malthus to ricardo
[Reply to 460.—Answered by 463]
[ca. 9 Oct. 1821]
My dear Ricardo
I am either most unfortunate in my explanations, or your mind is so entirely prepossessed with your own views on the subject of our discussion, that you will not give to any statement, which departs from them the degree of attention which is necessary to put you in possession of what is meant.
You say that my case is an impossible one 1st because I suppose profits in two countries to be the same although the cost of producing necessaries in one of them be only one half of what it is in the other, and 2nly because I assume that with a free trade the price of corn in the exporting country would rise to the price of the importing country, whereas it would fall in the importing country to the price of the exporting country.
With regard to your first objection, I would ask you, Where I have made the supposition you impute to me? Surely not in my last letter. Unless by mistake I left out a word. My first supposition was that profits would be 100 per cent in the country where corn was obtained with double the facility, while it was ten per cent in all others. And in my second illustration which had a direct reference to America I supposed that profits were 20 per cent or double what they were in the states of Europe. Do look again at my letter and tell me if I deceive myself.
With regard to your second objection, though it may be your opinion that the price of the corn of all the states of Europe will fall in proportion to the facility of production in America, I am certainly of a different opinion; and as some proof that I have reason on my side I refer to the actual state of things, and ask whether since the colonization of North America, it appears that American corn has more approached the level of European, or European corn sunk to the level of American. Could it indeed have been expected from theory that the small surplus which could be annually exported from America with the greatest quantity of labour which she could obtain from the most rapid possible increase of a small population would be sufficient to lower essentially the prices of corn all over Europe.
You say that you cannot agree with me that in the progress of cultivation in America a mean between corn and labour will remain nearly at the same price as it now is,—estimated in money, or in hogsheads of claret; and then you immediately suppose that in America corn will be only at half the price that it is in other countries. But what can possibly entitle you to make this supposition, if it be contrary to the fact. My observation, as you quote it, relates specifically to America. And if it be an acknowledged truth that in America for above half a century before the termination of the war, the bullion price of corn had been less below the average of Europe than the bullion price of labour had been above it, surely I have pretty strong reasons for concluding that a mean between corn and labour in America, a hundred years hence, is more likely to fall than rise as compared with the corn and claret of Flanders and France, supposing them to continue the same.
You say further that if in such a country labour were at a low money price, which you have a right to suppose where corn is obtained with so much facility, the conclusion would be much more in your favour. Now this is the kind of answer to me which I think I may fairly complain of. According to your theory labour ought certainly to be low. But I dispute your theory; and say that with whatever facility the corn was obtained if there were such a demand for it at home and abroad as to raise it nearly [to] the price of other countries, which might easily happen in a well situated colony for 150 years together, then of necessity, (on account of the demand for labour and the quantity of corn earned by the labourer) the bullion price of labour must be high. And as a proof I refer to the actual state of things in America. Surely in such a case your business is to shew that the fact in no respect invalidates your theory; but to assume a different fact, than the one I refer to, in order to refute me seems to be an odd mode of arguing. I have never heard the fact of the high bullion price of labour in the United States, before the late distresses, called in question by a single person, and it was to America with a high price of labour, that, as I said before, I specifically referred when I expressed the opinion that a mean between corn and labour would not be higher a hundred years hence.
You say that you cannot allow that hats would fall in a progressive country on account of the fall of profits; but that if I can shew that a fall of profits may take place without a rise of wages in any fixed measure of value, you will yield the point. Now it certainly appears to me, that if in every country the same quantity of gold and silver were obtained by the same quantity of labour, without any capital, money would be a more fixed measure of value than under any other circumstances. But in this case it is quite certain, that the money prices of commodities in different countries which had cost the same quantity of labour, would vary exactly as the rate of profits, and hats in a progressive country would fall as profits fell. The only stationary commodities would be corn and labour—Labour would be stationary by the hypothesis, and corn would have a constant tendency to maintain the same price, because the increasing quantity of labour and capital necessary to produce it would be just counterbalanced by the fall of profits, or the diminished quantity of necessaries given to the labourer. In the same country where the profits may be supposed to be equal (as far as the whole can be made to consist of labour and profits) prices will vary as the quantity of labour employed. In different countries where profits are unequal, the prices of commodities which have cost the same quantity of labour, will vary as profits.
According to your theory—if in a country which had been growing its corn and producing its money at a profit of ten per cent, the facility of production on the land were doubled, corn and labour would sink to one half, and profits would rise perhaps to above a hundred per cent. Now I wish to ask what is to become of the money which was before produced. It is obvious that the corn and labour of the country could absorb at first but little more than the half of what they did before; and yet as the profit of producing money as well as other commodities would be a hundred per cent, there could be little doubt of its continued production. Would not this great plenty of money in an isolated country necessarily keep up the prices of labour and commodities; and if the country were not isolated, the exportation of its corn would prevent any considerable fall. It appears to me I confess most extremely difficult to assimilate a country with an abundant capital, to a country with a scanty capital, merely because you suppose them by some sudden change to obtain their corn with the same quantity of labour. Much time and loss of capital must take place before they can be in a similar situation. In the case of the greatest improvements in agriculture, and a fall in the price of corn, it is my opinion that if labour were to fall before an increase of population had taken place, it could only be from glut and want of demand.
I am glad you approve of the Review in the Edinburgh. If you have discovered the author dont betray the secret. I hope Place has met with a favourable reception with Murray and is coming out. I am going to Town tomorrow to Holland House for a couple of days, and on other business. I met the Hollands at Lord Cowpers the other day at Pansanger and Lady H. made me promise to pay this visit. Mrs. M joins with me in kind regards to Mrs. Ricardo who I hope is quite well.
Ever truly Yours
T R Malthus.