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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.

[Notes on Blake’s ‘Observations on the Effects Produced by the Expenditure of Government’ 1823 with Blake’s Replies]

I

[Blake’s Observations, p. 7.] As the law now stands upon this point, the coin is permitted to be exported, and therefore no alteration whatever would take place in the price of gold so long as the merchant exporter could apply at the Bank and convert the paper currency into exportable coin.

[Ricardo’s note.] How long could he do so? Would the few millions of gold in the Bank, the greatest part of which is absolutely required to keep up a money circulation, have the effect ascribed by the author?

[Blake’s reply.] The author merely says that no alteration would take place in the price of Gold so long as the merchant could convert paper into Gold at the Bank. If the critic is determined to ask how long the author answers it would depend upon the amount of foreign expenditure; if that was very large the Bank would soon be drained.

II

[p. 9.] It is manifest to common sense, that with such an alteration in the exchange, there must be a corresponding and proportional alteration in the price of bullion.

Now, if the paper currency of the kingdom is not convertible into coin, what is there in this demand for bullion that can have any influence on the amount of the currency?

[R.] The exportation of commodities would prevent the rise of bullion. We have a debt to pay, why should it be assumed that the payment must be made in bullion to the exclusion of commodities. Every fall in the exchange is a bounty on the exportation of commodities.

[B.] The exportation of commodities would prevent the rise of Bullion if a sufficient quantity could be got out at a small variation in the Exchange but when the Expenditure is very large foreigners will not take our goods unless we can sell them cheap and we cannot sell them cheap enough to make the foreigner buy large quantities except the Exchange becomes adverse to a sufficient degree.

III

[p. 9.] It is curious to observe, in the examinations of the merchants on this point before the committees of 1810 and 1819, the extreme perplexity they evinced, when pressed to explain how the value of gold could rise partially here, without a corresponding rise on the Continent;

[R.] I should not call this a rise in the value of gold in England but a fall in the value of money peculiar to England.

[B.] When the Exchange became adverse so as to exceed the expenses of the transit of Bullion considerably the author maintains that the value of Bullion would rise although the currency remained at an invariable value.

IV

[pp. 9–10, consecutive to preceding quotation.] and with what complacency the examiners seem to have regarded the steadiness of its price on the Continent, as a proof that its high price here must have arisen from depreciation dependent upon over issue.

Now there is nothing whatever in the effect just described, that in the slightest degree indicates the currency to have changed its value in relation to commodities in general. It marks neither more nor less than that gold acquired an artificial increase of value in this country, in consequence solely of the premium on foreign bills.

[R.] The complacency was well founded. I do not know what sense the author gives to the word value when he talks of an artificial increase in the value of gold in this country. Can this artificial increase of value exist for years. The subject in dispute is, was gold increased in value when it differed from the value of paper or was paper low? The author answers gold had increased in value. I ask for his proofs and he answers that though gold rose other commodities did not rise. The fact however is directly the reverse—the author himself acknowledges it and endeavours to account for it by a theory of his own built upon a great government expenditure. He acknowledges that in our paper currency gold and all commodities rose in value whilst no such rise took place abroad, and yet he denies that it was our peculiar currency which fell in value.

[B.] This artificial increase of value might exist for years if the expenditure created an adverse Exchange for years—the author purposely avoids at present the discussion respecting the price of commodities generally—all that he contends for is that with an adverse exchange exceeding the expenses of the transit of Bullion—the price of Bullion must rise although currency remained unaltered and the prices of commodities generally remained the same—the demonstration is given first independently of all application to existing circumstances—then application is made afterwards.

V

[p. 10, consecutive to preceding.] The restriction on the specie payments of the Bank virtually precluding the accustomed contraction of the currency, it no longer rose to a level with the gold; and the excess of the market price above the mint price, marked the height to which the gold had risen.

[R.] Here the question in dispute is taken for granted. Did gold rise or paper fall? In either case the price of bullion would appear high and the exchanges unfavorable.

Goods rose as well as gold, and therefore the probability is in our favor.

[B.] The question is not taken for granted—the inference is drawn from the preceding demonstration. If there was no other cause for the rise of goods the probability would be in favor of the critic’s opinion that the paper altered—but why will not the critic be content to examine the demonstration whether Gold would or would not rise even though the paper did not alter.

VI

[p. 10, consecutive to preceding.] Admitting then, that if the Bank had been paying in specie, the difference in the value of gold would not have shown itself, would it not be a strange confusion to say that the restriction was the cause of the increased value?

