Front Page Titles (by Subject) 2: The Economists and the School - The Manchester School of Economics
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2: The Economists and the School - William Dyer Grampp, The Manchester School of Economics 
The Manchester School of Economics (Stanford: Stanford University Press, 1960).
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The Economists and the School
The names of none of the well-known economists appear in the register of the Manchester School. Neither the economists themselves nor their doctrines had any lasting connection with the repeal campaign. The Philosophic Radicals did, to be sure, and they sometimes are thought of as Ricardians; but their association with economics was, in fact, slight. The absence of the economists will surprise many, because free trade is an idea for which they are famous. Indeed, it is the one idea that is sure to be associated with the classical school. The association is partly the work of historians of economic thought and partly the work of the economists themselves who occasionally wrote more than they meant. Both suggest that Smith, Ricardo, and their followers were unqualified free traders. A reasonable inference is that they must have been opposed to the corn laws.
Actually they were not. A patient reading of their works will show that they qualified their advocacy of free trade in a number of ways. They opposed it when in their opinion it would weaken the military power of Great Britain, which is to be expected from economists who placed the national interest in power above that in wealth. They were opposed to free trade in those circumstances in which they believed it would work an injustice to legitimate vested interests, which is not surprising in men whose subject came out of moral philosophy. What is unusual is that they sometimes opposed free trade on grounds of economic logic alone; that is, they believed it would cause a reduction in the national output and wealth.
One of the qualifications is fairly well known. It is Smith’s approval of the Navigation Acts (which protected merchant shipping), and he made it in the belief that the acts were necessary to national defense. He also made other exceptions. Although they are less known, they are more relevant to the corn laws. He said that if a domestically produced good is taxed, the same good should pay a duty if it is imported. He also said that if a duty had been imposed in order to increase the domestic output of the product and if later the necessity for the increase had passed, the duty should be removed “only by slow gradations, and with a good deal of reserve and circumspection.” He said also that a protective duty is justified if it contributes to the defense of the nation, whether or not the domestic output is taxed and irrespective of the duty’s being used as an incentive to increase production.1
It happens that each of the three ideas could be used to defend the corn laws and to attack the free-trade movement. Although the case for retaining the law is described in the following chapters, it will be helpful to describe some of it here in order to explain the role of classical economics. It is one of the ironies of the free-trade movement that it had to combat what it first thought was its natural ally: classical economics. The protectionists stated, quite correctly, that the taxes on land were high and constituted a substantial duty on corn. If domestic corn was taxed, it was only proper that foreign corn also be taxed. Smith had said just that. The protectionists also used his second point. During the Napoleonic Wars, the British government had urged, at times had exhorted, farmers to increase their output, and had raised the duty on corn as an incentive. Now to abolish the corn laws completely and immediately was a violation of common justice, and was not, they said, a reduction “by slow gradations . . . reserve . . . and circumspection.” They also made his third point into a leading argument for protection. They contended that the corn laws reduced the dependence of Britain upon foreigners for its food, and, hence, protected it in peace against crop failures abroad, and in war against a cutting off of its imports.
Ricardo deplored the protectionists’ use of Smith’s ideas on taxation. He did not complain of their use of Smith’s ideas on duties. In this, as in many things, Ricardo was altogether consistent. His own ideas also were useful to the protectionists. They were expressed in detail in two pamphlets: An Essay on the Influence of a Low Price of Corn on the Profits of Stock; etc. (1815) and On Protection to Agriculture (1822). His view was that the duty on corn should be lowered but not eliminated and that a drawback should be paid on exports of it. His premise was Smith’s second point, i.e., if the domestic output of a product is taxed, there should be a duty on imports of it. Ricardo argued that if the corn duty were removed entirely, labor and capital would be withdrawn from agriculture where the product was taxed and would be employed in manufacturing where it was not, until the rate of profit in the two industries was equal. The result would be a smaller national output than could be produced by somewhat greater employment in agriculture and smaller in manufacturing. A better distribution of labor and capital between the two industries could be secured by placing a duty on corn equal to the tax on domestic corn. Although he said the scheme would produce “all the advantages of a free trade,” he seems not to have meant that literally, but to have meant the scheme would secure the best allocation of resources possible in the existing tax circumstances.
