Part 3

The first and most important truth illustrated in the table is, that, from the division of value into labour and profits, and the mode in which profits are always estimated, it follows necessarily, that the quantity of labour required to produce the wages of a given number of men, with the addition of the profits upon these advances estimated in labour, must always be exactly the same as the quantity of labour which the wages will command, and must together always make up the constant quantity which appears in the seventh column. But the quantity of labour required to produce the varying wages of ten men is, under the different circumstances supposed, very different, as appears in the fifth column; and it is obvious, that while the numbers in the fifth column vary, the numbers in the seventh column, or the quantity of labour and profits united, cannot be constant, unless, as the quantity of labour required to produce the wages of ten men increases, the quantity of profits estimated in labour diminishes exactly in the same degree. But this, from what has before been stated, must, under the circumstances supposed, be the case. And it follows, that if the natural value of a commodity may be estimated by the labour and profits of which it is composed, the natural value of the corn wages of a given number of men must always be the same. But such wages, according to the postulate with which we commenced, must necessarily be equal to the quantity of labour for which they will exchange. Consequently the value of a given quantity of labour must, under every variety which can take place in the fertility of the soil and the corn wages of labour, be always constant. It is, however, of the greatest importance to remark, that an exact balance of labour, and of profits estimated in labour, so as to yield always a constant quantity, cannot take place in the production of any one commodity or given portion of a commodity; because any one commodity, or given portion of a commodity, is liable to vary in relation to labour, and such variation will either increase or decrease the amount of the labour and profits united. It is only the varying wages of a given number of men bearing, as the terms imply, a constant relation to labour, which, under any changes in the quantity of labour required to produce them, can still continue of the same natural value. And it is precisely this necessary constancy in the natural value of the varying corn wages of labour, which renders the labour which a commodity will command, a standard measure both of its natural and exchangeable value.

2dly. It appears from the Table, that given the produce obtained by ten men, then as corn wages rise, the value of the produce will fall, or command less labour; and the constant value of the advances in labour absorbing a larger proportion of the value of the produce, profits will fall in proportion. But when more is produced by the same number of persons, then unless the corn wages rise so high as exactly to balance it, the value of the whole produce is increased, and the rate of profits and corn wages may both rise at the same time. Thus while the produce is 130 quarters, as labour rises from ten to twelve quarters, profits fall in an opposite direction from 30 per cent. to 8.3. per cent.; but if we compare the wages of labour when the produce is 130 quarters, with the wages of labour when the produce is 150, it appears that labour may rise from twelve to thirteen quarters, at the same time that profits rise from 8.3. to 15.38.

A third result illustrated in the Table is, that labour being constant, all commodities into which profits enter, which may be said to be nearly the whole mass, must fall on the fall of profits, and among these will, of course, be found metallic money. Supposing, therefore, money always to require in its production the same quantity of labour and capital, it will regularly fall in value in the progress of cultivation and population; while labour being uniform in value will rise in money price,[J] and the demand for corn increasing, compared with the demand for labour, the money price of corn will probably rise still more. But if the labourers were paid at all times exactly the same quantity of corn, (which, however, cannot be the case,) the value of corn, like the value of wages, would be constant, and the variations of fertility would only show themselves in the enormous variations of profits.

Thus, when labour is paid at ten quarters each man, the numbers in the eighth column, or the value of a given quantity of corn, must, it is obvious, always be the same, whatever be the quantity produced; and when the land is fertile, the small quantity of labour required to produce ten quarters is balanced by the great profits which appear in the fourth column.

In the actual state of things, corn generally rises in the progress of cultivation, not only nominally, but really, as may be seen in the eighth column, while labour, it is evident, can only rise nominally.

A fourth result shown in the Table is, that the value of the corn obtained by ten men depends mainly upon the rate of profits, which again depends mainly upon the demand and supply of corn compared with labour. If corn be in such demand, that notwithstanding the fertility of the soil, a small quantity of it comparatively will purchase the labour required, profits will be very high, and the value of the produce will greatly exceed the constant value of the wages of the labour advanced; but if the supply of corn be so great, compared with labour, that a large quantity of it is required to purchase the given quantity of labour, profits will be low, and the excess of the value of the produce above the constant value of the advances in wages will be inconsiderable.

