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high as hefore. But if the increase of produce took place simultaneously on all lands, the price would not be as high as hefore; and there is nothing unreasonable in supposing that the landlords would be, not benefited, but injured. It is admitted that whatever permanently reduces the price of produce diminishes rent: and it is quite in accordance with common notions to suppose that if, by the increased productiveness of land, less land were required for cultivation, its value, like that of other articles for which the demand had diminished, would fall.

I am quite willing to admit that rents have not really been lowered by the progress of agricultural improvement; but why? Because improvement has never in reality been sudden, bnt always slow; at no time much outstripping, and often falling far short of, the growth of capital and population, which tends as much to raise rent, as the other to lower it, and which is enabled, as we shall presently see, to raise it much higher by means of the additional margin afforded by improvements in agriculture. First, however, we must examine in what manner the sudden cheapening of agricultural produce would affect profits and wages.

In the beginning, money wages would probably remain the same as before, and the labourers would have the full benefit of the cheapness. They would be enabled to increase their consumption either of food or of other articles, and would receive the same cost, and a greater quantity. So far, profits would be unaffected. But the permanent remuneration of the labourers essentially depends on what we have called their habitual standard; the extent of the requirements which, as a class, they insist on satisfying before they choose to have children. If their tastes and requirements receive a durable impress from the sudden improvement in their condition, the benefit to the class will be permanent. But the same cause which enables them to purchase greater comforts and indulgences with the same wages, would enable them to purchase the same amount of comforts and in

dulgences with lower wages; and a greater population may now exist, without reducing the labourers below the condition to which they are accustomed. Hitherto, this and no other has been the use which the labourers have commonly made of any increase of their means of living; they have treated it simply as convertible into food for a greater number of children. It is probable, therefore, that population would be stimulated, and that after the lapse of a generation the real wages of labour would be no higher than before the improvement: the reduction being partly brought about by a fall of money wages, and partly through the price of food, the cost of which, from the demand occasioned by the increase of population, would be increased. To the extent to which money wages fell, profits would rise; the capitalist obtaining a greater quantity of equally efficient labour by the same outlay of capital. We thus see that a diminution of the cost of living, whether arising from agricultural improvements or from the importation of foreign produce, if the habits and requirements of the labourers are not raised, usually lowers money wages and rent, and raises the general rate of profit.

What is true of improvements which cheapen the production of food, is true also of the substitution of a cheaper for a more costly variety of it. The same land yields to the same labour a much greater quantity of human nutriment in the form of maize or potatoes, than in the form of wheat. If the labourers were to give up bread, and feed onlj on those cheaper products, taking as their compensation not a greater quantity of other consumable commodities, but earlier marriages and larger families, the cost of labour would be much diminished, and if labour continued equally efficient, profits would rise; while rent would be much lowered, since food for the whole population could be raised on half or a third part of the land now sown with corn. At the same time, it being evident that land too barren to be cultivated for wheat might be made in case of necessity to yield potatoes sufficient to support the little labour necessary for producing them, cultivation might ultimately descend lower, and rent eventually rise higher, on a potato or maize system, than on a corn system; because the land would be capable of feeding a much larger population before reaching the limit of its powers.

If the improvement, which we suppose to take place, is not in the production of food, but of some manufactured article consumed by the labouring class, the effect on wages and profits will at first he the same; but the effect on rent very different. It will not be lowered; it will even, if the ultimate effect of the improvement is an increase of population, be raised: in which last case profits will be lowered. The reasons are too evident to require statement.

§ 5. We have considered, on the one hand, the manner in which the distribution of the produce into rent, profits, and wages, is affected by the ordinary increase of population and capital, and on the other, how it is affected by improvements in production, and more especially in agriculture. We have found that the former cause lowers profits, and raises rent and the cost of labour: while the tendency of agricultural improvements is to diminish rent; and all improvements which cheapen any article of the labourer's consumption, tend to diminish the cost of labour, and to raise profits. The tendency of each cause in its separate state being thus' ascertained, it is easy to determine the tendency of the actual course of things, in which the two movements are going on simultaneously, capital and population increasing with tolerable steadiness, while improvements in agriculture are made from time to time, and the knowledge and practice of improved methods become diffused gradually through the community.

The habits and requirements of the labouring classes being given (which determine their real wages,) rent, profits, and money wages at any given time, are the result of the composition

of these rival forces. If during any period agricultural improvement advances faster than population, rent and money wages during that period will tend downward, and profits upward. If population advances more rapidly than agricultural improvement, either the labourers will submit to a reduction in the quantity or quality of their food, or if not, rent and money wages will progressively rise, and profits will fall.

