THE great and unlooked for discoveries that have taken place of late years in natural philosophy, the increasing diffusion of general knowledge from the extension of the art of printing, the ardent and unshackled spirit of inquiry that prevails throughout the lettered and even unlettered world, the new and extraordinary lights that have been thrown on political subjects which dazzle and astonish the understanding, and particularly that tremendous phenomenon in the political horizon, the French Revolution, which, like a blazing comet, seems destined either to inspire with fresh life and vigour, or to scorch up and destroy the shrinking inhabitants of the earth, have all concurred to lead many able men into the opinion that we were touching on a period big with the most important changes, changes that would in some measure be decisive of the future fate of mankind.
It has been said that the great question is now at issue, whether man shall henceforth start forwards with accelerated velocity towards illimitable, and hitherto unconceived improvement, or be condemned to a perpetual oscillation between happiness and misery, and after every effort remain still at an immeasurable distance from the wished-for goal.
It is an acknowledged truth in philosophy that a just theory will always be confirmed by experiment. Yet so much friction, and so many minute circumstances occur in practice, which it is next to impossible for the most enlarged and penetrating mind to foresee, that on few subjects can any theory be pronounced just, till all the arguments against it have been maturely weighed and clearly and consistently refuted.
I have read some of the speculations on the perfectibility of man and of society with great pleasure. I have been warmed and delighted with the enchanting picture which they hold forth. I ardently wish for such happy improvements. But I see great, and, to my understanding, unconquerable difficulties in the way to them. These difficulties it is my present purpose to state, declaring, at the same time, that so far from exulting in them, as a cause of triumph over the friends of innovation, nothing would give me greater pleasure than to see them completely removed.
I think I may fairly make two postulata.
First, That food is necessary to the existence of man.
Secondly, That the passion between the sexes is necessary and will remain nearly in its present state.
These two laws, ever since we have had any knowledge of mankind, appear to have been fixed laws of our nature, and, as we have not hitherto seen any alteration in them, we have no right to conclude that they will ever cease to be what they now are, without an immediate act of power in that Being who first arranged the system of the universe, and for the advantage of his creatures, still executes, according to fixed laws, all its various operations.
Assuming then my postulata as granted, I say, that the power of population is indefinitely greater than the power in the earth to produce subsistence for man.
Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. A slight acquaintance with numbers will shew the immensity of the first power in comparison of the second.
Consequently, if the premises are just, the argument is conclusive against the perfectibility of the mass of mankind.
I said that population, when unchecked, increased in a geometrical ratio; and subsistence for man in an arithmetical ratio.
Let us examine whether this position be just.
We will suppose the means of subsistence in any country just equal to the easy support of its inhabitants. The constant effort towards population, which is found to act even in the most vicious societies, increases the number of people before the means of subsistence are increased. The food therefore which before supported seven millions, must now be divided among seven millions and a half or eight millions. The poor consequently must live much worse, and many of them be reduced to severe distress. The number of labourers also being above the proportion of the work in the market, the price of labour must tend toward a decrease; while the price of provisions would at the same time tend to rise. The labourer therefore must work harder to earn the same as he did before. During this season of distress, the discouragements to marriage, and the difficulty of rearing a family are so great, that population is at a stand. In the mean time the cheapness of labour, the plenty of labourers, and the necessity of an increased industry amongst them, encourage cultivators to employ more labour upon their land; to turn up fresh soil, and to manure and improve more completely what is already in tillage; till ultimately the means of subsistence become in the same proportion to the population as at the period from which we set out.
If I find that at a certain period in ancient history, the encouragements to have a family were great, that early marriages were consequently very prevalent, and that few persons remained single, I should infer with certainty that population was rapidly increasing, but by no means that it was then actually very great; rather, indeed, the contrary, that it was then thin and that there was room and food for a much greater number. On the other hand, if I find that at this period the difficulties attending a family were very great; that, consequently, few early marriages took place, and that a great number of both sexes remained single, I infer with certainty that population was at a stand; and, probably, because the actual population was very great in proportion to the fertility of the land, and that there was scarcely room and food for more.
To remedy the frequent distresses of the common people, the poor laws of England have been instituted; but it is to be feared, that though they may have alleviated a little the intensity of individual misfortune, they have spread the general evil over a much larger surface.
