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year 1847, and seldom was there a greater break-up among the speculators than in the autumn of that year. The chances of failure, in this most precarious trade, are a set-off against great occasional profits. If the corn-dealer were to sell his stores, during a dearth, at a lower price than that which the competition of the consumers assigns to him, he would make a sacrifice, to charity or philanthropy, of the fair profits of his employment, which may be quite as reasonably required from any other person of equal means. His business being a useful one, it is the interest of the public that the ordinary motives should exist for carrying it on, and that neither law nor opinion should prevent an operation beneficial to the public from being attended with as much private advantage as is compatible with full and free competition.

It appears, then, that the fluctuations of values and prices arising from variations of supply, or from alterations in real (as distinguished from speculative) demand, may be expected to become more moderate as society advances. With regard to those which arise from miscalculation, and especially from the alternations of undue expansion and excessive contraction of credit, which occupy so conspicuous a place among commercial phenomena, the same thing cannot be affirmed with equal confidence. Such vicissitudes, beginning with irrational speculation and ending with a commercial crisis, have not hitherto become either less frequent or less violent with the growth of capital and extension of industry Rather they may be said to have become more so: in consequence, as is often said, of increased competition; but, as I prefer to say, of a low rate of profits and interest, which makes capitalists dissatisfied with the ordinary course of safe mercantile gains.1 The connexion of this low rate of profit with the advance of population and accumulation, is one of the points to be illustrated in the ensuing chapters.

1 [See Appendix Y. Commercial Cycles.]

CHAPTER III

INFLUENCE OF THE PROGRESS OF INDUSTRY AND POPULATION, ON RENTS, PROFITS, AND WAGES

§ 1. Continuing the inquiry into the nature of the economical changes taking place in a society which is in a state of industrial progress, we shall next consider what is the effect of that progress on the distribution of the produce among the various classes who share in it. We may confine our attention to the system of distribution which is the most complex, and which virtually includes all others—that in which the produce of manufactures is shared between two classes, labourers and capitalists, and the produce of agriculture among three, labourers, capitalists, and landlords.

The characteristic features of what is commonly meant by industrial progress resolve themselves mainly into three, increase of capital, increase of population, and improvements in production; understanding the last expression in its widest sense, to include the process of procuring commodities from a distance, as well as that of producing them. The other changes which take place are chiefly consequences of these; as, for example, the tendency to a progressive increase of the cost of production of food; arising from an increased demand, which may be occasioned either by increased population, or by an increase of capital and wages, enabling the poorer classes to increase their consumption. It will be convenient to set out by considering each of the three causes, as operating separately; after which we can suppose them combined in any manner we think fit.

Let us first suppose that population increases, capital and the arts of production remaining stationary. One of the effects of this change of circumstances is sufficiently obvious: wages will fall; the labouring class will be reduced to an inferior condition. The state of the capitalist, on the contrary, will be improved. With the same capital, he can purchase more labour, and obtain more produce. His rate of profit is increased. The dependence of the <rate of profits on the cost of labour is here verified; for the labourer obtaining a diminished quantity of commodities, and no alteration being supposed in the circumstances of their production, the diminished quantity represents a diminished cost. The labourer obtains not only a smaller real reward, but the product of a smaller quantity of labour. The first circumstance is the important one to himself, the last to his employer.

Nothing has occurred, thus far, to affect in any way the value of any commodity; and no reason, therefore, has yet shown itself, why rent should be either raised or lowered. But if we look forward another stage in the series of effects, we may see our way to such a consequence. The labourers have increased in numbers: their condition is reduced in the same proportion; the increased numbers divide among them only the produce of the same amount of labour as before. But they may economize in their other comforts, and not in their food: each may consume as much food, and of as costly a quality as previously; or they may submit to a reduction, but not in proportion to the increase of numbers. On this supposition, notwithstanding the diminution of real wages, the increased population will require an increased quantity of food. But since industrial skill and knowledge are supposed to be stationary, more food can only be obtained by resorting to worse land, or to methods of cultivation which are less productive in proportion to the outlay. Capital for this extension of agriculture will not be wanting; for though, by hypothesis, no addition takes place to the capital in existence, a sufficient amount can be spared from the industry which previously supplied the other and less pressing wants which the labourers have been obliged to curtail. The additional supply of food, therefore, will be produced, but produced at a greater cost; and the exchange value of agricultural produce must rise. It may be objected, that profits having risen, the extra cost of producing food can be defrayed from profits, without any increase of price. It could, undoubtedly, but it will not; because, if it did, the agriculturist would be placed in an inferior position to other capitalists. The increase of profits, being the effect of diminished wages, is common to all employers of labour. The increased expenses arising from the necessity of a more costly cultivation, affect the agriculturist alone. For this peculiar burthen he must be peculiarly compensated, whether the general rate of profit be high or low. He will not submit indefinitely to a deduction from his profits to which other capitalists are not subject. He will not extend his cultivation by laying out fresh capital, unless for a return sufficient to yield him as high a profit as could be obtained by the same capital in other investments. The value, therefore, of his commodity will rise, and rise in proportion to the increased cost. The farmer will thus be indemnified for the burthen which is peculiar to himself, and will also enjoy the augmented rate of profit which is common to all capitalists.