Thus, when the produce is 150 quarters, if corn be in such plenty that each labourer is awarded thirteen quarters, the profits of stock will be only 15.38 per cent.; and this rate of profit, added to the constant value of the advances in labour, which are represented by 10, will make the natural value of the produce equal to 11.53. But if corn, notwithstanding the fertility of the soil, be only supplied in such quantities, compared with labour, as to award the labourer no more than ten quarters, the rate of profits, instead of 15.38 per cent., will be 50 per cent., and the value of the produce, instead of being 11.53, will be 15.

This shows how greatly the natural value of commodities depends upon the average state of the demand and supply, and completely confirms the position in my last work, that the only difference between natural and market prices is, that the former are regulated by the average and ordinary relations of the demand to the supply, and the latter, when they differ from the former, upon the accidental and extraordinary relations of the demand to the supply.

Fifthly, it follows, from the constant value of labour, that,

Given the value of money in different countries, the natural prices of commodities, in which the same quantities of labour have been employed, will depend upon the rate and quantity of profits.

Given the rate and quantity of profits, and the value of money, the natural prices of commodities in different countries will depend upon the quantity of labour employed upon them.

And given the quantity of labour employed on them, and the rate and quantity of profits, the natural prices of commodities will depend upon the value of money.

But in reality none of the ingredients of natural or money price are given, excepting the natural value of labour, and consequently the money prices of commodities which regulate the ordinary rate at which different countries exchange their commodities with each other, will be determined partly by the quantity of labour employed upon them, partly by the ordinary rate of profits, and partly by the value of money.

The value of metallic money, it has before been stated, while it continues to be obtained by the same quantity of labour and capital, must always fall with the fall of profits, and will consequently have a strong tendency to fall with the progress of cultivation and improvement; but as few nations comparatively have mines of their own, the supplies which they obtain of the precious metals must be purchased by their exportable commodities; and these are produced and exported under such a variety of circumstances, in respect to cost, and the value of the same amount of the precious metals is further so much affected by the demand for corn and labour, the state of credit, paper currencies, taxation, and other circumstances, that no rule can safely be laid down on the subject.

Generally the value of money is the lowest in the richest and most manufacturing countries; but this is not always the case; and a country which raises an abundance of raw produce at a small expense of labour and profits, while its money value is kept up by a ready sale for it in foreign markets, and a continued demand for labour, may have the value of its money very low, although it is not rich or manufacturing. This is the case with the United States of America, where, owing to the low value of money, or high money price of labour, there are no doubt some commodities which, though produced by a less value of labour and profits, cannot be exported to England on account of the higher value of money in England; while we know that there are many other products which are obtained by so much a smaller quantity of labour and profits as more than to counterbalance the higher value of money in England, or the higher money price of labour in the United States.

In the same manner there are no doubt many commodities which, though obtained in England by a much less quantity of labour and profits than in India, cannot be exported to that country on account of the very high value of money in India; while, on the other hand, there are a few commodities in England in which the saving of labour and the effects of capital and skill have been so great, as to allow of their exportation from a country where the money wages of labour are two shillings a day, to one where they are only fourpence; that is, from a country where the value of money is six times lower than in the country to which the commodities are sent.

On the same principle, commodities may be imported from India into England, although the same commodities might be produced in England by a much less quantity of labour and profits, the low value of money in England more than compensating the greater quantity of labour and profits employed in India.

It is evident, therefore, that the values which determine what commodities shall be exported, and what imported, depend, as before stated, partly upon the quantity of labour employed in their production, partly upon the ordinary rates of profits in each country, and partly upon the value of money.

A sixth result illustrated in the Table is the important distinction between cost and value. The two last columns show the value of a given quantity of corn, and the value of the product of a given quantity of labour, under all the variations which may be supposed of fertility and corn wages. The difference between the numbers in the last column, and the uniform number expressing the value of labour, shows exactly the difference between the value of the labour which has been employed upon a production, or its cost, and the labour which that production will command, or its natural and exchangeable value; which, where profits and wages are alone concerned, must be exactly equal to the additional value occasioned by the amount of profits.

