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It is not, therefore, the competition caused by an increase of capital which reduces profits as society advances, but it is the necessity of having recourse to inferior soils to obtain the necessary supplies of food, coupled with the increase of taxation.

Dr Smith has justiy observed, that ' a man must always live • by his work, and his wages must at least be sufficient to main• tain him. They must, even upon most occasions, be some• what more; otherwise it would be impossible for him to bring • up a family; and the race of such workmen could not last be • yond the first generation.'

"But as the price of commodities can only be increased by an increase of the quantity of labour required to bring them to market, and not by an increase of wages; it follows, that if corn or manufactured goods always sold at the same price, profits would be high or low in proportion as wages were low or high, But, when corn rises in price, because more labour is necessary to produce it, and it must do so as soon as recourse is had to inferior soils, or soils of a decreasing degree of fertility, that cause will not raise the price of manufactured goods, in the production of which no additional quantity of labour is required: They therefore continue to sell at the same price as before; but, as the wages of labour, which must always bear a certain proportion to the price of raw producc, will then rise, it is obvious that the profits of stock must be proportionally diminished.

It is by this principle, of which Dr Smith was not aware, that we are enabled satisfactorily to account for the low rate of profit in all old settled and fully peopled countries, and for the slowness with which they accumulate capital and population. Profits, were other things stationary, would no doubt fall and rise according as taxes affecting the necessaries of life, and consequently the wages of labour, were increased or diminished ; but, whatever may be the rate of taxation, whether it be high or low, profits must decline, as recourse is had to lands of inferior quality, or, in other words, as the real price, or the cost of production of raw produce, is increased.

Dr Smith and other political economists have frequently referred to the rapid progress made by the United States in the accumulation of capital and riches, as a proof of the superior advantages resulting from the employment of capital in agriculture. This opinion, however, is altogether erroneous. The rapid accumulation of wealth by the Americans, is a conse quence, not of their predilection for agriculture, but of the boundless extent of their fertile and unoccupied land. This enables them to raise a very large amount of raw produce at a comparatively small expense. The wages of workmen are high ; but as every workman operates with the best machinery, that is to say, cultivates the best soils, a very large nett profit remains to his master. Capital, therefore, and consequently population, rapidly accumulate ; and, if the country is exempted from political convulsions, will continue to increase with the same rapidity, till the most fertile land having been brought under cultivation, recourse must be had to inferior soils. Should the real wages of labour continue equally high subsequent to this era, the profits of stock would be very much diminished; for labour, by being exerted on worse land, would yield a proportionably small produce; and out of this diminished produce, the labourer would have to receive as large & share as before. Wages, however, would not continue equally high: for the check which would then be given to the power to accumulate capital, by gradually lessening the demand for labour, would ultimately lower wages to the sum which was merely necessary to continue the race of labourers, or to furnish the mass of the people of the United States with those necessaries and comforts which they may consider as indispensable to their existence, and without which they would not be inclined to marry, or to encumber themselves with a family. After wages had sunk to this point, they could sink no lower. And if, in these circumstances, a great extension of manufacturing industry, or any other cause, should force recourse to be had to inferior soils to procure fresh supplies of raw produce, the profits of stock would immediately fall; and would continue to fall, and wages to rise, according as til, lage was extended, or as additional quantities of food were required.

It follows, from these principles, that the interest of the landlord is always opposed to that of every other class in the com, munity. In the progress of society, and as poorer lands are brought under cultivation, the landlord does not only receive à greater share of the produce of the soil as rent, but the value of that share, because of the increased difficulty of its production, is augmented. If his rent were increased from 100 to 200 quarters, it would be more than doubled, inasmuch as he would be able to command more than double the quantity of commodities in exchange for the 200 quarters :--And as rents are generally agreed for, and paid in money, he would, under the circumstances supposed, receive more than double of his former money rent.

In like manner, if rent fell, the landlord would suffer two losses; he would be a loser of that portion of the raw produce VOL. XXX. NO. 59.


which constituted his additional rent; and further, he would be á loser by the depreciation in the real or exchangeable value of the raw produce, in which, or in the value of which, his remaining rent would be paid.

But the rise in the price of raw produce, which is advantageous to the landlord, is prejudicial to farmers, capitalists, labourers, and every other class of society. High rents are invariably accompanied by a high price of raw produce, and consequently by high wages, and a low rate of profit. Every increase of rent is, therefore, a proof that society is becoming clogged in its progress. It shows, that the power to accumulate capital and population, or to increase that fund, by whose extent the extent of the productive industry of the country must ever be regulated, is diminished. It is not possible, however, that in any society, rent and wages can ever absorb the whole value of a commodity; for, long ere this could happen, there would be no motive to accumulate; capitalists would live, not on profit but on capital; a want of employment would be universally experienced; population would rapidly diminish ; and inferior lands being thrown out of cultivation, the price of raw produce would be reduced; rent and wages would fall, and capital would again yield a profit on its employment.

