Malthus' Other Opinions
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The real price of a commodity is here properly stated to depend on the greater or less quantity of labour and capital (that is, accumulated labour) which must be employed to produce it. Real price does not, as some have contended, depend on money value; nor, as others have said, on value relatively to corn, labour, or any other commodity taken singly, or to all commodities collectively; but, as Mr. Malthus justly says,
“on the greater (or less) quantity of capital and labour which must be employed to produce it.”
Among the causes of the rise of rent, Mr. Malthus mentions, “such an increase of population as will lower the wages of labour.”
But if, as the wages of labour fall, the profits of stock rise, and they be together always of the same value,54 no fall of wages can raise rent, for it will neither diminish the portion, nor the value of the portion of the pro569duce which will be allotted to the farmer and labourer together, and therefore will not leave a larger portion, nor a larger value for the landlord. In proportion as less is appropriated for wages, more will be appropriated for profits, and vice versa. This division will be settled by the farmer and his labourers, without any interference of the landlord; and indeed it is a matter in which he can have no interest, otherwise than as one division may be more favourable than another, to new accumulations, and to a further demand for land.
If wages fall, profits, and not rent, would rise. If wages rose, profits, and not rent, would fall. The rise of rent and wages, and the fall of profits, are generally the inevitable effects of the same cause—the increasing demand for food, the increased quantity of labour required to produce it, and its consequently high price. If the landlord were to forego his whole rent, the labourers would not be in the least benefited. If the labourers were to give up their whole wages, the landlords would derive no advantage from such a circumstance; but in both cases the farmer would receive and retain all which they relinquished. It has been my endeavour to570 shew in this work, that a fall of wages would have no other effect than to raise profits.
Another cause of the rise of rent, according to Mr. Malthus, is “such agricultural improvements, or such increase of exertions, as will diminish the number of labourers necessary to produce a given effect.” This would not raise the value of the whole produce, and would therefore not increase rent. It would rather have a contrary tendency, it would lower rent; for if in consequence of these improvements, the actual quantity of food required could be furnished either with fewer hands, or with a less quantity of land, the price of raw produce would fall, and capital would be withdrawn from the land.55 Nothing can raise rent, but a demand for new land of an inferior quality, or some cause which shall occasion an alteration in the relative fertility of the land already under cultivation.567 Improvements 571 in agriculture, and in the division of labour, are common to all land; they increase the absolute quantity of raw produce obtained from each, but probably do not much disturb the relative proportions which before existed between them.
Malthus has justly commented on an error of Adam Smith:
the substance of his (Dr. Smith’s) argument is, that corn is of so peculiar a nature, that its real price cannot be raised by an increase of its money price; and that, as it is clearly an increase of real price alone, which can encourage its production, the rise of money price, occasioned by a bounty, can have no such effect.
It is by no means intended to deny the powerful influence of the price of corn upon the price of labour, on an average of a considerable number of years; but that this influence is not such as to prevent the movement of capital to, or from the land, which is the precise point in question, will be made sufficiently evident by a short inquiry into the manner in which labour is paid, and brought into the market, and by a consideration of the consequences to which the assumption of Adam Smith’s proposition would inevitably lead.
Malthus then proceeds to shew, that demand and high price will as effectually encourage the production of raw produce, as the demand and high price of any other commodity will encourage its production. In this view it will be seen, from what I have said of the effects of bounties, that I entirely concur.
I have noticed the passage Malthus’s “Observations on the Corn Laws,” for the purpose of shewing in what a different sense the term real price is used here, and in his other pamphlet, entitled “Grounds of an Opinion, &c.”
In this passage Malthus tells us, that “it is clearly an increase of real price alone which can encourage the production of corn,” and by real price he evidently means the increase in its value relatively to all other things, or in other words, the rise in its market above its natural price, or the cost of its production.
If by real price this is what is meant, Mr. Malthus’s opinion is undoubtedly correct; it is the rise in the market price of corn which alone encourages its production, for it may be laid down as a principle uniformly true, that the only encouragement to the increased production of a commodity, is its market value exceeding its natural or necessary value.
