or low rate of profits, which, as connected with the progressive
cultivation of poorer land, and operating universally and necessarily
on the precious metals in common with all other commodities, and
raising or lowering them with regard to labour, may be denominated
the primary and necessary cause of the high or low value of metallic
money.--And secondly, those which depend on the fertility and vicinity
of the mines; the different efficiency of labour in different
countries; the abundance or scarcity of exportable commodities; and the
state of the demand and supply of commodities and labour compared with
money; which may be denominated the secondary and incidental causes of
the high or low value of metallic money.
These two different kinds of causes will sometimes act in conjunction,
and sometimes in opposition, so that it may not always be easy to
distinguish their separate effects; but as these effects have really a
different origin, it is desirable to keep them as separate as we can.
The marks which distinguish a fall in the value of the precious metals,
arising from the primary cause, are,--a rise in the money price of raw
produce and labour, without a general rise in the price of wrought
commodities. All of them, indeed, as far as they are composed of
raw produce, will have a tendency to rise; but, in a large class of
commodities, this tendency to rise will be more than counterbalanced
by the effect of the fall of profits.--Some therefore will rise, and
some will fall, as I stated in my last work,[Q] according to the nature
of the capitals employed upon them, compared with those which produce
money; and while the money prices of corn and labour very decidedly
increase, the prices of commodities, taken on the average, may possibly
remain not far from the same.
On the other hand, when the value of metallic money falls, from
the secondary causes above noticed, there will be a tendency to a
proportionate rise of all commodities as well as of corn and labour,
though in some cases it may take a considerable time before it is
completely effected. And, in general, whenever a fall in the value of
money takes place, without a fall in the rate of profits, an event
which is generally open to observation, it is to be attributed to
incidental and secondary causes affecting the relations of money to
labour, and not to that which is connected with the taking of poorer
land into cultivation.
Of these two classes of causes the second produces much the greatest
part of those differences in the value of metallic money, which are the
most observable in different countries, and at different periods in
the same country. If India and England had each of them mines of equal
natural fertility, the superior efficiency of English labour, assisted
by machinery, would extract a much greater quantity of metal from such
mines; and the money price of labour might be three or four times
higher, and the value of money three or four times lower in England
than in India.
The same effect is, at present, practically produced by the skill and
machinery employed on the manufactures with which England purchases her
gold. If she can prepare exportable commodities which are in demand
abroad, with much less labour than other nations, she will be able to
buy gold at a much lower natural value, and will continue to import it
under favourable exchanges, till its value falls in proportion.
It is farther established by experience, that a brisk or slack
demand for commodities and labour, and particularly for corn, has
a considerable effect on the value of gold. Such a demand not only
occasions a more rapid circulation of money, and enables the same
quantity to perform a greater number of transactions, but calls into
action a greater quantity of credit and private paper,[R] so that a
general rise of bullion prices, including labour, seems to be at all
times possible, even without any fresh importations of the precious
metals; and the only practical limit to this rise, is the turn of the
exchange, and the impossibility of maintaining the exchanges nearly at
par beyond a certain elevation of labour and commodities.
The secondary and incidental causes here enumerated, as affecting the
value of gold, often completely overcome the effects arising from the
primary cause. The state of bullion prices in most of the countries of
the commercial world make it evident, that the efficiency of labour,
and the abundance of exportable commodities, are much more powerful
in lowering the value of bullion in the countries where they prevail,
than high profits in raising it; and the same appears to be true, in
reference to an increased demand for corn and labour.
It cannot be doubted that the rate of interest and profits was
comparatively high during the late war, and this high rate of profits
would naturally have a tendency to lower the bullion price of labour;
but this was more than counterbalanced by the tendency of a brisk
demand for corn and labour to raise money prices generally, including
labour, and the consequence was a fall, during the greatest part of the
time, in the value of bullion.
