Front Page Titles (by Subject) 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. - Principles of Political Economy
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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. - Thomas Robert Malthus, Principles of Political Economy 
Principles of Political Economy (London: W. Pickering, 1836).
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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.
[* ] 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.