The reader will be aware that neither the preceding Table, nor any thing which has been said, tends in any degree to contradict the acknowledged truth that different _kinds_ of labour are of very different natural and exchangeable value. It will be further allowed, that even the same kind of labour, and the kind which has been especially referred to, namely common agricultural labour, may, under particular circumstances, and in particular places, vary in value from a partial or temporary state of demand and supply. We well know, that, from a partial and temporary demand at a particular period of the year, summer wages are of a very different value from winter wages; but in reality summer wages form a very important part of the wages of the whole year. They are generally employed to pay the rent of the house, or to purchase the necessary clothing for the family. They could not be essentially diminished, without altering the condition of the labourer throughout the year, or the rate of the increase of population. And if the labourer earned a smaller quantity of corn throughout the year, with an undiminished produce, it appears from the Table that the value of that corn would still remain the same, owing to the increased value of those profits of which it was in part composed.

With regard to the variations in the value of labour in different parts of the same country, if they are not partial, or temporary, and consequently exceptions to the general average, they are all resolvable into those differences in the value of money, which unquestionably take place in different parts of the same country, and arise from a want of demand for corn and labour, and a want of commodities to exchange with those parts of the country which are richer in the precious metals.

Having obtained a measure of the value of commodities in their more simple forms, we may apply this measure to the ingredients which compose the most complicated productions, and estimate all the advances which consist of accumulated profits, rents, tithes, and taxes in labour. In the case of taxes on the wages of labour, or an increase in the prices of those other necessaries of the labourer, besides food, which may occasion the sale of a greater quantity of the produce, in order to pay the same number of labourers, as these increased advances will have the same effect upon profits as a simple increase of wages, they will in no respect interfere with the constant value of labour, though an increase of wages, under such circumstances, will be of no advantage to the labourer.

Cases will of course frequently occur, in which the advances which do not consist of wages vary in a different degree from wages; but still the value of labour will remain constant. If the produce, instead of being obtained by the direct labour of a certain number of men, were obtained by the direct labour of only a part of this number, together with an amount of materials, or other advances consumed in the same time, equal to the labour of the other part, then upon a rise in the corn wages of labour, if the other advances were to fall, or not to be worth so much labour as before, it is obvious that the profits of stock would not fall so much as if the same rise of corn wages had taken place, when all the advances had been in labour; and it might be thought at first that profits not falling in proportion to the rise of labour, the value of labour would not continue the same. But it will be observed, that, in all cases of this kind, there will be a less value of labour, which is equivalent to a less quantity of it employed to obtain the same produce; and a less quantity of labour altogether being consequently necessary to produce the food of the labourer, than if labour alone had been employed, the higher profits, or smaller diminution of the former profits, will only just be such as to maintain labour of a constant value.

Let us suppose, for instance, that 120 quarters of corn are produced by ten men. If each man were paid ten quarters, profits would be 20 per cent.; and if wages were increased to eleven quarters, profits would fall from 20 per cent. to 9.09 per cent. Now supposing, that, instead of ten men being directly employed, five only are so employed, and that the other advances consist of capital which will continue of the same value as the corn;[K] then, while each labourer earns ten quarters, and the other capital advanced is worth the labour of five men so paid, profits will be, as before, 20 per cent. But if the labourer be paid eleven quarters instead of ten, profits will not fall, as before, from 20 per cent. to 9.09 per cent., but only from 20 per cent. to 14.28 per cent.; because the advances, instead of being 110, will only be 105; and the value of these advances estimated in labour paid at eleven quarters each man, being only 9.54, instead of 10; 9.54 may be considered as the number of persons employed. Then if 120 quarters be produced by 9.54 men, 105 quarters will be produced by 8.34. But 8.34, increased by a profit of 14.28, will make 9.54, the quantity of labour employed, and show that the natural value of labour is always proportioned to its quantity. In the former case, when ten men were employed at eleven quarters, as the advances were 110 quarters, instead of 105, the labour required to produce the food of the labourer was 9.166, and consequently a profit of only 9.09 will be sufficient to make up ten, the number of men employed, and thus equalize the value with the quantity.

