Part 2

The conditions of the supply of an Indian commodity are the advance and consumption of a certain quantity of Indian labour, with the profits on all the advances for the time that they are employed. Thus, if for the production of an Indian commodity, a fixed capital consisting of accumulated labour and profits, equal to 300 days, were advanced for a year, and a quantity of accumulated and immediate labour, consisting of the wear and tear of the machinery, the materials to be worked up, and direct labour, equal to 1500 days, were consumed on the commodity in the same time, profits being 20 per cent., the natural value of such commodity in India would be equal to the 1500 days labour consumed, with a profit of 20 per cent. upon 1800 days labour, which would amount to 1860 days labour.

If labour in India were fourpence a day, the fixed money capital in this case would equal £5, the labour advanced and consumed £25, and the labour consumed, together with the profits on the whole advances, would be equal to £31. And this would evidently be the natural price at which the commodity would circulate, and according to which it would exchange with any foreign commodity brought to India.

On the same principle, if for the production of an English commodity, 300 days labour were advanced in fixed capital for a year, and 1500 days labour were consumed on the commodity in the same time, while profits were 10 per cent., the natural value of such commodity, or the conditions of its supply, would be 1500 days labour, with a profit of 10 per cent. upon 1800, which together would equal 1680: and if labour were two shillings a day, the natural price at which the commodity would circulate, and according to which it would exchange with any foreign commodity brought to England, would be £168. This prodigious difference in the natural prices of two commodities in England and India, the natural values of which in each country were nearly the same, could only arise from a difference in the value of money occasioned by the very superior efficiency of English labour in the purchase of the precious metals, owing to the energy, skill, and situation of English labourers and capitalists, compared with those of India. But in estimating this difference in the value of money in England and India, it is quite obvious, that if, after ascertaining the natural conditions of the supply of a commodity in each country, we were to estimate the value of money either by its general power of purchasing, by a mean between corn and labour,[F] or by the quantity of labour alone which had been actually employed in bringing the money from the mine to the market, or by any other measure whatever, except the labour which it would command, we should not account for the natural prices which are found actually to prevail in the two countries, and according to which Indian and English commodities are found to exchange with each other by experience.

Consequently, as no other supposition will suit the actual phenomena, and as it has already appeared that the value of commodities in the same country is determined by the quantity of labour which they will command, we may safely conclude that the value of the precious metals in different countries is determined by the same measure, or by the different quantities of common agricultural labour, taking the average of summer and winter wages, which a given portion of them will command.

* * * * *

When we come to consider the varying value of commodities at distant periods in the same country, or the rise or fall of produce in the progress of cultivation and improvement, we are necessarily deprived of the test of an actual exchange. We know, however, that at different periods in the same country both the value of the precious metals, and the rate of profits and corn wages, may alter most essentially.

The effect of the varying value of the precious metals, when we have once obtained a measure of value, will be easily estimated. The most important point at present is, to consider the effects which must be produced upon the value of commodities in the progress of society, by the changes which necessarily take place in the profits of stock and the corn wages of labour.

On the supposition of high profits at an early period of society, and a considerable fall of them subsequently, how are we to measure and compare the value of commodities at these different periods? With regard to those which had continued to cost the same quantity of accumulated and immediate labour, we could not say that they were of the same value, unless we were prepared to assert that the value of commodities is determined solely by the labour employed upon them, not only when the rate of profits is the same but when it is totally different;[G] a proposition which no one can venture to assert in the case of foreign commodities, and which there is as little reason to assert in comparing the commodities of distant periods.

If profits were 50 per cent. five hundred years ago, and are 10 per cent. now, the question is, whether a piece of cloth which had cost the same quantity of labour at these different periods would be of the same value. By the supposition it was composed of a greater quantity of profits in the earlier period, and having cost the same quantity of labour, we should naturally conclude that it would be of a higher value.

