in the currency of a country, [13] 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: and that the reason why the
real price of corn is higher and continually rising in countries which
are already rich, and still advancing in prosperity and population, is
to be found in the necessity of resorting constantly to poorer land--to
machines which require a greater expenditure to work them--and which
consequently occasion each fresh addition to the raw produce of the
country to be purchased at a greater cost--in short, it is to be found
in the important truth that corn, in a progressive country, is sold at
the price necessary to yield the actual supply; and that, as this supply
becomes more and more difficult, the price rises in proportion. [14]
The price of corn, as determined by these causes, will of course
be greatly modified by other circumstances; by direct and indirect
taxation; by improvements in the modes of cultivation; by the saving
of labour on the land; and particularly by the importations of foreign
corn. The latter cause, indeed, may do away, in a considerable degree,
the usual effects of great wealth on the price of corn; and this wealth
will then show itself in a different form.
Let us suppose seven or eight large countries not very distant from each
other, and not very differently situated with regard to the mines.
Let us suppose further, that neither their soils nor their skill in
agriculture are essentially unlike; that their currencies are in a
natural state; their taxes nothing; and that every trade is free,
except the trade in corn. Let us now suppose one of them very greatly
to increase in capital and manufacturing skill above the rest, and to
become in consequence much more rich and populous. I should say, that
this great comparative increase of riches could not possibly take place,
without a great comparative advance in the price of raw produce; and
that such advance of price would, under the circumstances supposed, be
the natural sign and absolutely necessary consequence, of the increased
wealth and population of the country in question.
Let us now suppose the same countries to have the most perfect freedom
of intercourse in corn, and the expenses of freight, etc. to be quite
inconsiderable. And let us still suppose one of them to increase very
greatly above the rest, in manufacturing capital and skill, in wealth
and population. I should then say, that as the importation of corn
would prevent any great difference in the price of raw produce, it would
prevent any great difference in the quantity of capital laid out upon
the land, and the quantity of corn obtained from it; that, consequently,
the great increase of wealth could not take place without a great
dependence on the other nations for corn; and that this dependence,
under the circumstances supposed, would be the natural sign, and
absolutely necessary consequence of the increased wealth and population
of the country in question.
These I consider as the two alternatives necessarily belonging to a
great comparative increase of wealth; and the supposition here made
will, with proper restrictions, apply to the state of Europe.
In Europe, the expenses attending the carriage of corn are often
considerable. They form a natural barrier to importation; and even the
country which habitually depends upon foreign corn, must have the
price of its raw produce considerably higher than the general level.
Practically, also, the prices of raw produce, in the different countries
of Europe, will be variously modified by very different soils, very
different degrees of taxation, and very different degrees of improvement
in the science of agriculture. Heavy taxation, and a poor soil, may
occasion a high comparative price of raw produce, or a considerable
dependence on other countries, without great wealth and population;
while great improvements in agriculture and a good soil may keep the
price of produce low, and the country independent of foreign corn,
in spite of considerable wealth. But the principles laid down are
the general principles on the subject; and in applying them to any
particular case, the particular circumstances of such case must always
be taken into consideration.
With regard to improvements in agriculture, which in similar soils is
the great cause which retards the advance of price compared with the
advance of produce; although they are sometimes very powerful, they are
rarely found sufficient to balance the necessity of applying to poorer
land, or inferior machines. In this respect, raw produce is essentially
different from manufactures.
The real price of manufactures, the quantity of labour and capital
necessary to produce a given quantity of them, is almost constantly
diminishing; while the quantity of labour and capital, necessary to
procure the last addition that has been made to the raw produce of a
rich and advancing country, is almost constantly increasing. We see in
consequence, that in spite of continued improvements in agriculture,
the money price of corn is ceteris paribus the highest in the richest
countries, while in spite of this high price of corn, and consequent
high price of labour, the money price of manufactures still continues
lower than in poorer countries.
I cannot then agree with Adam Smith, in thinking that the low value of
gold and silver is no proof of the wealth and flourishing state of the
country, where it takes place. Nothing of course can be inferred from
it, taken absolutely, except the abundance of the mines; but taken
relatively, or in comparison with the state of other countries, much
may be inferred from it. If we are to measure the value of the precious
metals in different countries, and at different periods in the same
country, by the price of corn and labour, which appears to me to be the
nearest practical approximation that can be adopted [and in fact corn
is the measure used by Adam Smith himself], it appears to me to follow,
that in countries which have a frequent commercial intercourse with each
other, which are nearly at the same distance from the mines, and are not
essentially different in soil; there is no more certain sign, or more
necessary consequence of superiority of wealth, than the low value of
the precious metals, or the high price of raw produce. [15]
It is of importance to ascertain this point; that we may not complain of
one of the most certain proofs of the prosperous condition of a country.
