The time spent in two
different sorts of work will not always alone determine
this proportion.
different sorts of work will not always alone determine
this proportion.
Ricardo - On The Principles of Political Economy, and Taxation
Malthus would undoubtedly be right, if, in proportion as the land
yielded abundantly, a greater share of the whole produce were paid to
the landlord; but the contrary is the fact: when no other but the most
fertile land is in cultivation, the landlord has the smallest share of
the whole produce, as well as the smallest value, and it is only when
inferior lands are required to feed an augmenting population, that both
the landlord's share of the whole produce, and the value he receives,
progressively increase.
Suppose that the demand is for a million of quarters of corn, and that
they are the produce of the land actually in cultivation. Now, suppose
the fertility of all the land to be so diminished, that the very same
lands will yield only 900,000 quarters. The demand being for a million
of quarters, the price of corn would rise, and recourse must necessarily
be had to land of an inferior quality sooner than if the superior land
had continued to produce a million of quarters. But it is this necessity
of taking inferior land into cultivation which is the cause of the rise
of rent. Rent, it must be remembered, is not in proportion to the
absolute fertility of the land in cultivation, but in proportion to its
relative fertility. Whatever cause may drive capital to inferior land,
must elevate rent; the cause of rent being, as stated by Mr. Malthus in
his third proposition, "the comparative scarcity of the most fertile
land. " The price of corn will naturally rise with the difficulty of
producing the last portions of it; but as the cost of production will
not increase, as wages and profits taken together will continue always
of the same value,[52] it is evident that the excess of price above the
cost of production, or, in other words, rent, must rise with the
diminished fertility of the land, unless it is counteracted by a great
reduction of capital, population, and demand. It does not appear then
that Mr. Malthus's proposition is correct: rent does not immediately and
necessarily rise or fall with the increased or diminished fertility of
the land; but its increased fertility renders it capable of paying at
some future time an augmented rent. Land possessed of very little
fertility can never bear any rent; land of moderate fertility may be
made, as population increases, to bear a moderate rent; and land of
great fertility a high rent; but it is one thing to be able to bear a
high rent, and another thing actually to pay it. Rent may be lower in a
country where lands are exceedingly fertile than in a country where they
yield a moderate return, it being in proportion rather to relative than
absolute fertility--to the value of the produce, and not to its
abundance. Mr. Malthus says, that the "cause of the excess of price of
the necessaries of life above the cost of production, is to be found in
their abundance rather than their scarcity, and is essentially different
from the high price of those peculiar products of the earth, not
connected with food, which may be called natural and necessary
monopolies. "
In what are they essentially different? Would not the abundance of those
peculiar products of the earth cause a rise of rent, if the demand for
them at the same time increased? and can rent ever rise, whatever the
commodity produced may be, from abundance merely, and without an
increase of demand?
The second cause of rent mentioned by Mr. Malthus, namely, "that quality
peculiar to the necessaries of life, of being able to create their own
demand, or to raise up a number of demanders in proportion to the
quantity of necessaries produced," does not appear to me to be any way
essential to it. It is not the abundance of necessaries which raises up
demanders, but the abundance of demanders which raises up necessaries.
We are under no necessity of producing permanently any greater quantity
of a commodity than that which is demanded. If by accident any greater
quantity were produced, it would fall below its natural price, and
therefore would not pay the cost of production, together with the usual
and ordinary profits of stock: thus the supply would be checked till it
conformed to the demand, and the market price rose to the natural price.
Mr. Malthus appears to me to be too much inclined to think that
population is only increased by the previous provision of food,--"that
it is food that creates its own demand,"--that it is by first providing
food that encouragement is given to marriage, instead of considering
that the general progress of population is affected by the increase of
capital, the consequent demand for labour, and the rise of wages; and
that the production of food is but the effect of that demand.
It is by giving the workman more money, or any other commodity in which
wages are paid, and which has not fallen in value, that his situation is
improved. The increase of population, and the increase of food will
generally be the effect, but not the necessary effect of high wages. The
amended condition of the labourer, in consequence of the increased value
which is paid him, does not necessarily oblige him to marry and take
upon himself the charge of a family--he may, if it please him, exchange
his increased wages for any commodities that may contribute to his
enjoyments--for chairs, tables, and hardware; or for better clothes,
sugar, and tobacco. His increased wages then will be attended with no
other effect than an increased demand for some of those commodities; and
as the race of labourers will not be materially increased, his wages
will continue permanently high. But although this might be the
consequence of high wages, yet so great are the delights of domestic
society, that in practice it is invariably found that an increase of
population follows the amended condition of the labourer; and it is only
because it does so, that a new and increased demand arises for food.
This demand then is the effect of an increase of population, but not the
cause--it is only because the expenditure of the people takes this
direction, that the market price of necessaries exceeds the natural
price, and that the quantity of food required is produced; and it is
because the number of people is increased, that wages again fall.
What motive can a farmer have to produce more corn than is actually
demanded, when the consequence would be a depression of its market price
below its natural price, and consequently a privation to him of a
portion of his profits, by reducing them below the general rate? "If,"
says Mr. Malthus, "the necessaries of life, the most important products
of land, had not the property of creating an increase of demand
proportioned to their increased quantity, such increased quantity would
occasion a fall in their exchangeable value. [53] However abundant might
be the produce of a country, its population might remain stationary. And
this abundance without a proportionate demand, and with a very high corn
price of labour, which would naturally take place under these
circumstances, might reduce the price of raw produce, like the price of
manufactures, to the cost of production. "
"Might reduce the price of raw produce to the cost of production? " Is it
ever for any length of time either above or below this price? Does not
Mr. Malthus himself, state it never to be so? "I hope," he says, "to be
excused for dwelling a little, and presenting to the reader in various
forms the doctrine, that corn, in reference to the quantity _actually
produced_, is sold at its necessary price like manufactures, because I
consider it as a truth of the highest importance, which has been
overlooked by the economists, by Adam Smith, and all those writers, who
have represented raw produce as selling always at a monopoly price. "
"Every extensive country may thus be considered as possessing a
gradation of machines for the production of corn and raw materials,
including in this gradation not only all the various qualities of poor
land, of which every territory has generally an abundance, but the
inferior machinery which may be said to be employed when good land is
further and further forced for additional produce. As the price of raw
produce continues to rise, these inferior machines are successively
called into action; and as the price of raw produce continues to fall,
they are successively thrown out of action. The illustration here used
serves to shew at once the _necessity of the actual price of corn to the
actual produce_, and the different effect which would attend a great
reduction in the price of any particular manufacture, and a great
reduction in the price of raw produce. "[54]
How are these passages to be reconciled to that which affirms, that if
the necessaries of life had not the property of creating an increase of
demand proportioned to their increased quantity, the abundant quantity
produced would then, and then only, reduce the price of raw produce to
the cost of production? If corn is never under its natural price, it is
never more abundant than the actual population require it to be for
their own consumption; no store can be laid up for the consumption of
others; it can never then by its cheapness and abundance be a stimulus
to population. In proportion as corn can be produced cheaply, the
increased wages of the labourers will have more power to maintain
families. In America, population increases rapidly, because food can be
produced at a cheap price, and not because an abundant supply has been
previously provided. In Europe population increases comparatively
slowly, because food cannot be produced at a cheap value. In the usual
and ordinary course of things, the demand for all commodities precedes
their supply. By saying, that corn would, like manufactures, sink to its
price of production, if it could not raise up demanders, Mr. Malthus
cannot mean that all rent would be absorbed; for he has himself justly
remarked, that if all rent were given up by the landlords, corn would
not fall in price; rent being the effect, and not the cause of high
price, and there being always one quality of land in cultivation which
pays no rent whatever, the corn from which replaces by its price, only
wages and profits.
In the following passage, Mr. Malthus has given an able exposition of
the causes of the rise in the price of raw produce in rich and
progressive countries, in every word of which I concur; but it appears
to me to be at variance with some of the propositions maintained by him
in some parts of his Essay on Rent. "I have no hesitation in stating,
that, independently of the irregularities in the currency of a country,
and other temporary and accidental circumstances, the cause of the high
comparative money price of corn is its high comparative _real price_, or
the greater quantity of capital and labour which must be employed to
produce it; and that the reasons why the real price of corn is higher,
and continually rising in countries which are already rich, and still
advancing in prosperity and population, is to be found in the necessity
of resorting constantly to poorer land, to machines which require a
greater expenditure to work them, and which consequently occasion each
fresh addition to the raw produce of the country to be purchased at a
greater cost; in short, it is to be found in the important truth, that
corn in a progressive country, is sold at the price necessary to yield
the actual supply; and that, as this supply becomes more and more
difficult, the price rises in proportion. "
The real price of a commodity is here properly stated to depend on the
greater or less quantity of labour and capital (that is, accumulated
labour) which must be employed to produce it. Real price does not, as
some have contended, depend on money value; nor, as others have said, on
value relatively to corn, labour, or any other commodity taken singly,
or to all commodities collectively; but, as Mr. Malthus justly says, "on
the greater (or less) quantity of capital and labour which must be
employed to produce it. "
Among the causes of the rise of rent, Mr. Malthus mentions, "such an
increase of population as will lower the wages of labour. " But if, as
the wages of labour fall, the profits of stock rise, and they be
together always of the same value,[55] no fall of wages can raise rent,
for it will neither diminish the portion, nor the value of the portion
of the produce which will be allotted to the farmer and labourer
together, and therefore will not leave a larger portion, nor a larger
value for the landlord. In proportion as less is appropriated for wages,
more will be appropriated for profits, and _vice versa_. This division
will be settled by the farmer and his labourers, without any
interference of the landlord; and indeed it is a matter in which he can
have no interest, otherwise than as one division may be more favourable
than another, to new accumulations, and to a further demand for land. If
wages fall, profits, and not rent, would rise. If wages rose, profits,
and not rent, would fall. The rise of rent and wages, and the fall of
profits, are generally the inevitable effects of the same cause--the
increasing demand for food, the increased quantity of labour required to
produce it, and its consequently high price. If the landlord were to
forego his whole rent, the labourers would not be in the least
benefited. If the labourers were to give up their whole wages, the
landlords would derive no advantage from such a circumstance; but in
both cases the farmer would receive and retain all which they
relinquished. It has been my endeavour to shew in this work, that a
fall of wages would have no other effect than to raise profits.
