Lecture XI.

It is by no means a useless or uninteresting occupation, to reflect upon the various changes which in the progress of society take place in these great sources of revenue, namely, rent, profits, and wages. To investigate what laws and customs tend to increase or diminish those sources, is the principal object of Political-Economy. Today I intend merely to give a slight sketch of the principles on which such enquiries may be conducted, and of the inferences regarding them that may be drawn from the propositions which in the course of this Term I attempted to prove and to explain. The result of such enquiries will not, I trust, be unpleasing to the benevolent mind. The laws according to which wealth is created, distributed, and consumed, have been framed by the Great Author of our being, with the same regard to our happiness which is manifested by the laws that govern the material world. We shall find that all the causes which diminish any source of wealth originate in vice or folly—in a course of conduct which our higher faculties forbid us to pursue. At first sight it would appear, and many reasonings have proceeded upon the supposition, that the three principal classes have interests directly adverse to each other. That the landlord gets all the produce of the soil, except what is divided between the labourer and the capitalist. The more they take, the less is given to him. The more he gets, the less remains for them; and therefore as rent increases, the portion that is divided between the labourer and the farmer must suffer a corresponding diminution. In the same manner, as the fruits of industry are divided between the capitalist and the labourer, it might hastily be supposed that the gain of one must be the loss of the other. But the fact is not so. The parties to every contract have just at the time of making it, an interest opposed to each other, each being desirous to get as much, and to give as little, as he can. But the competition of others prevents this adverse interest from operating to the detriment of either, and previous to the contract, all parties have a common interest that the articles which are the subject of the exchange should be produced in the best and cheapest manner.

As a source of revenue, rent is capable of increasing without any exertions on the part of the proprietor. It increases naturally with the progress of society, as the increase of population creates a necessity of resorting for subsistence to inferior soils. This naturally raises the price of agricultural produce, and enables the landlord to receive a higher rent. Improvements in agriculture have a contrary tendency; they lower the prices of agricultural produce, and, if suddenly and universally introduced, would lower prices and diminish rents. But their introduction is never suddenly universal: they spread slowly, and population increases at the same time, so that one cause counteracting another, the price of corn is kept nearly stationary; consequently land, now taught more cheaply to yield a more abundant produce, is capable of yielding a higher rent, and the income of the landlord is increased, although the society is not obliged to pay a higher price for the materials of its subsistence. As the quantity of land within the kingdom remains the same, while the number of labourers, and quantity of capital, and total amount of rent are increasing, it is sometimes supposed that the condition of the landlord improves faster than that of the other classes. The increased rent is paid for an unaltered quantity of land; but the total quantity of profits is earned by an increased quantity of capital, and the total quantity of wages by an increased number of labourers; so that the profits of a given quantity of capital, or of a single labourer, may diminish, while the rent of any given estate will increase. This is true. But unless where the natural course of things is interfered with by artificial institutions, the number of landlords has also a tendency to increase. So that the same quantity of land will be distributed among a greater number of proprietors, and the relative situation of the classes will remain as before, and a greater number of men will be supported by the rent of land, a greater number by the profits of capital, and a greater number by the wages of their labour. Also, as society advances, the various articles of comfort and luxury will be more cheaply made, so that the same amount of rent will suffice to purchase a greater quantity. An estate in England would probably, at the present day, furnish ten families with the same amount of necessaries, comforts, and luxuries, that a single family could receive from it 200 years ago.

It is certainly a desirable thing that there should be in the country a number of persons, without toil or danger, in possession of comfort, and even affluence. Their advantages from education and society, their natural sense of honor and independence, will render them useful, as examples, to the rest of their countrymen in many respects. They will always form a very respectable class, and will naturally have much influence in discountenancing many habits of meanness and servility, which otherwise might spring up in a society, if every individual’s time and thoughts were devoted to the pursuit of gain. I do not say that the character or conduct of a landlord is likely to be better on the whole than that of a merchant or a labourer. His birth and education may give him advantages in some respects, and lay him under disadvantages in others. But his faults will not be of the same kind, and that is an important circumstance. We are more easily led into those vicious habits, from which we perceive none of our acquaintances to be free. It is therefore important that all should not be subject to the same temptations. Nothing but universal custom can blunt our feelings of what is right or wrong, and few who have an opportunity of viewing and comparing both, will hesitate to prefer the former, and to mark that preference at least by their approbation. Besides the advantage of the salutary influence of the examples of landlords upon society, another benefit results from the increase of rent as a source of wealth. The landlords themselves, and their families, are a numerous class, whose happiness, therefore, is a matter of no small concern. Increased rents afford the materials of subsistence and innocent enjoyment to an increased number, and the effect of improvements of all kinds is, that this increase takes place without a reduction of wages or profits. The number who participate in those advantages is not as great as it would be, were it not for several artificial institutions, which tend to prevent the division of landed property, and even without such institutions, there would be little reason to apprehend that the number of landed proprietors should ever become too great.