We cannot now help [he said] living under a system of heavy taxation, but to make our industry as productive as possible, we should offer no temptations to capitalists to employ their funds and their skill in any other way than they would have employed them, if we had had the good fortune to be untaxed, and had been permitted to give the greatest development to our talents and industry.2
It will be noticed that Ricardo opposed free trade only because he believed it would be inefficient. He did not oppose it because it would be unjust to landlords, as they claimed it would be in view of their heavier tax burden. He proposed to equalize the tax burden in the interest of a greater national output, not in the interest of justice. Had he stressed its equity, his plan might have gotten more support. Tax injustice was a great point in the debates, and it was conceded by many who were otherwise sympathetic to a freer trade. But to have ingratiated himself with the landlords would not have been in character for Ricardo. His aversion to them as a class is clearly expressed in his writings, and as he tried to be as consistent in politics as in economics he did not try to please them when he proposed his plan for reforming the corn laws.
The plan was ingenious, and discloses his great analytical ability. In explaining it, he developed a number of the theoretical propositions for which he is famous. The pamphlet of 1815 outlines the theories of rent and profit which were to go into the Principles of Political Economy and Taxation two years later. It also outlines the theory of wages which was to become so troublesome to the Manchester School. He wrote that money wages “must” fall when the price of corn falls, which it will do when more is imported. The idea was explained in detail in the Principles, and it was applied rigorously to the corn law question in the pamphlet of 1822. In the latter he wrote:
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.3
Among the ideas of economists that have had political consequences, this must be given a distinctive place. Not only was it used repeatedly in the debates over the corn laws, but it was used most effectively by those who were opposed to free trade, not on Ricardo’s grounds but on every other, and who were indeed opposed to almost everything else he stood for. They wished to prove the Manchester School wanted free trade so that money wages in the textile industry would be reduced. The leaders of the school used the idea themselves in the early stages of their campaign, but then severely repudiated it.
In the pamphlet of 1822, Ricardo made use of two other ideas which became important in economic theory. One was diminishing marginal utility, and its appearance is significant in view of the fact that later economists have said he was unaware of it. The very way in which he wrote that corn would be as cheap as water if it were as plentiful suggests that he thought the idea was too obvious to need more than passing mention.4 In the same pamphlet he used the idea of demand elasticity to explain why an unusually large harvest was injurious to farmers. It is, he said, because a small increase in the quantity of corn “operates very powerfully on price,” and hence the total value of (or expenditure on) the crop decreases.5 He believed the demand for corn was very inelastic, and that the demand for other products was also inelastic though not as much. Edward West, a contemporary academic economist, developed the idea in more detail, and distinguished between elastic and inelastic demand.6
Ricardo did not claim originality for the idea. He used it in order to explain a more important point, which was the effect of an increase in the output of corn on the fortunes of agriculture as distinct from its effect on the rest of the economy. He wished to deny the accusation that contemporary economics (of which he was the leading expositor) put forward the doctrine that “the bounty of Providence may become a curse to the country.” Agriculture, he wrote, is undoubtedly injured by abundance because the demand for its product is such that agricultural income falls when prices fall; but the rest of the economy is then better off, because the lower price of food brings down money wages and raises profits.
Here he made a telling reference to Robert Owen, who at that time was advancing his utopian socialism. “If,” Ricardo said, “we lived in one of Mr. Owen’s parallelograms, then no one could suffer in consequence of abundance, but as long as society is constituted as it now is, abundance will often be injurious to producers, and scarcity beneficial to them.”7 It was hardly a strong defense of a private enterprise economy, since it implies that two of the major problems of the time—the overproduction of food alternating with a scarcity of it—could be avoided by enacting Owen’s proposals which elsewhere he had said were “calculated to produce infinite mischief.”8 Had the implication been called to Ricardo’s attention, he perhaps would have been amused. For all of its potential mischief, the likelihood that Owen’s plan would conquer agriculture was slight indeed. Not even Ricardo’s moderate reform could budge it from its intransigent demands for ever higher protective duties.