It can as little be doubted, that the rate of interest and profits has
fallen since the war, and this low rate of profits would have a natural
tendency to raise the bullion price of labour; but this has been more
than counterbalanced by the tendency of a slack demand for corn and
labour to lower prices generally, and the consequence has been a rise
in the value of gold, and a still greater rise in the value of the
currency.
This rise, however, in the value of the currency, has been by no means
so considerable as those are inclined to make it, who would measure it
by the fall of agricultural produce; nor is it so inconsiderable as
those imagine who would measure it solely by the difference between
paper and gold. But whether this difference is the whole of what can
be fairly attributed to the Bank Restriction and the return to cash
payments, or not, it may by no means be the whole change which has
taken place in the value of the currency, when compared with an object
which has not changed.
It would be very desirable to be able to form an accurate estimate of
the rise and fall which has taken place in the bullion price of labour
for the last thirty years; but unfortunately, during the latter part of
the period, no general estimates of the price of labour have been made,
at least none that have come to my knowledge; and there is reason to
think that, under the late stagnation in the demand for agricultural
labour, the common rate of wages in England has been more than usually
interrupted by the operation of the poor laws. On this account, I have
made some inquiries respecting wages in Scotland, and have obtained a
most valuable communication; but before I refer to it particularly,
it may be useful to consider the results of the data we possess in
England. The rise in the bullion price of labour from 1790 to 1810 and
11, may be established upon satisfactory grounds, although the amount
of the fall which has since taken place may be a matter of considerable
uncertainty.
According to the communications to the Board of Agriculture, the price
of labour, in 1790, was 8_s._ 1_d._ per week. In 1796, Sir F. M.
Eden, in his work on the Poor, stated it at 8_s._ 11_d._ per week. In
1803, the communications to the Board of Agriculture make it 11_s._
5_d._, and in 1810 and 11, according to satisfactory returns obtained
by Arthur Young, it was 14_s._ 6_d._[S] This was a steady and very
great rise in the price of agricultural labour during the course of
twenty years. But in 1810 and 11, paper had separated from gold to a
considerable extent. Taking an average of the market prices of gold
during these two years, this price was £4. 13_s._ and reducing the
14_s._ 6_d._ currency to a bullion price, it will appear that the
bullion wages of labour in 1810 and 11 were a little above 12_s._ The
bullion price of labour had therefore risen 50 per cent. Now, on the
supposition that manufacturing and mercantile labour continued to bear
the same proportion to agricultural labour as before,[T] it is obvious
that there would be a difference of 50 per cent. between the quantity
of labour and profits with which an ounce of gold could be purchased
at the former period, compared with the latter; that is, while labour
was 8_s._ 1_d._ per week, it would require a piece of muslin, which
would command above nine and a half weeks labour, to purchase an ounce
of gold; but when wages were 12_s._ per week, a piece of muslin, which
would command little more than six and a half weeks labour, would be
sufficient for the purpose. The natural value of bullion, therefore,
the quantity of English labour and profits of which it was composed,
must have fallen to that extent.
Mr. Tooke, in his late valuable publication, after stating very justly
that an unusual proportion of unfavourable seasons must have had a
considerable effect in raising the prices of corn and labour during
the period adverted to, goes on to “ask upon what ground of fact or
reasoning can the high prices included in such a period be ascribed, in
fairness, to alterations in the currency, beyond the degree indicated
by the difference between paper and gold, when, after a sufficient time
has elapsed for the subsidence of the extraordinary effects of such an
unusual succession of bad seasons, there is a restoration to a level
even somewhat lower than that from which the rise is assumed to have
taken place, and to have continued progressively.”
