able to command more than double the
quantity of Commodities, in exchange for the twenty-eight
quarters. As rents are agreed for, and paid in money, he would,
under the circumstances supposed, receive more than double of his
former money rent.
In like manner, if rent fell, the landlord would suffer two
losses; he would be a loser of that portion of the raw produce
which constituted his additional rent; and further, he would be a
loser by the depreciation in the real or exchangeable value of
the raw produce in which, or in the value of which, his remaining
rent would be paid.(12*)
As the revenue of the farmer is realized in raw produce, or
in the value of raw produce, he is interested, as well as the
landlord, in its high exchangeable value, but a low price of
produce may be compensated to him by a great additional quantity.
It follows then, that the interest of the landlord is always
opposed to the interest of every other class in the community.
His situation is never so prosperous, as when food is scarCe and
dear: whereas, all other persons are greatly benefited by
procuring food cheap. High rent and low profits, for they
invariably accompany each other, ought never to be the subject of
complaint, if they are the effect of the natural course of
things.
They are the most unequivocal proofs of wealth and
prosperity, and of an abundant population, compared with the
fertility of the soil. The general profits of stock depend wholly
on the profits of the last portion of capital employed on the
land; if, therefore, landlords were to relinquish the whole of
their rents, they would neither raise the general profits of
stock, nor lower the price of corn to the consumer. It would have
no other effect, as Mr Malthus has observed, than to enable those
farmers, whose lands now pay a rent, to live like gentlemen, and
they would have to expend that portion of the general revenue,
which now falls to the share of the landlord.
A nation is rich, not accordIng to the abundance of its
money, nor to the high money value at which its commodities
circulate, but according to the abundance of its commodities,
contributing to its comforts and enjoyments. Although this is a
proposition, from which few would dissent, many look with the
greatest alarm at the prospect of the diminution of their money
revenue, though such reduced revenue should have so Improved in
exchangeable value, as to procure considerably more of all the
necessaries and luxuries of life.
If then, the principles here stated as governing rent and
profit be correct, general profits on capital, can only be raised
by a fall in the exchangeable value of food, and which fall can
only arise from three causes:
1st. The fall of the real wages of labour, which shall enable
the farmer to bring a greater excess of produce to market.
2d. Improvements in agriculture, or in the implements of
husbandry, which shall also increase the excess of produce.
3dly. The discovery of new markets, from whence corn may be
imported at a cheaper price than It can be grown for at home.
The first of these causes is more or less permanent,
according as the price from which wages fall, is more or less
near that remuneration for labour, which is necessary to the
actual subsistence of the labourer.
The rise or fall of wages is common to all states of society,
whether it be the stationary, the advancing, or the retrograde
state. In the stationary state, it is regulated wholly by the
increase or falling off of the population. in the advancing
state, it depends on whether the capital or the population
advance, at the more rapid course. In the retrograde state, it
depends on whether population or capital decrease with the
greater rapidity.
As experience demonstrates that capital and population
alternately take the lead, and wages in consequence are liberal
or scanty, nothing can be positively laid down, respecting
profits, as far as wages are concerned.
But I think it may be most satisfactorily proved, that in
every society advancing in wealth and population, independently
of the effect produced by liberal or scanty wages, general
profits must fall, unless there be improvements in agriculture,
or corn can be imported at a cheaper price.
It seems the necessary result of the principles which have
been stated to regulate the progress of rent.
This principle will, however, not be readily admitted by
those who ascribe to the extension of commerce, and discovery of
new markets, where our commodities can be sold dearer, and
foreign commodities can be bought cheaper, the progress of
profits, without any reference whatever to the state of the land,
and the rate of profit obtained on the last portions of capital
employed upon it. Nothing is more common than to hear it
asserted, that profits on agriculture no more regulate the
profits of commerce, than that the profits of commerce regulate
the profits on agriculture. It is contended, that they
alternately take the lead; and, if the profits of commerce rise,
which it is said they do, when new markets are discovered, the
profits of agriculture will also rise; for it is admitted, that
if they did not do so, capital would be withdraw from the land to
be employed in the more profitable trade. But if the principles
respecting the progress of rent be correct, it is evident, that
with the same population and capital, whilst none of the
agricultural capital is withdrawn from the cultivation of the
land, agricultural profits cannot rise, nor can rent fall: either
then it must be contended, which is at variance with all the
principles of political economy, that the profits on commercial
capital will rise considerably, whilst the profits on
agricultural capital suffer no alteration, or, that under such
circumstances, the profits on commerce will not rise.(13*)
It is this latter opinion which I consider as the true one. I
do not deny that the first discoverer of a new and better market
may, for a time, before competition operates, obtain unusual
profits. He may either sell the commodities he exports at a
higher price than those who are ignorant of the new market, or he
may purchase the commodities imported at a cheaper price. Whilst
he, or a few more exclusively follow this trade, their profits
will be above the level of general profits. But it is of the
general rate of profit that we are speaking, and not of the
profits of a few individuals; and I cannot doubt that, in
proportion as such trade shall be generally known and followed,
there will be such a fall in the price of the foreign commodity
in the importing country, in consequence of its increased
abundance, and the greater facility with which it is procured,
that its sale will afford only the common rate of profits -- that
so far from the high profits obtained by the few who first
engaged in the new trade elevating the general rate of profits --
those profits will themselves sink to the ordinary level.
