The Nature of Rent
by T.R. Malthus
1815
An Inquiry into the Nature and Progress of Rent, and the
Principles by which it is regulated. by Rev. T.R. Malthus,
Professor of History and Political Economy In the East
India
College, Hertfordshire London, Printed for John Murray,
Albemarle Street 1815.
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The following tract contains the substance
of some notes on
rent, which, with others on different subjects relating
to
political economy, I have collected in the course of
my
professional duties at the East India College. It has
been my
intention, at some time or other, to put them in a form
for
publication; and the very near connection of the subject
of the
present inquiry, with the topics immediately under discussion,
has induced me to hasten its appearance at the present
moment. It
is the duty of those who have any means of contributing
to the
public stock of knowledge, not only to do so, but to
do it at the
time when it is most likely to be useful. If the nature
of the
disquisition should appear to the reader hardly to suit
the form
of a pamphlet, my apology must be, that it was not originally
intended for so ephemeral a shape.
The rent of land is a portion of the national revenue,
which
has always been considered as of very high importance.
According to Adam Smith, it is one of the three original
sources of wealth, on which the three great divisions
of society
are supported.
By the Economists it is so pre-eminently distinguished,
that
it is considered as exclusively entitled to the name
of riches,
and the sole fund which is capable of supporting the
taxes of the
state, and on which they ultimately fall.
And it has, perhaps, a particular claim to our attention
at
the present moment, on account of the discussions which
are going
on respecting the corn laws, and the effects of rent
on the price
of raw produce, and the progress of agricultural improvement.
The rent of land may be defined to be that portion of
the
value of the whole produce which remains to the owner
of the
land, after all the outgoings belonging to its cultivation,
of
whatever kind, have been paid, including the profits
of the
capital employed, estimated according to the usual and
ordinary
rate of the profits of agricultural stock at the time
being.
It sometimes happens, that from accidental and temporary
circumstances, the farmer pays more, or less, than this;
but this
is the point towards which the actual rents paid are
constantly
gravitating, and which is therefore always referred to
when the
term is used in a general sense.
The immediate cause of rent is obviously the excess of
price
above the cost of production at which raw produce sells
in the
market.
The first object therefore which presents itself for
inquiry,
is the cause or causes of the high price of raw produce.
After very careful and repeated revisions of the subject,
I
do not find myself able to agree entirely in the view
taken of
it, either by Adam Smith, or the Economists; and still
less, by
some more modern writers.
Almost all these writers appear to me to consider rent
as too
nearly resembling in its nature, and the laws by which
it is
governed, the excess of price above the cost of production,
which
is the characteristic of a monopoly.
Adam Smith, though in some parts of the eleventh chapter
of
his first book he contemplates rent quite in its true
light,(1*)
and has interspersed through his work more just observations
on
the subject than any other writer, has not explained
the most
essential cause of the high price of raw produce with
sufficient
distinctness, though he often touches on it; and by applying
occasionally the term monopoly to the rent of land, without
stopping to mark its more radical peculiarities, he leaves
the
reader without a definite impression of the real difference
between the cause of the high price of the necessaries
of life,
and of monopolized commodities.
Some of the views which the Economists have taken of
the
nature of rent appear to me, in like manner, to be quite
just;
but they have mixed them with so much error, and have
drawn such
preposterous and contradictory conclusions from them,
that what
is true in their doctrines, has been obscured and lost
in the
mass of superincumbent error, and has in consequence
produced
little effect. Their great practical conclusion, namely,
the
propriety of taxing exclusively the net rents of the
landlords,
evidently depends upon their considering these rents
as
completely disposable, like that excess of price above
the cost
of production which distinguishes a common monopoly.
M. Say, in his valuable treatise on political economy,
in
which he has explained with great clearness many points
which
have not been sufficiently developed by Adam Smith, has
not
treated the subject of rent in a manner entirely satisfactory.
In
speaking of the different natural agents which, as well
as the
land, co-operate with the labours of man, he observes,
'Heureusement personne n'a pu dire le vent et le soleil
m'appartiennent, et le service qu'ils rendent doit m'etre
paye.'(2*) And, though he acknowledges that, for obvious
reasons,
property in land is necessary, yet he evidently considers
rent as
almost exclusively owing to such appropriation, and to
external
demand.
In the excellent work of M. de Sismondi, De la richesse
commerciale, he says in a note on the subject of rent,
'Cette
partie de la rente fonciere est celle que les Economistes
ont
decoree du nom du produit net comme etant le seul fruit
du
travail qui aj outat quelquechose a la richesse nationale.
On
pourrait au contraire soutenir contre eux, que c'est
la seule
partie du produit du travail, dont la valeur soit purement
nominale, et n'ait rien de reelle: c'est en effet le
resultat de
l'augmentation de prix qu'obtient un vendeur en vertu
de son
privilege, sans que la chose vendue en vaille reellement
d'avantage.'(3*) The prevailing opinions among the more
modern
writers in our own country, have appeared to me to incline
towards a similar view of the subject; and, not to multiply
citations, I shall only add, that in a very respectable
edition
of the Wealth of nations, lately published by Mr Buchanan,
of
Edinburgh, the idea of monopoly is pushed still further.
And
while former writers, though they considered rent as
governed by
the laws of monopoly, were still of opinion that this
monopoly in
the case of land was necessary and useful, Mr Buchanan
sometimes
speaks of it even as prejudicial, and as depriving the
consumer
of what it gives to the landlord.
In treating of productive and unproductive labour in
the last
volume, he observes,(4*) that, 'The net surplus by which
the
Economists estimate the utility of agriculture, plainly
arises
from the high price of its produce, which, however advantageous
to the landlord who receives it, is surely no advantage
to the
consumer who pays it. Were the produce of agriculture
to be sold
for a lower price, the same net surplus would not remain,
after
defraying the expenses of cultivation; but agriculture
would be
still equally productive to the general stock; and the
only
difference would be, that as the landlord was formerly
enriched
by the high price, at the expense of the community, the
community
would now profit by the low price at the expense of the
landlord.
The high price in which the rent or net surplus originates,
while
it enriches the landlord who has the produce of agriculture
to
sell, diminishes in the same proportion the wealth of
those who
are its purchasers; and on this account it is quite inaccurate
to
consider the landlord's rent as a clear addition to the
national
wealth.' In other parts of his work he uses the same,
or even
stronger language, and in a note on the subject of taxes,
he
speaks of the high price of the produce of land as advantageous
to those who receive it, it but proportionably injurious
to those
who pay it. 'In this view,' he adds, 'it can form no
general
addition to the stock of the community, as the net surplus
in
question is nothing more than a revenue transferred from
one
class to another, and from the mere circumstance of its
thus
changing hands, it is clear that no fund can arise out
of which
to pay taxes. The revenue which pays for the produce
of land
exists already in the hands of those who purchase that
produce;
and, if the price of subsistence were lower, it would
still
remain in their hands, where it would be just as available
for
taxation, as when by a higher price it is transferred
to the
landed proprietor.'(5*)
That there are some circumstances connected with rent,
which
have an affinity to a natural monopoly, will he readily
allowed.
