all commodities into which profits enter, which may be said to be
nearly the whole mass, must fall on the fall of profits, and among
these will, of course, be found metallic money. Supposing, therefore,
money always to require in its production the same quantity of labour
and capital, it will regularly fall in value in the progress of
cultivation and population; while labour being uniform in value will
rise in money price,[J] and the demand for corn increasing, compared
with the demand for labour, the money price of corn will probably rise
still more. But if the labourers were paid at all times exactly the
same quantity of corn, (which, however, cannot be the case,) the value
of corn, like the value of wages, would be constant, and the variations
of fertility would only show themselves in the enormous variations of
profits.
Thus, when labour is paid at ten quarters each man, the numbers in the
eighth column, or the value of a given quantity of corn, must, it is
obvious, always be the same, whatever be the quantity produced; and
when the land is fertile, the small quantity of labour required to
produce ten quarters is balanced by the great profits which appear in
the fourth column.
In the actual state of things, corn generally rises in the progress
of cultivation, not only nominally, but really, as may be seen in the
eighth column, while labour, it is evident, can only rise nominally.
A fourth result shown in the Table is, that the value of the corn
obtained by ten men depends mainly upon the rate of profits, which
again depends mainly upon the demand and supply of corn compared with
labour. If corn be in such demand, that notwithstanding the fertility
of the soil, a small quantity of it comparatively will purchase the
labour required, profits will be very high, and the value of the
produce will greatly exceed the constant value of the wages of the
labour advanced; but if the supply of corn be so great, compared with
labour, that a large quantity of it is required to purchase the given
quantity of labour, profits will be low, and the excess of the value of
the produce above the constant value of the advances in wages will be
inconsiderable.
Thus, when the produce is 150 quarters, if corn be in such plenty that
each labourer is awarded thirteen quarters, the profits of stock will
be only 15.38 per cent.; and this rate of profit, added to the constant
value of the advances in labour, which are represented by 10, will
make the natural value of the produce equal to 11.53. But if corn,
notwithstanding the fertility of the soil, be only supplied in such
quantities, compared with labour, as to award the labourer no more than
ten quarters, the rate of profits, instead of 15.38 per cent., will be
50 per cent., and the value of the produce, instead of being 11.53,
will be 15.
This shows how greatly the natural value of commodities depends upon
the average state of the demand and supply, and completely confirms
the position in my last work, that the only difference between natural
and market prices is, that the former are regulated by the average and
ordinary relations of the demand to the supply, and the latter, when
they differ from the former, upon the accidental and extraordinary
relations of the demand to the supply.
Fifthly, it follows, from the constant value of labour, that,
Given the value of money in different countries, the natural prices of
commodities, in which the same quantities of labour have been employed,
will depend upon the rate and quantity of profits.
Given the rate and quantity of profits, and the value of money, the
natural prices of commodities in different countries will depend upon
the quantity of labour employed upon them.
And given the quantity of labour employed on them, and the rate and
quantity of profits, the natural prices of commodities will depend upon
the value of money.
But in reality none of the ingredients of natural or money price are
given, excepting the natural value of labour, and consequently the
money prices of commodities which regulate the ordinary rate at which
different countries exchange their commodities with each other, will be
determined partly by the quantity of labour employed upon them, partly
by the ordinary rate of profits, and partly by the value of money.
The value of metallic money, it has before been stated, while it
continues to be obtained by the same quantity of labour and capital,
must always fall with the fall of profits, and will consequently
have a strong tendency to fall with the progress of cultivation and
improvement; but as few nations comparatively have mines of their own,
the supplies which they obtain of the precious metals must be purchased
by their exportable commodities; and these are produced and exported
under such a variety of circumstances, in respect to cost, and the
value of the same amount of the precious metals is further so much
affected by the demand for corn and labour, the state of credit, paper
currencies, taxation, and other circumstances, that no rule can safely
be laid down on the subject.
Generally the value of money is the lowest in the richest and most
manufacturing countries; but this is not always the case; and a country
which raises an abundance of raw produce at a small expense of labour
and profits, while its money value is kept up by a ready sale for it
in foreign markets, and a continued demand for labour, may have the
value of its money very low, although it is not rich or manufacturing.
This is the case with the United States of America, where, owing to the
low value of money, or high money price of labour, there are no doubt
some commodities which, though produced by a less value of labour and
profits, cannot be exported to England on account of the higher value
of money in England; while we know that there are many other products
which are obtained by so much a smaller quantity of labour and profits
as more than to counterbalance the higher value of money in England, or
the higher money price of labour in the United States.