Another cause of the rise of rent, according to Mr. Malthus, is "such
agricultural improvements, or such increase of exertions, as will
diminish the number of labourers necessary to produce a given effect. "
This would not raise the value of the whole produce, and would therefore
not increase rent. It would rather have a contrary tendency, it would
lower rent; for if in consequence of these improvements, the actual
quantity of food required could be furnished either with fewer hands, or
with a less quantity of land, the price of raw produce would fall, and
capital would be withdrawn from the land. [56] Nothing can raise rent,
but a demand for new land of an inferior quality, or some cause which
shall occasion an alteration in the relative fertility of the land
already under cultivation. [57] Improvements in agriculture, and in the
division of labour, are common to all land; they increase the absolute
quantity of raw produce obtained from each, but probably do not much
disturb the relative proportions which before existed between them.
Mr. Malthus has justly commented on an error of Adam Smith, and says,
"the substance of his (Dr. Smith's) argument is, that corn is of so
peculiar a nature, that its real price cannot be raised by an increase
of its money price; and that, as it is clearly an increase of real price
alone, which can encourage its production, the rise of money price,
occasioned by a bounty, can have no such effect. "
He continues: "It is by no means intended to deny the powerful influence
of the price of corn upon the price of labour, on an average of a
considerable number of years; but that this influence is not such as to
prevent the movement of capital to, or from the land, which is the
precise point in question, will be made sufficiently evident by a short
inquiry into the manner in which labour is paid, and brought into the
market, and by a consideration of the consequences to which the
assumption of Adam Smith's proposition would inevitably lead. "[58]
Mr. Malthus then proceeds to shew, that demand and high price will as
effectually encourage the production of raw produce, as the demand and
high price of any other commodity will encourage its production. In this
view it will be seen, from what I have said of the effects of bounties,
that I entirely concur. I have noticed the passage Mr. Malthus's
"Observations on the Corn Laws," for the purpose of shewing in what a
different sense the term real price is used here, and in his other
pamphlet, entitled "Grounds of an Opinion, &c. " In this passage Mr.
Malthus tells us, that "it is clearly an increase of real price alone
which can encourage the production of corn," and by real price he
evidently means the increase in its value relatively to all other
things, or in other words, the rise in its market above its natural
price, or the cost of its production. If by real price this is what is
meant, Mr. Malthus's opinion is undoubtedly correct; it is the rise in
the market price of corn which alone encourages its production, for it
may be laid down as a principle uniformly true, that the only
encouragement to the increased production of a commodity, is its market
value exceeding its natural or necessary value.
But this is not the meaning which Mr. Malthus, on other occasions,
attaches to the term, real price. In the Essay on Rent, Mr. Malthus
says, by "the real growing price of corn, I mean the real _quantity_ of
labour and capital, _which has been employed_ to produce the last
additions which have been made to the national produce. " In another part
he states "the cause of the high comparative real price of corn to be
the greater _quantity_ of capital and labour, which must be _employed_
to produce it. "[59] Suppose that in the foregoing passage we were to
substitute this definition of real price, would it not then run
thus? --"It is clearly the increase in the quantity of labour and capital
which must be employed to produce corn, which alone can encourage its
production. " This would be to say, that it is clearly the rise in the
natural or necessary price of corn, which encourages its production--a
proposition which could not be maintained. It is not the price at which
corn can be produced, that has any influence on the quantity produced,
but the price at which it can be sold. It is in proportion to the degree
of the excess of its price above the cost of production, that capital is
attracted to or repelled from the land. If that excess be such as to
give to capital so employed, a greater than the general profit of stock,
capital will go to the land; if less, it will be withdrawn from it.
It is not then by an alteration in the real price of corn that its
production is encouraged, but by an alteration in its market price. It
is not "because a greater quantity of capital and labour must be
employed to produce it," Mr. Malthus's just definition of real price,
that more capital and labour are attracted to the land, but because the
market price rises above this its real price, and, notwithstanding the
increased charge, makes the cultivation of land the more profitable
employment of capital.
Nothing can be more just than the following observations of Mr. Malthus,
on Adam Smith's standard of value. "Adam Smith was evidently led into
this train of argument, from his habit of considering _labour as the
standard measure of value_, and corn as the measure of labour. But that
corn is a very inaccurate measure of labour, the history of our own
country will amply demonstrate; where labour, compared with corn, will
be found to have experienced very great and striking variations, not
only from year to year, but from century to century; and for ten,
twenty, and thirty years together. _And that neither labour nor any
other commodity can be an accurate measure of real value in exchange_,
is now considered as one of the most incontrovertible doctrines of
political economy; and, indeed, follows from the very definition of
value in exchange. "
If neither corn nor labour are accurate measures of real value in
exchange, which they clearly are not, what other commodity
is? --certainly none. If then the expression real price of commodities,
have any meaning, it must be that which Mr. Malthus has stated, in the
Essay on Rent--it must be measured by the proportionate quantity of
capital and labour necessary to produce them.
In Mr. Malthus's "Inquiry into the Nature of Rent," he says, "that,
independently of irregularities in the currency of a country, and other
temporary and accidental circumstances, the cause of the high
comparative money price of corn, is its high comparative real price, _or
the greater quantity of capital and labour which must be employed to
produce it_. "[60]
This, I apprehend, is the correct account of all permanent variations in
price, whether of corn or of any other commodity. 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.
A variation arising from the latter of either of these alternatives, an
altered value of money, is common at once to all commodities; but a
variation arising from the former cause, is confined to the particular
commodity requiring more or less labour in its production. By allowing
the free importation of corn, or by improvements in agriculture, raw
produce would fall; but the price of no other commodity would be
affected, except in proportion to the fall in the real value, or cost of
production, of the raw produce which entered into its composition.
Mr. Malthus, having acknowledged this principle, cannot, I think,
consistently maintain that the whole money value of all the commodities
in the country must sink exactly in proportion to the fall in the price
of corn. If the corn consumed in the country were of the value of ten
millions per annum, and the manufactured and foreign commodities
consumed were of the value of twenty millions, making altogether thirty
millions, it would not be admissible to infer that the annual
expenditure was reduced to 15 millions, because corn had fallen 50 per
cent. , or from 10 to 5 millions.
The value of the raw produce which entered into the composition of these
manufactures might not, for example, exceed 20 per cent. of their whole
value, and, therefore, the fall in the value of manufactured
commodities, instead of being from 20 to 10 millions, would be only from
20 to 18 millions; and after the fall in the price of corn of 50 per
cent. , the whole amount of the annual expenditure, instead of falling
from 30 to 25 millions, would fall from 30 to 23 millions. [61]
Instead of thus considering the effect of a fall in the value of raw
produce; as Mr. Malthus was bound to do by his previous admission; he
considers it as precisely the same thing with a rise of 100 per cent. in
the value of money, and, therefore, argues as if all commodities would
sink to half their former price.
"During the twenty years, beginning with 1794," he says, "and ending
with 1813, the average price of British corn per quarter was about
eighty-three shillings; during the ten years ending with 1813,
ninety-two shillings; and during the last five years of the twenty, one
hundred and eight shillings. In the course of these twenty years, the
Government borrowed near five hundred millions of real capital; for
which, on a rough average, exclusive of the sinking fund, it engaged to
pay about five per cent. But if corn should fall to fifty shillings a
quarter, and other commodities in proportion, instead of an interest of
about five per cent. , the Government would really pay an interest of
seven, eight, nine, and, for the last two hundred millions, ten per
cent.