The effects are precisely similar to those which follow from
the use of improved machinery at home. Whilst the use of the
machine is confined to one, or a very few manufacturers, they may
obtain unusual profits, because they are enabled to sell their
commodities at a price much above the cost of production -- but
as soon as the machine becomes general to the whole trade, the
price of the commodities will sink to the actual cost of
production, leaving only the usual and ordinary profits.
During the period of capital moving from one employment to
another, the profits on that to which capital is flowing will be
relatively high, but will continue so no longer than till the
requisite capital is obtained.
There are two ways in which a country may be benefited by
trade -- one by the increase of the general rate of profits,
which, according to my opinion, can never take place but in
consequence of cheap food, which is beneficial only to those who
derive a revenue from the employment of their capital, either as
farmers, manufacturers, merchants, or capitalists, lending their
money at interest -- the other by the abundance of commodities,
and by a fall in their exchangeable value, in which the whole
community participate. In the first case, the revenue of the
country is augmented -- in the second the same revenue becomes
efficient in procuring a greater amount of the necessaries and
luxuries of life.
It is in this latter mode only (14*) that nations are
benefited by the extension of commerce, by the division of labour
in manufactures, and by the discovery of machinery, -- they all
augment the amount of commodities, and contribute very much to
the ease and happiness of mankind; but, they have no effect on
the rate of profits, because they do not augment the produce
compared with the cost of production on the land, and it is
impossible that all other profits should rise whilst the profits
on land are either stationary, or retrograde.
Profits then depend on the price, or rather on the value of
food. Every thing which gives facility to the production of food,
however scarce, or however abundant commodities may become, will
raise the rate of profits, whilst on the contrary, every thing
which shall augment the cost of production without augmenting the
quantity of food,(15*) will, under every circumstance, lower the
general rate of profits. The facility of obtaining food is
beneficial in two ways to the owners of capital, it at the same
time raises profits and increases the amount of consumable
commodities. The facility in obtaining all other things, only
increases the amount of commodities.
If, then, the power of purchasing cheap food be of such great
importance, and if the importation of corn will tend to reduce
its price, arguments almost unanswerable respecting the danger of
dependence on foreign countries for a portion of our food, for in
no other view will the question bear an argument, ought to be
brought forward to induce us to restrict importation, and thereby
forcibly to detain capital in an employment which it would
otherwise leave for one much more advantageous.
If the legislature were at once to adopt a decisive policy
with regard to the trade in corn -- if it were to allow a
permanently free trade, and did not with every variation of
price, alternately restrict and encourage importation, we should
undoubtedly be a regularly importing country. We should be so in
consequence of the superiority of our wealth and population,
compared to the fertility of our soil over our neighbours. It is
only when a country is comparatively wealthy, when all its
fertile land is in a state of high cultivation, and that it is
obliged to have recourse to its inferior lands to obtain the food
necessary for its population; or when it is originally without
the advantages of a fertile soil, that it can become profitable
to import corn.(16*)
It is, then, the dangers of dependence on foreign supply for
any considerable quantity of our food, which can alone be opposed
to the many advantages which, circumstanced as we are, would
attend the importation of corn. These dangers do not admit of
being very correctly estimated, they are in some degree, matters
of opinion and cannot like the advantages on the other side, be
reduced to accurate calculation. They are generally stated to be
two -- 1st, that in the case of war a combination of the
continental powers, or the influence of our principal enemy,
might deprive us of our accustomed supply -- 2dly, that when bad
seasons occurred abroad, the exporting countries would have, and
would exercise, the power of withholding the quantity usually
exported to make up for their own deficient supply.(17*)
If we became a regularly importing country, and foreigners
could confidently rely on the demand of our market, much more
land would be cultivated in the corn counties with a view to
exportation. When we consider the value of even a few weeks
consumption of corn in England, no interruption could be given to
the export trade, if the continent supplied us with any
considerable quantity of corn, without the most extensively
ruinous commercial distress -- distress which no sovereign, or
combination of sovereigns, would be willing to inflict on their
people; and, if willing, it would be a measure to which probably
no people would submit. It was the endeavour of Buonaparte to
prevent the exportation of the raw produce of Russia, more than
[any] other cause which produced the astonishing efforts of the
people of that county against the most powerful force perhaps
ever assembled to subjugate a nation.