Agricultural skill and knowledge are of slow growth, and still slower diffusion. Inventions and discoveries, too, occur only occasionally, while the increase of population and capital are continuous agencies. It therefore seldom happens that improvement, even during a short time, has so much the start of population and capital as actually to lower rent, or raise the rate of profits. There are many countries in which the growth of population and capital are not rapid, but in these agricultural improvement is less active still. Population almost everywhere treads close on the heels of agricultural improvement, and effaces its effects as fast as they are produced.

The reason why agricultural improvement seldom lowers rent, is that it seldom cheapens food, but only prevents it from growing dearer; and seldom, if ever, throws land out of cultivation, but only enables worse and worse land to be taken in for the supply of an increasing demand. What is sometimes called the natural statu of a country which is but half cultivated, namely, that the land is highly productive, and food obtained in great abundance by little labour, is only true of unoccupied countries colonized by a civilized people. In the United States the worst land in cultivation is of a high quality (except sometimes in the immediate vicinity of markets or means of conveyance, where a bad quality is compensated by a good situation); and even if no further improvements were made in agriculture or locomotion, cultivation would have many steps yet to descend, before the increase of population and capital would be brought to a stand; but in Europe five hundred years ago, though Bo thinly peopled in comparison to the present population, it is probable that the worst land under the plough was, from the rude state of agriculture, quite as unproductive as the worst land now cultivated; and that cultivation had approached as Jiear to the ultimate limit of profitable tillage, in those times as in the present. What the agricultural improvements since made have really done is, by increasing the capacity of production of land in general, to enable tillage to extend downwards to a much worse natural quality of land than the worst which at that time would have admitted of cultivation by a capitalist for profit; thus rendering a much greater increase of capital and population possible, and removing always a little and a little further off, the barrier which restrains them; population meanwhile always pressing so hard against the barrier, that there is never any visible margin left for it to seize, every inch of ground made vacant for it by improvement being at once filled up by its advancing columns. Agricultural improvement may thus be considered to be not so much a counterforce conflicting with increase of population, as a partial relaxation of the bonds which confine that increase.

The effects produced on the division of the produce by an increase of production, under the joint influence of increase of population and capital and improvements of agriculture, are very different from those deduced from the hypothetical cases previously discussed. In particular, the effect on rent is most materially different. We remarked that—while a great agricultural improvement, made suddenly and universally, would in the first instance inevitably lower rent—such improvements enable rent, in the progress of society, to rise gradually to a much higher limit than it could otherwise attain, since they enable a much lower quality of land to be ultimately cultivated. But in the case we are now supposing, which nearly corresponds to the usual course of things,

this ultimate effect becomes the immediate effect. Suppose cultivation to have reached, or almost reached, the utmost limit permitted by the state of the industrial arts, and rent, therefore, to have attained nearly the highest point to which it can be carried by the progress of population and capital, with the existing amount of skill and knowledge. If a great agricultural improvement were suddenly introduced, it might throw back rent for a considerable space, leaving it to regain its lost ground by the progress of population and capital, and afterwards to go on further. But, taking place, as such improvement always does, very gradually, it causes no retrograde movement of either rent or cultivation; it merely enables the one to go on rising, and the other extending, long after they must otherwise have stopped. It would do this even without the necessity of resorting to a worse quality of land; simply by enabling the lands already in cultivation to yield a greater produce, with no increase of the proportional cost. If by improvements of agriculture all the lands in cultivation could be made, even with double labour and capital,

to yield a double produce, (supposing that in the meantime population increased so as to require this double quantity) all rents would be doubled.

To illustrate the point, let us revert to the numerical example in a former page. Three qualities of land yield respectively 100, 80, and 60 bushels to the same outlay on the same extent of surface. tf No. 1 could be made to yield 200, No. 2, 160, and No. 3, 120 bushels, at only double the expense and therefore without any increase ot' the cost of production, and if the population, having doubled, required all this increased quantity, the rent of No. 1 would be 80 bushels instead of 40, and of No. 2, 40 instead of 20, while the price and value per bushel wonld be the same as before: so that corn rent and money rent would both be doubled. I need not point out the difference between this result, and what we have shown would taka place if there were an improvement in production without the accompaniment of an increased demand for food.

Agricultural improvement, then, is always ultimately, and in the manner in which it generally takes place also immediately, beneficial to the landlord. We may add, that when it takes place in that manner, it is beneficial to no one else. When the demand for produce fully keeps pace with the increased capacity of production, food is not cheapened; the labourers are not, even temporarily, benefited; the cost of labour is not diminished, nor profits raised. There is a greater aggregate production, a greater produce divided among the labourers, and a larger gross profit; but the wages being shared among a larger population, and the profit spread over a larger capital, no labourer is better off, nor does any capitalist derive from the same amount of capital a larger income.

