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.

CHAPTER I.

ON THE PROGRESS OF WEALTH.

Section I.—

Statement of the particular Object of Inquiry.

There is scarcely any inquiry more curious, or, from its importance, more worthy of attention, than that which traces the causes which practically check the progress of wealth in different countries, and stop it, or make it proceed very slowly, while the power of production remains comparatively undiminished, or at least would furnish the means of a great and abundant increase of produce and population.

In a former work* I endeavoured to trace the causes which practically keep down the population of a country to the level of its actual supplies. It is now my object to shew what are the causes which chiefly influence these supplies, or call the powers of production forth into the shape of increasing wealth.

Among the primary and most important causes which influence the wealth of nations, must unquestionably be placed, those which come under the head of politics and morals. Security of property, without a certain degree of which, there can be no encouragement to individual industry, depends mainly upon the political constitution of a country, the excellence of its laws and the manner in which they are administered. And those habits which are the most favourable to regular exertions as well as to general rectitude of character, and are consequently most favourable to the production and maintenance of wealth, depend chiefly upon the same causes, combined with moral and religious instruction. It is not however my intention at present to enter fully into these causes, important and effective as they are; but to confine myself chiefly to the more immediate and proximate causes of increasing wealth, whether they may have their origin in these political and moral sources, or in any others more specifically and directly within the province of political economy.

It is obviously true that there are many countries, not essentially different either in the degree of security which they afford to property, or in the moral and religious instruction received by the people, which yet, with nearly equal natural capabilities, make a very different progress in wealth. It is the principal object of the present inquiry to explain this; and to furnish some solution of certain phenomena frequently obtruded upon our attention, whenever we take a view of the different states of Europe, or of the world; namely, countries with great powers of production comparatively poor, and countries with small powers of production comparatively rich.

If the actual riches of a country not subject to repeated violences and a frequent destruction of produce, be not after a certain period in some degree proportioned to its power of producing riches, this deficiency must have arisen from the want of an adequate stimulus to continued production. The practical question then for our consideration is, what are the most immediate and effective stimulants to the continued creation and progress of wealth.

Section II.—

Of the Increase of Population considered as a Stimulus to the continued Increase of Wealth.

Many writers have been of opinion that an increase of population is the sole stimulus necessary to the increase of wealth, because population, being the great source of consumption, must in their opinion necessarily keep up the demand for an increase of produce, which will naturally be followed by a continued increase of supply.

That a continued increase of population is a powerful and necessary element of increasing demand, will be most readily allowed; but that the increase of population alone, or, more properly speaking, the pressure of the population hard against the limits of subsistence, does not furnish an effective stimulus to the continued increase of wealth, is not only evident in theory, but is confirmed by universal experience. If want alone, or the desire of the labouring classes to possess the necessaries and conveniences of life, were a sufficient stimulus to production, there is no state in Europe, or in the world, which would have found any other practical limit to its wealth than its power to produce; and the earth would probably before this period have contained, at the very least, ten times as many inhabitants as are supported on its surface at present.

But those who are acquainted with the nature of effectual demand, will be fully aware that, where the right of private property is established, and the wants of society are supplied by industry and barter, the desire of any individual to possess the necessaries, conveniences and luxuries of life, however intense, will avail nothing towards their production, if there be no where a reciprocal demand for something which he possesses. A man whose only possession is his labour has, or has not, an effective demand for produce according as his labour is, or is not, in demand by those who have the disposal of produce. And no productive labour can ever be in demand with a view to profit unless the produce when obtained is of greater value than the labour which obtained it. No fresh hands can be employed in any sort of industry merely in consequence of the demand for its produce occasioned by the persons employed. No farmer will take the trouble of superintending the labour of ten additional men merely because his whole produce will then sell in the market at an advanced price just equal to what he had paid his additional labourers. There must be something in the previous state of the demand and supply of the commodity in question, or in its price, antecedent to and independent of the demand occasioned by the new labourers, in order to warrant the employment of an additional number of people in its production.

It will be said perhaps that the increase of population will lower wages, and, by thus diminishing the costs of production, will increase the profits of the capitalists and the encouragement to produce. Some temporary effect of this kind may no doubt take place, but it is evidently very strictly limited. The fall of real wages cannot go on beyond a certain point without not only stopping the progress of the population but making it even retrograde; and before this point is reached, the increase of produce occasioned by the labour of the additional number of persons will have so lowered its value, and reduced profits, as to determine the capitalist to employ less labour. Though the producers of necessaries might certainly be able in this case to obtain the funds required for the support of a greater number of labourers; yet if the effectual demand for necessaries were fully supplied, and an adequate taste for unproductive consumption, or personal services had not been established, no motive of interest could induce the producers to make an effectual demand for this greater number of labourers.

It is obvious then in theory that an increase of population, when an additional quantity of labour is not required, will soon be checked by want of employment and the scanty support of those employed, and will not furnish the required stimulus to an increase of wealth proportioned to the power of production.

But, if any doubts should remain with respect to the theory on the subject, they will surely be dissipated by a reference to experience. It is scarcely possible to cast our eyes on any nation of the world without seeing a striking confirmation of what has been advanced. Almost universally, the actual wealth of all the states with which we are acquainted is very far short of their powers of production; and among those states, the slowest progress in wealth is often made where the stimulus arising from population alone is the greatest, that is, where the population presses the hardest against the actual limits of subsistence. It is quite evident that the only fair way, indeed the only way, by which we can judge of the practical effect of population alone as a stimulus to wealth, is to refer to those countries where, from the excess of population above the funds applied to the maintenance of labour, the stimulus of want is the greatest. And if in these countries, which still have great powers of production, the progress of wealth is very slow, we have certainly all the evidence which experience can possibly give us, that population alone cannot create an effective demand for wealth.

To suppose a great and continued increase of population is to beg the question. We may as well suppose at once an increase of wealth; because such an increase of population cannot take place without a proportionate or nearly proportionate increase of wealth. The question really is, whether encouragements to population, or even the natural tendency of population to increase beyond the funds destined for its maintenance, will, or will not, alone furnish an adequate stimulus to the increase of wealth. And this question, Spain, Portugal, Poland, Hungary, Turkey, and many other countries in Europe, together with nearly the whole of Asia and Africa, and the greatest part of America, distinctly answer in the negative.

Section III.—

Of Accumulation, or the Saving from Revenue to add to Capital, considered as a Stimulus to the Increase of Wealth.

Those who reject mere population as an adequate stimulus to the increase of wealth, are generally disposed to make every thing depend upon accumulation. It is certainly true that no permanent and continued increase of wealth can take place without a continued increase of capital; and I cannot agree with Lord Lauderdale in thinking that this increase can be effected in any other way than by saving from the stock which might have been destined for immediate consumption, and adding it to that which is to yield a profit; or in other words, by the conversion of revenue into capital.*

But we have yet to inquire what is the state of things which generally disposes a nation to accumulate; and further, what is the state of things which tends to make that accumulation the most effective, and lead to a further and continued increase of capital and wealth.

It is undoubtedly possible by parsimony to devote at once a much larger share than usual of the produce of any country to the maintenance of productive labour; and suppose this to be done, it is quite true that the labourers so employed are consumers as well as those engaged in personal services, and that as far as the labourers are concerned, there would be no diminution of consumption or demand. But it has already been shewn that the consumption and demand occasioned by the workmen employed in productive labour can never alone furnish a motive to the accumulation and employment of capital; and with regard to the capitalists themselves, together with the landlords and other rich persons, they have, by the supposition, agreed to be parsimonious, and by depriving themselves of their usual conveniencies and luxuries to save from their revenue and add to their capital. Under these circumstances, it is impossible that the increased quantity of commodities, obtained by the increased number of productive labourers, should find purchasers, without such a fall of price as would probably sink their value below that of the outlay, or, at least, so reduce profits as very greatly to diminish both the power and the will to save.

It has been thought by some very able writers, that although there may easily be a glut of particular commodities, there cannot possibly be a glut of commodities in general; because, according to their view of the subject, commodities being always exchanged for commodities, one half will furnish a market for the other half, and production being thus the sole source of demand, an excess in the supply of one article merely proves a deficiency in the supply of some other, and a general excess is impossible. M. Say, in his distinguished work on political economy, has indeed gone so far as to state that the consumption of a commodity by taking it out of the market diminishes demand, and the production of a commodity porportionably increases it.

This doctrine, however, as generally applied, appears to me to be utterly unfounded, and completely to contradict the great principles which regulate supply and demand.

It is by no means true, as a matter of fact, that commodities are always exchanged for commodities. An immense mass of commodities is exchanged directly, either for productive labour, or personal services: and it is quite obvious, that this mass of commodities, compared with the labour with which it is to be exchanged, may fall in value from a glut just as any one commodity falls in value from an excess of supply, compared either with labour or money.

In the case supposed there would evidently be an unusual quantity of commodities of all kinds in the market, owing to those who had been before engaged in personal services having been converted, by the accumulation of capital, into productive labourers; while the number of labourers altogether being the same, and the power and will to purchase for consumption among landlords and capitalists being by supposition diminished, commodities would necessarily fall in value compared with labour, so as very greatly to lower profits, and to check for a time further production. But this is precisely what is meant by the term glut, which, in this case, is evidently general not partial.

M. Say, Mr. Mill,* and Mr. Ricardo, the principal authors of these new doctrines, appear to me to have fallen into some fundamental errors in the view which they have taken of this subject.

In the first place, they have considered commodities as if they were so many mathematical figures, or arithmetical characters, the relations of which were to be compared, instead of articles of consumption, which must of course be referred to the numbers and wants of the consumers.

If commodities were only to be compared and exchanged with each other, then indeed it would be true that, if they were all increased in their proper proportions to any extent, they would continue to bear among themselves the same relative value; but, if we compare them, as we certainly ought to do, with the means of producing them, and with the numbers and wants of the consumers, then a great increase of produce with comparatively stationary numbers or with wants diminished by parsimony, must necessarily occasion a great fall of value estimated in labour, so that the same produce, though it might have cost the same quantity of labour as before, would no longer command the same quantity; and both the power of accumulation and the motive to accumulate would be strongly checked.

It is asserted that effectual demand is nothing more than the offering of one commodity in exchange for another which has cost the same quantity of labour. But is this all that is necessary to effectual demand? Though each commodity may have cost the same quantity of labour in its production, and they may be exactly equivalent to each other in exchange, yet why may not both be so plentiful as not to command more labour, than they have cost, that is, to yield no profit, and in this case, would the demand for them be effectual? Would it be such as to encourage their continued production? Unquestionably not. Their relation to each other may not have changed; but their relation to the wants of the society, and their relation to labour, may have experienced a most important change.*

It will be readily allowed that a new commodity thrown into the market, which, in proportion to the labour employed upon it, is of higher exchangeable value than usual, is precisely calculated to increase demand; because it implies, not a mere increase of quantity, but an increase of value owing to a better adaptation of the produce to the tastes, wants and consumption of the society. But to fabricate or procure commodities of this kind is the grand difficulty; and they certainly do not naturally and necessarily follow an accumulation of capital and increase of commodities, most particularly when such accumulation and increase have been occasioned by economy of consumption, or a discouragement to the indulgence of those tastes and wants, which are the very elements of demand and of value.

Mr. Ricardo, though he maintains as a general position that capital cannot be redundant, is obliged to make the following concession. He says, “There is only one case, and that will be temporary, in which the accumulation of capital with a low price of food may be attended with a fall of profits; and that is, when the funds for the maintenance of labour increase much more rapidly than population;—wages will then be high and profits low. If every man were to forego the use of luxuries and be intent only on accumulation, a quantity of necessaries might be produced for which there could not be any immediate consumption. Of commodities so limited in number, there might undoubtedly be an universal glut; and consequently there might neither be demand for an additional quantity of such commodities, nor profits on the employment of more capital. If men ceased to consume, they would cease to produce.” Mr. Ricardo then adds, “This admission does not impugn the general principle.”* In this last remark I can by no means agree with him. It appears to me most completely to impugn the general principle. Even if we suppose with Mr. Ricardo, what is not true, that an increase of population would certainly remedy the evil; yet as from the nature of a population, an increase of labourers cannot be brought into the market, in consequence of a particular demand, till after the lapse of sixteen or eighteen years, and the conversion of revenue into capital by saving, may take place much more rapidly; a country is always liable to an increase in the quantity of the funds for the maintenance of labour faster than the increase of population. But if, whenever this occurs, there may be an universal glut of commodities, how can it be maintained, as a general position, that capital is never redundant; and that because commodities may retain the same relative values, a glut can only be partial, not general?

Another fundamental error into which the writers above-mentioned and their followers appear to have fallen is, the not taking into consideration the influence of so general and important a principle in human nature, as indolence or love of ease.

It has been supposed* that, if a certain number of farmers and a certain number of manufacturers had been exchanging their surplus food and clothing with each other, and their powers of production were suddenly so increased that both parties could, with the same labour, produce luxuries in addition to what they had before obtained, there could be no sort of difficulty with regard to demand, as part of the luxuries which the farmer produced would be exchanged against part of the luxuries produced by the manufacturer; and the only result would be, the happy one of both parties being better supplied and having more enjoyments.

But in this intercourse of mutual gratifications, two things are taken for granted, which are the very points in dispute. It is taken for granted that luxuries are always preferred to indolence, and that an adequate proportion of the profits of each party is consumed as revenue. What would be the effect of a desire to save under such circumstances, shall be considered presently. The effect of a preference of indolence to luxuries would evidently be to occasion a want of demand for the returns of the increased powers of production supposed, and to throw labourers out of employment. The cultivator, being now enabled to obtain the necessaries and conveniences to which he had been accustomed, with less toil and trouble, and his tastes for ribands, lace and velvet not being fully formed, might be very likely to indulge himself in indolence, and employ less labour on the land; while the manufacturer, finding his velvets rather heavy of sale, would be led to discontinue their manufacture, and to fall almost necessarily into the same indolent system as the farmer. That an efficient taste for luxuries and conveniences, that is, such a taste as will properly stimulate industry, instead of being ready to appear at the moment it is required, is a plant of slow growth, the history of human society sufficiently shows; and that it is a most important error to take for granted, that mankind will produce and consume all that they have the power to produce and consume, and will never prefer indolence to the rewards of industry, will sufficiently appear from a slight review of some of the nations with which we are acquainted. But I shall have occasion for a review of this kind in the next section; and to this I refer the reader.

It has been said, that it is specifically the deficiency of production on the part of the indolent, which occasions the want of demand for the products of the industrious; and that, if the idle were made to produce, the surplus would disappear. But this remark is evidently beside the question.* The real question is, whether under the actual habits and tastes of the society, any number of persons who might be inclined to save and produce, if they suited their produce to these habits and tastes, would be secure of finding such a demand for all they could bring into the market as to prevent the possibility of what is called a glut, or a great fall of profits in a large mass of commodities. What might happen under different tastes and habits is entirely a different question.

It has also been said, that there is never an indisposition to consume, that the indisposition is to produce. Yet, what is the disposition of those master manufacturers, and merchants who produce very largely and consume sparingly? Is their will to purchase commodities for their consumption proportioned to their power? Does not the use which they make of their capital clearly show that their will is to produce, not to consume? and in fact, if there were not in every country some who were indisposed to consume to the value of what they produced, how could the national capital ever be increased?

A third very serious error of the writers above referred to, and practically the most important of the three, consists in supposing that accumulation ensures demand; or that the consumption of the labourers employed by those whose object is to save, will create such an effectual demand for commodities as to encourage a continued increase of produce.

Mr. Ricardo observes, that “If £10,000 were given to a man having £100,000 per annum, he would not lock it up in a chest, but would either increase his expenses by £10,000, employ it himself productively, or lend it to some other person for that purpose; in either case demand would be increased, although it would be for different objects. If he increased his expenses, his effectual demand might probably be for buildings, furniture, or some such enjoyment. If he employed his £10,000 productively, his effectual demand would be for food, clothing, and raw materials, which might set new labourers to work. But still it would be demand.”*

Upon this principle it is supposed that if the richer portion of society were to forego their accustomed conveniences and luxuries with a view to accumulation, the only effect would be a direction of nearly the whole capital of the country to the production of necessaries, which would lead to a great increase of cultivation and population. But this is precisely the case in which Mr. Ricardo distinctly allows that there might be a universal glut; for there would undoubtedly be more necessaries produced than would be sufficient for the existing demand. This state of things could not, however, continue; since, owing to the fall which would take place, cultivation would be checked, and accumulation be arrested in its progress.

It is therefore obvious that without an expenditure which will encourage commerce, manufactures, and personal services, the possessors of land would have no sufficient stimulus to cultivate well; and a country such as our own, which had been rich and populous, would, with too parsimonious habits, infallibly become poor and comparatively unpeopled.

This reasoning will obviously apply to the case noticed before. While the farmers were disposed to consume the luxuries produced by the manufacturers, and the manufacturers those produced by the farmers, all would go on smoothly; but if either one or both of the parties were disposed to save largely, with a view of bettering their condition, and providing for their families in future, the state of things would be very different. The farmer, instead of indulging himself in ribands, lace, and velvets,* would be disposed to be satisfied with more simple clothing, but by this economy he would disable the manufacturer from purchasing the same amount of his produce; and for the returns of so much labour employed upon the land, and all greatly increased in productive power, there would evidently be no market. The manufacturer, in like manner, instead of indulging himself in sugar, grapes, and tobacco, might be disposed to save with a view to the future, but would be totally unable to do so, owing to the parsimony of the farmers and the want of demand for manufactures.*

An accumulation, to a certain extent, of common food and common clothing might take place on both sides; but the amount must necessarily be extremely confined. It would be no sort of use to the farmer to go on cultivating his land with a view merely to give food and clothing to his labourers. He would be doing nothing either for himself or family, if he neither consumed the surplus of what they produced himself, nor could realize it in a shape that might be transmitted to his descendants. If he were a tenant, such additional care and labour would be entirely thrown away; and if he were a landlord, and were determined, without reference to markets, to cultivate his estate in such a way as to make it yield the greatest neat surplus with a view to the future, it is quite certain that the large portion of this surplus which was not required either for his home consumption, or to purchase clothing for himself and his labourers, would be absolutely wasted. If he did not choose to use it in the purchase of luxuries or the maintenance of personal services, it might as well be thrown into the sea. To save it, that is to use it in employing more labourers upon the land, would be to impoverish both himself and his family, and render it impossible at a future time to obtain a large disposeable produce from his land, without retracing his steps and dismissing half his labourers, who might starve when their labour was no longer wanted.

It would be still more useless to the manufacturers to go on producing clothing beyond what was wanted by the agriculturists and themselves. Their numbers indeed would entirely depend upon the demands of the agriculturists, as they would have no means of purchasing subsistence, but in proportion as there was a reciprocal want of their manufactures. The population required to provide simple clothing for such a society with the assistance of good machinery would be inconsiderable, and would absorb but a small portion of the proper surplus of rich and well cultivated land. There would evidently therefore be a general want of demand, both for produce and population; and while it is quite certain that an adequate passion for consumption may fully keep up the proper proportion between supply and demand, whatever may be the powers of production, it appears to be quite as certain that an inordinate passion for accumulation must inevitably lead to a supply of commodities beyond what the structure and habits of such a society will permit to be profitably consumed.*

But if this be so, surely it is a most important error to couple the passion for expenditure and the passion for accumulation together, as if they were of the same nature; and to consider the demand for the food and clothing of the labourer, who is to be employed productively, as securing such a general demand for commodities and such a rate of profits for the capital employed in producing them, as will adequately call forth the powers of the soil, and the ingenuity of man in procuring the greatest quantity both of raw and manufactured produce.

If, in the process of saving, all that was lost by the capitalist was gained by the labourer, the check to the progress of wealth would be but temporary, as stated by Mr. Ricardo; and the consequences need not be apprehended. But if the conversion of revenue into capital pushed beyond a certain point must, by diminishing the effectual demand for produce, throw the labouring classes out of employment, it is obvious that the adoption of parsimonious habits beyond a certain point, may be accompanied by the most distressing effects at first, and by a marked depression of wealth and population afterwards.

It is not, of course, meant to be stated that parsimony, or even a temporary diminution of consumption,* is not often in the highest degree useful, and sometimes absolutely necessary to the progress of wealth. A state may certainly be ruined by extravagance; and a diminution of the actual expenditure may not only be necessary on this account, but when the capital of a country is deficient, compared with the demand for its products, a temporary economy of consumption is required, in order to provide that supply of capital which can alone furnish the means of an increased consumption in future. All that is contended for is, that no nation can possibly grow rich by an accumulation of capital, arising from a permanent diminution of consumption; because such accumulation being beyond what is wanted in order to supply the effectual demand for produce, a part of it would very soon lose both its use and its value, and cease to possess the character of wealth.

The laws which regulate the rate of profits and the progress of capital, bear a very striking and singular resemblance to the laws which regulate the rate of wages and the progress of population.

Mr. Ricardo has very clearly shewn that the rate of profits must diminish, and the progress of accumulation be finally stopped, under the most favourable circumstances, by the increasing difficulty of procuring the food of the labourer. I, in like manner, endeavoured to shew in my Essay on the Principle of Population that, under circumstances the most favourable to cultivation which could possibly be supposed to operate in the actual state of the earth, the real wages of the labourer would gradually become more scanty, and the progress of population be finally stopped by the increasing difficulty of procuring the means of subsistence.

But Mr. Ricardo has not been satisfied with proving the position just stated. He has not been satisfied with shewing that the difficulty of procuring the food of the labourer is the only absolutely necessary cause of the fall of profits, in which I am ready fully and entirely to agree with him: but he has gone on to say, that there is no other cause of the fall of profits in the actual state of things that has any degree of permanence.* In this latter statement he appears to me to have fallen into precisely the same kind of error as I should have fallen into, if, after having shewn that the unrestricted power of population was beyond comparison greater than the power of the earth to produce food under the most favourable circumstances possible, I had allowed that population could not be redundant unless the powers of the earth to keep up with the progress of population had been tried to the uttermost. But I all along said, that population might be redundant, and greatly redundant, compared with the demand for it and the actual means of supporting it, although it might most properly be considered as deficient, and greatly deficient, compared with the extent of territory, and the powers of such territory to produce additional means of subsistence; that, in such cases, notwithstanding the acknowledged deficiency of population, and the obvious desirableness of having it greatly increased, it was useless and foolish directly to encourage the birth of more children, as the effect of such encouragement, without a demand for labour and the means of paying it properly, could only be increased misery and mortality with little or no final increase of population.

Now the same kind of reasoning ought, I think, to be applied to the rate of profits and the progress of capital. Fully acknowledging that there is hardly a country in the four quarters of the globe where capital is not deficient, and in most of them very greatly deficient, compared with the territory and even the number of people; and fully allowing at the same time the extreme desirableness of an increase of capital, I should say that, where the state of the demand for commodities was such as to afford much less than ordinary profits to the producer, and the capitalists were at a loss where and how to employ their capitals to advantage, the saving from revenue to add still more to these capitals would only tend prematurely to diminish the motive to accumulation, and still further to distress the capitalists, with little increase of a wholesome and effective capital.

