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social employment of their leisure hours not disagreeable.

§ 4. These two cases, of slave labour and of domestic manufactures, exemplify the conditions under which low wages enable a country to sell its commodities cheaper in foreign markets, and consequently to undersell its rivals, or to avoid being undersold by them. But no such advantage is conferred by low wages when common to all branches of industry. General low wages never caused any country to undersell its rivals, nor did general high wages ever hinder it from doing so.

To demonstrate this, we must return to an elementary principle which was discussed in a former chapter.* General low wages do not cause low prices, nor high wages high prices, within the country itself. General prices are not raised by a rise of wages, any more than they would be raised by an increase of the quantity of labour required in all production. Expenses which affect all commodities equally, have no influence on prices. If the maker of broadcloth or cutlery, and nobody else, had to pay higher wages, the price of his commodity would rise, just as it would if he had to employ more labour; because otherwise he would gain less profit than other producers, and nobody would engage in the employment. But if everybody has to pay higher wages, or everybody to employ more labour, the loss must be submitted to ; as it affects everybody alike, no one can hope to get rid of it by a change of employment, each therefore resigns himself to a diminution of profits, and prices remain as they were. In like manner, general low wages, or a general increase in the productiveness of labour, does not make prices low, but profits high. If wages fall (meaning here by wages the cost of labour), why, on that account, should the producer lower his price? He will be forced, it may be said, by the competition of other capitalists who will crowd into his employment. But other capitalists are also paying lower wages, and by entering into competition with him they would gain nothing but what * Supra, book iii. ch. It.

they are gaining already. The rate then at which labour is paid, as well as the quantity of it which is employed, affects neither the value nor the price of the commodity produced, except in so far as it is peculiar to that commodity, and not common to commodities generally.

Since low wages are not a cause of low prices in the country itself, so neither do they cause it to offer its commodities in foreign markets at a lower price. It is quite true that if the cost of labour is lower in America than in England, America could sell her cottons to Cuba at a lower price than England, and still gain as high a profit as the English manufacturer. But it is not with the profit of the English manufacturer that the American cotton spinner will make his comparison; it is with the profits of other American capitalists. These enjoy, in common with himself, the benefit of a low cost of labour, and have accordingly a high rate of profit. This high profit the cotton spinner must alsoliave: he will not content himself with the English profit. It is true he may go on for a time at that lower rate, rather than change his employment; and a trade may be carried on, sometimes for a long period, at a much lower profit than that for which it would have been originally engaged in. Countries which have a low cost of labour, and high profits, do not for that reason undersell others, but they do oppose a more obstinate resistance to being undersold, because the producers can often submit to a diminution of profit without being unable to live, and even to thrive, by their business. But this is all which their advantage does for them: and in this resistance they will not long persevere, when a change of times, which may give them equal profits with the rest of their countrymen, has become manifestly hopeless.

§ 5. There is a class of trading and exporting communities, on which a few words of explanation seem to be required. These are hardly to be, looked upon as countries, carrying on an exchange of commodities with other countries, but more properly as outlying agricultural or manufacturing establishments belonging to a larger community. Our West India colonies, for example, cannot be regarded as countries, with a productive capital of their own. If Manchester, instead of being where it is, were on a rock in the North Sea (its present industry nevertheless continuing), it would still be but a town of England, not a country trading with England; it would be merely, as now, a place where England finds it convenient to carry on her cotton manufacture. The West Indies, in like manner, are the place where England finds it convenient to carry on the production of sugar, coffee, and a few other tropical commodities. All the capital employed is English capital; almost all the industry is carried on for English uses; there is little production of anything except the staple commodities, and these are sent to England, not to be exchanged for things exported to the colony and consumed by its inhabitants, but to be sold in England for the benefit of the proprietors there. The trade with the West Indies is therefore hardly to be considered as external trade, but more resembles the traffic between town and country, and is amenable to the principles of the home trade. The rate of profit in the colonies will be regulated by English profits: the expectation of profit must be about the same as in England, with the addition of compensation, for the disadvantages attending the more distant and hazardous employment: and after allowance is made for those disadvantages, the value and price of West India produce in the English market must be regulated (or rather must have been regulated formerly), like that of any English commodity, by the cost of production. For the last twelve or fifteen years this principle has been in abeyance: the price was first kept up beyond the ratio of the cost of production by deficient supplies, which could not, owing to the deficiency of labour, be increased; and more recently the admission of foreign competition has introduced another

element, and some of the West India Islands are undersold, not so much because wages are higher than in Cuba and Brazil, as because they are higher than in England: for were they not so, Jamaica could sell her sugars at Cuban prices, and still obtain, though not a Cuban, an English rate of profit.