It is said, however, that, although it cost the same quantity of labour, yet that the labour in the former period was of much less value, which would counterbalance the greater quantity of profits, and leave the value obtained by the same quantity of labour the same. But when we are thus referred to the lower value of labour, the principle of compensation which had before been applied is quite forgotten. The corn which pays the labourer is indeed obtained by a smaller quantity of labour, on account of the superior fertility of the soil from which it is raised, but it is sold as the cloth is sold, at a profit of 50 per cent.; and if it be said that, in the case of the cloth, the low value of wages which is supposed to be the result of superior fertility counteracts the high profits and keeps the value of cloth the same, surely it may be said, in the case of the corn which pays the wages, that the smaller quantity of labour necessary to produce it is made up by the greater rate of profits at which it is sold, and the value of wages is thus kept the same.

If 100 quarters of corn be obtained in the different periods of society by the labour of a different number of men, such as 7, 8 and 9, each paid at the rate of 10 quarters a year, the value of the 100 quarters of corn, or the value of the wages of any one of the men employed, estimated in the labour advanced, with the addition of the profits upon such advances, must obviously always be the same.

At an early period of society, when the soil was very fertile and the labour of 7 men only was necessary to produce 100 quarters of corn on land which paid little or no rent, the advances in labour being 7 men, or in corn 70 quarters, and the return 100 quarters, the rate of profits would be 42-6/7 per cent., and the advances of the labour of 7 men increased by a profit of 42-6/7 would equal the labour of 10 men, or the quantity of labour which the whole return would command. At a more advanced period, when the last land taken into cultivation was less fertile, and the labour of 8 men was necessary to obtain the return of 100 quarters, the advances in labour being 8 men, or in corn 80 quarters, the rate of profits would be 25 per cent., and the labour of 8 men increased by 25 per cent. would exactly equal the labour of 10 men. On the same principle, if at a still later period 9 men were necessary to produce the 100 quarters, the rate of profits would be 11-1/9 per cent., and the quantity of labour employed increased by the profits would still be equal to the labour of 10 men.

It appears then that when the labourer continues to be paid the same corn wages, the value of the whole corn produce, or the value of each man’s wages estimated in the usual way in labour and profits, must obviously remain constant, and that it must be most erroneous to infer that labour rises in value because it requires more labour in the progress of cultivation to produce the wages of 10 men or one man, if at the same time it requires such a diminished value of profits as exactly to balance it.

But in the progress of cultivation, the corn wages of labour do not continue the same, and corn must consequently be liable to great variation of value, both on account of temporary variations in the state of the supply compared with labour, and on account of the more permanent state of the demand and supply of corn compared with labour, owing to the increasing difficulty of production.

It may be laid down, however, as a general proposition, liable to no exception, that when the value of any produce can be resolved into labour and profits, then as the _proportion_ of such produce which goes to labour increases, the proportion which goes to profits must decrease in the same degree, and as the _proportion_ which goes to labour decreases, the proportion which goes to profits must increase in the same degree.[H]

Thus if ¾ of the produce, whatever that produce may be, go to labour, ¼ will remain for profits; if ⅚ go to labour, ⅙ will remain for profits; and if ½ only go to labour, ½ will remain for profits.

In reference to corn or commodities in general, compared with each other at different periods in the progress of cultivation, it is obvious that neither an increase in the quantity of labour required to produce them, nor an increase in the quantity of produce awarded to the labourer, can ever determine the proportion of the whole produce which goes to labour and affect profits accordingly; because if the quantity of labour required to produce them increases, the effect of this upon profits may be totally destroyed by a diminution at the same time of the quantity of produce awarded to the labourer; or if a larger quantity of produce be awarded to the labourer, it may be only in consequence of a smaller quantity of labour being necessary to obtain the same produce, in which case profits may remain undiminished, or even rise, at the same time that corn wages rise.

But if instead of referring to commodities generally, we refer to the variable quantity of produce which, under different circumstances, forms the wages of a given number of labourers, we shall find that the variable quantity of labour required to obtain this produce will always exactly agree with the proportion of the whole produce which goes to labour; because, however variable may be the amount of this produce, it will be divided into a number of parts equal to the number of labourers which it will command, and as the first set of labourers who produced these wages may be considered as having been paid at the same rate as the second set, whose labour the produce commands; it is obvious that if to obtain the produce which commands ten labourers, 6, 7, 8, or 9 labourers be required, the proportion of the produce which goes to labour, in these different cases, will be 6/10, 7/10, 8/10, or 9/10, leaving 4/10, 3/10, 2/10, or 1/10, for profits.