What is wanted in both these cases, prior to the increase of capital and population, is an effectual demand for commodities, that is, a demand by those who are able and willing to pay an adequate price for them; and though high profits are not followed by an increase of capital, so certainly as high wages are by an increase of population, yet it will be found that they are so followed more generally than they appear to be, because, in many countries, profits are often thought to be high, owing to the high interest of money, when they are really low; and because, universally, risk in employing capital has precisely the same effect in diminishing the motive to accumulate and the reward of accumulation, as low profits. At the same time it will be allowed that determined extravagance, and a determined indisposition to save, may keep profits permanently high. The most powerful stimulants may, under peculiar circumstances, be resisted; yet still it will not cease to be true that the natural and legitimate encouragement to the increase of capital is that increase of the power and will to save which is held out by certain and steady profits; and under circumstances in any degree similar, such increase of power and will to save must almost always be accompanied by a proportionate increase of capital.

One of the most striking instances of the truth of this remark, and a further proof of a singular resemblance in the laws that regulate the increase of capital and of population, is to be found in the rapidity with which the loss of capital is recovered during a war which does not interrupt commerce. The loans to government convert capital into revenue, and increase demand at the same time that they at first diminish the means of supply.* The necessary consequence must be an increase of profits. This naturally increases both the power and the reward of accumulation; and if only the same habits of saving prevail among the capitalists as before, the recovery of the lost stock must be rapid, just for the same kind of reason that the recovery of population is so rapid after some great mortality.

It is now fully acknowledged that it would be a gross error in the latter case, to imagine that, without the previous diminution of the population, the same rate of increase would still have taken place; because it is precisely the high wages occasioned by the demand for labour, which produce the effect of so rapid an increase of population. On the same principle it appears to me as gross an error to suppose that, without the previous loss of capital and an increased demand for produce occasioned by the expenditure in question, capital should be as rapidly accumulated; because it is precisely the high profits of stock occasioned by the demand for commodities, and the consequent demand for the means of producing them, which at once give the power and the will to accumulate.

Though it may be allowed therefore that the laws which regulate the increase of capital are not quite so distinct as those which regulate the increase of population, yet they are certainly just of the same kind; and it is equally vain, with a view to the permanent increase of wealth, to continue converting revenue into capital, when there is no adequate demand for the products of such capital, as to continue encouraging marriage and the birth of children without a demand for labour and an increase of the funds for its maintenance.

Section IV.—

Of the Fertility of the Soil, considered as a Stimulus to the continued Increase of Wealth.

In speaking of the fertility of the soil as not affording with certainty an adequate stimulus to the continued increase of wealth, it must always be recollected that a fertile soil gives at once the greatest natural capability of wealth that a country can possibly possess. When the deficient wealth of such a country is mentioned, it is not intended to speak positively, but comparatively, that is with reference to its natural capabilities; and so understood, the proposition will be liable to few or no exceptions. Perhaps, indeed, it may be said that no instance has occurred, in modern times, of a large and very fertile country having made full use of its natural resources; while there have been many instances of small and unfertile states having accumulated within their narrow limits, by means of foreign commerce, an amount of wealth very greatly exceeding what could be expected from their physical capabilities.

If a small body of people were possessed of a rich and extensive inland territory, divided into large portions, and not favourably situated with respect to markets, a very long period might elapse before the state became wealthy and populous, notwithstanding the fertility of the soil and the consequent facility of production. The nature of such a soil would make it yield a profit or rent to the owner in its uncultivated state. He would set a value therefore upon his property, as a source of profit as well as of power and amusement; and though it was capable of yielding much more raw produce than he and his immediate dependents could consume, he would by no means be disposed to allow others to seize on it, and divide it at their pleasure. He would probably let out considerable portions of it for small rents. But the tenants of these portions, if there were no foreign vent for the raw produce, and the commodities which contribute to the conveniences and luxuries of life were but little known, would have but small incitement to call forth the resources of his land, and give encouragement to a rapid increase of population. By employing ten families he might perhaps, owing to the richness of the soil, obtain food for fifty; but he would find no proportionate market for this additional food, and would be soon sensible that he had wasted his time and attention in superintending the labour of so many persons. He would be disposed therefore to employ a smaller number; or if, from motives of humanity, or any other reason, he was induced to keep more than were necessary for the supply of the market, upon the supposition of their being tolerably industrious, he would be quite indifferent to their industry, and his labourers would naturally acquire the most indolent habits. Such habits would probably be generated both in the masters and servants by such circumstances, and when generated, a considerable time and considerable stimulants are necessary to get rid of them.

It has been said, that those who have food and necessaries at their disposal will not be long in want of workmen, who will put them in possession of some of the objects most useful and desirable to them.* But this appears to be directly contradicted by experience. If the establishment, extension, and refinement of domestic manufactures were so easy a matter, our ancestors would not have remained for many hundred years so ill supplied with them, and been obliged to expend the main part of their raw produce in the support of idle retainers. They might be very ready, when they had the opportunity, to exchange their surplus raw produce for the foreign commodities with which they were acquainted, and which they had learnt to estimate. But it would be a very different thing, and very ill suited to their habits and degree of information, to employ their power of commanding labour in setting up manufactures on their own estates. Though the land might be rich, it might not suit the production of the materials most wanted; and the necessary machinery, the necessary skill in using it, and the necessary intelligence and activity of superintendance, would all unavoidably be deficient at first, and under the circumstances supposed, must be of very slow growth; so that after those ruder and more indispensable articles were supplied, which are always wanted and produced in an early stage of society, it is natural enough that a great lord should prefer distinguishing himself by a few splendid foreign commodities, if he could get them, and a great number of retainers, than by a large quantity of clumsy manufactures, which involved great trouble of superintendance.

It is certainly true, however, taking as an instance an individual workman, and supposing him to possess a given degree of industry and skill, that the less time he is employed in procuring food, the more time will he be able to devote to the procuring of conveniences and luxuries; but to apply this truth to whole nations, and to infer that the greater is the facility of procuring food, the more abundantly will the people be supplied with conveniences and luxuries would be one among the many rash and false conclusions which are often made in the application of a proposition without due attention to all the parts of the premises on which it rests. In the present case, all depends upon the supposition of a given degree of industry and skill, and the encouragement to employ them. But if, after the necessaries of life were obtained, the workman should consider indolence as a greater luxury than those which he was likely to procure by further labour, the proposition would at once cease to be true. And as a matter of fact, confirmed by all the accounts we have of nations, in the different stages of their progress, it must be allowed that this choice seems to be very general in the early periods of society, and by no means uncommon in the most improved states.

Few indeed and scanty would be the portion of conveniences and luxuries found in society, if those who are the main instruments of their production had no stronger motives for their exertions than the desire of enjoying them. It is the want of necessaries which mainly stimulates the labouring classes to produce luxuries; and were this stimulus removed or greatly weakened, so that the necessaries of life could be obtained with very little labour, instead of more time being devoted to the production of conveniences, there is every reason to think that less time would be so devoted.

At an early period of cultivation, when only rich soils are worked, as the quantity of corn is the greatest, compared with the quantity of labour required to produce it, we might expect to find a small portion of the population engaged in agriculture, and a large portion engaged in administering to the other wants of the society. And there can be little doubt that this is the state of things which we really should see, were it true, that if the means of maintaining labour be found, there can be no difficulty in making it produce objects of adequate value; or that when food can be obtained with facility, more time will be devoted to the production of conveniences and luxuries. But in examining the state of unimproved countries, what do we really see?—almost invariably, a much larger proportion of the whole people employed on the land than in those countries where the increase of population has occasioned the necessity of resorting to poor soils; and less time instead of more time devoted to the production of conveniences and luxuries.

Of the great landed nations of Europe, and indeed of the world, England, with hardly an exception, is supposed to have pushed its cultivation the farthest; and though the natural qualities of its whole soil by no means stand very high in the scale of comparative richness, there is a smaller proportion of the people employed in agriculture, and a greater proportion employed in the production of conveniences and luxuries, or living on monied incomes, than in any other agricultural country of the world. According to a calculation of Susmilch, in which he enumerates the different proportions of people in different states, who live in towns, and are not employed in agriculture, the highest is that of three to seven, or three living in towns to seven in the country;* whereas in England the proportion of those engaged in manufactures and commerce, and other employments not connected with the land, compared with those engaged in agriculture is as much as three to two.†

This is a very extraordinary fact, and affords a striking proof how very dangerous it is, in political economy, to draw conclusions from the physical quality of the materials which are acted upon, without reference to the moral as well as the physical qualities of the agents.

It is undoubtedly a physical quality of very rich land, if worked by people possessing a given degree of industry and skill, to yield a large quantity of produce, compared with the number of hands employed; but, if the facility of production which rich land gives has the effect, under certain circumstances, of preventing the growth of industry and skill, the land may become practically less productive, compared with the number of persons employed upon it, than if it were not distinguished for its richness.

Upon the same principle, the man who can procure the necessary food for his family, by two days labour in the week, has the physical power of working much longer to procure conveniences and luxuries, than the man who must employ four days in procuring food; but if the facility of getting food creates habits of indolence, this indolence may make him prefer the luxury of doing little or nothing, to the luxury of possessing conveniences and comforts; and in this case, he may devote less time to the working for conveniences and comforts, and be more scantily provided with them than if he had been obliged to employ more industry in procuring food.

Among the crowd of countries which tend more or less to illustrate and confirm by their present state the truth of these positions, none perhaps will do it more strikingly than the Spanish dominions in America, of which M. Humboldt has given so valuable an account.

Speaking of the different plants which are cultivated in New Spain, he says of the banana, “Je doute qu’il existe une autre plante sur le globe qui, sur un si petit espace de terrain, puisse produire une masse de substance nourrissante aussi considérable.”* He calculates in another place more particularly, that “dans un pays éminemment fertile un demi hectare, ou un arpent légal cultivé en bananes de la grande espèce, peut nourrir plus de cinquantes individus, tandis qu’en Europe le même arpent ne donneroit par an, en supposant le huitième grain, que 576 kilogrammes de farine de froment, quantité qui n’est pas suffisante pour la subsistance de deux individus: aussi rien ne frappe plus l’Européen récemment arrivé dans la zone torride que l’extrême petitesse des terrains cultivés autour d’une cabane qui renferme une famille nombreuse d’indigènes.”†

It appears further, that the banana is cultivated with a very trifling quantity of labour, and “se perpétue sans que l’homme y mette d’autre soin que de couper les tiges dont le fruit a mûri, et de donner à la terre une ou deux fois par an un léger labeur en piochant autour des racines.”‡

What immense powers of production are here described! What resources for unbounded wealth, if effectively called into action? Yet what is the actual state of things in this fertile region. M. Humboldt says, “On entend souvent répéter dans les colonies Espagnoles, que les habitans de la région chaude (tierra caliente) ne pourront sortir de l’état d’apathie dans lequel ils sont plongés depuis des siècles, que lorsqu’une cedule royale ordonnera la destruction des bananiers. Le remède est violent; et ceux qui le proposent avec tant de chaleur ne déploient généralement pas plus d’activité que le bas-peuple qu’ils veulent forcer au travail en augmentant la masse de ses besoins. Il faut espérer que l’industrie fera des progrès parmi les Mexicains sans qu’on emploie des moyens de destruction. En considérant d’ailleurs la facilité avec laquelle l’homme se nourrit dans un climat où croissent les bananiers, on ne doit pas s’étonner que dans la région equinoctiale du nouveau continent la civilisation ait commencé dans les montagnes, sur un sol moins fertile, sous un ciel moins favorable au développement des êtres organisés où le besoin même réveille l’industrie.

“Au pied de la Cordillère dans les vallées humides des Intendances de Vera-Cruz, de Valladolid, ou de Guadalaxara, un homme qui employe seulement deux jours de la semaine à un travail peu pénible peut fournir de la subsistance à une famille entière.”*

It appears then, that the extreme fertility of these countries, instead of affording an adequate stimulus to a rapid increase of wealth and population, has produced, under the actual circumstances in which they have been placed, a degree of indolence which has kept them poor and thinly peopled after the lapse of ages. Though the labouring classes have such ample time to work for conveniences and comforts, they are almost destitute of them. And, even in the necessary article of food, their indolence and improvidence prevent them from adopting those measures which would secure them against the effects of unfavourable seasons. M. Humboldt states that famines are common to almost all the equinoctial regions; and observes that, “sous la zone torride, où une main bienfaisante semble avoir répandu le germe de l’abondance, l’homme insouciant et phlegmatique éprouve périodiquement un manque de nourriture que l’industrie des peuples cultivés éloigne des régions les plus stériles du Nord.”*

It is possible, however, that the heat of the climate in these lower regions of New Spain, and an inferior degree of healthiness compared with the higher regions, though by no means such as to preclude a full population, may have assisted in keeping them poor and thinly peopled. But when we ascend the Cordilleras, to climates which seem to be the finest in the world, the scene which presents itself is not essentially different.

The chief food of the lower classes of the inhabitants on the elevated plains of the Cordilleras, is maize; and maize, though not so productive, compared with the labour employed upon it, as the banana, exceeds very greatly in productiveness the grains of Europe, and even of the United States. Humboldt states, that “La fécondité du thaolli, ou maïs Mexicain, est au-delà de tout ce que l’on peut imaginer en Europe. La plante, favorisée par de fortes chaleurs et par beaucoup d’humidité, aquiert une hauteur de deux à trois mètres. Dans les belles plaines qui s’étendent depuis San Juan del Rio à Quiretaro, par exemple, dans les terres de la grande métairie de l’Esperanza, un fanègue de maïs en produit quelquefois huit cents; des terreins fertiles en donnent, année commune, trois à quatre cents. Dans les environs de Valladolid on regarde comme mauvaise une récolte qui ne donne que 130 ou 150 fois la semence. Là où le sol est le plus stérile, on compte encore soixante ou quatre-vingt grains. On croit qu’en général le produit du maïs peut être évalué dans la région equinoctiale du royaume de la Nouvelle Espagne à cent cinquante pour un.”*

This great fertility produces, as might be expected, its natural effect of making the maintenance of a family in ordinary times extremely easy.

In the town of Mexico itself, where provisions are very considerably dearer than in the country, on account of the badness of the roads, and the expense of carriage, the very dregs of the people are, according to Humboldt, able to earn their maintenance by only one or two days’ labour in the week.† “Les rues de Mexico fourmillent de vingt à trent mille malheureux (Saragates Guachinangos), dont la plûpart passent la nuit à la belle étoile, et s’étendent le jour au soleil, le corps tout nu enveloppé dans une couverture de flanelle. Cette lie du peuple, Indiens et Metis, présentent beaucoup d’analogie avec les Lazaronis de Naples. Paresseux, insoucians, sobres comme eux, les Guachinangos n’ont cependant aucune férocité dans le caractère; ils ne demandent jamais l’aumône: s’ils travaillent un ou deux jours par semaine, ils gagnent ce qu’il leur faut pour acheter du pulque, ou de ces canards qui couvrent les lagunes Mexicaines, et que l’on rôtit dans leur propre graisse.”

But this picture of poverty is not confined to the dregs of the inhabitants of a large town. “Les Indiens Mexicains, en les considérant en masse, présentent le tableau d’une grande misère. Relégués dans les terres les moins fertiles; indolens par caractère, et plus encore par suite de leur situation politique, les natifs ne vivent qu’au jour le jour.”‡

With these habits they are little likely to make provision against the occasional failures in the crops of maize, to which these crops are peculiarly liable; and consequently, when such failures take place, they are exposed to extreme distress. Speaking generally of the immediate obstacles to the progress of population in New Spain, Humboldt seems to consider famine and the diseases which it produces, as the most cruel and destructive of all. “Les Indiens Américains,” (he says) “comme les habitans de l’Indostan, sont accoutumés à se contenter de la moindre quantité d’alimens qu’exige le besoin de la vie; ils augmentent en nombre sans que l’accroissement des moyens de subsistance soit proportionel à cette augmentation de population. Indolens par caractère, et surtout à cause de la position dans laquelle ils se trouvent sous un beau climat, sur un sol généralement fertile, les indigènes ne cultivent en maïs, en pommes de terre, et en froment que ce qu’il leur faut pour leur propre nourriture, ou tout au plus ce que requiert la consommation des villes et celle des mines les plus voisines.” And further on, he says, “le manque de proportion qui existe entre les progrès de la population et l’accroissement de la quantité d’alimens produite par la culture, renouvelle le spectacle affligeant de la famine chaque fois qu’une grande sécheresse ou quelque autre cause locale a gâté la récolte du maïs.”*

These accounts strikingly shew the indolence and improvidence which prevail among the people. Such habits must necessarily act as formidable obstacles in the way of a rapid increase of wealth and population. Where they have been once fully established, they are not likely to change, except gradually and slowly under a course of powerful and effective stimulants. And while the extreme inequality of landed property continues, and no sufficient vent is found for the raw produce in foreign commerce, these stimulants will be furnished very slowly and inadequately.

That the indolence of the natives is greatly aggravated by their political situation, cannot for a moment be doubted; but that, in spite of this situation, it yields in a great measure to the usual excitements is sufficiently proved by the rapid cultivation which takes place in the neighbourhood of a new mine, where an animated and effective demand is created for labour and produce. “Bientôt le besoin réveille l’industrie; on commence à labourer le sol dans les ravins, et sur les pentes des montagnes voisines, par tout où le roc est couvert de terreau: des fermes s’établissent dans le voisinage de la mine: la cherté des vivres, le prix considérable auquel la concurrence des acheteurs maintient tous les produits de l’agriculture, dédommagent le cultivateur des privations aux-quelles l’expose la vie pénible des montagnes.”*

When these are the effects of a really brisk demand for produce and labour, we cannot be at a loss for the main cause of the slow cultivation which has taken place over the greatest part of the country. Except in the neighbourhood of the mines and near the great towns, the effective demand for produce is not such as to induce the great proprietors to bring their immense tracts of land properly into cultivation: and the population, which, as we have seen, presses hard at times against the limits of subsistence, evidently exceeds in general the demand for labour, or the number of persons which the country can employ with regularity and constancy in the actual state of its agriculture and manufactures.

In the midst of an abundance of fertile land, it appears that the natives are often very scantily supplied with it. They would gladly cultivate portions of the extensive districts held by the great proprietors, and could not fail of thus deriving an ample subsistence for themselves and families; but in the actual state of the demand for produce in many parts of the country, and in the actual state of the ignorance and indolence of the natives, such tenants might not be able to pay a rent equal to what the land would yield in its uncultivated state, andin this case they would seldom be allowed to intrude upon such domains; and thus lands which might be made capable of supporting thousands of people, may be left to support a few hundreds of cattle.

Speaking of a part of the Intendency of Vera Cruz, Humboldt says, “Aujourd’hui des espaces de plusieurs lieues carrées sont occupés par deux ou trois cabanes, autour desquelles errent des bœufs à demisauvages. Un petit nombre de familles puissantes, et qui vivent sur le plateau central, possèdent la plus grande partie du littoral des Intendances de Vera Cruz, et de San Luis Potosi. Aucune loi agraire ne force ces riches propriétaires de vendre leurs majorats, s’ils persistent à ne pas vouloir défricher eux-mêmes des terres immenses qui en dépendent.”*

Among proprietors of this description, caprice and indolence might often prevent many from cultivating their lands. Generally, however, it might be expected, that these tendencies would yield, at least in a considerable degree, to the more steady influence of self-interest. But a vicious division of territory prevents the motive of interest from operating so strongly as it ought to do in the extension of cultivation. Without sufficient foreign commerce to give value to the raw produce of the land; and before the general introduction of manufactures had opened channels for domestic industry, the demand of the great proprietors for labour would be very soon supplied; and beyond this, the labouring classes would have nothing to give them for the use of their lands. Though the landholders might have ample power to support an extended population on their estates, the very slender increase of enjoyments, if any, which they might derive from it, would rarely be sufficient to overcome their natural indolence, or overbalance the possible inconveniences or trouble that might attend the proceeding. Of that encouragement to the increase of population, which arises from the division and subdivision of land as new families are brought into being, the country is deprived by the original state of property, and the feudal customs and habits which it necessarily tends to generate. And under these circumstances, if a comparative deficiency of commerce and manufactures, which great inequality of property tends rather to perpetuate than to correct, prevents the growth of that demand for labour and produce, which can alone remedy the discouragement to population occasioned by this inequality, it is obvious that Spanish America may remain for ages thinly peopled and poor, compared with her natural resources.

And so, in fact, she has remained. For though the increase of population and wealth has been considerable, particularly of late years, since the trade with the mother-country has been more open, yet altogether it has been far short of what it would have been, even under a Spanish government, if the riches of the soil had been called forth by a better division of landed property, or a greater and more constant demand for raw produce.

Humboldt observes that “Les personnes qui ont réfléchi sérieusement sur la richesse du sol Mexicain savent que, par le moyen d’une culture plus soignée, et sans supposer des travaux extraordinaires pour l’irrigation des champs, la portion de terrain déjà défriché pourroit fournir de la subsistance pour une population huit à dix fois plus nombreuse.” He then adds, very justly, “Si les plaines fertiles d’Atalisco, de Cholula et de Puebla ne produisent pas des récoltes plus abondantes, la cause principale doit être cherchée dans le manque des consommateurs, et dans les entraves que les inégalités du sol opposent au commerce intérieur des grains, surtout à leur transport vers les côtes qui sont baignées par la mer des Antilles.”* In the actual state of these districts, the main and immediate cause which retards their cultivation is indeed the want of consumers, that is, the want of power to sell the produce at such a price as will at once encourage good cultivation, and enable the farmers to give the landlords something that they want, for the use of their land. And nothing is so likely to prevent this price from being obtained, as any obstacles natural or artificial to internal and external commerce.

That the slow progress of New Spain in wealth and population, compared with its prodigious resources, has been more owing to want of demand than want of capital, may fairly be inferred from the actual state of its capital, which, according to Humboldt, is rather redundant than deficient. Speaking of the cultivation of sugar, which he thinks might be successfully carried on in New Spain, he says, “La Nouvelle Espagne, outre l’avantage de sa population, en a encore un autre très important, celui d’une masse énorme de capitaux amoncelés chez les propriétaires des mines ou entre les mains de négocians qui se sont retirés du commerce.”*

Altogether the state of New Spain, as described by Humboldt, clearly shews—

1st. That the power of supporting labour may exist to a much greater extent than the will.

2dly. That the time employed in working for conveniences and luxuries is not always great in proportion as the time employed in working for food is small.

3dly. That the deficient wealth of a fertile country may be more owing to want of demand than want of capital.

And, in general, that fertility of soil alone is not an adequate stimulus to the continued increase of wealth.

It is not necessary, however, to go so far as the Spanish dominions in America, to illustrate these propositions. The state of the mother-country itself, and of most of the countries of Europe, would furnish the same conclusions. We need not indeed go farther than Ireland to see a confirmation of them to a very considerable extent.