The extent of the earth itself is limited, and cannot
be enlarged
by human demand. And the inequality of soils occasions,
even at
an early period of society a comparative scarcity of
the best
lands; and so far is undoubtedly one of the causes of
rent
properly so called. On this account, perhaps, the term
partial
monopoly might be fairly applicable. But the scarcity
of land,
thus implied, is by no means alone sufficient to produce
the
effects observed. And a more accurate investigation of
the
subject will show us how essentially different the high
price of
raw produce is, both in its nature and origin, and the
laws by
which it is governed, from the high price of a common
monopoly.
The causes of the high price of raw produce may be stated
to
be three.
First, and mainly, that quality of the earth, by which
it can
be made to yield a greater portion of the necessaries
of life
than is required for the maintenance of the persons employed
on
the land.
Secondly, that quality peculiar to the necessaries of
life of
being able to create their own demand, or to raise up
a number of
demanders in proportion to the quantity of necessaries
produced.
And, thirdly, the comparative scarcity of the most fertile
land.
The qualities of the soil and of its products, here noticed
as the primary causes of the high price of raw produce,
are the
gifts of nature to man. They are quite unconnected with
monopoly,
and yet are so absolutely essential to the existence
of rent,
that without them, no degree of scarcity or monopoly
could have
occasioned that excess of the price of raw produce, above
the
cost of production, which shows itself in this form.
If, for instance, the soil of the earth had been such,
that,
however well directed might have been the industry of
man, he
could not have produced from it more than was barely
sufficient
to maintain those, whose labour and attention were necessary
to
its products; though, in this case, food and raw materials
would
have been evidently scarcer than at present, and the
land might
have been, in the same manner, monopolized by particular
owners;
vet it is quite clear, that neither rent, nor any essential
surplus produce of the land in the form of high profits,
could
have existed.
It is equally clear, that if the necessaries of life
the most
important products of land - had not the property of
creating an
increase of demand proportioned to their increased quantity,
such
increased quantity would occasion a fall in their exchangeable
value. However abundant might be the produce of a country,
its
population might remain stationary And this abundance,
without a
proportionate demand, and with a very high corn price
of labour,
which would naturally take place under these circumstances,
might
reduce the price of raw produce, like the price of manufactures,
to the cost of production.
It has been sometimes argued, that it is mistaking the
principle of population, to imagine, that the increase
of food,
or of raw produce alone, can occasion a proportionate
increase of
population. This is no doubt true; but it must be allowed,
as has
been justly observed by Adam Smith, that 'when food is
provided,
it is comparatively easy to find the necessary clothing
and
lodging., And it should always be recollected, that land
does not
produce one commodity alone, but in addition to that
most
indispensable of all commodities - food - it produces
also the
materials for the other necessaries of life; and the
labour
required to work up these materials is of course never
excluded
from the consideration.(6*)
It is, therefore, strictly true, that land produces the
necessaries of life, produces food, materials, and labour,
produces the means by which, and by which alone, an increase
of
people may be brought into being, and supported. In this
respect
it is fundamentally different from every other kind of
machine
known to man; and it is natural to suppose, that it should
be
attended with some peculiar effects.
If the cotton machinery, in this country, were to go
on
increasing at its present rate, or even much faster;
but instead
of producing one particular sort of substance which may
be used
for some parts of dress and furniture, etc. had the qualities
of
land, and could yield what, with the assistance of a
little
labour, economy, and skill, could furnish food, clothing,
and
lodging, in such proportions as to create an increase
of
population equal to the increased supply of these necessaries;
the demand for the products of such improved machinery
would
continue in excess above the cost of production, and
this excess
would no longer exclusively belong to the machinery of
the
land.(7*)
There is a radical difference in the cause of a demand
for
those objects which are strictly necessary to the support
of
human life, and a demand for all other commodities. In
all other
commodities the demand is exterior to, and independent
of, the
production itself; and in the case of a monopoly, whether
natural
or artificial, the excess of price is in proportion to
the
smallness of the supply compared with the demand, while
this
demand is comparatively unlimited. In the case of strict
necessaries, the existence and increase of the demand,
or of the
number of demanders, must depend upon the existence and
increase
of these necessaries themselves; and the excess of their
price
above the cost of their production must depend upon,
and is
permanently limited by, the excess of their quantity
above the
quantity necessary to maintain the labour required to
produce
them; without which excess of quantity no demand could
have
existed, according to the laws of nature, for more than
was
necessary to support the producers.
It has been stated, in the new edition of the Wealth
of
nations, that the cause of the high price of raw produce
is, that
such price is required to proportion the consumption
to the
supply.(8*) This is also true, but it affords no solution
of the
point in question. We still want to know why the consumption
and
supply are such as to make the price so greatly exceed
the cost
of production, and the main cause is evidently the fertility
of
the earth in producing the necessaries of life. Diminish
this
plenty, diminish the fertility of the soil, and the excess
will
diminish; diminish it still further, and it will disappear.
The
cause of the high price of the necessaries of life above
the cost
of production, is to be found in their abundance, rather
than
their scarcity; and is not only essentially different
from the
high price occasioned by artificial monopolies, but from
the high
price of those peculiar products of the earth, not connected
with
food, which may be called natural and necessary monopolies.
The produce of certain vineyards in France, which, from
the
peculiarity of their soil and situation, exclusively
yield wine
of a certain flavour, is sold of course at a price very
far
exceeding the cost of production. And this is owing to
the
greatness of the competition for such wine, compared
with the
scantiness of its supply; which confines the use of it
to so
small a number of persons, that they are able, and rather
than go
without it, willing, to give an excessively high price.
But if
the fertility of these lands were increased, so as very
considerably to increase the produce, this produce might
so fall
in value as to diminish most essentially the excess of
its price
above the cost of production. While, on the other hand,
if the
vineyards were to become less productive, this excess
might
increase to almost any extent.
The obvious cause of these effects is, that in all
monopolies, properly so called, whether natural or artificial,
the demand is exterior to, and independent of, the production
itself. The number of persons who might have a taste
for scarce
wines, and would be desirous of entering into a competition
for
the purchase of them, might increase almost indefinitely,
while
the produce itself was decreasing; and its price, therefore,
would have no other limit than the numbers, powers, and
caprices,
of the competitors for it.
In the production of the necessaries of life, on the
contrary, the demand is dependent upon the produce itself;
and
the effects are, in consequence, widely different. In
this case,
it is physically impossible that the number of demanders
should
increase, while the quantity of produce diminishes, as
the
demanders only exist by means of this produce. The fertility
of
soil, and consequent abundance of produce from a certain
quantity
of land, which, in the former case, diminished the excess
of
price above the cost of production, is, in the present
case, the
specific cause of such excess; and the diminished fertility,
which in the former case might increase the price to
almost any
excess above the cost of production, may be safely asserted
to be
the sole cause which could permanently maintain the necessaries
of life at a price not exceeding the cost of production.