[R.] We say the restriction was the cause of the increased price. We have doubts about the increased value of gold.

[B.] If the critic doubts whether the Gold increased in value let him remain sceptical till the author removes those doubts let him attend first to the demonstration that the price of Gold might alter and afterwards to the facts which prove that it did alter.

VII

[p. 11.] The moment the term depreciation is applied to the currency, it is assumed as the cause of the increase of prices generally. If an adverse exchange raises the price of bullion 20 per cent. above the Mint price, it is supposed to account for an increase in the price of commodities to the extent of 20 per cent. also; than which nothing can be more fallacious.

[R.] This is not precisely what we say, for bullion itself may have varied all over the world.

[B.] The critic and his friends may not mean what is here stated but the public certainly misapply the term depreciation and do not use it in the sense ascribed to it by the critic. The author is writing for the public.

VIII

[p. 13.] And in another part of his evidence he [Mr. Ricardo] says, ‘I think it quite possible that a bank note may be depreciated, although it should rise in value, if it did not rise in value in a degree equal to the standard.’

[R.] I believe all the other witnesses agreed with Mr. Ricardo in this explanation of the meaning of the word depreciation.

[B.] The author agrees with the critic that Mr. Ricardo is consistent in his use of the term depreciation—although some passages in the pamphlet on the protection of Agriculture might lead to an opposite inference—but the author very much doubts whether the other witnesses are equally consistent—he believes that they frequently confound the two senses when their attention is not immediately drawn to the distinction.

IX

[pp. 13–14.] This question—whether the currency or the gold had altered?—was continually put to the witnesses by the committee in 1810 and 1819, and never received a precise and definite reply. To read the evidence, one would imagine both the examiners and the examined were alike perplexed. If the witness affirms, that gold has risen in value because it is wanted for exportation (which is quite correct), he is immediately asked, whether it has risen in the general market of the commercial world, whether there was any greater demand for gold on the Continent, or whether there was any scarcity in the supply there?

[R.] What should make gold go from England to the Continent where it did not go before unless it had fallen in England or had risen abroad? To say that it rose in value in England and remained steady abroad, and yet that it was profitable to export it is a manifest contradiction.

[B.] How can the critic ask such a question? The reason is obvious. If the premium on the foreign Bill was greater than the loss from the difference of prices the Gold would go. It might go too at a loss, if the loss was less upon the Gold, than upon the export of goods. The critic seems to forget that there was an expenditure that must be provided for coute qui coute.

X

[p. 14.] Whereas, the true and proper answer would have been, It has not risen in the general market of the world; it is not in greater demand abroad; there is no scarcity in the supply there. If goods could be exported without loss, they would answer the purpose as well as gold. The demand is for foreign payment, not for gold; and it rises in value in this country, and this country alone, because the exchange has become so adverse as to create a large premium on a foreign bill, and a profit is to be obtained by the export of gold.

[R.] A large premium on a foreign bill undoubtedly makes it profitable to export gold if its price does not rise in the same degree as the bill, but is not this true also of every other commodity? does it not become profitable to export them as well as gold? Why does the author always speak of gold as a commodity differing from all others and as alone calculated to discharge the expense of a foreign expenditure. Bills of exchange never really discharge a balance of debt, debts must be paid by things having value, a bill of exchange has none. If we observe that gold is regularly for years exported from one country into another shall we be wrong in saying that it is dearer or of greater value in the importing than in the exporting country?

[B.] Here the critic answers his own preceding question, and explains the supposed contradiction—but he asks—‘Why does the author always speak of Gold as alone calculated to discharge the foreign expenditure?’ This is a strange question in a note upon a passage where the author expressly says—‘If goods could be exported without loss they would answer the purpose as well as gold, the demand is for foreign payment, not for gold’. The author is perfectly aware that the foreign expenditure must be discharged by goods (except where it is very trifling) but he is also aware that goods have to come in competition with the goods of the foreigner in the foreign market, and that consequently he must sell them cheap in order to make the foreigner buy; but he cannot sell them cheap unless the Exchange is adverse in proportion to the quantity of goods that must be sent—whereas gold is nearly sure of a market. Goods go first. When the premium on the Bill exceeds the expenses of the transit of Bullion —Bullion goes. And as I have said in a note p. 8. a half cent profit would drain the country of all disposable Bullion. After that drain, goods must liquidate the balance—but in proportion as that balance is large, must the Exchange be depressed, before the goods can be sold cheap enough abroad. When the Exchange is thus depressed, what Gold remains in the country for the purpose of manufacture must be sold at a proportionally high price, for without that high price all would go.