The cultivation of the potatoe, and its adoption as the general food of the lower classes of the people in Ireland, has rendered the land and labour necessary to maintain a family, unusually small, compared with most of the countries of Europe. The consequence of this facility of production, unaccompanied by such a train of fortunate circumstances as would give it full effect in the increase of wealth, is a state of things resembling, in many respects, countries less advanced in civilization and improvement.

The prominent feature of Ireland is, the power which it possesses and actually exercises, of supporting a much greater population than it can employ, and the natural and necessary effect of this state of things, is the very general prevalence of habits of indolence. The landed proprietors and principal tenants being possessed of food and necessaries, or at least of the ready means of procuring them, have found workmen in abundance at their command; but these workmen not finding sufficient employment in the farms on which they had settled, have rarely been able to put their landlords in possession of the objects “most useful and most desirable” to them. Sometimes, indeed, from the competition for land occasioned by an overflowing population, very high rents have been given for small portions of ground fit for the growth of potatoes; but as the power of paying such rents must depend, in a considerable degree, upon the power of getting work, the number of families upon an estate, who can pay high money rents, must have an obvious limit. This limit, there is reason to believe, has been often found in the inability of the Irish cotter to pay the rent which he had contracted for; and it is generally understood that the most intelligent Irish landlords, influenced both by motives of humanity and interest, are now endeavouring to check the progress of that redundant population upon their estates, which, while it generates an excessive degree of poverty and misery as well as indolence, seldom makes up to the employer, in the lowness of wages, for the additional number of hands which he is obliged to hire, or call upon for their appointed service in labour. He is now generally aware that a smaller number of more industrious labourers would enable him to raise a larger produce for the consumption of towns and manufacturers, and at the same time that they would thus contribute more largely to the general wealth of the country, would be in a more happy condition themselves, and enable him to derive a larger and more certain rent from his estates.

The indolence of the country-labourers in Ireland has been universally remarked. And whether this arises from there being really little for them to do in the actual state of things,* or from a natural tendency to idleness, not to be overcome by ordinary stimulants; it is equally true that the large portion of time of which they have the command, beyond what is employed in providing themselves with necessaries, does not certainly produce the effect of making them abound in conveniences and luxuries. The poor clothing and worse lodging of the Irish peasant are as well known as the spare time which it might be expected would be the means of furnishing him amply with all kinds of conveniences.

In defence, however, of the Irish peasant, it may be truly said, that in the state or society in which he has been placed, he has not had a fair trial; he has not been subjected to the ordinary stimulants which produce industrious habits. In almost every part of the island, particularly in the south and west, the population of the country districts is greater than the actual business to be done on the land can employ. If the people, therefore, were ever so industriously inclined, it is not possible for them all to get regular employment in the occupations which belong to the soil. In the more hilly parts of the country which are devoted chiefly to pasture, this impossibility is more particularly striking. A small farm among the Kerry mountains may support perhaps a large family, among whom are a number of grown-up sons; but the business to be done upon the farm is a mere trifle. The greatest part of it falls to the share of the women. What remains for the men cannot occupy them for a number of hours equal to a single day in the week; and the consequence is, they are generally seen loitering about, as if time was absolutely of no value to them.

They might, one should suppose, with all this leisure, employ themselves in building better houses, or at least in improving them, and keeping them neat and clean. But with regard to the first, some difficulties may occur in procuring materials; and with regard to the second, it appears from experience, that the object is either not understood, or not considered as worth the trouble it would cost.

They might also, one should suppose, grow or purchase the raw materials of clothing, and work them up at home; and this in fact is really done to a certain extent. Most of the linen and wollen they wear is prepared by themselves. But the raw materials, when not of home growth, cannot be purchased without great difficulty, on account of the low money prices of labour; and in preparing them for wear, the temptations to indolence will generally be too powerful for human weakness, when the question is merely about a work which may be deferred or neglected, with no other effect than that of being obliged to wear old clothes a little longer, where it can be done certainly without any violation of the customs of the country.

If the Irish peasant could find such a market for the result of his in-door occupations as would give him constant employment at a fair money price, his habits might soon change; but it may be doubted whether any large body of people in any country ever acquired regular and industrious habits, where they were unable to get regular and constant work, and when, to keep themselves constantly and beneficially employed, it was necessary to exercise a great degree of providence, energy, and self-command.

It may be said, perhaps, that it is capital alone which is wanted in Ireland, and that if this want were supplied, all her people might be easily employed. That one of the greatest wants of Ireland is capital will be readily allowed; but I conceive it would be a very great mistake to suppose that the importation of a large quantity of capital, if it could be effected, would at once accomplish the object required, and create a quantity of wealth proportioned to the labour which seems ready to be employed in its production. The amount of capital which could be laid out in Ireland in preparing goods for foreign sale, must evidently depend upon the state of foreign markets; and the amount that could be employed in domestic manufactures, must as evidently depend upon the domestic demand. An attempt to force a foreign market by means of capital, must necessarily occasion a premature fall of profits, and might, after great losses, be quite ineffectual; and with regard to the domestic demand, while the habits of the great mass of the people are such as they are at present, it must be quite inadequate to take off the products of any considerable mass of new capital. In a country, where the necessary food is obtained with so little labour, and the population is still equal or nearly equal to the produce, it is perhaps impossible that the time not devoted to the production of food should create a proportionate quantity of wealth, without a very decided taste for conveniences and luxuries among the lower classes of society, and such a power of purchasing as would occasion an effective demand for them. But it is well known, that the taste of the Irish peasant for articles of this description is yet to be formed. His wants are few, and these wants he is in the habit of supplying principally at home. Owing to the cheapness of the potatoe, which forms the principal food of the lower classes of the people, his money wages are low; and the portion which remains, after providing absolute necessaries, will go but a very little way in the purchase of conveniences. All these circumstances are most unfavourable to the increase of wealth derived from manufactures destined for home consumption. But the tastes and habits of a large body of people are extremely slow in changing; and in the mean time the application of capital in larger quantities than was suited to the progress of the change, would certainly fail to yield such profits as would encourage its continued accumulation and application in the same way. In general it may be said that demand is quite as necessary to the increase of capital as the increase of capital is to demand. They mutually act upon and encourage each other, and neither of them can proceed with vigour if the other be left far behind.

In the actual state of Ireland, I am inclined to believe, that the check which the progress of her manufactures has received, has been as much owing to a want of demand as a want of capital. Her peculiar distress upon the termination of the late war had unquestionably this origin, whatever might have been the subsequent destruction of capital. And the great checks to her manufactures formerly were the unjust and impolitic restrictions imposed by England which prevented, or circumscribed the demand for them.

There is indeed in Ireland a fatal deficiency in one of the greatest sources of prosperity, the perfect security of property; and till this defect is remedied, it is not easy to so pronounce upon the degree in which the redundant capital of England would flow into Ireland with the best effect. Such a change could not fail to produce a great increase in the effectual demand for capital, as well as its supply; but in the actual state of things, there is reason to think that advances of capital have sometimes been made with little beneficial result. A certain definite assistance in particular establishments, or in facilitating the communications between one part of the country and another, may be given by government with advantage; but any thing approaching to a forced supply of capital with a view to the general employment of the people in the extension of cultivation, would infallibly create an unnatural demand for labour which could not be maintained, would tend to paralyse individual efforts, and terminate in increased poverty and distress among the labouring classes.

The state of Ireland in respect to the time and labour necessary to the production of her food is such, that her capabilities for manufacturing and commercial wealth are prodigious. If under a state of things where all kinds of property were secure an improved system of agriculture were to raise the food and raw materials required for the population with the smallest quantity of labour necessary to do it in the best manner, and the remainder of the people, instead of loitering about upon the land, were engaged in manufactures and commerce carried on in great and flourishing towns, Ireland would be beyond comparison richer than England. This is what is wanted to give full scope to her great natural resources; and to attain this state of things an immense capital is undoubtedly required; but it can only be employed to advantage as it is gradually called for; and a premature supply of it would be much less beneficial and less permanent in its effects, than such a change in the tastes and habits of the lower classes of people, such an alteration in the mode of paying their labour and such an improvement in the structure* of the whole society as would give both the lower and middle classes a greater will and power to purchase domestic manufactures and foreign commodities.

The state of Ireland then may be said to lead to nearly the same conclusions as that of New Spain, and to shew—

That the power of employing labour on the part of landholders may often exist to a much greater extent than the will;

That the necessity on the part of labourers of employing only a small portion of time in producing food does not always occasion the employment of a greater portion of time in procuring conveniences and luxuries;

That the deficiency of wealth in a fertile country may be more owing to want of demand than to want of capital;

And, in general, that the fertility of the soil alone is not an adequate stimulus to the permanent increase of wealth.

Section V.—

Of Inventions to save Labour, considered as a Stimulus to the continued Increase of Wealth.

Inventions to save labour seldom take place to any considerable extent, except when there is a decided demand for them. They are the natural consequence of improvement and civilization, and, in their more perfect forms, generally come in aid of the failing powers of production on the land. The fertility of the soil, being a gift of nature, exists whether it is wanted or not; and must often therefore exceed for many hundred years the power of fully using it. Inventions, which substitute machinery for manual exertions, being the result of the ingenuity of man, and called forth by his wants, will, as might be expected, seldom exceed those wants.

But the same law applies to both. They both come under the head of facilities of production; and in both cases a full use cannot be made of this facility, unless the power of supply which it furnishes be accompanied by an adequate extension of the market.

When a machine is invented, which, by saving labour, will bring goods into the market at a much cheaper rate than before, the most usual effect is such an extension of the demand for the commodity, by its being brought within the power of a much greater number of purchasers, that the value of the whole mass of goods made by the new machinery greatly exceeds their former value; and, notwithstanding the saving of labour, more hands, instead of fewer, are required in the manufacture.

This effect has been very strikingly exemplified in the cotton machinery of this country. The consumption of cotton goods has been so greatly extended both at home and abroad, on account of their cheapness, that the value of the whole of the cotton goods and twist now made exceeds, beyond comparison, their former value; while the rapidly increasing population of the towns of Manchester, Glasgow, &c. during the last thirty years, amply testifies that, with a few temporary exceptions, the demand for the labour concerned in the cotton manufactures, in spite of the machinery used, has been increasing very greatly.

When the introduction of machinery has this effect, it is not easy to appreciate its enriching power, or its tendency to increase both the value and quantity of domestic and foreign commodities.

When however the commodity to which machinery is applied is not of such a nature that its consumption can extend with its cheapness, the increase of wealth derived from it is neither so great nor so certain. Still however it may be highly beneficial; but the extent of this benefit* depends upon circumstances. Let us suppose a number of capitalists in the habit of employing £20,000 each for labour, in a manufacture of limited consumption, and that machines were introduced which, by the saving of labour, would enable them to supply the actual demand for the commodity with capitals of ten thousand pounds each in the purchase of labour, instead of twenty. There would, in this case, be a certain number of ten thousand pounds, and the men employed by these capitals, thrown out of employment. On the other hand, there would be a portion of revenue set free for the purchase of fresh commodities; and this demand would undoubtedly be of the greatest advantage in encouraging the employment of the vacant capitals in other directions. At the same time it must be recollected that this demand would not be a new one, and, even when fully supplied, could only replace the diminution of capital and profits in one department, occasioned by the employment of so many ten thousands, instead of twenty thousands. But in withdrawing capital, a part of which must necessarily be fixed, from one employment and placing it in another, there is almost always a considerable loss. The use-lessness of the old fixed capital would be at once a loss of revenue to the amount of the former interest and profits upon it. Even if the whole of the remainder could be immediately employed, it would probably be less in value: and on the whole, unless more menial servants were used, many persons would be thrown out of work; and thus the power of the whole capital and revenue to command the same quantity of labour would evidently depend upon the contingency of the vacant capitals being withdrawn undiminished from their old occupations, and finding immediately equivalent employment in others. But this assumed facility of finding immediate employment for fresh capital in new occupations with undiminished profits, appears to me to be contradicted by general experience; and the supposition here made must be allowed to present a case essentially distinct from that where, as in most of our great manufactures, the extension of demand, owing to the cheapness occasioned by machinery, has greatly increased the whole value as well as the whole quantity of the produce.

If, in order to try the principle, we were to push it farther, and to suppose that, without any extension of the foreign market for our goods, we could by means of machinery obtain all the commodities at present obtained at home, with one third of the labour now applied, is it in any degree probable that the mass of vacant capitals could be advantageously employed, or that the mass of labourers thrown out of work could find the means of commanding an adequate share of the national produce? If there were other foreign trades which, by means of the capital and labour thrown out of employment, might be greatly extended, the case would be at once quite altered, and the returns of such trades might furnish stimulants sufficient to keep up the value of the national income. But, if only an increase of domestic commodities could be obtained, there is every reason to fear that the exertions of industry would slacken. The peasant, who might be induced to labour an additional number of hours for tea or tobacco, might prefer indolence to a new coat. The tenant or small owner of land, who could obtain the common conveniences and luxuries of life at one third of their former price, might not labour so hard to procure the same amount of surplus produce from the land. And the trader or merchant, who would continue in his business in order to be able to drink and give his guests claret and champagne, might think an addition of homely commodities by no means worth the trouble of so much constant attention.

It has been said that, when there is an income ready for the demand, it is impossible that there should be any difficulty in the employment of labour and capital to supply it, as the owner of such an income, rather than not spend it, would purchase a table or chair that had cost the labour of a hundred men for a year. This may be true, in cases of fixed monied revenues, obtained by inheritance, or with little or no trouble. We well know that some of the Roman nobles, who obtained their immense wealth chiefly by the expeditious mode of plunder, sometimes gave the most enormous prices for fancied luxuries. A feather will weigh down a scale when there is nothing in the opposite one. But where the amount of the revenues of a country depend, in a considerable degree, upon the exertion of labour, activity and attention, there must be something in the commodities to be obtained sufficiently desirable to balance this exertion, or the exertion will cease. And experience amply shews, by the number of persons who daily leave off business, when they might certainly have continued to improve their fortunes, that most men place some limits, however variable, to the quantity of conveniences and luxuries which they will labour for; and that very few indeed would attend a counting-house six or eight hours a day, in order to purchase commodities which have no other merit than the quantity of labour which has been employed upon them.

Still however it is true that, when a great revenue has once been created in a country, in the shape of a large mass of rents, profits and wages, a considerable resistance will be made to any essential fall in its value. It is a very just remark of Hume,* that when the affairs of a society are brought to this situation; that is, when, by means of foreign trade, it has acquired the tastes necessary to give value to a great quantity of labour not employed upon actual necessaries, it may lose most of this trade, and yet continue great and powerful, on account of the extraordinary efforts which would be made by the spare capital and ingenuity of the country to refine home manufactures, in order to supply the tastes already formed, and the incomes already created. But if we were to allow that the revenue of such a nation might, in this way, by possibility be maintained, there is little chance of its increasing; and it is almost certain that it would not have reached the same amount, without the market occasioned by foreign commerce.

Of this I think we shall be convinced, if, in our own country, we look at the quantity of goods which we export chiefly in consequence of our machinery, and consider the nature of the returns obtained for them. In the accounts of the year ended the 5th of January, 1818, it appears that the exports of three articles alone in which machinery is used—cottons, woollen and hardware, including steel goods, &c. are valued at above 29 millions. And among the most prominent articles of the imports of the same year, we find coffee, indigo, sugar, tea, silks, tobacco, wines, and cotton-wool, amounting in value altogether to above 18 millions out of thirty! Now I would ask how we should have obtained these valuable imports, if the foreign markets for our cottons, woollens, and hardware had not been extended with the use of machinery? And further, where we could have found substitutes at home for such imports, which would have been likely to have produced the same effects, in stimulating the cultivation of the land, the accumulation of capital, and the increase of population? And when to these considerations we add the fortunes which have been made in these manufactures, the market for which has been continually extending, and continually requiring more capital and more people to be employed in them; and contrast with this state of things the constant necessity of looking out for new modes of employing the same capital and the same people, a portion of which would be thrown out of their old occupations by every new invention;—we must be convinced that the state of this country would have been totally different from what it is, and that it would not certainly have acquired the same revenue in rents, profits and wages, if the same ingenuity had been exercised in the invention of machinery, without the same extension of the market for the commodities produced.

It may justly be doubted, whether, at the present moment, upon the supposition of our foreign intercourse being interrupted, we should be likely to find efficient substitutes for teas, coffee, sugar, wines, silks, indigo, cottons, &c. so as to keep up the value of our present revenue; but it cannot well be doubted, that if, from the time of Edward the First, and setting out with the actual division of landed property which then prevailed, the foreign vent for our commodities had remained stationary, our revenue from the land alone would not have approached to what it is at present, and still less, the revenue from trade and manufactures.

Even under the actual division of the landed property in Europe, which is very much better than it was 500 years ago, most of the states of which it is composed would be comparatively unpeopled, if it were not for trade and manufactures. Without the excitements arising from the results of this sort of industry, no sufficient motives could be presented to great landholders either to divide their estates by sale, or to take care that they were well cultivated.

According to Adam Smith, the most important manufactures of the northern and western parts of Europe were established either in imitation of foreign articles, the tastes for which had been already formed by a previous foreign trade, or by the gradual refinement of domestic commodities till they were fit for exportation.* In the first case, the very origin of the manufacture is made to depend upon a previous extension of market, and the importation of foreign articles, and in the second case, the main object and use of refining the domestic commodities in an inland country, appears to be the fitting them for an extensive market, without which the local advantages enjoyed would be in a great measure lost.

In carrying on the late war, we were powerfully assisted by our steam-engines, which enabled us to command a prodigious quantity of foreign produce and foreign labour. But how would their efficacy have been weakened if we could not have exported our cottons, cloths and hardware?

If the mines of America could be successfully worked by machinery, and the King of Spain’s tax could be increased at will, so as to make the most of this advantage, what a vast revenue might they not be made to afford him! But it is obvious that the effects of such machinery would sink into insignificance, if the market for the precious metals were confined to the adjacent countries, and the principal effect of it was to throw capital and labour out of employment.

In the actual state of things in this country, the population and wealth of Manchester, Glasgow, Leeds, &c. have been greatly increasing; because, on account of the extending demand for their goods, more people have been continually required to work them up; but if a much smaller number of people had been required, on account of a saving of labour from machinery, without an adequate extension of the market, it is obvious that these towns would have been poorer, and more thinly peopled. To what extent the spare capital and labour thrown out of employment in one district would have enriched others, it is impossible to say; and on this subject any assertion may be made, as we cannot be set right by an appeal to facts. But I would ask, whether there are any grounds in the slightest degree plausible for saying, that not only the capital spared at any time from these manufactures would be preserved and employed elsewhere; but that it would be employed as profitably, and create as much exchangeable value in other places as it would have done in Manchester and Glasgow, with an extending market? In short, are there any plausible grounds whatever for stating that, if the twenty millions worth of cottons which we now export, were entirely stopped, either by successful foreign competition or positive prohibitions, we should have no difficulty in finding employment for our capital and labour equally advantageous to individuals in point of profit, and equally enriching to the country with respect to the exchangeable value of its revenue?

Unquestionably any country is entitled to consume all that it produces, however great in quantity; and every man in health has the power of applying his mind and body to productive labour for ten or twelve hours of the day. But these are dry assertions, which do not necessarily involve any practical consequences relating to the increase of wealth. If we could not export our cottons, it is quite certain that, though we might have the power, we should not have the will, to consume them all ourselves at such prices as would pay the producers. The quantity produced therefore would be very greatly diminished; and the maintenance of our national wealth and revenue would depend upon the circumstance whether the capital thrown out of the cotton trade could be so applied as to produce commodities which would be estimated as highly and consumed as eagerly as the foreign goods before imported. There is no magic in foreign markets. The final demand and consumption must always be at home; and if goods could be produced at home, which would excite people to work as many hours in the day, would communicate the same enjoyments, and create a consumption of the same value, foreign markets would be useless. We know however from experience, that very few countries are capable of producing commodities of the same efficacy, in this respect, as those which may be obtained by a trade to various climates and soils. Without such a trade, and with a great increase in the power of production, there is no inconsiderable danger that industry, consumption, and exchangeable value would diminish; and this danger would most unquestionably be realized if the cheapness of domestic commodities occasioned by machinery, were to lead to increased saving rather than to increased expenditure.

But it is known that facilities of production have the strongest tendency to open markets, both at home and abroad. In the actual state of things therefore, there are great advantages to be looked forward to, and little reason to apprehend any permanent evil from the increase of machinery. The presumption always is, that it will lead to a great extension both of wealth and value. But still we must allow that the pre-eminent advantages derived from the substitution of machinery for manual labour, depend upon the extension of the market for the commodities produced, and the increased stimulus given to consumption; and that, without this extension of market and increase of consumption, they must be in a considerable degree diminished. Like the fertility of land, the invention of good machinery confers a prodigious power of production. But neither of these great powers can be called fully into action, if the situation and circumstances, or the habits and tastes of the society prevent the opening of a sufficient market, and an adequate increase of consumption.

The three great causes most favourable to production are, accumulation of capital, fertility of soil, and inventions to save labour. They all act in the same direction; and as they all tend to facilitate supply, without reference to demand, it is not probable that they should either separately or conjointly afford an adequate 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.

We have seen that the powers of production, to whatever extent they may exist, are not alone sufficient to secure the creation of a proportionate degree of wealth. Something else seems to be necessary in order to call these powers fully into action. This is an effectual and unchecked demand for all that is produced. And what appears to contribute most to the attainment of this object, is, such a distribution of produce, and such an adaptation of this produce to the wants of those who are to consume it, as constantly to increase the exchangeable value of the whole mass. In a former section, relating to the distinction between wealth and value, it was observed, that where wealth and value are perhaps most nearly connected, is in the general necessity of the latter as a stimulus to the production of the former. Unless the estimation in which an object is held, or the value which an individual, or the society places on it when obtained, adequately compensates the sacrifice which has been made to obtain it, such wealth will not be produced in future.

In individual cases, the power of producing particular commodities is called into action, in proportion to the intensity of effectual demand for them; and the greatest stimulus to their increase, independent of improved facilities of production, is a high market price, or an increase of their exchangeable value, before a greater value of capital has been employed upon them.

In the same manner, the greatest stimulus to the continued production of commodities, taken altogether, is an increase in the exchangeable value of the whole mass, before a greater value of capital has been employed upon them.

It has been stated in a preceding section, that if all the roads and canals of the country were broken up, and the means of distributing its produce were essentially impeded, the whole value of the produce would greatly fall; indeed, it is obvious that if it were so distributed as not to be suited to the wants, tastes, and powers of the actual population in different situations, its value might sink to such a degree as to be comparatively quite inconsiderable. Upon the same principle, if the means of distributing the produce of the country were still further facilitated, and if the adaptation of it to the wants and powers of the consumers were more complete than at present, and better fitted to inspire new tastes, there can be no doubt that a great increase in the value of the whole produce would follow; first, in the shape of increased profits, and then of increased quantity, without a proportionate fall of value.