In 1822 Ricardo put before the House of Commons, of which he was a member, the program of the pamphlet published earlier that year (the outlines of which had appeared in the Principles five years before). There were to be unlimited imports of wheat once its price was 70 shillings per quarter (of a ton), on which there was to be a duty of 20 shillings. The duty was to be reduced one shilling annually until it was 10 shillings, after which it would be permanent. There was also to be a drawback (or refund of the domestic tax) of seven shillings on exports. The proposal was voted down 218 to 25. Among its supporters were Henry Brougham, a founder of the Edinburgh Review and then a radical, and the ever-faithful Joseph Hume, who was associated with the Philosophic Radicals and for years was a proponent of classical economics in the House. Supporting the government and against the resolution were John Russell and Robert Peel, who 23 years later, as leaders of the two parties, united on complete repeal.
When this happened, it was without the sanction of Ricardian economics. That doctrine supplied only one useful idea to the free traders—that free trade does not weaken a nation’s power—and it was not an economic idea. It was in Ricardo’s first pamphlet on the corn laws. When it was published in 1815 one of the principal arguments in their favor was the assertion that they reduced the dependence of Britain upon foreigners for its food supply. Memories were fresh of the efforts that had been made to increase the domestic output of corn during the Napoleonic Wars, and of the fears of famine.
Ricardo contended that the danger of dependence was exaggerated, and he was able to argue more forcibly because he was not about to propose complete repeal. He said that a less restricted trade in corn would establish a profitable export business in the food-producing countries. They would come to depend on Britain for their livelihood as much as Britain depended on them for food, and no exporting country would be foolish enough to deprive itself of profits by depriving Britain of food. A prohibition of exports in those countries would cause “the most extensively ruinous commercial distress—distress which no sovereign, or combination of sovereigns, would be willing to inflict on their people; and, if willing, it would be a measure to which probably no people would submit.”9
His point was that Britain could depend on the import of food in war or peace, abundance or dearth, because it would be profitable for the producing countries to supply it. The idea was at least plausible in his day, whatever we may think of it in ours. The Russians had resisted Napoleon, and their action was attributed in part to his attempt to prevent their exporting goods to the Allies. Ricardo cited the incident, and also cited the fact that during the wars Napoleon had permitted the export of corn to Britain when the price there, because of a dearth, was extremely high and the corn trade was profitable. One can add in support of Ricardo’s argument that a nation’s economy then was not mobilized in war time, and that it was customary for businessmen to try to maintain foreign trade even though their governments might be fighting each other. (Whether this was treasonable or sensible depends on the justice of the war, and history often has found less justice in wars than they were thought to have at the time they were fought.)
The pacifists in the Manchester School made one change in Ricardo’s argument, and it became their guiding principle. They assumed that war and trade could not go on together, that one must give way to the other. The one with the strongest economic interest behind it would win. It was trade of course. “Of course,” because they believed in the invincible power of self-interest. Admittedly, some would profit from war, but their gains would be much less than the gain to the rest of the nation from peace. The pacifists believed that free trade would connect the exporters and importers of each nation, and behind them the producers and consumers, by such a strong common interest in income that neither would allow their governments to engage in war. They did not hear Malthus, as possibly they should have, when he said that nations, like people, are at times governed less by interest than by passion.
After Ricardo’s death in 1823, his policy was expounded by M’Culloch, whose “usual dogmatism” was irksome to Cobden. His Statements Illustrative of the Policy and Probable Consequences of the Proposed Repeal of the Existing Corn Laws, etc. went through six editions by 1841. In that year the anti-corn law movement was assembling in force, and M’Culloch noticed it. “The opinions of [the manufacturers] as to the injurious influence of the existing law are, no doubt, in many respects, extravagant and absurd; still, however, there is enough of substantial truth in their statements . . .”10 This is vintage M’Culloch. When he made his point it was that a case could be made for partial and gradual repeal. It seems to have been the substantial truth he got from the manufacturers’ opinion that the laws should be repealed completely and immediately. He repeated Ricardo’s argument that the higher taxes on agriculture entitled it to a fixed and permanent duty. (M’Culloch had made the same proposal in the Edinburgh Review in 1834.)