It is worth while also to notice another class of small, but in this case mostly . independent communities, which have supported and enriched themselves almost without any productions of their own, (except ships and marine equipments,) by a mere carrying trade, and commerce of entrepot; by buying the produce of one country, to sell it at a profit in another. Such were. Venice and the Hanse Towns. The case of these communities is very simple. They made themselves and their capital the instruments, not of production, but of accomplishing exchanges between the productions of other countries. These exchanges are attended with an advantage to those countries—an increase of the aggregate returns to industry—part of which went to indemnify the agents, for the necessary expense of transport, and another part to remunerate the use of their capital and mercantile skill. The countries themselves had not capital disposable for the operation. When the Venetians became the agents of the general commerce of Southern Europe, they had scarcely any competitors: the thing would not have been done at all without them, and there was really no limit to their profits except the limit to what the ignorant feudal nobility could and would give for the unknown luxuries then first presented to their sight. At a later period competition arose, and the profit of this operation, like that of others, became amenable to natural laws. The carrying trade was taken up by Holland, a country with productions of its own and a large accumulated capital. The other nations of Europe also had now capital to spare, and were capable of conducting their foreign trade for themselves: but Holland, having, from a variety of circumstances, a lower rate of profit at home, could afford to carry for other countries at a smaller advance on the original cost of the goods, than would have been required by their own capitalists; and Holland, therefore, engrossed the

greatest part of the carrying trade cf all those countries which did not keep it to themselves by Navigation Laws, constructed, like those of England, for that express purpose.

CHAPTER XXVI.

OP DISTRIBUTION, AS AFFECTED BY EXCHANGE.

§ 1. We have now completed, as far as is compatible with our purposes and limits, the exposition of the machinery through which the produce of a country is apportioned among the different classes of its inhabitants; which is no other than the machinery of Exchange, and has for the exponents of its operation, the laws of Value and of Price. We shall now avail ourselves of the light thus acquired, to cast a retrospective glance at the subject of Distribution. The division of the produce among the three classes, Labourers, Capitalists, and Landlords, when considered without any reference to Exchange, appeared to depend on certain general laws. It is fit that we should now consider whether these same laws still operate, when the distribution takes place through the complex mechanism of exchange and money; or whether the properties of the mechanism interfere with and modify the presiding principles.

The primary division of the produce of human exertion and frugality is, as we have seen, into three shares, wages, profits, and rent; and these shares are portioned out to the persons entitled to them, in the form of money, and by a process of exchange; or rather, the capitalist, with whom in the usual arrangements of society the produce remains, pays in money, to the other two sharers, the market value of their labour and land. If we examine, on what the pecuniary value of labour, and the pecuniary value of the use of land, depend, we shall find that it is on the very same causes by which we found that wages and rent would be

regulated if there were no money and no exchange of commodities.

It is evident, in the first place, that the law of Wages is not affected by the existence or non-existence of Exchange or Money. Wages depend on the ratio between population and capital ; and would do so if all the capital in the world were the property of one association, or if the capitalists among whom it is shared maintained each an establishment for the production of every article consumed in the community, exchange of commodities having no existence. As the ratio between capital and population, in all old countries, depends on the strength of the checks by which the too rapid increase of population is restrained, it may be said, popularly speaking, that wages depend on the checks to population; that when the check is not death, by starvation or disease ,wages depend on the prudence of the labouring people; and that wages in any country are habitually at the lowest rate, to which in that country the labourer will suffer them to be depressed rather than put a restraint upon multiplication.

What is here meant, however, by wages, is the labourer's real scale of comfort; the quantity he obtains of the things which nature or habit has made necessary or agreeable to him: wages in the sense in which they are of importance to the receiver. In the sense in which they are of importance to the payer, they do not depend exclusively on such simple principles. Wages in the first sense, the wages on which the labourer's comfort depends,

we will call real wages, or wages in kind. Wages in the second sense, we may be permitted to call, for the present, money wages; assuming, as it is allowable to do, that money remains for the time an invariable standard, no alteration taking place in the conditions under which the circulating medium itself is produced or obtained. If money itself undergoes no variation in cost, the money price of labour is an exact measure of the Cost of Labour, and may be made use of as a convenient symbol to express it.

The money wages of labour are a compound result of two elements: first, real wages, or wages in kind, or in other words, the quantity which the labourer obtains of the ordinary articles of consumption; and secondly, the money prices of those articles. In all old countries—all countries in which the increase of population is in any degree checked by the difEculty of obtaining subsistence—the habitual money price of labour is that which .will just enable the labourers, one with another, to purchase the commodities without which they either cannot or will not keep up the population at its customary rate of increase. Their standard of comfort being given, (and by the standard of comfort in a labouring class, is meant that, rather than forego which, they will abstain from multiplication), money wages depend on the money price, and therefore on the cost of production, of the various articles which the labourers habitually consume: because if their wages cannot procure them a given quantity of these, their increase will slacken, and their wages rise. Of these articles, food and other agricultural produce are so much the principal, as to leave little influence to anything else.