The immense capital which would be employed on the land,
could not be withdrawn suddenly, and under such circumstances,
without immense loss; besides which, the glut of corn in their
markets, which would affect their whole supply, and lower its
value beyond calculation; the failure of those returns, which are
essential in all commercial adventures, would occasion a scene of
wide spreading ruin, which if a country would patiently endure,
would render it unfit to wage war with any prospect of success.
We have all witnessed the distress in this country, and we have
all heard of the still greater distress in Ireland, from a fall
in the price of corn, at a time too when it is acknowledged that
our own crop has been deficient; when importation has been
regulated by price, and when we have not experienced any of the
effects of a glut. Of what nature would that distress have been
if the price of corn had fallen to a half a quarter, or an eighth
part of the present price. For the effects of plenty or scarcity,
in the price of corn, are incalculably greater than in proportion
to the increase or deficiency of quantity. These then, are the
inconveniencies which the exporting countries would have to
endure.
Ours would not be light. A great diminution in our usual
supply, amounting probably to one-eighth of our whole
consumption, it must be confessed, would be an evil of
considerable magnitude; but we have obtained a supply equal to
this, even when the growth of foreign countries was not regulated
by the constant demand of our market. We all know the prodigious
effects of a high price in procuring a supply. It cannot, I think
be doubted, that we should obtain a considerable quantity from
those counties with which we were not at war; which, with the
most economical use of our own produce, and the quantity in
store,(18*) would enable us to subsist till we had bestowed the
necessary capital and labour on our own land, with a view to
future production. That this would be a most afflicting change, I
certainly allow; but I am fully persuaded that we should not be
driven to such an alternative, and that notwithstanding the war,
we should be freely supplied with the corn, expressly grown in
foreign counties for our consumption. Buonaparte, when he was
most hostile to us, permitted the exportation of corn to England
by licences, when our prices were high from a bad harvest, even
when all other commerce was prohibited. Such a state of things
could not come upon us suddenly; a danger of this nature would be
partly foreseen, and due precautions would be taken. Would it be
wise then to legislate with the view of preventing an evil which
might never occur; and to ward off a most improbable danger,
sacrifice annually a revenue of some millions?
In contemplating a trade in corn, unshackled by restrictions
on importation, and a consequent supply from France, and other
countries, where it can be brought to market, at a price not much
above half that at which we can ourselves produce it on some of
our poorer lands, Mr Malthus does not sufficiently allow for the
greater quantity of corn, which would be grown abroad, if
importation was to become the settled policy of this country.
There cannot be the least doubt that if the corn countries could
depend on the markets of England for a regular demand, if they
could be perfectly secure that our laws, respecting the corn
trade, would not be repeatedly vacillating between bounties,
restrictions, and prohibitions, a much larger supply would be
grown, and the danger of a greatly diminished exportation, in
consequence of bad seasons, would be less likely to occur.
Countries which have never yet supplied us, might, if our policy
was fixed, afford us a considerable quantity.
It is at such times that it would be particularly the
interest of foreign countries to supply our wants, as the
exchangeable value of corn does not rise in proportion only to
the deficiency of supply, but two, three, four, times as much,
according to the amount of the deficiency.
If the consumption of England is ten million quarters, which,
in an average year, would sell for forty millions of money; and,
if the supply should be deficient one fourth, the seven million
five hundred thousand quarters would not sell for forty millions
only, but probably for fifty millions, or more. Under the
circumstances then of bad seasons, the exporting country would
content itself with the smallest possible quantity necessary for
their own consumption, and would take advantage of the high price
in England, to sell all they could spare, as not only would corn
be high, as compared with money, but as compared with all other
things; and if the growers of corn adopted any other rule, they
would be in a worse situation, as far as regarded wealth, than if
they had constantly limited the growth of corn to the wants of
their own people.
