It is certainly probable that the fault is with me in not understanding
the proposition you submit to me; and it may arise as you say from my
being too much prepossessed in favour of my own views; but I do not
plead guilty to the charge of not giving the requisite degree of
attention to the propositions themselves. You now say 'where have I made
the supposition you impute to me? Surely not in my last letter. My first
supposition was that profits would be 100 per cent. in the country where
corn was obtained with double the facility, while it was 10 per cent. in
all others.' If you had done so, then indeed I should be justly
chargeable with inattention; but these were your words in the letter
which I was answering, 'I will try an illustration. Suppose that corn,
money and commodities were obtained in the great mass of nations,
connected with each other by commerce, at a rate of 10 per cent., but
that in one country half the quantity of labour only was necessary to
produce corn, while other commodities were produced with as much labour
as in the rest of the world;' not one word is said of profits being at a
different rate in this country; and, as you had said that in the great
mass of nations profits were at 10 per cent., I concluded that in this
country also profits were supposed to be at 10 per cent. In this
instance then you must acknowledge the fault was yours and not mine. You
do indeed afterwards suppose that this single country exports its corn
and obtains the high price of other countries for it, and by such means
raises its profits to 100 per cent.; but this evidently would depend on
the fact whether she would get the price of other countries or whether
domestic competition would lower the price of corn, in the countries to
which it was exported, to the growing price of the exporting country.
This I now understand to be your case. If the country which raised its
corn, with such great facility, were completely insulated from all other
countries, you would probably allow that corn, in that country, would be
cheap in proportion to the facility of producing it. You would allow
this also if all other countries were determined to protect their own
agriculture and absolutely refused to import foreign corn. But in the
case of a free trade, then you think the price would rise in the
exporting country to the level of the price of other countries, and
consequently profits would be enormously high. If I could admit the fact
of a high price, which I cannot do, I should adopt your conclusion. I
should say that general profits would be higher than they had been
before the rise in the price of corn. Rents would undoubtedly be higher,
for the landlord would have at least the same portion of corn as before,
and that portion would be greatly enhanced in value. Labour would be
higher, because the labourer would require higher money wages when corn
was doubled in price. And profits would be higher because the capitalist
would have more corn than before at the same time that it bore a higher
price. All these classes would be benefited by the high relative value
of corn to manufactured commodities, and the capitalist more
particularly so, because amongst those manufactured commodities are to
be found some of the necessaries of the labourer, and therefore by the
payment of a less portion of corn to the labourer he would still have
the command of a increased quantity of food and necessaries for himself
and his family. The question then between us is--would the price of corn
rise permanently or would it not, in the country which continued to
possess the great facility of producing it?
There is only one case in which I think such a rise possible, and that
is on the supposition that the whole capital of the country was employed
in producing corn, and yet could not produce it in sufficient quantity
to satisfy the demand of other countries. In that case corn would be at
a monopoly price, in the same manner as those rare wines which can only
be produced in particular districts are at a monopoly price, because
competition could not have its full effect. In the article of corn it
would be limited by the scarcity of capital, which gave to the growers
of corn large profits, in the same way as the East India Company or any
other Company might make large profits. In the article of wine the price
would be augmented by the scarcity of the land on which the grapes were
grown, and would chiefly go to the landlord in [the] form of rent. But,
supposing no monopoly, supposing capital to be so abundant that all the
corn demanded could be supplied, then I hold it to be demonstrable that
the price would sink to the growing price of it in the exporting
country.
There is however another point on which we differ; you say a striking
approximation to this actually exists in the case of America; the only
difference is that the demand for labour has awarded a larger quantity
of corn to the labourer, the effect of which has been to keep the rate
of profit comparatively low. But you surely do not mean that the
exchangeable value of the commodities exported by America are (_sic_) in
the least degree affected by the quantity of corn awarded to the
labourer. I do not think you are justified in your expectation that in
consequence of the accumulation of capital in America any commodity
should fall there until it ceased to possess the character of a
monopolized commodity. Corn and the bulky commodities of America (which
latter are always regulated by the price of corn) could not fall until
corn was sold at a price depending on the quantity of labour actually
expended on its production, and not on the demand of our countries. When
that time came, it would cease to be a monopolized commodity, and would
fall as well as profits to the fair competition rates. I deny that
America comes at all within your supposed case; and the proof is that,
if you were to isolate America from all other countries, you would not
lower her rate of profits, otherwise than by preventing her from
receiving a supply of labour from other countries; but do the same thing
to a country circumstanced as you have supposed, and profits would
immediately fall from 100 to perhaps 20 per cent. Your case in fact is
that of a country possessed of a particular commodity in very general
demand, and on which competition operates most feebly. We have often
discussed this peculiar case, and have always agreed in our opinions on
it. I confess, however, I am astonished to hear you say that this is the
case of America; you might with as much reason contend that it was also
the case of Russia, of Poland, of the Cape of Good Hope, of Botany Bay.
