Chapter II: Part 2

Thus, when the produce is 150 quarters, if corn be in such plenty that each labourer is awarded thirteen quarters, the profits of stock will be only 15.38 per cent.; and this rate of profit, added to the constant value of the advances in labour, which are represented by 10, will make the natural value of the produce equal to 11.53. But if corn, notwithstanding the fertility of the soil, be only supplied in such quantities, compared with labour, as to award the labourer no more than ten quarters, the rate of profits, instead of 15.38 per cent., will be 50 per cent., and the value of the produce, instead of being 11.53, will be 15.

This shows how greatly the natural value of commodities depends upon the average state of the demand and supply, and completely confirms the position in my last work, that the only difference between natural and market prices is, that the former are regulated by the average and ordinary relations of the demand to the supply, and the latter, when they differ from the former, upon the accidental and extraordinary relations of the demand to the supply.

Fifthly, it follows, from the constant value of labour, that,

Given the value of money in different countries, the natural prices of commodities, in which the same quantities of labour have been employed, will depend upon the rate and quantity of profits.

Given the rate and quantity of profits, and the value of money, the natural prices of commodities in different countries will depend upon the quantity of labour employed upon them.

And given the quantity of labour employed on them, and the rate and quantity of profits, the natural prices of commodities will depend upon the value of money.

But in reality none of the ingredients of natural or money price are given, excepting the natural value of labour, and consequently the money prices of commodities which regulate the ordinary rate at which different countries exchange their commodities with each other, will be determined partly by the quantity of labour employed upon them, partly by the ordinary rate of profits, and partly by the value of money.

The value of metallic money, it has before been stated, while it continues to be obtained by the same quantity of labour and capital, must always fall with the fall of profits, and will consequently have a strong tendency to fall with the progress of cultivation and improvement; but as few nations comparatively have mines of their own, the supplies which they obtain of the precious metals must be purchased by their exportable commodities; and these are produced and exported under such a variety of circumstances, in respect to cost, and the value of the same amount of the precious metals is further so much affected by the demand for corn and labour, the state of credit, paper currencies, taxation, and other circumstances, that no rule can safely be laid down on the subject.

Generally the value of money is the lowest in the richest and most manufacturing countries; but this is not always the case; and a country which raises an abundance of raw produce at a small expense of labour and profits, while its money value is kept up by a ready sale for it in foreign markets, and a continued demand for labour, may have the value of its money very low, although it is not rich or manufacturing. This is the case with the United States of America, where, owing to the low value of money, or high money price of labour, there are no doubt some commodities which, though produced by a less value of labour and profits, cannot be exported to England on account of the higher value of money in England; while we know that there are many other products which are obtained by so much a smaller quantity of labour and profits as more than to counterbalance the higher value of money in England, or the higher money price of labour in the United States.

In the same manner there are no doubt many commodities which, though obtained in England by a much less quantity of labour and profits than in India, cannot be exported to that country on account of the very high value of money in India; while, on the other hand, there are a few commodities in England in which the saving of labour and the effects of capital and skill have been so great, as to allow of their exportation from a country where the money wages of labour are two shillings a day, to one where they are only fourpence; that is, from a country where the value of money is six times lower than in the country to which the commodities are sent.

On the same principle, commodities may be imported from India into England, although the same commodities might be produced in England by a much less quantity of labour and profits, the low value of money in England more than compensating the greater quantity of labour and profits employed in India.

It is evident, therefore, that the values which determine what commodities shall be exported, and what imported, depend, as before stated, partly upon the quantity of labour employed in their production, partly upon the ordinary rates of profits in each country, and partly upon the value of money.

A sixth result illustrated in the Table is the important distinction between cost and value. The two last columns show the value of a given quantity of corn, and the value of the product of a given quantity of labour, under all the variations which may be supposed of fertility and corn wages. The difference between the numbers in the last column, and the uniform number expressing the value of labour, shows exactly the difference between the value of the labour which has been employed upon a production, or its cost, and the labour which that production will command, or its natural and exchangeable value; which, where profits and wages are alone concerned, must be exactly equal to the additional value occasioned by the amount of profits.

The reader will be aware that neither the preceding Table, nor any thing which has been said, tends in any degree to contradict the acknowledged truth that different _kinds_ of labour are of very different natural and exchangeable value. It will be further allowed, that even the same kind of labour, and the kind which has been especially referred to, namely common agricultural labour, may, under particular circumstances, and in particular places, vary in value from a partial or temporary state of demand and supply. We well know, that, from a partial and temporary demand at a particular period of the year, summer wages are of a very different value from winter wages; but in reality summer wages form a very important part of the wages of the whole year. They are generally employed to pay the rent of the house, or to purchase the necessary clothing for the family. They could not be essentially diminished, without altering the condition of the labourer throughout the year, or the rate of the increase of population. And if the labourer earned a smaller quantity of corn throughout the year, with an undiminished produce, it appears from the Table that the value of that corn would still remain the same, owing to the increased value of those profits of which it was in part composed.