Is it, then, possible to consider the price of the
necessaries of life as regulated upon the principle of
a common
monopoly? Is it possible, with M. de Sismondi, to regard
rent as
the sole produce of labour, which has a value purely
nominal, and
the mere result of that augmentation of price which a
seller
obtains in consequence of a peculiar privilege; or, with
Mr
Buchanan, to consider it as no addition to the national
wealth,
but merely as a transfer of value, advantageous only
to the
landlords, and proportionately injurious to the consumers?
Is it not, on the contrary, a clear indication of a most
inestimable quality in the soil, which God has bestowed
on man -
the quality of being able to maintain more persons than
are
necessary to work it? Is it not a part, and we shall
see further
on that it is an absolutely necessary part, of that surplus
produce from the land,(9*) which has been justly stated
to be the
source of all power and enjoyment; and without which,
in fact,
there would be no cities, no military or naval force,
no arts, no
learning, none of the finer manufactures, none of the
conveniences and luxuries of foreign countries, and none
of that
cultivated and polished society, which not only elevates
and
dignifies individuals, but which extends its beneficial
influence
through the whole mass of the people?
In the early periods of society, or more remarkably perhaps,
when the knowledge and capital of an old society are
employed
upon fresh and fertile land, this surplus produce, this
bountiful
gift of providence, shows itself chiefly in extraordinary
high
profits, and extraordinary high wages, and appears but
little in
the shape of rent. While fertile land is in abundance,
and may be
had by whoever asks for it, nobody of course will pay
a rent to a
landlord. But it is not consistent with the laws of nature,
and
the limits and quality of the earth, that this state
of things
should continue. Diversities of soil and situation must
necessarily exist in all countries. All land cannot be
the most
fertile: all situations cannot be the nearest to navigable
rivers
and markets. But the accumulation of capital beyond the
means of
employing it on land of the greatest natural fertility,
and the
greatest advantage of situation, must necessarily lower
profits;
while the tendency of population to increase beyond the
means of
subsistence must, after a certain time, lower the wages
of
labour.
The expense of production will thus be diminished, but
the
value of the produce, that is, the quantity of labour,
and of the
other products of labour besides corn, which it can command,
instead of diminishing, will be increased. There will
be an
increasing number of people demanding subsistence, and
ready to
offer their services in any way in which they can be
useful. The
exchangeable value of food will, therefore, be in excess
above
the cost of production, including in this cost the full
profits
of the stock employed upon the land, according to the
actual rate
of profits, at the time being. And this excess is rent.
Nor is it possible that these rents should permanently
remain
as parts of the profits of stock, or of the wages of
labour. If
such an accumulation were to take place, as decidedly
to lower
the general profits of stock, and, consequently, the
expenses of
cultivation, so as to make it answer to cultivate poorer
land;
the cultivators of the richer land, if they paid no rent,
would
cease to be mere farmers, or persons living upon the
profits of
agricultural stock. They would unite the characters of
farmers
and landlords - a union by no means uncommon; but which
does not
alter, in any degree, the nature of rent, or its essential
separation from profits. If the general profits of stock
were 20
per cent and particular portions of land would yield
30 per cent
on the capital employed, 10 per cent of the 30 would
obviously be
rent, by whomsoever received.
It happens, indeed, sometimes, that from bad government,
extravagant habits, and a faulty constitution of society,
the
accumulation of capital is stopped, while fertile land
is in
considerable plenty, in which case profits may continue
permanently very high; but even in this case wages must
necessarily fall, which by reducing the expenses of cultivation
must occasion rents. There is nothing so absolutely unavoidable
in the progress of society as the fall of wages, that
is such a
fall as, combined with the habits of the labouring classes,
will
regulate the progress of population according to the
means of
subsistence. And when, from the want of an increase of
capital,
the increase of produce is checked, and the means of
subsistence
come to a stand, the wages of labour must necessarily
fall so
low, as only just to maintain the existing population,
and to
prevent any increase.
We observe in consequence, that in all those countries,
such
as Poland, where, from the want of accumulation, the
profits of
stock remain very high, and the progress of cultivation
either
proceeds very slowly, or is entirely stopped, the wages
of labour
are extremely low. And this cheapness of labour, by diminishing
the expenses of cultivation, as far as labour is concerned,
counteracts the effects of the high profits of stock,
and
generally leaves a larger rent to the landlord than in
those
countries, such as America, where, by a rapid accumulation
of
stock, which can still find advantageous employment,
and a great
demand for labour, which is accompanied by an adequate
increase
of produce and population, profits cannot be low, and
labour for
some considerable time remains very high.
It may be laid down, therefore, as an incontrovertible
truth,
that as a nation reaches any considerable degree of wealth,
and
any considerable fullness of population, which of course
cannot
take place without a great fall both in the profits of
stock and
the wages of labour, the separation of rents, as a kind
of
fixture upon lands of a certain quality, is a law as
invariable
as the action of the principle of gravity. And that rents
are
neither a mere nominal value, nor a value unnecessarily
and
injuriously transferred from one set of people to another;
but a
most real and essential part of the whole value of the
national
property, and placed by the laws of nature where they
are, on the
land, by whomsoever possessed, whether the landlord,
the crown,
or the actual cultivator.
Rent then has been traced to the same common nature with
that
general surplus from the land, which is the result of
certain
qualities of the soil and its products; and it has been
found to
commence its separation from profits, as soon as profits
and
wages fall, owing to the comparative scarcity of fertile
land in
the natural progress of a country towards wealth and
population.
Having examined the nature and origin of rent, it remains
for
us to consider the laws by which it is governed, and
by which its
increase or decrease is regulated.
When capital has accumulated, and labour fallen on the
most
eligible lands of a country, other lands less favourably
circumstanced with respect to fertility or situation,
may be
occupied with advantage. The expenses of cultivation,
including
profits, having fallen, poorer land, or land more distant
from
markets, though yielding at first no rent, may fully
repay these
expenses, and fully answer to the cultivator. And again,
when
either the profits of stock or the wages of labour, or
both, have
still further fallen, land still poorer, or still less
favourably
situated, may be taken into cultivation. And, at every
step, it
is clear, that if the price of produce does not fall,
the rents
of land will rise. And the price of produce will not
fall, as
long as the industry and ingenuity of the labouring classes,
assisted by the capitals of those not employed upon the
land, can
find something to give in exchange to the cultivators
and
landlords, which will stimulate them to continue undiminished
their agricultural exertions, and maintain their increasing
excess of produce.