It is impossible to refer what is proposed as a standard to any _other_ measure, because, in that case, the other measure would be the standard. But if it can be shown, that any object, the value of which is composed of two elements, is of such a nature that while the value of one of these elements increases, the value of the other decreases exactly in the same degree, such object must be of a constant value. If the values of two variable quantities, _X_ and _Y_, be equal to the constant value _A_, it follows that, in all the variations to which _X_ and _Y_ are subject, whatever value _X_ gains must be lost by _Y_, and whatever value _Y_ gains must be lost by _X_. The converse of this proposition must also be true, that is, if the value of any object be made up of the variable values of two other objects, and it can be shown that, from the nature of these two objects, whatever increase of value one of them gains, must necessarily be lost by the other, and vice versâ, it follows that the value of the object, to which the two others are equal, must be constant. Now it has appeared that the variable values of the labour and of the profits which compose the value of the variable quantity of corn awarded in wages to a given number of labourers, must necessarily be such, that, as the quantity of labour required to produce them increases, either from difficulty of production or from the greater quantity of produce awarded to the labourer, all the value thus gained by labour is lost by profits; and as the quantity of labour required to produce them is diminished, either by facility of production or the small quantity of produce awarded to the labourer, all the value which is gained by profits is lost by labour. Consequently, the value of the variable quantity of produce which, under different circumstances, forms the wages of a given number of men, being composed of the values of the two elements, labour and profits, varying as above described, must be constant, and may therefore, with propriety, be proposed as a standard measure.

I have entered at some length into the details which show the necessary constancy of the value of labour, on account of its great importance; but, in reality, it follows directly from the manner in which the natural value of commodities and of wages is estimated, that when the labourer earns a greater or a smaller quantity of money or necessaries, it is not the value of labour which varies, but, as Adam Smith says, “it is the goods which are cheap in the one case and dear in the other.”

If labour alone, without any capital, were employed in procuring the fruits of the earth, the greater facility of procuring one sort of them compared with another, would not, it is acknowledged, alter the value of labour, or the exchangeable value of the whole produce obtained by a given quantity of exertion. We should, without hesitation, allow that the difference was in the cheapness or dearness of the produce, not of the labour.

In the same manner it will follow, that when capital and profits enter into the computation of value, and the demand for labour varies, the high or low reward of labour estimated in produce, implies a change in the value of the produce, not a change in the value of the labour.

If the increased reward of the labourer takes place without an increase of produce, this cannot happen without a fall of profits, as it is a self-evident truth, that given the quantity of the produce to be divided between labour and profits, the greater the portion of it which goes to labour the less will be left for profits. What then will be the result? It will appear that the value of the produce has fallen, and the value of wages, or of labour, will have remained the same. To obtain any given portion of the produce the same quantity of labour is necessary as before, but profits being diminished, the value of the produce is decreased; while this diminution of profits in reference to the value of wages is just counterbalanced by the increased quantity of labour necessary to procure the increased produce awarded to the labourer, leaving the value of labour the same as before.

Perhaps in the case just supposed, the result may be said to be occasioned by a fall in the value of the produce, without what could properly be called an increased demand for labour. But if we suppose that a considerable number of labourers were sent out of the country, or swept off by a plague, there could then be no doubt of a great demand for labour, yet the result would be similar. A larger quantity of produce would necessarily be awarded to the labourer, and profits would fall. A given quantity of produce obtained by the same quantity of labour as before, would fall in value on account of the fall of that part of its value which consisted of profits, while the fall of profits on the increased wages would be balanced by the increased labour necessary to obtain them.

If instead of labourers being sent out of the country, labourers were imported, the result would be just opposite. A smaller quantity of produce would be awarded to the labourer and profits would rise. A given quantity of produce, which had been obtained by the same quantity of labour as before, would rise in value on account of the rise of profits, while this rise of profits, in reference to the wages of the labourer, would be balanced by the smaller quantity of labour necessary to obtain the diminished produce awarded to the labourer.

In the former case of the demand for labour, it appeared that the greater earnings of the labourer were occasioned, not by a rise in the value of labour, but by a fall in the value of the produce for which the labour was exchanged. And in the latter case of the abundance of labour, it appeared that the small earnings of the labourer were occasioned by a rise in the value of the produce, and not by a fall in the value of the labour.