But to illustrate the power of distribution in increasing the mass of exchangeable value, we need only refer to experience. Before the introduction of good roads and of canals in England, the prices of produce in many country districts were extremely low compared with the same kind of produce in the London markets. After the means of distribution were facilitated, the price of country produce in the country, and of some sorts of London produce in London, which were sent into the country in exchange for it, rose; and rose in a greater degree than the country produce fell in the London markets, or the London produce fell in the country markets; and consequently the value of the whole produce, or the supply of London and the country together, was increased; and while encouragement was thus given to the employment of a greater quantity of capital by the extension of demand, the temporary rise of profits, occasioned by this extension, would greatly contribute to furnish the additional capital and produce required. It has never, I believe, occurred, that the better distribution of the commodities of a country occasioned by improved facilities of communication has failed to increase the value as well as the quantity of the whole produce.

In estimating an increase in the value of the whole produce, bullion, our most common measure of value, might, in general, and for short periods, be safely referred to; and though abstractedly considered, wealth is nearly independent of money; yet in the actual state of the relations of the different countries of the world with each other, it rarely happens that any great increase or decrease in the bullion value of all the commodities of a country takes place, without an increase or decrease of demand for commodities, compared with the supply of them.

It happens however, undoubtedly that in reference to periods of some length, the value of bullion alters, not only generally, but in particular countries; and it is not meant to be said that a country cannot be stimulated to an increase of wealth after a fall has taken place in the money-price of all its commodities. When, therefore, there is any doubt, in regard to a change in the value of money we must refer to that standard, the utility and comparative correctness of which I have endeavoured to establish; and in reference to which Adam Smith himself, says, “Labour, be it remembered, and not any particular commodity or set of commodities, is the real measure of the value both of silver and of all other commodities.”*

General wealth, like particular portions of it, will always follow effectual demand. Whenever there is a great demand for commodities, that is, whenever the whole mass will command a greater quantity of standard labour than before, without any greater value of capital having been required to produce them, there is the same kind of reason for expecting a general increase of commodities, as there is for expecting an increase of particular commodities when their market-prices rise; without a corresponding rise in their money-cost of production. And on the other hand, whenever the produce of a country estimated in the labour which it will command falls in value, while the same value of advances is continued, the power and will to set labourers to work will be diminished and the increase of produce must, for a time, be checked.

Mr. Ricardo, in his chapter on Value and Riches, has stated that “a certain quantity of clothes and provisions will maintain and employ the same number of men, and will therefore procure the same quantity of work to be done, whether they be produced by the labour of a hundred or of two hundred men; but they will be of twice the value, if two hundred have been employed in their production.”* But, even taking his own peculiar estimate of value, this statement would never be true. The clothes and provisions which had cost only one hundred days’ labour would never, but in the most unnatural state of things, be able to procure the same quantity of work to be done as if they had cost two hundred days’ labour. To suppose it, is to suppose that profits are at cent. per cent., and that the price of labour, estimated in necessaries, is the same at all times and in all countries, and does not depend upon the plenty or scarcity of necessaries compared with labour, a supposition contradicted by universal experience. Nine quarters of wheat will perhaps command a year’s labour in England; but eighteen quarters will hardly procure the same quantity of work to be done in America. And the great variety of corn wages in different countries at the same time, and in the same country at different times shows most clearly that it is not the quantity of necessaries, but their value which determines their efficiency in setting labourers to work, and that whatever increases their value will at the same time increase their efficiency, and whatever diminishes their value will diminish it.

Nor is the remark less applicable to those articles which are denominated luxuries, than it is to the necessaries of life, for although such commodities do not in kind form any part of the funds which are destined for the maintenance of ordinary labour, yet an increase in their value gives to those who produce them a greater command over those funds, which form the most stimulus to an increase of their quantity. In every case, therefore, a continued increase in the value of the whole produce estimated in labour seems to be necessary to a continued and unchecked increase of wealth; because without such an increase of value it is obvious that no fresh labour can be set in motion. And in order to support this value it is necessary that an effective distribution of the produce should take place, and a due proportion be maintained between the objects to be consumed and the number, wants, and powers of the consumers, or, in other words, between the supply of commodities and the demand for them.

It has already been shown that the value of the whole produce cannot be maintained in the case of a rapid accumulation of capital occasioned by an actual and continued diminution in the expenditure and consumption of the higher classes of society in the form of revenue.* Yet it will be most readily allowed that the saving from revenue to add to capital is an absolutely necessary step in the progress of wealth. How then is this saving to take place without producing the diminution of value apprehended?

It may take place, and practically almost always does take place, in consequence of a previous increase in the value of the national revenue, in which case a saving may be effected, not only without any diminution of demand and consumption, but under an actual increase of demand, consumption and value during every part of the process. And it is in fact this previous increase in the value of the national revenue which both gives the great stimulus to accumulation, and makes that accumulation effective in the continued production of wealth.

M. Sismondi, in his late work, speaking of the limits of accumulation, observes, “On ne fait jamais après tout qu’échanger la totalité de la production de l’année contre la totalité de la production de l’année précédente.”* If this were really the case, it would be difficult to say how the value of the national produce could ever be increased. But in fact a great increase of productions may immediately find an adequate market, and experience consequently a great increase of exchangeable value, if they are so well distributed and so well adapted to the tastes and wants of the society as to excite the desire of making an adequate sacrifice in order to procure and consume them. In fact, such an increase of value always really takes place on occasion of an increased foreign demand for commodities; and unquestionably a similar increase of value would take place in the case of such a production and distribution of domestic commodities as better to suit the tastes and desires of the domestic consumers.

The fortune of a country, though necessarily made more slow, is made in the same way as the fortunes of individuals in trade are generally made,—by savings, certainly; but by savings which are furnished from increased gains, and by no means involve a diminished expenditure on objects of luxury and enjoyment.

Many a merchant has made a large fortune although, during the acquisition of this fortune, there was perhaps hardly a single year in which he did not rather increase than diminish his expenditure in objects of luxury, enjoyment, and liberality. The amount of capital in this country is immense, and it certainly received very great additions during the last forty years; but on looking back, few traces are to be found of a diminished expenditure in the shape of revenue. If some such traces however are to be found, they will be found in exact conformity to the theory here laid down; they will be found during a period, when, from particular circumstances, the value of the national produce was not maintained, and there was in consequence a diminution of the power of expenditure, and a comparative check to the production of wealth.

Perhaps it will be said, that to lay so much stress on distribution, and to measure the increase of demand by the increase of the exchangeable value of the whole produce, is to exalt the gross revenue at the expense of the neat revenue of a country, and to favour that system of cultivation and manufacturing which employs on each object the greatest number of hands. But I have already shewn that the saving of labour, and the increase of skill, both in agricultural and manufacturing industry, by enabling a country to push its cultivation over poorer lands, without diminution of profits, and to extend far and wide the markets for its manufactures, must tend to increase the exchangeable value of the whole; and there cannot be a doubt that in this country they must have been the main sources of that rapid and astonishing increase in the value of the national wealth, which has taken place during the last thirty or forty years.

To dwell therefore mainly on the gross revenue of a country rather than on its neat revenue is in no respect to under-rate the prodigious advantage derived from skill and machinery, but merely to give that importance to the value of the whole produce to which it is so justly entitled. No description of national wealth, which refers only to neat revenue, can ever be in any degree satisfactory. The economists destroyed the practical utility of their works by referring exclusively to the neat produce of the land. And the writers who make wealth consist of rents and profits, to the exclusion of wages, commit an error exactly of the same kind though less in degree. Those who live upon the wages of labour, including of course those engaged in personal services, receive and expend much the greatest part of the annual produce, pay a very considerable sum in taxes for the maintenance of the government, and form by far the largest portion of its physical force. Under the prevalence of habits of prudence, the whole of this vast mass might be nearly as happy as the individuals of the other two classes, and probably a greater number of them, though not a greater proportion of them, happier. In every point of view therefore, both in reference to that part of the annual produce which falls to their share, and the means of health and happiness which it may be presumed to communicate, those who live on the wages of labour must be considered as the most important portion of the society; and any definition of wealth which should involve such a diminution of their numbers, as to require for the supply of the whole population a smaller annual produce, must necessarily be erroneous.

In the First Chapter of this Work, having defined wealth to be “the material objects which are necessary, useful, and agreeable to mankind,” I stated as a consequence that a country was rich or poor according to the abundance or scantiness in which these objects were supplied, compared with the extent of territory. It will be readily allowed that this definition does not include the question of what may be called the amount of disposable produce, or the fund for taxation; it is nevertheless a much more correct definition of the wealth of a country than any that should refer to this disposable part alone in the sense understood, either by the French economists, who confine it to neat rent, or by Mr. Ricardo who confines it to rents and profits. What should we say of the wealth of this country, if it were possible that its rents and profits could remain the same, while its population and produce were reduced two-thirds? Certainly it would be much poorer according to the above definition; and surely there are not many that would dissent from such a conclusion.

That it would be desirable, in a definition of national wealth, to include the consideration of disposable produce, as well as of actual quantity and value, cannot be doubted; but such a definition seems to be in its nature impossible, because in each individual case it must depend upon opinion, what increase of disposable produce should be accounted equivalent to a given diminution of gross produce.

We must content ourselves therefore with referring generally to the amount and value of national produce; and it may be subsequently stated as a separate, though very important consideration, that particular countries, with the same amount and value of produce, have a larger or smaller proportion of that produce disposable. In this respect, no doubt, a country with a fertile territory will have a prodigious advantage over those whose wealth depends almost entirely on manufactures. With the same population, the same rate of profits and wages, and the same amount and value of produce, the landed nation would have a much larger portion of its wealth disposable, or in other words, a larger proportion of its population might enjoy leisure, or be engaged in personal services without prejudice to its wealth.

Fortunately, it happens but seldom that we have to determine the amount of advantage or disadvantage occasioned by the increase of the neat, at the expense of the gross revenue. The interest of individual capitalists uniformly prompts them to the saving of labour, in whatever business they are engaged; and both theory and experience combine to shew that their successful efforts in this direction, by increasing the powers of production, afford the means of increasing, in the greatest practicable degree, the amount and value of the gross produce,* provided always that such a distribution and consumption of the increased supply of commodities takes place as constantly to increase their exchangeable value.

The reader will be aware, from what has been said in this section, that in dwelling on the importance of distribution as a main cause of the immediate progress of wealth, I by no means confine the terms to that process which in reference to commodities in ordinary use, prevents cottons which are not wanted from being brought into the market, instead of woollens which are wanted. The persevering production of cottons, when very much larger profits might be made by producing woollens is too gross an error not to be soon corrected in any country, and least of all in such a country as this. The distribution, which I mean, is not so readily accomplished. It is that which effects the best adaptation of the supplies of produce, both in quantity and quality, to the actual tastes and wants of the consumers, and creates new tastes and wants by means of greater facilities of intercourse. Such a distribution by new commodities from foreign countries, by the growth of large towns in agriculture, involving, by the increase of the middle classes of society, a gradual improvement in the structure of the society, is of slow and difficult accomplishment. To increase indeed, the proportion of the demand to the supply without a diminution of the produce is no easy task. We may know, that the opening of new channels of trade, and the extension of markets both at home and abroad will give us what we want; but these are objects which it is rarely in the power of a people or a government to accomplish at will.

In general, an increase of produce and an increase of value go on together; and this is that natural and healthy state of things, which is most favourable to the progress of wealth. An increase in the quantity of produce depends chiefly upon the power of production, and an increase in the value of produce upon its distribution. Production and distribution are the two grand elements of wealth, which, combined in their due proportions, are capable of carrying the riches and population of the earth in no great length of time to the utmost limits of its possible resources; but which taken separately, or combined in undue proportions, produce only, after the lapse of many thousand years, the scanty riches and scanty population, which are at present scattered over the face of the globe.

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.

The causes most favourable to that increase of value which depends upon distribution are, 1st, the division of landed property; 2dly, internal and external commerce; 3dly, the maintenance of an adequate proportion of the society employed in personal services, or otherwise entitled to make a demand for material products without contributing directly to their supply.

In the first settlement and colonization of new countries, an easy division and subdivision of the land is a point of the very highest importance. Without a facility of obtaining land in small portions by those who have accumulated small capitals, and of new proprietors settling upon the soil, as new families branch off from the parent stocks, no adequate effect can be given to the principle of population. This facility of settling upon the soil, as the population increases, is still more imperiously necessary in inland countries, which are not favourably situated for external and internal commerce. Countries of this description, if, from the laws and customs relating to landed property, great difficulties are thrown in the way of its distribution, may remain for ages very scantily peoplèd, in spite of the principle of population; while the easy division and subdivision of the land as new families arise to be provided for, might, with comparatively little commerce, furnish an effective demand for population, and create a produce which would have no inconsiderable value in exchange. Such a country would probably have a small neat produce compared with its gross produce; it would also be greatly deficient in the amount of its manufactures and mercantile products; yet still its actual produce and population might be respectable; and for the increase of exchangeable value which had produced these effects, it would be mainly indebted to that distribution of the produce which had arisen from the easy division of land.

The rapid increase of the United States of America, taken as a whole, has undoubtedly been aided very greatly by foreign commerce, and by the power of selling raw produce, obtained with little labour, for European commodities of a kind which, if made at home, would have cost much labour. But the cultivation of a great part of the interior territory has depended essentially upon the easy division of landed property. The facility with which even common workmen, if they were industrious and economical for some years, could become new settlers and small proprietors of land, has given prodigious effect to that high money price of labour, which could not have taken place without foreign commerce: and together they have occasioned yearly that extraordinary increase of exchangeable value, which has so distinguished the progress of the establishments in North America, compared with any others with which we are acquainted.

Over almost all Europe a most unequal and vicious division of landed property was established by conquest on the breaking up of the Western Roman Empire, and subsequently during the feudal times. In some states the laws, which protected and perpetuated this division, have been greatly weakened, and by the aids of commerce and manufactures have been rendered comparatively inefficient. But in others these laws still remain in great force, and throw very great obstacles in the way of increasing wealth and population. A very large proprietor, surrounded by very poor peasants, presents a distribution of property most unfavourable to effectual demand.

Adam Smith has well described the slack kind of cultivation which was likely to take place, and did in fact take place, among the great proprietors of the middle ages. But not only were they bad cultivators and improvers; and for a time perhaps deficient in a proper taste for manufactured products; yet, even if they had possessed these tastes in the degree found to prevail at present, their inconsiderable numbers would have prevented their demand from producing any important mass of such wealth. We hear of great splendour among princes and nobles in every period of history. The difficulty was not so much to inspire the rich with a love of finery, as to break down their immense properties, and to create a greater number of demanders in the middle ranks of life who were able and willing to purchase the results of productive labour. This, it is obvious, could only be effected very gradually. That the increasing love of finery assisted considerably in accomplishing this object is highly probable; but these tastes alone, unaccompanied by a better distribution of property in other respects, would have been quite inefficient. The possessor of numerous estates, after he had furnished his mansion or castle splendidly, and provided himself with handsome clothes and handsome carriages, would not change them all every two months, merely because he had the power of doing it. Instead of indulging in such useless and troublesome changes, he would be more likely to keep a number of servants and idle dependants, to take lower rents with a view of having a greater command over his tenants, and perhaps to sacrifice the produce of a considerable portion of his land in order to encourage more game, and to indulge, with more effect and less interruption, in the pleasures of the chase. Thirty or forty proprietors, with incomes answering to between one thousand and five thousand a year, would create a much more effectual demand for the necessaries, conveniences, and luxuries of life, than a single proprietor possessing a hundred thousand a year.

It is physically possible indeed for a nation, with a comparatively small body of very rich proprietors, and a large body of very poor workmen, to push both the produce of the land and of manufactures to the greatest extent, that the resources and ingenuity of the country would admit. But, in order to do this, we must suppose a passion among the rich for the consumption of manufactures, and the results of productive labour, much more excessive than has ever been witnessed in human society. And the consequence is, that no instance has ever been known of a country which has pushed its natural resources to a great extent, with a small proportionate body of persons of property, however rich and luxurious they might be. Practically it has always been found that the excessive wealth of the few is in no respect equivalent, with regard to effectual demand, to the more moderate wealth of the many. A large body of manufacturers and merchants can only find a market for their commodities among a numerous class of consumers below the rank of the great proprietors of land. And experience shews us that manufacturing wealth is at once the consequence of a better distribution of property, and the cause of further improvements in such distribution, by the increase in the proportion of the middle classes of society, which the growth of manufacturing and mercantile capital cannot fail to create.

But though it be true that the division of landed property, and the diffusion of manufacturing and mercantile capital to a certain extent, are of the utmost importance to the increase of wealth; yet it is equally true that, beyond a certain extent, they would impede the progress of wealth as much as they had before accelerated it. There is a certain elevation at which the projectile will go the farthest: but if it be directed either higher or lower, it will fall short. With a comparatively small proportion of rich proprietors, who would prefer menial servants, retainers and territorial influence to an excessive quantity of manufactured and mercantile products, the power among capitalists of supplying the results of productive labour would be much greater than the will to consume them, and the progress of wealth would be checked by the want of effectual demand.* With an excessive proportion of small proprietors both of land and of capital, all great improvements on the land, all great enterprizes in commerce and manufactures, and most of the wonders described by Adam Smith, as resulting from the division of labour, would be at an end; and the progress of wealth would be checked by a failure in the powers of supply.

It will be found, I believe, true that all the great results in political economy, respecting wealth, depend upon proportions;† and it is from overlooking this most important truth, that so many errors have prevailed in the prediction of consequences; that nations have sometimes been enriched when it was expected that they would be impoverished, and impoverished when it was expected that they would be enriched;‡ and that such contradictory opinions have occasionally prevailed respecting the most effective encouragements to the increase of wealth. But there is no part of the whole subject, where the efficacy of proportions in the production of wealth is so strikingly exemplified, as in the division of landed and other property; and where it is so very obvious that a division to a certain extent must be beneficial, and beyond a certain extent prejudicial to the increase of wealth.

On the effects of a great sub-division of property, a fearful experiment is now making in France. The law of succession in that country allows but a small portion of a father’s property to be disposed of by will, and the rest is equally divided among all the children without distinction of age or sex.

This law has not yet prevailed long enough to shew what its effects are likely to be on the national wealth and prosperity. If the state of property in France appears at present to be favourable to industry and demand, no inference can thence be drawn that it will be favourable in future. It is universally allowed that a division of property to a certain extent is extremely desirable; and so many traces yet remain almost all over Europe of the vast landed possessions which have descended from the feudal times, that there are not many states in which such a law as that of France might not be of use, with a view to wealth, for a certain number of years. But if such a law were to continue permanently to regulate the descent of property in France; if no modes of evading it should be invented, and if its effects should not be weakened by the operation of an extraordinary degree of prudence in marriage, which prudence such a law would certainly tend to discourage, there is every reason to believe that the country, at the end of a century, will be quite as remarkable for its extraordinary poverty and distress, as for its unusual equality of property. The owners of the minute divisions of landed property will be, as they always are, peculiarly without resource, and must perish in great numbers in every scarcity. Very few will be rich except those who receive salaries from the government.

In this state of things, with little or none of the natural influence of property to check at once the power of the crown and the violence of the people, it is not possible to conceive that such a mixed government as France has now established can be maintained. Nor can I think that a state of things, in which there would be so much poverty, could be favourable to the existence and duration of a republic. And when, in addition to this, we consider how extremely difficult it is, under any circumstances, to establish a well-constituted republic, and how dreadfully the chances are against its continuance, as the experience of all history shews; it is not too much to say, that no well-grounded hope could be entertained of the permanent prevalence of such a form of government.

But the state of property above described would be the very soil for a military despotism. If the government did not adopt the Eastern mode of considering itself as sole territorial proprietor, it might at least take a hint from the Economists, and declare itself co-proprietor with the landlords, and from this source, (which might still be a fertile one, though the landlords, on account of their numbers, might be poor,) together with a few other taxes, the army might easily be made the richest part of the society; and it would then possess an overwhelming influence, which, in such a state of things, nothing could oppose. The despot might now and then be changed, as under the Roman emperors, by the Prætorian guards; but the despotism would certainly rest upon very solid foundations.

It is hardly necessary to enter into the question, whether the wealth of the British empire would be essentially increased by that division of landed property which would be occasioned by the abolition of the law of primogeniture, and the power of entail, without any interference with testamentary dispositions. It is generally acknowledged that the country, in its actual state and under its actual laws, presents a picture of greater wealth, especially when compared with its natural resources, than any large territorial state of modern times. By the natural extinction of some great families, and the natural imprudence of some others, but, above all, by the extraordinary growth of manufactures and commerce, the immense landed properties which formerly prevailed all over the country have been in a great degree broken down, notwithstanding the law of primogeniture. And the few which remain may perhaps be of use in furnishing motives to the merchant and master-manufacturer, to continue the exercise of their skill and powers till they have acquired large capitals, and are able to contend in wealth with the great landlords. If, from the abolition of the law of primogeniture, the landed fortunes were all very inconsiderable, it is not probable that there would be many large capitals among merchants; and, in this case, much productive power would unquestionably be lost.

But however this may be, it is certain, that a very large body of what may be called the middle classes of society has been established in this country; while the law of primogeniture, by forcing the younger sons of the nobility and great landed proprietors into the higher divisions of these classes, has, for all practical purposes, annihilated the distinctions founded on rank and birth, and opened the fairest arena for the contests of personal merit in all the avenues to wealth and honours. It is probable that the obligation generally imposed upon younger sons to be the founders of their own fortunes, has infused a greater degree of energy and activity into professional and commercial exertions than would have taken place if property in land had been more equally divided. Altogether, the country possesses a very large class of effective demanders, who derive their power of purchasing from the various professions, from commerce, from manufactures, from wholesale and retail trade, from salaries of different kinds, and from the interest of public and private debts; and these demanders are likely, perhaps, to acquire tastes more favourable to the encouragement of wealth than the owners of small properties on the land.

Under these circumstances, which, to the extent in which they prevail, it must be allowed are almost peculiar to this country, it might be rash to conclude that the nation would be richer if the law of primogeniture were abolished. But even if we were able to determine the question in the affirmative, it would by no means determine the policy of such a change. In all cases of this kind there are higher considerations to be attended to than those which relate to mere wealth.

It is an historical truth which cannot for a moment be disputed, that the first formation, and subsequent preservation and improvement, of our present constitution, and of the liberties and privileges which have so long distinguished Englishmen, are mainly due to a landed aristocracy. And we are certainly not yet warranted by any experience to conclude that without an aristocracy, which cannot certainly be supported in an effective state but by the law of primogeniture, the constitution so established can be in future maintained. If then we set a value upon the British Constitution; if we think that, whatever may be its theoretical imperfections, it has practically given a better government, and more liberty to a greater mass of people for a longer time than any which history records, it would be most unwise to venture upon any such change as would risk the whole structure, and throw us upon a wide sea of experiment, where the chances are so dreadfully against our attaining the object of our search.*

It is not perhaps easy to say to what extent the abolition of the law of primogeniture and entails would divide the landed property of this country. If the power of testamentary bequest were left untouched, it is possible that past habits might still keep many estates together for a time; but the probabilities are, that by degrees a considerable subdivision of land would take place; and if there were few estates of above a thousand a year, the mercantile classes would either be induced to moderate their exertions in the acquisition of wealth, from the absence of the motive of competition with the landlords, as I stated above; or, if the merchants and manufacturers were still to acquire great wealth, excited either by a competition with each other or by political ambition, they would be the only persons who could possess great influence in the state; and the government of the country would fall almost wholly into their hands. In neither case, probably, could our present constitution be maintained. In the first, where the property of individuals would be so inconsiderable, and so equal, the tendencies would be either to democracy or military despotism, with the chances greatly in favour of the latter. And in the second case, whatever might be the form of government, the merchants and manufacturers would have the greatest influence in its councils; and it is justly observed by Adam Smith, that the interests of these classes do not always prepare them to give the most salutary advice.