With regard to the variations in the value of labour in different parts of the same country, if they are not partial, or temporary, and consequently exceptions to the general average, they are all resolvable into those differences in the value of money, which unquestionably take place in different parts of the same country, and arise from a want of demand for corn and labour, and a want of commodities to exchange with those parts of the country which are richer in the precious metals.

Having obtained a measure of the value of commodities in their more simple forms, we may apply this measure to the ingredients which compose the most complicated productions, and estimate all the advances which consist of accumulated profits, rents, tithes, and taxes in labour. In the case of taxes on the wages of labour, or an increase in the prices of those other necessaries of the labourer, besides food, which may occasion the sale of a greater quantity of the produce, in order to pay the same number of labourers, as these increased advances will have the same effect upon profits as a simple increase of wages, they will in no respect interfere with the constant value of labour, though an increase of wages, under such circumstances, will be of no advantage to the labourer.

Cases will of course frequently occur, in which the advances which do not consist of wages vary in a different degree from wages; but still the value of labour will remain constant. If the produce, instead of being obtained by the direct labour of a certain number of men, were obtained by the direct labour of only a part of this number, together with an amount of materials, or other advances consumed in the same time, equal to the labour of the other part, then upon a rise in the corn wages of labour, if the other advances were to fall, or not to be worth so much labour as before, it is obvious that the profits of stock would not fall so much as if the same rise of corn wages had taken place, when all the advances had been in labour; and it might be thought at first that profits not falling in proportion to the rise of labour, the value of labour would not continue the same. But it will be observed, that, in all cases of this kind, there will be a less value of labour, which is equivalent to a less quantity of it employed to obtain the same produce; and a less quantity of labour altogether being consequently necessary to produce the food of the labourer, than if labour alone had been employed, the higher profits, or smaller diminution of the former profits, will only just be such as to maintain labour of a constant value.

Let us suppose, for instance, that 120 quarters of corn are produced by ten men. If each man were paid ten quarters, profits would be 20 per cent.; and if wages were increased to eleven quarters, profits would fall from 20 per cent. to 9.09 per cent. Now supposing, that, instead of ten men being directly employed, five only are so employed, and that the other advances consist of capital which will continue of the same value as the corn;[K] then, while each labourer earns ten quarters, and the other capital advanced is worth the labour of five men so paid, profits will be, as before, 20 per cent. But if the labourer be paid eleven quarters instead of ten, profits will not fall, as before, from 20 per cent. to 9.09 per cent., but only from 20 per cent. to 14.28 per cent.; because the advances, instead of being 110, will only be 105; and the value of these advances estimated in labour paid at eleven quarters each man, being only 9.54, instead of 10; 9.54 may be considered as the number of persons employed. Then if 120 quarters be produced by 9.54 men, 105 quarters will be produced by 8.34. But 8.34, increased by a profit of 14.28, will make 9.54, the quantity of labour employed, and show that the natural value of labour is always proportioned to its quantity. In the former case, when ten men were employed at eleven quarters, as the advances were 110 quarters, instead of 105, the labour required to produce the food of the labourer was 9.166, and consequently a profit of only 9.09 will be sufficient to make up ten, the number of men employed, and thus equalize the value with the quantity.

In the case of fixed capital of considerable duration, there is always a probability that it will alter in value in reference to the quantity of labour, and of profits estimated in labour, of which it was composed when first produced; but after having advanced so far in establishing the labour which a commodity will command, as the measure of its value, we are entitled to consider the present value estimated in labour of any fixed capital which is about to be employed in production, as representing the quantity of accumulated labour actually so applied. It is further necessary, as before stated, to reckon the remaining value of the fixed capital as a part of the produce resulting from the whole of the accumulated and immediate labour employed. When, however, these corrections have been made, all the cases in which fixed capital enters, which may be said to include the great mass of commodities, will be found to answer to the theory as accurately as the simplest case that can be stated.

The exceptions, therefore, to the general proposition that the labour which commodities will command may be considered as a standard measure of their value are only apparent, not real, and may all be consistently explained.

And if the proposition be true, a standard measure of value is of so much importance in political economy, and the one proposed is at all times so very ready and easy of application,[L] that there is scarcely any part of the science in which it will not tend to simplify and facilitate our inquiries.

To advert shortly to a few points on which there have been some differences of opinion.

On the subject of rents, such a standard would determine, among other things, that, as the increase in the _value_ of corn is only measured by a decrease in the corn wages of labour, such increase of value is a very inconsiderable source of the increase of rents compared with improvements in agriculture; and on the same principle that, if tithes do not fall mainly on the labourer, the acknowledged diminution in the _corn_ rents of the landlord, occasioned by tithes, cannot be balanced by an increase of their value, and that, consequently, tithes must fall mainly on the landlord.