XI

[pp. 15–16.] The price of corn, of cloth, of every other commodity, might remain precisely the same, and nothing alter but the price of gold. Not only might it vary to any extent without altering the price of these articles, but for any length of time too, provided the foreign expenditure continued upon the same scale that first induced the adverse exchange, and was constantly creating a fresh adverse balance, as the export of bullion or of other commodities was tending to liquidate it.

[R.] This idea of commodities remaining at the same price while gold rises considerably, and no impediment is offered to foreign commerce, appears to me to have no foundation.

[B.] I do not believe that Gold would have remained at so high a price as it reached during the war, unless impediments had been thrown in the way of foreign commerce. It was during the Milan decrees and American Embargo that Gold continued at a very high price; from 1800 to 1802 and to 1808 it was scarcely more than 4£. oz. It is not denied either that the price of such goods as suited the foreign market might rise—but this would be a rise from demand not from an alteration in the value of currency neither would it affect all commodities. It could not in this country for instance affect the value of our Corn.

XII

[p. 17.] It will be asked, however, does not this excess [of the market price above the mint price of gold] imply a derangement in the currency? Does it not imply a greater amount of circulating medium than could have existed under similar circumstances, if the Bank had been paying in specie? Undoubtedly it does.

[R.] This is the sole admission that my theory requires.

[B.] This is the sole admission too that I require. I think it ought to conform to Gold—but I am examining whether Gold rises, not whether the currency ought not to rise also.

XIII

[p. 18.] But how is the currency to be so regulated? And to whom is the regulation to be committed? To the bank directors? By no means. Much of unmerited odium, as I believe these gentlemen to have incurred,...

[R.] What odium have they acquired except that of ignorance? is that unmerited?

[B.] The public certainly charged the Bank Directors with taking advantage of their privileges to enrich themselves and proprietors at the expense of other classes—they were charged too with the murder of all the poor wretches hanged for forgery &c. &c.

XIV

[pp. 19–20.] After this examination it may be assumed, that provided the paper be not convertible at option into coin or bullion, the price of gold will be advanced by an adverse exchange; and yet, that the currency may remain at its natural level, that is, unaltered in value, and be maintained in its exact and perfect relative proportion to the commodities to be circulated by it.

[R.] This is undoubtedly a possible case, and would happen if gold generally rose in value all over the world, but the proof to be given of that rise should be very satisfactory before it ought to be admitted.

[B.] It is more than a possible case it is a demonstrable case. Gold must advance under an adverse exchange, with a currency not convertible although invariable in value. It would happen too although Gold remained perfectly steady all over the world.

XV

[pp. 20–21.] Not only is there a general accordance between the exchanges and price of bullion whether rising or falling, but if taken for any long periods of time the connexion may be stated to be absolutely invariable.

[R.] The connexion cannot be otherwise than invariable after a certain limit of unfavourable exchange is passed.—

[B.] What does the critic mean? If the connexion is invariable how can the inference be denied that an adverse Exchange must raise the price of Gold here?

XVI

[p. 21, consecutive to preceding] Whilst, on the contrary, no such connexion has subsisted between the amount of Bank issues and the high price of gold: nay, so far from it, that for months together they are found to run in opposite directions.

It was this want of connexion, between the amount of Bank notes and the price of bullion, that first led me to suspect the accuracy of the theory, that attributed the high price of gold to the over-issues of the Bank;...

[R.] “Over issues of the Bank” Is not every thing an overissue after the market price of gold rises above the mint price, whether caused by a real rise in the value of gold or a real fall in the value of paper?

[B.] Yes overissue in the sense in which it is used by consistent political Oeconomists but not in the sense in which the public use it—viz. that notes have been issued in such excess as to alter the value of currency in respect to all commodities; there is a material difference between “overissue” and “non-contraction”.

XVII

[p. 29, n.] England might send hardware to Spain, Spain might send wool to France, and France send wine to England; in which case the respective debts and credits would be liquidated through a circuitous remittance, known technically by the term arbitration of exchange. The direct exchanges, however, between England and Spain would be in favour of England; between Spain and France, in favour of Spain; and between France and England, in favour of France.

[R.] The author appears to me to have fallen into a great error in this passage and I should be willing to rest the truth of our different theories on this proposition. In the case supposed the exchanges of all the three countries would be at par. If not an exchange broker might get 3 pc^t. by merely sending a bill to Spain with instructions to forward it to France and from France again to England—This bill would effect all the payments.

