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ability be fallacious, since, if it were shared by those who have greatest means of knowledge and motives to accurate examination, there would take place such an influx of capital as would soon lower the profits to the common level. It is true that, to persons with the same amount of original means, there is more chance of making a large fortune in some employments than in others. But it would be found that in those same employments, bankruptcies also are more frequent, and that the chance of greater success is balanced by a greater probability of complete failure. Very often it is more than balanced; for, as was remarked in another case, the chance of great prizes operates with a greater degree of strength than arithmetic will warrant, in attracting competitors; and I doubt not that the average gains, in a trade in which large fortunes may be made, are lower than in those in which gains are slow, though comparatively sure, and in which nothing is to be ultimately hoped for beyond a competency. The timber trade of Canada is one example of an employment of capital, partaking so much of the nature of a lottery, as to make it an accredited opinion that, taking the adventurers in the aggregate, there is more money lost by the trade than gained by it; in other words, that the average rate of profit is less than nothing. In such points as this, much depends on the characters of nations, according as they partake more or less of the adventurous, or, as it is called when the intention is to blame it, the gambling, spirit. This spirit is much stronger in the United States than in Great Britain ; and in Great Britain, than in any country of the continent. In some continental countries the tendency is so much the reverse, that safe and quiet employments probably yield a less average profit to the capital engaged in them, than those which, at the price of greater hazards, offer greater gains.

It must not, however, be forgotten, that even in the


countries of most active competition, custom also has a considerable share in determining the profits of trade. There is sometimes an idea afloat as to what the profit of an employment should be, which, although not adhered to by all the dealers, nor perhaps rigidly by any, still exercises a certain influence over their operations. There is in England a kind of notion, how widely prevailing I know not, that fifty per cent. is a proper and suitable rate of profit in retail transactions: understand, not fifty per cent. on the whole capital, but an advance of fifty per cent. on the wholesale prices; from which have to be defrayed bad debts, shop rent, the pay of clerks, shopmen, and agents of all descriptions, in short, all the expenses of the retail busi

If this custom were universal, and strictly adhered to, competition indeed would still operate, but the consumer would not derive any benefit from it; the way in which it would diminish the advantages of those engaged in retail trade, would be by a greater subdivision of the business. The intensity, however, of modern competition, in England at least, is tending to break down all customs of this description. In almost all trades, (at least in the great emporia of trade,) there are now numerous dealers whose motto is, “small gains and frequent”—a great business at low prices, rather than high prices and few transactions; and by turning over their capital more rapidly, and adding to it by borrowed capital when needed, these dealers often obtain individually higher profits; though they necessarily lower the profits of those among their competitors who do not adopt the same principle.

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The preceding remarks have, I hope, sufficiently elucidated what is meant by the common phrase, “the ordi · nary rate of profit ;" and the sense in which, and the limitations under which, this ordinary rate has a real existence. It now remains to consider what causes determine its amount.



I assume, throughout, the state of things, which, where the laborers and capitalists are separate classes, prevails, with tew exceptions, universally; namely, that the capitalist uivances the whole expenses, including the entire remuneration of the laborer. That he should do so, is not a matter of inherent necessity; the laborer might wait until the production is complete, for all that part of his wages which exceeds mere necessaries; and even for the whole, if he has funds in hand sufficient for his temporary support. But in the latter case, the laborer is to that extent really a capitalist, investing capital in the concern, by supplying a portion of the funds necessary for carrying it on; and even in the former case he may be looked upon in the same light, since, contributing his labor at less than the market price, he may be regarded as lending the difference to his employer, and receiving it back with interest (on whatever principle computed) from the proceeds of the enterprise.

The capitalist, then, may be assumed to make all the advances, and receive all the produce. His profit consists of the excess of the produce above the advances; his rate of profit is the ratio which that excess bears to the amount advanced. But what do the advances consist of?

It is, for the present, necessary to suppose that the capitalist does not pay any rent; has not to purchase the use of any appropriated natural agent. This, indeed, is scarcely ever the exact truth. The agricultural capitalist, except when he is the owner of the soil he cultivates, always, or almost always pays rent; and even in manufactures, (not to mention ground-rent, the materials of the manufacture have generally paid rent, in some stage of their production. The nature of rent, however, we have not yet taken into consideration ; and it will hereafter appear, that no practical

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error, on the question we are now examining, is produced by disregarding it.

do separatis If, then, leaving rent out of the question, we inquire in bert, what it is that the advances of the capitalist, for purposes of

the naty wres production, consist, we shall find that they consist of wages tre cartells of labor.

l's A large portion of the expenditure of every capitalist consists in the direct payment of wages. What does not not matinaia consist of this, is composed of materials and implements, implements ! including buildings. But materials and implements are produced by labor ; and as our supposed capitalist is not meant to represent a single employment, but to be a type of the productive industry of the whole country, we may suppose that he makes his own tools, and raises his own materials. He does this by means of previous advances, which, again, consist wholly of wages. If we suppose him to buy the materials and tools instead of producing them, the case is not altered; he then repays to a previous producer the wages which that previous producer has paid. It is true, he repays it to him with a profit; and if he had produced the things himself, he himself must have had that profit, on this part of his outlay as well as on every other part. The fact, however, remains, that in the whole process of production, beginning with the materials and tools and ending with the finished product, all the advances have consisted of nothing but wages; except that certain of the capitalists concerned have, for the sake of general convenience, had their share of profit paid to them before the operation was completed. Whatever, of the ultimate product, is not profit, is repayment of wages.

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$ 6. It thus appears that the two elements on which, and which alone, the gains of the capitalists depend, are, first, the magnitude of the produce, in other words, the productive power of labor; and secondly, the proportion of that |

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produce obtained by the laborers themselves; the ratio, which the remuneration of the laborers bears to the amount they produce. These two things form the data for determining the gross amount divided as profit among all the capitalists of the country; but the rate of profit, the percentage on the capital, depends only on the second of the two elements, the laborers' proportional share, and not on the amount to be shared. If the produce of labor were doubled, and the laborers obtained the same proportional share as before, that is, if their remuneration was also doubled, the capitalists, it is true, would gain twice as much; but as they would also have had to advance twice as much, the rate of their profit would be only the same as before.

We thus arrive at the conclusion of Ricardo and others, that the rate of profits depends upon wages; rising as wages fall, and falling as wages rise. In adopting, however, this doctrine, I must insist upon making a most necessary alteration in its wording. Instead of saying that profits depend on wages, let us say (what Ricardo really meant) that they depend on the cost of labor.

Wages, and the cost of labor ; what labor brings in to the laborer, and what it costs to the capitalist; are ideas quite distinct, and which it is of the utmost importance to keep so. For this purpose it is essential not to designate them, as is almost always done, by the same name. Nothing is more common than to say that wages are high or low, meaning only that the cost of labor is high or low. The reverse of this would be oftener the truth; the cost of labor is frequently at its highest where wages are lowest. This may arise from two causes. In the first place, the labor, though cheap, may be inefficient. In no European country are wages so low as in Ireland ; the remuneration of an agricultural laborer in the west of Ireland, is not more than half the wages of even the lowest-paid Englishman, the


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