In tracing more particularly the laws which govern the
rise
and fall of rents, the main causes which diminish the
expenses of
cultivation, or reduce the cost of the instruments of
production,
compared with the price of produce, require to be more
specifically enumerated. The principal of these seem
to be four:
first, such an accumulation of capital as will lower
the profits
of stock; secondly, such an increase of population as
will lower
the wages of labour; thirdly, such agricultural improvements,
or
such increase of exertions, as will diminish the number
of
labourers necessary to produce a given effect; and fourthly,
such
an increase in the price of agricultural produce, from
increased
demand, as without nominally lowering the expense of
production,
will increase the difference between this expense and
the price
of produce.
The operation of the three first causes in lowering the
expenses of cultivation, compared with the price of produce,
are
quite obvious; the fourth requires a few further observations.
If a great and continued demand should arise among
surrounding nations for the raw produce of a particular
country,
the price of this produce would of course rise considerably;
and
the expenses of cultivation, rising only slowly and gradually
to
the same proportion, the price of produce might for a
long time
keep so much ahead, as to give a prodigious stimulus
to
improvement, and encourage the employment of much capital
in
bringing fresh land under cultivation, and rendering
the old much
more productive.
Nor would the effect be essentially different in a country
which continued to feed its own people, if instead of
a demand
for its raw produce, there was the same increasing demand
for its
manufactures. These manufactures, if from such a demand
the value
of their amount in foreign countries was greatly to increase,
would bring back a great increase of value in return,
which
increase of value could not fail to increase the value
of the raw
produce. The demand for agricultural as well as manufactured
produce would be augmented; and a considerable stimulus,
though
not perhaps to the same extent as in the last case, would
be
given to every kind of improvement on the land.
A similar effect would be produced by the introduction
of new
machinery, and a more judicious division of labour in
manufactures. It almost always happens in this case,
not only
that the quantity of manufactures is very greatly increased,
but
that the value of the whole mass is augmented, from the
great
extension of the demand for them, occasioned by their
cheapness.
We see, in consequence, that in all rich manufacturing
and
commercial countries, the value of manufactured and commercial
products bears a very high proportion to the raw products;(10*)
whereas, in comparatively poor countries, without much
internal
trade and foreign commerce, the value of their raw produce
constitutes almost the whole of their wealth. If we suppose
the
wages of labour so to rise with the rise of produce,
as to give
the labourer the same command of the means of subsistence
as
before, yet if he is able to purchase a greater quantity
of other
necessaries and conveniencies, both foreign and domestic,
with
the price of a given quantity of corn, he may be equally
well
fed, clothed, and lodged, and population may be equally
encouraged, although the wages of labour may not rise
so high in
proportion as the price of produce.
And even when the price of labour does really rise in
proportion to the price of produce, which is a very rare
case,
and can only happen when the demand for labour precedes,
or is at
least quite contemporary with the demand for produce;
it is so
impossible that all the other outgoings in which capital
is
expended, should rise precisely in the same proportion,
and at
the same time, such as compositions for tithes, parish
rates,
taxes, manure, and the fixed capital accumulated under
the former
low prices, that a period of some continuance can scarcely
fail
to occur, when the difference between the price of produce
and
the cost of production is increased.
In some of these cases, the increase in the price of
agricultural produce, compared with the cost of the instruments
of production, appears from what has been said to be
only
temporary; and in these instances it will often give
a
considerable stimulus to cultivation, by an increase
of
agricultural profits, without showing itself much in
the shape of
rent. It hardly ever fails, however, to increase rent
ultimately.
The increased capital, which is employed in consequence
of the
opportunity of making great temporary profits, can seldom
if ever
be entirely removed from the land, at the expiration
of the
current leases; and, on the renewal of these leases,
the landlord
feels the benefit of it in the increase of his rents.
Whenever then, by the operation of the four causes above
mentioned, the difference between the price of produce
and the
cost of the instruments of production increases, the
rents of
land will rise.
It is, however, not necessary that all these four causes
should operate at the same time; it is only necessary
that the
difference here mentioned should increase. If, for instance,
the
price of produce were to rise, while the wages of labour,
and the
price of the other branches of capital did not rise in
proportion, and at the same time improved modes of agriculture
were coming into general use, it is evident that this
difference
might be increased, although the profits of agricultural
stock
were not only undiminished, but were to rise decidedly
higher.
Of the great additional quantity of capital employed
upon the
land in this country, during the last twenty years, by
far the
greater part is supposed to have been generated on the
soil, and
not to have been brought from commerce or manufactures.
And it
was unquestionably the high profits of agricultural stock,
occasioned by improvements in the modes of agriculture,
and by
the constant rise of prices, followed only slowly by
a
proportionate rise in the different branches of capital,
that
afforded the means of so rapid and so advantageous an
accumulation.
In this case cultivation has been extended, and rents
have
risen, although one of the instruments of production,
capital,
has been dearer.
In the same manner a fall of profits and improvements
in
agriculture, or even one of them separately, might raise
rents,
notwithstanding a rise of wages.
It may be laid down then as a general truth, that rents
naturally rise as the difference between the price of
produce and
the cost of the instruments of production increases.
It is further evident, that no fresh land can be taken
into
cultivation till rents have risen, or would allow of
a rise upon
what is already cultivated.
Land of an inferior quality requires a great quantity
of
capital to make it yield a given produce; and, if the
actual
price of this produce be not such as fully to compensate
the cost
of production, including the existing rate of profits,
the land
must remain uncultivated. It matters not whether this
compensation is effected by an increase in the money
price of raw
produce, without a proportionate increase in the money
price of
the instruments of production, or by a decrease in the
price of
the instruments of production, without a proportionate
decrease
in the price of produce. What is absolutely necessary,
is a
greater relative cheapness of the instruments of production,
to
make up for the quantity of them required to obtain a
given
produce from poor land.
But whenever, by the operation of one or more of the
causes
before mentioned, the instruments of production become
cheaper,
and the difference between the price of produce and the
expenses
of cultivation increases, rents naturally rise. It follows
therefore as a direct and necessary consequence, that
it can
never answer to take fresh land of a poorer quality into
cultivation, till rents have risen or would allow of
a rise, on
what is already cultivated.
It is equally true, that without the same tendency to
a rise
of rents, occasioned by the operation of the same causes,
it
cannot answer to lay out fresh capital in the improvement
of old
land - at least upon the supposition, that each farm
is already
furnished with as much capital as can be laid out to
advantage,
according to the actual rate of profits.
It is only necessary to state this proposition to make
its
truth appear. It certainly may happen, and I fear it
happens
frequently, that farmers are not provided with all the
capital
which could be employed upon their farms, at the actual
rate of
agricultural profits. But supposing they are so provided,
it
implies distinctly, that more could not be applied without
loss,
till, by the operation of one or more of the causes above
enumerated, rents had tended to rise.
It appears then, that the power of extending cultivation
and
increasing produce, both by the cultivation of fresh
land and the
improvement of the old, depends entirely upon the existence
of
such prices, compared with the expense of production,
as would
raise rents in the actual state of cultivation.