In the same manner there are no doubt many commodities which, though
obtained in England by a much less quantity of labour and profits than
in India, cannot be exported to that country on account of the very
high value of money in India; while, on the other hand, there are a few
commodities in England in which the saving of labour and the effects of
capital and skill have been so great, as to allow of their exportation
from a country where the money wages of labour are two shillings a day,
to one where they are only fourpence; that is, from a country where
the value of money is six times lower than in the country to which the
commodities are sent.
On the same principle, commodities may be imported from India into
England, although the same commodities might be produced in England
by a much less quantity of labour and profits, the low value of money
in England more than compensating the greater quantity of labour and
profits employed in India.
It is evident, therefore, that the values which determine what
commodities shall be exported, and what imported, depend, as before
stated, partly upon the quantity of labour employed in their
production, partly upon the ordinary rates of profits in each country,
and partly upon the value of money.
A sixth result illustrated in the Table is the important distinction
between cost and value. The two last columns show the value of a given
quantity of corn, and the value of the product of a given quantity of
labour, under all the variations which may be supposed of fertility and
corn wages. The difference between the numbers in the last column, and
the uniform number expressing the value of labour, shows exactly the
difference between the value of the labour which has been employed upon
a production, or its cost, and the labour which that production will
command, or its natural and exchangeable value; which, where profits
and wages are alone concerned, must be exactly equal to the additional
value occasioned by the amount of profits.
The reader will be aware that neither the preceding Table, nor any
thing which has been said, tends in any degree to contradict the
acknowledged truth that different _kinds_ of labour are of very
different natural and exchangeable value. It will be further allowed,
that even the same kind of labour, and the kind which has been
especially referred to, namely common agricultural labour, may, under
particular circumstances, and in particular places, vary in value from
a partial or temporary state of demand and supply. We well know, that,
from a partial and temporary demand at a particular period of the year,
summer wages are of a very different value from winter wages; but in
reality summer wages form a very important part of the wages of the
whole year. They are generally employed to pay the rent of the house,
or to purchase the necessary clothing for the family. They could not be
essentially diminished, without altering the condition of the labourer
throughout the year, or the rate of the increase of population. And if
the labourer earned a smaller quantity of corn throughout the year,
with an undiminished produce, it appears from the Table that the value
of that corn would still remain the same, owing to the increased value
of those profits of which it was in part composed.
With regard to the variations in the value of labour in different
parts of the same country, if they are not partial, or temporary, and
consequently exceptions to the general average, they are all resolvable
into those differences in the value of money, which unquestionably take
place in different parts of the same country, and arise from a want of
demand for corn and labour, and a want of commodities to exchange with
those parts of the country which are richer in the precious metals.
Having obtained a measure of the value of commodities in their more
simple forms, we may apply this measure to the ingredients which
compose the most complicated productions, and estimate all the advances
which consist of accumulated profits, rents, tithes, and taxes in
labour. In the case of taxes on the wages of labour, or an increase in
the prices of those other necessaries of the labourer, besides food,
which may occasion the sale of a greater quantity of the produce, in
order to pay the same number of labourers, as these increased advances
will have the same effect upon profits as a simple increase of wages,
they will in no respect interfere with the constant value of labour,
though an increase of wages, under such circumstances, will be of no
advantage to the labourer.
Cases will of course frequently occur, in which the advances which do
not consist of wages vary in a different degree from wages; but still
the value of labour will remain constant. If the produce, instead of
being obtained by the direct labour of a certain number of men, were
obtained by the direct labour of only a part of this number, together
with an amount of materials, or other advances consumed in the same
time, equal to the labour of the other part, then upon a rise in the
corn wages of labour, if the other advances were to fall, or not to
be worth so much labour as before, it is obvious that the profits of
stock would not fall so much as if the same rise of corn wages had
taken place, when all the advances had been in labour; and it might be
thought at first that profits not falling in proportion to the rise of
labour, the value of labour would not continue the same. But it will
be observed, that, in all cases of this kind, there will be a less
value of labour, which is equivalent to a less quantity of it employed
to obtain the same produce; and a less quantity of labour altogether
being consequently necessary to produce the food of the labourer, than
if labour alone had been employed, the higher profits, or smaller
diminution of the former profits, will only just be such as to maintain
labour of a constant value.