If one hundred millions of capital were employed on the land,
to obtain the quantity necessary to their own subsistence, and
twenty millions more, that they might export the produce, they
would lose the whole return of the twenty millions in the scarce
year, which they would not have done had they not been an
exporting country.
At whatever price exportation might be restricted, by foreign
countries, the chance of corn rising to that price would be
diminished by the greater quantity produced in consequence of our
demand.
With respect to the supply of corn, it has been remarked, in
reference to a single country, that if the crops are bad in one
district, they are generally productive in another; that if the
weather is injurious to one soil, or to one situation, it is
beneficial to a different soil and different situation; and, by
this compensating power, Providence has bountifully secured us
from the frequent recurrence of dearths. If this remark be just,
as applied to one country, how much more strongly may it be
applied to all the countries together which compose our world?
Will not the deficiency of one country be made up by the plenty
of another? and, after the experience which we have had of the
power of high prices to procure a supply, can we have any just
reason to fear that we shall be exposed to any particular danger
from depending on importation, for so much corn as may be
necessary for a few weeks of our consumption.
From all that I can learn, the price of corn in Holland,
which country depends almost wholly on foreign supply, has been
remarkably steady, even during the convulsed times which Europe
has lately experienced -- a convincing proof, notwithstanding the
smallness of the country, that the effects of bad seasons are not
exclusively borne by importing countries.
That great improvements have been made in agriculture, and
that much capital has been expended on the land, it is not
attempted to deny; but, with all those improvements, we have not
overcome the natural impediments resulting from our increasing
wealth and prosperity, which obliges us to cultivate at a
disadvantage our poor lands, if the importation of corn is
restricted or prohibited. If we were left to ourselves,
unfettered by legislative enactments, we should gradually
withdraw our capital from the cultivation of such lands, and
import the produce which is at present raised upon them. The
capital withdrawn would be employed in the manufacture of such
commodities as would be exported in return for the corn.(19*)
Such a distribution of part of the capital of the country, would
be more advantageous, or it would not be adopted. This principle
is one of the best established in the science of political
economy, and by no one is more readily admitted than by Mr
Malthus. It is the foundation of all his arguments, in his
comparison of the advantages and disadvantages attending an
unrestricted trade in corn, in his "Observations on the Corn
Laws."
In his last publication, however, in one part of it, he
dwells with much stress on the losses of agricultural capital,
which the country would sustain, by allowing an unrestricted
importation. He laments the loss of that which by the course of
events has become of no use to us, and by the employment of which
we actually lose. We might just as fairly have been told, when
the steam-engine, or Mr Arkwright's cotton-machine, was brought
to perfection, that it would be wrong to adopt the use of them,
because the value of the old clumsy machinery would be lost to
us. That the farmers of the poorer lands would be losers, there
can be no doubt, but the public would gain many times the amount
of their losses; and, after the exchange of capital from land to
manufactures had been effected, the farmers themselves, as well
as every other class of the community, except the landholders,
would very considerably increase their profits.
It might, however, be desirable, that the farmers, during
their current leases, should be protected against the losses
which they would undoubtedly suffer from the new value of money,
which would result from a cheap price of corn, under their
existing money engagements with their landlords.
Although the nation would sacrifice much more than the
farmers would save even by a temporary high price of corn, it
might be just to lay restrictive duties on importation for three
or four years, and to declare that, after that period, the trade
in corn should be free, and that imported corn should be subject
to no other duty than such as we might find it expedient to
impose on corn of our own growth.(20*)
Mr Malthus is, no doubt, correct, when he says, "If merely
the best modes of cultivation now in use, in some parts of Great
Britain, were generally extended, and the whole country was
brought to a level, in proportion to its natural advantages of
soil and situation, by the further accumulation and more equable
distribution of capital and skill, the quantity of additional
produce would be immense, and would afford the means of
subsistence to a very great increase of population.["] (21*)
This rejection is true, and is highly pleasing -- it shews
that we are yet at a great distance from the end of our
resources, and that we may contemplate an increase of prosperity
and wealth, far exceeding that of any country which has preceded
us. This may take place under either system, that of importation
or restriction, though not with an equally accelerated pace, and
is no argument why we should not, at every period of our
improvement, avail ourselves of the full extent of the advantages
offered to our acceptance -- it is no reason why we should not
make the very best disposition of our capital, so as to ensure
the most abundant return. The land has, as I before said, been
compared by Mr Malthus to a great number of machines, all
susceptible of continued improvement by the application of
capital to them, but yet of very different original qualities and
powers. Would it be wise at a great expense to use some of the
worst of these machines, when at a less expense we could hire the
very best from our neighbours.
