194.: ricardo to m2[Reply to 190] - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 7 Letters 1816-1818 
The Works and Correspondence of David Ricardo, ed. Piero Sraffa with the Collaboration of M.H. Dobb (Indianapolis: Liberty Fund, 2005). Vol. 7 Letters 1816-1818.
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ricardo to m
[Reply to 190]
Gatcomb Park Minchinhampton Gloucestershire 4th. Decr. 1816
A visit of two days to London, last week, put me in possession of your book and letter, which I brought with me here on my return. Your enlarged essay has afforded me both instruction and pleasure, although I cannot yet agree in the justice of adopting the grand measure which you propose for relieving the nation from its present difficulties. I concur with you in all you have said on the bullion question. —I think with you that it is too much to entrust to any corporate body the power of raising or lowering the taxes at pleasure, and I do not deny that for many of the loans borrowed during the war a really greater interest will be paid when Bank notes are at par, than what was contracted for during the depreciation. But who depreciated the money borrowed? what made it of less value than gold money? Was it not the act of the legislature, and would it now be just for the same legislature to say to a man who then lent £100, “you must now take £3 for your interest, instead of £5, because £3 is now as valuable as £5 was then.” Will not the lender reply “the reason why my £100 was then less valuable than it is now was in consequence of your giving an unlimited power to a corporate body. Since 1797 I had employed my money in discounting bills and always received £5 for every £100 for interest. By an act of yours you reduced its value, and assured me at the time that I was mistaken in thinking so, as my £100 was as valuable as before. By reducing my interest now you will really pay me only ⅗ of my original £100.” You may say that he probably had not the money since 1797, that in 1812 he sold goods to purchase stock, or to lend it to the state, and obtained an additional quantity of money because it was depreciated, and therefore his plea is not valid; but who is to determine this? You say that you do not propose to reduce the interest of any part of the debt created anterior to the depreciation of paper, but how is this part to be distinguished from the other, how are you to distinguish the stockholder of 1790 from the stockholder of 1800 or of 1810 or of 1816? It is evidently impossible, the stock is all amalgamated together—has passed through a thousand hands and can in no way be distinguished.
You say too that were the value of agricultural produce reduced, so ought the burdens of those who grow it. But would not their burdens be diminished? Would they have the same taxes to pay on an expenditure of 60/- that they now have to pay on an expenditure of 80/-. Would their tithes come to so much? Would their property tax be so great if that tax still existed? If they bought one bottle of wine would they pay the same tax as if they bought two? A part of the capital of the farmer would be removed from agriculture to manufactures,—it would be productive of value in that shape and would pay taxes equally as before. But you may say the whole will not be equally productive as before and that therefore more taxes must be raised to pay the interest of the Natl. Debt. You may repeat the quotation from Mr. Malthus of which you avail yourself page 198, but Mr. Malthus does not satisfy me—I am persuaded he is wrong, though to shew his error would require more space than I now can allow myself. I firmly believe that if corn fell from 80 to 60/- the ability of the people to pay taxes would be increased instead of diminished.
You say that in 1812 the state in engaging to pay an annuity of £10000 really had in view to give a power of purchasing 1600 quarters of wheat. I differ from you.— Leaving out of the question the depreciation of money it really agreed to give £10000 money, leaving it to the course of events whether £10000 should purchase in 1816—3000— or 800 quarters of wheat; it made no provision either for a rise or fall of money, or a rise or fall of any other commodity. If the state had any other intention your argument about money is delusive, as neither gold nor silver is the standard by which Bank notes should be regulated, but wheat, and then every year or every ten years the dividend on the Natl. Debt must be re-adjusted by the price of wheat. If the stockholder is enriched by the fall of wheat so is the mortgagee, the discounter of bills—the manufacturer of cloth and of every other commodity. Why not use your adjusting rule to all these persons transactions? Your system proceeds upon the supposition that the price of corn regulates the price of all other things, and that when corn rises or falls, commodities also rise or fall,—but this I hold to be an erroneous system, although you have great authorities in your favour, no less than Adam Smith, Mr. Malthus and M. Say.
If your opinion be just, when corn was at 40/-, and the state borrowed money, it agreed to give 5000 quarters of corn to an annuitant of £10000, but it has paid £10000 money ever since although that money would frequently purchase no more than 2000 quarters of wheat. How will you compensate to this man the injustice to which he has so long been subjected?
This letter has swelled to an unconscionable length, but I have one observation more to make and then I shall finish.
You accuse me of protesting strongly against the injustice of encroaching on the sinking fund at the same time that I shewed the propriety and justice of repealing the corn laws. In this you are mistaken I recommended no repeal of the corn laws, for I wrote before they were enacted. But if I had I should not I think have been guilty of any inconsistency— laws are made for the benefit of the whole community and not for the benefit of any particular class—they may therefore be enacted or repealed as expediency may require. A parental Government however will never be unmindful of the consequences of their acts to a large class of individuals. But on the question of the sinking fund they have no choice—I consider it as a positive bargain between the nation and the stockholder, which cannot be infringed by one of the contracting parties.
I am Sir Your obedt. Servant
J R MCullock Esqr.