Of the subsidence here alluded to, before 1814, Mr. Tooke has certainly
not given proofs sufficiently general; but without dwelling on this
point, it appears to me that the question of the fall in the value of
the currency including the gold, is exclusively a question of fact, and
must be referred to some criterion. It is a very intelligible thing to
say that paper has fallen, if it has fallen with regard to the gold
which it professes to represent; but it is not intelligible to say
that gold has not fallen, when it is acknowledged to have fallen both
with regard to its power of purchasing generally, and its power of
commanding labour; unless a reference can be made for the proof of it
to some more satisfactory criterion. A season of scarcity will make
corn dear, and a season of plenty cheap, without necessarily affecting
labour in either case, as is shown by Adam Smith, and proved by
repeated experience. But if seasons of scarcity occur so frequently as
to raise generally the bullion price of labour, it must of necessity be
accompanied by a power of purchasing bullion with a smaller quantity of
labour and profits; otherwise the event could not occur. Whenever it
does occur, the natural value of bullion falls.[U]
The observations here made, with a view to place the controversy
respecting the alterations in the currency on its proper ground, and to
make the necessary distinction between facts and the causes which may
have produced them, apply still more strongly to the publication of Mr.
Blake, in much of the reasoning of which I entirely concur. He proposes
to prove that it was the gold which rose, and not the paper which fell
during the war, although he acknowledges as a matter of fact, that
almost all prices, including labour, rose not only in paper but in
gold. This has, no doubt, the air of a contradiction, according to all
the common modes of estimating the value of money; and it certainly is
not removed by showing that the main cause of these high prices was a
great demand compared with the supply of commodities--a cause which,
involving as it always does, more transactions on credit, and a more
rapid circulation of currency, is one of the most legitimate causes of
a fall in the value of money.
Mr. Blake, however, is certainly right in his view of the effects of
an unfavourable exchange on the price of gold, when it ceases to form
a part of the circulation. It is not only possible that from this
cause gold might for a time rise in value much beyond the expense of
transporting it; but as a matter of fact, this did unquestionably occur
at certain periods during the war. There is no account of the price
of agricultural labour in England subsequently to 1811. Probably it
did not rise any more; but if it did, judging from what took place in
Scotland, it did not rise sufficiently to balance the subsequent rise
in the market price of gold, which was from £4. 15_s._ in 1811, to £5.
8_s._[V] in 1813. Consequently, in 1813, as compared with 1811, the
value of gold must have risen considerably; and on the supposition that
the price of labour did not rise after 1811, it would appear that the
natural and exchangeable value of gold, as measured by the standard,
rose above 13½ per cent.
The rise of gold from the sudden fall of the exchange in consequence
of Buonaparte’s return from Elba was still more remarkable. The price
had been as low, in the spring of 1815, as 4_l._ 9_s._, and without
any known change in the currency price of labour, it rose suddenly to
5_l._ 5_s._, or 18 per cent.; and consequently, to purchase an ounce
of gold it was necessary at that time to give commodities worth 18 per
cent. more of agricultural labour than it might have been purchased
for a month or two before. Whatever might have been the case with the
paper, there could not, on any view of the subject, be the slightest
foundation for the supposition of a sudden abundance and cheapness of
labour just before the battle of Waterloo. In fact, agricultural labour
had not fallen, and manufacturing labour was higher than usual; so
that even without considering labour as a standard, it must have been
acknowledged, that, of these two objects which had altered in relative
value, it was the gold which had risen, not the labour which had fallen.
In attempting to measure the _rise_ in the value of the currency since
the period of the high prices, we shall be greatly assisted by the
following very valuable document respecting the price of labour in the
county or stewartry of Kircudbright. It is considered that the prices
in this table represent pretty nearly (though they are rather below)
the wages in other parts of Scotland. The labourers have no other
allowances whatever except the daily wages specified in the table. In
the intermediate years not quoted the wages remained stationary at the
rates last mentioned; and when any change took place, the period of
such change and the degree of it are regularly stated.
--------+-----------+-----------
| Rate per | Rate per
Years. | day in | day in
| winter. | summer.
