ricardo to mcculloch
[Reply to 431.—Answered by 434]
London 18 June 1821
My dear Sir
Although I am not disposed to defend the manner in which I have acknowledged the change of my opinion, on the subject of machinery, in the third edition of my book, I cannot agree with you that it will arm those, who have contended that Political Economy is a fabric without a foundation, with any additional arguments in favor of that opinion. The whole change of my opinion is simply this, I formerly thought that machinery enabled a country to add annually to the gross produce of its commodities, and I now think that the use of it rather tends to the diminution of the gross produce. I have stated my reasons for thinking so, and I am willing again to acknowledge my error if I should be proved wrong. There are so many faults of manner in my book which I cannot defend, that I must submit to have this one added to their number.
There is on this part of the subject one expression of yours which I confess surprises me, and appears to me so great a misapprehension of my present opinion, that I cannot but flatter myself, when that opinion is more clearly explained to you, you will yourself embrace it as sound doctrine. You say, “little did I expect after reading your triumphant answer to the arguments of Mr. Malthus that you were so soon to shake hands with him, and to give up all.” Mr. Malthus does not think that I have given up any thing to him, and no one who has read the chapter has supposed me to have approached one step nearer to Mr. Malthus’s doctrine than I was before. You surely must forget that Mr. Malthus’ objection to machinery is that it adds so much to the gross produce of the country that the commodities produced cannot be consumed —that there is no demand for them: mine, on the contrary, is that the use of machinery often diminishes the quantity of gross produce, and although the inclination to consume is unlimited, the demand will be diminished, by the want of means of purchasing. Can any two doctrines be more different? and yet you speak of them as identically the same.
I will now proceed to the consideration of the doctrine itself, and I am not without hopes that I shall convince you of its being a correct one; as demonstrable as any in the science of Political Economy. I acknowledge that machinery would not be erected if it did not produce commodities cheaper than they were produced before its erection, but I deny “that if it does produce them cheaper its erection must be profitable to every class of persons”. Its erection must be profitable to every class of buyers as buyers , but the question between us, is whether it will or not diminish the number of the class of buyers. I say it will, because it will diminish the quantity of gross produce; and therefore the observation in your letter that it is not with the greater or less gross or nett produce that we have the smallest concern, cannot be well founded, for the whole question rests on the truth of this proposition. Diminish the quantity of exchangeable articles, and you diminish the demand for commodities;—you diminish the means of enjoyment of some one, or more, of the classes of the community. If I have not said whether the machine was to last one, ten, or a hundred years I have not been so explicit as I ought to have been. I admit too that it is as plain as any proposition in geometry that if it lasted only one year there could be no diminution in the demand for labour, but I do not admit that the same result would necessarily take place if the machine lasted for ten years. If the machine was to last one year only, the cloth produced must be of as great a value at least as before, but if it were to last 10 years, a value much less than that, would afford the ordinary profits of stock, because although the same amount of capital would be employed, less of that capital would be employed in the maintenance of labour, and consequently a less deduction would be annually made from the gross value of the commodity produced. It is what remains after this deduction that invariably constitutes profits. A manufacturer of cloth produces 10,000 yards of cloth, at £2 pr. yard, or £20,000, of which he pays 9000 yards, or £18,000, for labour. By the assistance of machinery, and with the same amount of capital, he can produce only 3000 yards annually, but of these 3000 he is able to retain 1500 yards for his share as profit, and by the economy in the means of production, cloth we will suppose falls to £1. 10 – pr. yard, does not the manufacturer get £2250 – on the same amount of capital, instead of £2000, which he got before? Are there not motives enough for him to substitute the fixed for the circulating capital, and can he do so without displacing labour? Here then we have a case of a commodity becoming cheaper, because its cost of production is reduced, although its aggregate quantity is diminished. Give to the machine greater durability, and a less return than 3000 yards will be sufficient to compensate the manufacturer, because he must sacrifice fewer yards for the purpose of keeping his fixed capital in its original efficient state. If with greater durability you suppose the machine still to produce 3000 yards of cloth, the price of cloth will fall, for its cost of production will still further diminish. It is only in the case of the machine affording 10000 yards of cloth that you could employ the same quantity of labour, for it is only in that case that you would have the same quantity of food, cloth, and all other commodities annually. You say the productiveness of the steam engine would not be impaired though the fiat of Almighty power were to confer indestructibility on the materials of which it is composed. True, but then the steam engine would be of less value, because nature would do more for it, and labour less. To obtain an indestructible steam engine now, we are obliged annually to bestow a quantity of labour upon it, and therefore it is of great value. I have not said that if Almighty power would give us steam engines ready made, and capable of doing work for us without the assistance of human labour, that such a present would be injurious to any class—it would be far otherwise; but I have said that when a manufacturer is in possession of a circulating capital he can employ with it a greater number of men, and if it should suit his purposes to substitute a fixed capital of an equal value for this circulating capital, it will be inevitably followed by a necessity for dismissing a part of his workmen, for a fixed capital cannot employ all the labour which it is calculated to supersede. I confess that these truths appear to me to be as demonstrable as any of the truths of geometry, and I am only astonished that I should so long have failed to see them. I pray you, in my turn, to give an unprejudiced attention to them; if you do I think you will agree with me.
The Report of the Agricultural Committee will be delivered to the House to-morrow. Considering the composition of the committee it is better than could be expected, and I flatter myself there is enough of good about it to shew the fallacies which we could not expunge from it. Mr. Huskisson drew it up, and it is but justice to him to say that he is for establishing the trade on the most free and liberal foundation.
Mushet wishes I believe that his tables should be noticed in the Scotsman. I have not examined them very accurately, but I observe that he reckons the whole debt as a capital bearing 5 pct., whereas a great part only bears an interest of 3 pct. Whether this leading error is compensated for by reckoning the debt created since the depreciation in 1800 in the same manner I do not know—if it is the result will probably be correct. He was bound I think to make all his calculations at compound interest—he has made them at simple interest.
I request you will be kind enough to give directions that the Scotsman be sent to me at Gatcomb to which place I am going on tuesday sen’-night.
Ever faithfully Yrs.