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replacing the machinery as it wears out, and not reinvesting the money as it comes in from the sale of the produce. The capital is thus ready for a new employment, in which it will maintain as much labor as before. The manufacturer and his work-people lose the benefit of the skill and knowledge which they had acquired in the particular business, and which can only be partially of use to them in any other; and that is the amount of loss to the community by the change. But the laborers can still work, and the capital which previously employed them will, either in the same hands, or by, being lent to others, employ either those laborers or an equivalent number in some other occupation.

This truth, that purchasing produce is not employing labor; that the demand for labor is constituted by the wages which precede the production, and not by the demand which may exist for the commodities resulting from the production; is a proposition which greatly needs all the illustration it can receive. It is, to common apprehension, a paradox; and even among political economists of reputation, I can hardly point to any, except Mr. Ricardo and M. Say, who have kept it constantly and steadily in view. Almost all others occasionally express themselves as if a person who buys commodities, the produce of labor, was an employer of labor, and created a demand for it as really, and in the same sense, as if he bought the labor itself directly, by the payment of wages. It is no wonder that political economy advances slowly, when such a question as this still remains open, at its very threshold. desirous of impressing on the reader that a demand for commodities does not in any manner constitute a demand for labor, but only determines into a particular channel a portion, more or less considerable, of the demand already existing. It determines that a part of the labor and capital of the community shall be employed in producing certain

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VOL. I.

things instead of other things. The demand for labor is constituted solely by the funds directly set apart for the use of laborers.

For the better illustration of our principle, let us put the following case. A consumer may expend his income either in buying services or commodities; he may employ part of it in hiring journeymen bricklayers to build a house, or excavators to dig artificial lakes, or laborers to make plantations and lay out pleasure grounds; or, instead of this, he may expend the same value in buying velvet and lace. The question is, whether the difference between these two modes of expending his income affects the interest of the laboring classes. It is plain that in the first of the two cases he employs laborers, who will be out of employment, or at least out of that employment, in the opposite case. But those from whom I differ say that is of no consequence, because in buying velvet and lace he equally employs laborers, namely, those who make the velvet and lace. This, according to the principle we laid down, is an error, and I proceed to show still more clearly that it is so. The consumer does not with his own funds pay to the weavers and lacemakers their day's wages. He buys the finished commodity, which has been produced by labor and capital, the labor not being paid nor the capital furnished by him, but pre-existing. Suppose that he had been in the habit of expending this portion of his income in hiring journeymen bricklayers, who laid out the amount of their wages in food and clothing, which were also produced by labor and capital. He, however, determines to prefer velvet, for which he thus creates an extra demand. This demand cannot be satisfied without an extra supply, nor can the supply be produced without an extra capital ; where, then, is the capital to come from? There is nothing in the consumer's change of purpose which makes the capital of the country greater than it otherwise was. It appears, then, that the increased demand for velvet could not for the present be supplied, were it not that the very circumstance which gave rise to it has set at liberty a capital of the exact amount required. The very sum which the consumer now employs in buying velvet formerly passed into the hands of journeymen bricklayers, who expended it in food and necessaries, which they now either go without, or squeeze, by their competition, from the shares of other laborers. The labor and capital, therefore, which formerly produced necessaries for the use of these bricklayers, are deprived of their market, and must look out for other employment; and they find it in making velvet for the new demand. I do not mean that the very same labor and capital which produced the necessaries turn themselves to producing the velvet; but, in some one or other of a hundred modes, they take the place of that which does. There was capital in existence to do one of two things to make the velvet, or to produce necessaries for the journeymen bricklayers; but not to do both. It was at the option of the consumer which of the two should happen ; and if he chooses the velvet, they go without the necessaries.

It must not be inferred from this, that it is, or that I am bound to think it, advantageous to the laboring class, that consumers should expend their income in services, rather than in commodities. The difference does not lie there, but in their employing it or not in the direct payment or maintenance of labor, without the intervention of another capital. The detriment to the laborers would have been the same, if the consumer had persisted in building a house, but instead of engaging laborers himself and paying them, had given an order to a builder, and settled the account after the work was finished. For in this manner of proceeding, the consumer no longer himself maintains the labor, but attracts the capital of another person from some other place or occupation to do it, and therefore does not open a new employment for labor, but merely changes the course of an existing employment. Thus, in whatever manner the question is stated, we are brought back to the conclusion, that a demand delayed until the work is completed, and furnishing no advances, but only reimbursing advances made by others, contributes nothing to the demand for labor; and that what is so expended is, in all its effects, so far as regards the employment of the laboring class, a mere nullity: it does not and cannot create any employment except at the expense of other employment which existed before.*

The error, nevertheless, is a most natural one, and has first appearances strongly on its side. Although a demand for velvet does nothing more in regard to the employment for labor and capital, than to determine so much of the employment that already existed, into that particular channel instead of any other; still, to the producers already engaged in the velvet manufacture, and not intending to quit it, this is of the utmost importance. To them a falling off in the demand is a real loss, and one which, even if none of their goods finally perish unsold, may mount to any height, up to that which would make them choose as the

The grounds of a proposition, when well understood, usually give a tolerable indication of the limitations of it. There is a case in which a demand for commodities may create employment for labor, namely, when the laborer is already fed, without being fully employed. Work which can be done in the spare hours of persons subsisted from some other source, can (as we before remarked) be undertaken without withdrawing capital from other occupations beyond the amount (often very small) required to repay the expense of tools and materials. The reason of our principle thus failing, the principle itself fails, and employment of this kind may, by the springing up of a demand for the commodity, be called into existence without depriving labor of an equivalent amount of employment in another quarter. The demand does not even in this case operate on labor any otherwise than through the medium of an existing capital, but it affords an inducement which causes that capital to set in motion a greater amount of labor than it did before.

smaller evil, to retire from the business. On the contrary, an increased demand enables them to extend their transactions—to make a profit upon a larger capital, if they have it, or can borrow it; and, turning over their capital more rapidly, they will employ their laborers more constantly, or employ a greater number than before. So that an increased demand for a commodity does really, in the particular department, often cause a greater employment to be given to labor by the same capital. The mistake lies in not perceiving that in the cases supposed, this advantage is given to labor and capital in one department, only by being withdrawn from another; and that when the change has produced its natural effect of attracting into the employment additional capital proportional to the increased demand, the advantage itself ceases.

The demand for commodities is a consideration of importance rather in the theory of exchange, than in that of production. Looking at things in the aggregate, and permanently, the remuneration of the producer is derived from the productive power of his own capital. The sale of the produce for money, and the subsequent expenditure of the money in buying other commodities, are a mere exchange of equivalent values, for mutual accommodation. It is true that, the division of employments being one of the principal means of increasing the productive power of labor, the power of exchanging gives rise to a great increase of the produce; but even then it is production, not exchange, which remunerates labor and capital. We cannot too strictly represent to ourselves the operation of exchange, whether conducted by barter or through the medium of money, as the mere mechanism by which each person transforms the remuneration of his labor or of his capital into the particular shape in which it is most convenient to him to possess it, but in no wise the source of the remuneration itself.

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