But in Political-Economy, profits and wages are more important sources of wealth than rent. They differ from rent in this, that they afford a stimulus to production, and so far as one does not interfere with the other, it is desirable that both should be as high as possible. But legislation can do nothing here, every thing must be left to contract. The rate of profits may be measured, as I have attempted to shew, by the efficiency in assisting labour, of the least efficient capital. An example may prove this. Suppose the last capital employed in any manufacture is so efficient that an increased expense of machinery, equivalent to the labour of 100 men, shall produce a return equal to what would be produced by the labour of 10 additional men per annum. While this is the last application of capital, and only partially introduced from want of sufficient capital to introduce it universally, profits must be exactly 10 per cent. per annum. They cannot be more, for this last capital is not capable of yielding more. At a higher rate of profits it would be cheaper to employ 10 men per annum, than 100 men at once. And profits cannot be less than 10 per cent., for the proprietors of this last applied capital will obtain 10 per cent. for it, if they pay the same wages to their labourers, and obtain the same price for their goods, as other people. We must take care not to confound the last capital applied to land, with the last or least efficient capital, considered with a view to its efficiency in superseding labour. For instance, when inferior soils are brought under cultivation, some of the capital employed for that purpose is of the most efficient kind in superseding labour, and it is its efficiency in this latter respect that regulates profits.

The rate of profits has a tendency to decline with the increase of capital, but in the progress of society this tendency is in a great measure counteracted by several circumstances. 1st. The increase of population gives a greater scope for the employment of capital, and provides a more extended market for its productions. The increased capital is required to advance wages to an increased number of labourers, to supply them with the requisite machinery, and to produce the commodities required for the consumption of an increased population. 2ndly. Improvements have the effect of keeping up the rate of profits, by finding new employments for capital, and new modes of assisting and superseding labour. This cause of increased profits is in no manner detrimental to the labourer, since it is caused by the increased efficiency of capital in assisting his powers of production. The increase will always leave to him at least the same share as before, and generally even a greater, and will lead to a further accumulation of capital, to the additional advantage of the labourer. 3rdly. Increased skill, and good conduct on the part of the labourer, is a source of increase of profit in a slight degree. It enables the capitalist to construct machinery more cheaply in proportion to its efficiency, and it adds to the value of the labour, which is multiplied or superseded by its means. This cause, however, has much greater effect in increasing wages than in adding to the rate of profits. 4thly. As society advances in civilization—intelligence, attention, and industry will be more generally possessed by the capitalist, and the vigorous exertion of those qualities will in some measure counteract the tendency of profits to decline.