Although therefore it be true that a better distribution of landed property might exist than that which actually prevails in this country at present; and although it be also true, that to make it better, the distribution should be more equal; yet it may by no means be wise to abolish the law of primogeniture, which would be likely to lead to a subdivision of land greater probably than would be favourable even to the wealth of the country; and greater certainly than would be consistent with those higher interests, which relate to the protection of a people equally from the tyranny of despotic rulers, and the fury of a despotic mob.

But, whatever conduct the wisdom and policy of a legislature may dictate respecting the laws of succession, the principle will still be true, that the division of landed property is one of the great means of the distribution of wealth, which tends to keep up and increase its exchangeable value, and to encourage further production; and that the distribution so occasioned will, as it extends, continue to produce a more favourable effect on wealth, till it meets its antagonist principle, and begins to interfere with the power of production. This will take place sooner or later, according to circumstances, depending chiefly upon the activity of foreign and domestic commerce, and the mass of effective demanders besides the landlords. If the demand be great, independently of the land, a slight diminution in the power of production may turn the scale; and any change which is unfavourable to accumulation, enterprize, and the division of labour, will be unfavourable to the progress of wealth. But if the country be ill situated for foreign commerce, and its tastes, habits, and internal communications be such as not to encourage an active home trade, nothing can occasion an adequate demand for produce, but an easy subdivision of landed property; and without such a subdivision, a country with great natural resources might slumber for ages with an uncultivated soil, and a scanty yet starving population.

Section VIII.—

Of the Distribution occasioned by Commerce, internal and external, considered as the Means of increasing the exchangeable Value of Produce.

The second main cause favourable to that increase of exchangeable value, which depends upon distribution, is internal and external commerce.

Every exchange which takes place in a country, effects a distribution of its produce better adapted to the wants of the society. It is with regard to both parties concerned, an exchange of what is wanted less for what is wanted more, and must therefore raise the value of both the products. If two districts, one of which possessed a rich copper mine, and the other a rich tin mine, had always been separated by an impassable river or mountain, there can be no doubt that on the opening of a communication, a greater demand would take place, and a greater price be given both for tin and copper; and this greater price of both metals, though it might only be temporary, would alone go a great way towards furnishing the additional capital wanted to supply the additional demand; and the capitals of both districts, and the products of both mines, would be increased both in quantity and value to a degree which could not have taken place without this new distribution of the produce, or some event equivalent to it.

The French Economists, in their endeavours to prove the unproductive nature of trade, always insisted that the effect of it was merely to equalize prices, which were in some places too high and in others too low, but in their amount the same as they would be after the exchange had taken place. This position must be considered as unfounded, and capable of being contradicted by incontrovertible facts. The increase of price at first, from the extension of the market, is unquestionable. And when to this we add the effect occasioned by the demand for further produce, and the means thus afforded of rapid accumulation for the supply of this demand, it is impossible to doubt for a moment the direct tendency of all internal trade to increase both the quantity and value of the national produce.

If indeed it did not tend to increase the value of the national produce, it would not be carried on. It is out of this increase that the merchants concerned are paid; and if some London goods are not more valued in Glasgow than in London, and some Glasgow goods more valued in London than in Glasgow, the merchants who exchange the articles in which these towns trade, would neither be doing themselves any good, nor any one else. It is a mere futile process to exchange one set of commodities for another, if the parties, after this new distribution of goods has taken place, are not better off than they were before. The giving one article for another has nothing to do with effectual demand, unless the commodity received so far exceeds in value the labour employed on the commodity parted with, as to yield adequate profits to the capitalists concerned, and to give them both the power and the will to set fresh labour to work in the same trade.

It has been said that the industry of a country is measured by the extent of its capital, and that the manner in which this capital is employed, though it may make some difference to the enjoyment of the inhabitants, makes very little in the value of the national revenue. This would be true on one supposition, and on one supposition only; namely that the inhabitants could be persuaded to estimate their confined productions just as highly, to be as eager to obtain and consume them, and as willing to work hard for them, and to make great sacrifices for them, as for the commodities which they obtain from a distance. But are we at liberty to make such a supposition? It is specifically to overcome the want of eagerness to purchase domestic commodities that the merchant exchanges them for others more in request. Could we but so alter the wants and tastes of the people of Glasgow as to make them estimate as highly the profusion of cotton goods which they produce, as any articles which they could receive in return for them under a prosperous trade, we should hear no more of their distresses. It may be allowed that the quantity of productive industry maintained in a country is nearly proportioned to the quantity of capital employed; but the value of the revenue will be greater or less, according to the market prices of the commodities produced. These market prices must obviously depend upon the interchange of goods; and consequently the value of the revenue, and the power and will to increase it, must depend upon that distribution of commodities which best adapts them to the wants and tastes of the society.

The whole produce of a nation may be said to have a market price in money and labour. When this market price is high, that is, when the prices of commodities rise so as to command a greater excess of labour above what they had cost in production than before, while the same capital and number of people had been employed upon them, it is evident that more fresh labour will be set in motion every year, and the increase of wealth will be certain and rapid. On the other hand, when the market prices of commodities are such as to be able to command very little more labour than the production of them has cost, it is as evident that the national wealth will proceed very slowly, or perhaps be quite stationary.

In the distribution of commodities, the circulating medium of every country bears a most important part; and, as I intimated before in a note, we are much more likely to obscure our reasonings than to render them clearer, by throwing it out of our consideration. It is not easy indeed, without reference to a circulating medium, to ascertain whether the commodities of a country are so distributed as to give them their proper value.

It may be said, perhaps, that if the funds for the maintenance of labour are at any time in unusual abundance, it may fairly be presumed that they will be able to command a more than usual quantity of labour. But they certainly will not be able to command more labour, nor even so much, if the distribution of them be defective; and in a country which has a circulating medium, the specific proof of the distribution being defective is, that the whole produce does not exchange for so large an amount of circulating medium as before, and that consequently the producers have been obliged to sell at a great diminution of money profits, or a positive money loss.

From the harvest of 1815 to the harvest of 1816, there cannot be a doubt that the funds for the maintenance of labour in this country were unusually abundant. Corn was particularly plentiful, and no other necessaries were deficient; yet it is an acknowledged fact, that great numbers were thrown out of employment, partly from the want of power, and partly from the want of will to employ the same quantity of labour as before. How is this fact to be accounted for? It would certainly not be easy to explain it without referring to a circulating medium. But the moment we refer to a circulating medium, the theory of the fact observed becomes perfectly clear. It is acknowledged that there was a fall in the money value of the raw produce, to the amount of nearly one third. But if the farmer sold his produce for only two thirds of the price at which he had before sold it, while the money price of labour had not fallen, it is evident that he would be quite unable to command the same quantity of labour, and to employ the same quantity of capital on his farm as he did the year before. And when afterwards a great fall of money prices took place in almost all manufactured products, occasioned in a considerable degree by this previous fall of raw produce, it is as evident that if the price of labour had not fallen, or not in proportion, so large a quantity of produce would be required to pay the labourer, that the manufacturers would be unable to employ the same number of workmen as before. In the midst of the plenty of necessaries, these two important classes of society would really have their power of employing labour diminished, while all those who possessed fixed incomes would have their power of employing labour increased, with very little chance of an increase of will to extend their demand in proportion; and the general result would resemble the effects of that partial distribution of products which would arise from the interruption of accustomed communications. The same quantity of commodities might be produced for a short time; but the distribution not being such as to proportion the supply in each quarter to the demand, the whole would fall in exchangeable value, and a decided check to production would be experienced in reference to the whole country. It follows, that the labouring classes of society may be thrown out of work in the midst of an abundance of necessaries, if these necessaries are not in the hands of those who are at the same time both able and willing to employ an adequate quantity of labour.

As long as this fall in the money price of produce continues to diminish the power of commanding labour, a discouragement to production must obviously continue; and if, after labour has adjusted itself to the new level of prices, the permanent distribution of the produce and the permanent tastes and habits of the people should not be favourable to an adequate degree of effectual consumption, the clearest principles of political economy shew that the profits of stock might be lower for any length of time than the state of the land rendered necessary; and that the retarded rate of production might be as permanent as the faulty distribution of the produce and the unfavourable tastes and habits which had occasioned it.

It is scarcely possible for any essential changes to take place in the value of the circulating medium of a country without occasioning an alteration in the distribution of its produce. The imprudent use of paper money must be allowed to be the principal cause of these changes. But even without a paper currency, or with one always maintaining the same value as bullion, every country is liable to changes in the value of its produce, compared with its money; and as such changes must have a great effect on the distribution of produce, partly temporary and partly permanent, a determination to reason on these subjects, without taking into account the effects of so powerful an agent, would be purposely to shut our eyes to the truth. Referring therefore ultimately to the command over labour as the best practical measure of the value of the whole produce, it will be useful to refer previously to its bullion value, in order to ascertain whether the distribution of the produce is such as to enable it to command labour in proportion to the increase of its quantity. If the bullion value of a country’s products so increases as to command yearly an increased quantity of labour without a fall of profits, we may feel pretty well assured that it is proceeding without check in wealth and prosperity. But, if there is merely an increase of commodities, it is impossible to say, without further inquiry, that they may not be so distributed as to retard, instead of promote, the further progress of national wealth.

It has been fully stated and allowed, that a period of comparative stagnation must finally arrive in every country from the difficulty of procuring subsistence. But a deficiency of effectual demand has often occasioned a similar stagnation at an early period of a nation’s progress. No country with a very confined market, internal as well as external, has ever been able to accumulate a large capital, because such a market prevents the formation of those wants and tastes, and that desire to consume, which are absolutely necessary to keep up the market prices of commodities, and prevent the fall of profits. The distribution of commodities occasioned by internal trade is the first step towards any considerable increase of wealth and capital; and if no exchanges could have taken place in this country, at a greater distance than five miles, it is probable that not a fifth part of our present capital could have been employed before the effective encouragement to accumulation and the further progress of wealth had nearly ceased.

The motives which urge individuals to engage in foreign commerce are precisely the same as those which lead to the interchange of goods between the more distant parts of the same country, namely, a desire to increase or keep up the market prices of the local products; and the increase of profits thus made by the individual, or the prevention of that fall of profits which would have taken place if the capital had been employed at home, must be considered as a comparative increase in the value of the national produce.

Mr. Ricardo begins his Chapter on Foreign Trade by stating that “No extension of foreign trade will immediately increase the amount of value in a country although it will very powerfully contribute to increase the mass of commodities, and therefore the sum of enjoyments.” This statement is quite consistent with his peculiar view of value, as depending solely upon the labour which a commodity has cost. However abundant may be the returns of the merchant, or however greatly they may exceed his exports in value according to the common acceptation of the term, it is certain that the labour employed in procuring these exports will at first remain the same. But, as it is so glaring and undeniable a fact that the returns from an unusually favourable trade will exchange for an unusual quantity of money, labour and domestic commodities; as this increased power of commanding money, labour and commodities is in reality what is meant by the merchant when he talks of the extension of the foreign market and a favourable trade, and as it is known that such a state of things often lasts a sufficient time to produce the most important results, it must be allowed that the statement is quite incorrect.

Undoubtedly, as Mr. Ricardo observes, the interest of the merchant is no way affected by importing fifty pipes of wine instead of twenty-five, if the fifty pipes be not of greater value. Profits, as I have shown, are always estimated by value, not by quantity. The specific object which the merchant has in view when he engages in foreign commerce, is to obtain returns for his capital of greater value than if he had employed it at home; and in all cases of a favourable foreign trade from extending markets, this is specifically what he obtains.

But Mr. Ricardo thinks that value cannot increase in one department of produce without its being diminished in some other.* This again may be true according to his view of value, but is utterly unfounded according to that more enlarged view of exchangeable value which is established and confirmed by experience. If any foreign power were to send to a particular merchant commodities of a new description which would sell in the London market for fifty thousand pounds, the wealth of such merchant would be increased to that extent; and who, I would ask, would be the poorer for it? It is no doubt true that the purchasers of these commodities may be obliged to forego the use of some of the articles which they had before been in the habit of buying,† and so far in some quarters demand may be diminished; but, to counterbalance this diminution, the enriched merchant will become a purchaser of additional goods to the amount perhaps of the whole fifty thousand pounds, and thus prevent any general fall in the value of the native produce consumed in the country, while the value of the foreign produce so consumed has increased to the amount of the whole of the new produce imported. I see no difference between a present from abroad, and the unusual profits of a new foreign trade, in their effects upon the wealth of a state. They are equally calculated to increase the wealth of the community, by an increase both of the quantity and value of the produce obtained.

It may perhaps be thought that the money value of the whole produce cannot be increased without an importation of money. But, in fact, a successful extension of foreign trade is exactly that state of things which most directly leads to the importation of bullion.* For what is it that the merchant exporter specifically considers as a successful extension of foreign commerce in dealing with civilized nations? Undoubtedly, the power of selling his exports abroad for a greater value than usual, estimated in bullion; and of course, if the goods which he would import in return will not sell at home so much higher as to warrant their importation, a part of the returns will finally be imported in money. But if on the whole trade only such an amount be imported as shall bear the same proportion to the returns in goods as the whole of the currency of the country does to the whole of its produce, it is obvious that no difficulty whatever can occur in the circulation of the commodities of the country at their former prices, with the single exception of those articles with which the foreign goods might directly enter into competition, which in this case would never be sufficient to prevent a general increase of value in the whole produce.

I most distinctly therefore differ from Mr. Ricardo in the conclusion implied in the following passage. “In all cases the demand for foreign and home commodities together, as far as regards value, is limited by the revenue and capital of the country. If one increases, the other must diminish.”* It appears to me that in almost every case of successful foreign trade, it is a matter of unquestionable fact that the demand for foreign and home commodities taken together decidedly increases; and that the increase in the value of foreign produce does not occasion a proportionate diminution in the value of home produce.

I would still however allow that the demand for foreign and home commodities together is limited by the value of the revenue and capital of the country; but, according to my view of the subject, the national revenue, which consists of the sum of rents, profits, and wages, is at once decidedly increased by the increased profits of the foreign merchant, without a proportionate diminution of revenue in any other quarter; whereas Mr. Ricardo is evidently of opinion that, though the abundance of commodities is increased, the revenue of the country, as far as regards value, remains the same.

It will readily be allowed that an increase in the quantity of commodities is one of the most desirable effects of foreign commerce; but I wish particularly to press on the attention of the reader that in almost all cases, another most important effect accompanies it, namely, an increase in the amount of exchangeable value. And that this latter effect is so necessary, in order to create a continued stimulus to productive industry, and keep up an abundant supply of commodities, that in the few cases in which it does not take place, a stagnation in the demand for labour is immediately perceptible, and the progress of wealth is checked. An extension of foreign commerce, according to the view which Mr. Ricardo takes of it, would, in my opinion, place us frequently in the situation in which this country was in the early part of 1816, when a sudden abundance and cheapness of corn and other commodities, from a great supply meeting a deficient demand, so diminished the value of the income of the country, that it could no longer command the same quantity of labour at the same price; the consequence of which was that, in the midst of plenty, thousands were thrown out of employment—a most painful but almost unavoidable preliminary to a fall in the money wages of labour, which it is obvious could alone enable the general income of the country to employ the same number of labourers as before, and, after a period of severe check to the increase of wealth, to recommence a progressive movement.

Mr. Ricardo always seems to think that it is quite the same to the labourer, whether he is able to command more of the necessaries of life by a rise in the money price of labour, or by a fall in the money price of provisions; but these two events, though apparently similar in their effects, may be, and in general are, most essentially different. An increase in the money wages of labour, generally implies such a distribution of the actual wealth as to give it an increasing value, to ensure full employment to all the labouring classes, and to create a demand for further produce, and for the capital which is to obtain it. In short, it is the infallible sign of health and prosperity. Whereas a general fall in the money price of necessaries often arises from so defective a distribution of the produce of the country, that the general amount of its value cannot be kept up; in which case, under the most favourable circumstances, a temporary period of want of employment and distress is unavoidable; and in many cases, (as may be too frequently observed in surveying the different countries of the globe,) this fall in the money price of necessaries is the accompaniment of a permanent want of employment and the most abject poverty, in consequence of a retrograde and permanently diminished wealth.

The reader will be fully aware that a great fall in the price of particular commodities, either from improved machinery or foreign commerce, is perfectly compatible with a continued and great increase, not only in the exchangeable value of the whole produce of the country, but even in the exchangeable value of the whole produce of these particular articles themselves. It has been already stated that the whole value of the cottons produced in this country has been prodigiously increased, notwithstanding the great fall in their price. The same may be said of teas, sugars, and many other articles, although when they were first imported, their prices were greatly higher than at present; and there can be little doubt, that if we were to attempt to make our own wines by means of hot-houses, they would altogether be worth much less money, and would give encouragement to much less industry that at present.

The causes of an increase in the effectual demand for particular commodities are of very easy explanation; but it has been considered, and with reason, as not very easy to explain the cause of that general briskness of demand which is sometimes so very sensibly felt throughout a whole country, and is so strikingly contrasted with the feeling which gives rise to the expression of trade being universally very dead. As the specific and immediate cause of this general increase of effective demand, I should decidedly point to such a distribution of the produce, and such an adaptation of it to the wants and tastes of the society as will give the money price for which it sells an increased command of labour before more labour has been employed on its production; and I am inclined to think that, if this test be applied to all the striking cases that have occurred, it will rarely or never be found to fail.

It cannot for a moment be doubted, for instance, that the annual increase of the produce of the United States of America, estimated either in bullion or in labour, has been greater than that of any country we are acquainted with, and that this has been greatly owing to their foreign commerce, which, notwithstanding their facility of production, has given a value to their corn and raw produce nearly equal to what they bear in many of the countries of Europe, and has consequently given to them a power of commanding the produce and labour of other countries which is quite extraordinary when compared with the quantity of labour which they have employed. It can as little be doubted that in this country, from 1793 to 1814, the whole exchangeable value of the produce, estimated either in labour, or in bullion, was greatly augmented every year. In this increase of value, as well as of riches, the extension of our foreign commerce has been considered, almost without a dissentient opinion, as a most powerful agent; and certainly till 1815, no appearances seemed to indicate, that the increasing value of our imports had the slightest tendency to diminish the value of our domestic produce. They both increased, together, and increased greatly, estimated either in bullion or labour.

But while in every country to which it seems possible to refer, an increase of value will be found to accompany increasing prosperity and riches, I believe that no single instance can be produced of a country engaged in a successful commerce, and exhibiting an increasing plenty of commodities, where the value of the whole produce estimated in labour, was retrograde or even stationary. And of the two ways in which capital may be accumulated, as stated by Mr. Ricardo in his chapter on Foreign Commerce, namely increase of revenue from increased profits, or a diminished expenditure arising from cheap commodities,* it will be found that the latter never has been, nor ever will be, experienced as an effective stimulus to the permanent and continued production of increasing wealth.

It is the natural tendency of foreign trade, (as of all sorts of exchanges by which a distribution is effected better suited to the wants of society,) immediately to increase the value of that part of the national revenue which consists of profits, without a proportionate diminution elsewhere. It is precisely this immediate increase of national income arising from the exchange of what is of less value in the country, for what is of more value, that furnishes both the power and will to employ more labour, and occasions the animated demand for labour, produce and capital, which is a striking and almost universal accompaniment of successful foreign commerce; whereas, a mere abundance of commodities falling very greatly in value compared with labour, though it may be called an actual increase of wealth, would obviously at first diminish the power of employing the same number of workmen, and a temporary glut and general deficiency of demand could not fail to ensue in labour, in produce, and in capital, attended with the usual distress which a glut must necessarily occasion.

Mr. Ricardo always views foreign trade in the light of means of obtaining cheaper commodities. But this is only looking to one half of its advantages, and I am strongly disposed to think, not the larger half. In our own commerce at least, this part of the trade is comparatively inconsiderable. The great mass of our imports consists of articles as to which there can be no kind of question about their comparative cheapness, as raised abroad or at home. If we could not import from foreign countries our silk, cotton and indigo, our tea, sugar, coffee and tobacco, our port, sherry, claret and champagne, our almonds, raisins, oranges and lemons, our various spices and our various drugs, with many other articles peculiar to foreign climates, it is quite certain that we should not have them at all. To estimate the advantage derived from their importation by their cheapness, compared with the quantity of labour and other advances which they would have cost, if we had attempted to raise them at home, would be perfectly preposterous. In reality, no such attempt would have been thought of. If we could by possibility have made fine claret at ten pounds a bottle, few or none would have drunk it; and the actual quantity of labour and other advances employed in obtaining these foreign commodities is at present beyond comparison greater than it would have been if we had not imported them.

We must evidently therefore estimate the advantage which we derive from such a trade upon a very different principle. This is the simple and obvious one often adverted to as the foundation of every act of barter, whether foreign or domestic, namely, the increased value which results from exchanging what is wanted less for what is wanted more. After we had, by our exports of home commodities, obtained in return all the foreign articles above-mentioned, we might be very much puzzled to say whether we had increased or decreased the quantity of our commodities, but we should feel quite certain that the new distribution of produce which had taken place, by giving us commodities much better suited to our wants and tastes than those which had been sent away, had decidedly increased the exchangeable value of our possessions, our means of enjoyment, and our wealth.

Taking therefore a very different view of the effects of foreign commerce on exchangeable value from Mr. Ricardo, I should bring forward the extension of markets as being, in its general tendency, pre-eminently favourable to that increase of value and wealth which arises from distribution.

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.

The third main cause which tends to keep up and increase the value of produce by favouring its distribution is the employment of individuals in personal services, or the maintenance of an adequate proportion of consumers not directly productive of material objects.

It has been already shewn that, under a rapid accumulation of capital, or in other words, a rapid conversion of persons engaged in personal services into productive labourers, the demand, compared with the supply of material products, would prematurely fail, and the motive to further accumulation be checked, before it was checked by the exhaustion of the land. It follows that, without supposing the productive classes to consume much more than they are found to do by experience, particularly when they are rapidly saving from revenue to add to their capitals, it is necessary that a country with great powers of production should possess a body of consumers who are not themselves engaged in production.