Let us suppose, for instance, that 120 quarters of corn are produced by
ten men. If each man were paid ten quarters, profits would be 20 per
cent.; and if wages were increased to eleven quarters, profits would
fall from 20 per cent. to 9.09 per cent. Now supposing, that, instead
of ten men being directly employed, five only are so employed, and that
the other advances consist of capital which will continue of the same
value as the corn;[K] then, while each labourer earns ten quarters,
and the other capital advanced is worth the labour of five men so
paid, profits will be, as before, 20 per cent. But if the labourer be
paid eleven quarters instead of ten, profits will not fall, as before,
from 20 per cent. to 9.09 per cent., but only from 20 per cent. to
14.28 per cent.; because the advances, instead of being 110, will only
be 105; and the value of these advances estimated in labour paid at
eleven quarters each man, being only 9.54, instead of 10; 9.54 may be
considered as the number of persons employed. Then if 120 quarters
be produced by 9.54 men, 105 quarters will be produced by 8.34. But
8.34, increased by a profit of 14.28, will make 9.54, the quantity of
labour employed, and show that the natural value of labour is always
proportioned to its quantity. In the former case, when ten men were
employed at eleven quarters, as the advances were 110 quarters,
instead of 105, the labour required to produce the food of the labourer
was 9.166, and consequently a profit of only 9.09 will be sufficient to
make up ten, the number of men employed, and thus equalize the value
with the quantity.
In the case of fixed capital of considerable duration, there is always
a probability that it will alter in value in reference to the quantity
of labour, and of profits estimated in labour, of which it was composed
when first produced; but after having advanced so far in establishing
the labour which a commodity will command, as the measure of its value,
we are entitled to consider the present value estimated in labour of
any fixed capital which is about to be employed in production, as
representing the quantity of accumulated labour actually so applied.
It is further necessary, as before stated, to reckon the remaining
value of the fixed capital as a part of the produce resulting from the
whole of the accumulated and immediate labour employed. When, however,
these corrections have been made, all the cases in which fixed capital
enters, which may be said to include the great mass of commodities,
will be found to answer to the theory as accurately as the simplest
case that can be stated.
The exceptions, therefore, to the general proposition that the labour
which commodities will command may be considered as a standard measure
of their value are only apparent, not real, and may all be consistently
explained.
And if the proposition be true, a standard measure of value is of so
much importance in political economy, and the one proposed is at all
times so very ready and easy of application,[L] that there is scarcely
any part of the science in which it will not tend to simplify and
facilitate our inquiries.
To advert shortly to a few points on which there have been some
differences of opinion.
On the subject of rents, such a standard would determine, among other
things, that, as the increase in the _value_ of corn is only measured
by a decrease in the corn wages of labour, such increase of value is
a very inconsiderable source of the increase of rents compared with
improvements in agriculture; and on the same principle that, if tithes
do not fall mainly on the labourer, the acknowledged diminution in the
_corn_ rents of the landlord, occasioned by tithes, cannot be balanced
by an increase of their value, and that, consequently, tithes must fall
mainly on the landlord.
On the subject of labour it would determine, that the increasing
_value_ of the funds destined for the maintenance of labour can alone
occasion an increase in the demand for it, or the will and power
to employ a greater number of labourers; and that it is consistent
with theory, as well as general experience, that high corn wages, in
proportion to the quantity of work done, should frequently occur with
a very slack demand for labour;[M] or, in other words, that when the
_value_ of the whole produce falls from excess of supply compared with
the demand, it cannot have the power of setting the same number of
labourers to work.
On the subject of profits, it would show, that they are determined,
not by the varying value of a given quantity of labour compared with
the constant value of the commodities which it produces, but, as is
more conformable to our experience, by the variable value of the
commodities produced by a given quantity of labour, compared with the
constant value of such labour; and that profits never, on any occasion,
rise or fall, unless the value of the produce of a given quantity of
labour rises or falls, either from the temporary or ordinary state of
the demand and supply.
On the subject of the distinction between wealth and value, it would
show, that though they are by no means the same, they are much more
closely connected than they have of late been supposed to be; and
that the best practical measure of the relative wealth of different
countries would be the quantity of common labour which the value of the
whole annual produce of each country would enable it to command at the
actual price of the time, which in some rich countries might amount
to above double the number of families actually employed, and in poor
countries might not greatly exceed such number.
On the subject of foreign trade, it would show that its universally
acknowledged effect in giving a stimulus to production, generally, is
mainly owing to its increasing the value of the produce of a country’s
labour by the extension of demand, before the value of its labour is
increased by the increase of its quantity; and that the effect of every
extension of demand, whether foreign or domestic, is always, as far as
it goes, to increase the average rate of profits[N] till this increase
is counteracted by a further accumulation of capital.