On the subject of labour it would determine, that the increasing _value_ of the funds destined for the maintenance of labour can alone occasion an increase in the demand for it, or the will and power to employ a greater number of labourers; and that it is consistent with theory, as well as general experience, that high corn wages, in proportion to the quantity of work done, should frequently occur with a very slack demand for labour;[M] or, in other words, that when the _value_ of the whole produce falls from excess of supply compared with the demand, it cannot have the power of setting the same number of labourers to work.

On the subject of profits, it would show, that they are determined, not by the varying value of a given quantity of labour compared with the constant value of the commodities which it produces, but, as is more conformable to our experience, by the variable value of the commodities produced by a given quantity of labour, compared with the constant value of such labour; and that profits never, on any occasion, rise or fall, unless the value of the produce of a given quantity of labour rises or falls, either from the temporary or ordinary state of the demand and supply.

On the subject of the distinction between wealth and value, it would show, that though they are by no means the same, they are much more closely connected than they have of late been supposed to be; and that the best practical measure of the relative wealth of different countries would be the quantity of common labour which the value of the whole annual produce of each country would enable it to command at the actual price of the time, which in some rich countries might amount to above double the number of families actually employed, and in poor countries might not greatly exceed such number.

On the subject of foreign trade, it would show that its universally acknowledged effect in giving a stimulus to production, generally, is mainly owing to its increasing the value of the produce of a country’s labour by the extension of demand, before the value of its labour is increased by the increase of its quantity; and that the effect of every extension of demand, whether foreign or domestic, is always, as far as it goes, to increase the average rate of profits[N] till this increase is counteracted by a further accumulation of capital.

On the subject of the accumulation of capital it would show that if the increase of capital be measured by the increase of its materials, such as corn, clothing, &c., then it is obvious that the supply of these materials may, by saving, increase so rapidly, compared with labour and the wants of the effective demanders, that with a greater quantity of materials the capitalist will neither have the power nor the will to set in motion the same quantity of labour, and that consequently the progress of wealth will be checked; but that if the increase of capital be measured, as it ought to be, by the increase of its power to command labour, then accumulation so limited cannot possibly go on too fast.

On the general subject of demand and supply, it would show that they must be restored to their universal empire, both in reference to the prices of commodities, and the dependence of the progress of wealth on the due proportion maintained between them. If the cost of a commodity be considered as composed exclusively of the actual advances of the capital required for its production, which seems to be the most natural and correct mode of viewing it,[O] then it is obvious, that as both the prices and values of commodities are proportioned to these advances, with the _addition_ of profits very variable in their amount, neither of them can be determined by these advances alone, or by the costs of production so defined. We must therefore have recourse to demand and supply. And on the other hand, if profits be included in the costs of production, then, as it follows, from the constancy of the value of labour, that ordinary profits are determined by the ordinary demand compared with the ordinary supply of the products of the same quantity of labour, the certain conclusion must be, that demand and supply enter powerfully into the costs of production according to this latter definition, and that therefore their dominion as to prices and value is absolutely universal.[P]

Nor would they be less so in their effect on the general progress of wealth. If commodities and the materials of capital increase faster than the effectual demand for them, profits fall prematurely, and capitalists are ruined without a proportionate benefit to the labouring classes, because an increasing demand for labour cannot go on under such circumstances. If the value of commodities and the materials of capital increase for some time without an increase of their quantity, the labouring classes must soon be supported on the lowest amount of food on which they will consent to keep up their actual number; and the main part of the population would suffer severely without any proportionate benefit to the capitalists; because the value of their capitals, measured by the labour which they can command, would shortly be incapable of further increase. In either of these cases a decided check would be given to the progress of wealth, which progress must necessarily be the greatest, when the joint product of the capitalist and labourer, which the state of the land and the skill with which it is worked enable them to obtain, is so divided between them, that in the progress of cultivation and improvement any unnecessary or premature fall either of profits or corn wages is prevented. But this can only be accomplished by a proper proportion of the supply to the demand, that is, by an accumulation so proportioned to the actual consumption of produce by those who can make an effectual demand for it, as to occasion the greatest permanent annual increase in the value of the materials of capital.

The reader of my last work, in which I laid down as my rule, to admit no principles of Political Economy as just which were inconsistent with general experience, will be aware that the conclusions to which I have here shortly adverted, as following necessarily from the constancy of the value of labour, are almost exactly the same as the conclusions of that work. And the reason is, that although at that time I did not think that the labour which a commodity would command could, with propriety, be considered as a _standard_ measure of value, yet I thought it the nearest approximation to a standard of any one object known, and consequently applied it, on almost all occasions, to correct the errors arising from the application of more variable measures. The conclusions, therefore, of my former and present reasonings were likely to be nearly the same, although the premises might now admit of further correction and illustration, and the conclusions might be pronounced with greater precision and certainty.