Mr Malthus thinks that a low money price of corn would not be
favourable to the lower classes of society, because the real
exchangeable value of labour; that is, its power of commanding
the necessaries, conveniences, and luxuries of life, would not be
augmented, but diminished by a low money price. Some of his
observations on this subject are certainly of great weight, but
he does not sufficiently allow for the effects of a better
distribution of the national capital on the situation of the
lower classes. It would be beneficial to them, because the same
capital would employ more hands; besides, that the greater
profits would lead to further accumulation; and thus would a
stimulus be given to population by really high wages, which could
not fail for a long time to ameliorate the condition of the
labouring classes.
The effects on the interests of this class, would be nearly
the same as the effects of improved machinery, which it is now no
longer questioned, has a decided tendency to raise the real wages
of labour.
Mr Malthus also observes, "that of the commercial and
manufacturing classes, only those who are directly engaged in
foreign trade will feel the benefit of the importing system."
If the view which has been taken of rent be correct, -- if it
rise as general profits fall, and falls as general profits rise,
-- and if the effect of importing corn is to lower rent, which
has been admitted, and ably exemplified by Mr Malthus himself, --
all who are concerned in trade, -- all capitalists whatever,
whether they be farmers, manufacturers, or merchants, will have a
great augmentation of profits. A fall in the price of corn, in
consequence of improvements in agriculture or of importation,
will lower the exchangeable value of corn, only -- the price of
no other commodity will be affected. If, then, the price of
labour falls, which it must do when the price of corn is lowered,
the real profits of all descriptions must rise; and no person
will be so materially benefited as the manufacturing and
commercial part of society.
If the demand for home commodities should be diminished,
because of the fall of rent on the part of the landlords, it will
be increased in a far greater degree by the increased opulence of
the commercial classes.
If restrictions on the importation of corn should take place,
I do not apprehend, that we shall lose any part of our foreign
trade; on this point, I agree with Mr Malthus. In the case of a
free trade in corn, it would be considerably augmented; but the
question is not, whether we can retain the same foreign trade --
but, whether, in both cases, it will be equally profitable.
Our commodities would not sell abroad for more or for less in
consequence of a free trade, and a cheap price of corn; but the
cost of production to our manufacturers would be very different
if the price of corn was eighty, or was sixty shillings per
quarter; and consequently profits would be augmented by all the
cost saved in the production of the exported commodities.
Mr Malthus notices an observation, which was first made by
Hume, that a rise of prices, has a magic effect on industry: he
states the effects of a fall to be proportionally
depressing.(22*) A rise of prices has been stated to be one of
the advantages, to counterbalance the many evils attendant on a
depreciation of money, from a real fall in the value of the
precious metals, from rising the denomination of the coin, or
from the overissue of paper money.
It is said to be beneficial, because it betters the situation
of the commercial classes at the expense of those enjoying fixed
incomes; -- and that it is chiefly in those classes, that the
great accumulations are made, and productive industry encouraged.
A recurrence to a better monetary system, it is said, though
highly desirable, tends to give a temporary discouragement to
accumulation and industry, by depressing the commercial part of
the community, and is the effect of a fall of prices: Mr Malthus
supposes that such an effect will be produced by the fall of the
price of corn. If the observation made by Hume were well founded,
still it would not apply to the present instance: -- for every
thing that the manufacturer would have to sell, would be as dear
as ever: it is only what he would buy that would be cheap,
namely, corn and labour by which his gains would be increased. I
must again observe, that a rise in the value of money lowers all
things; whereas a fall in the price of corn, only lowers the
wages of labour, and therefore raises profits.
If then the prosperity of the commercial classes, will most
certainly lead to accumulation of capital, and the encouragement
of productive industry; these can by no means be so surely
obtained as by a fall in the price of corn.