Another Ricardian was William T. Thornton, an intimate of John Stuart Mill, and of the generation following that of Henry Thornton of the Bullionist controversy. He expressly agreed with M’Culloch that there should be a fixed and permanent duty, and held the same low opinion of the Manchester people. “Total and unconditional repeal is not . . . desired by any, save the wildest of political fanatics,” he wrote. He departed from Ricardo by denying that corn prices determined money wages. If such were true, he said, it would mean that a scarcity of corn never would injure the working class but only the middle and upper classes, because the workers always could afford a constant quantity of corn. Ricardo’s iron law of wages, which conjured up so dismal a prospect to others, would, if valid, constitute “one of the most striking among the merciful dispensations of Providence.”11
Neither Senior nor Torrens were orthodox Ricardians on the corn law issue. Senior’s first published work was an article in 1821 on the corn laws in the Quarterly Review. In it he rejected Ricardo’s premise that agriculture was taxed more highly than manufacturing, and so denied that agriculture was entitled to permanent protection. However, he did grant that a temporary duty was only just, in deference to legitimate vested interests, and proposed it be reduced gradually while capital was being withdrawn from the least productive land. Although gradual, the reduction should be complete, and he suggested the duty be reduced to zero in 12 years.12 He made the same proposal again in 1839, which was the year Manchester assumed control of the anti-corn law forces. In the first article he alluded to an idea the Manchester people were to use with great effect when they invaded the agricultural districts, although they seem not to have been familiar with his work. He said that it was to the interest of agriculture that manufacturing should prosper, because the manufacturing districts were the greatest users of farm products. It is curious that Senior’s article should have appeared in the very conservative Quarterly Review. The reason may have been that neither the Tory editors nor the readers could make their way through the bewildering circumlocutions to the point. The article does, however, contain this gem: “Now granting the possibility of thus raising the price of corn by legislative interference (which we believe in, much as we do in the Turkish plan of sinking it, by hanging a baker) . . .”
Torrens wrote on the corn laws a number of times. In An Essay on the External Corn Trade (1815), he proposed the gradual reduction of duties while capital was being withdrawn from agriculture. Parliament meanwhile should correct the tax system to remove the excessive levies on land. In the third edition of the same work (1826), he proposed a fixed duty which would be reduced annually until it was eliminated. By 1839, however, he had come to favor immediate action, and in a pamphlet written “in the hope of contributing something towards the success of the national struggle for the Abolition of the Corn Laws” he proposed “the unrestricted importation of foreign corn.” Yet four years later, when the national struggle was touch-and-go, he addressed a public letter to Cobden stating his opposition to complete and immediate repeal. By now Torrens was urging his program of reciprocity, and he declared Britain should not buy the corn of any country which placed a duty on British goods.13
The position of Malthus on the corn laws was much different from that of the other economists, so different that when they undertook to refute him they usually did not understand it. His major point was that the corn laws raised money wages, and higher money wages (not only higher real wages) caused the welfare of the working class to increase. Since the welfare of the worker (in both agriculture and manufacturing) was the standard by which Malthus judged a policy, he was in favor of the laws. The idea is all the more unusual in coming from one who is placed in the classical school. It troubled his contemporaries who early in the controversy had supposed he would disapprove of the laws, and he was even more troubling to those who tried to disprove him. (Since I have described the idea in detail elsewhere14 I shall only summarize it here.)
Malthus assumed that money wages were regulated by the price of corn in the sense that the worker’s total wages always would buy the same quantity of it. As its price increased, money wages would increase in the same proportion. One can think of the worker as being paid in corn and always receiving the same quantity of it. Malthus did not assume the worker consumed only corn; his argument actually depended upon other goods also being consumed. His other assumption was that the prices of other goods did not change in the same proportion as the price of corn.
