The Online Library of Liberty

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• Advertisement to the Second Edition.
• Memoir of Robert Malthus.
• Principles of Political Economy.
• Introduction.
• Book I
• Chapter I.: Of the Definitions of Wealth and of Productive Labour.
• Section I.—: On the Definitions of Wealth.
• Section II.—: On Productive Labour.
• Chapter II.: On the Nature, Causes, and Measures of Value.
• Section I.—: On the Different Sorts of Value.
• Section II.—: Of Demand and Supply As They Affect Exchangeable Value.
• Section III.—: Of the Cost of Production As Affected By the Demand and Supply, and On the Mode of Representing Demand.
• Section IV.—: Of the Labour Which Has Been Employed On a Commodity Considered As a Measure of Its Exchangeable Value.
• Section V.—: Of the Labour Which a Commodity Will Command, Considered As a Measure of Value In Exchange.
• Section VI.—: On the Practical Application of the Measure of Value, and Its General Use and Advantages.
• Section VII.—: On the Variations In the Value of Money In the Same, and Different Countries.
• Chapter III.: Of the Rent of Land.
• Section I.—: Of the Nature and Causes of Rent.
• Section II.—: On the Necessary Separation of the Rent of Land From the Profits of the Cultivator and the Wages of the Labourer.
• Section III.—: Of the Causes Which Tend to Raise Rents In the Ordinary Progress of Civilized and Improved Societies.
• Section IV.—: Of the Causes Which Tend to Lower Rents.
• Section V.—: On the Dependance of the Actual Quantity of Produce Obtained From the Land, Upon the Existing Prices of Produce, and Existing Rents, Under the Same Agricultural Skill and the Same Value of Money.
• Section VI.—: Of the Connexion Between Great Comparative Wealth, and a High Comparative Price of Raw Produce.
• Section VII.—: On the Causes Which May Mislead the Landlord In Letting His Lands, to the Injury Both of Himself and the Country.
• Section VIII.—: On the Strict and Necessary Connection of the Interests of the Landlord and of the State.
• Section IX.—: General Remarks On the Surplus Produce of the Land.
• Chapter IV.: Of the Wages of Labour.
• Section I.—: On the Definition of the Wages of Labour, and Their Dependance Upon Supply and Demand.
• Section II.—: Of the Causes Which Principally Affect the Habits of the Labouring Classes.
• Section III.—: Of the Causes Which Principally Influence the Demand For Labour, and the Increase of the Population.
• Section IV.—: A Review of the Corn Wages of Labour From the Reign of Edward III.
• Section V.—: On the Conclusions to Be Drawn From the Preceding Review of the Prices of Corn and Labour During the Five Last Centuries.
• Chapter V.: Of the Profits of Capital.
• Section I.—: Of the Nature of Profits, and the Mode In Which They Are Estimated.
• Section II.—: Of the Limiting Principle of Profits.
• Section III.—: Of the Regulating Principle of Profits.
• Section IV.—: Of Profits As Affected By the Causes Practically In Operation.
• Section V. —: Remarks On Mr. Ricardo’s Theory of Profits.
• Chapter VI.: Of the Distinction Between Wealth and Value.
• Book II.
• Chapter I.: On the Progress of Wealth.
• Section I.—: Statement of the Particular Object of Inquiry.
• Section II.—: Of the Increase of Population Considered As a Stimulus to the Continued Increase of Wealth.
• Section III.—: Of Accumulation, Or the Saving From Revenue to Add to Capital, Considered As a Stimulus to the Increase of Wealth.
• Section IV.—: Of the Fertility of the Soil, Considered As a Stimulus to the Continued Increase of Wealth.
• Section V.—: Of Inventions to Save Labour, Considered As a Stimulus to the Continued Increase of Wealth.
• Section VI.—: Of the Necessity of a Union of the Powers of Production With the Means of Distribution, In Order to Ensure a Continued Increase of Wealth.
• Section VII.—: Of the Distribution Occasioned By the Division of Landed Property Considered As the Means of Increasing the Exchangeable Value of the Whole Produce.
• Section VIII.—: Of the Distribution Occasioned By Commerce, Internal and External, Considered As the Means of Increasing the Exchangeable Value of Produce.
• Section IX.—: Of the Distribution Occasioned By Personal Services and Unproductive Consumers, Considered As the Means of Increasing the Exchangeable Value of the Whole Produce.
• Section X.—: Application of Some of the Preceding Principles to the Distresses of the Labouring Classes Since 1815, With General Observations.

Section II.—

On the necessary Separation of the Rent of Land from the Profits of the Cultivator and the Wages of the Labourer.