It is not of course meant to be asserted, that the high price of raw
produce is, separately taken, advantageous to the consumer; but that it
is the necessary concomitant of superior and increasing wealth, and that
one of them cannot be had without the other. [16]
With regard to the labouring classes of society, whose interests as
consumers may be supposed to be most nearly concerned, it is a very
short-sighted view of the subject, which contemplates, with alarm, the
high price of corn as certainly injurious to them. The essentials to
their well being are their own prudential habits, and the increasing
demand for labour. And I do not scruple distinctly to affirm, that under
similar habits, and a similar demand for labour, the high price of corn,
when it has had time to produce its natural effects, so far from being
a disadvantage to them, is a positive and unquestionable advantage. To
supply the same demand for labour, the necessary price of production
must be paid, and they must be able to command the same quantities of
the necessaries of life, whether they are high or low in price. [17]
But if they are able to command the same quantity of necessaries, and
receive a money price for their labour, proportioned to their advanced
price, there is no doubt that, with regard to all the objects of
convenience and comfort, which do not rise in proportion to corn [and
there are many such consumed by the poor], their condition will be most
decidedly improved.
The reader will observe in what manner I have guarded the proposition. I
am well aware, and indeed have myself stated in another place, that the
price of provisions often rises, without a proportionate rise of labour:
but this cannot possibly happen for any length of time, if the demand
for labour continues increasing at the same rate, and the habits of
the labourer are not altered, either with regard to prudence, or the
quantity of work which he is disposed to perform.
The peculiar evil to be apprehended is, that the high money price of
labour may diminish the demand for it; and that it has this tendency
will be readily allowed, particularly as it tends to increase the prices
of exportable commodities. But repeated experience has shown us
that such tendencies are continually counterbalanced, and more than
counterbalanced by other circumstances. And we have witnessed, in our
own country, a greater and more rapid extension of foreign commerce,
than perhaps was ever known, under the apparent disadvantage of a very
great increase in the price of corn and labour, compared with the prices
of surrounding countries.
On the other hand, instances everywhere abound of a very low money price
of labour, totally failing to produce an increasing demand for it. And
among the labouring classes of different countries, none certainly are
so wretched as those, where the demand for labour, and the population
are stationary, and yet the prices of provisions extremely low, compared
with manufactures and foreign commodities. However low they may be,
it is certain, that under such circumstances, no more will fall to the
share of the labourer than is necessary just to maintain the actual
population; and his condition will be depressed, not only by the
stationary demand for labour, but by the additional evil of being able
to command but a small portion of manufactures or foreign commodities,
with the little surplus which he may possess. If, for instance, under a
stationary population, we suppose, that in average families two thirds
of the wages estimated in corn are spent in necessary provisions, it
will make a great difference in the condition of the poor, whether the
remaining one third will command few or many conveniencies and comforts;
and almost invariably, the higher is the price of corn, the more
indulgences will a given surplus purchase.
The high or low price of provisions, therefore, in any country is
evidently a most uncertain criterion of the state of the poor in that
country. Their condition obviously depends upon other more powerful
causes; and it is probably true, that it is as frequently good, or
perhaps more frequently so, in countries where corn is high, than where
it is low.
At the same time it should be observed, that the high price
of corn, occasioned by the difficulty of procuring it, may be considered
as the ultimate check to the indefinite progress of a country in wealth
and population. And, although the actual progress of countries be
subject to great variations in their rate of movement, both from
external and internal causes, and it would be rash to say that a state
which is well peopled and proceeding rather slowly at present, may
not proceed rapidly forty years hence; yet it must be owned, that the
chances of a future rapid progress are diminished by the high prices of
corn and labour, compared with other countries.
It is, therefore, of great importance, that these prices should be
increased as little as possible artificially, that is, by taxation.
But every tax which falls upon agricultural capital tends to check
the application of such capital, to the bringing of fresh land under
cultivation, and the improvement of the old. It was shown, in a former
part of this inquiry, that before such application of capital could
take place, the price of produce, compared with the instruments of
production, must rise sufficiently to pay the farmer. But, if the
increasing difficulties to be overcome are aggravated by taxation, it
is necessary, that before the proposed improvements are undertaken, the
price should rise sufficiently, not only to pay the farmer, but also the
government. And every tax, which falls on agricultural capital, either
prevents a proposed improvement, or causes it to be purchased at a
higher price.