But though cultivation cannot be extended, and the produce
of
the country increased, but in such a state of things
as would
allow of a rise of rents, yet it is of importance to
remark, that
this rise of rents will be by no means in proportion
to the
extension of cultivation, or the increase of produce.
Every
relative fall in the price of the instruments of production,
may
allow of the employment of a considerable quantity of
additional
capital; and when either new land is taken into cultivation,
or
the old improved, the increase of produce may be considerable,
though the increase of rents be trifling. We see, in
consequence,
that in the progress of a country towards a high state
of
cultivation, the quantity of capital employed upon the
land, and
the quantity of produce yielded by it, bears a constantly
increasing proportion to the amount of rents, unless
counterbalanced by extraordinary improvements in the
modes of
cultivation.(11*)
According to the returns lately made to the Board of
Agriculture, the average proportion which rent bears
to the value
of the whole produce, seems not to exceed one fifth;(12*)
whereas
formerly, when there was less capital employed, and less
value
produced, the proportion amounted to one fourth, one
third, or
even two fifths. Still, however, the numerical difference
between
the price of produce and the expenses of cultivation,
increases
with the progress of improvement; and though the landlord
has a
less share of the whole produce, yet this less share,
from the
very great increase of the produce, yields a larger quantity,
and
gives him a greater command of corn and labour. If the
produce of
land be represented by the number six, and the landlord
has one
fourth of it, his share will be represented by one and
a half. If
the produce of land be as ten, and the landlord has one
fifth of
it, his share will be represented by two. In the latter
case,
therefore, though the proportion of the landlord's share
to the
whole produce is greatly diminished, his real rent, independently
of nominal price, will be increased in the proportion
of from
three to four. And in general, in all cases of increasing
produce, if the landlord's share of this produce do not
diminish
in the same proportion, which though it often happens
during the
currency of leases, rarely or never happens on the renewal
of
them, the real rents of land must rise.
We see then, that a progressive rise of rents seems to
be
necessarily connected with the progressive cultivation
of new
land, and the progressive improvement of the old: and
that this
rise is the natural and necessary consequence of the
operation of
four causes, which are the most certain indications of
increasing
prosperity and wealth - namely, the accumulation of capital,
the
increase of population, improvements in agriculture,
and the high
price of raw produce, occasioned by the extension of
our
manufactures and commerce.
On the other hand, it will appear, that a fall of rents
is as
necessarily connected with the throwing of inferior land
out of
cultivation, and the continued deterioration of the land
of a
superior quality; and that it is the natural and necessary
consequence of causes, which are the certain indications
of
poverty and decline, namely, diminished capital, diminished
population, a bad system of cultivation, and the low
price of raw
produce.
If it be true, that cultivation cannot be extended but
under
such a state of prices, compared with the expenses of
production,
as will allow of an increase of rents, it follows naturally
that
under such a state of relative prices as will occasion
a fall of
rents, cultivation must decline. If the instruments of
production
become dearer, compared with the price of produce, it
is a
certain sign that they are relatively scarce; and in
all those
cases where a large quantity of them is required, as
in the
cultivation of poor land, the means of procuring them
will be
deficient, and the land will be thrown out of employment.
It appeared, that in the progress of cultivation and
of
increasing rents, it was not necessary that all the instruments
of production should fall in price at the same time;
and that the
difference between the price of produce and the expense
of
cultivation might increase, although either the profits
of stock
or the wages of labour might be higher, instead of lower.
In the same manner, when the produce of a country is
declining, and rents are falling, it is not necessary
that all
the instruments of production should be dearer. In a
declining or
stationary country, one most important instrument of
production
is always cheap, namely, labour; but this cheapness of
labour
does not counterbalance the disadvantages arising from
the
dearness of capital; a bad system of culture; and, above
all, a
fall in the price of raw produce, greater than in the
price of
the other branches of expenditure, which, in addition
to labour,
are necessary to cultivation.
It has appeared also, that in the progress of cultivation
and
of increasing rents, rent, though greater in positive
amount,
bears a less, and lesser proportion to the quantity of
capital
employed upon the land, and the quantity of produce derived
from
it. According to the same principle, when produce diminishes
and
rents fall, though the amount of rent will always be
less, the
proportion which it bears to capital and produce will
always be
greater. And, as in the former case, the diminished proportion
of
rent was owing to the necessity of yearly taking fresh
land of an
inferior quality into cultivation, and proceeding in
the
improvement of old land, when it would return only the
common
profits of stock, with little or no rent; so, in the
latter case,
the high proportion of rent is owing to the impossibility
of
obtaining produce, whenever a great expenditure is required,
and
the necessity of employing the reduced capital of the
country, in
the exclusive cultivation of its richest lands.
In proportion, therefore, as the relative state of prices
is
such as to occasion a progressive fall of rents, more
and more
lands will be gradually thrown out of cultivation, the
remainder
will be worse cultivated, and the diminution of produce
will
proceed still faster than the diminution of rents.
If the doctrine here laid down, respecting the laws which
govern the rise and fall of rents, be near the truth,
the
doctrine which maintains that, if the produce of agriculture
were
sold at such a price as to yield less net surplus, agriculture
would be equally productive to the general stock, must
be very
far from the truth.
With regard to my own conviction, indeed, I feel no sort
of
doubt that if, under the impression that the high price
of raw
produce, which occasions rent, is as injurious to the
consumer as
it is advantageous to the landlord, a rich and improved
nation
were determined by law, to lower the price of produce,
till no
surplus in the shape of rent anywhere remained; it would
inevitably throw not only all the poor land, but all,
except the
very best land, out of cultivation, and probably reduce
its
produce and population to less than one tenth of their
former
amount.
From the preceding account of the progress of rent, it
follows, that the actual state of the natural rent of
land is
necessary to the actual produce; and that the price of
produce,
in every progressive country, must be just about equal
to the
cost of production on land of the poorest quality actually
in
use; or to the cost of raising additional produce on
old land,
which yields only the usual returns of agricultural stock
with
little or no rent.
It is quite obvious that the price cannot be less; or
such
land would not be cultivated, nor such capital employed.
Nor can
it ever much exceed this price, because the poor land
progressively taken into cultivation, yields at first
little or
no rent; and because it will always answer to any farmer
who can
command capital, to lay it out on his land, if the additional
produce resulting from it will fully repay the profits
of his
stock, although it yields nothing to his landlord.
It follows then, that the price of raw produce, in reference
to the whole quantity raised, is sold at the natural
or necessary
price, that is, at the price necessary to obtain the
actual
amount of produce, although by far the largest part is
sold at a
price very much above that which is necessary to its
production,
owing to this part being produced at less expense, while
its
exchangeable value remains undiminished.