"To this extraordinary generosity towards the stockholders, I should be
disposed to make no kind of objection, if it were not necessary to
consider by whom it is to be paid; and a moment's reflection will shew
us, that it can only be paid by the industrious classes of society, and
the landlords, that is, by all those whose nominal income will vary with
the variations in the measure of value. The nominal revenues of this
part of the society, compared with the average of the last five years,
will be diminished one half, and out of this nominally reduced income,
they will have to pay the same nominal amount of taxes. "[62]
In the first place, I think, I have already shewn, that the nominal
income of the whole country will not be diminished in the proportion
for which Mr. Malthus here contends; it would not follow, that because
corn fell fifty per cent. , each man's income would be reduced fifty per
cent. in value. [63]
In the second place, I think the reader will agree with me, that the
increased charge, if admitted, would not fall exclusively "on the
landlords and the industrious classes of society:" the stockholder, by
his expenditure, contributes his share to the support of the public
burdens in the same way as the other classes of society. If then money
became really more valuable, although he would receive a greater value,
he would also pay a greater value in taxes, and, therefore, it cannot be
true that the whole addition to the real value of the interest would be
paid by "the landlords and the industrious classes. "
The whole argument, however, of Mr. Malthus, is built on an infirm
basis: it supposes, because the gross income of the country is
diminished, that, therefore, the net income must also be diminished, in
the same proportion. It has been one of the objects of this work to
shew, that with every fall in the real value of necessaries, the wages
of labour would fall, and that the profits of stock would rise--in other
words, that of any given annual value a less portion would be paid to
the labouring class, and a larger portion to those whose funds employed
this class. Suppose the value of the commodities produced in a
particular manufacture to be 1000_l. _, and to be divided between the
master and his labourers, in the proportion of 800_l. _ to labourers, and
200_l. _ to the master; if the value of these commodities should fall to
900_l. _, and 100_l. _ be saved from the wages of labour, in consequence
of the fall of necessaries, the net income of the masters would be in no
degree impaired, and, therefore, he could with just as much facility pay
the same amount of taxes, after, as before the reduction of price. [64]
And that wages would fall as much as the mass of commodities, or rather
that the net income remaining to landlords, farmers, manufacturers,
traders, and stockholders, the only real payers of taxes, would be as
great as before, is very highly probable; for nothing would be even
nominally lost to the society by the freest importation of corn, but
that portion of rent of which the landlords would be deprived in
consequence of the fall of raw produce.
The difference between the value of corn and all other commodities sold
in the country, before and after the importation of cheap corn, would be
only equal to the fall of rent; because, independently of rent, the same
quantity of labour would always produce the same value.
The whole reduction which is made in wages, is a value actually added to
the value of the net income before possessed by the society; whilst the
only value which is taken from that net income is the value of that part
of their rent of which the landlords will be deprived by a fall of raw
produce. When we consider that the fall of produce acts upon a limited
number of landlords, while it reduces the wages not only of those who
are employed in agriculture, but of all those who are occupied in
manufactures and commerce, it may well be doubted, whether the net
revenue of the society would suffer any abatement whatever. [65]
But, if it did, it must not be supposed that the ability to pay taxes
will diminish in the same degree, as the money value, even of the net
revenue. Suppose that my net revenue were diminished from 1000_l. _ to
900_l. _; but that my taxes continued to be the same, to be 100_l. _: is
it not probable that my ability to pay this 100_l. _ may be greater with
the smaller than with the larger revenue? Commodities cannot fall so
universally as Mr. Malthus supposes, without greatly benefiting the
consumers, without enabling them with a much smaller money revenue to
command more of the conveniences, necessaries, and luxuries of human
life; and the question resolves itself into this--whether those who are
in possession of the net revenue of the country will be benefited as
much by the diminished price of commodities, as they will suffer by the
greater real taxation. On which side the balance may preponderate, will
depend on the proportion which taxes bear to the annual revenue; if it
be enormously large, it may undoubtedly more than counterbalance the
advantages from cheap necessaries; but I trust enough has been said, to
shew, that Mr. Malthus has very greatly over-rated the loss to the
tax-payers, from a fall in one of the most important necessaries of
life; and that if they were not entirely remunerated for the real
increase of taxes, by the fall of wages and increase of profits, they
would be more than compensated, by the cheaper price of all objects on
which their incomes were expended.
That the stockholder is benefited by a great fall in the value of corn,
cannot be doubted; but if no one else be injured, that is no reason why
corn should be made dear: for the gains of the stockholder are national
gains, and increase, as all other gains do, the real wealth and power of
the country. If they are unjustly benefited, let the degree in which
they are so, be accurately ascertained, and then it is for the
legislature to devise a remedy; but no policy can be more unwise than to
shut ourselves out from the great advantages arising from cheap corn,
and abundant productions, merely because the stockholder would have an
undue proportion of the increase.
To regulate the dividends on stock by the money value of corn, has never
yet been attempted. If justice and good faith required such a
regulation, a great debt is due to the old stockholders; for they have
been receiving the same money dividends for more than a century,
although corn has, perhaps, been doubled or trebled in price. [66]
Mr. Malthus says, "It is true, that the last additions to the
agricultural produce of an improving country are not attended with a
large proportion of rent; and it is precisely this circumstance that may
make it answer to a rich country to import some of its corn, if it can
be secure of obtaining an equable supply. But in all cases the
importation of foreign corn must fail to answer nationally, if it is not
so much cheaper than the corn that can be grown at home, as to equal
both the profits and the rent of the grain which it displaces. "
_Grounds_, &c. p. 36.
As rent is the effect of the high price of corn, the loss of rent is the
effect of a low price. Foreign corn never enters into competition with
such home corn as affords a rent; the fall of price invariably affects
the landlord till the whole of his rent is absorbed;--if it fall still
more, the price will not afford even the common profits of stock;
capital will then quit the land for some other employment, and the corn,
which was before grown upon it, will then, and not till then, be
imported. From the loss of rent, there will be a loss of value, of
estimated money value, but there will be a gain of wealth. The amount
of the raw produce and other productions together will be increased,
from the greater facility with which they are produced; they will,
though augmented in quantity, be diminished in value.
Two men employ equal capitals--one in agriculture, the other in
manufactures. That in agriculture produces a net annual value of
1200_l. _ of which 1000_l. _ is retained for profit, and 200_l. _ is paid
for rent; the other in manufactures produces only an annual value of
1000_l. _ Suppose that by importation, the same quantity of corn can be
obtained for commodities which cost 950_l. _, and that, in consequence,
the capital employed in agriculture is diverted to manufactures, where
it can produce a value of 1000_l. _ the net revenue of the country will
be of less value, it will be reduced from 2200_l. _ to 2000_l. _, but
there will not only be the same quantity of commodities and corn for its
own consumption, but also as much addition to that quantity as 50_l. _
would purchase, the difference between the value at which its
manufactures were sold to the foreign country, and the value of the corn
which was purchased from it.
Mr. Malthus says, "It has been justly observed by Adam Smith, that no
equal quantity of productive labour employed in manufactures can ever
occasion so great a reproduction as in agriculture. " If Adam Smith
speaks of value, he is correct, but if he speaks of riches, which is the
important point, he is mistaken, for he has himself defined riches to
consist of the necessaries, conveniences, and enjoyments of human life.
One set of necessaries and conveniences admits of no comparison with
another set; value in use cannot be measured by any known standard, it
is differently estimated by different persons.
FOOTNOTES:
[1] Chap. xv. part i. "Des Débouchés," contains in
particular some very important principles, which I believe
were first explained by this distinguished writer.
[2] Book i. chap. 5.
[3] "But though labour be the real measure of the
exchangeable value of all commodities, it is not that by
which their value is commonly estimated. It is often
difficult to ascertain the proportion between two
different quantities of labour.
The time spent in two
different sorts of work will not always alone determine
this proportion. The different degrees of hardship
endured, and of ingenuity exercised, must likewise be
taken into account. There may be more labour in an hour's
hard work, than in two hours' easy business; or, in an
hour's application to a trade, which it costs ten years'
labour to learn, than in a month's industry at an ordinary
and obvious employment. But it is not easy to find any
accurate measure, either of hardship or ingenuity. In
exchanging, indeed, the different productions of different
sorts of labour for one another, some allowance is
commonly made for both. It is adjusted, however, not by
any accurate measure, but by the higgling and bargaining
of the market, according to that sort of rough equality,
which, though not exact, is sufficient for carrying on the
business of common life. "--_Wealth of Nations. _ Book i.
chap. 10.
[4] Wealth of Nations, book i. chap. 10.
[5] "The earth, as we have already seen, is not the only
agent of nature which has a productive power; but it is
the only one, or nearly so, that one set of men take to
themselves, to the exclusion of others; and of which
consequently they can appropriate the benefits. The waters
of rivers, and of the sea, by the power which they have of
giving movement to our machines, carrying our boats,
nourishing our fish, have also a productive power; the
wind which turns our mills, and even the heat of the sun,
work for us; but happily no one has yet been able to say:
the 'wind and the sun are mine, and the service which they
render must be paid for. '"--_Economie Politique, par J. B.
Say_, vol. ii. p. 124.
[6] Has not M. Say forgotten, in the following passage,
that it is the cost of production which ultimately
regulates price? "The produce of labour employed on the
land has this peculiar property, that it does not become
more dear by becoming more scarce, because population
always diminishes at the same time that food diminishes,
and consequently the quantity of these products
_demanded_, diminishes at the same time as the quantity
supplied. Besides it is not observed that corn is more
dear in those places where there is plenty of uncultivated
land, than in completely cultivated countries. England and
France were much more imperfectly cultivated in the middle
ages than they are now; they produced much less raw
produce: nevertheless from all that we can judge by a
comparison with the value of other things, corn was not
sold at a dearer price. If the produce was less, so was
the population; the weakness of the demand compensated the
feebleness of the supply. " vol. ii. 338. M. Say being
impressed with the opinion that the price of commodities
is regulated by the price of labour, and justly supposing
that charitable institutions of all sorts tend to increase
the population beyond what it otherwise would be, and
therefore to lower wages, says, "I suspect that the
cheapness of the goods, which come from England is partly
caused by the numerous charitable institutions which exist
in that country. " vol. ii. 277. This is a consistent
opinion in one who maintains that wages regulate price.