From these assumptions, he reasoned as follows. When the price of corn rises, the wage earner can do either of two things: (1) He can continue to buy the same quantity of corn—or bread, to be realistic—as he bought before its price increased, and he then will spend more on it. After he has paid for his bread, he will have a larger amount of money to spend on other goods, and so can buy a larger quantity of them. This is so, because the worker does not spend all of his income on bread. Suppose that he had been buying 25 loaves when it was a penny a loaf and his wage was 100 pennies. Now suppose the price of bread increases 20 per cent. If he still buys 25 loaves, he will have to pay 30 pennies for them. But his wage also will have increased by 20 per cent, to 120 pennies. After he pays for the bread, he will have 90 pennies left to spend on other goods (120 minus 30), while at the lower price of bread and lower money wage he had only 75 pennies left for other goods (100 minus 25). So long as the prices of other goods increase less than the price of bread, the wage earner will be able to buy more of them. This becomes quite clear if one supposes that the prices of other goods do not increase at all. If their average price is one penny also, he could buy 75 of them at the money wage of 100, and 90 at the money wage of 120. And at each money wage, he could buy 25 loaves of bread. If at the higher bread price he buys as much bread as before and more of other goods, he obviously is better off. That is, his welfare is greater. (2) The other course the worker can follow is to reduce the amount of bread he buys and to increase the quantity of other goods still more. By this course, he will have an amount of bread plus other goods which together yield him as much satisfaction as his bread alone yielded before; in ing, measured by the cost of bread, the better off the working addition he will have a larger quantity of other goods. Again his welfare will have increased.
The reasoning suggests that the higher the cost of liv-class will be. It is not surprising that one of Malthus’ friends said it had the air of paradox about it. Nonetheless, it was valid. Its converse is valid also; that is, a decrease in the price of bread will reduce welfare. As the price of bread falls, money wages fall in the same proportion. If the worker continues to buy the same quantity of bread, he will have less to spend on other goods, the prices of which have not fallen as much as the price of bread. If he buys a larger quantity of bread, he will have still less to spend on other goods. Suppose the price of bread falls 20 per cent. His wages—using the figures of the previous example—will fall from 100 to 80 pennies. If he continues to buy 25 loaves, he will spend 20 pennies for them and will have 60 to spend on other goods instead of the 75 he had before. If he buys more than 25 loaves, which he probably will because bread has become cheap in relation to other goods, he will spend more than 20 pennies for it and have less than 60 for other goods. Whichever he does, he will be worse off.
To the reader not used to the ways of economists, it may seem that Malthus was saying high bread prices are better than low because the worker can save more by not buying bread when it is dear than when it is cheap. The reader would be correct in his inference. That is what Malthus did contend, and if his premises are granted his conclusion also must be granted.
One premise was that when the price of bread changes, the prices of other goods do not change in the same proportion. The premise is factually valid in the sense that when the price of bread changed, the prices of some other goods did not change as much. This is so, because prices never change in the same proportion. Therefore, the worker’s real wage, measured by the amount of goods he could buy, changed.
The other premise was that money wages are regulated by the price of corn. It is not valid, because in fact wages were almost never regulated in this way. The supposition that they were was one of Ricardo’s principles, it will be recalled. He was not the first to assert it or the last. Behind it was the belief that the workers lived at a subsistence level—defined either as the quantity of goods they needed for sheer physical survival or the quantity needed for meeting their standards of comfort and propriety. It was also believed that over a long period of time (the exact number of years never being stated), the subsistence level was constant, neither rising nor falling, owing to the relationship between the population and the quantity of goods available for the workers. If that quantity exceeded the amount required for subsistence, the population would increase until the quantity available per person declined to the subsistence amount. The population then would be constant. If it should happen that the population was excessive and the quantity of goods per person fell below the required amount, there then would be a decrease in the population, and the quantity of goods per person would increase until it reached the subsistence amount.
There is evidence that money wages in some areas were influenced by the price of corn, although not in the way Ricardo contended. In some agricultural districts, the money wages of farm laborers were pitifully low and not enough to keep their families alive. “I be protected, and I be starving,” one of them said about the corn laws. Their wages were supplemented by payments out of the local relief funds provided by the heavy taxes on land so often cited in the debates. The supplement rose and fell with the price of corn and, together with the wage, was meant to maintain a farm laborer and his family. Some of the laborers produced the corn whose price regulated their total income, of which the wage element was a cost of producing the corn whose price, etc. The reader can imagine the conundrums this presented to the economists of the day. The practice was not general, it was not obligatory in manufacturing, and in agriculture itself it diminished just prior to the repeal campaign. It expressed a deeply felt belief that money wages ought not to be regulated wholly by the market, and it had an effect in manufacturing in a way which is described in Chapter 3.