In the case of fixed capital of considerable duration, there is always a probability that it will alter in value in reference to the quantity of labour, and of profits estimated in labour, of which it was composed when first produced; but after having advanced so far in establishing the labour which a commodity will command, as the measure of its value, we are entitled to consider the present value estimated in labour of any fixed capital which is about to be employed in production, as representing the quantity of accumulated labour actually so applied. It is further necessary, as before stated, to reckon the remaining value of the fixed capital as a part of the produce resulting from the whole of the accumulated and immediate labour employed. When, however, these corrections have been made, all the cases in which fixed capital enters, which may be said to include the great mass of commodities, will be found to answer to the theory as accurately as the simplest case that can be stated.

The exceptions, therefore, to the general proposition that the labour which commodities will command may be considered as a standard measure of their value are only apparent, not real, and may all be consistently explained.

And if the proposition be true, a standard measure of value is of so much importance in political economy, and the one proposed is at all times so very ready and easy of application,[L] that there is scarcely any part of the science in which it will not tend to simplify and facilitate our inquiries.

To advert shortly to a few points on which there have been some differences of opinion.

On the subject of rents, such a standard would determine, among other things, that, as the increase in the _value_ of corn is only measured by a decrease in the corn wages of labour, such increase of value is a very inconsiderable source of the increase of rents compared with improvements in agriculture; and on the same principle that, if tithes do not fall mainly on the labourer, the acknowledged diminution in the _corn_ rents of the landlord, occasioned by tithes, cannot be balanced by an increase of their value, and that, consequently, tithes must fall mainly on the landlord.

On the subject of labour it would determine, that the increasing _value_ of the funds destined for the maintenance of labour can alone occasion an increase in the demand for it, or the will and power to employ a greater number of labourers; and that it is consistent with theory, as well as general experience, that high corn wages, in proportion to the quantity of work done, should frequently occur with a very slack demand for labour;[M] or, in other words, that when the _value_ of the whole produce falls from excess of supply compared with the demand, it cannot have the power of setting the same number of labourers to work.

On the subject of profits, it would show, that they are determined, not by the varying value of a given quantity of labour compared with the constant value of the commodities which it produces, but, as is more conformable to our experience, by the variable value of the commodities produced by a given quantity of labour, compared with the constant value of such labour; and that profits never, on any occasion, rise or fall, unless the value of the produce of a given quantity of labour rises or falls, either from the temporary or ordinary state of the demand and supply.

On the subject of the distinction between wealth and value, it would show, that though they are by no means the same, they are much more closely connected than they have of late been supposed to be; and that the best practical measure of the relative wealth of different countries would be the quantity of common labour which the value of the whole annual produce of each country would enable it to command at the actual price of the time, which in some rich countries might amount to above double the number of families actually employed, and in poor countries might not greatly exceed such number.

On the subject of foreign trade, it would show that its universally acknowledged effect in giving a stimulus to production, generally, is mainly owing to its increasing the value of the produce of a country’s labour by the extension of demand, before the value of its labour is increased by the increase of its quantity; and that the effect of every extension of demand, whether foreign or domestic, is always, as far as it goes, to increase the average rate of profits[N] till this increase is counteracted by a further accumulation of capital.

On the subject of the accumulation of capital it would show that if the increase of capital be measured by the increase of its materials, such as corn, clothing, &c., then it is obvious that the supply of these materials may, by saving, increase so rapidly, compared with labour and the wants of the effective demanders, that with a greater quantity of materials the capitalist will neither have the power nor the will to set in motion the same quantity of labour, and that consequently the progress of wealth will be checked; but that if the increase of capital be measured, as it ought to be, by the increase of its power to command labour, then accumulation so limited cannot possibly go on too fast.

On the general subject of demand and supply, it would show that they must be restored to their universal empire, both in reference to the prices of commodities, and the dependence of the progress of wealth on the due proportion maintained between them. If the cost of a commodity be considered as composed exclusively of the actual advances of the capital required for its production, which seems to be the most natural and correct mode of viewing it,[O] then it is obvious, that as both the prices and values of commodities are proportioned to these advances, with the _addition_ of profits very variable in their amount, neither of them can be determined by these advances alone, or by the costs of production so defined. We must therefore have recourse to demand and supply. And on the other hand, if profits be included in the costs of production, then, as it follows, from the constancy of the value of labour, that ordinary profits are determined by the ordinary demand compared with the ordinary supply of the products of the same quantity of labour, the certain conclusion must be, that demand and supply enter powerfully into the costs of production according to this latter definition, and that therefore their dominion as to prices and value is absolutely universal.[P]