The difference between the price of corn and the price
of
manufactures, with regard to natural or necessary price,
is this;
that if the price of any manufacture were essentially
depressed,
the whole manufacture would be entirely destroyed; whereas,
if
the price of corn were essentially depressed, the quantity
of it
only would be diminished. There would be some machinery
in the
country still capable of sending the commodity to market
at the
reduced price.
The earth has been sometimes compared to a vast machine,
presented by nature to man for the production of food
and raw
materials; but, to make the resemblance more just, as
far as they
admit of comparison, we should consider the soil as a
present to
man of a great number of machines, all susceptible of
continued
improvement by the application of capital to them, but
yet of
very different original qualities and powers.
This great inequality in the powers of the machinery
employed
in procuring raw produce, forms one of the most remarkable
features which distinguishes the machinery of the land
from the
machinery employed in manufactures.
When a machine in manufactures is invented, which will
produce more finished work with less labour and capital
than
before, if there be no patent, or as soon as the patent
is over,
a sufficient number of such machines may be made to supply
the
whole demand, and to supersede entirely the use of all
the old
machinery. The natural consequence is, that the price
is reduced
to the price of production from the best machinery, and
if the
price were to be depressed lower, the whole of the commodity
would be withdrawn from the market.
The machines which produce corn and raw materials on
the
contrary, are the gifts of nature, not the works of man;
and we
find, by experience, that these gifts have very different
qualities and powers. The most fertile lands of a country,
those
which, like the best machinery in manufactures, yield
the
greatest products with the least labour and capital,
are never
found sufficient to supply the effective demand of an
increasing
population. The price of raw produce, therefore, naturally
rises
till it becomes sufficiently high to pay the cost of
raising it
with inferior machines, and by a more expensive process;
and, as
there cannot be two prices for corn of the same quality,
all the
other machines, the working of which requires less capital
compared with the produce, must yield rents in proportion
to
their goodness.
Every extensive country may thus be considered as possessing
a gradation of machines for the production of corn and
raw
materials, including in this gradation not only all the
various
qualities of poor land, of which every large territory
has
generally an abundance, but the inferior machinery which
may be
said to be employed when good land is further and further
forced
for additional produce. As the price of raw produce continues
to
rise, these inferior machines are successively called
into
action; and, as the price of raw produce continues to
fall, they
are successively thrown out of action. The illustration
here used
serves to show at once the necessity of the actual price
of corn
to the actual produce, and the different effect which
would
attend a great reduction in the price of any particular
manufacture, and a great reduction in the price of raw
produce.
I hope to be excused for dwelling a little, and presenting
to
the reader in various forms the doctrine, that corn in
reference
to the quantity actually produced is sold at its necessary
price
like manufactures, because I consider it as a truth of
the
highest importance, which has been entirely overlooked
by the
Economists, by Adam Smith, and all those writers who
have
represented raw produce as selling always at a monopoly
price.
Adam Smith has very clearly explained in what manner
the
progress of wealth and improvement tends to raise the
price of
cattle, poultry, the materials of clothing and lodging,
the most
useful minerals, etc., etc. compared with corn; but he
has not
entered into the explanation of the natural causes which
tend to
determine the price of corn. He has left the reader,
indeed, to
conclude, that he considers the price of corn as determined
only
by the state of the mines which at the time supply the
circulating medium of the commercial world. But this
is a cause
obviously inadequate to account for the actual differences
in the
price of grain, observable in countries at no great distance
from
each other, and at nearly the same distance from the
mines.
I entirely agree with him, that it is of great use to
inquire
into the causes of high price; as, from the result of
such
inquiry, it may turn out, that the very circumstance
of which we
complain, may be the necessary consequence and the most
certain
sign of increasing wealth and prosperity. But, of all
inquiries
of this kind, none surely can be so important, or so
generally
interesting, as an inquiry into the causes which affect
the price
of corn, and which occasion the differences in this price,
so
observable in different countries.
I have no hesitation in stating that, independently of
irregularities in the currency of a country,(13*) and
other
temporary and accidental circumstances, the cause of
the high
comparative money price of corn is its high comparative
real
price, or the greater quantity of capital and labour
which must
be employed to produce it: and that the reason why the
real price
of corn is higher and continually rising in countries
which are
already rich, and still advancing in prosperity and population,
is to be found in the necessity of resorting constantly
to poorer
land - to machines which require a greater expenditure
to work
them - and which consequently occasion each fresh addition
to the
raw produce of the country to be purchased at a greater
cost - in
short, it is to be found in the important truth that
corn, in a
progressive country, is sold at the price necessary to
yield the
actual supply; and that, as this supply becomes more
and more
difficult, the price rises in proportion.(14*)
The price of corn, as determined by these causes, will
of
course be greatly modified by other circumstances; by
direct and
indirect taxation; by improvements in the modes of cultivation;
by the saving of labour on the land; and particularly
by the
importations of foreign corn. The latter cause, indeed,
may do
away, in a considerable degree, the usual effects of
great wealth
on the price of corn; and this wealth will then show
itself in a
different form.
Let us suppose seven or eight large countries not very
distant from each other, and not very differently situated
with
regard to the mines. Let us suppose further, that neither
their
soils nor their skill in agriculture are essentially
unlike; that
their currencies are in a natural state; their taxes
nothing; and
that every trade is free, except the trade in corn. Let
us now
suppose one of them very greatly to increase in capital
and
manufacturing skill above the rest, and to become in
consequence
much more rich and populous. I should say, that this
great
comparative increase of riches could not possibly take
place,
without a great comparative advance in the price of raw
produce;
and that such advance of price would, under the circumstances
supposed, be the natural sign and absolutely necessary
consequence, of the increased wealth and population of
the
country in question.
Let us now suppose the same countries to have the most
perfect freedom of intercourse in corn, and the expenses
of
freight, etc. to be quite inconsiderable. And let us
still
suppose one of them to increase very greatly above the
rest, in
manufacturing capital and skill, in wealth and population.
I
should then say, that as the importation of corn would
prevent
any great difference in the price of raw produce, it
would
prevent any great difference in the quantity of capital
laid out
upon the land, and the quantity of corn obtained from
it; that,
consequently, the great increase of wealth could not
take place
without a great dependence on the other nations for corn;
and
that this dependence, under the circumstances supposed,
would be
the natural sign, and absolutely necessary consequence
of the
increased wealth and population of the country in question.
These I consider as the two alternatives necessarily
belonging to a great comparative increase of wealth;
and the
supposition here made will, with proper restrictions,
apply to
the state of Europe.
In Europe, the expenses attending the carriage of corn
are
often considerable. They form a natural barrier to importation;
and even the country which habitually depends upon foreign
corn,
must have the price of its raw produce considerably higher
than
the general level. Practically, also, the prices of raw
produce,
in the different countries of Europe, will be variously
modified
by very different soils, very different degrees of taxation,
and
very different degrees of improvement in the science
of
agriculture. Heavy taxation, and a poor soil, may occasion
a high
comparative price of raw produce, or a considerable dependence
on
other countries, without great wealth and population;
while great
improvements in agriculture and a good soil may keep
the price of
produce low, and the country independent of foreign corn,
in
spite of considerable wealth. But the principles laid
down are
the general principles on the subject; and in applying
them to
any particular case, the particular circumstances of
such case
must always be taken into consideration.