It was my intention to have done this much more fully than in the present treatise; but having been interrupted by unforeseen circumstances, and being unwilling to delay any longer the publication of this essential part of my proposed plan, I have determined to submit it to the public in its present form; and will only add here a few observations on a question closely connected with it, which has lately excited much interest and discussion.

Among the questions for the determination of which a standard measure of value is most particularly required, are those which relate to alterations in the value of the currency. We know perfectly well, from experience, that commodities are subject to great variations of price, and that many of these variations may arise from causes which alter the natural value of these commodities, and are equally applicable to a large mass of them, as to a very few. On the supposition of a large mass being altered, any article which had retained the same natural value, would have its power of purchasing considerably affected; but this would be owing to an alteration in the value of the mass of commodities, and not in the value of the article, which by the supposition remains the same. It follows, that although money may increase in its power of purchasing, it does not necessarily increase in value. But in estimating the value of money, some criterion or other must be referred to. If we cannot refer to the mass of commodities, we must refer to some one object, and this object can only be labour. Our present inquiry, therefore, must be into the causes which affect the value of the precious metals as compared with labour.

These causes are of two kinds:--first, those which occasion a high or low rate of profits, which, as connected with the progressive cultivation of poorer land, and operating universally and necessarily on the precious metals in common with all other commodities, and raising or lowering them with regard to labour, may be denominated the primary and necessary cause of the high or low value of metallic money.--And secondly, those which depend on the fertility and vicinity of the mines; the different efficiency of labour in different countries; the abundance or scarcity of exportable commodities; and the state of the demand and supply of commodities and labour compared with money; which may be denominated the secondary and incidental causes of the high or low value of metallic money.

These two different kinds of causes will sometimes act in conjunction, and sometimes in opposition, so that it may not always be easy to distinguish their separate effects; but as these effects have really a different origin, it is desirable to keep them as separate as we can.

The marks which distinguish a fall in the value of the precious metals, arising from the primary cause, are,--a rise in the money price of raw produce and labour, without a general rise in the price of wrought commodities. All of them, indeed, as far as they are composed of raw produce, will have a tendency to rise; but, in a large class of commodities, this tendency to rise will be more than counterbalanced by the effect of the fall of profits.--Some therefore will rise, and some will fall, as I stated in my last work,[Q] according to the nature of the capitals employed upon them, compared with those which produce money; and while the money prices of corn and labour very decidedly increase, the prices of commodities, taken on the average, may possibly remain not far from the same.

On the other hand, when the value of metallic money falls, from the secondary causes above noticed, there will be a tendency to a proportionate rise of all commodities as well as of corn and labour, though in some cases it may take a considerable time before it is completely effected. And, in general, whenever a fall in the value of money takes place, without a fall in the rate of profits, an event which is generally open to observation, it is to be attributed to incidental and secondary causes affecting the relations of money to labour, and not to that which is connected with the taking of poorer land into cultivation.

Of these two classes of causes the second produces much the greatest part of those differences in the value of metallic money, which are the most observable in different countries, and at different periods in the same country. If India and England had each of them mines of equal natural fertility, the superior efficiency of English labour, assisted by machinery, would extract a much greater quantity of metal from such mines; and the money price of labour might be three or four times higher, and the value of money three or four times lower in England than in India.

The same effect is, at present, practically produced by the skill and machinery employed on the manufactures with which England purchases her gold. If she can prepare exportable commodities which are in demand abroad, with much less labour than other nations, she will be able to buy gold at a much lower natural value, and will continue to import it under favourable exchanges, till its value falls in proportion.

It is farther established by experience, that a brisk or slack demand for commodities and labour, and particularly for corn, has a considerable effect on the value of gold. Such a demand not only occasions a more rapid circulation of money, and enables the same quantity to perform a greater number of transactions, but calls into action a greater quantity of credit and private paper,[R] so that a general rise of bullion prices, including labour, seems to be at all times possible, even without any fresh importations of the precious metals; and the only practical limit to this rise, is the turn of the exchange, and the impossibility of maintaining the exchanges nearly at par beyond a certain elevation of labour and commodities.

The secondary and incidental causes here enumerated, as affecting the value of gold, often completely overcome the effects arising from the primary cause. The state of bullion prices in most of the countries of the commercial world make it evident, that the efficiency of labour, and the abundance of exportable commodities, are much more powerful in lowering the value of bullion in the countries where they prevail, than high profits in raising it; and the same appears to be true, in reference to an increased demand for corn and labour.

It cannot be doubted that the rate of interest and profits was comparatively high during the late war, and this high rate of profits would naturally have a tendency to lower the bullion price of labour; but this was more than counterbalanced by the tendency of a brisk demand for corn and labour to raise money prices generally, including labour, and the consequence was a fall, during the greatest part of the time, in the value of bullion.