The result would be similar, if instead of supposing the same quantity of produce to be obtained by the same quantity of labour, we were to suppose the greatest variations to take place in the fertility of the soil, and, consequently, in the productive power of labour. In all cases it would still be found that, as Adam Smith says, it is the produce which varies in value, not the labour for which it will exchange; and if money were obtained in the way in which its value would unquestionably be the most constant, all these variations would appear in the money prices of commodities, whenever the demand for labour varied; while the money price of a given quantify of labour would remain the same.[I]

The following Table will further illustrate the necessary constancy in the value of labour, and some of its most important results, in a clearer manner and in a shorter compass than if each case were taken separately.

The first column represents the varying fertility of the soil, by the varying quantity of corn which can be obtained by the labour of a given number of men.

The second column represents the yearly corn wages of each labourer, determined by the state of the demand and supply of produce compared with labour.

The third column represents the variable advances of produce, in the form of corn wages, which, according to the rate at which the labourers are paid, are necessary to obtain the produce of the first column.

The fourth column represents the rate of profits determined in the common way, by the proportion which the excess of the produce in the first column above the produce paid to the labourers in the third, bears to these advances.

The fifth and sixth columns represent the quantity of labour required to produce the varying corn wages of the given number of men, with the profits estimated also in quantity of labour; and the reader will see at once that these two columns must necessarily, from the manner in which profits and wages are estimated, make up the constant quantity and value of labour which appears in the seventh column.

The eighth and ninth columns show the value of a given quantity of corn, and the value of the produce of a given number of men under the varying circumstances supposed.

_Table illustrating the invariable Value of Labour and its Results._

KEY:

1. Quarters of Corn produced by Ten Men, of varying Fertility of the Soil.

2. Yearly Corn Wages to each Labourer, determined by the Demand and Supply.

3. Advances in Corn Wages, or variable Produce commanding the Labour of Ten Men.

4. Rate of Profits under the foregoing Circumstances.

5. Quantity of Labour required to produce the Wages of Ten Men under the foregoing Circumstances.

6. Quantity of Profits on the Advances of Labour.

7. Invariable Value of the Wages of a given Number of Men.

8. Value of 100 Quarters of Corn under the varying Circumstances supposed.

9. Value of the Product of the Labour of Ten Men under the Circumstances supposed.

+---------+--------+---------+-----------+------+------+----+------+-------+ | 1. | 2. | 3. | 4. | 5. | 6. | 7. | 8. | 9. | +---------+--------+---------+-----------+------+------+----+------+-------+ | 150 qrs.| 12 qrs.| 120 qrs.| 25 pr. Ct.| 8 | 2 | 10 | 8.33 | 12.5 | | 150 | 13 | 130 | 15.38 | 8.66 | 1.34 | 10 | 7.7 | 11.53 | | 150 | 10 | 100 | 50 | 6.6 | 3.4 | 10 | 10 | 15 | | 140 | 12 | 120 | 16.66 | 8.6 | 1.4 | 10 | 7.14 | 11.6 | | 140 | 11 | 110 | 27.2 | 7.85 | 2.15 | 10 | 9.09 | 12.7 | | 130 | 12 | 120 | 8.3 | 9.23 | 0.77 | 10 | 8.33 | 10.8 | | 130 | 10 | 100 | 30 | 7.7 | 2.3 | 10 | 10 | 13 | | 120 | 11 | 110 | 9 | 9.17 | 0.83 | 10 | 9.09 | 10.9 | | 120 | 10 | 100 | 20 | 8.33 | 1.67 | 10 | 10 | 12 | | 110 | 10 | 100 | 10 | 9.09 | 0.91 | 10 | 10 | 11 | | 110 | 9 | 90 | 22.2 | 8.18 | 1.82 | 10 | 11.1 | 12.2 | | 100 | 9 | 90 | 11.1 | 9 | 1 | 10 | 11.1 | 11.1 | | 100 | 8 | 80 | 25 | 8 | 2 | 10 | 12.5 | 12.5 | | 90 | 8 | 80 | 12.5 | 8.88 | 1.12 | 10 | 12.5 | 11.25 | +---------+--------+---------+-----------+------+------+----+------+-------+