[7] "In agriculture too," says Adam Smith, "nature labours
along with man; and though her labour costs no expense,
its produce has its value, as well as that of the most
expensive workman. " The labour of nature is paid, not
because she does much, but because she does little. In
proportion as she becomes niggardly in her gifts, she
exacts a greater price for her work. Where she is
munificently beneficent, she always works gratis. "The
labouring cattle employed in agriculture, not only
occasion, like the workmen in manufactures, the
reproduction of a value equal to their own consumption, or
to the capital which employs them, together with its
owner's profits, but of a much greater value. Over and
above the capital of the farmer and all its profits, they
regularly occasion the reproduction of the rent of the
landlord. This rent may be considered as the produce of
those powers of nature, the use of which the landlord
lends to the farmer. It is greater or smaller according to
the supposed extent of those powers, or in other words,
according to the supposed natural or improved fertility of
the land. It is the work of nature which remains, after
deducting or compensating every thing which can be
regarded as the work of man. It is seldom less than a
fourth, and frequently more than a third of the whole
produce. No equal quantity of productive labour employed
in manufactures, can ever occasion so great a
reproduction. _In them nature does nothing, man does all_;
and the reproduction must always be in proportion to the
strength of the agents that occasion it. The capital
employed in agriculture, therefore, not only puts into
motion a greater quantity of productive labour than any
equal capital employed in manufactures, but in proportion
too to the quantity of the productive labour which it
employs, it adds a much greater value to the annual
produce of the land and labour of the country, to the
_real_ wealth and revenue of its inhabitants. Of all the
ways in which a capital can be employed, it is by far the
most advantageous to the society. "--Book II. chap. v. p.
15.
Does nature nothing for man in manufactures? Are the
powers of wind and water, which move our machinery, and
assist navigation, nothing? The pressure of the atmosphere
and the elasticity of steam, which enable us to work the
most stupendous engines--are they not the gifts of nature?
to say nothing of the effects of the matter of heat in
softening and melting metals, of the decomposition of the
atmosphere in the process of dyeing and fermentation.
There is not a manufacture which can be mentioned, in
which nature does not give her assistance to man, and give
it too, generously and gratuitously.
In remarking on the passage which I have copied from Adam
Smith, Mr. Buchanan observes, "I have endeavoured to shew,
in the observations on productive and unproductive
Footnote: labour, contained in the fourth volume, that
agriculture adds no more to the national stock than any
other sort of industry. In dwelling on the reproduction of
rent as so great an advantage to society, Dr. Smith does
not reflect that rent is the effect of high price, and
that what the landlord gains in this way, he gains at the
expense of the community at large. There is no absolute
gain to the society by the reproduction of rent; it is
only one class profiting at the expense of another class.
The notion of agriculture yielding a produce, and a rent
in consequence, because nature concurs with human industry
in the process of cultivation, is a mere fancy. It is not
from the produce, but from the price at which the produce
is sold, that the rent is derived; and this price is got,
not because nature assists in the production, but because
it is the price which suits the consumption to the
supply. "
[8] To make this obvious, and to shew the degrees in which
corn and money rent will vary, let us suppose that the
labour of ten men will, on land of a certain quality,
obtain 180 quarters of wheat, and its value to be 4_l. _
per quarter, or 720_l. _; and that the labour of ten
additional men will, on the same or any other land,
produce only 170 quarters in addition; wheat would rise
from 4_l. _ to 4_l. _ 4_s. _. 8_d. _ for 170: 180:: 4_l. _:
4_l. _ 4_s. _ 8_d. _; or, as in the production of 170
quarters, the labour of 10 men is necessary in one case,
and only of 9. 44 in the other, the rise would be as 9. 44
to 10, or as 4_l. _ to 4_l. _ 4_s. _ 8_d. _ If 10 men be
further employed, and the return be
160, the price will rise to £4 10 0
150, " " " " " 4 16 0
140, " " " " " 5 2 10
Now if no rent was paid for the land which yielded 180
quarters when corn was at 4_l. _ per quarter, the value of
10 quarters would be paid as rent when only 170 could be
procured, which, at 4_l. _ 4_s. _ 8_d. _ would be 42_l. _
7_s. _ 6_d. _
20 qrs. when 160 were produced, which at £4 10 0 would be £ 90 0 0
30 qrs. " 150 " " " " 4 16 0 " " 144 0 0
40 qrs. " 140 " " " " 5 2 10 " " 205 13 4
{100} { 100
Corn rent then would increase {200} and money rent in the { 212
in the proportion of {300} proportion of { 340
{400} { 485
[9] With Mr. Buchanan in the following passage, if it
refers to temporary states of misery, I so far agree, that
"the great evil of the labourer's condition, is poverty,
arising either from a scarcity of food or of work; and in
all countries, laws without number have been enacted for
his relief. But there are miseries in the social state
which legislation cannot relieve; and it is useful
therefore to know its limits, that we may not, by aiming
at what is impracticable, miss the good which is really in
our power. "--_Buchanan_, page 61.
[10] The reader is desired to bear in mind, that for the
purpose of making the subject more clear, I consider money
to be invariable in value, and therefore every variation
of price to be referable to an alteration in the value of
the commodity.
[11] The reader is aware, that we are leaving out of our
consideration the accidental variations arising from bad
and good seasons, or from the demand increasing or
diminishing by any sudden effect on the state of
population. We are speaking of the natural and constant,
not of the accidental and fluctuating price of corn.
[12] The 180 quarters of corn would be divided in the
following proportions between landlords, farmers, and
labourers, with the above-named variations in the value of
corn.
Price per qr. Rent. Profit. Wages. Total.
_£. s. d. _ In Wheat. In Wheat. In Wheat.
4 0 0 None. 120 qrs. 60 qrs. }
4 4 8 10 qrs. 111. 7 58. 3 }
4 10 0 20 103. 4 56. 6 } 180
4 16 0 30 95 55 }
5 2 10 40 86. 7 53. 5 }
and, under the same circumstances, money rent, wages, and
profit, would be as follows:
Price per qr. Rent. Profit. Wages. Total.
_£. s. d. _ _£. s. d. _ _£. s. d. _ _£. s. d. _ _£. s. d. _
4 0 0 None. 480 0 0 240 0 0 720 0 0
4 4 8 42 7 6 473 0 0 247 0 0 762 7 6
4 10 0 90 0 0 465 0 0 255 0 0 810 0 0
4 16 0 144 0 0 456 0 0 264 0 0 864 0 0
5 2 10 205 13 4 445 15 0 274 5 0 925 13 4
[13] See Adam Smith, book i. chap. 9.
[14] It will appear then, that a country possessing very
considerable advantages in machinery and skill, and which
may therefore be enabled to manufacture commodities with
much less labour than her neighbours, may in return for
such commodities, import a portion of the corn required
for its consumption, even if its land were more fertile,
and corn could be grown with less labour than in the
country from which it was imported. Two men can both make
shoes and hats, and one is superior to the other in both
employments; but in making hats, he can only exceed his
competitor by one-fifth or 20 per cent. , and in making
shoes he can excel him by one-third or 33 per cent. ;--will
it not be for the interest of both, that the superior man
should employ himself exclusively in making shoes, and the
inferior man in making hats?
[15] Book V. ch. ii.
[16] M. Say appears to have imbibed the general opinion on
this subject. Speaking of corn, he says, "thence it
results, that its price influences the price of _all_
other commodities. A farmer, a manufacturer, or a
merchant, employs a certain number of workmen, who all
have occasion to consume a certain quantity of corn. If
the price of corn rises, he is obliged to raise, in an
equal proportion, the price of his productions. " Vol. i.
p. 255.
[17] M. Say says, that "the tax, added to the price of a
commodity, raises its price. Every increase in the price
of a commodity, necessarily reduces the number of those
who are able to purchase it, or at least the quantity they
will consume of it. " This is by no means a necessary
consequence. I do not believe, that if bread were taxed,
the consumption of bread would be diminished, more than if
cloth, wine, or soap, were taxed.
[18] The following remark of the same author appears to me
equally erroneous: "When a high duty is laid on cotton,
the production of all those goods, of which cotton is the
basis, is diminished. If the total value added to cotton
in its various manufactures, in a particular country,
amounted to 100 millions of francs per annum, and the
effect of the tax was, to diminish the consumption one
half, then the tax would deprive that country every year
of 50 millions of francs, in addition to the sum received
by government. " Vol. ii. p. 314.
[19] It is observed by M. Say, "that a manufacturer is not
enabled to make the consumer pay the whole tax levied on
his commodity, because its increased price will diminish
its consumption. " Should this be the case, should the
consumption be diminished, will not the supply also
speedily be diminished? Why should the manufacturer
continue in the trade if his profits are below the general
level? M. Say appears here also to have forgotten the
doctrine which he elsewhere supports, "that the cost of
production determines the price, below which commodities
cannot fall for any length of time, because production
would then be either suspended or diminished. "--Vol. ii.
p. 26.
"The tax in this case falls then partly on the consumer
who is obliged to give more for the commodity taxed, and
partly on the producer, who, after deducting the tax, will
receive less. The public treasury will be benefited by
what the purchaser pays in addition, and also by the
sacrifice which the producer is obliged to make of a part
of his profits. It is the effort of gunpowder, which acts
at the same time on the bullet which it projects, and on
the gun which it causes to recoil. " Vol. ii. p. 333.