I cannot agree with Mr Malthus in his approbation of the
opinion of Adam Smith, "that no equal quantity of productive
labour employed in manufactures, can ever occasion so great a
re-production as in agriculture." I suppose that he must have
overlooked the term ever in this passage, otherwise the opinion
is more consistent with the doctrine of the Economists, than with
those which he has maintained; as he has stated, and I think
correctly, that in the first settling of a new country, and in
every stage of its improvement, there is a portion of its capital
employed on the land, for the profits of stock merely, and which
yields no rent whatever. Productive labour employed on such land
never does in fact afford so great a reproduction, as the same
productive labour employed in manufactures.
The difference is not indeed great, and is voluntarily
relinquished, on account of the security and respectability which
attends the employment of capital on land. In the infancy of
society, when no rent is paid, is not the re-production of value
in the coarse manufactures, and in the implements of husbandry
with a given capital, at least as great as the value which the
same capital would afford if employed on the land?
This opinion indeed is at variance with all the general
doctrines of Mr Malthus, which he has so ably maintained in this
as well as in all his other publications. In the "Inquiry,"
speaking of what I consider a similar opinion of Adam Smith, he
observes, "I cannot, however, agree with him in thinking that all
land which yields food must necessarily yield rent. The land
which is successively taken into cultivation in improving
countries, may only pay profits and labour. A fair profit on the
stock employed, including, of course, the payment of labour, will
always be a sufficient inducement to cultivate." The same motives
will also induce some to manufacture goods, and the profits of
both in the same stages of society will be nearly the same.
In the course of these observations, I have often had
occasion to insist, that rent never falls without the profits of
stock rising. If it suit us to day to import corn rather than
grow it, we are solely influenced by the cheaper price. If we
import the portion of capital last employed on the land, and
which yielded no rent, will be withdrawn; rent will fall and
profits rise, and another portion of capital employed on the land
will come under the same description of only yielding the usual
profits of stock.
If corn can be imported cheaper than it can be grown on this
rather better land, rent will again fall and profits rise, and
another and better description of land will now be cultivated for
profits only. In every step of our progress, profits of stock
increase and rents fall, and more land is abandoned: besides
which, the country saves all the difference between the price at
which corn can be grown, and the price at which it can be
imported, on the quantity we receive from abroad.
Mr Malthus has considered, with the greatest ability, the
effect of a cheap price of corn on those who contribute to the
interest of our enormous debt. I most fully concur in many of his
conclusions on this part of the subject. The wealth of England
would, I am persuaded, be considerably augmented by a great
reduction in the price of corn, but the whole money value of that
wealth would be diminished. It would be diminished by the whole
difference of the money value of the corn consumed, -- it would
be augmented by the increased exchangeable value of all those
commodities which would be exported in exchange for the corn
imported. The latter would, however, be very unequal to the
former; therefore the money value of the commodities of England
would, undoubtedly, be considerably lowered.
But, though it is true, that the money value of the mass of
our commodities would be diminished, it by no means follows, that
our annual revenue would fall in the same degree. The advocates
for importation ground their opinion of the advantages of it on
the conviction that the revenue would not so fall. And, as it is
from our revenue that taxes are paid, the burthen might not be
really augmented.
Suppose the revenue of a country to fall from ten to nine
millions, whilst the value of money altered in the proportion of
ten to eight, such country would have a larger neat revenue,
after paying a million from the smaller, than it would have after
paying it from the larger sum.
That the stockholder would receive more in real value than
what he contracted for, in the loans of the late years, is also
true; but, as the stockholders themselves contribute very largely
to the public burthens, and therefore to the payment of the
interest which they receive, no inconsiderable proportion of the
taxes would fall on them; and, if we estimate at its true value
the additional profits made by the commercial class, they would
still be great gainers, notwithstanding their really augmented
contributions.
The landlord would be the only sufferer by paying really
more, not only without any adequate compensation, but with
lowered rents.