It was not evidence of the validity of Ricardo’s wage theory. Indeed, it was just the opposite. Ricardo maintained that the unobstructed operation of the market would cause money wages and corn prices to move together over the long period and to make the real income of the worker constant. He did not say the two would move together because the parish authorities would make them to, which, if it is evidence of anything, is evidence that the market does not operate in the way he contended or is obstructed in some manner. The Ricardians actually were opposed to the Allowance system, and one of their conquests—of which they were more proud than their successors—was to have it forbidden by the New Poor Law of 1834, in the framing of which Senior had a large part.
The belief in the Ricardian principle lingers, not just among the public to whom it is an article of faith that wages are set by the cost of living, but also among economists. In a recent and otherwise excellent study of the economic theory of the period, Mark Blaug asserts that Ricardo was correct, that money wages were in fact regulated by the price of corn, and Mr. Blaug has denied my statement (made in the article on Malthus) that they were not.15 It is not terribly important whether Mr. Blaug or I am right, but it is important whether or not Ricardo was. I have compiled the accompanying table from statistics that seem to be as reliable as any available. The first column is an index number of wheat prices, and the second of money wages. By dividing wages by wheat prices, one obtains the value of wages expressed in wheat or an index of the amount of wheat purchasable by the money wage. That is done in the third column. If the Ricardian principle were correct, the value of “wheat” wages would be fairly constant, not the same year after year but constant over say a fifteen- or twenty-year period. (The Ricardians were not explicit about the length of the period.) Actually, the value of “wheat” wages was not at all constant, as the table shows. I should add that the table is not meant to be entirely conclusive. The statistics are partial, the price being that of wheat and not of all grains, and the wage series being only that of one group of workers. Moreover, the facts on which the statistics are based may not be entirely accurate. But I have not seen any statistics that show anything else than the substantial variation shown by those in the table. Mr. Blaug believes the wage data is unreliable because it does not show short-term changes in wages. That is a slip on his part. The Ricardian wage theory was not meant to explain short-term wage movements, and the testing of it
requires long-term, not short-term, data. As it happens, the table shows even more short-term than long-term variation.
Not all of the economists of the period accepted the Ricardian theory of wages. Thomas Tooke did not, and he especially is to be noticed because he was the great empiricist of the time. He found no relationship at all between corn prices and money wages. Nor did John Rooke, another, although he discovered that the “corn value” of the money wages of Cumberland agricultural workers was stable for long periods.16 Both men urged the public to disabuse itself of the Ricardian principle. Neither was heeded. One consequence was that the principle figured large in the rhetoric of the repeal campaign.
In the final months of the campaign, John Stuart Mill began to write his Principles of Political Economy. It was the last great statement of classical economics, and presented that view of free trade. It was one of qualified advocacy. Yet Mill was known to the public as a champion of free trade. Of all of the economists of the corn law period, he behaved in the most surprising way. Unlike his predecessors and his contemporaries, he did not oppose repeal. He was silent on the issue. He is supposed to have written two articles about it for Fox’s newspaper (which he helped along out of friendship with Fox), but they are not listed in the authoritative bibliography of his writings. If they were written, they made a slight ripple indeed. On many other public issues, most of them less consequential and all of them less urgent, he wrote profusely.
There are a few references to the corn laws in the Principles, which was published after repeal, and the most interesting is in the chapter on wage determination. It reads as if it had been written before the issue of repeal had been decided. Mill explained that the immediate effect of repeal would be to raise real wages, and that subsequently the population very probably would increase. The reason is that the average real income of working-class families would increase, amd they could afford more children (children vs. bread being another instance, along with war vs. peace, of the “nicely calculated less or more”). But then the real income of each member of the family would decline until it was the same as before repeal. Would the birth rate then diminish in order to restore the real income each person had immediately after repeal, or would the average family remain larger and the real income of each member be smaller? The latter would occur, Mill believed, because he felt the workers’ “habits with respect to population” were stronger than those “with respect to comfort.” This seems to mean that the workers loved children more than cheap bread. The preference was regrettable, and weakened the case for repeal. “I cannot, therefore, agree in the importance so often attached to the repeal of the corn laws, considered merely as a labourer’s question,” he concluded.17 The statement is not a general declaration against repeal, and it leaves the way open for other arguments in its favor. It implies that the case for repeal would be strong if the working class could be persuaded to reduce its birth rate. Yet it is significant that he should have chosen to examine the effect of repeal on the income of the working class rather than its other possible effects.
