You think that the low price of labour which has lately prevailed
contradicts my theory of profits depending on wages, because the rate of
interest is at the same time very low. If interest and profits
invariably moved in the same degree and in the same direction, my theory
might be plausibly opposed; but I consider this as by no means the case.
Although interest is undoubtedly ultimately regulated by profits, rising
when they are high and falling when they are low, yet there are
considerable intervals during which a low rate of interest is compatible
with a high rate of profit; and this generally occurs when capital is
moving from the employments of war to those of peace. If goods do not
vary in price and the cost of manufacturing them falls, it is
self-evident that profits must rise; and, if goods do fall in price
generally, then it is not the value of goods or of labour which falls,
but the value of the medium in which they are paid which rises, and then
my theory does not require any rise of profits; they may even fall.
You ask me if I can show you the fallacy of the following statement:
'Capital is wholly employed in the purchase of materials and machinery
and the maintenance of labour. If, from any cause whatever, materials,
machinery and the maintenance of the labourer and his wages fall
considerably in money value, is it _possible_ that the same amount of
monied capital can be employed in the country?' I answer that it is
_possible_ but by no means probable. Suppose the mines were to produce a
diminished quantity of the precious metals, at the same time that
materials and machinery were greatly increased in quantity, might not
the increased aggregate quantity of materials and machinery be of a
greater money value than before, although each particular portion should
be at a less? Might we not by importation appropriate to ourselves a
larger proportion of the mass of money distributed amongst all the
countries of the world? I cannot doubt the _possibility_ of the case.
In your argument about the stimulus of increased value and the effects
of demand and supply on future wealth, you do not really differ from my
views on this subject so much as you suppose, for I make profits and
wealth to depend on the real cheapness of labour, and so do you, for you
say that the evils of a dearth will often be more than counteracted as
regards wealth, by the great stimulus which it may give to industry. I
say the same, for I contend that the evils of a dearth fall exclusively
on the labouring classes, that they perform frequently more labour not
only without receiving the same allowance of food and necessaries, but
often without receiving the same value for wages or the same recompense
in money, whilst everything is dearer. When this happens, profits, which
always depend on the value of labour, must necessarily rise.
I thought I had written to you about the additional matter in your
excellent work[172], although I had not given it all the examination
I intended. I read it as I was travelling and noticed the pages
wherever I saw the shadow of a difference between us, that I might
look at the passages again when I got home and give them my best
consideration[A][173]. On my passing through London when I returned from
France, I looked for your book, as I expected you had sent me a copy,
which I think you kindly told me you would do; but Mrs. Ricardo had
jumbled that and many other books in a wardrobe, and it could not be got
at till I went to town. I have it now here and have been reading all the
new matter again, and am surprised at the little that I can discover,
with the utmost ingenuity, to differ from.
[A] [_Foot-note, eventually ousting the text._] In every part you are
exceedingly clear, and time only is wanted to carry conviction to every
mind. The chief difference between us is whether food or population
precedes. I could almost agree with the statement of the question in p.
47 of third vol., which I think is in strict conformity with Sir J.
Steuart's opinion. In speaking of the fall of wages you only once
mention _corn_ wages, but must always mean corn wages and not money
wages. In the note to p. 438 of the third vol. you agree to my doctrine,
but I think in pp. 446, 456 and 457 you forget the admission you had
before made, 497 [_sic_]. You agree with Smith that the monopoly of the
Colony trade raises profits. 502 is in my opinion wrong and inconsistent
with 438. I differ a little from your views in 506. You do not always
appear to me to admit that the tendency of the Poor Laws is to increase
the quantity of food to be divided, but assume in some places that the
same quantity is to be divided among a larger number. I can neither
agree with Adam Smith nor with you in 326, 328: a maximum tends to
discourage future production; an undue increase of wages, or poor laws,
tend to promote it. 360, a fall in the price of commodities and a rise
in the value of money are spoken of as the same thing. 361, a diminution
of production is another way of expressing an abatement of demand. 371,
a combination among the workmen would increase the amount of money to be
divided amongst the labouring class. These you will observe are slight
objections, and I make them that I may preserve my consistency. They
would not be understood by the mass of readers, but to you who are
acquainted with my _peculiar_ views, if you please, they need no
explanation....
Ever yours,
DAVID RICARDO.