I think that the concession which I have made will not bear the
construction you have put upon it. 'An increased power of production
must be accompanied with an increase of productive or unproductive
expenditure.' This is the sentence on which you have remarked, and you
say could not be true if the gross produce were diminished. Certainly
not, but I have never said that with an increased power of production
the gross produce would be diminished; I have never said that machinery
enables you to get a greater quantity of gross produce; my sole
complaint against it is that it sometimes actually diminishes the gross
produce.
With respect to the particular subject of discussion between us, you
seem to be surprised that I should understand you to say in your book
'that vast powers of production are put into action, and the result is
unfavourable to the interests of mankind.' Have you not said so? Is it
not your objection to machinery that it often produces a quantity of
commodities for which there is no demand, and that it is the glut which
is the consequence of quantity which is unfavourable to the interests of
mankind? Even as you state your proposition in your present letter, I
have a right to conclude that you see great evils in great powers of
production from the quantity of commodities which will be the result,
and the low price to which they will fall. Saving, you would say, would
first lead to great production, then to low prices, which would
necessarily be followed by low profits. With very low profits the
motives for saving would cease, and therefore the motives for increased
production would also cease. Do you not then say that increased
production is often attended with evil consequences to mankind because
it destroys the motives to industry, and to the keeping up of the
increased production? Now in much of this I cannot agree with you. I
indeed allow that the case is possible, to conceive of saving being so
universal that no profit will arise from the employment of capital; but
then I contend that the specific reason is because all that fund, which
should, and in ordinary cases does, constitute profit, goes to wages and
immoderately swells that fund which is destined to the support of
labour. The labourers are immoderately paid for their labour, and they
necessarily become the unproductive consumers of the country. I agree
too that the capitalists being in such a case without a sufficient
motive for saving from revenue to add to capital, will cease doing so,
will, if you please, even expend a part of their capital; but I ask what
evil will result from this? None to the capitalist, you will allow, for
his enjoyments and his profits will be thereby increased, or he would
continue to save; none to the labourers, for which we should repine,
because their situation was so exceedingly favourable that they could
bear a deduction from their wages and yet be in a most prosperous
condition. Here it is where we most differ. You think that the
capitalist could not cease saving on account of the lowness of his
profits, without a cessation in some degree of employment to the people.
I, on the contrary, think that with all the abatements from the fund
destined to the payment of labour, which I acknowledge would be the
consequence of the new course of the capitalists, enough would remain to
employ all the labour that could be obtained and to pay it liberally, so
that in fact there would be little diminution in the quantity of
commodities produced; the distribution only would be different; more
would go to the capitalists and less to the labourers.
I do not think that stagnation is a proper term to apply to a state of
things, in which for a time there is no motive to a further increase of
production. When in the course of things profits shall be so low from a
great accumulation of capital and a want of means of providing food for
an increasing population, all motive for further savings will cease; but
there will be no stagnation; all that is produced will be at its fair
relative price, and will be freely exchanged. Surely the word stagnation
is improperly applied to such a state of things, for there will not be
a general glut, nor will any particular commodity be necessarily
produced in greater abundance than the demand shall warrant.
You say, 'We know from repeated experience that the money price of
labour never falls till many workmen have been for some time out of
work.' I know no such thing; and, if wages were previously high, I can
see no reason whatever why they should not fall before many labourers
are thrown out of work. All general reasoning, I apprehend, is in favour
of my view of this question, for why should some agree to go without any
wages while others were most liberally rewarded? Once more I must say
that a sudden and diminished demand for labour in this case must mean a
diminished reward to the labourer, and not a diminished employment of
him; he will work at least as much as before, but will have a less
proportion of the produce of his work, and this will be so in order that
his employer may have an adequate motive for employing him at all, which
he certainly would not have if his share of the produce were reduced so
low as to make increased production an evil rather than a benefit to
him. 'It is' (never) 'said that an increase of unproductive consumption
among landlords and capitalists may not sometimes be the proper remedy
for a state of things in which the motives for production fail.' I know
of no one who has recommended a perseverance in parsimony even after the
profits of capital have vanished. I have never done so, and I should be
amongst the first to reprobate the folly of the capitalist in not
indulging himself in unproductive consumption. I have indeed said that
nothing can be produced for which there will not be a demand, unless
from miscalculation, while the employment of stock affords even moderate
profits; but I have not said that production may not in theory be pushed
so far as to destroy the motive on the part of the capitalist to
continue producing to the same extent. I believe it might possibly be
pushed so far, but we have never witnessed it in our days, and I feel
quite confident that, however injurious such a state of things may be to
the capitalist, it is so only because it is attended with
disproportionate and unusual benefits to the labourers. The remedy,
therefore, and the sole remedy, is a more just distribution of the
produce; and this can be brought about only, as I said in my last
letter, by an increase of workmen or by a more liberal unproductive
expenditure on the part of the capitalists. I should not make a protest
against an increase of consumption as a remedy to the stagnation of
trade, if I thought as you do, that we were now suffering from too great
savings; as I have already said, I do not see how stagnation of trade
can arise from such a cause.
We appear then not to differ _very_ widely in our general principles,
but more so respecting the applications of them. Such and such evils may
exist; but the question is do they exist now? I think not; none of the
symptoms indicate that they do, and in my opinion increased savings
would alleviate rather than aggravate the sufferings of which we have
lately had to complain. Stagnation is a derangement of the system, and
not too much general production, arising from too great an accumulation
of capital.
Mr. Tooke has been here since Saturday last. I am going with him
to-morrow to Bromesberrow[241], from whence he will go to Ross and down
the Wye to Chepstow. We have had plenty of talk on subjects of political
economy, and have found out points on which there is partial difference
of opinion between us. He brought with him two pamphlets, in which you
are often mentioned as well as myself; perhaps you have seen them: their
titles are An Inquiry into those principles advocated by Mr. Malthus
relative to the Nature of Demand and the necessity of Consumption[242],
the other Observations on certain Verbal Disputes in political
economy[243]. Mrs. Ricardo unites with me in kind regards to Mrs.
Malthus and yourself. Mr. Tooke also desires to be kindly remembered.
Ever truly yours,
DAVID RICARDO.