High rent and low profits, for they are inséparably connected, ought never to be made the subject of complaint, if they occur in the natural progress of society, and under a system of perfectly free intercourse with other nations. But if they are caused by an exclusive commercial system, or by restrictions which prevent the importation of cheap foreign corn, and which, therefore, force the cultivation of inferior soils at home, they are highly to be deprecated. A nation placed in such circumstances, must not only advance slowly, when compared with other nations which are enabled to raise their supplies of raw produce from superior soils, and at a less expense,-the power to accumulate capital must not only be diminished, but a strong inducement will be held out to transfer it to other countries. The love of country,--the thousand ties of society and friendship, -the ignorance of foreign languages, and the desire of having one's funds employed under their own inspection-will, no doubt, in very many cases, induce capitalists to put up with a less rate of profit in their own, than they might realize by investing their funds in other countries. But this love of country has its limits. The love of gain is a no less powerful and constantly operating principle; and if capitalists are once assured that their stock can be laid out with equal security, and with considerably greater advantage, in foreign states, a transference to a greater or less extent will undoubtedly take place.

A manufacturing country which has wisely adopted a liberal commercial system, has no reason to be alarmed at the effects of competition in any department of industry. The manufacture of one commodity opens up a market for the exchange; that is, for the sale of some other commodity. What a manufacturing nation has really to fear is, that the average profits of its capital do not fall lower than the average rate of profit in the surrounding countries. If this is the case, its progress must be retarded; and it will ultimately languish and decline. Neither the skill, industry, and perseverance of artisans, nor the most improved machinery, can permanently bear up against a constantly diminishing rate of profit. And such a comparative diminution is always produced by acting on a fictitious and exclusive system, which, by preventing the importation of foreign corn, forces the cultivation of poor soils, and raises the real price of raw produce.

The length to which the foregoing remarks have extended, and our anxiety to lay before our readers a faithful abstract of the fundamental principles which have been developed and illustrated by Mr Ricardo, and to point out some of their more important consequences, preclude our giving any detailed account of the subsidiary parts of his great work. We shall, perhaps, on some future occasion, endeavour to supply this deficiency; but, in the mean time, such of our readers as wish to be made acquainted with the laws by which the commercial transactions between different countries are always regulated, will do well to study Mr Ricardo's chapter on Foreign Trade.' This is one of the most valuable and original parts of the work before us; and affords a striking example of Mr Ricardo's uncommon sagacity in investigating and tracing the operation of fixed and general principles, and in disentangling and separating them from those of a secondary and accidental nature.

That part of Mr Ricardo's work which treats of the THEORY OF TAXATION, is entirely bottomed on the principles we have been endeavouring to elucidate; and a few remarks will be sufficient to give our readers an idea of its general scope and bearing.

It is observed by Mr Dugald Stewart, * and the observation seems perfectly just, that Dr Smith is more loose and unsatisfactory in his chapter on the Principles of Taxation, than in almost any other part of his work. But the fact is, that it was

* Sketch of the Life and Writings of Dr Smith,

impossible to engraft a sound theory of taxation on the principles which pervade the greater part of the Wealth of Nations. Had Dr Smith been acquainted with the real nature of rent, and with the circumstances which, in every stage of society, regulate the exchangeable value of commodities, he would doubtless have come to very different conclusions respecting the ultimate incidence and effects of various taxes.

That a direct tax on the wages of labour would raise wages, is universally admitted; and Dr Smith, in perfect conformity with his opinion, that every rise in the rate of wages caused a proportionable rise in the price of commodities, contended, that the final payment of such a tax would fall, not on the labourer or the capitalist, but on the consumer. If it be true, however, that a rise in the wages of labour does not, and cannot, raise the price of commodities, a tax on wages, it is obvious, could not be paid by the consumer. Such a tax would fall entirely on the employers of labourers, and, by raising wages, would lower the profits of stock to a corresponding extent.

The only difference between a direct tax on the wages of labour, and a tax on those commodities which, to use the words of Dr Smith, are not only indispensably necessary for the support of life, but which the custom of the country renders it indecent for creditable people even of the lowest order to be without, consists in this, that the former is altogether a tax on profits, and is entirely paid by the employers of labourers, whereas the latter is partly, because it must raise wages, a tax on profits, and partly, because every person is a consumer of necessaries, a tax on consumers generally.

The low rate of profit in Holland has often been appealed to as a practical proof of the truth of the theory which teaches that the increase of capital, and the consequent competition in the different departments of industry, is always attended by a diminution of the profits of stock. But the imposition of heavy taxes on the necessaries of life, and not the abundance of capital, was the real cause of the low rate of profits in Holland. "The principle of population, if it does not outrun, will at least keep pace with, the increase of capital; and when this is the case, when the demand for commodities must be constantly increasing with every increase of the means whereby they are produced, it is impossible, as we have already remarked, to conceive how any multiplication of commodities, or any increase of capital, should be attended with a diminution of profits. This can only be effected by an increase of wages; and wages will always be increased by every increase of those taxes which affect the necessaries of life.

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