Still it is on the whole probable, that capital will accumulate so fast as that profits will decline, but the effect of a decline of profits, when produced by such a cause, will by no means be detrimental to the society. It will be accompanied by many advantages. The first direct and most striking effect of a habitually low rate of profits is to render the future and present period of nearly equal importance in all pecuniary speculations. In comparing future with present advantage, a lower rate of discount is necessary than when profits are high: and permanence and durability become of more importance, and will be purchased by a greater immediate expenditure when profits fall. An annuity, or a constantly recurring advantage which partakes of the nature of an annuity, will be purchased at a greater immediate sacrifice than before, in proportion to the period for which the advantage is to endure. And, in the same manner, for any advantage to be gained at a future period, a larger annuity in the mean time will be paid, or a greater intermediate sacrifice of toil and expense will be made. The calculation to prove this is almost too evident to require any statement of it. In comparing any present and future advantage, if each is to be measured by the price that it would cost at the time of enjoyment, an allowance must be made in the comparison, for the profit that in the mean time might be made of the price of the former. If the rate of profits is 20 per cent. per annum, two advantages, of which one is to be enjoyed now, and the other at the end of a year, would be of equal present values when their proportions were as 5 to 6, since £100 now, would at the end of the year be made £120. If the rate of profits is 10 per cent., the proportion must be as 11 to 10; if 5 per cent., as 21 to 20; and so on, as the rate of profits diminishes, the proportion will become nearer to equality. In consequence of this state of things, many permanent investments of capital will be made, which while the rate of profits was higher, could not have been done except at a disadvantage, and generally in all kinds of works, durability will be more studied, and will be purchased by greater sacrifices than before. This is very favourable to the accumulation of capital within the country, since a larger proportion than heretofore will be laid out in durable improvements, which cannot be removed or transferred to another land. While the rate of profits is high, it is of importance that the returns to capital should be quick, and a speedy return will be preferred to one of much greater amount, if the latter cannot be received until the expiration of a long period. But as the rate of profits diminishes, the interval between the outlay and the return becomes of less importance, and durability, when the returns are contemplated at a distant period, becomes an object of attention. Thus roads, canals, quays, docks, bridges, and all kinds of buildings, public and private, will be constructed with greater care, and will become desirable modes of investing capital. Improvements in land, by fencing, draining, &c. will be made, which could not be effected with the same prices of agricultural produce, if the rate of profits was higher. And as losses from ignorance or negligence will be more severely felt, greater care must be observed in the conduct of every business, and thus the wages of labour will become more mixed up with the profits of capital. For although in analysis, it is convenient to distinguish between wages and profits, yet part of the profits which the capitalist appears to derive from his capital, is in fact only a return for his skill and labour in superintending the business in which it is employed. Thus in some trades the greater part, and in almost all, some part of what appears to be profits, is to be considered more properly as wages, and in the same manner, in many employments: what is denominated wages consists partly of profits of the capital, either employed by the labourer in his trade, or expended in procuring his education. As profits fall from the accumulation of capital, this union prevails more. Capital, in consequence of the increased competition, will do little unless it is wisely and carefully superintended, and the labourer will in general be possessed of some capital, the employment of which will add to the apparent wages of his labour. Education also, which implies a present sacrifice to procure a future good, will probably become more prevalent, and the country possessed of a redundant capital, will offer to the general market of the world such goods as require in their fabrication the employment of intelligent labourers and of skilfully directed capital, and will procure at a cheaper rate by means of exchange, such goods as can be manufactured without skill or capital.

Many other consequences, which I need not dilate upon, follow from abundance of capital, and the consequent low rate of profit. For example, cleanliness will be most likely to prevail where such a state of things exist. Dirt is scarcely more disgusting to the senses, than it is injurious to material wealth. In many articles of use and enjoyment, it produces a rapid decay. At the same time, cleanliness generally requires some immediate expense or labour to keep it up, and therefore, as the durability of articles becomes more important in comparison with a slight immediate expense, cleanliness will become more indispensable as a measure of economy. This cause will make it grow into a habit, and be observed even when no wealth would be destroyed by departing from it. Humanity to the inferior animals will become general, nearly in the same manner. It will become good economy, as an animal’s power of doing work for a longer period will become more important. Indeed there is a strong analogy between those two virtues. Nothing but habit can reconcile men to dirt or inhumanity, and they both bring a certain ultimate loss to the owner of property, and they can both be generally avoided by an exceedingly light present expense.

The disadvantages of a low rate of profits are—1st. The reduction of the income of the capitalist. 2ndly. The difficulty it adds to the accumulation of capital. 3dly. The inducements it holds out to the proprietors of capital to remove it to another country. Those disadvantages are, with the progress of society, counteracted by the abundance of capital, which notwithstanding the low rate of profits, makes their total amount very large, and by the habits of saving, and the prudent regard to the future, which must exist in such a country. The disposition of capital to migrate is checked by the manner in which much of it will be invested, in bridges, canals, rail-roads, &c. which cannot be removed, and by the manner in which the wages of his skill and industry are mixed up with the profit of the capitalist. This skill and industry will be comparatively useless, if he transfers his capital to another land. Accustomed to the superintendence of labourers possessed of a certain degree of skill, intelligence, and honesty, he will dislike to employ those whom alone he can procure in a country where capital is less abundant. The greater security too of his life, liberty, property, and character, will be inducements to the capitalist to withstand the temptations which high profits might offer to him to migrate to a comparatively barbarous country, and if a little capital does migrate, its loss will not be felt, the quantity removed will be so small, compared with the abundance left behind.

