for the same expense, must really have the same effect on profits as if the supply of superior soils had been increased, and may, for a considerable period, increase the rate of profit. Had the inventive genius of man been limited in its powers, and had the various machines and implements used in agriculture, and the skill of the husbandman, at once attained to their utmost perfection, the rise in the price of raw produce, and the fall of profits consequent upon the increase of population, would have been much more apparent and obvious. When, in such a state of things, it became necessary to resort to poorer soils to raise an additional quantity of food, a corresponding increase of labour would plainly have been required—for, on this supposition, no improvement could take place in the powers of the labourer himself. Having already reached the perfection of his art, a greater degree of animal exertion could alone overcome fresh obstacles. More labour would, therefore, have been necessary to the production of a greater quantity of food; and it would have been necessary in the precise proportion in which the quantity of food was to be increased. So that it is plain, if the arts had continued in this stationary state, that the price of raw produce would have varied directly with every variation in the qualities of the soils successively brought under tillage. But the circumstances regulating the real and exchangeable value of raw produce in an improving society, are extremely different. Even there, it has, as has been shown, a constant tendency to rise; for, the rise of profits consequent upon every improvement, by occasioning a greater demand for labour, gives a fresh stimulus to population, and thus by increasing the demand for food, again inevitably forces the cultivation of poorer soils, and raises prices. But it is evident, that these effects of this great law of nature, from whose all-pervading influence the utmost efforts of human ingenuity can never enable man to escape, are rendered less palpable and obvious in consequence of improvements. After inferior soils are cultivated, more labourers are, no doubt, required to raise the same quantities of food; but, as the powers of the labourers are improved in the progress of society, a smaller number is required in proportion to the whole work to be performed, than if no such improvement had taken place. It is in this way that the natural tendency to an increase in the price of raw produce is counteracted in the progress of society. The productive energies of the earth itself gradually diminish, and we are compelled to resort to soils of a constantly decreasing degree of fertility; but the productive energies of the labour employed to extract produce from these soils, are as constantly augmented by the discoveries and inventions that are always being made. Two directly opposite and continually acting principles are thus set in motion. From the operation of fixed and permanent causes, the increasing sterility of the soil must, in the long-run, overmatch the increasing power of machinery and the improvements of 202 RATE OF PROFIT HAS A TENDENCY TO EQUALISE ITSELF. agriculture and prices must experience a corresponding rise, and profits a corresponding fall. Occasionally, however, improvements in the latter more than compensate for the deterioration in the quality of the former, and a fall of prices and rise of profits take place, until the constant pressure of population again forces the cultivation of poorer lands. The previous reasoning, in so far as the general principle is concerned, is equally applicable to the commercial world, or to any single nation. It is quite plain, however, that the fall in the rate of profit, and the consequent check to the progress of society originating in the necessity of resorting to poorer soils, will be more severely felt in an improving country, which excludes foreign corn from her markets, than in one which maintains a free and unfettered intercourse with her neighbours. A highly manufacturing and commercial country, like England, which should deal with all the world on fair and liberal principles, could avail herself of all those capacities of production with which Providence has endowed different countries; and, besides obtaining supplies of food at the cheapest rate at which they can be raised, the numberless markets to which she could resort, would prevent her from feeling any very injurious consequences from the occasional failure of her own harvests, and would not only secure her con stant plenty, but, what is of hardly less importance, constant steadiness of price. Such a nation would have the foundations of her greatness established on a broad and solid basis; for they would rest, not on the productive energies of her own soil only, but, on those of all the countries of the world; nor is there any natural and necessarily operating cause, why her profits should be reduced, and she should get clogged in her progress, until the general increase of population had forced the cultivation of inferior soils, in all the countries whence she had been in the custom of drawing a portion of her supplies. And even then, she would not be surpassed by her neighbours; her progress would only be retarded by the same cause which must also retard theirs; her relative power would not be impaired; and should new markets be opened, or new discoveries made in agricultural industry, in any quarter of the world, she would reap her full share of the advantage, and be renovated and strengthened for a new career of exertion, A relative lowness in the rate of profit in a particular country, not only lessens its power to accumulate capital, or to add to that fund by which its population and industry must always be regulated; but it also creates a strong temptation to transmit a part of it to other countries. The rate of profit has a constant tendency to equalise itself. The same principle that would prevent the employment of capital in Yorkshire, if it did not yield as great a rate of profit there as in Kent or Surrey, regulates its distribution among the different countries of the world. It is true that the love of country—the thousand ties of so ciety and friendship-the ignorance of foreign languages, and the desire to have our stock employed under our own inspection, would make a greater difference in the rate of profit necessary to occasion a transfer of capital from one country to another, than from one province of the same country to another. But this love of country has its limits. The love of gain is a no less powerful and constantly operating principle; and if capitalists are once assured that their stock can be laid out with tolerable security, and with considerably greater advantage, in foreign states, an efflux of capital, to a greater or less extent, will certainly take place, The rate of taxation has, throughout this discussion, been supposed to be invariable. It is plain, however, that when it is increased, such increase must either immediately fall wholly on profits or wages, or partly on the one, and partly on the other. If it falls on profits, it must make an equivalent deduction from them; and if it falls on wages, it must proportionally depress the condition of the great mass of the people. There are limits, however, and those not very remote, to the power of the labourer to pay taxes; and whenever these limits have been attained, they must entirely fall on profits. It has, therefore, been most justly and truly observed by Adam Smith, that a heavy taxation has exactly the same effects as an increased barrenness of the soil, and an increased inclemency of the heavens, It was the excessive weight of taxation that was the real cause of the lowness of profits in Holland, and consequently of the decline of her manufacturing and commercial prosperity. Notwithstanding the rigid and laudable economy of her rulers, the vast expense which the republic incurred in her revolutionary struggle with Spain, and in her subsequent contests with France and England, having led to the contraction of an immense public debt, she was obliged, in order to provide funds for the payment of the interest and other necessary charges, to lay heavy taxes on the most indispensable necessaries.