[20] "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
consumption which has followed the loan has annihilated 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.
yielded abundantly, a greater share of the whole produce were paid to
the landlord; but the contrary is the fact: when no other but the most
fertile land is in cultivation, the landlord has the smallest share of
the whole produce, as well as the smallest value, and it is only when
inferior lands are required to feed an augmenting population, that both
the landlord's share of the whole produce, and the value he receives,
progressively increase.
Suppose that the demand is for a million of quarters of corn, and that
they are the produce of the land actually in cultivation. Now, suppose
the fertility of all the land to be so diminished, that the very same
lands will yield only 900,000 quarters. The demand being for a million
of quarters, the price of corn would rise, and recourse must necessarily
be had to land of an inferior quality sooner than if the superior land
had continued to produce a million of quarters. But it is this necessity
of taking inferior land into cultivation which is the cause of the rise
of rent. Rent, it must be remembered, is not in proportion to the
absolute fertility of the land in cultivation, but in proportion to its
relative fertility. Whatever cause may drive capital to inferior land,
must elevate rent; the cause of rent being, as stated by Mr. Malthus in
his third proposition, "the comparative scarcity of the most fertile
land. " The price of corn will naturally rise with the difficulty of
producing the last portions of it; but as the cost of production will
not increase, as wages and profits taken together will continue always
of the same value,[52] it is evident that the excess of price above the
cost of production, or, in other words, rent, must rise with the
diminished fertility of the land, unless it is counteracted by a great
reduction of capital, population, and demand. It does not appear then
that Mr. Malthus's proposition is correct: rent does not immediately and
necessarily rise or fall with the increased or diminished fertility of
the land; but its increased fertility renders it capable of paying at
some future time an augmented rent. Land possessed of very little
fertility can never bear any rent; land of moderate fertility may be
made, as population increases, to bear a moderate rent; and land of
great fertility a high rent; but it is one thing to be able to bear a
high rent, and another thing actually to pay it. Rent may be lower in a
country where lands are exceedingly fertile than in a country where they
yield a moderate return, it being in proportion rather to relative than
absolute fertility--to the value of the produce, and not to its
abundance. Mr. Malthus says, that the "cause of the excess of price of
the necessaries of life above the cost of production, is to be found in
their abundance rather than their scarcity, and is essentially different
from the high price of those peculiar products of the earth, not
connected with food, which may be called natural and necessary
monopolies. "
In what are they essentially different? Would not the abundance of those
peculiar products of the earth cause a rise of rent, if the demand for
them at the same time increased? and can rent ever rise, whatever the
commodity produced may be, from abundance merely, and without an
increase of demand?
The second cause of rent mentioned by Mr. Malthus, namely, "that quality
peculiar to the necessaries of life, of being able to create their own
demand, or to raise up a number of demanders in proportion to the
quantity of necessaries produced," does not appear to me to be any way
essential to it. It is not the abundance of necessaries which raises up
demanders, but the abundance of demanders which raises up necessaries.
We are under no necessity of producing permanently any greater quantity
of a commodity than that which is demanded. If by accident any greater
quantity were produced, it would fall below its natural price, and
therefore would not pay the cost of production, together with the usual
and ordinary profits of stock: thus the supply would be checked till it
conformed to the demand, and the market price rose to the natural price.
Mr. Malthus appears to me to be too much inclined to think that
population is only increased by the previous provision of food,--"that
it is food that creates its own demand,"--that it is by first providing
food that encouragement is given to marriage, instead of considering
that the general progress of population is affected by the increase of
capital, the consequent demand for labour, and the rise of wages; and
that the production of food is but the effect of that demand.
It is by giving the workman more money, or any other commodity in which
wages are paid, and which has not fallen in value, that his situation is
improved. The increase of population, and the increase of food will
generally be the effect, but not the necessary effect of high wages. The
amended condition of the labourer, in consequence of the increased value
which is paid him, does not necessarily oblige him to marry and take
upon himself the charge of a family--he may, if it please him, exchange
his increased wages for any commodities that may contribute to his
enjoyments--for chairs, tables, and hardware; or for better clothes,
sugar, and tobacco. His increased wages then will be attended with no
other effect than an increased demand for some of those commodities; and
as the race of labourers will not be materially increased, his wages
will continue permanently high. But although this might be the
consequence of high wages, yet so great are the delights of domestic
society, that in practice it is invariably found that an increase of
population follows the amended condition of the labourer; and it is only
because it does so, that a new and increased demand arises for food.
This demand then is the effect of an increase of population, but not the
cause--it is only because the expenditure of the people takes this
direction, that the market price of necessaries exceeds the natural
price, and that the quantity of food required is produced; and it is
because the number of people is increased, that wages again fall.
What motive can a farmer have to produce more corn than is actually
demanded, when the consequence would be a depression of its market price
below its natural price, and consequently a privation to him of a
portion of his profits, by reducing them below the general rate? "If,"
says Mr. Malthus, "the necessaries of life, the most important products
of land, had not the property of creating an increase of demand
proportioned to their increased quantity, such increased quantity would
occasion a fall in their exchangeable value. [53] However abundant might
be the produce of a country, its population might remain stationary. And
this abundance without a proportionate demand, and with a very high corn
price of labour, which would naturally take place under these
circumstances, might reduce the price of raw produce, like the price of
manufactures, to the cost of production. "
"Might reduce the price of raw produce to the cost of production? " Is it
ever for any length of time either above or below this price? Does not
Mr. Malthus himself, state it never to be so? "I hope," he says, "to be
excused for dwelling a little, and presenting to the reader in various
forms the doctrine, that corn, in reference to the quantity _actually
produced_, is sold at its necessary price like manufactures, because I
consider it as a truth of the highest importance, which has been
overlooked by the economists, by Adam Smith, and all those writers, who
have represented raw produce as selling always at a monopoly price. "
"Every extensive country may thus be considered as possessing a
gradation of machines for the production of corn and raw materials,
including in this gradation not only all the various qualities of poor
land, of which every territory has generally an abundance, but the
inferior machinery which may be said to be employed when good land is
further and further forced for additional produce. As the price of raw
produce continues to rise, these inferior machines are successively
called into action; and as the price of raw produce continues to fall,
they are successively thrown out of action. The illustration here used
serves to shew at once the _necessity of the actual price of corn to the
actual produce_, and the different effect which would attend a great
reduction in the price of any particular manufacture, and a great
reduction in the price of raw produce. "[54]
How are these passages to be reconciled to that which affirms, that if
the necessaries of life had not the property of creating an increase of
demand proportioned to their increased quantity, the abundant quantity
produced would then, and then only, reduce the price of raw produce to
the cost of production? If corn is never under its natural price, it is
never more abundant than the actual population require it to be for
their own consumption; no store can be laid up for the consumption of
others; it can never then by its cheapness and abundance be a stimulus
to population. In proportion as corn can be produced cheaply, the
increased wages of the labourers will have more power to maintain
families. In America, population increases rapidly, because food can be
produced at a cheap price, and not because an abundant supply has been
previously provided. In Europe population increases comparatively
slowly, because food cannot be produced at a cheap value. In the usual
and ordinary course of things, the demand for all commodities precedes
their supply. By saying, that corn would, like manufactures, sink to its
price of production, if it could not raise up demanders, Mr. Malthus
cannot mean that all rent would be absorbed; for he has himself justly
remarked, that if all rent were given up by the landlords, corn would
not fall in price; rent being the effect, and not the cause of high
price, and there being always one quality of land in cultivation which
pays no rent whatever, the corn from which replaces by its price, only
wages and profits.
In the following passage, Mr. Malthus has given an able exposition of
the causes of the rise in the price of raw produce in rich and
progressive countries, in every word of which I concur; but it appears
to me to be at variance with some of the propositions maintained by him
in some parts of his Essay on Rent. "I have no hesitation in stating,
that, independently of the irregularities in the currency of a country,
and other temporary and accidental circumstances, the cause of the high
comparative money price of corn is its high comparative _real price_, or
the greater quantity of capital and labour which must be employed to
produce it; and that the reasons why the real price of corn is higher,
and continually rising in countries which are already rich, and still
advancing in prosperity and population, is to be found in the necessity
of resorting constantly to poorer land, to machines which require a
greater expenditure to work them, and which consequently occasion each
fresh addition to the raw produce of the country to be purchased at a
greater cost; in short, it is to be found in the important truth, that
corn in a progressive country, is sold at the price necessary to yield
the actual supply; and that, as this supply becomes more and more
difficult, the price rises in proportion. "
The real price of a commodity is here properly stated to depend on the
greater or less quantity of labour and capital (that is, accumulated
labour) which must be employed to produce it. Real price does not, as
some have contended, depend on money value; nor, as others have said, on
value relatively to corn, labour, or any other commodity taken singly,
or to all commodities collectively; but, as Mr. Malthus justly says, "on
the greater (or less) quantity of capital and labour which must be
employed to produce it. "
Among the causes of the rise of rent, Mr. Malthus mentions, "such an
increase of population as will lower the wages of labour. " But if, as
the wages of labour fall, the profits of stock rise, and they be
together always of the same value,[55] no fall of wages can raise rent,
for it will neither diminish the portion, nor the value of the portion
of the produce which will be allotted to the farmer and labourer
together, and therefore will not leave a larger portion, nor a larger
value for the landlord. In proportion as less is appropriated for wages,
more will be appropriated for profits, and _vice versa_. This division
will be settled by the farmer and his labourers, without any
interference of the landlord; and indeed it is a matter in which he can
have no interest, otherwise than as one division may be more favourable
than another, to new accumulations, and to a further demand for land. If
wages fall, profits, and not rent, would rise. If wages rose, profits,
and not rent, would fall. The rise of rent and wages, and the fall of
profits, are generally the inevitable effects of the same cause--the
increasing demand for food, the increased quantity of labour required to
produce it, and its consequently high price. If the landlord were to
forego his whole rent, the labourers would not be in the least
benefited. If the labourers were to give up their whole wages, the
landlords would derive no advantage from such a circumstance; but in
both cases the farmer would receive and retain all which they
relinquished. It has been my endeavour to shew in this work, that a
fall of wages would have no other effect than to raise profits.