The causes which affect the wages of labour are in constant operation, and the condition of the labourer is rarely stationary for any length of time. Some of the changes produced by the progress of society lay him under disadvantages, and others have a tendency to improve his condition. I have shewn that his wages depend upon the productiveness of labour and the rate of profit, and that as capital increases in the country, the rate of profits has a tendency to decline. But we have also seen that the productiveness of agricultural labour has a tendency to diminish. This is a serious evil. Every man has occasion to use the produce of the earth; and as more labour becomes necessary to produce the same quantity of corn, the wages of the same quantity of labour cannot purchase as much corn as before, and consequently the labourer finds increased difficulty in providing subsistence for himself and his family. The increase of population has also a tendency to raise the rate of profits, and thus lower the rate of wages. This latter tendency is counteracted by the increased accumulations of capital. But the evil arising from the necessity of resorting for subsistence to inferior soils, may be neutralized by other circumstances, which will probably occur as society advances. 1st. Improvements in agriculture have an effect in diminishing the cost of production of corn, which may be equal, or even superior to the contrary effect produced by the increase of population. There is no necessary relation between the magnitudes of those effects; either may exceed the other; and the condition of the labourer is materially affected by the direction and amount of the excess. Having this in view, such institutions are to be preferred as will cause the beneficial effects produced by the progress of society, to exceed the prejudicial effects resulting from the increase of population. The skill and capital of the country remaining the same, what effect an increased population will have in increasing the cost of production of corn will depend upon the relative quantities and fertilities of the different soils, and the natural capabilities of the country, over which man cannot exercise any control. The subject of population is too extensive to be discussed at present, and therefore I shall merely observe, that population naturally increases, and that there is little room for the wisdom of legislation, except to provide that no artificial stimulus shall be given to its increase. But the advantages which naturally accompany, though they do not necessarily follow from, an increase of population, are placed more within man’s control. Wise institutions and good habits may make them far more than a compensation for the decreasing fertility of the soil, as on the other hand, corrupt habits or injudicious regulations may annul them altogether, and allow the march of population to produce an unmitigated evil. Agricultural improvements will naturally take place as population increases. There will be a greater demand for the produce of the soil, and necessity is proverbially the mother of invention. A greater number of people turning their thoughts to the same pursuits, and the general diffusion of education and increased means of communication, naturally lead to the same result. But this secondary effect of the growth of population, this beneficial counteracting influence, is very dependent upon the wisdom of our institutions for the extent to which it will prevail. Undoubtedly, a dense population is in many respects highly favourable to the diffusion of knowledge and civilization, but it does not necessarily lead to such results. Freedom and security are equally essential; and the intellectual, moral, and religious education of the people are not less necessary. If these are carefully protected and promoted by our institutions, and if no artificial stimulus is given to the increase of population, we have every reason to hope, that with the progress of society, population and wealth will increase together, and that more human beings will be supported in greater comfort than heretofore. At least our trust in the wisdom and goodness of the Supreme Being, would lead us to expect with confidence that it will be so. For experience and reason alike prove that there is a certain degree of poverty among the inhabitants of a country, which is incompatible with obedience to the laws, with an intellectual or moral education, and is adverse to the propagation of true religion.

Besides the progress of agricultural improvements, there are many other circumstances to counteract the evil arising from the necessity of resorting for subsistence to inferior soil. An improved system of division of labour, and the extension of machinery in manufactures, enables the labourer to live even more comfortably than before. He will gain more by the diminished prices of all other articles, than he will lose by the dearness of food and all raw materials. And in general, as comforts of every kind become cheaper in comparison of articles of necessity, so the number of those possessing such comforts will increase in proportion to those who are stinted to the means of a bare subsistence. Means of communication will become cheaper and more universal, and that part of the cost of production of commodities which is composed of the expense of transferring goods from place to place, will diminish. I do not apprehend that in the natural course of things, the increase of population, with all its attendants and consequences, will be prejudicial to the labourer. His condition will depend upon the relative value of his own labour, upon the rate of profits, and the productiveness of that labour which is employed in the production of those commodities upon which he wishes to expend his wages. The progress of society, if it is well governed, and if the people are moral and obedient, has a tendency to alter those three quantities in a manner favourable to his condition. If life and property are secured, the rate of profits will diminish, and labour will become more productive, and the relative value of each man’s labour will increase.