* Among others, high duties were laid on foreign corn when imported, on flour and meal when ground at the mill, and on bread when it came from the oven. Taxation affected all the sources of national wealth; and so oppressive did it ultimately become, that it was a common saying at Amsterdam, that every dish of fish brought to table was paid once to the fisherman, and six times to the state! Wages being necessarily raised so as to enable the labourers to subsist and continue their race, the weight of these enormous taxes fell almost wholly on the capitalists. Profits being in consequence reduced below their level in other countries, the prosperity of Holland gradually declined; and her capitalists were * In 1579, at the Union of Utrecht, the interest of the public debt of the province of Holland amounted to only 117,000 florins; but so rapidly did it increase, that, in 1655, during the administration of the famous John De Witt, the States were compelled to reduce the interest from 5 to 4 per cent., and yet, notwithstanding this reduction, it amounted, in 1678, to 7,107,000 florins! Metelerkamp, Statisque de la Hollande, p. 203. tempted to employ their stocks in other countries rather than at home. 'L'augmentation successive des impôts, que les payments des interêts, et les remboursements ont rendu indispensable, a détruit une grande partie de l'industrie, a diminué le commerce, a diminué ou fort alteré l'état florissant ou êtoit autrefois la population, en resserrant chez le peuple les moyens de subsistence.'* · No people have any reason whatever to be alarmed at the effects of competition in any department of industry, for instead of losing, they are always sure to gain by every discovery which tends to facilitate production, or to reduce cost. It is not by improvements among their neighbours, but by a decline in the productiveness of industry at home-a decline which will always be indicated and correctly measured by the fall of profits it must infallibly occasion-that either their absolute or relative situation can ever be injuriously affected. But every such fall of profits will undoubtedly tend to sink them in the scale of national power and importance, and to enable their rivals to outstrip them in the career of wealth and greatness. Neither the skill and industry of the most intelligent and persevering artisans, nor the most improved and powerful machinery, can permanently withstand the paralysing and deadening influence of a relatively low rate of profit— And, let it never be forgotten, that such relative lowness must necessarily be produced by every system or regulation, which, by excluding foreign corn or otherwise, forces the premature cultivation of poor soils at home, and artificially raises prices; and can only be prevented by acting on a liberal commercial system, and enforcing the strictest economy in the public expenditure. PART IV. CONSUMPTION OF WEALTH. HAVING in the previous parts of this work endeavoured to explain the means by which labour is facilitated, and wealth produced, and to investigate the laws regulating its distribution among the various classes of society, we come now to the fourth and last division of our subject, or to that which treats of the CONSUMPTION of Wealth. Definition of Consumption-Consumption the end of ProductionTest of Advantageous and Disadvantageous Consumption-Injurious operation of Sumptuary Laws-Advantage of a Taste for * Richesse de la Hollande, tome ii. p. 179. This work contains a great deal of most valuable information. The author, (M. de Luzac,) mentions, that the Hollanders had, in 1778, about 1500 millions of livres (62 millions sterling) in the public funds of France and England! -See also, on the subject of the taxation of Holland, a Memoir on the Means of Amending and Redressing the Commerce of the Republic, drawn up from information communicated by the best informed merchants, and published by order of the Stadtholder, William IV. Prince of Orange, in 1751. This Memoir was translated into English, and published in London in the same year. Luxuries-Error of Adam Smith's Opinion with respect to unproductive Consumption—Error of those who contend, that to facilitate Production it is necessary to encourage Consumption—Consumption of Government-Conclusion. IT was formerly shown that, by the production of a commodity was not meant the production of matter, for that is the exclusive prerogative of Omnipotence, but the giving to matter already in existence such a shape as might fit it for ministering to our wants and enjoyments. In like manner, by consumption is not meant the consumption, or annihilation of matter, for that is equally impossible as its creation, but merely the consumption or annihilation of those qualities which render commodities useful and desirable. To consume the products of art and industry is, therefore, really to deprive the matter of which they consist of the utility, and consequently of the exchangeable value communicated to it by labour. And hence we are not to measure consumption by the magnitude, the weight, or the number of the products consumed, but exclusively by their value. Large consumption is the destruction of large value, however small the bulk in which that value may happen to be compressed. Consumption, in the sense in which the word is used by Political Economists, is synonymous with use. We produce commodities only that we may be able to use or consume them. Consumption is the great end and object of all human industry. Production is merely a means to attain an end. No one would produce were it not that he might afterwards consume. All the products of art and industry are destined to be consumed, or made use of; and when a commodity is brought into a state fit to be used, if its consumption be deferred, a loss is incurred. All products are intended either to satisfy the immediate wants, or to add to the enjoyments of their producers; or they are intended to be employed for the purpose of reproducing a greater value than themselves. In the first case, by delaying to use them, it is plain we either refuse to satisfy a want, or deny ourselves a gratification it is in our power to obtain; and, in the second, by delaying to use them, it is equally plain we allow the instruments of production to lie idle, and then we lose the profit that might be derived from their employment. But, although all commodities are produced only to be consumed, we must not fall into the error of supposing that all consumption is equally advantageous to the individual or the society. It is, however, exceedingly difficult to draw a distinct line of demarcation between advantageous or disadvantageous, or, as it is more commonly termed, productive and unproductive consumption. In so far, however, as the public interests are involved, and it is such only that we are now called upon to consider, all consumption of the products of art and industry |