In the fertility of the soil, in the powers of man to apply machinery as a substitute for labour, and in the motives to exertion under a system of private property, the laws of nature have provided for the leisure or personal services of a certain portion of society; and if this beneficent offer be not accepted by an adequate number of individuals, not only will a positive good, which might have been so attained, be lost, but the rest of the society, so far from being benefited by such self-denial, will be decidedly injured by it.

What the proportion is between the productive labourers and those engaged in personal services, which affords the greatest encouragement to the continued increase of wealth, it has before been said that the resources of political economy are unequal to determine. It must depend upon a great variety of circumstances, particularly upon the fertility of the soil and the progress of invention in machinery. A fertile soil and an ingenious people can not only support without injury a considerable proportion of consumers not directly productive of material wealth, but may absolutely require such a body of demanders, in order to give effect to the powers of production. While, with a poor soil and a people of little ingenuity, an attempt to support such a body would throw land out of cultivation, and lead infallibly to impoverishment and ruin.

Another cause, which makes it impossible to say what proportion of consumers directly productive to those not directly productive is most favourable to the increase of wealth, is the difference in the degree of consumption which may prevail among the producers themselves.

Perhaps it will be said that there can be no occasion for unproductive consumers, if a consumption sufficient to keep up the value of the produce takes place among those who are engaged in production.

With regard to the capitalists who are so engaged, they have certainly the power of consuming their profits, or the revenue which they make by the employment of their capitals; and if they were to consume it, with the exception of what could be beneficially added to their capitals, so as to provide in the best way both for an increased production and increased consumption, there might be little occasion for unproductive consumers. But such consumption is not consistent with the actual habits of the generality of capitalists. The great object of their lives is to save a fortune, both because it is their duty to make a provision for their families, and because they cannot spend an income with so much comfort to themselves, while they are obliged perhaps to attend a counting-house for seven or eight hours a day.

It has been laid down as a sort of axiom among some writers that the wants of mankind may be considered as at all times commensurate with their powers; but this position is not always true, even in those cases where a fortune comes without trouble; and in reference to the great mass of capitalists, it is completely contradicted by experience. Almost all merchants and manufacturers save, in prosperous times, much more rapidly than it would be possible for the national capital to increase, so as to keep up the value of the produce. But if this be true of them as a body, taken one with another, it is quite obvious that, with their actual habits, they could not afford an adequate market to each other by exchanging their several products.

There must therefore be a considerable class of persons who have both the will and power to consume more material wealth than they produce, or the mercantile classes could not continue profitably to produce so much more than they consume. In this class the landlords no doubt stand pre-eminent; but if they were not assisted by the great mass of individuals engaged in personal services, whom they maintain, their own consumption would of itself be insufficient to keep up and increase the value of the produce, and enable the increase of its quantity more than to counterbalance the fall of its price. Nor could the capitalists in that case continue with effect the same habits of saving. The deficiency in the value of what they produced would necessarily make them either consume more, or produce less; and when the mere pleasure of present expenditure, without the accompaniments of an improved local situation and an advance in rank, is put in opposition to the continued labour of attending to business during the greatest part of the day, the probability is that a considerable body of them will be induced to prefer the latter alternative, and produce less. But if, in order to balance the demand and supply, a permanent diminution of production takes place, rather than an increase of effective consumption, the whole of the national wealth, which consists of what is produced and consumed, will be decidedly diminished.

Mr. Ricardo frequently speaks, as if saving were an end instead of a means. Yet even with regard to individuals, where this view of the subject is nearest the truth, it must be allowed that the final object in saving is expenditure and enjoyment. But, in reference to national wealth, it can never be considered either immediately or permanently in any other light than as a means. If however commodities are already so plentiful that an adequate portion of them is not profitably consumed, to save capital can only be still further to increase the plenty of commodities, and still further to lower already low profits, which can be comparatively of little use.

National saving, therefore, considered as the means of increased production, is confined within much narrower limits than individual saving. While some individuals continue to spend, other individuals may continue to save to a very great extent; but the national saving, in reference to the whole mass of producers and consumers, must necessarily be limited by the amount which can be advantageously employed in supplying the demand for produce; and to create this demand, there must be an adequate and effective consumption either among the producers themselves, or other classes of consumers.

Adam Smith has observed “that the desire of food is limited in every man by the narrow capacity of the human stomach; but the desire of the conveniences and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary.” That it has no certain boundary is unquestionably true; that it has no limit must be allowed to be too strong an expression, when we consider how it will be practically limited by the countervailing luxury of indolence, or by the general desire of mankind to better their condition, and make a provision for a family; a principle which, as Adam Smith himself states, is on the whole stronger than the principle which prompts to expense.* But surely it is a glaring misapplication of this statement in any sense in which it can be reasonably understood, to say, that there is no limit to the saving and employment of capital except the difficulty of procuring food. It is to found a doctrine upon the unlimited desire of mankind to consume; then to suppose this desire limited in order to save capital, and thus completely alter the premises, and yet still to maintain that the doctrine is true. Let a sufficient consumption always take place, whether by the producers or others, to keep up and increase the exchangeable value of the whole produce; and I am perfectly ready to allow that, to the employment of a national capital, increasing only at such a rate, there is no other limit than that which bounds the power of maintaining population. But it appears to me perfectly clear in theory, and universally confirmed by experience, that the employment of capital may, and in fact often does, find a limit, long before there is any real difficulty in procuring the means of subsistence; and that both capital and population may be at the same time, and for a period of considerable length, redundant, compared with the effectual demand for produce.

Of the wants of mankind in general, it may be further observed, that it is a partial and narrow view of the subject, to consider only the propensity to spend what is actually possessed. It forms but a very small part of the question to determine that if a man has a hundred thousand a year, he will not decline the offer of ten thousand more; or to lay down generally that mankind are never disposed to refuse the means of increased power and enjoyment. The main part of the question respecting the wants of mankind, relates to their power of calling forth the exertions necessary to acquire the means of expenditure. It is unquestionably true that wealth produces wants; but it is a still more important truth, that wants produce wealth. Each cause acts and re-acts upon the other, but the order, both of precedence and of importance, is with the wants which stimulate to industry; and with regard to these, it appears that, instead of being always ready to second the physical powers of man, they require for their developement “all appliances and means to boot.” The greatest of all difficulties in converting uncivilized and thinly peopled countries into civilized and populous ones, is to inspire them with the wants best calculated to excite their exertions in the production of wealth. One of the greatest benefits which foreign commerce confers, and the reason why it has always appeared an almost necessary ingredient in the progress of wealth, is, its tendency to inspire new wants, to form new tastes, and to furnish fresh motives for industry. Even civilized and improved countries cannot afford to lose any of these motives. It is not the most pleasant employment to spend eight hours a day in a counting-house. Nor will it be submitted to after the common necessaries and conveniences of life are attained, unless adequate motives are presented to the mind of the man of business. Among these motives is undoubtedly the desire of advancing his rank, and contending with the landlords in the enjoyment of leisure, as well as of foreign and domestic luxuries.

But the desire to realize a fortune as a permanent provision for a family is perhaps the most general motive for the continued exertions of those whose incomes depend upon their own personal skill and efforts. Whatever may be said of the virtue of parsimony or saving, as a public duty, there cannot be a doubt that it is, in numberless cases, a most sacred and binding private duty; and were this legitimate and praiseworthy motive to persevering industry in any degree weakened, it is impossible that the wealth and prosperity of the country should not most materially suffer. But if, from the want of other effective consumers, the capitalists were obliged to consume all that could not be advantageously added to the national capital, under such circumstances the motives which support them in their daily tasks must essentially be weakened, and the same powers of production would not be called forth.

It has appeared then that, in the ordinary state of society, the master producers and capitalists, though they may have the power, have not the will, to consume in the shape of revenue to the necessary extent. And with regard to their workmen, it must be allowed that, if they possessed the will, they have not the power. It is indeed most important to observe that no power of consumption on the part of the labouring classes can ever, according to the common motives which influence mankind, alone furnish an encouragement to the employment of capital. No one will ever employ capital merely for the sake of the demand occasioned by those who work for him. Unless they produce an excess of value above what they consume, which he either wants himself in kind, or which he can advantageously exchange for something which he desires, either for present or future use, it is quite obvious that his capital will not be employed in maintaining them. When indeed this further value is created and affords a sufficient excitement to the saving and employment of capital, then certainly the power of consumption possessed by the workmen will greatly add to the whole national demand, and make room for the employment of a much greater capital.

It is most desirable that the labouring classes should be well paid, for a much more important reason than any that can relate to wealth; namely, the happiness of the great mass of society. But as a great increase of consumption among the working classes must greatly increase the cost of production, it must lower profits, and diminish or destroy the motive to accumulate, before agriculture, manufactures, and commerce have reached any considerable degree of prosperity. If each labourer were actually to consume double the quantity of corn which he does at present, such a demand, instead of giving a stimulus to wealth, would unquestionably throw a great quantity of land out of cultivation, and greatly diminish both internal and external commerce.*

It may be thought perhaps that the landlords could not fail to supply any deficiency of demand and consumption among the producers, and that between them there would be little chance of any approach towards redundancy of capital. What might be the result of the most favourable distribution of landed property it is not easy to say from experience; but experience certainly tells us that, under the distribution of land which actually takes place in most of the countries in Europe, the demands of the landlords, added to those of the producers, have not always been found sufficient to prevent any difficulty in the employment of capital. In the instance alluded to in a former chapter, which occurred in this country in the middle of last century, there must have been a considerable difficulty in finding employment for capital, or the national creditors would rather have been paid off than have submitted to a reduction of interest from 4 per cent. to 3½, and afterwards to 3. And that this fall in the rate of interest and profits arose from a redundancy of capital and a want of demand for produce, rather than from the difficulty of production on the land, is fully evinced by the low price of corn at the time, and the very different state of interest and profits which has occurred since.

A similar instance took place in Italy in 1685, when, upon the Pope’s reducing the interest of his debts from 4 to 3 per cent., the value of the principal rose afterwards to 112; and yet the Pope’s territories have at no time been so cultivated as to occasion such a low rate of interest and profits from the difficulty of procuring the food of the labourer. Under a more favourable distribution of property, there cannot be a doubt that such a demand for produce, agricultural, manufacturing, and mercantile, might have been created, as to have prevented for many many years the interest of money from falling below 3 per cent. In both these cases, the demands of the landlords were added to those of the productive classes.

But if the master-producers, from the laudable desire they feel of bettering their condition, and providing for a family, do not consume their revenue sufficiently to give an adequate stimulus to the increase of wealth; if the working producers, by increasing their consumption, supposing them to have the means of so doing, would impede the growth of wealth more by diminishing the power of production, than they could encourage it by increasing the demand for produce; and if the expenditure of the landlords, in addition to the expenditure of the two preceding classes, be found insufficient to keep up and increase the value of that which is produced, where are we to look for the consumption required but among the unproductive labourers of Adam Smith?

Every society must have a body of persons engaged in personal services of various kinds; as every society, besides the menial servants required, must have statesmen to govern it, soldiers to defend it, judges and lawyers to administer justice and protect the rights of individuals, physicians and surgeons to cure diseases and heal wounds, and a body of clergy to instruct the ignorant, and administer the consolations of religion. No civilized state has ever been known to exist without a certain portion of all these classes of society in addition to those who are directly employed in production. To a certain extent therefore they appear to be absolutely necessary. But it is perhaps one of the most important practical questions that can possibly be brought under our view, whether, however necessary and desirable they may be, they must be considered as detracting so much from the material products of a country, and its power of supporting an extended population; or whether they furnish fresh motives to production, and tend to push the wealth of a country farther than it would go without them.

The solution of this question evidently depends, first, upon the solution of the main practical question, whether the capital of a country can or cannot be redundant; that is, whether the motive to accumulate may be checked or destroyed by the want of effective demand long before it is checked by the difficulty of procuring the subsistence of the labourer. And secondly, whether, allowing the possibility of such a redundance, there is sufficient reason to believe that, under the actual habits of mankind, it is a probable occurrence.

In the Chapter on Profits, but more particularly in the Third Section of the present Chapter, where I have considered the effect of accumulation as a stimulus to the increase of wealth, I trust that the first of these questions has been satisfactorily answered. And in the present Section it has been shewn that the actual habits and practice of the productive classes, in the most improved societies, do not lead them to consume as revenue so large a proportion of what they produce, even though assisted by the landlords, as to prevent their finding frequent difficulties in the employment of their capitals. We may conclude therefore, with little danger of error, that such a body of persons as I have described is not only necessary to the government, protection, health, and instruction of a country, but is also necessary to call forth those exertions which are required to give full play to its physical resources.

With respect to those persons who are not employed in the production or distribution of material objects, it is obvious that such as are paid voluntarily by individuals, will be the most likely to be useful in exciting industry, and the least likely to be prejudicial by interfering with the costs of production. It may be presumed that a person will not take a menial servant, unless he can afford to pay him; and that he is as likely to be excited to industry by the prospect of this indulgence, as by the prospect of buying ribands and laces.

It is also very important to observe, that menial servants are absolutely necessary to make the resources of the higher and middle classes of society efficient in the demand for material products. No persons possessing incomes above five hundred pounds a year, would be inclined to have such houses, furniture, clothes, carriages and horses, and such eatables and drinkables in their houses as they have at present, if they were obliged to sweep their own rooms, brush and wash their own furniture and clothes, clean their own carriages and horses, and had none but themselves to make a demand for eatables and drinkables. And it is farther to be remarked, that all personal services paid voluntarily, whether of a menial or intellectual kind, are essentially distinct from the labour necessary to production. They are paid from revenue, not from capital. They have no tendency to increase cost and lower profits. On the contrary, while they leave the cost of production, as far as regards the quantities of labour required to obtain any particular commodities the same as before, they increase profits by occasioning a more brisk demand for material products, as compared with the supply of them.

Yet to shew how frequently the doctrine of proportions meets us at every turn, and how much the wealth of nations depends upon the relation of parts, rather than on any positive rule respecting the advantages of productive labour as compared with personal services, it may be worth while to remind the reader that, though the employment of a number of persons in menial service, varying with the neat revenue of the society, is in every respect desirable, there could hardly be a taste more unfavourable to the progress of wealth than a strong preference of menial service and ill accommodated followers to material products. We may, however, safely trust to the inclinations of individuals in this respect; and it will be allowed generally, that there is little difficulty in reference to those classes which are supported voluntarily, though there may be much with regard to those which must be supported by taxation.

With regard to these latter classes, such as statesmen, soldiers, sailors, and those who live upon the interest of a national debt, it cannot be denied that they contribute powerfully to distribution and demand; they frequently occasion a division of property more favourable to the progress of wealth than would otherwise have taken place; they ensure that effective consumption which is necessary to give the proper stimulus to production; and the desire to pay a tax, and yet enjoy the same means of gratification, must often operate to excite the exertions of industry quite as effectually as the desire to pay a lawyer or physician. Yet to counterbalance these advantages, which so far are unquestionable, it must be acknowledged that injudicious taxation might stop the increase of wealth at almost any period of its progress, early or late;* and that the most judicious taxation might ultimately be so heavy as to clog all the channels of foreign and domestic trade, and almost prevent the possibility of accumulation.

The effect therefore on national wealth of those classes of unproductive consumers which are supported by taxation, must be very various in different countries, and must depend entirely upon the powers of production, and upon the manner in which the taxes are raised in each country. As great powers of production are neither likely to be called into action, or, when once in action, kept in activity without a great effective consumption, I feel very little doubt that instances have practically occurred of national wealth being decidedly stimulated by the consumption of those who have been supported by taxes. Yet taxation is a stimulus so liable in every way to abuse, and it is so absolutely necessary for the general interests of society to consider private property as sacred, that no one would think of trusting to any government the means of making a different distribution of wealth, with a view to the general good. But when, either from necessity or error, a different distribution has taken place, and the evil, as far as it regards private property, has actually been committed, it may not be wise to attempt, at the expense of a great temporary sacrifice, a sudden return to the former distribution, without very fully considering whether, if it were effected, it would be really advantageous; that is, whether, in the actual circumstances of the country, with reference to its powers of production, more would not be lost by the want of effectual demand than gained by the diminution of taxation.

If there could be no sort of difficulty in finding profitable employment for any amount of capital, provided labour were sufficiently abundant, the way to national wealth, though it might not always be easy, would be quite straight, and our only object need be to save from revenue, and repress unproductive consumers. But, if it has appeared that the greatest powers of production are rendered comparatively useless without effectual consumption,* and that a proper distribution of the produce is as necessary to the continued increase of wealth as the means of producing it, it follows that, in cases of this kind, the question depends upon proportions; and it would be the height of rashness to determine, under all circumstances, that the sudden diminution of a national debt and the removal of taxation must necessarily tend to increase the national wealth, and provide employment for the labouring classes.

I am very far, however, from being insensible to the evils of a great national debt. Though, in many respects, it may be a useful instrument of distribution, it must be allowed to be a very cumbersome and very dangerous instrument. In the first place, the revenue necessary to pay the interest of such a debt can only be raised by taxation; and, as this taxation, if pushed to any considerable extent, can hardly fail of interfering with the powers of production, there is always danger of impairing one element of wealth, while we are improving another. A second important objection to a large national debt, is the feeling which prevails so very generally among all those not immediately concerned in it, and consequently among the great mass of the population, that they would be immediately and greatly relieved by its extinction; and, whether this impression be well founded or not, it cannot exist without rendering the interest paid for it in some degree insecure, and exposing a country to the risk of a great convulsion of property, particularly as it prevents any economy of expenditure which is practicable, from affording such a relief from taxation, as will tell upon the feelings of the people. A third objection to such a debt is, that it greatly aggravates the evils arising from changes in the value of money. When the currency falls in value, the annuitants, as owners of fixed incomes, are most unjustly deprived of their proper share of the national produce; when the currency rises in value, the pressure of the taxation necessary to pay the interests of the debt, may become suddenly so heavy as greatly to distress the productive classes;* and this kind of sudden pressure must very much enhance the insecurity of property vested in public funds.

On these and other accounts it would be desirable gradually to diminish the debt, and more especially to discourage the growth of it in future, even though it were allowed that its past effects had been favourable to wealth, and that the advantageous distribution of produce which it had occasioned, had, under the actual circumstances, more than counterbalanced the obstructions which it might have given to commerce.

On the whole it may be observed, that the specific use of a body of unproductive consumers, is to give encouragement to wealth by maintaining such a balance between produce and consumption as will give the greatest exchangeable value to the results of the national industry. If such consumers were to predominate, the comparatively small quantity of material products brought to market would keep down the value of the whole produce, from the deficiency of quantity. If, on the other hand, the productive classes were in excess, the value of the whole produce would fall from excess of supply. There is therefore a certain proportion between the two which will yield the greatest value, and command for a continuance the greatest quantity of labour; and we may safely conclude that, among the causes necessary to that distribution, which tends to keep up and increase the exchangeable value of the whole produce, we must place the maintenance of a certain body of consumers who are not themselves engaged in the immediate production of material objects. This body, considered as a stimulus to wealth, should vary in different countries, and at different times, according to the powers of production; and the most favourable result evidently depends upon their numbers being best suited to the natural resources of the soil, and the skill, and accquired tastes of the people.

Section X.—

Application of some of the preceding Principles to the Distresses of the Labouring Classes since 1815, with General Observations.

It has been said that the distresses of the labouring classes since 1815 are owing to a deficient capital, which is evidently unable to employ all that are in want of work.

That the capital of the country does not bear an adequate proportion to the population; that the capital and revenue together do not bear so great a proportion as they did before 1815; and that such a disproportion will at once account for very great distress among the labouring classes, I am most ready to allow. But it is a very different thing to allow that the capital is deficient compared with the population; and to allow that it is deficient compared with the demand for it, and the demand for the commodities procured by it.* The two cases are very frequently confounded, because they both produce distress among the labouring classes; but they are essentially distinct. They are attended with some very different symptoms, and require to be treated in a very different manner.

If one fourth of the capital of a country were suddenly destroyed, or entirely transferred to a different part of the world, without any other cause occurring of a diminished demand for commodities, this scantiness of capital would certainly occasion great inconvenience to consumers, and great distress among the working classes; but it would be attended with great advantages to the remaining capitalists. Commodities, in general, would be scarce, and bear a high price on account of the deficiency in the means of producing them. Nothing would be so easy as to find a profitable employment for capital; but it would by no means be easy to find capital for the number of employments in which it was deficient; and consequently the rate of profits would be very high. In this state of things there would be an immediate and pressing demand for capital, on account of there being an immediate and pressing demand for commodities; and the obvious remedy would be, the supply of the demand in the only way in which it could take place, namely, by saving from revenue to add to capital. This supply of capital would, as I have before stated, take place just upon the same principle as a supply of population would follow a great destruction of people on the supposition of there being an immediate and pressing want of labour evinced by the high real wages given to the labourer.

On the other hand, if the capital of the country were diminished by the failure of demand in some large branches of trade, which had before been very prosperous, and absorbed a great quantity of stock; or even if, while capital were suddenly destroyed, the revenue of the landlords was diminished in a greater proportion owing to peculiar circumstances, the state of things, with the exception of the distresses of the poor, would be almost exactly reversed. The remaining capitalists would be in no respect benefited by events which had diminished demand in a still greater proportion than they had diminished the supply. Commodities would be every where cheap. Capital would be seeking employment, but would not easily find it; and the profits of stock would be low. There would be no pressing and immediate demand for capital, because there would be no pressing and immediate demand for commodities; and, under these circumstances, the saving from revenue to add to capital, instead of affording the remedy required, would only aggravate the distresses of the capitalists, and fill the stream of capital which was flowing out of the country. The distresses of the capitalists would be aggravated, just upon the same principle as the distresses of the labouring classes would be aggravated if they were encouraged to marry and increase, after a considerable destruction of people, although accompanied by a still greater destruction of capital which had kept the wages of labour very low. There might certainly be a great deficiency of population, compared with the territory and powers of the country, and it might be very desirable that it should be greater; but if the wages of labour were still low, notwithstanding the diminution of people, to encourage the birth of more children would be to encourage misery and mortality rather than population.