It remains to inquire whether this power can be checked, and its effects kept equal to the means of subsistence, without vice or misery.
In examining the principal states of modern Europe, we shall find that though they have increased very considerably in population since they were nations of shepherds, yet that at present their progress is but slow, and instead of doubling their numbers every twenty-five years they require three or four hundred years, or more, for that purpose. Some, indeed, may be absolutely stationary, and others even retrograde. The cause of this slow progress in population cannot be traced to a decay of the passion between the sexes. We have sufficient reason to think that this natural propensity exists still in undiminished vigour. Why then do not its effects appear in a rapid increase of the human species? An intimate view of the state of society in any one country in Europe, which may serve equally for all, will enable us to answer this question, and to say that a foresight of the difficulties attending the rearing of a family acts as a preventive check, and the actual distresses of some of the lower classes, by which they are disabled from giving the proper food and attention to their children, act as a positive check to the natural increase of population.
THE positive check to population, by which I mean the check that represses an increase which is already begun, is confined chiefly, though not perhaps solely, to the lowest orders of society.
This check is not so obvious to common view as the other I have mentioned, and, to prove distinctly the force and extent of its operation would require, perhaps, more data than we are in possession of. But I believe it has been very generally remarked by those who have attended to bills of mortality that of the number of children who die annually, much too great a proportion belongs to those who may be supposed unable to give their offspring proper food and attention, exposed as they are occasionally to severe distress and confined, perhaps, to unwholesome habitations and hard labour. This mortality among the children of the poor has been constantly taken notice of in all towns.
To these two great checks to population, in all long occupied countries, which I have called the preventive and the positive checks, may be added vicious customs with respect to women, great cities, unwholesome manufactures, luxury, pestilence, and war.
All these checks may be fairly resolved into misery and vice. And that these are the true causes of the slow increase of population in all the states of modern Europe, will appear sufficiently evident from the comparatively rapid increase that has invariably taken place whenever these causes have been in any considerable degree removed.
The poor laws of England tend to depress the general condition of the poor in these two ways. Their first obvious tendency is to increase population without increasing the food for its support. A poor man may marry with little or no prospect of being able to support a family in independence. They may be said therefore in some measure to create the poor which they maintain, and as the provisions of the country must, in consequence of the increased population, be distributed to every man in smaller proportions, it is evident that the labour of those who are not supported by parish assistance will purchase a smaller quantity of provisions than before and consequently more of them must be driven to ask for support.
Secondly, the quantity of provisions consumed in workhouses upon a part of the society that cannot in general be considered as the most valuable part diminishes the shares that would otherwise belong to more industrious and more worthy members, and thus in the same manner forces more to become dependent. If the poor in the workhouses were to live better than they now do, this new distribution of the money of the society would tend more conspicuously to depress the condition of those out of the workhouses by occasioning a rise in the price of provisions.
THE professed object of Dr Adam Smith's inquiry is the nature and causes of the wealth of nations. There is another inquiry, however, perhaps still more interesting, which he occasionally mixes with it, I mean an inquiry into the causes which affect the happiness of nations or the happiness and comfort of the lower orders of society, which is the most numerous class in every nation. I am sufficiently aware of the near connection of these two subjects, and that the causes which tend to increase the wealth of a state tend also, generally speaking, to increase the happiness of the lower classes of the people. But perhaps Dr Adam Smith has considered these two inquiries as still more nearly connected than they really are; at least, he has not stopped to take notice of those instances where the wealth of a society may increase (according to his definition of 'wealth') without having any tendency to increase the comforts of the labouring part of it. I do not mean to enter into a philosophical discussion of what constitutes the proper happiness of man, but shall merely consider two universally acknowledged ingredients, health, and the command of the necessaries and conveniences of life.