Of course this increase will not be such as to affect the relative values of the labourers of any one country: that would be absurd. All cannot rise in proportion to each other. But commerce, which exchanges the productions of human labour, has the same effect as if the labourers themselves could remove from one country to another, without greater expense or inconvenience than attends the removal of the goods which they manufacture. Hence the same laws which regulate the wages of labourers in any one country, govern also those of the labourers existing in every part of the world. I shall hereafter shew that taxes and restrictions upon trade have not any considerable effect in modifying this proposition. The differences in the relative values of labour in different employments are caused, principally, by the necessity of the labourer possessing superior skill and intelligence, or encountering greater hardships, or having a greater degree of confidence reposed in him. I have also shewn that in a highly civilized society, skill, intelligence, and integrity will be more general, and therefore will have a less effect in increasing wages; while on the other hand, the labourer already in possession of all the necessaries and comforts of life, will not easily be induced to engage in a disagreeable or unhealthy occupation. To induce him to do so, he must be highly paid for the hardships he encounters, and in consideration of the higher qualities which are unemployed. The reverse of all this holds in a less civilized society. Intelligence and integrity will be rare, and must be dearly purchased by those who desire to employ labourers possessed of such rare and valuable qualities, while to men in a state of destitution, a slight increase of wages will be a considerable inducement to undertake an unwholesome or disagreeable occupation. Hence, independent of every difference of soil or climate, the exchanges between two countries such as I have described, will consist principally of articles produced by that species of labour which in each country is relatively cheapest. The one will export articles where skill and integrity are required on the part of the workman, and where intelligence and capital are required on the part of his employer. The workman’s labour here will be of the most valuable kind, it will be carefully and wisely directed, and the low rate of profits will make his wages amount to a considerable portion of the finished work. Nothing can compete with him except other labour of the same kind, directed with equal skill, and his wages will consequently always remain high. But the case will be different in the less civilized country, where life and property are insecure, and capital therefore scarce, and profits high, and the labourer needy, ignorant, and dishonest. The exports of this country will consist of articles produced by the most unwholesome and disagreeable labour, but in making which, skill and honesty are not required from the labourer; such exports, in short, as in a lecture of last Term I said were naturally produced in a country where slavery was allowed. Here the workman’s labour will be of the most unwholesome kind, and will be directed by an ignorant and needy employer. The value of the work executed by him will be small, and the insecurity of property, and the higher rate of profits, will make a greater part of it go to his employer. His work will require no intelligence, and his competitors will be slaves, and brutes, and machines.

Such must be the fate of the labourer in every country where disorder prevails, and life and property are insecure. Give him arms and discipline, and he may acquire power and imagine himself free, for he will cease to obey the laws, but be ruled by some demagogue with a rod of iron. His imaginary freedom will consist in being governed by laws hastily framed by a dishonest and ignorant legislature, and administered by a corrupt and passionate tribunal with remorseless severity. But even if the habits which lead a demagogue to success were such as naturally produced calm reflection, freedom from passion, integrity, and wisdom, still, while anarchy and turbulence prevail, immutable necessity ordains that the labourer shall suffer this part of the hard condition of the slave. He must encounter severe toil, and receive scanty wages. From this state of degradation and slavery, order and obedience can alone relieve him. I have now, Gentlemen, got over the driest and least interesting part of Political-Economy, and I am sensible that my lectures have been obscure and uninteresting; but I proceeded according to this order, putting first the most abstract principles, because I am convinced that it is the only method by which truth can be attained, or even any progress made. Had others done so, my task would have been lighter. Next Term I shall be able to engage with more interesting subjects, relating to the trade, commerce, production, taxation, &c. of the different European Kingdoms.