XVIII

[pp. 30–31.] There is another powerful auxiliary to rectify the fluctuations of the exchange. For as soon as the premium on a foreign bill has exceeded the limits which will repay the exporter the expenses of transmitting bullion, the coin itself will be exported in payment of the adverse balance. This will lead to a contraction of the currency, and an artificial elevation of its value; and this elevation of the value of the currency, lowering the prices of produce, will still further increase the profits upon export, and diminish the profits upon import.... Now it is thisfall of price, arising from the forced contraction, that enables the exporting merchant to gain augmented profits upon all his exports; he would buy cheaper here, and sell at the same price abroad.

[R.] So he would without a contraction of currency. The author appears to forget here that it is only the fall in the real, and not in the nominal exchange, which operates as a bounty on exportation.

[B.] The author admits himself to have been asleep when he wrote this passage or that he had forgotten the distinction which his own pamphlet on the Exchange was (as far as he knows) the first to point out—but he cannot understand how the critic should admit of any distinction between real and nominal Exchange since as far as the author is enabled to understand the critic’s theory he supposes all variations in the exchange to depend upon a previous alteration in the value of currency and this is precisely what the author means by a nominal Exchange. No export or import of goods can rectify a nominal Exchange. Export or import of currency would be the only remedy. How does the critic shew upon his theory of Exchange that it could ever afford a bounty on the exportation of goods?

XIX

[p. 42.] Every manufacturer is aware, that during the pressure of unusual demand, he can well afford to pay higher wages to his workmen; because he not only reimburses himself for the extra advances, but is enabled to increase the price of his articles so as to augment his profits also. In a particular case then, his power of adding wages to the price will depend upon the demand compared with the means of supplying that demand. But the same reasoning will apply to the whole mass of manufacturers, provided a general demand arises for their commodities beyond the customary powers of supply.

[R.] The author appears to me to fall into an error when he supposes that because an individual manufacturer may raise the price of his commodities when he has increased wages to pay that therefore the whole mass of manufacturers may do the same. The two cases are widely different.

[B.] The author does not suppose the same reasoning will apply to the whole mass of manufacturers unless a general demand arises beyond the customary powers of supply. And this question leads to his following discussion—whether such a general demand can occur or not.

XX

[pp. 50–51.] Assuming then twenty millions to be wanted for the service of the year, let us suppose that this amount of capital is taken from an employment where it is reproduced with a profit, and that it is transferred to be expended unproductively, so that at the end of the twelve-month, no traces of it shall appear. This is precisely what is meant by converting capital into revenue.

Now twenty millions of circulating capital thus borrowed will, of course, throw out of work all the hands employed by the capitalists who lend it. The persons thus deprived of employment would be chiefly artisans, and might, one with another, earn £40 per annum each. At this rate, the twenty millions of capital would give employment to five hundred thousand workmen, and as many of these might be heads of families, there could hardly be (taking workmen and their families together) less than one million of souls depending for subsistence upon their employment.

[R.] Why suppose all capital to be circulating capital?

[B.] The author does not suppose all capital to be circulating capital but he supposes that Government obtains circulating capital alone and therefore his reasoning is confined to a change in the employment of circulating capital.

XXI

[p. 51, consecutive to preceding.] To prevent the convulsion incident to such a diversion of capital, let us suppose that government employs a certain number as soldiers, and that the remainder could find work in manufacturing the warlike stores and accoutrements,* all of which are to be consumed, according to the conditions, unproductively. In this way, no inconvenience would be felt; the whole million of souls would be provided for, and it would be a fair representation of the change of productive capital into unproductive revenue.

[R.] *They could not find work in these manufactories if the former supposition be realised namely that there should be a destruction of capital equal to 20 millions.

[B.] The author in order to give every advantage to the opposite arguments supposes that the men thrown out of work by the diversion of circulating capital find employment from the same capital distributed by Government amongst troops and manufactories of warlike stores.

XXII

[pp. 51–52, consecutive to preceding.] Thus far the process goes on very smoothly; and were we to stop here, no other difficulty would ensue, except that which attends all violent transitions. But what is to be done the second year? Government requires a further supply of twenty millions, which is to be borrowed in the same manner, and with the same consequences. Five hundred thousand more artisans are thrown out of work, who with their families constitute a second million of persons wanting the means of subsistence, in addition to the million of the former year.

[R.] Again all capital is supposed to be circulating capital.