--------+-----------+-----------
1760 | 4_d._ | 6_d._
1765 | 6_d._ | 8_d._
1770 | 8_d._ | 10_d._
1772 | 8_d._ | 12_d._
1776 | 7_d._ | 9_d._
1780 | 8_d._ | 10_d._
1791 | 8_d._ | 11_d._
1793 | 9_d._ | 12_d._
1798 | 11_d._ | 14_d._
1799 | 12_d._ | 15_d._
1800 | 14_d._ | 16_d._
1802 | 16_d._ | 18_d._
1811 | 18_d._ | 22_d._
1812 | 20_d._ | 24_d._
1816 | 18_d._ | 22_d._
1817 | 16_d._ | 20_d._
1819 | 15_d._ | 18_d._
1822 | 12_d._ | 15_d._
In 1812, farm servants boarded in the house received from 14_l._ to
22_l._ a year; women servants from 5_l._ to 8_l._ At present, (April,
1823,) men receive from 10_l._ to 14_l._, and women from 3_l._ 10_s._
to 6_l._
Masons’ wages per day were three shillings in 1812, and are now
half-a-crown.
All work done by the piece, such as building stone fences, cutting
ditches either for fences or drains, making roads, &c. may be done at
a greater reduction of price than the fall in the rate of labour by
the day. Work is now performed more frequently by the piece; and the
best labourers are employed by the day; while the inferior workmen, and
those unable from age, or other causes, to perform a full day’s work,
are turned over to work by the piece. Agricultural affairs are under
such depression, that the work is curtailed, and the competition for
work is thereby increased.[W]
The first thing that strikes us in the table is the very remarkable
rise of labour in Scotland from 1760--much greater than in England, and
much greater than in proportion to the rise in the price of corn. This
was no doubt owing in part to the comparatively unimproved state of the
district in question, and of Scotland in general at the earliest period
adverted to. But to go no farther back than 1790, the period with which
we commenced in England, it appears that the rise from 1790 to 1811,
was considerably greater than in England, and nearly in proportion
to the rise in the price of wheat. If, indeed, we take the price of
labour as mentioned in the table for 1812, and compare it with the
average price of wheat for the four years from 1812 to 1815 inclusive,
during which period the same price of labour seems to have continued,
it will appear, that labour, taking summer and winter wages together,
rose in the proportion of from 19_s._ to 44_s._, while wheat rose
from 43_s._ in 1792, (according to the average of England and Wales,
which commences with that year,) to 88_s._ and therefore labour rose
decidedly more than wheat, except in reference to the peculiarly high
price of wheat in 1812.
Taking the currency price of labour in Scotland as having risen from
9½_d._ to 22_d._, and reducing the 22_d._ to its value in bullion,
the average price of bullion in that year being 5_l._ 1_s._, it will
appear, that the bullion price of labour in Scotland rose, in the
interval between 1790 and 1812, from 9½_d._ to 16½_d._, or nearly 73
per cent. And consequently, the same quantity of gold for which it
would have been necessary to give commodities worth 173 days labour in
1790, might be purchased for 100 days labour in 1812; or the value of
the currency estimated in gold might be considered as having fallen in
that proportion.
In 1812, the bullion price of labour as above stated was 16½_d._;
it has since fallen to 13½_d._, or in the proportion of from 100 to
81·8--rather more than 18 per cent. This view of it shows most clearly
the change in the bullion value of the currency since 1812. But if we
wish to estimate the whole fall which has taken place in the currency,
and then subtract what is due to the difference between paper and
gold, it will appear that the whole fall since 1812, estimated on the
currency wages of 1812, has been rather less than 39 per cent.; of
which, if the average difference between paper and gold in the year
1812 was as 101 to 78, about 23 per cent. would belong to the paper,
leaving about 16 per cent. for the fall in the currency independently
of the excess of paper prices above gold prices. The apparent
difference in the results of these estimates arises merely from the per
centage in the latter case being taken on a higher number.