Another cause of the rise of rent, according to Mr. Malthus, is "such
agricultural improvements, or such increase of exertions, as will
diminish the number of labourers necessary to produce a given effect. "
This would not raise the value of the whole produce, and would therefore
not increase rent. It would rather have a contrary tendency, it would
lower rent; for if in consequence of these improvements, the actual
quantity of food required could be furnished either with fewer hands, or
with a less quantity of land, the price of raw produce would fall, and
capital would be withdrawn from the land. [56] Nothing can raise rent,
but a demand for new land of an inferior quality, or some cause which
shall occasion an alteration in the relative fertility of the land
already under cultivation. [57] Improvements in agriculture, and in the
division of labour, are common to all land; they increase the absolute
quantity of raw produce obtained from each, but probably do not much
disturb the relative proportions which before existed between them.
Mr. Malthus has justly commented on an error of Adam Smith, and says,
"the substance of his (Dr. Smith's) argument is, that corn is of so
peculiar a nature, that its real price cannot be raised by an increase
of its money price; and that, as it is clearly an increase of real price
alone, which can encourage its production, the rise of money price,
occasioned by a bounty, can have no such effect. "
He continues: "It is by no means intended to deny the powerful influence
of the price of corn upon the price of labour, on an average of a
considerable number of years; but that this influence is not such as to
prevent the movement of capital to, or from the land, which is the
precise point in question, will be made sufficiently evident by a short
inquiry into the manner in which labour is paid, and brought into the
market, and by a consideration of the consequences to which the
assumption of Adam Smith's proposition would inevitably lead. "[58]
Mr. Malthus then proceeds to shew, that demand and high price will as
effectually encourage the production of raw produce, as the demand and
high price of any other commodity will encourage its production. In this
view it will be seen, from what I have said of the effects of bounties,
that I entirely concur. I have noticed the passage Mr. Malthus's
"Observations on the Corn Laws," for the purpose of shewing in what a
different sense the term real price is used here, and in his other
pamphlet, entitled "Grounds of an Opinion, &c. " In this passage Mr.
Malthus tells us, that "it is clearly an increase of real price alone
which can encourage the production of corn," and by real price he
evidently means the increase in its value relatively to all other
things, or in other words, the rise in its market above its natural
price, or the cost of its production. If by real price this is what is
meant, Mr. Malthus's opinion is undoubtedly correct; it is the rise in
the market price of corn which alone encourages its production, for it
may be laid down as a principle uniformly true, that the only
encouragement to the increased production of a commodity, is its market
value exceeding its natural or necessary value.
But this is not the meaning which Mr. Malthus, on other occasions,
attaches to the term, real price. In the Essay on Rent, Mr. Malthus
says, by "the real growing price of corn, I mean the real _quantity_ of
labour and capital, _which has been employed_ to produce the last
additions which have been made to the national produce. " In another part
he states "the cause of the high comparative real price of corn to be
the greater _quantity_ of capital and labour, which must be _employed_
to produce it. "[59] Suppose that in the foregoing passage we were to
substitute this definition of real price, would it not then run
thus? --"It is clearly the increase in the quantity of labour and capital
which must be employed to produce corn, which alone can encourage its
production. " This would be to say, that it is clearly the rise in the
natural or necessary price of corn, which encourages its production--a
proposition which could not be maintained. It is not the price at which
corn can be produced, that has any influence on the quantity produced,
but the price at which it can be sold. It is in proportion to the degree
of the excess of its price above the cost of production, that capital is
attracted to or repelled from the land. If that excess be such as to
give to capital so employed, a greater than the general profit of stock,
capital will go to the land; if less, it will be withdrawn from it.
It is not then by an alteration in the real price of corn that its
production is encouraged, but by an alteration in its market price. It
is not "because a greater quantity of capital and labour must be
employed to produce it," Mr. Malthus's just definition of real price,
that more capital and labour are attracted to the land, but because the
market price rises above this its real price, and, notwithstanding the
increased charge, makes the cultivation of land the more profitable
employment of capital.
Nothing can be more just than the following observations of Mr. Malthus,
on Adam Smith's standard of value. "Adam Smith was evidently led into
this train of argument, from his habit of considering _labour as the
standard measure of value_, and corn as the measure of labour. But that
corn is a very inaccurate measure of labour, the history of our own
country will amply demonstrate; where labour, compared with corn, will
be found to have experienced very great and striking variations, not
only from year to year, but from century to century; and for ten,
twenty, and thirty years together. _And that neither labour nor any
other commodity can be an accurate measure of real value in exchange_,
is now considered as one of the most incontrovertible doctrines of
political economy; and, indeed, follows from the very definition of
value in exchange. "
If neither corn nor labour are accurate measures of real value in
exchange, which they clearly are not, what other commodity
is? --certainly none. If then the expression real price of commodities,
have any meaning, it must be that which Mr. Malthus has stated, in the
Essay on Rent--it must be measured by the proportionate quantity of
capital and labour necessary to produce them.
In Mr. Malthus's "Inquiry into the Nature of Rent," he says, "that,
independently of irregularities in the currency of a country, and other
temporary and accidental circumstances, the cause of the high
comparative money price of corn, is its high comparative real price, _or
the greater quantity of capital and labour which must be employed to
produce it_. "[60]
This, I apprehend, is the correct account of all permanent variations in
price, whether of corn or of any other commodity. 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.
A variation arising from the latter of either of these alternatives, an
altered value of money, is common at once to all commodities; but a
variation arising from the former cause, is confined to the particular
commodity requiring more or less labour in its production. By allowing
the free importation of corn, or by improvements in agriculture, raw
produce would fall; but the price of no other commodity would be
affected, except in proportion to the fall in the real value, or cost of
production, of the raw produce which entered into its composition.
Mr. Malthus, having acknowledged this principle, cannot, I think,
consistently maintain that the whole money value of all the commodities
in the country must sink exactly in proportion to the fall in the price
of corn. If the corn consumed in the country were of the value of ten
millions per annum, and the manufactured and foreign commodities
consumed were of the value of twenty millions, making altogether thirty
millions, it would not be admissible to infer that the annual
expenditure was reduced to 15 millions, because corn had fallen 50 per
cent. , or from 10 to 5 millions.
The value of the raw produce which entered into the composition of these
manufactures might not, for example, exceed 20 per cent. of their whole
value, and, therefore, the fall in the value of manufactured
commodities, instead of being from 20 to 10 millions, would be only from
20 to 18 millions; and after the fall in the price of corn of 50 per
cent. , the whole amount of the annual expenditure, instead of falling
from 30 to 25 millions, would fall from 30 to 23 millions. [61]
Instead of thus considering the effect of a fall in the value of raw
produce; as Mr. Malthus was bound to do by his previous admission; he
considers it as precisely the same thing with a rise of 100 per cent. in
the value of money, and, therefore, argues as if all commodities would
sink to half their former price.
"During the twenty years, beginning with 1794," he says, "and ending
with 1813, the average price of British corn per quarter was about
eighty-three shillings; during the ten years ending with 1813,
ninety-two shillings; and during the last five years of the twenty, one
hundred and eight shillings. In the course of these twenty years, the
Government borrowed near five hundred millions of real capital; for
which, on a rough average, exclusive of the sinking fund, it engaged to
pay about five per cent. But if corn should fall to fifty shillings a
quarter, and other commodities in proportion, instead of an interest of
about five per cent. , the Government would really pay an interest of
seven, eight, nine, and, for the last two hundred millions, ten per
cent.