But this is not the meaning which Mr. Malthus, on other occasions, attaches to the term, real price. In the Essay on Rent, Mr. Malthus says, by “the real growing price of corn, I mean the real quantity of labour and capital, which has been employed to produce the last additions which have been made to the national produce.” In another part he states “the cause of the high comparative real price of corn to be the greater quantity of capital and labour, which must be employed to produce it.“58 Suppose that in the fore574going passage we were to substitute this definition of real price, would it not then run thus?—”
It is clearly the increase in the quantity of labour and capital which must be employed to produce corn, which alone can encourage its production.”
This would be to say, that it is clearly the rise in the natural or necessary price of corn, which encourages its production—a proposition which could not be maintained. It is not the price at which corn can be produced, that has any influence on the quantity produced, but the price at which it can be sold. It is in proportion to the degree of the excess of its price above the cost of production, that capital is attracted to or repelled from the land. If that excess be such as to give to capital so employed, a greater than the general profit of stock, capital will go to the land; if less, it will be withdrawn from it.
It is not then by an alteration in the real price of corn that its production is encouraged, but by an alteration in its market price. It is not “because a greater quantity of capital and labour must be employed to produce it,” Mr. Malthus’s just definition of real price, that more capital and labour are attracted to the land, but because the market price rises above this its real price, and, notwithstanding the increased charge, makes the cultivation of land the more profitable employment of capital.
Nothing can be more just than the following observations of Mr. Malthus, on Adam Smith’s standard of value. “Adam Smith was evidently led into this train of argument, from his habit of considering labour as the standard measure of value, and corn as the measure of labour. But that corn is a very inaccurate measure of labour, the history of our own country will amply demonstrate; where labour, compared with corn, will be found to have experienced very great and striking variations, not only from year to year, but from century to century; and for ten, twenty, and thirty years together. And576 that neither labour nor any other commodity can be an accurate measure of real value in exchange, is now considered as one of the most incontrovertible doctrines of political economy; and, indeed, follows from the very definition of value in exchange.”
If neither corn nor labour are accurate measures of real value in exchange, which they clearly are not, what other commodity is?—certainly none.
If then the expression real price of commodities, have any meaning, it must be that which Mr. Malthus has stated, in the Essay on Rent—it must be measured by the proportionate quantity of capital and labour necessary to produce them.
In Mr. Malthus’s “Inquiry into the Nature of Rent,” he says, “that, independently of irregularities in the currency of a country, and other temporary and accidental circumstances, the cause of the high comparative money price of corn, is its high comparative real price, or the greater quantity of capital and labour which must be employed to produce it.59
This, I apprehend, is the correct account of all permanent variations in price, whether of corn or of any other commodity. A commodity can only permanently rise in price, either because a greater quantity of capital and labour must be employed to produce it, or because money has fallen in value; and on the contrary, it can only fall in price, either because a less quantity of capital and labour may be employed to produce it, or because money has risen in value.
A variation arising from the latter of either of these alternatives, an altered value of money, is common at once to all commodities; but a variation arising from the former cause, is confined to the particular commodity requiring more or less labour in its production. By allowing the free importation of corn, or by improvements in agriculture, raw produce would fall;
But the price of no other commodity would be affected, except in proportion to the fall in the real value, or cost of production, of the raw produce which entered into its composition.
Malthus, having acknowledged this578 principle, cannot, I think, consistently maintain that the whole money value of all the commodities in the country must sink exactly in proportion to the fall in the price of corn. If the corn consumed in the country were of the value of ten millions per annum, and the manufactured and foreign commodities consumed were of the value of twenty millions, making altogether thirty millions, it would not be admissible to infer that the annual expenditure was reduced to 15 millions, because corn had fallen 50%, or from 10 to 5 millions.