It can as little be doubted, that the rate of interest and profits has fallen since the war, and this low rate of profits would have a natural tendency to raise the bullion price of labour; but this has been more than counterbalanced by the tendency of a slack demand for corn and labour to lower prices generally, and the consequence has been a rise in the value of gold, and a still greater rise in the value of the currency.

This rise, however, in the value of the currency, has been by no means so considerable as those are inclined to make it, who would measure it by the fall of agricultural produce; nor is it so inconsiderable as those imagine who would measure it solely by the difference between paper and gold. But whether this difference is the whole of what can be fairly attributed to the Bank Restriction and the return to cash payments, or not, it may by no means be the whole change which has taken place in the value of the currency, when compared with an object which has not changed.

It would be very desirable to be able to form an accurate estimate of the rise and fall which has taken place in the bullion price of labour for the last thirty years; but unfortunately, during the latter part of the period, no general estimates of the price of labour have been made, at least none that have come to my knowledge; and there is reason to think that, under the late stagnation in the demand for agricultural labour, the common rate of wages in England has been more than usually interrupted by the operation of the poor laws. On this account, I have made some inquiries respecting wages in Scotland, and have obtained a most valuable communication; but before I refer to it particularly, it may be useful to consider the results of the data we possess in England. The rise in the bullion price of labour from 1790 to 1810 and 11, may be established upon satisfactory grounds, although the amount of the fall which has since taken place may be a matter of considerable uncertainty.

According to the communications to the Board of Agriculture, the price of labour, in 1790, was 8_s._ 1_d._ per week. In 1796, Sir F. M. Eden, in his work on the Poor, stated it at 8_s._ 11_d._ per week. In 1803, the communications to the Board of Agriculture make it 11_s._ 5_d._, and in 1810 and 11, according to satisfactory returns obtained by Arthur Young, it was 14_s._ 6_d._[S] This was a steady and very great rise in the price of agricultural labour during the course of twenty years. But in 1810 and 11, paper had separated from gold to a considerable extent. Taking an average of the market prices of gold during these two years, this price was £4. 13_s._ and reducing the 14_s._ 6_d._ currency to a bullion price, it will appear that the bullion wages of labour in 1810 and 11 were a little above 12_s._ The bullion price of labour had therefore risen 50 per cent. Now, on the supposition that manufacturing and mercantile labour continued to bear the same proportion to agricultural labour as before,[T] it is obvious that there would be a difference of 50 per cent. between the quantity of labour and profits with which an ounce of gold could be purchased at the former period, compared with the latter; that is, while labour was 8_s._ 1_d._ per week, it would require a piece of muslin, which would command above nine and a half weeks labour, to purchase an ounce of gold; but when wages were 12_s._ per week, a piece of muslin, which would command little more than six and a half weeks labour, would be sufficient for the purpose. The natural value of bullion, therefore, the quantity of English labour and profits of which it was composed, must have fallen to that extent.

Mr. Tooke, in his late valuable publication, after stating very justly that an unusual proportion of unfavourable seasons must have had a considerable effect in raising the prices of corn and labour during the period adverted to, goes on to “ask upon what ground of fact or reasoning can the high prices included in such a period be ascribed, in fairness, to alterations in the currency, beyond the degree indicated by the difference between paper and gold, when, after a sufficient time has elapsed for the subsidence of the extraordinary effects of such an unusual succession of bad seasons, there is a restoration to a level even somewhat lower than that from which the rise is assumed to have taken place, and to have continued progressively.”

Of the subsidence here alluded to, before 1814, Mr. Tooke has certainly not given proofs sufficiently general; but without dwelling on this point, it appears to me that the question of the fall in the value of the currency including the gold, is exclusively a question of fact, and must be referred to some criterion. It is a very intelligible thing to say that paper has fallen, if it has fallen with regard to the gold which it professes to represent; but it is not intelligible to say that gold has not fallen, when it is acknowledged to have fallen both with regard to its power of purchasing generally, and its power of commanding labour; unless a reference can be made for the proof of it to some more satisfactory criterion. A season of scarcity will make corn dear, and a season of plenty cheap, without necessarily affecting labour in either case, as is shown by Adam Smith, and proved by repeated experience. But if seasons of scarcity occur so frequently as to raise generally the bullion price of labour, it must of necessity be accompanied by a power of purchasing bullion with a smaller quantity of labour and profits; otherwise the event could not occur. Whenever it does occur, the natural value of bullion falls.[U]

The observations here made, with a view to place the controversy respecting the alterations in the currency on its proper ground, and to make the necessary distinction between facts and the causes which may have produced them, apply still more strongly to the publication of Mr. Blake, in much of the reasoning of which I entirely concur. He proposes to prove that it was the gold which rose, and not the paper which fell during the war, although he acknowledges as a matter of fact, that almost all prices, including labour, rose not only in paper but in gold. This has, no doubt, the air of a contradiction, according to all the common modes of estimating the value of money; and it certainly is not removed by showing that the main cause of these high prices was a great demand compared with the supply of commodities--a cause which, involving as it always does, more transactions on credit, and a more rapid circulation of currency, is one of the most legitimate causes of a fall in the value of money.

