increase rapidly than population because the possible increase of population may be described by the term 'rapid,' and the increase of capital by the term 'slow.' It is, therefore, rather a relief to the reader to find that the proof that it is the tendency of population to increase faster than capital does not depend upon this foundation, strong as it is.' It depends on the fact that 'The tendency of population to increase, whatever it may be, greater or less, is at any rate an equable tendency. At what rate soever it has increased at any one time, it may be expected to increase at an equal rate if placed in equally favourable circumstances, at any other time. The case with capital is the reverse. As capital continues to accumulate, the difficulty of increasing it becomes gradually greater and greater, till, finally, increase becomes impracticable.' This is a consequence of the general rule of diminishing returns: 'Whether, after land of superior quality has been exhausted, capital is applied to new land of inferior quality, or in successive doses with diminished returns upon the same land, the produce of it is continually diminishing in proportion to its increase. If the return to capital is, however, continually decreasing, the annual fund from which savings are made is continually diminishing. The difficulty of making savings is thus continually augmented, and at last they must totally cease.' 1 As there is no such thing as a general rule of diminishing returns, we need not stop to inquire whether a diminution of the return not to the whole capital, but to a given quantity or unit of capital, necessarily means a diminution of the whole annual fund from which savings are made. Proceeding, James Mill argues that forcible means employed to make capital increase faster than its natural tendency would not produce desirable effects,' and when he has proved this, and alleged that it is not desirable that population should increase beyond that degree of density which affords in perfection the benefits of social intercourse, and of combined labour,' he concludes: "The precise problem, therefore, is to find the means of limiting births to that number which is necessary to keep up the population 1 Elements, pp. 41, 42; 3d ed. P 56. without increasing it. Were that accomplished while the return to capital from the land was yet high, the reward of the labourer would be ample, and a large surplus would still remain.'1 Quite unconsciously reducing his theory to the absurd, he adds that the limitation of the number of births, if limitation were possible, might be carried so far as to 'raise the condition of the labourer to any state of comfort and enjoyment which may be desired.'2 Any state which may be desired! In his Encyclopædia article, M'Culloch had nothing to say about wages per head, except that the labourer cannot work if he is not supplied with the means of subsistence.'" But in the book into which he expanded his article, he definitely put the supply and demand theory into the arithmetical form appropriate to the wage-fund theory. That wages rise when capital increases faster than population, and fall when population increases faster than capital, had become a commonplace. That the rate of wages depends on the proportion between the labouring population and 'capital,' had been laid down in Mrs. Marcet's Conversations. But it was reserved for M'Culloch to give definiteness and rigidity to Mrs. Marcet's doctrine by illustrating it with an arithmetical example: "The capacity of a country to support and employ labourers,' he asked his readers to believe, is in no degree dependent on advantageousness of situation, richness of soil, or extent of territory. These, undoubtedly, are circumstances of very great importance, and must have a powerful influence in determining the rate at which a people advances in the career of wealth and civilisation. But it is obviously not on these circumstances, but on the actual amount of the accumulated produce of previous labour, or of capital, devoted to the payment of wages, in the possession of a country at any given period, that its power of supporting and employing labourers must wholly depend. A fertile soil affords the means of rapidly increasing capital; but that is all. Before this soil can be cultivated, capital must be provided for the support of the labourers employed upon it, just as it must be provided for the support of those engaged in manufactures, or in any other department of industry. 'It is a necessary consequence of this principle that the amount 1 Elements, p. 52; 3d ed. p. 65. 1st ed. p. 53; 3d ed. p. 57. 2 3 Encyclopædia Britannica, 4th ed. supplement, vol. vi. pt. i. p. 270 a. • Above, p. 242. of subsistence falling to each labourer, or the rate of wages, must depend on the proportion which the whole capital bears to the whole amount of the labouring population. .... 'To illustrate this principle, let us suppose that the capital of a country appropriated to the payment of wages would, if reduced to the standard of wheat, form a mass of 10,000,000 quarters: If the number of labourers in that country were two millions, it is evident that the wages of each, reducing them all to the same common standard, would be five quarters.'1 He endeavours to illustrate or support the proposition that 'the well-being and comfort of the labouring classes are especially dependent on the relation which their increase bears to the increase of the capital which is to feed and employ them,'' by comparing the growth of population and capital and the condition of the people in England and Ireland. The Irish population had increased faster than the English population, and the Irish capital had increased slower than the English capital. The Irish suffered from want and were miserable, .... 