One may explain his viewpoint in the light of two of his major interests: the distribution of income and the problem of overpopulation. A distinctive feature of the Principles on which he departed from his predecessors is his assertion that while the laws governing production are not subject to human control, those governing the distribution of income are. It is understandable that he should have attended to proposals such as repeal, which professed to change the distribution. He would be led to his conclusion—that no permanent increase in the real income per member of the working class would occur—by his assumption that real income determines the size of the family. The skeptical reader of Mill might well come away wondering why the working class shouldn’t use its greater real income for larger families instead of for more goods. One explanation is that in time the children will grow up and enter the labor force, increasing the supply of labor and reducing money wages. Then real income per person will be lower than before repeal. Those who admire Mill, as it is nearly impossible not to do, will be satisfied with this explanation. But it leaves one thing unsaid, which is helpful to know in trying to understand his views about population. The danger of its being excessive was almost an obsession with him. On this point it perhaps is permissible to adduce an aspect of his personality, about which a great deal is known since the publication of the psychological studies by A. W. Levi and the biography by Michael St. John Packe.18 His attitude toward family life was, to say the least, unusual, not only for the Victorian period but for any other, and one finds it easier to believe that his immoderate fear of overpopulation came more from that attitude than from the careful, disinterested consideration he gave to other problems.
Mill was, in fact, associated with the Manchester School, but that was much later and on another issue—the franchise—and the association is explained in Chapter 6.
Whatever the reasons for his position on the corn laws, it was of no help to the Manchester School. Although he did not turn his back on the free traders, as other economists did, neither did he support them. One of the instructive aspects of the repeal campaign is the fact that the great change in economic policy, which was the purpose of the campaign, was carried against the opposition of most of the economists. Another instructive aspect is that it was the theoretical economists who, instead of giving their usual counsel of perfection, advised caution, restraint, and patience, while the untheoretical men of business demanded immediate action and would hear of no compromise and little moderation.
Shall one say that Malthus, Senior, the Ricardians, and Mill were not proponents of liberalism, and that when one examines their ideas about free trade one must conclude that their reputation for liberalism is a grand mistake? No. That would be quite wrong. They were liberal, but their liberalism did not direct them to propose free exchange in every market or in any one market in all circumstances. Each economist made numerous qualifications to the practice of laisser faire, and they differed among themselves about its application. The only premise on which all of them can be brought together is the premise that policy must have the rational consent of the persons who are affected by it. That premise is a synthetic one, clear only in retrospect, and if the economists had been asked whether or not they accepted it they might have wondered what the questioner was talking about.
Yet they were liberal. There is, for example, nothing illiberal in Ricardo’s opposition to complete free trade in corn. Free trade to him was a means to the end of efficiency, and was not an end in itself. If we are surprised by his opposition to the repeal of the corn laws, it is because we are in the habit of thinking that a free market is an end of liberal policy. It can be defined that way of course, but such a definition is not useful. One would have to exclude the classical school from the liberal tradition. Just what school and which economists would remain in the tradition, it is hard to say. A few writers like Herbert Spencer perhaps, and if he were so classified we should have to redefine the word “economist.” If however one accepts efficiency as an end, as Ricardo did, it follows that the government may control a market, as by a tariff, if efficiency is better served that way than by complete freedom of exchange. Since he believed a free trade in corn would cause excessive investment and employment in manufacturing, because of its being taxed less than agriculture, he was opposed to free trade. Had taxes fallen with equal weight on both industries, he then would have proposed complete repeal (and very likely by a gradual reduction of duties).
This interpretation puts the economic side of Ricardo’s policy in order. But what of the political side? Economics is an instrumental study, and is worthwhile only if it helps to solve social problems. Problem-solving is politics, and politics, being the art of the possible, does what it can. In Ricardo’s day, and for a generation after his death, the corn laws were a major problem. Efficiency in the Ricardian sense was much less important. The economists would be heard on the issue of free trade; they would be listened to politely on how to secure an efficient allocation of resources in the British economy. The Ricardian position on the corn laws was an ingenious bit of economic reasoning. As a contribution to the debate on a public issue it was not impressive. It was, indeed, ineffectual and mischievous. The protectionists misunderstood it to be a concession to their position, and would have none of it because they wanted even more. The free traders understood it, and would have none of it because their purpose was not efficiency.
