Probable error of Dr Adam Smith in representing every increase of the revenue or stock of a society as an increase in the funds for the maintenance of labour — Instances where an increase of wealth can have no tendency to better the condition of the labouring poor — England has increased in riches without a proportional increase in the funds for the maintenance of labour — The state of the poor in China would not be improved by an increase of wealth from manufactures.
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 sufficiency 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.
The question is whether wealth, increasing in this way, has any tendency to better the condition of the labouring poor. It is a self-evident proposition that any general rise in the price of labour, the stock of provisions remaining the same, can only be a nominal rise, as it must very shortly be followed by a proportional rise in the price of provisions. The increase in the price of labour, therefore, which we have supposed, would have little or no effect in giving the labouring poor a greater command over the necessaries and conveniences of life. In this respect they would be nearly in the same state as before. In one other respect they would be in a worse state. A greater proportion of them would be employed in manufactures, and fewer, consequently, in agriculture. And this exchange of professions will be allowed, I think, by all, to be very unfavourable in respect of health, one essential ingredient of happiness, besides the greater uncertainty of manufacturing labour, arising from the capricious taste of man, the accidents of war, and other causes.
It may be said, perhaps, that such an instance as I have supposed could not occur, because the rise in the price of provisions would immediately turn some additional capital into the channel of agriculture. But this is an event which may take place very slowly, as it should be remarked that a rise in the price of labour had preceded the rise of provisions, and would, therefore, impede the good effects upon agriculture, which the increased value of the produce of the land might otherwise have occasioned.
It might also be said, that the additional capital of the nation would enable it to import provisions sufficient for the maintenance of those whom its stock could employ. A small country with a large navy, and great inland accommodations for carriage, such as Holland, may, indeed, import and distribute an effectual quantity of provisions; but the price of provisions must be very high to make such an importation and distribution answer in large countries less advantageously circumstanced in this respect.
An instance, accurately such as I have supposed, may not, perhaps, ever have occurred, but I have little doubt that instances nearly approximating to it may be found without any very laborious search. Indeed I am strongly inclined to think that England herself, since the Revolution, affords a very striking elucidation of the argument in question.
The commerce of this country, internal as well as external, has certainly been rapidly advancing during the last century. The exchangeable value in the market of Europe of the annual produce of its land and labour has, without doubt, increased very considerably. But, upon examination, it will be found that the increase has been chiefly in the produce of labour and not in the produce of land, and therefore, though the wealth of the nation has been advancing with a quick pace, the effectual funds for the maintenance of labour have been increasing very slowly, and the result is such as might be expected. The increasing wealth of the nation has had little or no tendency to better the condition of the labouring poor. They have not, I believe, a greater command of the necessaries and conveniences of life, and a much greater proportion of them than at the period of the Revolution is employed in manufactures and crowded together in close and unwholesome rooms.
Could we believe the statement of Dr Price that the population of England has decreased since the Revolution, it would even appear that the effectual funds for the maintenance of labour had been declining during the progress of wealth in other respects. For I conceive that it may be laid down as a general rule that if the effectual funds for the maintenance of labour are increasing, that is, if the territory can maintain as well as the stock employ a greater number of labourers, this additional number will quickly spring up, even in spite of such wars as Dr Price enumerates. And, consequently, if the population of any country has been stationary, or declining, we may safely infer, that, however it may have advanced in manufacturing wealth, its effectual funds for the maintenance of labour cannot have increased.
It is difficult, however, to conceive that the population of England has been declining since the Revolution, though every testimony concurs to prove that its increase, if it has increased, has been very slow. In the controversy which the question has occasioned, Dr Price undoubtedly appears to be much more completely master of his subject, and to possess more accurate information, than his opponents. Judging simply from this controversy, I think one should say that Dr Price’s point is nearer being proved than Mr Howlett’s. Truth, probably, lies between the two statements, but this supposition makes the increase of population since the Revolution to have been very slow in comparison with the increase of wealth.
That the produce of the land has been decreasing, or even that it has been absolutely stationary during the last century, few will be disposed to believe. The enclosure of commons and waste lands certainly tends to increase the food of the country, but it has been asserted with confidence that the enclosure of common fields has frequently had a contrary effect, and that large tracts of land which formerly produced great quantities of corn, by being converted into pasture both employ fewer hands and feed fewer mouths than before their enclosure. It is, indeed, an acknowledged truth, that pasture land produces a smaller quantity of human subsistence than corn land of the same natural fertility, and could it be clearly ascertained that from the increased demand for butchers’ meat of the best quality, and its increased price in consequence, a greater quantity of good land has annually been employed in grazing, the diminution of human subsistence, which this circumstance would occasion, might have counterbalanced the advantages derived from the enclosure of waste lands, and the general improvements in husbandry.