"To this extraordinary generosity towards the stockholders, I should be
disposed to make no kind of objection, if it were not necessary to
consider by whom it is to be paid; and a moment's reflection will shew
us, that it can only be paid by the industrious classes of society, and
the landlords, that is, by all those whose nominal income will vary with
the variations in the measure of value. The nominal revenues of this
part of the society, compared with the average of the last five years,
will be diminished one half, and out of this nominally reduced income,
they will have to pay the same nominal amount of taxes. "[62]
In the first place, I think, I have already shewn, that the nominal
income of the whole country will not be diminished in the proportion
for which Mr. Malthus here contends; it would not follow, that because
corn fell fifty per cent. , each man's income would be reduced fifty per
cent. in value. [63]
In the second place, I think the reader will agree with me, that the
increased charge, if admitted, would not fall exclusively "on the
landlords and the industrious classes of society:" the stockholder, by
his expenditure, contributes his share to the support of the public
burdens in the same way as the other classes of society. If then money
became really more valuable, although he would receive a greater value,
he would also pay a greater value in taxes, and, therefore, it cannot be
true that the whole addition to the real value of the interest would be
paid by "the landlords and the industrious classes. "
The whole argument, however, of Mr. Malthus, is built on an infirm
basis: it supposes, because the gross income of the country is
diminished, that, therefore, the net income must also be diminished, in
the same proportion. It has been one of the objects of this work to
shew, that with every fall in the real value of necessaries, the wages
of labour would fall, and that the profits of stock would rise--in other
words, that of any given annual value a less portion would be paid to
the labouring class, and a larger portion to those whose funds employed
this class. Suppose the value of the commodities produced in a
particular manufacture to be 1000_l. _, and to be divided between the
master and his labourers, in the proportion of 800_l. _ to labourers, and
200_l. _ to the master; if the value of these commodities should fall to
900_l. _, and 100_l. _ be saved from the wages of labour, in consequence
of the fall of necessaries, the net income of the masters would be in no
degree impaired, and, therefore, he could with just as much facility pay
the same amount of taxes, after, as before the reduction of price. [64]
And that wages would fall as much as the mass of commodities, or rather
that the net income remaining to landlords, farmers, manufacturers,
traders, and stockholders, the only real payers of taxes, would be as
great as before, is very highly probable; for nothing would be even
nominally lost to the society by the freest importation of corn, but
that portion of rent of which the landlords would be deprived in
consequence of the fall of raw produce.
The difference between the value of corn and all other commodities sold
in the country, before and after the importation of cheap corn, would be
only equal to the fall of rent; because, independently of rent, the same
quantity of labour would always produce the same value.
The whole reduction which is made in wages, is a value actually added to
the value of the net income before possessed by the society; whilst the
only value which is taken from that net income is the value of that part
of their rent of which the landlords will be deprived by a fall of raw
produce. When we consider that the fall of produce acts upon a limited
number of landlords, while it reduces the wages not only of those who
are employed in agriculture, but of all those who are occupied in
manufactures and commerce, it may well be doubted, whether the net
revenue of the society would suffer any abatement whatever. [65]
But, if it did, it must not be supposed that the ability to pay taxes
will diminish in the same degree, as the money value, even of the net
revenue. Suppose that my net revenue were diminished from 1000_l. _ to
900_l. _; but that my taxes continued to be the same, to be 100_l. _: is
it not probable that my ability to pay this 100_l. _ may be greater with
the smaller than with the larger revenue? Commodities cannot fall so
universally as Mr. Malthus supposes, without greatly benefiting the
consumers, without enabling them with a much smaller money revenue to
command more of the conveniences, necessaries, and luxuries of human
life; and the question resolves itself into this--whether those who are
in possession of the net revenue of the country will be benefited as
much by the diminished price of commodities, as they will suffer by the
greater real taxation. On which side the balance may preponderate, will
depend on the proportion which taxes bear to the annual revenue; if it
be enormously large, it may undoubtedly more than counterbalance the
advantages from cheap necessaries; but I trust enough has been said, to
shew, that Mr. Malthus has very greatly over-rated the loss to the
tax-payers, from a fall in one of the most important necessaries of
life; and that if they were not entirely remunerated for the real
increase of taxes, by the fall of wages and increase of profits, they
would be more than compensated, by the cheaper price of all objects on
which their incomes were expended.
That the stockholder is benefited by a great fall in the value of corn,
cannot be doubted; but if no one else be injured, that is no reason why
corn should be made dear: for the gains of the stockholder are national
gains, and increase, as all other gains do, the real wealth and power of
the country. If they are unjustly benefited, let the degree in which
they are so, be accurately ascertained, and then it is for the
legislature to devise a remedy; but no policy can be more unwise than to
shut ourselves out from the great advantages arising from cheap corn,
and abundant productions, merely because the stockholder would have an
undue proportion of the increase.
To regulate the dividends on stock by the money value of corn, has never
yet been attempted. If justice and good faith required such a
regulation, a great debt is due to the old stockholders; for they have
been receiving the same money dividends for more than a century,
although corn has, perhaps, been doubled or trebled in price. [66]
Mr. Malthus says, "It is true, that the last additions to the
agricultural produce of an improving country are not attended with a
large proportion of rent; and it is precisely this circumstance that may
make it answer to a rich country to import some of its corn, if it can
be secure of obtaining an equable supply. But in all cases the
importation of foreign corn must fail to answer nationally, if it is not
so much cheaper than the corn that can be grown at home, as to equal
both the profits and the rent of the grain which it displaces. "
_Grounds_, &c. p. 36.
As rent is the effect of the high price of corn, the loss of rent is the
effect of a low price. Foreign corn never enters into competition with
such home corn as affords a rent; the fall of price invariably affects
the landlord till the whole of his rent is absorbed;--if it fall still
more, the price will not afford even the common profits of stock;
capital will then quit the land for some other employment, and the corn,
which was before grown upon it, will then, and not till then, be
imported. From the loss of rent, there will be a loss of value, of
estimated money value, but there will be a gain of wealth. The amount
of the raw produce and other productions together will be increased,
from the greater facility with which they are produced; they will,
though augmented in quantity, be diminished in value.
Two men employ equal capitals--one in agriculture, the other in
manufactures. That in agriculture produces a net annual value of
1200_l. _ of which 1000_l. _ is retained for profit, and 200_l. _ is paid
for rent; the other in manufactures produces only an annual value of
1000_l. _ Suppose that by importation, the same quantity of corn can be
obtained for commodities which cost 950_l. _, and that, in consequence,
the capital employed in agriculture is diverted to manufactures, where
it can produce a value of 1000_l. _ the net revenue of the country will
be of less value, it will be reduced from 2200_l. _ to 2000_l. _, but
there will not only be the same quantity of commodities and corn for its
own consumption, but also as much addition to that quantity as 50_l. _
would purchase, the difference between the value at which its
manufactures were sold to the foreign country, and the value of the corn
which was purchased from it.
Mr. Malthus says, "It has been justly observed by Adam Smith, that no
equal quantity of productive labour employed in manufactures can ever
occasion so great a reproduction as in agriculture. " If Adam Smith
speaks of value, he is correct, but if he speaks of riches, which is the
important point, he is mistaken, for he has himself defined riches to
consist of the necessaries, conveniences, and enjoyments of human life.
One set of necessaries and conveniences admits of no comparison with
another set; value in use cannot be measured by any known standard, it
is differently estimated by different persons.
FOOTNOTES:
[1] Chap. xv. part i. "Des Débouchés," contains in
particular some very important principles, which I believe
were first explained by this distinguished writer.
[2] Book i. chap. 5.
[3] "But though labour be the real measure of the
exchangeable value of all commodities, it is not that by
which their value is commonly estimated. It is often
difficult to ascertain the proportion between two
different quantities of labour.
The time spent in two
different sorts of work will not always alone determine
this proportion. The different degrees of hardship
endured, and of ingenuity exercised, must likewise be
taken into account. There may be more labour in an hour's
hard work, than in two hours' easy business; or, in an
hour's application to a trade, which it costs ten years'
labour to learn, than in a month's industry at an ordinary
and obvious employment. But it is not easy to find any
accurate measure, either of hardship or ingenuity. In
exchanging, indeed, the different productions of different
sorts of labour for one another, some allowance is
commonly made for both. It is adjusted, however, not by
any accurate measure, but by the higgling and bargaining
of the market, according to that sort of rough equality,
which, though not exact, is sufficient for carrying on the
business of common life. "--_Wealth of Nations. _ Book i.
chap. 10.
[4] Wealth of Nations, book i. chap. 10.
[5] "The earth, as we have already seen, is not the only
agent of nature which has a productive power; but it is
the only one, or nearly so, that one set of men take to
themselves, to the exclusion of others; and of which
consequently they can appropriate the benefits. The waters
of rivers, and of the sea, by the power which they have of
giving movement to our machines, carrying our boats,
nourishing our fish, have also a productive power; the
wind which turns our mills, and even the heat of the sun,
work for us; but happily no one has yet been able to say:
the 'wind and the sun are mine, and the service which they
render must be paid for. '"--_Economie Politique, par J. B.
Say_, vol. ii. p. 124.
[6] Has not M. Say forgotten, in the following passage,
that it is the cost of production which ultimately
regulates price? "The produce of labour employed on the
land has this peculiar property, that it does not become
more dear by becoming more scarce, because population
always diminishes at the same time that food diminishes,
and consequently the quantity of these products
_demanded_, diminishes at the same time as the quantity
supplied. Besides it is not observed that corn is more
dear in those places where there is plenty of uncultivated
land, than in completely cultivated countries. England and
France were much more imperfectly cultivated in the middle
ages than they are now; they produced much less raw
produce: nevertheless from all that we can judge by a
comparison with the value of other things, corn was not
sold at a dearer price. If the produce was less, so was
the population; the weakness of the demand compensated the
feebleness of the supply. " vol. ii. 338. M. Say being
impressed with the opinion that the price of commodities
is regulated by the price of labour, and justly supposing
that charitable institutions of all sorts tend to increase
the population beyond what it otherwise would be, and
therefore to lower wages, says, "I suspect that the
cheapness of the goods, which come from England is partly
caused by the numerous charitable institutions which exist
in that country. " vol. ii. 277. This is a consistent
opinion in one who maintains that wages regulate price.
