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• An Essay On the Influence of a Low Price of Corn On the Profits of Stock 1815
• Proposals For an Economical and Secure Currency 1816
• Section I: In the Medium of Circulation—cause of Uniformity Is Cause of Goodness
• Section II: Use of a Standard Commodity—objections to It Considered
• Section III: The Standard, Its Imperfections—variations Below Without Allowance of the Countervailing Variations Above the Standard, Their Effects— Correspondence With the Standard the Rule For Paper Money
• Section IV: An Expedient to Bring the English Currency As Near As Possible to Perfection
• Section V: A Practice Which Creates a Great Mass of Mercantile Inconvenience— Remedy Proposed
• Section VI: The Public Services of the Bank Excessively Overpaid—remedy Proposed
• Section VII: Bank Profits and Savings—misapplication—proposed Remedy
• Appendix
• Funding System an Article In the Supplement to the Fourth, Fifth and Sixth Editions of the Encyclopaedia Britannica 1820
• On Protection to Agriculture 1822
• Introduction
• Section I: On Remunerating Price
• Section II: On the Influence of a Rise of Wages On the Price of Corn
• Section III: On the Effects of Taxes Imposed On a Particular Commodity
• Section IV: On the Effect of Abundant Crops On the Price of Corn
• Section V: On the Effect Produced On the Price of Corn By Mr. Peel’s Bill For Restoring the Ancient Standard
• Section VI: On the Effects of a Low Value of Corn On the Rate of Profits
• Section VII: Under a System of Protecting Duties Established With a View to Give the Monopoly of the Home Market to the Home Grower of Corn, Prices Cannot Be Otherwise Than Fluctuating
• Section VIII: On the Project of Advancing Money On Loan, to Speculators In Corn, At a Low Interest
• Section IX: Can the Present State of Agricultural Distress Be Attributed to Taxation?
• Conclusion
• Appendix (a.): At a Court of Directors At the Bank. On Thursday 20th May 1819.
• Plan For the Establishment of a National Bank
• Notes From Ricardo’s Manuscripts 1818–1823
• Fragments On Torrens Concerning Value 1818
• Note On Fragments On Torrens
• (a 1): [ricardo On Torrens]
• (a 2): [torrens On Ricardo]
• (b): [an Entry In Ricardo’s Commonplace Book]
• A Note On Prices and Taxation 1821
• On Blake’s ‘observations On the Effects Produced By the Expenditure of Government’ 1823
• Note On the Papers On Blake
• [notes On Blake’s ‘observations On the Effects Produced By the Expenditure of Government’ 1823 With Blake’s Replies]
• [an Unfinished Review of Blake’s ‘observations On … the Expenditure of Government’ 1823]
• Absolute Value and Exchangeable Value 1823
• Appendix
• The ‘ingenious Calculator’
• Bullion Report.

section vi

On the Effects of a Low Value of Corn on the Rate of Profits

When I use the term—a low value of corn, I wish to be clearly understood. I consider the value of corn to be low, when a large quantity is the result of a moderate quantity of labour. In proportion, as for a given quantity of labour a smaller quantity of corn is obtained, corn will rise in value. In the progress of society there are two opposite causes operating on the value of corn; one, the increase of population, and the necessity of cultivating, at an increased charge, land of an inferior quality, which always occasions a rise in the value of corn; the other, improvements in agriculture, or the discovery of new and abundant foreign markets, which always tend to lower the value. Sometimes one predominates, sometimes the other, and the value of corn rises or falls accordingly.

In speaking of the value of corn, I mean something rather different from its price;—when its value rises, its price generally rises, and would always do so, if money, in which price is uniformly estimated, were invariable in value. But corn may not vary as compared with all other things—it may not be the result of either more or less labour, and yet it may rise or fall in price, because money may become more plentiful and cheap, or more scarce and dear. Nothing is of so little importance to the community collectively, as an alteration in the price of corn, caused by an alteration in the value of money merely; nothing of greater importance, as far as its profits and its wealth are concerned, than a rise or fall in the price of corn, when money continues of a fixed and invariable value. We will suppose money to continue at a fixed and invariable value, that we may ascertain the effects of a rise or fall in the value of corn; which on this supposition will be synonymous with a rise or fall in its price.

Corn being one of the chief articles on which the wages of labour are expended, its value, to a great degree, regulates wages. Labour itself is subject to a fluctuation of value, in the same manner as every thing which is the subject of demand and supply, but it is also particularly affected by the price of the necessaries of the labourer; and corn, as I have already observed, is amongst the principal of those necessaries. In a former section1 I have endeavoured to shew, that a general rise of wages will not raise the prices of commodities on which labour is expended. If wages rose in one trade, the commodity produced in that trade must rise, to place the producer of it on a par with all other trades; but when wages affect all producers alike, a rise in the value of all their commodities must, as I have on a former occasion remarked, be a matter of great indifference to them, as whether they were all at a high price or all at a low price, their relative values would be the same, and it is the alteration of their relative values only which gives to the holders of them a greater or less command of goods. Every man exchanges his goods, finally, for other goods, or for labour, and he cares little whether he sells his own goods at a high price if he is obliged to give a high price for the goods he purchases, or sells them at a low price, if, at the same time, he can also procure the goods he wants at a low price. In either case his enjoyments are the same.