Now I would ask, to which of these two suppositions does the present state of this country* bear the nearest resemblance? Surely to the latter. That a great loss of capital has lately been sustained, is unquestionable. During nearly the whole of the war, owing to the union of great powers of production with a great effectual consumption and demand, the prodigious destruction of capital by the government was much more than recovered. To doubt this would be to shut our eyes to the comparative state of the country in 1792 and 1813. The two last years of the war were, however, years of extraordinary expense, and being followed immediately by a period marked by a very unusual stagnation of effectual demand, the destruction of capital which took place in those years was not probably recovered. But this stagnation itself was much more disastrous in its effects upon the national capital, and still more upon the national revenue, than any previous destruction of stock. It commenced certainly with the extraordinary fall in the value of the raw produce of the land, to the amount, it has been supposed, of nearly one third. When this fall had diminished the capitals of the farmers, and still more the revenues both of landlords and farmers, and of all those who were otherwise connected with the land, their power of purchasing manufactures and foreign products was of necessity greatly diminished. The failure of home demand filled the warehouses of the manufacturers with unsold goods, which urged them to export more largely at all risks. But this excessive exportation glutted all the foreign markets, and prevented the merchants from receiving adequate returns; while, from the diminution of the home revenues, aggravated by a sudden and extraordinary contraction of the currency, even the comparatively scanty returns obtained from abroad found a very insufficient domestic demand, and the profits and consequent expenditure of merchants and manufacturers were proportionably lowered. While these unfavourable changes were taking place in rents and profits, the powerful stimulus which had been given to population by the continued demand for labour during the war, occasioned the pouring in of fresh supplies of labour, which, aided by the disbanded soldiers and sailors, and the failure of demand arising from the losses of the farmers and merchants, reduced generally both wages and profits, and left the country with a greatly diminished capital and revenue;—not merely in proportion to the alteration of the value of the currency, but in reference to the bullion value of its produce, and the command of this bullion value over labour, at the price at which it was actually employed. For the four or five years since the war, on account of the change in the distribution of the national produce, and the want of effectual consumption and demand occasioned by it, a check has been given to the rate of production, and the population, under its former impulse, has increased, not only faster than the demand for labour, but faster than the actual produce; yet this produce, though deficient, compared with the population, is redundant, compared with the effectual demand for it and the revenue which is to purchase it. Though labour is cheap, there is neither the power nor the will to employ it all; because not only has the capital of the country diminished, compared with the number of labourers, but, owing to the diminished revenues of the country, the commodities which those labourers would produce are not in such request as to ensure tolerable profits to the reduced capital.

But when profits are low and uncertain, when capitalists are quite at a loss where they can safely employ their capitals, and when on these accounts capital is flowing out of the country; in short, when all the evidence which the nature of the subject admits, distinctly proves that there is no effective demand for capital at home, is it not contrary to the general principles of political economy, is it not a vain and fruitless opposition to that first, greatest, and most universal of all its principles, the principle of supply and demand, to recommend saving, and the conversion of more revenue into capital? Is it not just the same sort of thing as to recommend marriage when people are starving and emigrating?

I am fully aware that the low profits of stock, and the difficulty of finding employment for it, which I consider as an unequivocal proof that the immediate want of the country is not capital, has been attributed to other causes; but to whatever causes they may be attributed, an increase in the proportion of capital to revenue must aggravate them. With regard to these causes, such as the cultivation of our poor soils, our restrictions upon commerce, and our weight of taxation, I find it very difficult to admit a theory of our distresses so inconsistent with the theory of our comparative prosperity. While the greatest quantity of our poor lands were in cultivation; while there were more than usual restrictions upon our commerce, and very little corn was imported; and while taxation was at its height, the country confessedly increased in wealth with a rapidity never known before. Since some of our poorest lands have been thrown out of cultivation; since the peace has removed many of the restrictions upon our commerce, and, notwithstanding our corn laws, we have imported a great quantity of corn; and since seventeen millions of taxes have been taken off from the people, we have experienced the greatest degree of distress, both among capitalists and labourers.

I am very far indeed from meaning to infer from these striking facts that restrictions upon commerce and heavy taxation are beneficial to a country. But the facts certainly show that, whatever may be the future effect of the causes above alluded to in checking the progress of our wealth, we must look elsewhere for the immediate sources of our present distresses. How far our artificial system, and particularly the changes in the value of our currency operating upon a large national debt, may have aggravated the evils we have experienced, it would be extremely difficult to say. But I feel perfectly convinced that a very considerable portion of these evils might be experienced by a nation without poor land in cultivation, without taxes, and without any fresh restrictions on trade.

If a large country, of considerable fertility, and sufficient inland communications, were surrounded by an impassable wall, we all agree that it might be tolerably rich, though not so rich as if it enjoyed the benefit of foreign commerce. Now, supposing such a country gradually to indulge in a considerable consumption, to call forth and employ a great quantity of ingenuity in production, and to save only yearly that portion of its revenue which it could most advantageously add to its capital, expending the rest in consumable commodities and personal services, it might evidently, under such a balance of produce and consumption, be increasing in wealth and population with considerable rapidity. But if, upon the principle laid down by M. Say, that the consumption of a commodity is a diminution of demand, the society were greatly and generally to slacken their consumption, and add to their capitals, there cannot be the least doubt, on the principle of demand and supply, that the profits of capitalists would soon be greatly reduced, though there were no poor land in cultivation; and the population would be thrown out of work and would be starving, although without a single tax, or any restrictions on trade.

The state of Europe and America may perhaps be said, in some points, to resemble the case here supposed; and the stagnation which has been so generally felt and complained of since the war, appears to me inexplicable upon the principles of those who think that the power of production is the only element of wealth, and, who consequently infer that if the means of production be increased, wealth will certainly increase in proportion. Now it is unquestionable that the means of production were increased by the cessation of war, and that more people and more capital were ready to be employed in productive labour; but notwithstanding this obvious increase in the means of production, we hear every where of difficulties and distresses, instead of ease and plenty. In the United States of America in particular, a country of extraordinary physical resources, the difficulties which have been experienced are very striking, and such certainly as could hardly have been expected. These difficulties, at least, cannot be attributed to the cultivation of poor land, restrictions upon commerce, and excess of taxation. Altogether the state of the commercial world, since the war, clearly shows that something else is necessary to the continued increase of wealth besides an increase in the means of producing.

That the transition from war to peace, of which so much has been said, is a main cause of the effects observed, will be readily allowed, but not as the operation is usually explained. It is generally said that there has not been time to transfer capital from the employments where it is redundant to those where it is deficient, and thus to restore the proper equilibrium. But such a transfer could hardly require so much time as has now elapsed since the war; and I would ask, where are the under-stocked employments, which, according to this theory, ought to be numerous, and fully capable of absorbing all the redundant capital, which is confessedly glutting the markets of Europe in so many different branches of trade? It is well known by the owners of floating capital, that none such are now to be found; and if the transition in question is to account for what has happened, it must have produced some other effects besides that which arises from the difficulty of moving capital. This I conceive to be a diminution of the demand compared with the supply of produce. The necessary changes in the channels of trade would be effected in a year or two; but the general diminution of demand, compared with the supply occasioned by the transition from such a war to a peace, may last for a very considerable time. The returned taxes, and the excess of individual gains above expenditure, which were so largely used as revenue during the war, are now in part, and probably in no inconsiderable part, saved. I cannot doubt, for instance, that in our own country very many persons have taken the opportunity of saving a part of their returned property-tax, particularly those who have only life-incomes, and who, contrary to the principles of just taxation, had been assessed at the same rate with those whose incomes were derived from realized property. This saving is quite natural and proper, and forms no just argument against the removal of the tax; but still it contributes to explain the cause of the diminished demand for commodities, compared with their supply since the war. If some of the principal governments concerned spent the taxes which they raised in a manner to create a greater and more certain demand for labour and commodities, particularly the former, than the present owners of them, and if this difference of expenditure be of a nature to last for some time, we cannot be surprised at the duration of the effects arising from the transition from war to peace.

The changes, however, which have taken place so generally must have operated very differently upon the different countries of the commercial world, according to the different circumstances in which they were placed; and it will be found generally, as the principles which have been laid down would lead us to expect, that those states which have suffered the most by the war have suffered the least by the peace. In the countries where a great pressure has fallen upon moderate or scanty powers of production, it is hardly possible to suppose that their wealth should not have been stopped in its progress during the war, or perhaps rendered positively retrograde. Such countries must have found relief from a state of things, which now allows them to accumulate capital, without which no state can permanently increase in wealth. But in those countries, where the pressure of the war found great powers of production, and seemed to create greater; where accumulation, instead of being checked, was accelerated, and where the vast consumption of commodities was followed by supplies which occasioned a more rapid increase of wealth than before, the effect of peace would be very different. In such countries it is natural to suppose that a great diminution of the demand compared with the supply, would decidedly check the progress of wealth, and occasion very general and severe distress, both to capitalists and the labouring classes. England and America come the nearest to the countries of this latter description. They suffered the least by the war, or rather were enriched by it, and they are now suffering the most by the peace.

It is certainly a very unfortunate circumstance that any period should ever have occurred in which peace should appear to have been, in so marked a manner, connected with distress; but it should always be recollected that it was owing to the very peculiar circumstances attending the late war that the contrast has been so striking. In the American and former wars it was very different; and, if the same exertions had been attempted, without the same powers of supporting them, that is, without the command of the greatest part of the commerce of the world, and a more rapid and successful progress in the use of machinery than was ever before known, we might have been in a state to have felt the greatest relief at the cessation of hostilities. When Hume and Adam Smith prophesied that a little increase of national debt beyond the then amount of it, would probably occasion bankruptcy; the main cause of their error was the very natural one, of not being able to see the vast increase of productive power to which the nation would subsequently attain. An expenditure, which would have absolutely crushed the country in 1770, might be little more than what was necessary to call forth its prodigious powers of production in 1816. But just in proportion to this power of production, and to the facility with which a vast consumption could be supplied, consistently with a rapid accumulation of capital, would be the distress felt by capitalists and labourers upon any great and sudden diminution of expenditure.

On this account there is reason to doubt the policy of raising the supplies of a long and expensive war within the year, a policy which has been recommended by very able writers. If the country were poor, such a system of taxation might completely keep down its efforts. It might every year positively diminish its capital, and render it every year more ruinous to furnish the same supplies; till the country would be obliged to submit to its enemies from the absolute inability of continuing to oppose them with effect. On the other hand, if the country were rich, and had great powers of production, which were likely to be still further called forth by the stimulus of a great effective consumption, it might be able to pay the heavy taxes imposed upon it, out of its revenue, and yet find the means of adequate accumulation; but if this process were to last for any time, and the habits of the people were accommodated to this scale of public and private expenditure, it is scarcely possible to doubt that, at the end of the war, when so large a mass of taxes would at once be restored to the payers of them, the just balance of produce and consumption would be completely destroyed, and a period would ensue, longer or shorter, according to circumstances, in which a very great stagnation would be felt in every branch of productive industry, attended by its usual concomitant general distress. The evil occasioned by imposing a tax is very rarely compensated by the taking it off. We should constantly keep in mind that the tendency to expenditure in individuals has most formidable antagonists in the love of indolence, and in the desire of saving, in order to better their condition and provide for a family; and that all theories founded upon the assumption that mankind always produce and consume as much as they have the power to produce and consume, are founded upon a want of knowledge of the human character and of the motives by which it is usually influenced.

It will be said, perhaps, that as the capital of the country compared with its population has been diminished since the war, partly by the unrecovered destruction which it sustained during the last two years of the contest, and still more by the sudden want of demand which occurred on its termination; how is the lost capital ever to be recovered, except by accumulation? Now it is perfectly true that the recovery and increase of our capital can take place in no other way than by accumulation. But in looking to this most desirable object, it is absolutely necessary that we should listen to the dictates of those great general laws which seldom fail to direct us in the right course. If population were ever so deficient in a state compared with its territory, yet, if the wages of labour still continued very scanty, and the people were emigrating, the great general laws of demand and supply would instruct us that some previous change in the state of things was necessary, before we ought to wish for an increased proportion of marriages, which in fact, under the actual circumstances, would not accomplish the object aimed at. In the same manner, if a portion of our capital be destroyed, and yet the profits of the remainder are low, and accompanied with frequent losses, and a tendency to emigrate, surely the great general laws of demand and supply cannot more clearly shew us that something else is wanted before we can accumulate with effect.

What is now wanted in this country is an increased national revenue,—an increase in the exchangeable value of the whole produce estimated in bullion,—and in the command of this bullion over labour. When we have attained this, which can only be attained by increased and steady profits, we may then begin again to accumulate, and our accumulation will then be effectual. But if, instead of saving from increased profits, we save from diminished expenditure; if, at the very time that the supply of commodities compared with the demand for them, clearly admonishes us that the proportion of capital to revenue is already too great, we go on saving from our revenue to add still further to our capital, all general principles concur in shewing that we must of necessity be aggravating instead of alleviating our distresses.

But how, it will be asked, are we to obtain this increase of revenue? What steps are we to take in order to raise the exchangeable value of the whole produce, and prepare the way for the future saving which is acknowledged to be necessary? These questions I have endeavoured to answer in the latter Sections of this very long Chapter On the immediate Causes of the Progress of Wealth, where it has appeared that a union of the means of distribution with the powers of production is absolutely necessary to create an adequate stimulus to the continued increase of wealth; and that the three causes, which, by favouring distribution, tend most to keep up and increase the exchangeable value of the whole produce, are, the division of landed property, the extension of domestic and foreign trade, and the maintenance of such a proportion of unproductive consumers as is best adapted to the powers of production.

The mention of these causes is alone sufficient to shew that they are much less within our immediate controul than the common process of accumulation. If it were true that, in order to employ all that are out of work, and to create at the same time a sufficient market for what they produce, it is only necessary that a little more should be saved from the revenue and added to the capital of the country, I am fully persuaded that this species of charity would not want contributors, and that a change would soon be wrought in the condition of the labouring classes. But when we know, both from theory and experience, that this proceeding will not afford the relief sought for, and are referred to an increase in the exchangeable value of the whole produce as the only cause which can restore a healthy and effective demand for labour, it must be allowed that we may be at a loss with respect to the first steps which it would be advisable to take, in order to accomplish what we wish.

Still, however, it is of the utmost importance to know the immediate object which ought to be aimed at; that if we can do but little actually to forward it, we may not, from ignorance, do much to retard it. With regard to the first main cause which I have mentioned, as tending to increase the exchangeable value of the national produce, namely the division of landed property, I have given my reasons for thinking that, in the actual and peculiar state of this country, the abolition of the law of primogeniture would produce more evil than good; and there is no other way in which a different division of land could be effected, consistently with an adequate respect for the great fundamental law of property, on which all progress in civilization, improvement, and wealth, must ever depend. But if the distribution of wealth to a certain extent be one of the main causes of its increase, while it is unadvisable directly to interfere with the present division of land in this country, it may justly become a question, whether the evils attendant on the national debt are not more than counterbalanced by the distribution of property and increase of the middle classes of society, which it must necessarily create; and whether by saving, in order to pay it off, we are not submitting to a painful sacrifice, which, if it attains its object, whatever other good it may effect, will leave us with a much less favourable distribution of wealth? By greatly reducing the national debt, if we are able to accomplish it, we may place ourselves perhaps in a more safe position, and this no doubt is a most important consideration; but grievously will those be disappointed who think that, either by greatly reducing or at once destroying it, we can enrich ourselves, and employ all our labouring classes.

With regard to the second main cause of an increase in the exchangeable value of the whole produce—namely, the extension of domestic and foreign trade, it is well known that we can by no means command either of these at pleasure, but we may do much to impede both. We cannot indeed reasonably attribute any sudden deficiency of trade to causes which have been of long duration; yet there can be little doubt that our commerce has been much impaired by unnecessary restraints, and that much benefit might be derived from the removal of them. While it is necessary to raise a large sum by taxation for the expenses of the government and the payment of the interest of the national debt, it would by no means be advisable to neglect so fair and fruitful a resource as the customs. In regulating these taxes, it is also natural that those foreign commodities should be taxed the highest, which are either of the same kind as the native commodities which have been taxed, or such as, for special reasons of health, happiness, or safety, it is desirable to grow largely at home. But there seems to be no reason for the absolute prohibition of any commodities whatever; and there is little doubt that, upon this principle, a much greater freedom might be given to foreign commerce, at the same time that a greater revenue might be derived from the customs. I have already stated, in more places than one, why, under all the circumstances of the case, I think it desirable that we should permanently grow nearly our own consumption of corn. But I see no sufficient cause why we should permanently prefer the wines of Portugal and the silks of London to the wines and silks of France. For the same reason that more British capital and labour is even now employed in purchasing claret than would be employed in attempting to make it at home, we might fairly expect that, in the case of an extended trade with France, more British capital would be employed in purchasing the wines and silks of France, than is now employed in purchasing the wines of Portugal and making the silks of Spitalfields and Derby.

At the same time it should be remarked that, in looking forward to changes of this kind, it is always incumbent upon us, particularly in the actual situation of our people, to attend to the wise caution suggested by Adam Smith. Fully convinced of the benefits of unrestrained trade, he observes, that, “The case in which it may sometimes be a matter of deliberation how far, and in what manner, it is proper to restore the free importation of foreign goods, after it has been for some time interrupted, is, when particular manufactures, by means of high duties and prohibitions upon all foreign goods which can come into competition with them, have been so far extended as to employ a great multitude of hands. Humanity may in this case require that the freedom of trade should be restored only by slow gradations, and with a good deal of reserve and circumspection. Were these high duties and prohibitions taken away all at once, cheaper foreign goods of the same kind might be poured so fast into the home market as to deprive all at once many thousands of their ordinary employment and means of subsistence.”* The caution here given by Adam Smith certainly applies in a very marked manner to the silk trade; and, however desirable it may be (and it is so most unquestionably) to open the trade with France, a sudden and incautious admission of a large quantity of French silks would tend to aggravate, instead of to relieve the present distresses of our working classes.

In all cases where, under peculiar circumstances, the distress of the country would be aggravated by the opening of certain trades, which had before been subject to restrictions, the exchangeable value of the whole produce estimated in labour, would for a time be diminished. But, in general, as I have endeavoured to shew in the 8th Section of this Chapter, the natural and permanent tendency of all extension of trade both domestic and foreign, is to increase the exchangeable value of the whole produce. This is more especially the case when, instead of changing the channels of commerce, we are able to make large and distinct additions to them. The good is then unalloyed by partial and temporary evil. This better distribution of the produce of the country, this better adaptation of it to the wants and tastes of the consumers, will at once give it a greater market value, and at once increase the national revenue, the rate of steady profits, and the wages of labour.

With regard to the third cause of an increase in the exchangeable value of the whole produce, the maintenance of unproductive consumers—though many have no power to be of use in this respect, others may do something; and it must certainly be advantageous that the truth, whatever it may be, relating to the effects of unproductive consumers, should be fully known, that we may not aim at what will obstruct the progress of wealth, and clamour at what is calculated to advance it. Whatever it may be thought advisable to do respecting the diminution of unproductive consumers, with a view to the placing ourselves in a safer position, we shall be led to proceed with more deliberation, if we are not hurried on by the impression that, by this diminution, we are affording immediate relief to the labouring classes.

It is also of importance to know that, in our endeavours to assist the working classes in a period like the present, it is desirable to employ them in those kinds of labour, the results of which do not come for sale into the market, such as roads and public works. The objection to employing a large sum in this way, raised by taxes, would not be its tendency to diminish the capital employed in productive labour; because this, to a certain extent, is exactly what is wanted; but it might, perhaps, have the effect of concealing too much the failure of the national demand for labour, and prevent the population from gradually accommodating itself to a reduced demand. This however might be, in a considerable degree, corrected by the wages given. And altogether I should say, that the employment of the poor in roads and public works, and a tendency among landlords and persons of property to build, to improve and beautify their grounds, and to employ workmen and menial servants, are the means most within our power and most directly calculated to remedy the evils arising from that disturbance in the balance of produce and consumption, which has been occasioned by the sudden conversion of soldiers, sailors, and various other classes which the war employed, into productive labourers.

If by the operation of these three causes, either separately or conjointly, we can make the supply and demand bear a more advantageous proportion to each other, so as to increase the exchangeable value of the whole produce, the rate of profits may then permanently rise as high as the quality of the soil in cultivation combined with the actual skill of the cultivators will allow, which is far from being the case at present. And as soon as the capitalists can begin to save from steady and improving profits, instead of from diminished expenditure, that is, as soon as the national revenue, estimated in bullion, and in the command of this bullion over labour, begins yearly and steadily to increase, we may then begin safely and effectively to recover our lost capital by the usual process of saving a portion of our increased revenue to add to it.

It is, I believe, the opinion of many persons, particularly among the mercantile classes, that nothing would so soon and so effectively increase the revenue and consumption of the country as a free issue of paper. But in holding this opinion, they have mistaken the nature of the great advantage which the national wealth may sometimes unquestionably derive from a fall in the value of the currency. The specific effect of this fall is to take away property from those who have fixed incomes, and give a greater command over the produce of the country to those who buy and sell. When the state of the national expenditure is such that there is a difficulty of supplying it, then whatever tends to throw a greater proportion of the produce into the hands of capitalists, as it must increase the power of production, must be just calculated to supply what is wanted. And, though the continuation of the act of restriction beyond the immediate necessity of the case, can hardly be considered in any other light than that as an act of positive injustice towards the possessors of fixed incomes; yet there is little doubt that the fall in the value of money, and the facility of credit which it occasioned, acting in the way described, must have contributed greatly to that rapid recovery of vast capital destroyed, which, in the same degree, never probably occurred in the history of any nation before.

But, if we were now to make similar issues of paper, the effect would be very different. Perhaps a sudden increase of currency and a new facility of borrowing might under any circumstances, give a temporary stimulus to trade, but it would only be temporary. Without a large expenditure on the part of the government, and a frequent conversion of capital into revenue, the great powers of production acquired by the capitalists, operating upon the diminished power of purchasing possessed by the owners of fixed incomes, could not fail to occasion a still greater glut of commodities than is felt at present; and experience has sufficiently shewn us, that paper cannot support prices under such circumstances. In the history of our paper transactions, it will be found that the abundance or scantiness of currency has generally followed and aggravated high or low prices, but seldom or never led them; and it is of the utmost importance to recollect that, at the end of the war, the prices failed before the contraction of the currency began. It was, in fact, the failure of the prices of agricultural produce, which destroyed the country banks, and shewed us the frail foundations on which the excess of our paper-currency rested. This sudden contraction no doubt aggravated very greatly the distresses of the merchants and of the country; and for this very reason we should use our utmost endeavours to avoid such an event in future; not, however, by vain efforts to keep up prices by forcible issues of paper, in defiance at once of the laws of justice and the great principles of supply and demand, but by the only effectual way, that of steadily maintaining our paper of the same value with the coin which it professes to represent, and subjecting it to no other fluctuations than those which belong to the precious metals.

In reference to the main doctrine inculcated in the latter part of this work, namely, that the progress of wealth depends upon proportions; it will be objected, perhaps, that it necessarily opens the way to differences of opinion relating to these proportions, and thus throws a kind of uncertainty over the science of political economy which was not supposed to belong to it. If, however, the doctrine should be found, upon sufficient examination, to be true; if it adequately accounts for things as they are, and explains consistently why frequent mistakes have been made respecting the future, it will be allowed that such objectors are answered. We cannot make a science more certain by our wishes or opinions; but we may obviously make it much more uncertain in its application, by believing it to be what it is not.