Mr. Blake, however, is certainly right in his view of the effects of an unfavourable exchange on the price of gold, when it ceases to form a part of the circulation. It is not only possible that from this cause gold might for a time rise in value much beyond the expense of transporting it; but as a matter of fact, this did unquestionably occur at certain periods during the war. There is no account of the price of agricultural labour in England subsequently to 1811. Probably it did not rise any more; but if it did, judging from what took place in Scotland, it did not rise sufficiently to balance the subsequent rise in the market price of gold, which was from £4. 15_s._ in 1811, to £5. 8_s._[V] in 1813. Consequently, in 1813, as compared with 1811, the value of gold must have risen considerably; and on the supposition that the price of labour did not rise after 1811, it would appear that the natural and exchangeable value of gold, as measured by the standard, rose above 13½ per cent.

The rise of gold from the sudden fall of the exchange in consequence of Buonaparte’s return from Elba was still more remarkable. The price had been as low, in the spring of 1815, as 4_l._ 9_s._, and without any known change in the currency price of labour, it rose suddenly to 5_l._ 5_s._, or 18 per cent.; and consequently, to purchase an ounce of gold it was necessary at that time to give commodities worth 18 per cent. more of agricultural labour than it might have been purchased for a month or two before. Whatever might have been the case with the paper, there could not, on any view of the subject, be the slightest foundation for the supposition of a sudden abundance and cheapness of labour just before the battle of Waterloo. In fact, agricultural labour had not fallen, and manufacturing labour was higher than usual; so that even without considering labour as a standard, it must have been acknowledged, that, of these two objects which had altered in relative value, it was the gold which had risen, not the labour which had fallen.

In attempting to measure the _rise_ in the value of the currency since the period of the high prices, we shall be greatly assisted by the following very valuable document respecting the price of labour in the county or stewartry of Kircudbright. It is considered that the prices in this table represent pretty nearly (though they are rather below) the wages in other parts of Scotland. The labourers have no other allowances whatever except the daily wages specified in the table. In the intermediate years not quoted the wages remained stationary at the rates last mentioned; and when any change took place, the period of such change and the degree of it are regularly stated.

--------+-----------+-----------
| Rate per | Rate per
Years. | day in | day in
| winter. | summer.
--------+-----------+-----------
1760 | 4_d._ | 6_d._
1765 | 6_d._ | 8_d._
1770 | 8_d._ | 10_d._
1772 | 8_d._ | 12_d._
1776 | 7_d._ | 9_d._
1780 | 8_d._ | 10_d._
1791 | 8_d._ | 11_d._
1793 | 9_d._ | 12_d._
1798 | 11_d._ | 14_d._
1799 | 12_d._ | 15_d._
1800 | 14_d._ | 16_d._
1802 | 16_d._ | 18_d._
1811 | 18_d._ | 22_d._
1812 | 20_d._ | 24_d._
1816 | 18_d._ | 22_d._
1817 | 16_d._ | 20_d._
1819 | 15_d._ | 18_d._
1822 | 12_d._ | 15_d._

In 1812, farm servants boarded in the house received from 14_l._ to 22_l._ a year; women servants from 5_l._ to 8_l._ At present, (April, 1823,) men receive from 10_l._ to 14_l._, and women from 3_l._ 10_s._ to 6_l._

Masons’ wages per day were three shillings in 1812, and are now half-a-crown.

All work done by the piece, such as building stone fences, cutting ditches either for fences or drains, making roads, &c. may be done at a greater reduction of price than the fall in the rate of labour by the day. Work is now performed more frequently by the piece; and the best labourers are employed by the day; while the inferior workmen, and those unable from age, or other causes, to perform a full day’s work, are turned over to work by the piece. Agricultural affairs are under such depression, that the work is curtailed, and the competition for work is thereby increased.[W]

The first thing that strikes us in the table is the very remarkable rise of labour in Scotland from 1760--much greater than in England, and much greater than in proportion to the rise in the price of corn. This was no doubt owing in part to the comparatively unimproved state of the district in question, and of Scotland in general at the earliest period adverted to. But to go no farther back than 1790, the period with which we commenced in England, it appears that the rise from 1790 to 1811, was considerably greater than in England, and nearly in proportion to the rise in the price of wheat. If, indeed, we take the price of labour as mentioned in the table for 1812, and compare it with the average price of wheat for the four years from 1812 to 1815 inclusive, during which period the same price of labour seems to have continued, it will appear, that labour, taking summer and winter wages together, rose in the proportion of from 19_s._ to 44_s._, while wheat rose from 43_s._ in 1792, (according to the average of England and Wales, which commences with that year,) to 88_s._ and therefore labour rose decidedly more than wheat, except in reference to the peculiarly high price of wheat in 1812.