I stated before, that I was not aware of any data on which reliance
could be placed respecting the amount of the fall of agricultural wages
in England since the termination of the war; but on the supposition
that the wages, which in 1810 and 1811 were 14_s._ 6_d._ per week,
had fallen to 10_s._ then as the bullion wages of 1810 and 1811 were
a little above 12_s._, the fall in the bullion value of the currency
would be nearly 17 per cent., or for the same quantity of gold which in
1810 and 1811 might be purchased by commodities worth 83 days labour,
it would now be necessary to give commodities the natural value of
which would be represented by 100 days labour. This difference of
course includes the effects which have been attributed to the purchases
of bullion by the Bank with a view to a return to cash payments, the
amount of which separately it is scarcely possible to calculate; but I
am inclined to agree with Mr. Tooke in thinking that it is not above
one or two per cent. If the price of agricultural labour in England
has not fallen so much as is here supposed, the difference in the
value of the currency will not be so great as above stated, but on any
supposition which is at all probable, it must be something considerable.
It is certain therefore that the currency, estimated in what appears to
be a correct standard of value, has fallen in such a degree beyond the
difference between paper and gold, as to add much to the pressure upon
the landed interest, though by no means to the extent which would be
implied by measuring the value of the currency in agricultural produce.
This produce, from the scantiness of the supply compared with the
demand, was at one time much above its natural and ordinary value, and
has since, from the abundance of the supply compared with the demand,
been as much below its natural value; while the value of the currency,
though it has fallen and risen considerably, has been much more steady
than the value of corn.
To what extent the alterations in the value of the currency beyond
the difference between bullion and paper are attributable to the Bank
restriction, and the return to cash payments, it is by no means easy
to say. That the currency would have fallen very considerably under
the circumstances of the last war, and risen very considerably under
the circumstances which accompanied the peace, although paper had been
kept on a par with gold, I cannot feel the least doubt; and probably
the only difference has been, that as the increase of paper beyond what
would circulate at par with gold gave facilities to production, and
to the bringing of poor land into cultivation during the war, it has
tended to increase the glut and low prices since the peace.
But whatever may have been the pressure on the owners of land since
the peace, they cannot have the slightest plea for an attempt to
indemnify themselves at the expense of the public creditor. In the
turns of the wheel of fortune all parties should have fair play; no
class of persons can be justified in endeavouring to lift themselves
up by using unfair and dishonourable means to pull others down; and
least of all ought such means to be thought of by the landlords of this
country, who, whatever inconveniences they may have suffered latterly,
have unquestionably altogether benefited much more largely from the
alterations in the value of the currency, than the very persons who in
their opinion should be made to relieve them from their embarrassments.
London: Printed by C. Roworth,
Bell-Yard, Temple-Bar.
FOOTNOTES
[A] Mr. Ricardo, speaking of the commodities produced by the
capitalist, says, “their whole value is divided into two portions only:
one constitutes the profits of stock; the other the wages of labour.”
(p. 107. 3d edit.) The language of Mr. Mill, in his _Elements of
Political Economy_, is similar.
[B] This is very properly stated by Colonel Torrens, in his _Production
of Wealth_, c. 1. p. 28.
[C] The effects of slow or quick returns, and of the different
proportions of fixed and circulating capitals, are distinctly allowed
by Mr. Ricardo; but in his last edition, (the third, p. 32.) he
has much underrated their amount. They are both theoretically and
practically so considerable as entirely to destroy the position that
commodities exchange with each other according to the quantity of
labour which has been employed upon them; but no one that I am aware
of has ever stated that the different quantity of labour employed on
commodities is not a much more powerful source of difference of value.
[D] Colonel Torrens, by representing capital under the form of certain
quantities of cloth and corn, instead of value in labour, has precluded
himself from the possibility of giving a just view either of value,
profits, or effectual demand. An increase of cloth and corn from
the same quantity of labour is of no avail whatever in increasing
value, profits, or effectual demand, if this increased produce will
not command so much labour as before, an event which is continually
occurring, from deficiency of demand.
[E] Agricultural labour is taken for the obvious reasons that it is
the commonest species of labour, that it directly produces the food of
the labourer, and that it is the most immediately connected with the
gradations of soil, and the necessary variations of profits. It is also
assumed with Adam Smith, Mr. Ricardo, and other political economists,
that, on an average, other kinds of labour continue to bear the same
proportions to agricultural labour.