Little or no doubt can exist that the comforts of the labouring poor depend upon the increase of the funds destined for the maintenance of labour, and will be very exactly in proportion to the rapidity of this increase. The demand for labour which such increase would occasion, by creating a competition in the market, must necessarily raise the value of labour, and, till the additional number of hands required were reared, the increased funds would be distributed to the same number of persons as before the increase, and therefore every labourer would live comparatively at his ease. But perhaps Dr Adam Smith errs in representing every increase of the revenue or stock of a society as an increase of these funds. Such surplus stock or revenue will, indeed, always be considered by the individual possessing it as an additional fund from which he may maintain more labour: but it will not be a real and effectual fund for the maintenance of an additional number of labourers, unless the whole, or at least a great part of this increase of the stock or revenue of the society, be convertible into a proportional quantity of provisions; and it will not be so convertible where the increase has arisen merely from the produce of labour, and not from the produce of land. A distinction will in this case occur, between the number of hands which the stock of the society could employ, and the number which its territory can maintain.
To explain myself by an instance. Dr Adam Smith defines the wealth of a nation to consist in the annual produce of its land and labour. This definition evidently includes manufactured produce, as well as the produce of the land. Now supposing a nation for a course of years was to add what it saved from its yearly revenue to its manufacturing capital solely, and not to its capital employed upon land, it is evident that it might grow richer according to the above definition, without a power of supporting a greater number of labourers, and, therefore, without an increase in the real funds for the maintenance of labour. There would, notwithstanding, be a demand for labour from the power which each manufacturer would possess, or at least think he possessed, of extending his old stock in trade or of setting up fresh works. This demand would of course raise the price of labour, but if the yearly stock of provisions in the country was not increasing, this rise would soon turn out to be merely nominal, as the price of provisions must necessarily rise with it. The demand for manufacturing labourers might, indeed, entice many from agriculture and thus tend to diminish the annual produce of the land, but we will suppose any effect of this kind to be compensated by improvements in the instruments of agriculture, and the quantity of provisions therefore to remain the same. Improvements in manufacturing machinery would of course take place, and this circumstance, added to the greater number of hands employed in manufactures, would cause the annual produce of the labour of the country to be upon the whole greatly increased. The wealth therefore of the country would be increasing annually, according to the definition, and might not, perhaps, be increasing very slowly.
Must it not then be acknowledged by an attentive examiner of the histories of mankind, that in every age and in every state in which man has existed, or does now exist.
Let us suppose a commodity in great request by fifty people, but of which, from some failure in its production, there is only sufficient to supply forty. If the fortieth man from the top have two shillings which he can spend in this commodity, and the thirty nine above him, more, in various proportions, and the ten below, all less, the actual price of the article, according to the genuine principles of trade, will be two shillings. If more be asked, the whole will not be sold, because there are only forty who have as much as two shillings to spend in the article; and there is no reason for asking less, because the whole may be disposed of at that sum.
That there are some circumstances connected with rent, which have an affinity to a natural monopoly, will he readily allowed. The extent of the earth itself is limited, and cannot be enlarged by human demand. And the inequality of soils occasions, even at an early period of society a comparative scarcity of the best lands; and so far is undoubtedly one of the causes of rent properly so called. On this account, perhaps, the term partial monopoly might be fairly applicable. But the scarcity of land, thus implied, is by no means alone sufficient to produce the effects observed. And a more accurate investigation of the subject will show us how essentially different the high price of raw produce is, both in its nature and origin, and the laws by which it is governed, from the high price of a common monopoly.
The causes of the high price of raw produce may be stated to be three.
First, and mainly, that quality of the earth, by which it can be made to yield a greater portion of the necessaries of life than is required for the maintenance of the persons employed on the land.
Secondly, that quality peculiar to the necessaries of life of being able to create their own demand, or to raise up a number of demanders in proportion to the quantity of necessaries produced.
And, thirdly, the comparative scarcity of the most fertile land.
The qualities of the soil and of its products, here noticed as the primary causes of the high price of raw produce, are the gifts of nature to man. They are quite unconnected with monopoly, and yet are so absolutely essential to the existence of rent, that without them, no degree of scarcity or monopoly could have occasioned that excess of the price of raw produce, above the cost of production, which shows itself in this form.
It has been stated, in the new edition of the Wealth of Nations, that the cause of the high price of raw produce is, that such price is required to proportion the consumption to the supply. This is also true, but it affords no solution of the point in question. We still want to know why the consumption and supply are such as to make the price so greatly exceed the cost of production, and the main cause is evidently the fertility of the earth in producing the necessaries of life.