With regard to improvements in agriculture, which in
similar
soils is the great cause which retards the advance of
price
compared with the advance of produce; although they are
sometimes
very powerful, they are rarely found sufficient to balance
the
necessity of applying to poorer land, or inferior machines.
In
this respect, raw produce is essentially different from
manufactures.
The real price of manufactures, the quantity of labour
and
capital necessary to produce a given quantity of them,
is almost
constantly diminishing; while the quantity of labour
and capital,
necessary to procure the last addition that has been
made to the
raw produce of a rich and advancing country, is almost
constantly
increasing. We see in consequence, that in spite of continued
improvements in agriculture, the money price of corn
is ceteris
paribus the highest in the richest countries, while in
spite of
this high price of corn, and consequent high price of
labour, the
money price of manufactures still continues lower than
in poorer
countries.
I cannot then agree with Adam Smith, in thinking that
the low
value of gold and silver is no proof of the wealth and
flourishing state of the country, where it takes place.
Nothing
of course can be inferred from it, taken absolutely,
except the
abundance of the mines; but taken relatively, or in comparison
with the state of other countries, much may be inferred
from it.
If we are to measure the value of the precious metals
in
different countries, and at different periods in the
same
country, by the price of corn and labour, which appears
to me to
be the nearest practical approximation that can be adopted
(and
in fact corn is the measure used by Adam Smith himself),
it
appears to me to follow, that in countries which have
a frequent
commercial intercourse with each other, which are nearly
at the
same distance from the mines, and are not essentially
different
in soil; there is no more certain sign, or more necessary
consequence of superiority of wealth, than the low value
of the
precious metals, or the high price of raw produce.(15*)
It is of importance to ascertain this point; that we
may not
complain of one of the most certain proofs of the prosperous
condition of a country.
It is not of course meant to be asserted, that the high
price
of raw produce is, separately taken, advantageous to
the
consumer; but that it is the necessary concomitant of
superior
and increasing wealth, and that one of them cannot be
had without
the other.(16*)
With regard to the labouring classes of society, whose
interests as consumers may be supposed to be most nearly
concerned, it is a very short-sighted view of the subject,
which
contemplates, with alarm, the high price of corn as certainly
injurious to them. The essentials to their well being
are their
own prudential habits, and the increasing demand for
labour. And
I do not scruple distinctly to affirm, that under similar
habits,
and a similar demand for labour, the high price of corn,
when it
has had time to produce its natural effects, so far from
being a
disadvantage to them, is a positive and unquestionable
advantage.
To supply the same demand for labour, the necessary price
of
production must be paid, and they must be able to command
the
same quantities of the necessaries of life, whether they
are high
or low in price.(17*) But if they are able to command
the same
quantity of necessaries, and receive a money price for
their
labour, proportioned to their advanced price, there is
no doubt
that, with regard to all the objects of convenience and
comfort,
which do not rise in proportion to corn (and there are
many such
consumed by the poor), their condition will be most decidedly
improved.
The reader will observe in what manner I have guarded
the
proposition. I am well aware, and indeed have myself
stated in
another place, that the price of provisions often rises,
without
a proportionate rise of labour: but this cannot possibly
happen
for any length of time, if the demand for labour continues
increasing at the same rate, and the habits of the labourer
are
not altered, either with regard to prudence, or the quantity
of
work which he is disposed to perform.
The peculiar evil to be apprehended is, that the high
money
price of labour may diminish the demand for it; and that
it has
this tendency will be readily allowed, particularly as
it tends
to increase the prices of exportable commodities. But
repeated
experience has shown us that such tendencies are continually
counterbalanced, and more than counterbalanced by other
circumstances. And we have witnessed, in our own country,
a
greater and more rapid extension of foreign commerce,
than
perhaps was ever known, under the apparent disadvantage
of a very
great increase in the price of corn and labour, compared
with the
prices of surrounding countries.
On the other hand, instances everywhere abound of a very
low
money price of labour, totally failing to produce an
increasing
demand for it. And among the labouring classes of different
countries, none certainly are so wretched as those, where
the
demand for labour, and the population are stationary,
and yet the
prices of provisions extremely low, compared with manufactures
and foreign commodities. However low they may be, it
is certain,
that under such circumstances, no more will fall to the
share of
the labourer than is necessary just to maintain the actual
population; and his condition will be depressed, not
only by the
stationary demand for labour, but by the additional evil
of being
able to command but a small portion of manufactures or
foreign
commodities, with the little surplus which he may possess.
If,
for instance, under a stationary population, we suppose,
that in
average families two thirds of the wages estimated in
corn are
spent in necessary provisions, it will make a great difference
in
the condition of the poor, whether the remaining one
third will
command few or many conveniencies and comforts; and almost
invariably, the higher is the price of corn, the more
indulgences
will a given surplus purchase.
The high or low price of provisions, therefore, in any
country is evidently a most uncertain criterion of the
state of
the poor in that country. Their condition obviously depends
upon
other more powerful causes; and it is probably true,
that it is
as frequently good. or perhaps more frequently so, in
countries
where corn is high, than where it is low.
At the same time it should be observed, that the high
price
of corn, occasioned by the difficulty of procuring it,
may be
considered as the ultimate check to the indefinite progress
of a
country in wealth and population. And, although the actual
progress of countries be subject to great variations
in their
rate of movement, both from external and internal causes,
and it
would be rash to say that a state which is well peopled
and
proceeding rather slowly at present, may not proceed
rapidly
forty years hence; yet it must be owned, that the chances
of a
future rapid progress are diminished by the high prices
of corn
and labour, compared with other countries.
It is, therefore, of great importance, that these prices
should be increased as little as possible artificially,
that is,
by taxation. But every tax which falls upon agricultural
capital
tends to check the application of such capital, to the
bringing
of fresh land under cultivation, and the improvement
of the old.
It was shown, in a former part of this inquiry, that
before such
application of capital could take place, the price of
produce,
compared with the instruments of production, must rise
sufficiently to pay the farmer. But, if the increasing
difficulties to be overcome are aggravated by taxation,
it is
necessary, that before the proposed improvements are
undertaken,
the price should rise sufficiently, not only to pay the
farmer,
but also the government. And every tax, which falls on
agricultural capital, either prevents a proposed improvement,
or
causes it to be purchased at a higher price.
When new leases are let, these taxes are generally thrown
off
upon the landlord. The farmer so makes his bargain, or
ought so
to make it, as to leave himself, after every expense
has been
paid, the average profits of agricultural stock in the
actual
circumstances of the country, whatever they may be, and
in
whatever manner they may have been affected by taxes,
particularly by so general a one as the property tax.