[7] "In agriculture too," says Adam Smith, "nature labours
along with man; and though her labour costs no expense,
its produce has its value, as well as that of the most
expensive workman. " The labour of nature is paid, not
because she does much, but because she does little. In
proportion as she becomes niggardly in her gifts, she
exacts a greater price for her work. Where she is
munificently beneficent, she always works gratis. "The
labouring cattle employed in agriculture, not only
occasion, like the workmen in manufactures, the
reproduction of a value equal to their own consumption, or
to the capital which employs them, together with its
owner's profits, but of a much greater value. Over and
above the capital of the farmer and all its profits, they
regularly occasion the reproduction of the rent of the
landlord. This rent may be considered as the produce of
those powers of nature, the use of which the landlord
lends to the farmer. It is greater or smaller according to
the supposed extent of those powers, or in other words,
according to the supposed natural or improved fertility of
the land. It is the work of nature which remains, after
deducting or compensating every thing which can be
regarded as the work of man. It is seldom less than a
fourth, and frequently more than a third of the whole
produce. No equal quantity of productive labour employed
in manufactures, can ever occasion so great a
reproduction. _In them nature does nothing, man does all_;
and the reproduction must always be in proportion to the
strength of the agents that occasion it. The capital
employed in agriculture, therefore, not only puts into
motion a greater quantity of productive labour than any
equal capital employed in manufactures, but in proportion
too to the quantity of the productive labour which it
employs, it adds a much greater value to the annual
produce of the land and labour of the country, to the
_real_ wealth and revenue of its inhabitants. Of all the
ways in which a capital can be employed, it is by far the
most advantageous to the society. "--Book II. chap. v. p.
15.
Does nature nothing for man in manufactures? Are the
powers of wind and water, which move our machinery, and
assist navigation, nothing? The pressure of the atmosphere
and the elasticity of steam, which enable us to work the
most stupendous engines--are they not the gifts of nature?
to say nothing of the effects of the matter of heat in
softening and melting metals, of the decomposition of the
atmosphere in the process of dyeing and fermentation.
There is not a manufacture which can be mentioned, in
which nature does not give her assistance to man, and give
it too, generously and gratuitously.
In remarking on the passage which I have copied from Adam
Smith, Mr. Buchanan observes, "I have endeavoured to shew,
in the observations on productive and unproductive
Footnote: labour, contained in the fourth volume, that
agriculture adds no more to the national stock than any
other sort of industry. In dwelling on the reproduction of
rent as so great an advantage to society, Dr. Smith does
not reflect that rent is the effect of high price, and
that what the landlord gains in this way, he gains at the
expense of the community at large. There is no absolute
gain to the society by the reproduction of rent; it is
only one class profiting at the expense of another class.
The notion of agriculture yielding a produce, and a rent
in consequence, because nature concurs with human industry
in the process of cultivation, is a mere fancy. It is not
from the produce, but from the price at which the produce
is sold, that the rent is derived; and this price is got,
not because nature assists in the production, but because
it is the price which suits the consumption to the
supply. "
[8] To make this obvious, and to shew the degrees in which
corn and money rent will vary, let us suppose that the
labour of ten men will, on land of a certain quality,
obtain 180 quarters of wheat, and its value to be 4_l. _
per quarter, or 720_l. _; and that the labour of ten
additional men will, on the same or any other land,
produce only 170 quarters in addition; wheat would rise
from 4_l. _ to 4_l. _ 4_s. _. 8_d. _ for 170: 180:: 4_l. _:
4_l. _ 4_s. _ 8_d. _; or, as in the production of 170
quarters, the labour of 10 men is necessary in one case,
and only of 9. 44 in the other, the rise would be as 9. 44
to 10, or as 4_l. _ to 4_l. _ 4_s. _ 8_d. _ If 10 men be
further employed, and the return be
160, the price will rise to £4 10 0
150, " " " " " 4 16 0
140, " " " " " 5 2 10
Now if no rent was paid for the land which yielded 180
quarters when corn was at 4_l. _ per quarter, the value of
10 quarters would be paid as rent when only 170 could be
procured, which, at 4_l. _ 4_s. _ 8_d. _ would be 42_l. _
7_s. _ 6_d. _
20 qrs. when 160 were produced, which at £4 10 0 would be £ 90 0 0
30 qrs. " 150 " " " " 4 16 0 " " 144 0 0
40 qrs. " 140 " " " " 5 2 10 " " 205 13 4
{100} { 100
Corn rent then would increase {200} and money rent in the { 212
in the proportion of {300} proportion of { 340
{400} { 485
[9] With Mr. Buchanan in the following passage, if it
refers to temporary states of misery, I so far agree, that
"the great evil of the labourer's condition, is poverty,
arising either from a scarcity of food or of work; and in
all countries, laws without number have been enacted for
his relief. But there are miseries in the social state
which legislation cannot relieve; and it is useful
therefore to know its limits, that we may not, by aiming
at what is impracticable, miss the good which is really in
our power. "--_Buchanan_, page 61.
[10] The reader is desired to bear in mind, that for the
purpose of making the subject more clear, I consider money
to be invariable in value, and therefore every variation
of price to be referable to an alteration in the value of
the commodity.
[11] The reader is aware, that we are leaving out of our
consideration the accidental variations arising from bad
and good seasons, or from the demand increasing or
diminishing by any sudden effect on the state of
population. We are speaking of the natural and constant,
not of the accidental and fluctuating price of corn.
[12] The 180 quarters of corn would be divided in the
following proportions between landlords, farmers, and
labourers, with the above-named variations in the value of
corn.
Price per qr. Rent. Profit. Wages. Total.
_£. s. d. _ In Wheat. In Wheat. In Wheat.
4 0 0 None. 120 qrs. 60 qrs. }
4 4 8 10 qrs. 111. 7 58. 3 }
4 10 0 20 103. 4 56. 6 } 180
4 16 0 30 95 55 }
5 2 10 40 86. 7 53. 5 }
and, under the same circumstances, money rent, wages, and
profit, would be as follows:
Price per qr. Rent. Profit. Wages. Total.
_£. s. d. _ _£. s. d. _ _£. s. d. _ _£. s. d. _ _£. s. d. _
4 0 0 None. 480 0 0 240 0 0 720 0 0
4 4 8 42 7 6 473 0 0 247 0 0 762 7 6
4 10 0 90 0 0 465 0 0 255 0 0 810 0 0
4 16 0 144 0 0 456 0 0 264 0 0 864 0 0
5 2 10 205 13 4 445 15 0 274 5 0 925 13 4
[13] See Adam Smith, book i. chap. 9.
[14] It will appear then, that a country possessing very
considerable advantages in machinery and skill, and which
may therefore be enabled to manufacture commodities with
much less labour than her neighbours, may in return for
such commodities, import a portion of the corn required
for its consumption, even if its land were more fertile,
and corn could be grown with less labour than in the
country from which it was imported. Two men can both make
shoes and hats, and one is superior to the other in both
employments; but in making hats, he can only exceed his
competitor by one-fifth or 20 per cent. , and in making
shoes he can excel him by one-third or 33 per cent. ;--will
it not be for the interest of both, that the superior man
should employ himself exclusively in making shoes, and the
inferior man in making hats?
[15] Book V. ch. ii.
[16] M. Say appears to have imbibed the general opinion on
this subject. Speaking of corn, he says, "thence it
results, that its price influences the price of _all_
other commodities. A farmer, a manufacturer, or a
merchant, employs a certain number of workmen, who all
have occasion to consume a certain quantity of corn. If
the price of corn rises, he is obliged to raise, in an
equal proportion, the price of his productions. " Vol. i.
p. 255.
[17] M. Say says, that "the tax, added to the price of a
commodity, raises its price. Every increase in the price
of a commodity, necessarily reduces the number of those
who are able to purchase it, or at least the quantity they
will consume of it. " This is by no means a necessary
consequence. I do not believe, that if bread were taxed,
the consumption of bread would be diminished, more than if
cloth, wine, or soap, were taxed.
[18] The following remark of the same author appears to me
equally erroneous: "When a high duty is laid on cotton,
the production of all those goods, of which cotton is the
basis, is diminished. If the total value added to cotton
in its various manufactures, in a particular country,
amounted to 100 millions of francs per annum, and the
effect of the tax was, to diminish the consumption one
half, then the tax would deprive that country every year
of 50 millions of francs, in addition to the sum received
by government. " Vol. ii. p. 314.
[19] It is observed by M. Say, "that a manufacturer is not
enabled to make the consumer pay the whole tax levied on
his commodity, because its increased price will diminish
its consumption. " Should this be the case, should the
consumption be diminished, will not the supply also
speedily be diminished? Why should the manufacturer
continue in the trade if his profits are below the general
level? M. Say appears here also to have forgotten the
doctrine which he elsewhere supports, "that the cost of
production determines the price, below which commodities
cannot fall for any length of time, because production
would then be either suspended or diminished. "--Vol. ii.
p. 26.
"The tax in this case falls then partly on the consumer
who is obliged to give more for the commodity taxed, and
partly on the producer, who, after deducting the tax, will
receive less. The public treasury will be benefited by
what the purchaser pays in addition, and also by the
sacrifice which the producer is obliged to make of a part
of his profits. It is the effort of gunpowder, which acts
at the same time on the bullet which it projects, and on
the gun which it causes to recoil. " Vol. ii. p. 333.
[20] "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
consumption which has followed the loan has annihilated 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.