In the early periods of society, or more remarkably perhaps, when the knowledge and capital of an old society are employed upon fresh and fertile land, this surplus produce, this bountiful gift of providence, shows itself chiefly in extraordinary high profits, and extraordinary high wages, and appears but little in the shape of rent. While fertile land is in abundance, and may be had by whoever asks for it, nobody of course will pay a rent to a landlord. But it is not consistent with the laws of nature, and the limits and quality of the earth, that this state of things should continue. Diversities of soil and situation must necessarily exist in all countries. All land cannot be the most fertile: all situations cannot be the nearest to navigable rivers and markets. But the accumulation of capital beyond the means of employing it on land of the greatest natural fertility, and the greatest advantage of situation, must necessarily lower profits; while the tendency of population to increase beyond the means of subsistence must, after a certain time, lower the wages of labour.
If the general profits of stock were 20 per cent and particular portions of land would yield 30 per cent on the capital employed, 10 per cent of the 30 would obviously be rent, by whomsoever received.
Nor would the effect be essentially different ... if instead ... there was the same increasing demand for ... manufactures. These manufactures, if from such a demand the value of their amount in foreign countries was greatly to increase, would bring back a great increase of value in return, which increase of value could not fail to increase the value of the raw produce. The demand for agricultural as well as manufactured produce would be augmented; and a considerable stimulus, ... would be given to every kind of improvement on the land.
A similar effect would be produced by the introduction of new machinery, and a more judicious division of labour in manufactures. It almost always happens in this case, not only that the quantity of manufactures is very greatly increased, but that the value of the whole mass is augmented, from the great extension of the demand for them, occasioned by their cheapness. We see, in consequence, that in all rich manufacturing and commercial countries, the value of manufactured and commercial products bears a very high proportion to the raw products; whereas, in comparatively poor countries, without much internal trade and foreign commerce, the value of their raw produce constitutes almost the whole of their wealth. If we suppose the wages of labour so to rise with the rise of produce, as to give the labourer the same command of the means of subsistence as before, yet if he is able to purchase a greater quantity of other necessaries and conveniencies, both foreign and domestic, with the price of a given quantity of corn, he may be equally well fed, clothed, and lodged, and population may be equally encouraged, although the wages of labour may not rise so high in proportion as the price of produce.
Let us suppose seven or eight large countries not very distant from each other, and not very differently situated with regard to the mines. Let us suppose further, that neither their soils nor their skill in agriculture are essentially unlike; that their currencies are in a natural state; their taxes nothing; and that every trade is free, except the trade in corn. Let us now suppose one of them very greatly to increase in capital and manufacturing skill above the rest, and to become in consequence much more rich and populous. I should say, that this great comparative increase of riches could not possibly take place, without a great comparative advance in the price of raw produce; and that such advance of price would, under the circumstances supposed, be the natural sign and absolutely necessary consequence, of the increased wealth and population of the country in question.
Let us now suppose the same countries to have the most perfect freedom of intercourse in corn, and the expenses of freight, etc. to be quite inconsiderable. And let us still suppose one of them to increase very greatly above the rest, in manufacturing capital and skill, in wealth and population. I should then say, that as the importation of corn would prevent any great difference in the price of raw produce, it would prevent any great difference in the quantity of capital laid out upon the land, and the quantity of corn obtained from it; that, consequently, the great increase of wealth could not take place without a great dependence on the other nations for corn; and that this dependence, under the circumstances supposed, would be the natural sign, and absolutely necessary consequence of the increased wealth and population of the country in question.
With regard to improvements in agriculture, which in similar soils is the great cause which retards the advance of price compared with the advance of produce; although they are sometimes very powerful, they are rarely found sufficient to balance the necessity of applying to poorer land, or inferior machines. In this respect, raw produce is essentially different from manufactures.
There is scarcely any inquiry more curious, or, from its importance, more worthy of attention, than that which traces the causes which practically check the progress of wealth in different countries, and stop it, or make it proceed very slowly while the power of production remains comparatively undiminished, or at least would furnish the means of a great and abundant increase of produce and population.
In a former work I endeavoured to trace the causes which practically keep down the population of a country to the level of its actual supplies. It is now my object to show what are the causes which chiefly influence these supplies, or call the powers of production forth into the shape of increasing wealth.