So much of violence, and unjust monopoly has attended the appropriation of land in the early times of all long settled states, that in order to see the natural foundation and natural progress of rents, it is necessary to direct our attention to the establishment and progressive cultivation of new colonies. In the settlement of a new colony, where the knowledge and capital of an old society are employed upon fresh and fertile land, the surplus produce of the soil shews itself chiefly in high profits, and high wages, and appears but little in the shape of rent. While fertile land is in abundance, and may be had by whoever asks for it, nobody of course will pay a rent to a landlord. But it is not consistent with the laws of nature, and the limits and quality of the earth, that this state of things should continue. Diversities of soil and situation must necessarily exist in all countries. All land cannot be the most fertile: all situations cannot be the nearest to navigable rivers and markets. But the accumulation of capital beyond the means of employing it with the same returns on land of the greatest natural fertility, and the most advantageously situated, must necessarily lower profits; while the rapid increase of population will tend to lower† the wages of labour.

The costs of production in corn wages and profits will thus be diminished; but the value of the produce, that is, the quantity of labour which it can command, instead of diminishing, will have a tendency to increase. There will be an increasing number of people demanding subsistence, and ready to offer their services in any way in which they can be useful. The value of food will be in excess above the value of the labour and profits which are the condition of its supply; and this excess is that portion of the general surplus derived from land which has been peculiarly denominated rent.

The quality of the earth first mentioned, or its power to yield a greater quantity of the necessaries of life than is required for the maintenance of the persons employed in cultivation, is obviously the foundation of this rent, and the limit to its possible increase. The second quality noticed, or the tendency of an abundance of food to increase population, is necessary both to give a value to the surplus of necessaries which the cultivators can obtain on the first land cultivated; and also to create a demand for more food than can be procured from the richest lands.* And the third cause, or the comparative scarcity of fertile land, which is clearly the natural consequence of the second, is finally necessary to separate a portion of the general surplus from the land, into the specific form of rent to a landlord.†

Nor is it possible that in a country increasing in wealth and population, the whole produce could continue to be divided only between the capitalists and labourers, as the profits of capital and the wages of labour. If profits and corn wages were not to fall, then, without particular improvements in cultivation, none but the very richest lands could be brought into use. The fall of profits and wages which practically takes place, undoubtedly transfers a portion of produce to the landlord, and forms a part, though, as we shall see farther on, only a part of his rent. But if this transfer can be considered as injurious to the consumers, then every increase of capital and population not resulting specifically from improvements in agriculture, must be considered as injurious; and a country which might maintain well ten millions of inhabitants ought to be kept down to a million. The transfer from profits and wages, and such a value of the produce as yields rent, which have been objected to as injurious, and as depriving the consumer of what it gives to the landlord, are absolutely necessary in order to obtain any considerable addition to the wealth and numbers of the first settlers in a new country; and are the natural and unavoidable consequences of that increase of capital and population for which nature has provided in the propensities of the human race.

When such an accumulation of capital has taken place, as to render the returns of an additional quantity employed on the lands first chosen less than could be obtained from inferior land,* it must evidently answer to cultivate such inferior land. But the cultivators of the richer land, after profits and wages had fallen, if they paid no rent, would cease to be mere farmers, or persons living upon the profits of agricultural stock; they would evidently unite the characters of landlords and farmers—a union by no means uncommon, but one which does not alter in any degree the nature of rent, or its essential separation from profits and wages.

If the profits of capital on the inferior land taken into cultivation were thirty per cent., and portions of the old land would yield forty per cent., ten per cent. of the forty would obviously be rent by whomsoever received: and when capital had further accumulated and corn wages fallen† on the more eligible lands of a country, other lands, less favourably circumstanced with respect to fertility or situation, might be occupied with advantage. The quantity of produce required to replace wages and profits, having fallen, poorer land, or land more distant from rivers and markets, though yielding at first no rents, might fully repay these expenses, and fully answer to the cultivator. And again, when either the profits of stock, or the corn wages of labour, or both, have still further fallen, land still poorer or still less favourably situated, might be taken into cultivation. And at every step of this kind it is clear, that the rent of land must rise.

It may be laid down, therefore, as an incontrovertible truth, that as a nation reaches any considerable degree of wealth, and any considerable fullness of population, the separation of rents, as a kind of fixture upon lands of a certain quality, is a law as invariable as the action of the principle of gravity; and that rents are neither a mere nominal value, nor a value unnecessarily and injuriously transferred from one set of people to another; but a most important part of the whole value of the annual produce, necessarily resulting from its continued increase, and placed by the laws of nature on the land, by whomsoever possessed, whether by few or many, whether by the landlord, the crown, or the actual cultivator.