When new leases are let, these taxes are generally thrown off upon the
landlord. The farmer so makes his bargain, or ought so to make it, as to
leave himself, after every expense has been paid, the average profits of
agricultural stock in the actual circumstances of the country, whatever
they may be, and in whatever manner they may have been affected by
taxes, particularly by so general a one as the property tax. The farmer,
therefore, by paying a less rent to his landlord on the renewal of his
lease, is relieved from any peculiar pressure, and may go on in
the common routine of cultivation with the common profits. But his
encouragement to lay out fresh capital in improvements is by no means
restored by his new bargain. This encouragement must depend, both with
regard to the farmer and the landlord himself, exclusively on the price
of produce, compared with the price of the instruments of production;
and, if the price of these instruments have been raised by taxation, no
diminution of rent can give relief. It is, in fact, a question, in which
rent is not concerned. And, with a view to progressive improvements, it
may be safely asserted, that the total abolition of rents would be
less effectual than the removal of taxes which fall upon agricultural
capital.
I believe it to be the prevailing opinion, that the greatest expense of
growing corn in this country is almost exclusively owing to the weight
of taxation. Of the tendency of many of our taxes to increase the
expenses of cultivation and the price of corn, I feel no doubt; but the
reader will see from the course of argument pursued in this inquiry,
that I think a part of this price, and perhaps no inconsiderable part,
arises from a cause which lies deeper, and is in fact the necessary
result of the great superiority of our wealth and population, compared
with the quality of our natural soil and the extent of our territory.
This is a cause which can only be essentially mitigated by the habitual
importation of foreign corn, and a diminished cultivation of it at home.
The policy of such a system has been discussed in another place; but, of
course, every relief from taxation must tend, under any system, to make
the price of corn less high, and importation less necessary.
In the progress of a country towards a high state of improvement, the
positive wealth of the landlord ought, upon the principles which have
been laid down, gradually to increase; although his relative condition
and influence in society will probably rather diminish, owing to
the increasing number and wealth of those who live upon a still more
important surplus [18] --the profits of stock.
The progressive fall, with few exceptions, in the value of the precious
metals throughout Europe; the still greater fall, which has occurred in
the richest countries, together with the increase of produce which
has been obtained from the soil, must all conduce to make the landlord
expect an increase of rents on the renewal of his leases. But, in
reletting his farms, he is liable to fall into two errors, which are
almost equally prejudicial to his own interests, and to those of his
country.
In the first place, he may be induced, by the immediate prospect of an
exorbitant rent, offered by farmers bidding against each other, to let
his land to a tenant without sufficient capital to cultivate it in
the best way, and make the necessary improvements upon it. This is
undoubtedly a most short-sighted policy, the bad effects of which have
been strongly noticed by the most intelligent land surveyors in the
evidence lately brought before Parliament; and have been particularly
remarkable in Ireland, where the imprudence of the landlords in this
respect, combined, perhaps, with some real difficulty of finding
substantial tenants, has aggravated the discontents of the country, and
thrown the most serious obstacles in the way of an improved system of
cultivation. The consequence of this error is the certain loss of all
that future source of rent to the landlord, and wealth to the country,
which arises from increase of produce.
The second error to which the landlord is liable, is that of mistaking
a mere temporary rise of prices, for a rise of sufficient duration to
warrant an increase of rents. It frequently happens, that a scarcity of
one or two years, or an unusual demand arising from any other cause,
may raise the price of raw produce to a height, at which it cannot be
maintained. And the farmers, who take land under the influence of such
prices, will, in the return of a more natural state of things, probably
break, and leave their farms in a ruined and exhausted state. These
short periods of high price are of great importance in generating
capital upon the land, if the farmers are allowed to have the advantage
of them; but, if they are grasped at prematurely by the landlord,
capital is destroyed, instead of being accumulated; and both the
landlord and the country incur a loss, instead of gaining a benefit.
A similar caution is necessary in raising rents, even when the rise of
prices seems as if it would be permanent. In the progress of prices and
rents, rent ought always to be a little behind; not only to afford the
means of ascertaining whether the rise be temporary or permanent, but
even in the latter case, to give a little time for the accumulation of
capital on the land, of which the landholder is sure to feel the full
benefit in the end.