Among the primary and most important causes which influence the wealth of nations, must unquestionably be placed, those which come under the head of politics and morals. Security of property, without a certain degree of which, there can be no encouragement to individual industry, depends mainly upon the political constitution of a country, the excellence of its laws and the manner in which they are administered. And those habits which are the most favourable to regular exertions as well as to general rectitude of character, and are consequently most favourable to the production and maintenance of wealth, depend chiefly upon the same causes, combined with moral and religious instruction. It is not however my intention at present to enter fully into these causes, important and effective as they are; but to confine myself chiefly to the more immediate and proximate causes of increasing wealth, whether they may have their origin in these political and moral sources, or in any others more specifically and directly within the province of political economy.
It is obviously true that there are many countries, not essentially different either in the degree of security which they afford to property, or in the moral and religious instruction received by the people, which yet, with nearly equal natural capabilities, make a very different progress in wealth. It is the principal object of the present inquiry to explain this; and to furnish some solution of certain phenomena frequently obtruded upon our attention, whenever we take a view of the different states of Europe, or of the world; namely, countries with great powers of production comparatively poor, and countries with small powers of production comparatively rich.
If the actual riches of a country not subject to repeated violences and a frequent destruction of produce, be not after a certain period in some degree proportioned to its power of producing riches, this deficiency must have arisen from the want of an adequate stimulus to continued production. The practical question then for our consideration is, what are the most immediate and effective stimulants to the continued creation and progress of wealth.
Many writers have been of opinion that an increase of population is the sole stimulus necessary to the increase of wealth, because population, being the great source of consumption, must in their opinion necessarily keep up the demand for an increase of produce, which will naturally be followed by a continued increase of supply.
That a permanent increase of population is a powerful and necessary element of increasing demand, will be most readily allowed; but that the increase of population alone, or, more properly speaking, the pressure of the population hard against the limits of subsistence, does not furnish an effective stimulus to the continued increase of wealth, is not only evident in theory, but is confirmed by universal experience. If want alone, or the desire of the labouring classes to possess the necessaries and conveniences of life, were a sufficient stimulus to production, there is no state in Europe, or in the world, that would have found any other practical limit to its wealth than its power to produce; and the earth would probably before this period have contained, at the very least, ten times as many inhabitants as are supported on its surface at present.
But those who are acquainted with the nature of effective demand, will be fully aware that, where the right of private property is established, and the wants of society are supplied by industry and barter, the desire of any individual to possess the necessary conveniences and luxuries of life, however intense, will avail nothing towards their production, if there be no where a reciprocal demand for something which he possesses. A man whose only possession is his labour has, or has not, an effective demand for produce according as his labour is, or is not, in demand by those who have the disposal of produce. And no productive labour will ever be in demand unless the produce when obtained is of greater value than the labour which obtained it. No fresh hands can be employed in any sort of industry merely in consequence of the demand for its produce occasioned by the persons employed. No farmer will take the trouble of superintending the labour of ten additional men merely because his whole produce will then sell in the market at an advanced price just equal to what he had paid his additional labourers. There must be something in the previous state of the demand and supply of the commodity in question, or in its price, antecedent to and independently of the demand occasioned by the new labourers, in order to warrant the employment of an additional number of people in its production.
It will be said perhaps that the increase of population will lower wages, and, by thus diminishing the costs of production, will increase the profits of the capitalists and the encouragement to produce. Some temporary effect of this kind may no doubt take place, but it is evidently very strictly limited. The fall of wages cannot go on beyond a certain point without not only stopping the progress of the population but making it even retrograde; and before this point is reached, it will probably happen that the increase of produce occasioned by the labour of the additional number of persons will have so lowered its value, as more than to counterbalance the fall of wages, and thus to diminish instead of increase the profits of the capitalists and the power and will to employ more labour.
It is obvious then in theory that an increase of population, when an additional quantity of labour is not wanted, will soon be checked by want of employment, and the scanty support of those employed, and will not furnish the required stimulus to an increase of wealth proportioned to the power of production.