The value of the raw produce which entered into the composition of these manufactures might not, for example, exceed 20% of their whole value, and, therefore, the fall in the value of manufactured commodities, instead of being from 20 to 10 millions, would be only from 20 to 18 millions; and after the fall in the price of corn of 50%, the whole amount of the annual expenditure, instead of falling from 30 to 25 millions, would fall from 30 to 23 millions.60
Instead of thus considering the effect of a fall in the value of raw produce; as Mr. Malthus was bound to do by his previous admission; he considers it as precisely the same thing with a rise of 100% in the value of money, and, therefore, argues as if all commodities would sink to half their former price.
“During the 20 years, beginning with 1794 and ending with 1813, the average price of British corn per quarter was about eighty-three shillings; during the ten years ending with 1813, ninety-two shillings; and during the last five years of the twenty, one hundred and eight shillings. In the course of these twenty years, the Government borrowed near five hundred millions of real capital; for which, on a rough average, exclusive of the sinking fund, it engaged to pay about five% But if corn should 580fall to fifty shillings a quarter, and other commodities in proportion, instead of an interest of about five%, the Government would really pay an interest of seven, eight, nine, and, for the last two hundred millions, 10%.
“To this extraordinary generosity towards the stockholders, I should be disposed to make no kind of objection, if it were not necessary to consider by whom it is to be paid; and a moment’s reflection will shew us, that it can only be paid by the industrious classes of society, and the landlords, that is, by all those whose nominal income will vary with the variations in the measure of value. The nominal revenues of this part of the society, compared with the average of the last five years, will be diminished one half, and out of this nominally reduced income, they will have to pay the same nominal amount of taxes.”
In the first place, I think, I have already shewn, that the nominal income of the whole 581country will not be diminished in the proportion for which Malthus here contends.
It would not follow, that because corn fell fifty%, each man’s income would be reduced fifty% in value.
In the second place, I think the reader will agree with me, that the increased charge, if admitted, would not fall exclusively “on the landlords and the industrious classes of society:” the stockholder, by his expenditure, contributes his share to the support of the public burdens in the same way as the other classes of society. If then money became really more valuable, although he would receive a greater value, he would also pay a greater value in taxes, and, therefore, it cannot be true that the whole addition to the real value of the interest would be paid by “the landlords and the industrious classes.”
The whole argument, however, of Mr. Malthus, is built on an infirm basis: it supposes,582 because the gross income of the country is diminished, that, therefore, the net income must also be diminished, in the same proportion. It has been one of the objects of this work to shew, that with every fall in the real value of necessaries, the wages of labour would fall, and that the profits of stock would rise—in other words, that of any given annual value a less portion would be paid to the labouring class, and a larger portion to those whose funds employed this class. Suppose the value of the commodities produced in a particular manufacture to be 1000l., and to be divided between the master and his labourers, in the proportion of 800l. to labourers, and 200l. to the master; if the value of these commodities should fall to 900l., and 100l. be saved from the wages of labour, in consequence of the fall of necessaries, the net income of the masters would be in no degree impaired, and, therefore, he could with just as much facility pay the same amount of taxes, after, as before the reduction of price.63
Wages would fall as much as the mass of commodities, or rather that the net income remaining to landlords, farmers, manufacturers, traders, and stockholders, the only real payers of taxes, would be as great as before, is very highly probable; for nothing would be even nominally lost to the society by the freest importation of corn, but that portion of rent of which the landlords would be deprived in consequence of the fall of raw produce.
The difference between the value of corn and all other commodities sold in the country, before and after the importation of cheap corn, would be only equal to the fall of rent; because, independently of rent, the same quantity of labour would always produce the same value.
The whole reduction which is made in wages, is a value actually added to the value of the net income before possessed by the society; whilst the only value which is taken from that net income is the value of that part of their rent of which the landlords will be deprived by a fall of raw produce. When we584 consider that the fall of produce acts upon a limited number of landlords, while it reduces the wages not only of those who are employed in agriculture, but of all those who are occupied in manufactures and commerce, it may well be doubted, whether the net revenue of the society would suffer any abatement whatever.64
But, if it did, it must not be supposed that the ability to pay taxes will diminish in the same degree, as the money value, even of the net revenue. Suppose that my net revenue were diminished from 1000l. to 900l.; but that my taxes continued to be the same, to be 100l.: is it not probable that my ability to pay this 100l. may be greater with the smaller than with the larger revenue?