With a permanently high price of corn, caused by increased labour on the land, wages would be high; and, as commodities would not rise on account of the rise of wages, profits would necessarily fall. If goods worth 1000l. require at one time labour which cost 800l., and at another the price of the same quantity of labour is raised to 900l., profits will fall from 200l. to 100l. Profits would not fall in one trade only, but in all. High wages, when general, equally affect the profits of the farmer, the manufacturer, and the merchant. There is no other way of keeping profits up but by keeping wages down. In this view of the law of profits, it will at once be seen how important it is that so essential a necessary as corn, which so powerfully affects wages, should be at a low price; and how injurious it must be to the community generally, that, by prohibitions against importation, we should be driven to the cultivation of our poorer lands to feed our augmenting population.

Besides the impolicy of devoting a greater portion of our labour to the production of food than would otherwise be necessary, thereby diminishing the sum of our enjoyments and the power of saving,1 by lowering profits, we offer an irresistible temptation to capitalists to quit this country, that they may take their capitals to places where wages are low and profits high. If landlords could be sure of the prices of corn remaining steadily high, which happily they cannot be, they would have an interest opposed to every other class in the community; for a high price, proceeding from difficulty of production, is the main cause of the rise of rent: not that the rise of rent, the advantage gained by the landlord, is an equivalent for the disadvantage imposed on the other classes of the community, in being prevented from importing cheap corn; we have not that consolation: for to give a moderate advantage to one class, a most oppressive burthen must be laid on all the other classes.

This advantage to the landlords themselves would be more apparent than real; for, to complete the advantage, they should be able to calculate on steady as well as high prices. Nothing is so injurious to tenants as constantly fluctuating prices, and under a system of protection to the landlord, and prohibition against the importation of foreign corn, tenants must be exposed to the most injurious fluctuations of profits, as I shall attempt to shew in the next Section. When the profits of a farmer are high, he is induced to live more profusely, and to make his arrangements as if his good fortune were always to continue; but a reverse is sure to come: he has then to suffer from his former improvidence, and he finds himself entangled in expenses, which render him utterly unable to fulfil his engagements with his landlord.

The landlord’s rent is, indeed, nominally high, but he is frequently in the situation of not being able to realize it; and little doubt can exist, that a more moderate and steady price of corn, with regular profits to the tenant, would afford to the landlord the best security for his happiness and comfort, if not for the receipt of the largest amount of rent.

It appears, then, that a high but steady price of corn is most advantageous to the landlord; but, as steadiness in a country situated as ours, is nearly incompatible with a price high in this country, as compared with other countries, a more moderate price is really for his interest. Nothing can be more clearly established, than that low prices of corn are for the interest of the farmer, and of every other class of society; high prices are incompatible with low wages, and high wages cannot exist with high profits.

I must here notice an error, which has been supported by one of those, whose talents give them great authority in the place where the opinion was delivered;1 it is, that though the manufacturer has it in his power to raise the price of his commodity when it is taxed, and even, on some occasions, to profit by its being taxed, yet the farmer cannot so indemnify himself, and that, consequently at the end of his lease, if not before, the whole weight of the tax must fall on his landlord. This is an error of long standing, for it is supported by no less an authority than Adam Smith.2 The subject of rent, and the laws by which its fall and rise are regulated, have been explained since the time of Adam Smith; and all those men who are acquainted with this explanation, are incapable of falling into the error. I am not now going into the question of rent; that subject has been well elucidated by several able writers. But I would ask those who still adhere to Adam Smith’s doctrine, on whom the tax on land could fall when it was equal to three shillings per acre, if the land cultivated were of the description mentioned by Mr. Harvey in his evidence, and to which I have already referred;3 land for which eighteen-pence only is paid as rent? The farmer must either get lower profits than other farmers who pay higher rents, or he must be able to transfer this charge to the consumer. But why should he remain in an occupation in which his profits are below the profits of all other capitalists in the community? He might require time to remove himself from an unprofitable employment; but he would not perseveringly continue in it, more than any other person similarly circumstanced in other occupations.

I have taken the instance mentioned by Mr. Harvey, because, as he is a practical man, weight will be given to his information; but I am myself fully persuaded that a large quantity of corn is raised in every country, for the privilege of raising which, no rent whatever is paid. Every farmer is at liberty to employ an additional portion of capital on his land after all that which is necessary for affording his rent, has already been employed. The corn raised with this capital, can only afford the usual profits if no rent is paid out of it. Impose a tax on producing it, without admitting a compensation by a rise of price, and that moment you offer an inducement to the withdrawing of that portion of capital from the land, thereby diminishing the supply. No point is more satisfactorily established in my opinion, than that every tax imposed on the production of raw produce falls ultimately on the consumer, in the same way as taxes on the production of manufactured commodities fall on the consumers of those articles.

[1 ]Section II.

[1 ]Ed. 1 ‘saving;’.

[1 ]See Brougham’s speech on the distressed state of the country, ii Feb. 1822 (Hansard, N.S., VI, 240 and 243–4); and cp. Ricardo’s speech on the same occasion, below, V, 124–5.

[2 ]See quotations given in Principles, above, I, 183–4.

[3 ]Above, p. 210.