But, if any doubts should remain with respect to the theory , on the subject , they will surely be dissipated by a reference to experience. It is scarcely possible to cast our eyes on any nation of the world without seeing a striking confirmation of what has been advanced. Almost universally, the actual wealth of all the states with which we are acquainted is very far short of their powers of production; and almost universally among those states, the slowest progress in wealth is made where the stimulus arising from population alone is the greatest, that is, where the population presses the hardest against the limits of subsistence. It is quite evident that the only fair way, indeed the only way, by which we can judge of the practical effect of population alone as a stimulus to wealth, is to refer to those countries where, from the excess of population above the funds applied to the maintenance of labour, the stimulus of want is the greatest. And if in these countries, which still have great powers of production, the progress of wealth is very slow, we have certainly all the evidence which experience can possibly give us, that population alone cannot create an effective demand for wealth.
To suppose an actual and permanent increase of population is to beg the question. We may as well suppose at once an increase of wealth; because an actual and permanent increase of population cannot take place without a proportionate or nearly proportionate increase of wealth. The question really is, whether encouragements to population, or even the natural tendency of population to increase beyond the funds for its maintenance, so as to press hard against the limits of subsistence, will, or will not, alone furnish an adequate stimulus to the increase of wealth. And this question, Spain, Portugal, Poland, Hungary, Turkey, and many other countries in Europe, together with nearly the whole of Asia and Africa, and the greatest part of America, distinctly answer in the negative.
It has been thought by some very able writers, that although there may easily be a glut of particular commodities, there cannot possibly be a glut of commodities in general; because, according to their view of the subject, commodities always being exchanged for commodities, one half will furnish a market for the other half, and production being thus the whole source of demand, an excess in the supply of one article merely proves a deficiency in the supply of some other, and a general excess is impossible. M. Say, in his distinguished work on political economy, has indeed gone so far as to state that the consumption of a commodity by taking it out of the market diminishes demand, and the production of a commodity proportionably increases it.
This doctrine, however, as generally applied, appears to me to be utterly unfounded, and completely to contradict the great principles which regulate supply and demand.
[From a later section]
There must be a considerable class of persons who have both the will and power to consume more material wealth than they produce, or the mercantile classes could not continue profitably to produce so much more than they consume. In this class the landlords no doubt stand pre-eminent, ...
But it appears to me perfectly clear in theory, and universally confirmed by experience, that the employment of capital may, and in fact often does, find a limit, long before there is any real difficulty in procuring the means of subsistence; and that both capital and population may be at the same time, and for a period of considerable length, redundant, compared with the effectual demand for produce.
The first thing wanted in both these cases of deficient capital and deficient population, is an effective demand for commodities, that is, a demand by those who are able and willing to pay an adequate price for them; and though high profits are not followed by an increase of capital, so certainly as high wages are by an increase of population, yet I believe that they are so followed more generally than they appear to be, because, in many countries, as I have before intimated, profits are often thought to be high, owing to the high interest of money, when they are really low; and because, universally, risk in employing capital has precisely the same effect in diminishing the motive to accumulate and the reward of accumulation, as low profits.
One of the most striking instances of the truth of this remark, and a further proof of a singular resemblance in the laws that regulate the increase of capital and of population, is to be found in the rapidity with which the loss of capital is recovered during a war which does not interrupt commerce. The loans to government convert capital into revenue, and increase demand at the same time that they at first diminish the means of supply.
The necessary consequence must be an increase of profits. This naturally increases both the power and the reward of accumulation; and if only the same habits of saving prevail among the capitalists as before, the recovery of the lost stock must be rapid, just for the same kind of reason that the recovery of population is so rapid when, by some cause or other, it has been suddenly destroyed.
It is now fully acknowledged that it would be a gross error in the latter case, to imagine that, without the previous diminution of the population, the same rate of increase would still have taken place; because it is precisely the high wages occasioned by the demand for labour, which produce the effect of so rapid an increase of population. On the same principle it appears to me as gross an error to suppose that, without the previous loss of capital occasioned by the expenditure in question, capital should be as rapidly accumulated; because it is precisely the high profits of stock occasioned by the demand for commodities, and the consequent demand for the means of producing them, which at once give the power and the will to accumulate.
Though it may be allowed therefore that the laws which regulate the increase of capital are not quite so distinct as those which regulate the increase of population, yet they are certainly just of the same kind; and it is equally vain, with a view to the permanent increase of wealth, to continue converting revenue into capital, when there is no adequate demand for the products of such capital, as to continue encouraging marriage and the birth of children without a demand for labour and an increase of the funds for its maintenance.