There is no just reason to believe, that if the lands were to give the
whole of their rents to their tenants, corn would be more plentiful and
cheaper. If the view of the subject, taken in the preceding inquiry,
be correct, the last additions made to our home produce are sold at the
cost of production, and the same quantity could not be produced from our
own soil at a less price, even without rent. The effect of transferring
all rents to tenants, would be merely the turning them into gentlemen,
and tempting them to cultivate their farms under the superintendence
of careless and uninterested bailiffs, instead of the vigilant eye of
a master, who is deterred from carelessness by the fear of ruin, and
stimulated to exertion by the hope of a competence. The most numerous
instances of successful industry, and well-directed knowledge, have been
found among those who have paid a fair rent for their lands; who have
embarked the whole of their capital in their undertaking; and who
feel it their duty to watch over it with unceasing care, and add to it
whenever it is possible. But when this laudable spirit prevails among a
tenantry, it is of the very utmost importance to the progress of riches,
and the permanent increase of rents, that it should have the power as
well as the will to accumulate; and an interval of advancing prices,
not immediately followed by a proportionate rise of rents, furnishes the
most effective powers of this kind. These intervals of advancing prices,
when not succeeded by retrograde movements, most powerfully contribute
to the progress of national wealth. And practically I should say, that
when once a character of industry and economy has been established,
temporary high profits are a more frequent and powerful source of
accumulation, than either an increased spirit of saving, or any other
cause that can be named. [19] It is the only cause which seems capable
of accounting for the prodigious accumulation among individuals, which
must have taken place in this country during the last twenty years, and
which has left us with a greatly increased capital, notwithstanding our
vast annual destruction of stock, for so long a period.
Among the temporary causes of high price, which may sometimes mislead
the landlord, it is necessary to notice irregularities in the currency.
When they are likely to be of short duration, they must be treated by
the landlord in the same manner as years of unusual demand. But
when they continue so long as they have done in this country, it is
impossible for the landlord to do otherwise than proportion his rent
accordingly, and take the chance of being obliged to lessen it again, on
the return of the currency to its natural state.
The present fall in the price of bullion, and the improved state of
our exchanges, proves, in my opinion, that a much greater part of the
difference between gold and paper was owing to commercial causes, and a
peculiar demand for bullion than was supposed by many persons; but they
by no means prove that the issue of paper did not allow of a higher rise
of prices than could be permanently maintained. Already a retrograde
movement, not exclusively occasioned by the importations of corn, has
been sensibly felt; and it must go somewhat further before we can return
to payments in specie. Those who let their lands during the period of
the greatest difference between notes and bullion, must probably lower
them, whichever system may be adopted with regard to the trade in corn.
These retrograde movements are always unfortunate; and high rents,
partly occasioned by causes of this kind, greatly embarrass the regular
march of prices, and confound the calculations both of the farmer and
landlord.
With the cautions here noticed in letting farms, the landlord may fairly
look forward to a gradual and permanent increase of rents; and, in
general, not only to an increase proportioned to the rise in the price
of produce, but to a still further increase, arising from an increase in
the quantity of produce.
If in taking rents, which are equally fair for the landlord and tenant,
it is found that in successive lettings they do not rise rather more
than in proportion to the price of produce, it will generally be owing
to heavy taxation.
Though it is by no means true, as stated by the Economists, that all
taxes fall on the net rents of the landlords, yet it is certainly true
that they are more frequently taxed both indirectly as well as directly,
and have less power of relieving themselves, than any other order of the
state. And as they pay, as they certainly do, many of the taxes which
fall on the capital of the farmer and the wages of the labourer, as well
as those directly imposed on themselves; they must necessarily feel
it in the diminution of that portion of the whole produce, which under
other circumstances would have fallen to their share. But the degree
in which the different classes of society are affected by taxes, is
in itself a copious subject, belonging to the general principles of
taxation, and deserves a separate inquiry.
FOOTNOTES:
[Footnote 1: I cannot, however, agree with him in thinking that all land
which yields food must necessarily yield rent. The land which is
successively taken into cultivation in improving countries, may only pay
profits and labour. A fair profit on the stock employed, including, of
course, the payment of labour, will always be a sufficient inducement to
cultivate.]
[Footnote 2: Vol II. p. 124. Of this work a new and much improved
edition has lately been published, which is highly worthy the attention
of all those who take an interest in these subjects.]
[Footnote 3: Vol. I. p. 49.]
[Footnote 4: Vol IV. p. 134.]
[Footnote 5: Vol. III. p. 272.]