XXIII

[p. 52, consecutive to preceding.] Continuing, then, the same supposition, that government could apply, as before, the twenty millions of money in providing work for the discharged artisans, we should still have two millions of persons to support with a fund equal only to the supply of one million: the third year would give three millions of people to be employed by a fund of the same limited power, and thus in succession as long as the war lasted. So that at the end of the late struggle, after twenty-two years of war, there would be a destruction of four hundred and forty millions of capital, and twenty-one millions of souls would have been left without subsistence, or any possibility of finding employment.

A more striking example of a moral reductio ad absurdum could hardly be imagined; and yet, extravagant and preposterous as this conclusion may appear, I am not aware of any exaggeration.

[R.] Who has ever supposed this? The author raises a phantom of the imagination and then demolishes it. There can be no doubt that a nation may make great inroads on its capital. In point of fact it never does, because public extravagance is made up by private frugality and savings.

[B.] Many persons have supposed this. I have imagined that nothing more was required than to convert capital into revenue in order to account for the high prices of the last 20 years. It was absolutely necessary to shew that such a conversion upon the scale that occurred during the war must have entailed irretrievable ruin unless some counteracting cause corrected the mischief. The author may have mistaken the best mode of conducting his argument but the mode adopted appeared to him to make a deeper impression.

XXIV

[pp. 54–55.] It appears to me that the error lies in supposing, first, that the whole capital of the country is fully occupied; and, secondly, that there is immediate employment for successive accumulations of capital as it accrues from saving. I believe there are at all times some portions of capital devoted to undertakings that yield very slow returns and slender profits, and some portions lying wholly dormant in the form of goods, for which there is not sufficient demand. I believe, too, that when capital accumulates rapidly from savings, it is not always practicable to find new modes of employing it. Now, if these dormant portions and savings could be transferred into the hands of government in exchange for its annuities, they would become sources of new demand, without encroaching upon the existing capital.

[R.] Suppose these dormant portions to consist of goods for which there is no market, how will the government expenditure procure a market for them? How should they do it if the proprietors cannot? In point of fact these dormant portions never find their way into the hands of Government.

[B.] Some dormant portions may not find their way to the hands of Government, and may be irretrievably lost by miscalculation, such as machinery that is rendered useless by the invention of that which is more perfect. But suppose a quantity of cotton or woollen goods without a market, such goods may be bought by the working classes receiving more wages from full employment in consequence of the capital which Government distributes. It would be effected through the circulation of money which alone passes through the hands of Government. But substantially it would be as if Government granted an annuity for the woollens and cottons and then distributed those woollens and cottons as wages for which it would receive as an equivalent the warlike stores fabricated by the workmen.

XXV

[p. 55, consecutive to preceding.] Unless savings were actually accumulating simultaneously with the expenditure of government, it appears to me that all the mischief described in the foregoing pages would have followed, and that long before the expiration of the contest our efforts must have been completely paralysed.

[R.] Who denies that savings actually accumulate simultaneously with the expenditure of Government? It is the only theory by which the actual phenomena of the last 25 years can be explained.

[B.] No one denies it, whose attention is strictly drawn to the subject but an author is obliged in the conduct of his argument frequently to introduce propositions which no one denies. No one denies the propositions of Euclid, are they not therefore to be published.

I am disposed to think however that the same capital may be made to produce more work or if I may use the expression— may be put to harder work under the influence of great demand by quicker rapidity of return—but I did not venture to hazard the opinion without more maturely weighing it and chiefly out of deference to the authority of the Critic himself. If this opinion should be well founded—then the extravagance of Government might be supplied to a certain extent at least without having recourse to the supposition of simultaneous saving.

XXVI

[pp. 55–56.] It will be contended, no doubt, that if the savings had remained in the hands of the capitalist, they would have equally been a source of demand as when transferred to the government; but this is the very point at issue.

[R.] This will not be contended, because profits have a tendency to fall as capital increases, and vice versa. A Government expenditure reduces capital and increases profits and therefore render every given proportion of profits more efficacious as a fund for replacing expended capital.

[B.] I do not see the bearing of the Critic’s remark in this case. The author is speaking of demand and the Critic seems to be speaking of Profits.

XXVII

[p. 56.] Now, whenever savings are made from revenue, it is clear that the person entitled to enjoy the portion saved is satisfied without consuming it. It proves that the industry of the country is capable of raising more produce than the wants of the community require.

[R.] There would be more in this argument if a man had a right to consume all which his capital contributed to produce. As it is every thing produced is actually consumed.

