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 onwhich 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 astandardmeasure 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 determinationof 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, thosewhich 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 composedof 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,Qaccording 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 secondproduces 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 quantityto perform a greater number of transactions, but calls into action a greater quantity of credit and private paper,Rso 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 interestand 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 returnto 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, in1790, was 8s.1d.per week. In 1796, Sir F. M. Eden, in his work on the Poor, stated it at 8s.11d.per week. In 1803, the communications to the Board of Agriculture make it 11s.5d., and in 1810 and 11, according to satisfactory returns obtained by Arthur Young, it was 14s.6d.SThis 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. 13s.and reducing the 14s.6d.currency to a bullion price, it will appear that the bullion wages of labour in 1810 and 11 were a little above 12s.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,Tit 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 8s.1d.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 12s.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 fromwhich 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 notoccur. 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 circulationof 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. 15s.in 1811, to £5. 8s.Vin 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 returnfrom Elba was still more remarkable. The price had been as low, in the spring of 1815, as 4l.9s., and without any known change in the currency price of labour, it rose suddenly to 5l.5s., 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 therisein 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 inother 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.
In 1812, farm servants boarded in the house received from 14l.to 22l.a year; women servants from 5l.to 8l.At present, (April, 1823,) men receive from 10l.to 14l., and women from 3l.10s.to 6l.
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 bedone 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 19s.to 44s., while wheat rose from 43s.in 1792, (according to the average of England and Wales, which commences with that year,) to 88s.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 9½d.to 22d., and reducing the 22d.to its value in bullion, the average price of bullion in that year being 5l.1s., it will appear, that the bullion price of labour in Scotland rose, in the interval between 1790 and 1812, from 9½d.to 16½d., 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 abovestated was 16½d.; it has since fallen to 13½d., 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 14s.6d.per week, had fallen to 10s.then as the bullion wages of 1810 and 1811 were a little above 12s., thefall 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 cannothave 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.