Commodities cannot fall so universally as Mr. Malthus supposes, without greatly benefiting the consumers, without enabling them with a 585much smaller money revenue to command more of the conveniences, necessaries, and luxuries of human life; and the question resolves itself into this—whether those who are in possession of the net revenue of the country will be benefited as much by the diminished price of commodities, as they will suffer by the greater real taxation.
On which side the balance may preponderate, will depend on the proportion which taxes bear to the annual revenue; if it be enormously large, it may undoubtedly more than counterbalance the advantages from cheap necessaries; but I trust enough has been said, to shew, that Mr. Malthus has very greatly over-rated the loss to the tax-payers, from a fall in one of the most important necessaries of life; and that if they were not entirely remunerated for the real increase of taxes, by the fall of wages and increase of profits, they would be more than compensated, by the cheaper price of all objects on which their incomes were expended.
That the stockholder is benefited by a great fall in the value of corn, cannot be doubted; but if no one else be injured, that is no reason586 why corn should be made dear: for the gains of the stockholder are national gains, and increase, as all other gains do, the real wealth and power of the country. If they are unjustly benefited, let the degree in which they are so, be accurately ascertained, and then it is for the legislature to devise a remedy; but no policy can be more unwise than to shut ourselves out from the great advantages arising from cheap corn, and abundant productions, merely because the stockholder would have an undue proportion of the increase.
To regulate the dividends on stock by the money value of corn, has never yet been attempted. If justice and good faith required such a regulation, a great debt is due to the old stockholders; for they have been receiving the same money dividends for more than a century, although corn has, perhaps, been doubled or trebled in price.65
Malthus says: “It is true, that the last additions to the agricultural produce of an improving country are not attended with a large proportion of rent; and it is precisely this circumstance that may make it answer to a rich country to import some of its corn, if it can be secure of obtaining an equable supply. But in all cases the importation of foreign corn must fail to answer nationally, if it is not so much cheaper than the corn that can be grown at home, as to equal both the profits and the rent of the grain which it displaces.”
As rent is the effect of the high price of corn, the loss of rent is the effect of a low price. Foreign corn never enters into competition with such home corn as affords a rent.
The fall of price invariably affects the landlord till the whole of his rent is absorbed;—if it fall still more, the price will not afford even the common profits of stock; capital will then quit the land for some other employment, and the corn, which was before grown upon it, will then, and not till then, be imported.
From the loss of rent, there will be a loss of value, of estimated money value, but there will be588 a gain of wealth. The amount of the raw produce and other productions together will be increased, from the greater facility with which they are produced; they will, though augmented in quantity, be diminished in value.
Two men employ equal capitals—one in agriculture, the other in manufactures. That in agriculture produces a net annual value of 1200l. of which 1000l. is retained for profit, and 200l. is paid for rent; the other in manufactures produces only an annual value of 1000l.
Suppose that by importation, the same quantity of corn can be obtained for commodities which cost 950l., and that, in consequence, the capital employed in agriculture is diverted to manufactures, where it can produce a value of 1000l. the net revenue of the country will be of less value, it will be reduced from 2200l. to 2000l., but there will not only be the same quantity of commodities and corn for its own consumption, but also as much addition to that quantity as 50l. would purchase, the difference between the value at which its manufactures were sold to the foreign country, and the value of the corn which was purchased from it.
Malthus says: “It has been justly observed by Adam Smith, that no equal quantity of productive labour employed in manufactures can ever occasion so great a reproduction as in agriculture.” If Adam Smith speaks of value, he is correct, but if he speaks of riches, which is the important point, he is mistaken, for he has himself defined riches to consist of the necessaries, conveniences, and enjoyments of human life. One set of necessaries and conveniences admits of no comparison with another set; value in use cannot be measured by any known standard, it is differently estimated by different persons.
THE END