It follows, from principles with which we are already familiar, that in these circumstances rent will rise. Any land can afford to pay, and under free competition will pay, a rent equal to the excess of its produce above the return to an equal capital on the worst land, or under the least favourable conditions. Whenever, therefore, agriculture is driven to descend to worse land, or more onerous processes, rent rises. Its rise will be twofold, for, in the first place, rent in kind, or corn rent, will rise; and in the second, since the value of agricultural produce has also risen, rent, estimated in manufactured or foreign commodities (which is represented, cceteris paribus, by money rent) will rise still more.

The steps of the process (if, after what has been formerly said, it is necessary to retrace them) are as follows. Corn rises in price, to repay with the ordinary profit the capital required for producing additional corn on worse land or by more costly processes. So far as regards this additional corn, the increased price is but an equivalent for the additional expense; but the rise, extending to all corn, affords on all, except the last produced, an extra profit. If the farmer was accustomed to produce 100 quarters of wheat at 405., and 1 120 quarters are now required, of which the last twenty cannot be produced under 45s., he obtains the extra five shillings on the entire 120 quarters, and not on the last twenty alone. He has thus an extra 25L beyond the ordinary profits, and this, in a state of free competition, he will not be able to retain. He cannot however be compelled to give it up to the consumer, since a less price than 45s. would be inconsistent with the production of the last twenty quarters. The price, then, will remain at 45s., and the 25Z. will be transferred by competition not to the consumer but to the landlord. A rise of rents is therefore inevitably consequent on an increased demand for agricultural produce, when unaccompanied by increased facilities for its production. A truth which, after this final illustration, we may henceforth take for granted.

The new element now introduced—an increased demand for food —besides occasioning an increase of rent, still further disturbs the distribution of the produce between capitalists and labourers. The increase of population will have diminished the reward of labour: and if its cost is diminished as greatly as its real remuneration, profits will be increased by the full amount. If, however, the increase of population leads to an increased production of food, which cannot be supplied but at an enhanced cost of production, the cost of labour will not be so much diminished as the real reward of it, and profits, therefore, will not be so much raised. It is even possible that they might not be raised at all. The labourers may previously have been so well provided for, that the whole of what they now lose may be struck off from their other indulgences, and they may not, either by necessity or choice, undergo any reduction in the quantity or quality of their food. To produce the food for the increased number may be attended with such an increase of expense, that wages, though reduced in quantity, may represent as great a cost, may be the product of as much labour, as before, and the capitalist may not be at all benefited. On this supposition the loss to the labourer is partly absorbed in the additional labour required for producing the last instalment of agricultural produce; and the remainder is gained by the landlord, the only sharer who always benefits by an increase of population.

§ 2. Let us now reverse our hypothesis, and instead of supposing capital stationary and population advancing, let us suppose capital advancing and population stationary; the facilities of production, both natural and acquired, being, as before, unaltered. The real wages of labour, instead of falling, will now rise; and since the cost of production of the things consumed by the labourer is not diminished, this rise of wages implies an equivalent increase of the cost of labour, and diminution of profits. To state the same deduction in other terms; the labourers not being more numerous, and the productive power of their labour being only the same as before, there is no increase of the produce; the increase of wages, therefore, must be at the charge of the capitalist. It is not impossible that the cost of labour might be increased in even a greater ratio than its real remuneration. The improved condition of the labourers may increase the demand for food. The labourers may have been so ill off before, as not to have food enough; and may now consume more: or they may choose to expend their increased means partly or wholly in a more costly quality of food, requiring more labour and more land; wheat, for example, instead of oats, or potatoes. This

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