Taking the currency price of labour in Scotland as having risen from 9½_d._ to 22_d._, and reducing the 22_d._ to its value in bullion, the average price of bullion in that year being 5_l._ 1_s._, it will appear, that the bullion price of labour in Scotland rose, in the interval between 1790 and 1812, from 9½_d._ to 16½_d._, or nearly 73 per cent. And consequently, the same quantity of gold for which it would have been necessary to give commodities worth 173 days labour in 1790, might be purchased for 100 days labour in 1812; or the value of the currency estimated in gold might be considered as having fallen in that proportion.

In 1812, the bullion price of labour as above stated was 16½_d._; it has since fallen to 13½_d._, or in the proportion of from 100 to 81·8--rather more than 18 per cent. This view of it shows most clearly the change in the bullion value of the currency since 1812. But if we wish to estimate the whole fall which has taken place in the currency, and then subtract what is due to the difference between paper and gold, it will appear that the whole fall since 1812, estimated on the currency wages of 1812, has been rather less than 39 per cent.; of which, if the average difference between paper and gold in the year 1812 was as 101 to 78, about 23 per cent. would belong to the paper, leaving about 16 per cent. for the fall in the currency independently of the excess of paper prices above gold prices. The apparent difference in the results of these estimates arises merely from the per centage in the latter case being taken on a higher number.

I stated before, that I was not aware of any data on which reliance could be placed respecting the amount of the fall of agricultural wages in England since the termination of the war; but on the supposition that the wages, which in 1810 and 1811 were 14_s._ 6_d._ per week, had fallen to 10_s._ then as the bullion wages of 1810 and 1811 were a little above 12_s._, the fall in the bullion value of the currency would be nearly 17 per cent., or for the same quantity of gold which in 1810 and 1811 might be purchased by commodities worth 83 days labour, it would now be necessary to give commodities the natural value of which would be represented by 100 days labour. This difference of course includes the effects which have been attributed to the purchases of bullion by the Bank with a view to a return to cash payments, the amount of which separately it is scarcely possible to calculate; but I am inclined to agree with Mr. Tooke in thinking that it is not above one or two per cent. If the price of agricultural labour in England has not fallen so much as is here supposed, the difference in the value of the currency will not be so great as above stated, but on any supposition which is at all probable, it must be something considerable.

It is certain therefore that the currency, estimated in what appears to be a correct standard of value, has fallen in such a degree beyond the difference between paper and gold, as to add much to the pressure upon the landed interest, though by no means to the extent which would be implied by measuring the value of the currency in agricultural produce. This produce, from the scantiness of the supply compared with the demand, was at one time much above its natural and ordinary value, and has since, from the abundance of the supply compared with the demand, been as much below its natural value; while the value of the currency, though it has fallen and risen considerably, has been much more steady than the value of corn.

To what extent the alterations in the value of the currency beyond the difference between bullion and paper are attributable to the Bank restriction, and the return to cash payments, it is by no means easy to say. That the currency would have fallen very considerably under the circumstances of the last war, and risen very considerably under the circumstances which accompanied the peace, although paper had been kept on a par with gold, I cannot feel the least doubt; and probably the only difference has been, that as the increase of paper beyond what would circulate at par with gold gave facilities to production, and to the bringing of poor land into cultivation during the war, it has tended to increase the glut and low prices since the peace.

But whatever may have been the pressure on the owners of land since the peace, they cannot have the slightest plea for an attempt to indemnify themselves at the expense of the public creditor. In the turns of the wheel of fortune all parties should have fair play; no class of persons can be justified in endeavouring to lift themselves up by using unfair and dishonourable means to pull others down; and least of all ought such means to be thought of by the landlords of this country, who, whatever inconveniences they may have suffered latterly, have unquestionably altogether benefited much more largely from the alterations in the value of the currency, than the very persons who in their opinion should be made to relieve them from their embarrassments.

London: Printed by C. Roworth,
Bell-Yard, Temple-Bar.

FOOTNOTES

[A] Mr. Ricardo, speaking of the commodities produced by the capitalist, says, “their whole value is divided into two portions only: one constitutes the profits of stock; the other the wages of labour.” (p. 107. 3d edit.) The language of Mr. Mill, in his _Elements of Political Economy_, is similar.

[B] This is very properly stated by Colonel Torrens, in his _Production of Wealth_, c. 1. p. 28.