If indeed America could send her produce from the interior to Europe
without expense, and if the ports of all countries were open freely to
receive the corn with which America could, under the circumstances I
have supposed, supply [them], then I should say the cases were similar;
but, with the enormous expenses of sending corn from the interior of the
country, America can really produce a very inconsiderable supply to
Europe at an expense much less than Europe can grow it. You ask what can
entitle me to suppose that corn will be at half the price in America
that it is in other countries, and then argue on that supposition so
contrary to the fact. I answer I did not apply my argument to America
but to your case, which supposed a country to produce corn with half the
labour which was required to produce it in other countries. If America
can do this, then I apply it to America. You complain that I do not
reason fairly with you, that my theory requires labour to be low in
America; but you dispute my theory and refer to the actual state of
things in America, where labour is high, and yet I contend that I have a
right to suppose labour low. I was dealing with your case and not with
America. With respect to America I am not in possession of the facts of
her case, and I cannot admit that my theory requires the price of labour
to be low in that country. It requires rent to be low, for without that
there cannot be a great surplus produce to divide between the two other
classes, after satisfying the landlord. You will always make me say that
profits depend on the low price of corn. I never do say so; I contend
that they depend on wages, and, although in my opinion wages will be
mainly regulated by the facility of obtaining necessaries, they do not
entirely depend on such facility. You wish to confine me to that theory,
but I reject it; it is none of mine, and I have often told you so. I
think I _do_ show that your fact does not invalidate my theory, which
you say I am bound to do, and I do not assume a different fact than the
one you refer to in order to refute you. Surely it is fair to say 'for
such and such reasons your conclusion is not correct, but my argument
would have been still stronger against you, if, as I have a right to
suppose, labour in such a country were cheap, because the necessaries of
the labourer are there obtained with facility.' In a country situated as
you suppose America to be I do not see what is to make her corn rise; it
is already according to your arguments at a monopoly price and cannot
rise above that price unless there should be a greater demand and a
higher price in Europe, which you say regulates the price in America, or
unless America should become so populous that the price of her corn
should be regulated by the expense of growing it, as in other countries,
and that expense should exceed the present expense in Europe. If your
theory be correct, this may not happen in 150 years, notwithstanding the
greatest accumulation of capital; but will not labour fall during all
that time? If it does fall, then the mean between corn and labour will
fall. But suppose the other case. Suppose the _cost_ price of corn in
America should rise above the present cost price in Europe; is it
conceivable that labour should fall under such circumstances? To me it
appears impossible unless we suppose money to alter in value. In this
case then also the mean between corn and labour would vary in value. If
hats were produced under the same circumstances as money they would not
fall in price in consequence of a fall of profits. If hats were
produced by the employment of capital, and money were produced, as you
suppose, without any capital, then I allow and have said so in my
book[253], hats would fall in price with a fall of profits. But I say
again that too much importance is attached to money; facility of
production is the great and interesting point. How does that operate on
the interests of mankind? You ask what is to become of the money before
produced in a country which should grow its own corn with 10 per cent.
profit, if it had its facility of producing corn doubled, and profit,
were to rise to 100 per cent.; you ask further whether she would not
continue to produce money as well as other commodities as the profits of
producing it would be also 100 per cent. If the facility of producing
corn were doubled, a great deal of labour would be employed on other
things, and therefore the corn and commodities of the country would
altogether be of as great a money value as before, and would require the
same quantity of money to circulate them. With respect to the production
of more money that would depend on the demand for it and the prices of
other things. I think the production of money would continue as before,
but it is quite possible that there might be less encouragement to
produce money than other things, and therefore capital might afford 100
per cent. profit in all employments except that one. I wonder you should
refuse to assent to this obvious conclusion. You say it is your opinion
that, if labour were to fall in consequence of improvements in
agriculture before an increase of population had taken place, it could
only be from glut and want of demand. Is this opinion consistent with
another, which I think you hold, and in which I agree, that one of the
regulators of the price of labour is the price of the necessaries of the
labourer?
I have mentioned my suspicions respecting the writer of the article on
population in the _Edinburgh Review_ to several persons. I will not
utter them from this time. I hear nothing about Murray and Place. I hope
your visit at Holland House was an agreeable one. Mrs. Ricardo unites
with me in kind regards to Mrs. Malthus; we are all well and are leading
gay lives, one week at Worcester Music meeting and Bromesberrow, another
at Bath, etc.
Ever truly yours,
DAVID RICARDO.
NOTE.--Francis Place, the radical tailor, is well known to every
reader of Prof. Bain's Life of Mill (see e.g. p. 77). His book on
Population, perhaps the best of the long series that followed the
'Essay' of Malthus, was published by Longman early in 1822. He
differed from Malthus mainly on the nature of the preventive checks.
The collection of Scrap Books known by his name in the British
Museum library contains the following autograph letter of Malthus
(whom he seems to have first known through Ricardo):--'Mr. Malthus
sends to Mr. Place, at the request of Mr. Ricardo, the edition of
the Essay on Population which was first published in reply to the
speculations of Mr. Godwin and other writers. The copy sent is the
only one which Mr. Malthus has left. He will be much obliged to Mr.
Place, therefore, as soon as he has done with it, to send it to Mr.
Ricardo's house in Upper Brook St., to be kept till Mr. M. is in
town, which will be in a fortnight. Mr. Godwin, in his last work,
has proceeded to the discussion of the principles of population with
a degree of ignorance of his subject which is really quite
inconceivable.' E. I. Coll. Feb. 19, 1821.