This then is the mode in which rent would separate itself from profits and wages, in a natural state of things, the least interrupted by bad government, or any kind of unnecessary monopoly; but in the different states in which mankind have lived, it is but too well known that bad governments and unnecessary monopolies have been frequent; and it is certain that they will essentially modify this natural progress, and often occasion a premature formation of rent.

In most of the great eastern monarchies, the sovereign has been considered in the light of the owner of the soil. This premature monopoly of the land joined with the two properties of the soil, and of its products first noticed, has enabled the government to claim, at a very early period, a certain portion of the produce of all cultivated land; and under whatever name this may be taken, it is essentially rent. It is an excess both of the quantity, and of the value of what is produced above the costs of cultivation.*

But in most of these monarchies there was a great extent of fertile territory; the natural surplus of the soil was very considerable; and while the claims upon it were moderate, the remainder was sufficient to afford such profits and wages as would allow of a great increase of population.

It is obvious, however, that it is in the power of a sovereign who is owner of the soil in a very rich territory to obtain, at an early stage of improvement, an excessive rent. He might, almost from the first, demand all that was not necessary to allow of a moderate increase of the cultivators, which, if their skill were not deficient, would afford him a larger proportion of the whole produce in the shape of a tax or rent, than could probably be obtained at any more advanced period of society; but then of course only the most fertile lands of the country could be cultivated; and profits, wages and population would come to a premature stop.

It is not to be expected that sovereigns should push their rights over the soil to such an extreme extent, as it would be equally contrary to their own interest, and to that of their subjects; but there is reason to believe that in parts of India, and in many other southern and eastern countries, and probably even in China, the progress of taxation on the land, founded upon the sovereign’s right to the soil, together with other customary payments out of the raw produce, have forcibly and prematurely lowered the profits of capital, and the wages of labour on the land, and have thrown great obstacles in the way of progressive cultivation and population in latter times, while much good land has remained waste. This will always be the case, when, owing to an unnecessary monopoly, a greater portion of the surplus produce is taken in the shape of rent or taxes, than would have been separated by the natural fall of profits and wages occasioned by the increase of capital and population. But whatever may be the nature of the monopoly of land, whether necessary or artificial, it will be observed that the power of paying a rent or taxes on the land, is completely limited by its fertility; and those who are disposed to underrate the importance of the two first causes of rent which I have stated, should look at the various distributions of the produce in kind which take place in many parts of India, where, when once the monopoly has enabled the sovereign to claim all the produce which remains above what is required for the cultivation of the soil, his resources obviously depend upon the surplus of necessaries which the land yields, and the power of these necessaries to command labour.

It may be thought, perhaps, that rent could not be forcibly and prematurely separated from profits and wages so as unnaturally to reduce the two latter, because capital and labour would quit the land if more could be made of them elsewhere; but it should be recollected, that the actual cultivators of the soil in these countries are generally in a very low and degraded condition; that very little capital is employed by them, and scarcely any which they can remove and employ in another business; that the surplus produce possessed by the government soon raises up a population to be employed by it, so as to keep down the price of labour in other departments to the level of the price in agriculture; and that the small demand for the products of manufacturing and commercial industry, owing to the poverty of the great mass of society, affords no room for the employment of a large capital, with high profits in manufactures and commerce.

On account of these causes which tend to lower profits, and the difficulty of collecting money, together with the risk of lending it which tends to raise interest, I have long been of opinion, that though the rate of interest in different countries is almost the only criterion from which a judgment can be formed of the rate of profits; yet that in such countries as India and China, and indeed in most of the eastern and southern regions of the globe, it is a criterion subject to the greatest uncertainty. In China, the legal interest of money is said to be three per cent. per month.* But it is impossible to suppose, when we consider the state of China, so far as it is known to us, that capital employed on the land can yield profits to this amount; or, indeed, that it can be employed in any steady and well-known trade with such a return.

In the same way extraordinary accounts have been given of the high rate of interest in India; but the state of the actual cultivators completely contradicts the supposition, that, independently of their labour, the profits upon their stock is so considerable; and the late reduction of the government paper to six per cent. fully proves that, in common and peaceable times, the returns of capital, which can be depended upon in other sorts of business, are by no means so great as to warrant the borrowing at a very high rate of interest.

It is probable that, with the exception of occasional speculations, the money which is borrowed at the high rates of interest noticed in China and India, is borrowed in both countries, rather with a view to expenditure, the payment of debts, or some pressing necessity, than with a view to regular profits.