[C] The effects of slow or quick returns, and of the different proportions of fixed and circulating capitals, are distinctly allowed by Mr. Ricardo; but in his last edition, (the third, p. 32.) he has much underrated their amount. They are both theoretically and practically so considerable as entirely to destroy the position that commodities exchange with each other according to the quantity of labour which has been employed upon them; but no one that I am aware of has ever stated that the different quantity of labour employed on commodities is not a much more powerful source of difference of value.

[D] Colonel Torrens, by representing capital under the form of certain quantities of cloth and corn, instead of value in labour, has precluded himself from the possibility of giving a just view either of value, profits, or effectual demand. An increase of cloth and corn from the same quantity of labour is of no avail whatever in increasing value, profits, or effectual demand, if this increased produce will not command so much labour as before, an event which is continually occurring, from deficiency of demand.

[E] Agricultural labour is taken for the obvious reasons that it is the commonest species of labour, that it directly produces the food of the labourer, and that it is the most immediately connected with the gradations of soil, and the necessary variations of profits. It is also assumed with Adam Smith, Mr. Ricardo, and other political economists, that, on an average, other kinds of labour continue to bear the same proportions to agricultural labour.

[F] In my last work, I thought that a mean between corn and labour might be a better measure of value than labour alone; but I am now convinced that I was wrong, and that labour alone is the true measure.

[G] Whenever it is said that the value of labour rises in the progress of cultivation, a comparison is made between the value of a given quantity of labour at two different periods; and when it is added that wages rise in proportion to the quantity of labour required to produce them, objects are measured solely by the quantity of labour employed upon them, although the rate of profits may be totally different.

[H] This proposition is essentially the same as that which is very clearly and ably expressed by Mr. Ricardo in his chapter on Profits, (p. 128. 3d ed.) in the following terms: “in all countries and at all times profits depend on the quantity of labour requisite to provide necessaries for the labourers on that land, or with that capital which yields no rent;” a proposition which though incomplete in reference to the ultimate causes of the variations of profits, contains a most important truth. From this truth the legitimate deduction appears to me to be, the constant value of labour; but Mr. Ricardo has formed his system on a deduction exactly opposite to it. He has, however, in my opinion, amply compensated for the errors into which he may have fallen, by furnishing us, at the same time, not only with the means of their refutation, but the means of improving the science of Political Economy.

[I] Mr. Ricardo, by supposing gold to be produced always by a certain quantity of labour and _capital_, is compelled to acknowledge that his standard “would be a perfect measure of value for all things produced under the same circumstances precisely as itself, but for no others.” p. 43. This concession appears to me quite fatal. We want to measure the value of commodities under _all circumstances_, and it is only gold obtained exclusively by labour, or labour itself, which can do this. See _Principles of Political Economy considered with a View to their Practical Application_, pp. 111 and 118.

[J] It is this rise in the money price of labour, occasioned by the fall of profits, which Mr. Ricardo considers as that necessary rise in the _value_ of labour on which he makes so much depend in his system; but if the foregoing reasoning be well founded, it follows that this rise is not a rise in the _value_ of labour, but a fall in the value of money.

[K] This applies to the seed, and the food of the working cattle in agriculture.

[L] The labour worked up in a commodity could not, in many cases, be ascertained without considerable difficulty; but the labour which it will command is always open and palpable.

[M] Practically, in all countries such as South America and Ireland, where there is a slack demand for labour, and the people are but half employed, the food wages of labour are high, compared with the work done.

[N] If profits rise in some departments without falling proportionally in others, the _average_ rate of profits will have increased, although, from the difficulty of moving capital, the rate of profits in some employments may not have had time to rise before the stimulus to such rise comes to an end by a fresh increase of capital.

[O] This is the view taken of it by Colonel Torrens in his _Production of Wealth_, which I think the just one; because it makes the proper distinction between cost and value, on which the great stimulus to production depends. But he has most unnecessarily and incorrectly given the same interpretation to _natural price_, which always includes profits.

[P] In order to exclude demand and supply from the costs of production, when ordinary profits are considered as making a part of them, it would be necessary to assume that the corn wages of labour are always the same, an assumption which would be quite unwarranted, not only in reference to short periods, but to periods of fifty or sixty years, as the history of corn wages in this country alone amply testifies (see ch. iv. sect. 4, of my Princ. of Pol. Econ. &c.); and what but the state of the demand and supply of corn, compared with labour, prevents profits in the United States from being 100 per cent.? The quantity of corn divided between the labourer and capitalist would be amply sufficient to yield such profits, if the corn wages of labour were no higher than in England.

[Q] Sect. IV. p. 91, et seq.

[R] One of the most valuable sections in Mr. Tooke’s late work _On High and Low Prices_, is the seventh, in which he proves the frequent occurrence of this event, and explains, with great clearness and knowledge of the subject, the mode in which it takes place.

[S] Inquiry into the Rise of Prices in Europe, p. 15.