ON BOUNTIES ON PRODUCTION.
It may not be uninstructive to consider the effects of a bounty on the
_production_ of raw produce and other commodities, with a view to
observe the application of the principles which I have been endeavouring
to establish, with regard to the profits of stock, the annual produce of
the land and labour, and the relative prices of manufactures and raw
produce. In the first place, let us suppose that a tax was imposed on
all commodities, for the purpose of raising a fund to be employed by
Government, in giving a bounty on the _production_ of corn. As no part
of such a tax would be expended by Government, and as all that was
received from one class of the people, would be returned to another, the
nation collectively would neither be richer nor poorer, from such a tax
and bounty. It would be readily allowed, that the tax on commodities by
which the fund was created, would raise the price of the commodities
taxed; all the consumers of those commodities therefore would contribute
towards that fund; in other words, their natural or necessary price
being raised, so would too their market price. But for the same reason
that the natural price of those commodities would be raised, the natural
price of corn would be lowered; before the bounty was paid on
production, the farmers obtained as great a price for their corn as was
necessary to repay them their rent and their expenses, and afford them
the general rate of profits; after the bounty, they would receive more
than that rate, unless the price of corn fell by a sum at least equal to
the bounty. The effect then of the tax and bounty, would be to raise the
price of commodities in a degree equal to the tax levied on them, and to
lower the price of corn by a sum equal to the bounty paid. It will be
observed too, that no permanent alteration could be made in the
distribution of capital between agriculture and manufactures, because as
there would be no alteration, either in the amount of capital or
population, there would be precisely the same demand for bread and
manufactures. The profits of the farmer would be no higher than the
general level, after the fall in the price of corn; nor would the
profits of the manufacturer be lower after the rise of manufactured
goods; the bounty then would not occasion any more capital to be
employed on the land in the production of corn, nor any less in the
manufacture of goods. But how would the interest of the landlord be
affected? On the same principles that a tax on raw produce would lower
the corn rent of land, leaving the money rent unaltered, a bounty on
production, which is directly the contrary of a tax, would raise corn
rent, leaving the money rent unaltered.[42] With the same money rent the
landlord would have a greater price to pay for his manufactured goods,
and a less price for his corn; he would probably therefore be neither
richer nor poorer.
Now whether such a measure would have any operation on the wages of
labour, would depend on the question, whether the labourer, in
purchasing commodities, would pay as much towards the tax, as he would
receive from the bounty, in the low price of his food. If these two
quantities were equal, wages would continue unaltered; but if the
commodities taxed were not those consumed by the labourer, his wages
would fall, and his employer would be benefited by the difference. But
this is no real advantage to his employer; it would indeed operate to
increase the rate of his profits, as every fall of wages must do; but in
proportion as the labourer contributed less to the fund from which the
bounty was paid, and which, let it be remembered, must be raised, his
employer must contribute more; in other words, he would contribute as
much to the tax by his expenditure, as he would receive in the effects
of the bounty and the higher rate of profits together. He obtains a
higher rate of profits to requite him for his payment, not only of his
own quota of the tax, but of his labourer's also; the remuneration which
he receives for his labourer's quota appears in diminished wages, or,
which is the same thing, in increased profits; the remuneration for his
own appears in the diminution in the price of the corn which he
consumes, arising from the bounty.
Here it will be proper to remark the different effects produced on
profits from an alteration in the real labour value of corn, and an
alteration in the relative value of corn, from taxation and from
bounties. If corn is lowered in price by an alteration in its labour
price, not only will the rate of the profits of stock be altered, but
the absolute profits also; which does not happen, as we have just seen,
when the fall is occasioned artificially by a bounty. In the real fall
in the value of corn, arising from less labour being required to produce
one of the most important objects of man's consumption, labour is
rendered more productive. With the same capital the same labour is
employed, and an increase of productions is the result; not only then
will the rate of profits, but the absolute profits of stock be
increased; not only will each capitalist have a greater money revenue,
if he employs the same money capital, but also when that money is
expended, it will procure him a greater sum of commodities; his
enjoyments will be augmented. In the case of the bounty, to balance the
advantage which he derives from the fall of one commodity, he has the
disadvantage of paying a price more than proportionally high for
another; he receives an increased rate of profits in order to enable him
to pay this higher price; so that his real situation is in no way
improved: though he gets a higher rate of profits, he has no greater
command of the produce of the land and labour of the country. When the
fall in the value of corn is brought about by natural causes, it is not
counteracted by the rise of other commodities; on the contrary, they
fall from the raw material falling from which they are made: but when
the fall in corn is occasioned by artificial means, it is always
counteracted by a real rise in the value of some other commodity, so
that if corn be bought cheaper, other commodities are bought dearer.
This then is a further proof, that no particular disadvantage arises
from taxes on necessaries, on account of their raising wages and
lowering the rate of profits. Profits are indeed lowered, but only to
the amount of the labourer's portion of the tax, which must at all
events, be paid either by his employer, or by the consumer of the
produce of the labourer's work. Whether you deduct 50_l._ per annum from
the employer's revenue, or add 50_l._ to the prices of the commodities
which he consumes, can be of no other consequence to him or to the
community, than as it may equally affect all other classes. If it be
added to the prices of the commodity, a miser may avoid the tax by not
consuming; if it be indirectly deducted from every man's revenue, he
cannot avoid paying his fair proportion of the public burthens.
A bounty on the production of corn then, would produce no real effect on
the annual produce of the land and labour of the country, although it
would make corn relatively cheap, and manufactures relatively dear. But
suppose now that a contrary measure should be adopted, that a tax should
be raised on corn for the purpose of affording a fund for a bounty on
the production of commodities.
In such case, it is evident that corn would be dear, and commodities
cheap; labour would continue at the same price, if the labourer were as
much benefited by the cheapness of commodities as he was injured by the
dearness of corn; but if he were not, wages would rise, and profits
would fall, while money rent would continue the same as before; profits
would fall, because, as we have just explained, that would be the mode
in which the labourer's share of the tax would be paid by the employers
of labour. By the increase of wages the labourer would be compensated
for the tax which he would pay in the increased price of corn; by not
expending any part of his wages on the manufactured commodities, he
would receive no part of the bounty; the bounty would be all received by
the employers, and the tax would be partly paid by the employed; a
remuneration would be made to the labourers, in the shape of wages, for
this increased burden laid upon them, and thus the rate of profits would
be reduced. In this case too there would be a complicated measure
producing no national result whatever.
In considering this question, we have purposely left out of our
consideration the effect of such a measure on foreign trade; we have
rather been supposing the case of an insulated country, having no
commercial connexion with other countries. We have seen that as the
demand of the country for corn and commodities would be the same,
whatever direction the bounty might take, there would be no temptation
to remove capital from one employment to another: but this would no
longer be the case if there were foreign commerce, and that commerce
were free. By altering the relative value of commodities and corn, by
producing so powerful an effect on their natural prices, we should be
applying a strong stimulus to the exportation of those commodities whose
natural prices were lowered, and an equal stimulus to the importation of
those commodities whose natural prices were raised, and thus such a
financial measure might entirely alter the natural distribution of
employments; to the advantage indeed of the foreign countries, but
ruinously to that in which so absurd a policy was adopted.