Some of the causes, which have been noticed as tending prematurely and irregularly to raise rents and lower profits in the countries of the east, operated without doubt to a certain extent in the early stages of society in Europe. At one period most of the land was cultivated by slaves; and on the metayer system which succeeded, the division of the crop was so arranged as to allow the cultivator but little more than a scanty subsistence. In this state of things the rate of profits on the land could have but little to do with the general rate of profits. The peasant could not, without the greatest difficulty, realize money and change his profession; and it is quite certain that no one who had accumulated a capital in manufactures and commerce, would employ it in cultivating the lands of others as a metayer. There would thus be little or no interchange of capital between trade and agriculture, and the profits in each might in consequence be very unequal.

It is probable however, as in the case of China and India above mentioned, that profits would not be excessively high. This would depend indeed mainly upon the supply of capital in manufactures and commerce; if capital were scarce, compared with the demand for the products of these kinds of industry, profits would certainly be high; and all that can be said safely is, that we cannot infer that they were very high, from the very high rates of interest occasionally mentioned.

Rent then has been traced to the same common nature with that general surplus from the land, which is the result of certain qualities of the soil and its produce; and it has been found to commence its separation from profits and wages, as soon as they begin to fall from the scarcity of fertile land whether occasioned by the natural progress of a country towards wealth and population, or by any premature and unnecessary monopoly of the soil.

[† ] After what has been stated respecting the constancy of the value of labour in the last chapter, it will be understood that whenever I speak of high or low wages, or of the rise or fall of wages, I always mean to refer to their greater or less amount, or to the increase or diminution of the quantity of necessaries, &c. awarded the labourer, or of the money wherewith he purchases those necessaries, and which is variable in its value.

It would, perhaps, have been better, in order to avoid ambiguity, always to have applied these latter terms to wages, instead of the former ones, but the expressions high and low wages, and the rise and fall of wages, being so constantly used in common conversation, and being always understood in the sense in which I explain them, the retaining them is not likely to create confusion in the mind of the reader.

[* ] If, commencing with a new colony the increase of population did not create a demand for more food than could be produced with the same profits from the richest lands, no rent could arise, and no inferior land could be taken into cultivation.

[† ] Mr. Ricardo quite misunderstood me, when he represents me as saying that rent immediately and necessarily rises or falls with the increased or diminished fertility of the land. (p. 489, 3d edit.) How far my former words would bear this interpretation the reader must judge: but I certainly could not be aware that they would be so construed. Having stated three causes as necessary to the production of rent, I could not possibly have meant to say that rent would vary always and exactly in proportion to one of them. I distinctly stated, indeed, that in new colonies, the surplus produce from the land, or its fertility, appears but little in the shape of rent. Surely he expressed himself more inadvertently while correcting me, by referring to the comparative scarcity of the most fertile land as the only cause of rent, (p. 490, 3d edit.) although he has himself acknowledged, that without positive fertility, no rent can exist. (p. 491.) If the most fertile land of any country were still very poor, such country would yield but very little rent, however scarce such land might be; and if there were no excess of necessaries above what are required for the maintenance of the cultivators, there would be no excess of price.

[* ] The immediate motive for the cultivation of fresh land can only be the prospect of employing an increasing capital to greater advantage than on the old land.

[† ] When a given value of capital yields smaller returns, whether on new land or old, the loss is generally divided between the labourers and capitalists, and wages and profits fall at the same time. This is quite contrary to Mr. Ricardo’s language. But the wages we refer to are totally different. He speaks of the mere labour cost of producing the necessaries of the labourer; I speak of the necessaries themselves. The reader will be aware that when corn wages have fallen, the value of corn has risen, owing to a greater intensity of demand for it, or the power and will to purchase it by the sacrifice of a greater quantity of labour.

[* ] This view of the subject includes all the different kinds of rent referred to by Mr. Jones, in his late valuable account of the state of rents, and the various modes of paying labour in different parts of the world. Whether the labourer is paid in money, in produce, or by a portion of land which he is to work himself with a part of his labour, while he gives the other part to his lord, the foundation of rent is exactly the same, depending always upon the value of the excess of what the whole of the lord’s land produces, above that which under the actual circumstances is received by the cultivators, and the amount of rent which can be received from a given extent of land will rise according to all the different degrees of fertility above that which will only support the actual cultivators.

[* ] Penal Code, Staunton, p. 158. The market-rate of interest at Canton is said, however, to be only from twelve to eighteen per cent. Id. note XVII.