It scarcely need be remarked that the high price of butchers’ meat at present, and its low price formerly, were not caused by the scarcity in the one case or the plenty in the other, but by the different expense sustained at the different periods, in preparing cattle for the market. It is, however, possible, that there might have been more cattle a hundred years ago in the country than at present; but no doubt can be entertained, that there is much more meat of a superior quality brought to market at present than ever there was. When the price of butchers’ meat was very low, cattle were reared chiefly upon waste lands; and except for some of the principal markets, were probably killed with but little other fatting. The veal that is sold so cheap in some distant counties at present bears little other resemblance than the name, to that which is bought in London. Formerly, the price of butchers, meat would not pay for rearing, and scarcely for feeding, cattle on land that would answer in tillage; but the present price will not only pay for fatting cattle on the very best land, but will even allow of the rearing many, on land that would bear good crops of corn. The same number of cattle, or even the same weight of cattle at the different periods when killed, will have consumed (if I may be allowed the expression) very different quantities of human substance. A fatted beast may in some respects be considered, in the language of the French economists,36 as an unproductive labourer: he has added nothing to the value of the raw produce that he has consumed. The present system of grating, undoubtedly tends more than the former system to diminish the quantity of human subsistence in the country, in proportion to the general fertility of the land.
I would not by any means be understood to say that the former system either could or ought to have continued. The increasing price of butchers’ meat is a natural and inevitable consequence of the general progress of cultivation; but I cannot help thinking, that the present great demand for butchers’ meat of the best quality, and the quantity of good land that is in consequence annually employed to produce it, together with the great number of horses at present kept for pleasure, are the chief causes that have prevented the quantity of human food in the country from keeping pace with the generally increased fertility of the soil; and a change of custom in these respects would, I have little doubt, have a very sensible effect on the quantity of subsistence in the country, and consequently on its population.
The employment of much of the most fertile land in grating, the improvements in agricultural instruments, the increase of large farms, and particularly the diminution of the number of cottages throughout the kingdom, all concur to prove, that there are not probably so many persons employed in agricultural labour now as at the period of the Revolution. Whatever increase of population, therefore, has taken place, must be employed almost wholly in manufactures, and it is well known that the failure of some of these manufactures, merely from the caprice of fashion, such as the adoption of muslins instead of silks, or of shoe-strings and covered buttons, instead of buckles and metal buttons, combined with the restraints in the market of labour arising from corporation and parish laws, have frequently driven thousands on charity for support. The great increase of the poor rates is, indeed, of itself a strong evidence that the poor have not a greater command of the necessaries and conveniences of life, and if to the consideration, that their condition in this respect is rather worse than better, be added the circumstance, that a much greater proportion of them is employed in large manufactories, unfavourable both to health and virtue, it must be acknowledged, that the increase of wealth of late years has had no tendency to increase the happiness of the labouring poor.
That every increase of the stock or revenue of a nation cannot be considered as an increase of the real funds for the maintenance of labour and, therefore, cannot have the same good effect upon the condition of the poor, will appear in a strong light if the argument be applied to China.
Dr Adam Smith observes that China has probably long been as rich as the nature of her laws and institutions will admit, but that with other laws and institutions, and if foreign commerce were had in honour, she might still be much richer. The question is, would such an increase of wealth be an increase of the real funds for the maintenance of labour, and consequently tend to place the lower classes of people in China in a state of greater plenty?
It is evident, that if trade and foreign commerce were held in great honour in China, from the plenty of labourers, and the cheapness of labour, she might work up manufactures for foreign sale to an immense amount. It is equally evident that from the great bulk of provisions and the amazing extent of her inland territory she could not in return import such a quantity as would be any sensible addition to the annual stock of subsistence in the country. Her immense amount of manufactures, therefore, she would exchange, chiefly, for luxuries collected from all parts of the world. At present, it appears, that no labour whatever is spared in the production of food. The country is rather over-people in proportion to what its stock can employ, and labour is, therefore, so abundant, that no pains are taken to abridge it. The consequence of this is, probably, the greatest production of food that the soil can possibly afford, for it will be generally observed, that processes for abridging labour, though they may enable a farmer to bring a certain quantity of grain cheaper to market, tend rather to diminish than increase the whole produce; and in agriculture, therefore, may, in some respects, be considered rather as private than public advantages.
An immense capital could not be employed in China in preparing manufactures for foreign trade without taking off so many labourers from agriculture as to alter this state of things, and in some degree to diminish the produce of the country. The demand for manufacturing labourers would naturally raise the price of labour, but as the quantity of subsistence would not be increased, the price of provisions would keep pace with it, or even more than keep pace with it if the quantity of provisions were really decreasing. The country would be evidently advancing in wealth, the exchangeable value of the annual produce of its land and labour would be annually augmented, yet the real funds for the maintenance of labour would be stationary, or even declining, and, consequently, the increasing wealth of the nation would rather tend to depress than to raise the condition of the poor. With regard to the command over the necessaries and comforts of life, they would be in the same or rather worse state than before; and a great part of them would have exchanged the healthy labours of agriculture for the unhealthy occupations of manufacturing industry.
The argument, perhaps, appears clearer when applied to China, because it is generally allowed that the wealth of China has been long stationary. With regard to any other country it might be always a matter of dispute at which of the two periods, compared, wealth was increasing the fastest, as it is upon the rapidity of the increase of wealth at any particular period that Dr Adam Smith says the condition of the poor depends. It is evident, however, that two nations might increase exactly with the same rapidity in the exchangeable value of the annual produce of their land and labour, yet if one had applied itself chiefly to agriculture, and the other chiefly to commerce, the funds for the maintenance of labour, and consequently the effect of the increase of wealth in each nation, would be extremely different. In that which had applied itself chiefly to agriculture, the poor would live in great plenty, and population would rapidly increase. In that which had applied itself chiefly to commerce, the poor would be comparatively but little benefited and consequently population would increase slowly.
Last updated Sunday, March 27, 2016 at 11:58