Though we cannot, however, lay down a certain rule for growing rich, and say that a nation will increase in wealth just in the degree in which it saves from its revenue, and adds to its capital: yet even in the most uncertain parts of the science, even in those parts which relate to the proportions of production and effective consumption, we are not left without guides; and if we attend to the great laws of demand and supply, they will generally direct us into the right course. It is justly observed by Mr. Ricardo that “the farmer and manufacturer can no more live without profit than the labourer without wages. Their motive for accumulation will diminish with every diminution of profit, and will cease altogether when their profits are so low as not to afford them an adequate compensation for their trouble, and the risk which they must necessarily encounter in employing their capital productively.”* Mr. Ricardo applies this passage to the final and necessary fall of profits occasioned by the state of the land. I would apply it at all times, throughout all the variable periods which intervene between the first stage of cultivation and the last. Whenever capital increases too fast, the motive to accumulation diminishes, and there will be a natural tendency to spend more and save less. When profits rise, the motive to accumulation will increase, and there will be a tendency to spend a smaller proportion of the gains, and to save a greater. These tendencies, operating on individuals, direct them towards the just mean, which they would more frequently attain if they were not interrupted by bad laws or unwise exhortations. If every man who saves from his income is necessarily a friend to his country, it follows that all those who spend their incomes, though they may not be absolute enemies, like the spendthrift, must be considered as failing in the duty of benefiting their country, and employing the labouring classes, when it is in their power; and this cannot be an agreeable reflection to those whose scale of expenditure in their houses, furniture, carriages and table, would certainly admit of great retrenchment, with but little sacrifice of real comfort. But if, in reality, saving is a national benefit, or a national disadvantage, according to the circumstances of the period; and, if these circumstances are best declared by the rate of profits, surely it is a case in which individual interest needs no extraneous assistance.

Saving, as I have before said, is, in numerous instances, a most sacred private duty. How far a just sense of this duty, together with the desire of bettering our condition so strongly implanted in the human breast, may sometimes, and in some states of society, occasion a greater tendency to parsimony than is consistent with the most effective encouragement to the growth of public wealth, it is difficult to say; but whether this tendency, if let alone, be ever too great or not, no one could think of interfering with it, even in its caprices. There is no reason, however, for giving an additional sanction to it, by calling it a public duty. The market for national capital will be supplied, like other markets, without the aid of patriotism. And in leaving the whole question of saving to the uninfluenced operation of individual interest and individual feelings, we shall best conform to that great principle of political economy laid down by Adam Smith, which teaches us a general maxim, liable to very few exceptions, that the wealth of nations is best secured by allowing every person, as long as he adheres to the rules of justice, to pursue his own interest in his own way.

Still it must be allowed that this very doctrine, and the main doctrines of the foregoing work, all tend to shew, as was stated in the Introduction, that the science of political ecomony bears a nearer resemblance to the sciences of morals and politics, than to the science of mathematics. But this truth, though it detracts from its certainty, does not detract from its importance. While the science of political economy involves some of the questions which have the nearest connection with the well-being of society, it must always be a subject of the highest interest. The study of it is calculated to be of great practical use, and to prevent much positive evil. And if its principles be carefully founded on an experience sufficiently extended, we have good reason to believe, from what they have already done, that, when properly applied, they will rarely disappoint our just expectations.

There is another objection which will probably be made to the doctrines of the latter part of this work, which I am more anxious to guard against. If the principles which I have laid down be true, it will certainly follow that the sudden removal of taxes will often be attended with very different effects, particularly to the labouring classes of society, from those which have been generally expected. And an inference may perhaps be drawn from this conclusion in favour of taxation. But the just inference from it is, that taxes should never be imposed, nor to a greater amount, than the necessity of the case justifies, and particularly that every effort should be made, consistently with national honour and security to prevent a scale of expenditure so great that it cannot proceed without ruin, and cannot be stopped without distress.

Even if it be allowed that the excitement of a prodigious public expenditure, and of the taxation necessary to support it, operating upon extraordinary powers of production, might, under peculiar circumstances, increase the wealth of a country in a greater degree than it otherwise would have increased; yet, as the greatest powers of production must finally be overcome by excessive borrowing, and as increased misery among the labouring classes must be the consequence, whether we go on or attempt to return, it would surely have been much better for the society if such wealth had never existed. It is like the unnatural strength occasioned by some violent stimulant, which, if not absolutely necessary, should be by all means avoided, on account of the exhaustion which is sure to follow it.

In the Essay on Population I have observed, that “In the whole compass of human events, I doubt if there be a more fruitful source of misery, or one more invariably productive of disastrous consequences, than a sudden start of population from two or three years of plenty, which must necessarily be repressed by the first return of scarcity, or even of average crops.”* The great demand for labour which took place during the war must have had an effect precisely of a similar kind, only aggravated by duration; and as this is a state of things which cannot in its nature continue, it is obviously the duty of all governments, if they have any regard for the happiness of their subjects, to avoid all wars and excessive expenditure as far as it is possible; but if war be unavoidable, so to regulate the necessary expenditure as to occasion the least pressure upon the people during the contest, and the least convulsion in the state of the demand at the termination of it. We may have good reason to lament that such taxation and consumption should ever have taken place, and that so great an impetus, which could only be temporary, should have been given to the wealth and population of the country; but it is a very different question, what is the best remedy now that the evil has been incurred? If the population had made a start during a few years of plenty, we should surely make great efforts to prevent, by importation, the misery which would be occasioned by the sudden return of average crops. If the human body had been subjected to a very powerful stimulus, we should surely be cautious not to remove it too suddenly. And, if the country had been unfortunately subjected to the excitement of a long continuance of excessive expenditure, it surely must be against all analogy and all general principles, to look for the immediate remedy of it in a great and sudden contraction of consumption.

There is every reason to believe that the working classes of society would be severely injured by attaining the object which they seem so ardently to wish for. To those who live upon fixed incomes, the relief from taxation is a great and unmixed good; to the mercantile and trading classes it is sometimes a good and sometimes an evil, according to circumstances; but to the working classes, no taking off of taxes, nor any degree of cheapness of corn, can compensate a want of demand for labour. If the general demand for labour fail, particularly if the failure be sudden, the labouring classes will be wretched in the midst of cheapness; if the demand for labour be considerable, they will be comparatively rich in the midst of dearness.*

To state these facts is not to favour taxes; but to give one of the strongest reasons against them; namely, that they are not only a great evil on their first imposition, but that the attempt to get rid of them afterwards, is often attended with fresh suffering. They are like those injudicious regulations of the mercantile system noticed by Adam Smith, which, though acknowledged to be pernicious, cannot be removed without producing a greater evil for an interval of considerable length.

Theoretical writers are too apt, in their calculations, to overlook these intervals; but eight or ten years, recurring not unfrequently, are serious spaces in human life. They amount to a serious sum of happiness or misery, according as they are prosperous or adverse, and leave the country in a very different state at their termination. In prosperous times the mercantile classes often realize fortunes, which go far towards securing them against the future; but unfortunately the working classes, though they share in the general prosperity, do not share in it so largely as in the general adversity. They may suffer the greatest distress in a period of low wages, but cannot be adequately compensated by a period of high wages. To them fluctuations must always bring more evil than good; and, with a view to the happiness of the great mass of society, it should be our object, as far as possible, to maintain peace, and an equable expenditure.

the end.

[* ] Essay on the Principle of Population.

[* ] See Lord Lauderdale’s Chapter on Parsimony, in his Inquiry into the Nature and Origin of Public Wealth, ch. iv, p. 198, 2d edit. Lord Lauderdale appears to have gone as much too far in deprecating accumulation, as some other writers in recommending it. This tendency to extremes is one of the great sources of error in political economy, where so much depends upon proportions.

[* ] Mr. Mill, in a reply to Mr. Spence, published in 1808, has laid down very broadly the doctrine that commodities are only purchased by commodities, and that one half of them must always furnish a market for the other half. The same doctrine appears to be adopted in its fullest extent by the author of an able and useful article on the Corn Laws, in the supplement to the Encyclopædia Britannica, which has been referred to a previous chapter. These writers do not seem to be aware of what is unquestionably true, that demand is always determined by value, and supply by quantity. Two bushels of wheat are double the quantity of one in regard to supply; but in numerous cases, two bushels will not make so great a demand as one bushel.

[* ] The variations which take place in the general rate of profits being common to all commodities, will not of course affect their relative values; that is, whether commodities universally rise to a higher price, or sink to a lower one, or even fall below their cost, they will continue to bear the same proportion to each other as they did before. But no one would ever think of saying, that the demand for them (in the ordinary sense of the word) was the same in both cases. When, therefore, Mr. Mill explains the equality of demand and supply to consist in this;—“that goods which have been produced by a certain quantity of labour, exchange for goods which have been produced by an equal quantity of labour,” (Elements of Polit. Econ. 3rd edit. p. 239.) he uses the term demand in a sense quite different from that which is usually meant by it. The demand and supply, as he understands them, may be equal to each other, when, owing to a general slackness of trade, the mass of goods are selling at a price very much below their ordinary costs of production; or when, in consequence of unusual briskness, they are selling very much above their costs; that is, when, according to Adam Smith, and to the accustomed language of society, the supply would be said, either greatly to exceed the demand, or to fall considerably short of it.

Throughout the chapter from which the foregoing passage is taken, Mr. Mill uses the term demand, as if it were synonymous with extent of consumption. By an increase or diminution of the demand, he means to refer simply to the greater or less quantity of goods bought or sold. What is usually meant by it, is, the rise or fall in the value of any given quantity of them.

An error, not to the same extent, but somewhat similar in kind, pervades the writings of Col. Torrens.—He represents effectual and profitable demand as consisting in the power of exchanging commodities for a greater quantity of the ingredients of capital than have been expended in their production. (Essay on Wealth, p. 360.) This view of demand, though nearer to the truth than the foregoing one, is nevertheless incorrect. The chief ingredients of capital, and frequently by far the largest, are food and clothing; and this Col. Torrens admits, since he represents the costs of production, as consisting in the advance of a given number of quarters of corn and suits of clothing. Now, although a man should sell his commodity for more corn and clothing than it has cost him, he may, notwithstanding, find himself in this predicament, that, the corn and clothing when obtained, may not, owing to a change in their relation to labour, command the services of the same number of men as were employed in the production of the commodity for which they have been exchanged; in which case the apparent profit would be greatly reduced, or might even disappear altogether. It is then in vain for us to measure the demand for a commodity by the quantity of any other commodity which can be had in exchange for it, since we must at last resort to labour as the only standard of the real value of every thing, and of the effectual demand for it.—Ed.

[* ] Princ. of Polit. Econ. ch. xxi. p. 343, 3rd edit.

[* ] Edinburgh Review, No. LXIV. p. 471.

[* ] This answer of the author will hardly be thought satisfactory. For if the allegation set up be a true one, it certainly falls within the limits of the question. The proper answer is, that it is not a true one. If the idle were to produce, it could only be by means of a larger accumulation, that is, of the conversion of more revenue into capital. But this, though it might make some alteration in the channels of demand, could not possibly increase the sum total of the demand. Ed.

[* ] Prin. of Polit. Econ. ch. xxi. p. 361, 2nd edit.

[* ] Edinburgh Review, No. lxiv. p. 471.

[* ] Theoretical writers in Political Economy, from the fear of appearing to attach too much importance to money, have perhaps been too apt to throw it out of their consideration in their reasonings. It is an abstract truth that we want commodities, not money. But, in reality, no commodity for which it is possible to sell our goods at once, can be an adequate substitute for a circulating medium, and enable us in the same manner to provide for children, to purchase an estate, or to command labour and provisions a year or two hence. A circulating medium is absolutely necessary to any considerable saving; and even the manufacturer would get on but slowly, if he were obliged to accumulate in kind all the wages of his workmen. We cannot therefore be surprised at his wanting money rather than other goods; and, in civilized countries, we may be quite sure that if the farmer or manufacturer cannot sell his products so as to give him a profit estimated in money, his industry will immediately slacken. The circulating medium bears so important a part in the distribution of wealth, and the encouragement of industry, that it is hardly ever safe to set it aside in our reasonings, and all attempts at illustration, by supposing advances of a certain quantity of corn and clothing, instead of a certain quantity of money, which every year practically represents a variable quantity of corn, cannot fail to lead us wrong.

[* ] The reader must already know, that I do not share in the apprehensions of Mr. Owen about the permanent effects of machinery. But I am decidedly of opinion, that on this point he has the best of the argument with those who think that accumulation ensures effectual demand.

[* ] Parsimony, or the conversion of revenue into capital, may take place without any diminution of consumption, if the revenue increases first.

[* ] By this expression I mean such a degree of permanence as to be called the ordinary rate of profits.

[* ] Capital is withdrawn only from those employments where it can best be spared. It is hardly ever withdrawn from agriculture. Nothing is more common, as I have stated in the Chapter on Rent, than increased profits, not only without any capital being withdrawn from the land, but under a continual addition to it. Mr. Ricardo’s assumption of constant prices would make it absolutely impossible to account theoretically for things as they are. If capital were considered as not within the pale of demand and supply, the very familiar event of the rapid recovery of capital would be quite inexplicable. The amount of capital employed on the land during the revolutionary war, was prodigiously increased owing to the great increase of profits; and although many merchants and manufacturers were occasionally subjected to great losses, yet the high rate of profits generally seemed more than to balance them; and there cannot be a doubt of the increase both of mercantile and manufacturing capitals.

[* ] Ricardo’s Princ. of Polit. Econ. ch. xxi. p. 342, 3rd edit.

[* ] Susmilch, vol. iii. p. 60. Essay on Population, vol. i. p. 459. edit. 5th. In foreign states very few persons live in the country who are not engaged in agriculture; but it is not so in England.

[† ] Population Abstracts, 1811.

[* ] Essai Politique sur la Nouvelle Espagne, tom. iii. l. iv. c. ix. p. 28.

[† ] Id. p. 36.

[‡ ] Id. p. 28.

[* ] Humboldt’s Nouvelle Espagne, tom. iii. l. iv. c. ix. p. 38.

[* ] Id. tom. i. l. ii. c. v. p. 358.

[* ] Essai Politique sur la Nouvelle Espagne, tom. iii. l. iv. c. ix. p. 56.

[† ] Nouvelle Espagne, tom. ii. l. ii. c. vii. p. 37.

[‡ ] Tom i. l. ii. c. vi. p. 429.

[* ] Nouvelle Espagne, tom. i. liv. ii. c. v. pp. 355 et 356.

[* ] Nouvelle Espagne, tom. iii. liv. iv. c. ix. p. 12.

[* ] Nouvelle Espagne, tom ii. l. iii. c. viii. p. 342.

[* ] Tom. iii. l. iv. c. ix. p. 89.

[* ] Tom. iii. l. iv. c. x. p. 178.

[* ] In applying labour as a rough measure of wealth, or in measuring value in Ireland we must remember, as before intimated, that we must take the price of the labour which is actually, and with average constancy engaged, and not the price at which it may be occasionally offered by a half employed population. The caution which Adam Smith has given about the labour of cotters, already referred to in this work, must be particularly attended to.

[* ] There is nothing so favourable to effectual demand as a large proportion of the middle classes of society.

[* ] Considering the manner in which I have expressed myself here, it appears to me not a little extraordinary that I should sometimes have been classed with Mr. Sismondi as an enemy to machinery. If the reader will direct his attention to what I have said, I think he must allow that it is hardly possible to say more with truth. To maintain that the same extent of benefit will result in all cases, and that there never can be the least difficulty in finding new employments for capital at the same profits, does appear to me, I own, an assertion equally contradicted by all just theory, and universal experience.

[* ] Essays, vol. i. p. 293.

[* ] Wealth of Nations, Vol. ii. B. iii. ch. iii. p. 115. 6th edit.

[* ] Book I. ch. xi.

[* ] Princ. of Polit. Econ. ch. xx. p. 349.

[* ] Sect. III. of this chapter.

[* ] Nouveaux Principes d’Economie Politique, tom, i. p. 120. I agree with M. Sismondi in some of his principles respecting consumption and demand; but I do not think that the view which he takes of the formation of national revenue, on which all increase of consumption and demand depends, is just; and I can by no means go with him in the fears which he expresses about machinery, and still less in the opinion which he holds respecting the necessity of a frequent interference on the part of government to protect individuals, and classes, from the consequences of competition. With regard to population, he has misunderstood my work more than I could have expected from so able and distinguished a writer. He says, that my reasoning is completely sophistical, because I have compared the virtual increase of population with the positive increase of food. But surely I have compared the virtual increase of population with the virtual increase of food; and the positive increase of population with the positive increase of food; and the greater part of my book is taken up with the latter comparison. Practically M. Sismondi goes much farther than I do in his apprehensions of a redundant population, and proposes to repress it by all sorts of strange means. I never have recommended, nor ever shall, any other means than those of explaining to the labouring classes the manner in which their interests are affected, by too great an increase of their numbers, and of removing or weakening the positive laws which tend to discourage habits of prudence and foresight.

[* ] From what has been here said, the reader will see that I can by no means agree with Mr. Ricardo, in his chapter On Gross and Net Revenue. I should not hesitate a moment in saying, that a country with a neat revenue from rents and profits, consisting of food and clothing for five millions of men, would be decidedly richer and more powerful, if such neat revenue were obtained from seven millions of men, rather than five, supposing them to be equally well supported. The whole produce would be greater; and the additional two millions of labourers would some of them unquestionably have a part of their wages disposable. I agree, however, with Mr. Ricardo, in approving all saving of labour and inventions in machinery; but it is because I think that their tendency is to increase the gross produce and to make room for a larger population and a larger capital. If the saving of labour were to be accompanied by the effects stated in Mr. Ricardo’s instance, I should agree with M. Sismondi and Mr. Owen in deprecating it as a great misfortune.

Mr. Ricardo, in his last edition, allows in a note that he has perhaps expressed himself too strongly on this subject, and that the labourer may have some portion of the net produce of the country; but he has not altered the text.

[* ] It is perhaps just possible to conceive a passion for menial service, which would stimulate landlords to cultivate lands in the best way, in order to support the greatest quantity of such attendants. This would be the same thing as the passion for population adverted to in a former section. Such a passion, to the extent here supposed, may be possible; but scarcely any supposition can be less probable.

[† ] It is not, however, in political economy alone that so much depends upon proportions, but throughout the whole range of nature and art.

[‡ ] This was strikingly illustrated in the predictions, during the late war, of the abundant wealth which would be the immediate result of a peace.

[* ] This was written in 1820. Imperious circumstances have since brought on a reform of a more sudden and extensive nature than prudence would have perhaps suggested, if the time and the circumstances could have been commanded. Yet it must be allowed, that all which has been done, is to bring the practical working of the constitution nearer to its theory. And there is every reason to believe, that a great majority of the middle classes of society, among whom the elective franchise has been principally extended, must soon see that their own interests, and the interests and happiness of those who are dependent upon them, will be most essentially injured by any proceedings which tend to encourage turbulence and shake the security of property. If they become adequately sensible of this most unquestionable truth, and act accordingly, there is no doubt that the removal of those unsightly blots, of those handles, which, with a fair show of reason, might at any time be laid hold of to excite discontents and to stir up the people, will place the British Constitution upon a much broader and more solid base than ever.

[* ] It appears to me that if the two first sentences in Mr. Ricardo’s Chapter on Foreign Trade were well founded, there would be no intercourse between nations.

[† ] This, however, will not necessarily happen. The greater temptation offered to consumption may induce some persons to spend what they otherwise would have saved, and in many cases the wealth of the country, instead of suffering by this change, will gain by it. The increased consumption, as far as it goes, will occasion an increase of market prices and profits, and this increase of profits will soon restore the capital which for a short time had been diverted from its destined office.

[* ] The importation of bullion is not necessary to a rise of prices; for, there is no necessary connection between a given quantity of money and a given scale of prices.—If a certain quantity of money be exchanged for a certain quantity of goods, their price is of course represented by that money; but if the money is exchanged for one half only of the goods at a time, the whole quantity of goods will be worth twice the money; and if the money be exchanged for one third the goods at a time, their total price will be equal to three times the amount of the money. The quantity of goods, and the quantity of money may therefore remain the same, and prices may rise or fall notwithstanding.

This is fully exemplified by what occurs when there is a deficiency or an excess of any one commodity which is of very extensive consumption.—Take corn as an instance.—The total money value of a scanty crop is known to be much more, and the total money value of a super-abundant crop much less, than that of an ordinary crop, while the prices of other things remain the same. In this case, it is obvious, that the price of the whole produce, agricultural and manufactured together, (or its value estimated in money) will be either greater or less than ordinary, even though there shall be no greater or less quantity of money in circulation. And this is very easily explained. Those who have to pay dearer or cheaper for their corn, have no doubt less or more to spend on other things. But, to counterbalance this, the farmers means of purchasing other things are increased or diminished in the very same proportion. If I have a commodity, which, from being in great request, rises fron £10 to £20, the purchaser must forego his demand for other things to the extent of £20 instead of £10; but my demand for other things is increased from £10 to £20. All this may take place, and indeed is constantly taking place, without a shilling being added to the circulation.—Ed.

[* ] Princ. of Polit. Econ. ch. vii. p. 138, 2nd edit.

[* ] Princ. of Pol. Econ. ch. vii. p. 132, 2d edit.

[* ] Wealth of Nations, vol. ii. b. ii. ch. ii. p. 19, 6th edit.

[* ] The demand created by the productive labourer himself can never be an adequate demand, because it does not go to the full extent of what he produces. If it did, there would be no profit, consequently no motive to employ him. The very existence of a profit upon any commodity presupposes a demand exterior to that of the labour which has produced it. Ed.

[* ] The effect of obliging a cultivator of a certain portion of rich land to maintain two men and two horses for the state, might in some cases only induce him to cultivate more, and create more wealth than he otherwise would have done, while it might leave him personally as rich as before, and the nation richer; but if the same obligation were to be imposed on the cultivator of an equal quantity of poor land, the property might be rendered at once not worth working, and the desertion of it would be the natural consequence. An indiscriminate and heavy tax on gross produce might immediately scatter desolation over a country, capable, under a better system, of producing considerable wealth.

[* ] By effectual consumption is meant, a consumption by those who are able and willing to pay such a price for produce, as will effect the continuation of its supply without a fall of profits not required by the state of the land.

[* ] In a country with a large public debt, there is no duty which ought to be held more sacred on the part of the administrators of the government than to prevent any variations of the currency beyond those which necessarily belong to the varying value of the precious metals. I am fully aware of the temporary advantages which may be derived from a fall in the value of money; and perhaps it may be true that a part of the distress during the last year, though I believe but a small part, was occasioned by the measure lately adopted, for the restoration of the currency to its just value. But some such measure was indispensably necessary; and Mr. Ricardo deserves the thanks of his country for having suggested one which has rendered the transition more easy than could reasonably have been expected. This was written in 1820.

[* ] It is a contradiction in terms, to say that labour is redundant compared with capital, and that capital is at the same time redundant compared with labour:—but it is no contradiction in terms to say that both labourers and capital may be redundant, compared with the means of employing them profitably. I have never maintained the former position, though I have been charged with so doing; but the latter has been so fully established by experience, that I am surprized at the pertinacity with which theoretical writers continue to refuse their assent to it.

[* ] This was written in 1820.

[* ] Wealth of Nations, Book iv. ch. vii. p. 202, 6th edit.

[* ] Princ. of Polit. Econ ch. vi. p. 127.

[* ] Vol. ii. p. 170. 4th edit.

[* ] When there is no demand for labour, however low the price of food may be, the labouring classes can only obtain it by charity.