It may indeed be urged, on the part of the stockholder, and
those who live on fixed incomes, that they have been by far the
greatest sufferers by the war. The value of their revenue has
been diminished by the rise in the price of corn, and by the
depreciation in the value of paper money, whilst, at the same
time, the value of their capital has been very much diminished
from the lover price of the funds. They have suffered too from
the inroads lately made on the sinking fund, and which, it is
supposed, will be still further extended, -- a measure of the
greatest injustice, -- in direct violation of solemn contracts;
for the sinking fund is as much a part of the contract as the
dividend, and, as a source of revenue, utterly at variance with
all sound principles. It is to the growth of that fund that we
ought to look for the means of caring on future wars, unless we
are prepared to relinquish the funding system altogether. To
meddle with the sinking fund, is to obtain a little temporary aid
at the sacrifice of a great future advantage. It is reversing the
whole system of Mr Pitt, in the creation of that fund: he
proceeded on the conviction, that, for a small present burthen,
an immense future advantage would be obtained; and, after
witnessing, as we have done, the benefits which have already
resulted from his inflexible determination to leave that fund
untouched, even when he was pressed by the greatest financial
distress, when three per cents were so low as forty-eight, we
cannot, I think, hesitate in pronouncing, that he would not have
countenanced, had he still lived, the measures which have been
adopted.
To recur, however, to the subject before me, I shall only
further observe, that I shall greatly regret that considerations
for any particular class, are allowed to check the progress of
the wealth and population of the country. If the interests of the
landlord be of sufficient consequence, to determine us not to
avail ourselves of all the benefits which would follow from
importing corn at a cheap price, they should also influence us in
rejecting all improvements in agriculture, and in the implements
of husbandry; for it is as certain that corn is rendered cheap,
rents are lowered, and the ability of the landlord to pay taxes,
is for a time, at least, as much impaired by such improvements,
as by the importation of corn. To be consistent then, let us by
the same act arrest improvement, and prohibit importation.
NOTES:
1. Mr Malthus considers that the surplus of produce obtained in
consequence of diminished wages, or of improvements in
agriculture, to be one of the causes to raise rents. To me it
appears that it will only augment profits.
"The accumulation of capital, beyond the means of employing
it on land of the greatest natural fertility, and the greatest
advantage of situation, must necessarily lower profits; while the
tendency of population to increase beyond the means of
subsistence must, after a certain time, lower the wages of
labour.
"The expense of production will thus be diminished, but the
value of the produce, that is, the quantity of labour, and of the
other products of labour besides corn, which it can command
instead of diminishing, will be increased.
"There will be an increasing number of people demanding
subsistence, and ready to offer their services in any way in
which they can be useful. The exchangeable value of food will
therefore be in excess above the cost of production, including in
this cost the full profits of the stock employed upon the land,
according to the actual rate of profits, at the time being. And
this excess is rent." -- An Inquiry into the Nature and Progress
of Rent, page 18.
2. It is not meant, that strictly the rate of profits on
agriculture and manufactures will be the same, but that they will
bear some proportion to each other. Adam Smith has explained why
profits are somewhat less on some employments of capital than on
others, according to their security, cleanliness, and
respectibility, &c. &c.
What the proportion may be, is of no importance to my
argument, as I am only desirous of proving that the profits on
agricultural capital cannot materially vary, without occasioning
a similar variation in the profits on capital, employed on
manufactures and commerece.
3. Profits of stock fall because land equally fertile cannot be
obtained, and through the whole progress of society, profits are
regulated by the difficulty or facility of procuring food. This
is a principle of great importance, and has been almost
overlooked in the writing of Political Economists. They appear to
think that profits of stock can be raised by commercial causes,
independently of the supply of food.
4. In all that I have said concerning the origin and progress of
rent, I have briefly repeated, and endeavoured to elucidate the
principles which Mr Malthus has so ably laid down, on the same
subject, in his "Inquiry into the Nature and Progress of Rent;" a
work abounding in original ideas, -- which are useful not only as
they regard rent, but as connected with the question of taxation;
perhaps, the most difficult and intricate of all the subjects on
which Political Economy treats.
5. It is scarcely necessary to observe that the data on which
this table is constructed are assumed, and are probably very far
from the truth. They are fixed on as tending to illustrate the
principle, -- which would be the same, whether the first profits
were fifty per cent or five, -- or, whether an additional capital
of ten quarters, or of one hundred, were required to obtain the
same produce from the cultivation of new land. In proportion as
the capital employed on the land, consisted more of fixed
capital, and less of circulating captial, would rent advance, and
property {profits?} fall less rapidly.
6. This would be the effect of a constantly accumulating capital,
in a country which refused to import foreign and cheaper corn.
But after profits have very much fallen, accumulation will be
checked, and capital will be exported to be employed in those
countries where food is cheap and profits high. All European
colonies have been established with the capital of the mother
countries, and have thereby checked accumulation. That part of
the population too, which is employed in the foreign carrying
trade, is fed with foreign corn. It cannot be doubted, that low
profits, which are the inevitable effects of a really high price
of corn,tend to draw capital abroad; this consideration ought
therefore to be a powerful reason to prevent us from restricting
importation.