It is at this point that we are enabled to invoke the aid of the principles which have been laid down in this Third Part. The cost of production of food and agricultural produce has been analyzed in a preceding chapter. It depends on the productiveness of the least fertile land, or of the least productively employed portion of capital, which the necessities of r.E.

society have as yet put in requisition for agricultural purposes. The cost of production of food grown in these least advantageous circumstances, determines, as we have seen, the exchange value and money price of the whole. In any given state, therefore, of the labourers' habits, their money wages depend on the productiveness of the least fertile land, or least productive agricultural capital; on the point which cultivation has reached in its downward progress—in its encroachments on the barren lands, and its gradually increased strain upon the powers of the more fertile. Now, the force which urges cultivation in this downward course, is the increase of people; while the counter-force which checks the descent, is the improvement of agricultural science and practice, enabling the same soil to yield to the same labour more ample returns. The costliness of the most costly part of the produce of cultivation, is an exact expression of the state, at any given moment, of the race which population and agricultural skill are always running against each other.

§ 2. It is well said by Dr. Chalmers, that many of the most important lessons in political economy are to be learnt at the extreme margin of cultivation, the last point which the culture of the soil has reached in its contest with the spontaneous agencies of nature. The degree of productiveness of this extreme margin, is an index to the existing state of the distribution of the produce among the three classes, of labourers, capitalists, and landlords.

When the demand of an increasing population for more food cannot be satisfied without extending cultivation to less fertile land, or incurring additional outlay, with a less proportional return, on land already in cultivation, it is a necessary condition of this increase of agricultural produce, that the value and price of that produce must first rise. But as soon as the price has risen sufficiently to give to the additional outlay of capital the ordinary profit, the rise will not go on still further for the purpose of enabling the new land, or the new expenditure on old land, to yield rent as well as profit. The land or capital last put in requisition, and occupying what Dr. Chalmers calls the margin of cultivation, will yield, and continue to yield, no rent. But if this yields no rent, the rent afforded by all other land or agricultural capital will be exactly so much as it produces more than this. The price of food will always on the average be such, that the worst land, and the least productive instalment of the capital employed on the better lands, shall just replace the expenses with the ordinary profit. If the least favoured land and capital just do thus much, all other land and capital will yield an extra profit, equal to the proceeds of the extra produce due to their superior productiveness; and this extra profit becomes, by competition, the prize of the landlords. Exchange, and money, therefore, make no difference in the law of rent: it is the same as we originally found it. Bent is the extra return made to agricultural capital when employed with peculiar advantages; the exact equivalent of what those advantages enable the producers to economize in the cost of production: the value and price of the produce being regulated by the cost of production to those producers who have no advantages; by the return to that portion of agricultural capital, the circumstances of which are the least favourable.

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§ 3. Wages and Rent being thus regulated by the same principles when paid in money, as they would be if apportioned in kind, it follows that Profits are so likewise. For the surplus, after replacing wages and paying rent, constitutes Profits.

We found in the last chapter of the Second Book, that the advances of the capitalist, when analyzed to their ultimate elements, consist either in the purchase or maintenance of labour, or in the profits of former capitalists; and that therefore profits in the last resort, depend upon the Cost of Labour, falling as that rises, and rising as it falls. Let

us endeavour to trace more minutely the operation cf this law.

There are two modes in which the Cost of Labour, which is correctly represented (money being supposed invariable) by the money wages of the labourer, may be increased. The labourer may obtain greater comforts; wages in kind—real wages—may rise. Or the progress of population may force down cultivation to inferior soils, and more costly processes; thus raising tie cost of production, the value, and the price, of the chief articles of the labourer's consumption. On either of these suppositions, the rate of profit will fall.

If the labourer obtains more abundant commodities, only by reason of their greater cheapness; if he obtains a greater quantity, but not on the whole a greater cost; real wages will be increased, but not money wages, and there will be nothing to affect the rate of profit. But if he obtains a greater quantity of commodities of which the cost of production is not lowered, he obtains a greater cost; his money wages are higher. The expense of these increased money wages falls wholly on the capitalist. There are no conceivable means by which he can shake it off. It may be said—it used formerly to be said—that he will get rid of it by raising his price. But this opinion we have already, and more than once, fully refuted.*

The doctrine, indeed, that a rise of wages causes an equivalent rise of prices, is, as we formerly observed, selfcontradictory: for if it did so, it would not be a rise of wages; the labourer would get no more of any commodity than he had before, let his money wages rise ever so much; a rise of real wages would be an impossibility. This being equally contrary to reason and to fact, it is evident that a rise of money wages does not raise prices; that high wages are not a cause of high prices. A rise of general wages falls on profits. There is no possible alternative.

Having disposed of the case in which the increase of money wages, and of

* Supra, book iii. ch. Iv. § 2, and eta. Xzt. 5 4.

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