[B.] It proves that the person whose capital has been raising him a revenue was supplied with a revenue that he did not want for the purpose of consumption. If that revenue is made to produce again, there will be two portions of revenue the 2^d. year not wanted for consumption. It appears to me that there must be some limit to the degree in which this process can go forward.

XXVIII

[p. 56, consecutive to preceding.] If the quantity saved is employed as capital in reproducing a value equivalent to itself, together with a profit, this new creation, when added to the general fund, can be drawn out by that person alone who made the savings; that is, by the very person who has already shown his disinclination to consume.

[R.] It is not all drawn out by him: the greatest part is drawn out by the workmen he employs and is actually consumed by them.

XXIX

[p. 57, consecutive to preceding.] When once the division of labour has taken place, the efforts of each individual are directed to the fabrication of some specific commodity. He fabricates it in the hopes that there will be a demand for all that he can produce. If every one consumes what he has a right to consume, there must of necessity be a market. Whoever saves from his revenue, foregoes this right, and his share remains undisposed of.

[R.] I deny this, it is disposed of when it becomes a fund for future production.

[B.] His share remains undisposed of in the consumption of that year. Whether it will be disposed of in the following year as a fund for reproduction depends upon the opportunity of finding what M. Say calls un emplacement.

XXX

[p. 57, consecutive to preceding.] Should this spirit of economy be general, the market is necessarily overstocked, and it must depend upon the degree in which this surplus accumulates, whether it can find new employment as capital. For it is quite evident, that to continue to fabricate the same sort of goods that have been already rejected would only tend to increase the evil.

[R.] This is to suppose demand to be limited which is not true either in theory or practice.

[B.] There can be no doubt that there will be no progressive improvement without accumulation but it is a question of degree and whether capital may not increase faster than the employment for it. I am not aware that I can state my opinion more clearly than in the text. It seems that the Author and the Critic differ here materially and the Author is sorry to find such a difference with a person to whose opinion he looks up with so much respect. There seems to be no alternative but to agree to differ.

XXXI

[p. 58.] This doctrine, I think, has been pushed a little too far. It proceeds upon the assumption that every addition to capital necessarily creates its own demand; but in applying the theory to the actual circumstances of mankind, some inseparable conditions appear to me to have been overlooked. It takes for granted, that new tastes, new wants, and a new population, increase simultaneously with the new capital; a supposition which is not consonant with the fact.

[R.] It is not necessary that in such a country as England new tastes and new wants should be generated—the old tastes are sufficient for the purpose. Tastes and wants exist already in a sufficient degree, give but the means of satisfying them and demand follows.

[B.] Conceive the immense revenue that is at present spent for the luxury of having Physicians, Lawyers, Clergymen, Musicians, Players Buffoons, &c. &c. suppose those tastes to be annihilated what would become of the revenue or how would it be disposed of—Have those tastes grown up suddenly? have they not been the growth of centuries—May not the means of indulgence in them increase faster than the desire of indulgence— Does not saving imply a want of desire to indulge? There was a time when these tastes did not exist—would production have gone on without them. I cannot conceive production for the sake of production—without an ultimate desire to gratification by consumption.

XXXII

[pp. 59–60.] But this proposition implies that there is not more corn and cloth in the whole than the two classes of capitalists [producing corn and cloth] want to consume. If more than that is produced, the surplus is absolute waste on both sides; and all the labour thrown away.

[R.] True. This is what the Political Economists of the present day call glut arising from miscalculation. They do not say there may not be a glut of 2 or of 10 commodities but they say there cannot be a glut of all.

[B.] The author has supposed a case of a country divided into two sets of capitalists, one producing food and the other clothing —but where the division of labour was complete. If these persons produce more food and clothing on the whole than is wanted, there will be general glut. It is not a case of two or ten commodities—but of all commodities—the author having supposed no other production than cloth and corn.

XXXIII

[p. 60.] How is it possible for this process to continue without a fall in prices, and a lower rate of profit to the capitalist?

[R.] Certainly not possible without a lower rate of profit in the particular trade.

XXXIV

[pp. 60–61, consecutive to preceding.] The difficulty of finding employment for new capital is acknowledged by all practical men. They continually feel and complain that every channel is full. The evidence is brought home to them, by the general accumulation of commodities undisposed of, and stored in the warehouse. These are the records of so much capital in a state of actual stagnation, neither affording profit to the owner, nor employment to the workman, and discouraging all future exertion.

[R.] When markets are dispersed and competition active great mistakes are made in the application of capital to the production of particular commodities, but this only proves the great risk of miscalculation, it does not impugn the general principle that if there were no mistakes there would be no glut.