On the subject of the accumulation of capital it would show that if the
increase of capital be measured by the increase of its materials, such
as corn, clothing, &c., then it is obvious that the supply of these
materials may, by saving, increase so rapidly, compared with labour and
the wants of the effective demanders, that with a greater quantity of
materials the capitalist will neither have the power nor the will to
set in motion the same quantity of labour, and that consequently the
progress of wealth will be checked; but that if the increase of capital
be measured, as it ought to be, by the increase of its power to command
labour, then accumulation so limited cannot possibly go on too fast.
On the general subject of demand and supply, it would show that they
must be restored to their universal empire, both in reference to the
prices of commodities, and the dependence of the progress of wealth on
the due proportion maintained between them. If the cost of a commodity
be considered as composed exclusively of the actual advances of the
capital required for its production, which seems to be the most natural
and correct mode of viewing it,[O] then it is obvious, that as both the
prices and values of commodities are proportioned to these advances,
with the _addition_ of profits very variable in their amount, neither
of them can be determined by these advances alone, or by the costs of
production so defined. We must therefore have recourse to demand and
supply. And on the other hand, if profits be included in the costs of
production, then, as it follows, from the constancy of the value of
labour, that ordinary profits are determined by the ordinary demand
compared with the ordinary supply of the products of the same quantity
of labour, the certain conclusion must be, that demand and supply
enter powerfully into the costs of production according to this latter
definition, and that therefore their dominion as to prices and value is
absolutely universal.[P]
Nor would they be less so in their effect on the general progress of
wealth. If commodities and the materials of capital increase faster
than the effectual demand for them, profits fall prematurely, and
capitalists are ruined without a proportionate benefit to the labouring
classes, because an increasing demand for labour cannot go on under
such circumstances. If the value of commodities and the materials of
capital increase for some time without an increase of their quantity,
the labouring classes must soon be supported on the lowest amount of
food on which they will consent to keep up their actual number; and
the main part of the population would suffer severely without any
proportionate benefit to the capitalists; because the value of their
capitals, measured by the labour which they can command, would shortly
be incapable of further increase. In either of these cases a decided
check would be given to the progress of wealth, which progress must
necessarily be the greatest, when the joint product of the capitalist
and labourer, which the state of the land and the skill with which
it is worked enable them to obtain, is so divided between them, that
in the progress of cultivation and improvement any unnecessary or
premature fall either of profits or corn wages is prevented. But this
can only be accomplished by a proper proportion of the supply to the
demand, that is, by an accumulation so proportioned to the actual
consumption of produce by those who can make an effectual demand for
it, as to occasion the greatest permanent annual increase in the value
of the materials of capital.
The reader of my last work, in which I laid down as my rule, to admit
no principles of Political Economy as just which were inconsistent
with general experience, will be aware that the conclusions to which
I have here shortly adverted, as following necessarily from the
constancy of the value of labour, are almost exactly the same as the
conclusions of that work. And the reason is, that although at that time
I did not think that the labour which a commodity would command could,
with propriety, be considered as a _standard_ measure of value, yet I
thought it the nearest approximation to a standard of any one object
known, and consequently applied it, on almost all occasions, to correct
the errors arising from the application of more variable measures. The
conclusions, therefore, of my former and present reasonings were likely
to be nearly the same, although the premises might now admit of further
correction and illustration, and the conclusions might be pronounced
with greater precision and certainty.
It was my intention to have done this much more fully than in
the present treatise; but having been interrupted by unforeseen
circumstances, and being unwilling to delay any longer the publication
of this essential part of my proposed plan, I have determined to submit
it to the public in its present form; and will only add here a few
observations on a question closely connected with it, which has lately
excited much interest and discussion.
Among the questions for the determination of which a standard measure
of value is most particularly required, are those which relate to
alterations in the value of the currency. We know perfectly well, from
experience, that commodities are subject to great variations of price,
and that many of these variations may arise from causes which alter
the natural value of these commodities, and are equally applicable to
a large mass of them, as to a very few. On the supposition of a large
mass being altered, any article which had retained the same natural
value, would have its power of purchasing considerably affected;
but this would be owing to an alteration in the value of the mass
of commodities, and not in the value of the article, which by the
supposition remains the same. It follows, that although money may
increase in its power of purchasing, it does not necessarily increase
in value. But in estimating the value of money, some criterion or other
must be referred to. If we cannot refer to the mass of commodities, we
must refer to some one object, and this object can only be labour. Our
present inquiry, therefore, must be into the causes which affect the
value of the precious metals as compared with labour.