The result of this long investigation may be summed up as follows. The economical progress of a society constituted of landlords, capitalists, and labourers, tends to the progressive enrichment of the landlord class; while the cost of the labourer's subsistence tends on the whole to increase, and profits to fall. Agricultural improvements are a counteracting force to the two last effects; but the first, though a case is conceivable in which it would be temporarily checked, is ultimately in a high degree promoted by those improvements; and the increase of population tends to transfer all the benefits derived from agricultural improvement to the landlords alone. What other consequences, in addition to these, or in modification of them, arise from the industrial progress of a society thus constituted, I shall endeavour to show in the succeeding chaptei.

CHAPTER IV.

OF THE TENDENCY OF PROFITS TO A MINIMUM.

§ 1. The tendency of profits to fall as society advances, which has been brought to notice in the preceding chapter, was early recognised by writers on industry and commerce; but the laws which govern profits not being then understood, the phenomenon was ascribed to a wrong cause. Adam Smith considered profits to be determined by what he called the competition of capital; and concluded that when capital increased, this competition must likewise increase, and profits must fall. It is not quite certain what sort of competition Adam Smith had here in view. His words in the chapter on Profits of Stock* are, " When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profits; and • Wealth of Jfaiiom, book i. eh. 9.

when there is a like increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in them all." This passage would lead us to infer that, in Adam Smith's opinion, the manner in which the competition of capital lowers profits is by lowering prices; that being usually the mode in which an increased investment of capital in any particular trade, lowers the profits of that trade. But if this was his meaning, he overlooked the circumstance, that the fall of price, which if confined to one commodity really does lower the profits of the producer, ceases to have that effect as soon as it extends to all commodities; because, when all things have fallen, nothing has really fallen, except nominally; and even computed in money, the expenses of every producer have diminished as much as his returns. Unless indeed labour be the one commodity which has not fallen in money price, when all other things have: if so, what has really taken place is a rise of wages; and it is that, and not the fall of prices, which has lowered the profits of capital. There is another thing which escaped the notice of Adam Smith; that the supposed universal fall of prices, through increased competition of capitals, is a thing which cannot take place. Prices are not determined by the competition of the sellers only, but also by that of the buyers; by demand as well as supply. The demand which affects money prices consists of all the money in the hands of the community destined to be laid out in commodities; and as long as the proportion of this to the commodities is not diminished, there is no fall of general prices. Now, howsoever capital may increase, and give rise to an increased production of commodities, a full share of the capital will be drawn to the business of producing or importing money, and the quantity of money will be augmented in an eqiiAl ratio with the quantity of commodities. For if this were not the case, and if money, therefore, were, as the theory supposes, perpetually acquiring increased purchasing power, those who produced or imported it would obtain constantly increasing profits; and this could not happen without attracting labour and capital to that occupation from other employments. If a general fall of prices, and increased value of money, were really to occur, it could only be as a consequence of increased cost of production, from the gradual exhaustion of the mines.

It is not tenable, therefore, in theory, that the increase of capital produces, or tends to produce, a general decline of money prices. Neither is it true, that any general decline of prices, as capital increased, has manifested itself in fact. The only things observed to fall in price with the progress of society, are those in which there have been improvements in production, greater than have taken place in the

production of the precious metals; as for example, all spun and woven fabrics. Other things again, instead of falling, have risen in price, because their cost of production, compared with that of gold and silver, has. increased. Among these are all kindsof food, comparison being made with a much earlier period of history. The doctrine, therefore, that competition of capital lowers profits by lowering prices, is incorrect in fact, as well as unsound in principle.

But it is not certain that Adam Smith really held that doctrine; for his language on the subject is wavering and unsteady, denoting the absence of a definite and well-digested opinion. Occasionally he seems to think that the mode in which the competition of capital lowers profits, is by raising wages. And when speaking of the rate of profit in new colonies, he seems. on the very verge of grasping the complete theory of the subject. "As the colony increases, the profits of stock gradually diminish. When the most fertile and best situated lands have been all occupied, less profit can be made by the cultivation of what is inferior both in soil and situation." Had Adam Smith meditated longer on the subject, and systematized his view of it by harmonizing with each, other the various glimpses which he caught of it from different points, he would have perceived that this last is the true cause of the fall of profits usually consequent npon increase of capital.

§ 2. Mr. Wakefield, in his Commentary on Adam Smith, and his important writings on Colonization, takes a much clearer view of the subject, and arrives, through a substantially correct series of deductions, at practical conclusions which appear to me just and important; but he is not equally happy in incorporating his valuable speculations with the results of previous thought, and reconciling them with other truths. Some of the theories of Dr. Chalmers, in his chapter "On the Increase and Limits of Capital," and the two chapters which follow

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