[B.] This case therefore if founded does impugn the general principle. It shews that there may be more of every thing than is wanted—unless new tastes are introduced.

XXXV

[p. 62.] The immediate means of purchasing which government possesses is derived from the sale of annuities.

[R.] Will the sale of annuities create a demand for cloth and corn which were before and are still in excess?

[B.] The sale of annuities gives Government money with that money a demand is made for commodities the cost of those commodities is chiefly made up of wages—the money therefore distributed as wages enables the workmen to buy the cloth and corn which were in excess. Without the demand of Government those extra wages would not have been distributed.

XXXVI

[p. 62, consecutive to preceding.] The power of levying taxes in perpetuity, and of transferring the income arising therefrom to individuals, enables the government to collect all those savings that find no immediate employment as capital,* and to devote them to expenditure.

[R.] *In what shape does this capital exist which is to be devoted to expenditure?

[B.] It exists in the shape of goods unemployed for want of demand—as soon as the extra employment is given to workmen their wages purchase the goods.

XXXVII

[p. 63.] No proposition is more generally admitted, than that the market rate of interest paid for the loan of capital is proportionate to the profits that can be made from the employment of it.

[R.] This proposition cannot be admitted without great qualification.

[B.] There can be no doubt that the market rate of interest must be a tolerably correct index of the rate of profits.

XXXVIII

[p. 64, consecutive to preceding.] If profits, then, were regulated solely by those made upon the last quality of land taken into cultivation, we should observe in all countries a regular fall in the market rate of interest as the population increased, and was compelled to have recourse to inferior land. Now it is not denied that such has been the usual course of the rate of interest;...

[R.] Not if great improvements were at the same time made in agriculture, nor if wages fell from a too abundant supply of labourers.

XXXIX

[p. 65.] These facts are in direct opposition to the theory of profits being regulated always by the quality of the last land taken into cultivation;...

[R.] This is not a correct representation. I say that profits depend always upon wages—that wages depend upon demand and supply, and are also mainly regulated by the price of food, and that the price of food depends on the productiveness of the last capital employed on the land. I see the greatest difference between this proposition and that in the text.

[B.] The critic will see that the text is a repetition of what was expressed before nearly in his own words—at p. 58.

XL

[p. 67.] The trade with India is thrown open, and instantly the different presidencies are glutted with English goods, without any diminution in the supply of the home market.

[R.] Who says without any diminution in the supply of the home market?

XLI

[pp. 69–70.] The demand, however, of a large manufacturing population, receiving high instead of low wages, and in full employment, is an efficient and powerful cause, that must produce an immediate effect upon consumption, more especially of food and the raw materials of coarse clothing.

The numbers in the higher classes of society bear no sort of proportion to that of the working class. We are apt to dwell upon the expenditure of the former, as if their revenues were the great source of national demand; forgetting that the bulk of the gross annual produce is consumed by workmen whilst preparing commodities to gratify the tastes of capitalists. A return of 10 per cent. has been thought a fair profit to the possessor of capital. For every £100, then, of circulating capital that is distributed amongst workmen as wages, which is the measure of their consumption, the possessor himself can consume but to the extent of £10.

XLII

[p. 70, consecutive to preceding.] If, in consequence of brisk markets, the artisans are employed fourteen hours a day instead of twelve, and they receive wages in proportion, the demand for goods suited to their consumption will be increased in the same ratio as the wages. An increased exertion amounting to one-sixth would be tantamount to an increase of population to the same extent; and a population, too, possessing the means of effective demand.

[R.] What is the complaint? a redundant production which cannot find a market. What is the remedy? a demand by Government which immediately leads to an increased production leaving the former surplus just what it was.

[B.] The demand of Government leads to an increased production, but the workmen having more wages consume the excess that was previously existing and the government consumes the stores that are produced. There are two extra consumptions and only one extra production.

XLIII

[p. 71.] When the capitalist furnishes an extra quantity of goods, he acquires a greater amount of profits, but not a greater rate of profits.

[R.] Surely to[o] a greater rate of profits if the machinery and buildings are adequate to the performance of the increased work. They do not rise in price or in value.

[B.] There may be some inaccuracy in the Author’s expression here but he did not mean in this passage that the increased work was produced from the same capital. The latter part of the paragraph evidently shews that more wages were given to the workmen which implies that more capital was employed.

XLIV

[p. 72.] But it does appear to me, that not only was there an increased amount of wages and profits from the extra work done [during the war], but also an increased rate of both, and that this was effected through the medium of prices.... I am, therefore, disposed to concur with Mr. Malthus, that the rise of wages which took place during the war did actually afford a greater remuneration to the labourers.