'And hence the obvious and undeniable inference, that in the event of the population having increased less rapidly than it has done, there would have been fewer individuals soliciting employment, and that consequently the rate of wages would have been proportionally higher. . . . . It is obvious too, that the low and degraded condition into which the people of Ireland are now sunk is the condition to which every people must be reduced whose numbers continue, for any considerable period, to increase faster than the means of providing for their comfortable and decent subsistence; and such will most assuredly be the case in every old settled country in which the principle of increase is not powerfully counteracted by the operation of moral restraint, or by the exercise of a proper degree of prudence and forethought in the formation of matrimonial connections.' 3 This is open to the same objection as James Mill's argument that population has a tendency to increase faster than capital, because otherwise wages would have risen. M'Culloch entirely forgets to show that there had been any absolute deterioration in the condition of the Irish labourers, or even any deterioration as compared with the English labourers. 1 Principles, 1st ed., 1825, pp. 327, 328; 2d ed. 1830, pp. 377, 378. Of an upper limit, above which no reduction of population or increase of capital can raise wages, M'Culloch, like James Mill, says nothing, but he provides a lower limit, below which wages cannot fall, in the shape of a 'natural or necessary rate of wages.' This is 'the cost of producing labour,' which, 'like that of producing all other articles brought to market, must be paid by the purchasers.' The cost seems at first to be a quantity of food and other articles sufficient for the support of the labourers and their families.'1 'If they did not obtain this supply, they would be left destitute; and disease and death would continue to thin the population until the reduced number bore such a proportion to the national capital as would enable them to obtain the means of subsistence.' 2 But it is soon explained that 'moral restraint' may and does keep down the population, so that the natural or necessary rate of wages is higher than what is requisite to furnish a bare subsistence. Moreover, M'Culloch follows Malthus's Political Economy by saying that moral restraint may be itself increased by changes of habit which have been brought about by increases of wages caused by increases of capital. M'Culloch's wage-fund theory was refuted in the very next year by Sir Edward West in his Price of Corn and Wages of Labour. Answering the contention of those who asserted that government could not add to the demand for labour, West says: 'If the capital for the support of labourers were of a given amount, and that amount were necessarily laid out upon the labouring population in the course of the year, it could make no difference in the demand for labour or amount of wages by whom it were expended; whether by government upon unproductive persons, such as soldiers or sailors; or by individuals upon productive labourers; the whole population would get the whole of this capital within the year, and they could not have more.' 3 This he does not believe to be the case: 'What,' he asks, 'was the effect of the immense subscriptions and parish donations and increased allowances, during the periods of 1 Principles, pp. 334, 335. 2 Ibid., p. 336. $ P. 83. scarcity of the last thirty-five years? Is it not admitted that the effect of them was to increase the money means of the labouring poor, and to raise the price of corn to a much higher point than it would otherwise have attained? Does it not follow that a larger or smaller amount of the pecuniary means or pecuniary capital of a country may be expended on the labouring population?' 1 The demand for labour does not, he concludes, depend solely on the rate of the increase of the wealth or capital of a country. A brisk state of trade may double wages without any increase of capital: 'The employer of capital and labour employs, we will say, ten men, who produce the article upon which their labour is expended in two months, and he is enabled to sell it immediately, and thus replace his capital with a profit. Now, suppose these ten men to do double work a day at the same rate of wages for the work; their wages by the day will be doubled; the article will be produced in one month, that is, in half the time, with the same profit upon the capital expended, that is, with double profit, for profit being the gain upon capital in a given period, increased rapidity of the returns will have the same effect as increased rate of production.' 2 West was not alone in refusing to accept the wage-fund theory. Mountifort Longfield, in his Dublin lectures, which were published in 1834, ignores altogether the doctrine that wages depend on the proportion between capital and population. Wages, he says, depend upon the relation between the supply of labourers and the demand for them, and 'the supply consists of the present existing race of labourers.' 3 But instead of saying that the demand for them depends on the magnitude of the country's capital, he says that it is caused by the utility or value of the work which they are capable of performing. . . . The wages of the great mass of labourers must be paid out of the produce, or the price of the produce, of their labour.'4 Leaving 'capital' out of account altogether, he puts forward a produce theory: 'The real wages of the labourer, that is, his command of the necessaries and comforts of life, will depend entirely on the rate of 1 P. 85. 2 Pp. 86, 87. 3 Lectures on Political Economy, delivered in Trinity and Michaelmas Terms 1833, by Mountifort Longfield, LL.D., 1834, p. 209. |