The mischief in the proposal came from its establishing an optimum tax system as a condition for free trade. If that condition can be laid down, why cannot others, such as full employment, or the internal mobility of resources, or a particular monetary standard which will establish the proper exchange rates? And if economic prerequisites can be asked, then why not those of justice, the national interest, or some other normative requirement also? If any of them are allowed, as it is only reasonable to do, the debate becomes endless, and action is postponed indefinitely. That postponement was the mischief in the Ricardian policy. At the time he proposed it, the forces for repeal were stronger than ever and were growing. The issue had arisen repeatedly in the House, a select committee to investigate it had been named and he was made a member, the merchants of London had petitioned Parliament for free trade, the businessmen of Manchester had begun to express themselves, and representations for reform of the corn laws streamed in from the public. All of this happened between 1819 and 1822. When Ricardo published On Protection to Agriculture in 1822, he repeated what he had said in his pamphlet of 1815: there must be a reform of the tax system before there could be free trade. Had there been great public support for tax reform, his political conduct might have been effective. There was not, and he himself indicated he thought it impossible. Such support as there was for liberal policy was for the repeal of the corn laws or for a drastic reduction of the duties. That was just what he did not propose. He said, in effect, that the public must solve its economic problems in his order and not in the order in which it was prepared to solve them.
Repeal came 24 years later. One reason for the delay was the fact that the free-trade movement had no intellectual leadership. It would be extravagant to make Ricardo or the Ricardians or all of the economists together responsible for the delay. It also would be quite wrong to suppose their ideas were in no way related to what happened, because economic ideas or the want of them do have consequences. Those who propose or fail to propose them must share the responsibility for what occurs.
[1.] Adam Smith, The Wealth of Nations, ed. Edwin Cannan (New York, 1937), pp. 429-35.
[2.] “On Protection to Agriculture,” The Works and Correspondence of David Ricardo, ed. Piero Sraffa (Cambridge, 1951), IV, 244.
[3.]Ibid., p. 237.
[4.]Ibid., p. 221.
[5.]Ibid., p. 220.
[6.] Edward West, Price of Corn and Wages of Labour, etc. (London, 1826), p. 57.
[7.]The Works and Correspondence of David Ricardo, IV, 222.
[8.]Parliamentary Debates, Vol. 41, pp. 1206-9.
[9.] “An Essay on The Influence of a low Price of Corn on the Profits of Stock; etc.,” The Works and Correspondence of David Ricardo, IV, 28.
[10.] J. R. M’Culloch, Statements Illustrative of the Policy and Probable Consequences of the Proposed Repeal of the Existing Corn Laws, etc., 6th ed., (London, 1841), p. 2.
[11.] William T. Thornton, The Consequences of the Repeal of the Corn Laws (London, ), pp. 26, 15.
[12.]The Quarterly Review, XXV (1821), 466-504.
[13.] Robert Torrens, An Essay on the External Corn Trade, 3d ed. (London, 1826), p. 395; Three Letters to the Marquis of Chandos on the Effects of the Corn Laws (London, 1839), pp. 28, 2, A Letter to Senior, etc. (London, 1843), pp. 80-85.
[14.] William D. Grampp, “Malthus on Money Wages and Welfare,” American Economic Review, XLVI (Dec. 1956), 924-36.
[15.] Mark Blaug, Ricardian Economics, A Historical Study (New Haven, 1958), pp. 9-10.
[16.] Thomas Tooke, A History of Prices, and of the State of the Circulation, from 1793 to 1837; etc. (London, 1838), II, 256. John Rooke, Free Trade and Safe Government, etc. (London, 1835), p. 182.
[17.] John Stuart Mill, Principles of Political Economy (London, 1891), p. 241.
[18.] A. W. Levi, “The Mental Crisis of John Stuart Mill,” Psychoanalytic Review, XXXII (Jan. 1945), 86-101; “The Writing of Mill’s Autobiography,” Ethics, LXI (July 1951), 284-96. Michael St. John Packe, Life of John Stuart Mill (London, 1954).