By facility of production I do not mean to consider the productiveness
of the soil only, but the skill, machinery, and labour joined to the
natural fertility of the earth. It does not therefore follow that
because Otaheite[112] has an abundance of fertile land profits should be
there at the highest rate, because the skill and the means of abridging
labour may in Europe more than compensate this natural advantage of
Otaheite. The question is this: If part of the skill and capital of
England were employed in Otaheite to produce 100,000 quarters of corn,
would not the persons employing that capital obtain greater profits in
Otaheite than they would if they employed the same capital for the same
purpose here, and would not rent be lower there than here? You must at
any rate allow that the quantity of corn produced with a given quantity
of capital, supposing the same skill to be employed, must be greater
there than here, or there is no meaning in fertility of soil. You must
allow too that in proportion to the fertility of Otaheite and to its
extent compared with the population will be the lowness of rent,
notwithstanding its abundant rate of produce. I can easily _conceive_
that, with the imperfect tillage the people of Otaheite now give their
land, the population may be just sufficiently numerous to require that
the whole of their lands should be in cultivation, and consequently that
they should bear a rent; but let a hundred Europeans only join them with
our improved machinery and perfectly skilled in husbandry, and the
immediate consequence would be that three quarters of their lands would
for a time become perfectly useless to them, as the quarter might
produce them more food than all the inhabitants could possibly consume.
Now I ask whether it be possible that three quarters of the land of a
country can be suffered to pass from a state of tillage to a state of
nature without occasioning a fall in rents? If land is less in demand,
must not the rent of it fall? If you say no, there is no truth in the
proposition that value depends upon the proportion between supply and
demand. Now suppose England in the state in which I have been fancying
Otaheite; and she is actually in that state, all or most of her land
being in cultivation; and suppose further that there is another country
totally unknown to us whose skill and machinery in husbandry as far
surpasses ours as ours does that of the Otaheiteans. If a hundred of
these persons were to come amongst us with their capital, skill, etc.,
would not the same consequences follow as I have just stated? Now every
improvement in machinery is precisely on a small scale what I have been
here supposing on a large scale; and I am quite astonished that you
should yet maintain that 'universally where land is limited in quantity,
the facility of production upon it will go mainly to rent, and the soil
of a country might be of such fertility as to yield sixtyfold instead of
eight or ten, and yet the profits of stock be only six per cent. and the
wages of labour both nominally and really low.' Land, like everything
else, rises or falls in proportion to the demand for it; every
improvement which shall enable you to raise the same quantity of produce
on a less quantity of land or, which is the same thing, a larger
quantity of produce on the same quantity of land cannot increase the
demand for land and therefore cannot raise rents.
I do not clearly see the distinction which you think important between
productiveness of industry and productiveness of capital. Every machine
which abridges labour adds to the productiveness of industry, but it
adds also to the productiveness of capital. England with machinery and
with a given capital will obtain a greater real net produce than
Otaheite with the same capital without machinery, whether it be in
manufactures or in the produce of the soil. It will do so because it
employs much fewer hands to obtain the same produce. Industry is more
productive; so is capital. It appears to me that one is a necessary
consequence of the other, and that the opinion which I have advanced and
which you are combat[t]ing is that in the progress of society
independently of all improvements in skill and machinery the produce of
industry constantly diminishes as far as the land is concerned, and
consequently capital becomes less productive. That this diminution of
produce is beneficial to all owners of land, but that it is so at the
expense of manufacturers, amongst which [_sic_] I include farmers, first
by rendering the commodities which they manufacture of less
exchangeable value than they before were for corn, and secondly by
raising the cost of production by raising the price of labour.
I shall put this letter in the Post Office in London, where I am going
to-morrow for a few days. I have been writing, in my unconnected and
confused style, my opinions on the profits of the Bank and on the
advantages of a paper and nothing but a paper currency. I am too little
pleased with it to think of publishing. The whole is too little for a
pamphlet. Mr. Grenfell is, I think, anxious that something should be
said about the Bank before the meeting of Parliament, and I too wish
some able hand would undertake it.
I am always glad to hear that you are preparing for the press; for,
though I do not always agree in opinion with you, I am sure that your
writings will contribute towards the progress of a science in which I
take great interest. I should be more pleased that we did not so
materially differ. If I am too theoretical (which I really believe is is
the case), you I think are too practical. There are so many combinations
and so many operating causes in Political Economy that there is great
danger in appealing to experience in favour of a particular doctrine,
unless we are sure that all the causes of variation are seen and their
effects duly estimated. Mr. Whishaw and Mr. Warburton[113] have been at
Mr. Smith's for some time. I have been absent from home unfortunately,
and have seen but little of them. I yesterday dined with Mr. Whishaw; he
talked of leaving Mr. Smith immediately....
Yours,
DAVID RICARDO.
_7th Oct., 1815._