I have an account before me of the capital actually employed on a farm
of 200 acres in Essex. It amounts to L3433 or about L17 per acre[114],
of which not more than L1100 or L1200 is of that description which is
not subject to the same variation of value as the produce of the land
itself, for L2200 consists of the value of the seeds in the ground, the
advances for labour, the horses and live stock, etc. etc. If then the
money value of the produce from the land should fall _from facility of
production_ it must ever continue to bear a greater ratio to the whole
money value of the capital employed on the land, for there will be a
great increase of average produce per acre, whilst the fall in money
value will be common to both capital and produce, and it cannot
therefore be true that rent, profits, and wages can all _really_ fall at
the same time.
The effect of high or low wages on profits has always been distinctly
recognized by me:--till the population increases to the proportion which
the increased capital can employ, wages will rise, and may absorb a
larger portion of the whole produce. But this effect will only take
place with an increase of capital, and has nothing to do with new
facilities of production. Wages do not depend upon the quantity of a
commodity which a day's labour will produce, and I cannot help thinking
you quite incorrect when you say that the natural consequence of the
facility of production being so increased that a day's labour will
produce 4 measures of corn, cloth and cotton instead of 2 measures, will
be that 4 measures of corn, cloth and cotton will be worth only the
price of a day's labour instead of 2. It appears to me that, if,
instead of 4, 10 measures could be produced by a day's labour, no rise
would take place in wages, no greater portion of corn, cloth or cotton
would be given to the labourer, unless a portion of the increased
produce were employed as capital, and then the rise in wages would be in
proportion to the new demand for labour, and not at all in proportion to
the increase in the quantity of commodities produced. This increase
would be exclusively enjoyed by the owner of stock, and, if he consumed
in his family the whole increased produce, without augmenting his
capital, wages would remain stationary, and not be in any way affected
by the increased facility of production.
I cannot agree with your proposition, namely, [']That the means of
employing capital profitably can never co-exist with an abundant capital
and produce and a stationary population, on account of the necessary
effect of such a state of things in increasing the real price of
labour,' because I consider the rise of wages as by no means a necessary
effect of an abundant capital and produce, for it may be accompanied
with new facilities in procuring corn, and then wages even if they
should rise would not lessen profits, they will only keep them lower
than they otherwise would be. In the case which we were considering the
other night, if every lady made her own shoes, a part of the capital now
employed in making shoes by the shoemakers would be otherwise employed.
The same labour would be bestowed in the production of other objects
desirable to these lady shoemakers, who would have both the power and
the will to purchase them from the savings which would accrue to them by
employing their labour productively. There is a great difference between
[the] common effects of an accumulation of capital, and the employing
the same capital more productively. The first is generally attended with
a rise of wages and a fall of profits for a time at least,--but the
second may exist for an indefinite length of time without producing any
such effects. In the case of great improvements in machinery,--capital
is liberated for other employments and at the same time the labour
necessary for those employments is also liberated,--so that no demand
for additional labour will take place unless the increased production in
consequence of the improvement should lead to further accumulation of
capital, and then the effect on wages is to be ascribed to the
accumulation of capital and not to the better employment of the same
capital. If the population were to be stopped whilst accumulation
continued the effects which you enumerate would undoubtedly follow, but
this would arise from the demand for labour not being adequately
supplied,--it would be the effect of accumulation which would operate so
powerfully that it would be but slightly checked by the facility of
production, but it would not by any means be the consequence of such
facility.
It is true that the rate of profits depends upon the scanty or abundant
supply of capital compared with the means of employing it
profitably,--and these means will as you say upon the common principles
of supply and demand be increased either by a diminution of capital or
by an extension of the market for it. Our inquiry is in fact what the
causes are of an extension of the market, and I hold that the most
powerful, and the only one which operates permanently, is a reduction in
the relative value of food. You appear to me to concede a little
respecting demand being regulated by the power of production,--but you
are yet very far from yielding all that I demand. I hope we shall meet
this month, but I cannot yet say whether I can leave London.
Yours very truly,
D. RICARDO.