7. By rent I always mean the remuneration given to the landlord
for the use of the original power of the land. If either the
landlord expends capital on his own land, or the capital of a
preceding tenant is left upon it at the expiration of his lease,
he may obtain what is indeed called a larger rent, but a portion
of this is evidently paid for the use of capital. The other
portion only is paid for the use of the orginal power of the
land.
8. Excepting, as has been before observed, the real wages of
labour should rise, or a worse system of agriculture be
practised.
9. The low price of corn, caused by improvements in agriculture,
would give a stimulus to population, by increasing profits and
encouraging accumulation, which would again raise the price of
corn and lower profits. But a larger population could be
maintained at the same price of corn, the same profits, and the
same rents. Improvements in agriculture may then be said to
increase profits, and to lower for a time rents.
10. The causes, which render the acquisition of an additional
quantity of corn more difficult are, in progressive countries, in
constant operation, whilst marked improvements in agriculture, or
in the implements of husbandry are of less frequent occurrence.
If these opposite causes acted with equal effect, corn would be
subject only to accidental variation of price, arising from bad
seasons, from greater or less real wages of labour, or from an
alteration in the value of the precious metals, proceeding from
their abundance or scarcity.
11. Through the price of all commodities is ultimately regulated
by, and is always tending to, the cost of their production,
including the general profits of stock, they are all subject, and
perhaps corn more than most others, to an accidental price,
proceeding from temporary causes.
12. It has been thought that the price of corn regulates the
prices of all other things. This appears to me to be a mistake.
If the price of corn is affected by the rise or fall of the value
of the precious metals themselves, then indeed will the price of
commodities be also affected, but they vary, because the value of
money varies, not because the value of corn is altered.
Commodities, I think, cannot materially rise or fall, whilst
money and commodities continue in the same proportions, or rather
whilst the cost of production of both estimated in corn continues
the same. In the case of taxation, a part of the price is paid
for the liberty of using the commodity, and does not constitute
its real price.
13. Mr Malthus has supplied me with a happy illustration -- he
has correctly compared "soil to a great number of machines, all
susceptible of continued improvement by the application of
capital to them, buy yet of very different original qualities and
powers." How, I would ask, can profits rise whilst we are obliged
to make use of that machine which has the worst original
qualities and powers? We cannot abandon the use of it; for it is
the condition on which we obtain the food necessary for our
population, and the demand for food is by the supposition not
diminished -- but who would consent to use it if he could make
greater profits elsewhere?
14. Excepting when the extension of commerce enables us to obtain
food at really cheaper prices.
15. If by foreign commerce,or the discovery of machinery, the
commodities consumed by the labourer should become much cheaper,
wages would fall; and this, as we have before observed, would
raise the profits of the farmer, and therefore, all other
profits.
16. This principle is most ably stated by Mr Malthus in page 42
of "An Inquiry," &c.
17. It is this latter opinion which is chiefly insisted upon by
Mr Malthus in his late publication, "The grounds of An Opinion,"
&c.
18. As London is to be a depot for foreign corn, this store might
be very great.
19. If it be true, as Mr Malthus observes, that in Ireland there
are no manufactures in which capital could be profitably
employed, capital would not be withdrawn from the land, and then
there would be no loss of agricultural capital. Ireland would, in
such case, have the same surplus corn produce, although it would
be of less exchangeable value. Her revenue might be diminished;
but if she would not, or could not manufacture goods, and would
not cultivate the ground, she would have no revenue at all.
20. I by no means agree with Adam Smith, or with Mr Malthus,
respecting the effects of taxation on the necessaries of life.
The former can find no term too severe by which to characterize
them. Mr Malthus is more lenient. They both think that such
taxes, incalculably more than any other, tend to diminish capital
and production. I do not say that they are the best of taxes, but
they do not, I think, subject us to any of the disadvantages of
which Adam Smith speaks in foreign trade: nor do they produce
effects very different from other taxes. Adam Smith thought that
such taxes fell exclusively on the landholder; Mr Malthus thinks
they are divided between the landholder and consumer. It appears
to me that they are paid wholly by the consumer.
21. Page 22, Grounds, &c.
22. Grounds, &c. p. 32.
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