ricardo to malthus
[Reply to 443.—Answered by 455]
Gatcomb Park 21 July 1821
My Dear Malthus
I think that the concession which I have made will not bear the construction you have put upon it. “An increased power of production, must be accompanied with an increase of productive or unproductive expenditure”[.] This is the sentence on which you have remarked, and you say could not be true if the gross produce were diminished. Certainly not; but I have never said that with an increased power of production the gross produce would be diminished—I have never said that machinery enables you to get a greater quantity of gross produce, my sole complaint against it is that it sometimes actually diminishes the gross produce.
With respect to the particular subject of discussion between us you seem to be surprised that I should understand you to say in your book “that vast powers of production are put into action, and the result is unfavorable to the interests of mankind.” Have you not said so? Is it not your objection to machinery that it often produces a quantity of commodities for which there is no demand, and that it is the glut which is the consequence of quantity which is unfavorable to the interests of mankind. Even as you state your proposition in your present letter, I have a right to conclude that you see great evils in great powers of production, from the quantity of commodities which will be the result, and the low price to which they will fall. Saving, you would say, would first lead to great production—then to low prices, which would necessarily be followed by low profits. With very low profits the motives for saving would cease, and therefore the motives for increased production would also cease. Do you not then say that increased production is often attended with evil consequences to mankind, because it destroys the motives to industry, and to the keeping up of the increased production? Now in much of this I cannot agree with you. I indeed allow that the case is possible to conceive of saving being so universal that no profit will arise from the employment of capital, but then I contend that the specific reason is, because all that fund which should, and in ordinary cases, does, constitute profit, goes to wages, and immoderately swells that fund which is destined to the support of labour. The labourers are immoderately paid for their labour, and they necessarily become the unproductive consumers of the country. I agree too that the capitalists being in such a case without a sufficient motive for saving from revenue, to add to capital, will cease doing so—will, if you please, even expend a part of their capital; but I ask what evil will result from this? none to the capitalist, you will allow, for his enjoyments and his profits will be thereby increased, or he would continue to save. None to the labourers, for which we should repine; because their situation was so exceedingly favorable that they could bear a deduction from their wages and yet be in a most prosperous condition. Here it is where we most differ. You think that the capitalist could not cease saving, on account of the lowness of his profits, without a cessation, in some degree, of employment to the people. I on the contrary think that with all the abatements from the fund destined to the payment of labour, which I acknowledge would be the consequence of the new course of the capitalists, enough would remain to employ all the labour that could be obtained, and to pay it liberally, so that in fact there would be little diminution in the quantity of commodities produced,—the distribution only would be different; more would go [to] the capitalists, and less to the labourers.
I do not think that stagnation is a proper term to apply to a state of things in which for a time there is no motive to a further increase of production. When in the course of things profits shall be so low, from a great accumulation of capital, and a want of means of providing food for an increasing population, all motive for further savings will cease, but there will be no stagnation—all that is produced will be at its fair relative price and will be freely exchanged.—Surely the word stagnation is improperly applied to such a state of things, for there will not be a general glut, nor will any particular commodity be necessarily produced in greater abundance than the demand shall warrant.
You say “we know from repeated experience that the money price of labour never falls till many workmen have been for some time out of work.” I know no such thing, and if wages were previously high, I can see no reason whatever why they should not fall before many labourers are thrown out of work. All general reasoning I apprehend is in favor of my view of this question, for why should some agree to go without any wages while others were most liberally rewarded. Once more I must say that a sudden and diminished demand for labour in this case must mean a diminished reward to the labourer, and not a diminished employment of him—he will work at least as much as before, but will have a less proportion of the produce of his work, and this will be so in order that his employer may have an adequate motive for employing him at all, which he certainly would not have if his share of the produce were reduced so low as to make increased production an evil rather than a benefit to him. “It is” (never) “said that an increase of unproductive consumption among landlords and capitalists may not sometimes be the proper remedy for a state of things in which the motives for production fail”—I know of no one who has recommended a perseverance in parsimony even after the profits of capital have vanished. I have never done so, and I should be amongst the first to reprobate the folly of the capitalist in not indulging himself in unproductive consumption. I have indeed said that nothing can be produced for which there will not be a demand, unless, from miscalculation, while the employment of stock affords even moderate profits, but I have not said that production may not in theory be pushed so far as to destroy the motive on the part of the capitalist to continue producing to the same extent. I believe it might possibly be pushed so far, but we have never witnessed it in our days, and I feel quite confident that however injurious such a state of things may be to the capitalist, it is so only because it is attended with disproportionate and unusual benefits to the labourers. The remedy therefore, and the sole remedy, is a more just distribution of the produce; and this can be brought about only, as I said in my last letter, by an increase of workmen, or by a more liberal unproductive expenditure on the part of the capitalist. I should not make a protest against an increase of consumption, as a remedy to the stagnation of trade, if I thought, as you do, that we were now suffering from too great savings. As I have already said I do not see how stagnation of trade can arise from such a cause.
We appear then not to differ very widely in our general principles, but more so respecting the applications of them. Such and such evils may exist, but the question is, do they exist now? I think not, none of the symptoms indicate that they do, and in my opinion increased savings would alleviate rather than aggravate the sufferings of which we have lately had to complain. Stagnation is a derangement of the system, and not too much general production, arising from too great an accumulation of capital.
Mr. Tooke has been here since saturday last.—I am going with him to-morrow to Bromesberrow from whence he will go to Ross and down the Wye to Chepstow. We have had plenty of talk on subjects of Political Economy, and have found out points on which there is partial difference of opinion between us. He brought with him two pamphlets in which you are often mentioned as well as myself; perhaps you have seen them—their titles are An Inquiry into those Principles advocated by Mr. Malthus relative to the nature of Demand, and the necessity of consumption —the other Observations on certain Verbal disputes in Political Economy. —
Mrs. Ricardo unites with me in kind regards to Mrs. Malthus and yourself. Mr. Tooke also desires to be kindly remembered.
Ever truly Yr.