[R.] Profits and wages were both higher it seems. Was this general? If you say yes I ask how they can both be higher if the value of commodities is at all times equal to the value of wages and profits together?

[B.] Wages and profits together cannot (perhaps) be higher unless there is a large class of consumers who do not produce— but with such a class a new distribution may take place affording higher wages and profits at the expense of that class.

XLV

[pp. 73–74.] If A, having a certain capital, and employing a certain number of labourers in raising corn, has to exchange his produce with B, who, with a similar capital and number of workmen, is fabricating cloth, it is evident that no advantage could accrue to either of them by increasing the price at which they interchanged the corn and the cloth. But if both A and B have to contribute a fixed sum for the expenses of government, for the payment of public creditors, for the interest on capital borrowed, for the support of the clergy, it is their interest to inter-change commodities at the highest prices that can be obtained.

[R.] This is only proving that it is the interest of all producers at all times to depreciate the value of money, because by so doing they defraud the public creditor. No proposition can be more true. I do not see how the payment of the clergy or the expences of the government can affect this question, they must vary with the alteration of prices because they are not fixed payments.

[B.] Great part of the Clergy receive nominal sums for their livings and curacies—by the expenses of Government was here meant the consolidated fund and the nominal sum paid to the Stockholders.

XLVI

[pp. 74–75.] In times of peace, when more is produced than finds a ready consumption, there is a difficulty in raising prices as wages rise. But in time of war, when there is an unusual demand, when the markets are more scantily supplied in proportion to the extent of consumption, when the supply can only be obtained by increased exertion on the part of the capitalists and the labourers, then it is that the working classes reap their harvest, and acquire not only the increased wages and profits to which they are entitled from the addition to the annual produce, which their extra exertion has created, but an increased rate both of wages and profits.

[R.] Is war then the interest of the country?

XLVII

[p. 75.] A given number of workmen, and a given number of capitalists employing them, are called upon to furnish an extra quantity of work. Is it possible to conceive that they will not take advantage of the urgent necessities of the buyer, even if they could produce the articles wanted without additional sacrifices? But if the men are to work thirteen hours a day instead of twelve, and the machinery is to be watched night and day, and the employers to devote more time to superintendence, are they not entitled to a greater remuneration?

[R.] I do not call it an increase of wages if the men are paid more only because they do more.

[B.] When men are paid more because they do more, they receive increased wages but certainly not a higher rate of wages. It is not necessary for the author’s argument to suppose that workmen received higher wages—if they received more wages their effectual demand would be proportionally increased. The author cannot help thinking that workmen must have received higher wages during the war than previously to the war—but it is an incidental remark that might have been omitted without prejudicing his argument.

XLVIII

[p. 76.] During the progress of the war, five hundred and nine millions sterling were in this way devoted to the purchase of commodities intended for consumption, instead of being devoted to reproduction.

[R.] Much more than 509 millions must have been expended by Government.

[B.] Much more was spent by Government but not in the form of loans—the sum is taken from Dr. Hamilton and includes all sums funded either in loans or Exchequer Bills. The sums derived from war taxes was only a transfer of Income and has therefore been omitted by the author.

XLIX

[pp. 78–79.] When commodities become high priced, and continue so for a length of time, it is sometimes argued that this circumstance of itself is proof of a depreciation of the currency....Be it so: but let us understand each other.... Let us not invalidatethe fixed contracts between man and man....

[R.] Very good and so is almost all that follows.

[B.] The only few words of comfort that the author receives for all his labours.

L

[p. 93.] This [glut] might arise partly from the cessation of our own demand, and partly from the cessation of demand which the war expenditure of other governments had created.

[R.] Have you not in a former part ridiculed the idea of the war having made much difference in the quantity consumed?

LI

[p. 94.] To those who imagine consumption not to be a necessary ingredient of demand, and that in order to make a market for commodities, it is only necessary to produce more, these phenomena [of the universal distress] offer problems not very easy of solution; nor is the difficulty less for those who conceive the previously existing capital to have been diminished by being converted into revenue. Accordingly, every drowning theorist has caught at the various straws that crossed him.

[R.] Drowning theorist! I am not one for I as well as you say the supply was too great for the demand.

[B.] The author certainly did not apply the term drowning Theorist to the Critic but perhaps the Critic may be included in the class of those who just keep their heads above water by supposing a cycle of abundant harvests since the termination of the War.