Book 1. Chap. vii. Sect. 5. Supposed Efficiency. into account the very great increase which, from time to time, really takes place in the efficiency of manufacturing industry, the case is altered; and we see, that an increase in the relative value of Decrease of raw produce is what must be expected, although the agricultural productive power of agriculture were stationary, or even to a certain extent increasing. For instance, let two men produce two quarters of corn, and two men two pieces of cloth; and a quarter of corn and a piece of cloth will exchange for each other. Next, the efficiency of agricultural industry increasing, let two men produce three quarters of corn, and the efficiency of manufacturing industry increasing yet more, let two men produce six pieces of cloth: corn will have risen in relative value; a quarter of corn, instead of exchanging for one piece of cloth, will exchange for two. In this case, clearly, we should be mistaken if we assumed the fact of a decrease in the efficiency of industry, from that of the rise of the relative value of raw produce. In the progress of nations, an increase of manufacturing power and skill usually occurs, greater than that which can be expected in the agriculture of an increasing people. This is an unquestionable and familiar truth. A rise in the relative value of raw produce may, therefore, be expected in the advance of nations, and this from a cause quite distinct from any positive decrease in the efficiency of agriculture. BOOK I. Chap. vii. An increasing Money Value of raw Produce, com Sect. 5. Supposed pared with the Prices of other Countries, is no Proof of the decreasing Efficiency of agricul tural Industry. There are various causes which may elevate the money value of raw produce; one is undoubtedly the decreasing fertility of the soil which governs prices. If, in two neighbouring countries paying equal wages, the land is such that it requires three men in the worse to produce the effect which two men will produce in the more fertile of the two; the poorer country will not be able to sell its produce as cheaply as the richer. Still different prices are no certain indication of a difference in fertility. They may proceed from at least three other and distinct causes. First, from a higher rate of wages; secondly, from a higher rate of taxation; thirdly, from a different value of the precious metals. Whatever effect on prices may be produced by the necessity of employing more men in agricul ture, will be produced by the necessity of paying higher wages to the men actually employed, or of paying higher taxes. When the corn-grower, getting the same quantity of produce, is obliged to pay away an additional quantity; whether the fresh expence is incurred in the shape of wages to additional laborers, or of greater wages to those before employed, or of heavier taxes, must be indifferent to him; and as far as the cost of cultivation is Book I. Chap. vii. Sect. 5. Supposed concerned, it amounts to the same thing. And supposing two countries to grow corn at precisely the same expence of labor and capital, an alteration in the rate of wages, or the amount of taxation, Decrease of may raise the cost of cultivation in the one beyond agricultural that in the other, though the dearer country be stationary, or even (to a limited extent,) improving in the efficiency of its agricultural industry. There is a third cause also, quite distinct from the decreasing fertility of the soil, which may increase the prices of raw produce in one country, while prices in other nations are stationary, and that is a decreasing value of the precious metals peculiar to the dearer country. That this is a cause which has some effect upon the prices of the different countries of the world, there can be little doubt. I wish, however, to be distinctly understood, as giving no opinion on the possible extent or the limits of that effect. The eminent writer I am about to quote first on the point, thinks it will appear "that far the greater part of the high 66 price of corn in this country, compared with most "of the states in Europe," is occasioned in this way. "The causes," Mr. Malthus says, "which "affect the price of corn, and occasion the difference "in this price so observable in different countries, seem to be two. First, a difference in the value "of the precious metals in different countries under "different circumstances; secondly, a difference in "the quantity of labor and capital necessary to pro 66 1 Principles of Political Economy, p. 193. Efficiency. Chap. vii. Sect. 5. Decrease of Efficiency. 66 66 Book I. "duce corn. The first cause undoubtedly occasions the greatest portion of that inequality in the price "of corn, which is the most striking and prominent, Supposed" particularly in countries at a considerable distance agricultural "from each other. More than three-fourths of the prodigious difference between the price of corn in "Bengal and England, is probably occasioned by "the difference in the value of money in the two countries, and far the greater part of the high "price of corn in this country, compared with most "of the states in Europe is occasioned in the same way." In a note to some further observations on the same subject, Mr. Malthus afterwards says', "This conclusion may appear to contradict the doc"trine of the level of the precious metals. And so "it does if by level be meant level of value esti"timated in the usual way. I consider that doc"trine, indeed, as quite unsupported by facts. The 66 66 precious metals are always tending to a state of "rest, or such a state of things as to make their "movement unnecessary. But when this state of "rest has been nearly attained, and the exchanges "of all countries are nearly at par, the value of "the precious metals in different countries, esti"mated in corn and labor, or the mass of commodities, is very far indeed from being the same." Mr. Ricardo has stated similar opinions. "When any particular country excels in manufactures, so as to occasion an influx of money towards it, the "value of money will be lower, and the prices of 66 66 66 1 Page 198. 66 Book I. Chap. vii. Sect. 5. Supposed agricultural "corn and labor will be relatively higher in that country than in any other. This higher value "of money will not be indicated by the exchange. "Bills may continue to be negotiated at par, although Decrease of "the prices of corn and labor should be 10, 20, Efficiency. "or 30 per cent. higher in one country than an"other. Under the circumstances supposed, such "a difference of prices is the natural order of things, "and the exchange can only be at par when a suf"ficient quantity of money is introduced into the 66 country excelling in manufactures, so as to raise "the price of its corn and labor?." "In the early "states of society, when manufactures have made "little progress, and the produce of all countries "is nearly similar, consisting of the bulky and most "useful commodities, the value of money in different "countries will be chiefly regulated by their dis"tance from the mines which supply the precious "metals; but as the arts and improvements of so 66 ciety advance, and different nations excel in par"ticular manufactures, although distance will still "enter into the calculation, the value of the pre"cious metals will be chiefly regulated by the supe 66 riority of those manufactures." "Of two coun"tries having precisely the same population, and "the same quantity of land of equal fertility in "cultivation, with the same knowledge too of agriculture, the prices of raw produce will be highest "in that where the greater skill and the better 66 2 Ricardo, 2nd edit. 3 Ibid. p. 159. |