The farmer,
therefore, by paying a less rent to his landlord on the
renewal
of his lease, is relieved from any peculiar pressure,
and may go
on in the common routine of cultivation with the common
profits.
But his encouragement to lay out fresh capital in improvements
is
by no means restored by his new bargain. This encouragement
must
depend, both with regard to the farmer and the landlord
himself,
exclusively on the price of produce, compared with the
price of
the instruments of production; and, if the price of these
instruments have been raised by taxation, no diminution
of rent
can give relief. It is, in fact, a question, in which
rent is not
concerned. And, with a view to progressive improvements,
it may
be safely asserted, that the total abolition of rents
would be
less effectual than the removal of taxes which fall upon
agricultural capital.
I believe it to be the prevailing opinion, that the greatest
expense of growing corn in this country is almost exclusively
owing to the weight of taxation. Of the tendency of many
of our
taxes to increase the expenses of cultivation and the
price of
corn, I feel no doubt; but the reader will see from the
course of
argument pursued in this inquiry, that I think a part
of this
price, and perhaps no inconsiderable part, arises from
a cause
which lies deeper, and is in fact the necessary result
of the
great superiority of our wealth and population, compared
with the
quality of our natural soil and the extent of our territory.
This is a cause which can only be essentially mitigated
by
the habitual importation of foreign corn, and a diminished
cultivation of it at home. The policy of such a system
has been
discussed in another place; but, of course, every relief
from
taxation must tend, under any system, to make the price
of corn
less high, and importation less necessary.
In the progress of a country towards
a high state of
improvement, the positive wealth of the landlord ought,
upon the
principles which have been laid down, gradually to increase;
although his relative condition and influence in society
will
probably rather diminish, owing to the increasing number
and
wealth of those who live upon a still more important
surplus(18*)
- the profits of stock.
The progressive fall, with few exceptions, in the value
of
the precious metals throughout Europe; the still greater
fall,
which has occurred in the richest countries, together
with the
increase of produce which has been obtained from the
soil, must
all conduce to make the landlord expect an increase of
rents on
the renewal of his leases. But, in reletting his farms,
he is
liable to fall into two errors, which are almost equally
prejudicial to his own interests, and to those of his
country.
In the first place, he may be induced, by the immediate
prospect of an exorbitant rent, offered by farmers bidding
against each other, to let his land to a tenant without
sufficient capital to cultivate it in the best way, and
make the
necessary improvements upon it. This is undoubtedly a
most
short-sighted policy, the bad effects of which have been
strongly
noticed by the most intelligent land surveyors in the
evidence
lately brought before Parliament; and have been particularly
remarkable in Ireland, where the imprudence of the landlords
in
this respect, combined, perhaps, with some real difficulty
of
finding substantial tenants, has aggravated the discontents
of
the country, and thrown the most serious obstacles in
the way of
an improved system of cultivation. The consequence of
this error
is the certain loss of all that future source of rent
to the
landlord, and wealth to the country, which arises from
increase
of produce.
The second error to which the landlord is liable, is
that of
mistaking a mere temporary rise of prices, for a rise
of
sufficient duration to warrant an increase of rents.
It
frequently happens, that a scarcity of one or two years,
or an
unusual demand arising from any other cause, may raise
the price
of raw produce to a height, at which it cannot be maintained.
And
the farmers, who take land under the influence of such
prices,
will, in the return of a more natural state of things,
probably
break, and leave their farms in a ruined and exhausted
state.
These short periods of high price are of great importance
in
generating capital upon the land, if the farmers are
allowed to
have the advantage of them; but, if they are grasped
at
prematurely by the landlord, capital is destroyed, instead
of
being accumulated; and both the landlord and the country
incur a
loss, instead of gaining a benefit.
A similar caution is necessary in raising rents, even
when
the rise of prices seems as if it would be permanent.
In the
progress of prices and rents, rent ought always to be
a little
behind; not only to afford the means of ascertaining
whether the
rise be temporary or permanent, but even in the latter
case, to
give a little time for the accumulation of capital on
the land,
of which the landholder is sure to feel the full benefit
in the
end.
There is no just reason to believe, that if the lands
were to
give the whole of their rents to their tenants, corn
would be
more plentiful and cheaper. If the view of the subject,
taken in
the preceding inquiry, be correct, the last additions
made to our
home produce are sold at the cost of production, and
the same
quantity could not be produced from our own soil at a
less price,
even without rent. The effect of transferring all rents
to
tenants, would be merely the turning them into gentlemen,
and
tempting them to cultivate their farms under the superintendence
of careless and uninterested bailiffs, instead of the
vigilant
eye of a master, who is deterred from carelessness by
the fear of
ruin, and stimulated to exertion by the hope of a competence.
The
most numerous instances of successful industry, and well-directed
knowledge, have been found among those who have paid
a fair rent
for their lands; who have embarked the whole of their
capital in
their undertaking; and who feel it their duty to watch
over it
with unceasing care, and add to it whenever it is possible.
But
when this laudable spirit prevails among a tenantry,
it is of the
very utmost importance to the progress of riches, and
the
permanent increase of rents, that it should have the
power as
well as the will to accumulate; and an interval of advancing
prices, not immediately followed by a proportionate rise
of
rents, furnishes the most effective powers of this kind.
These
intervals of advancing prices, when not succeeded by
retrograde
movements, most powerfully contribute to the progress
of national
wealth. And practically I should say, that when once
a character
of industry and economy has been established, temporary
high
profits are a more frequent and powerful source of accumulation,
than either an increased spirit of saving, or any other
cause
that can be named.(19*) It is the only cause which seems
capable
of accounting for the prodigious accumulation among individuals,
which must have taken place in this country during the
last
twenty years, and which has left us with a greatly increased
capital, notwithstanding our vast annual destruction
of stock,
for so long a period.
Among the temporary causes of high price, which may sometimes
mislead the landlord, it is necessary to notice irregularities
in
the currency. When they are likely to be of short duration,
they
must be treated by the landlord in the same manner as
years of
unusual demand. But when they continue so long as they
have done
in this country, it is impossible for the landlord to
do
otherwise than proportion his rent accordingly, and take
the
chance of being obliged to lessen it again, on the return
of the
currency to its natural state.
The present fall in the price of bullion, and the improved
state of our exchanges, proves, in my opinion, that a
much
greater part of the difference between gold and paper
was owing
to commercial causes, and a peculiar demand for bullion
than was
supposed by many persons; but they by no means prove
that the
issue of paper did not allow of a higher rise of prices
than
could be permanently maintained. Already a retrograde
movement,
not exclusively occasioned by the importations of corn,
has been
sensibly felt; and it must go somewhat further before
we can
return to payments in specie. Those who let their lands
during
the period of the greatest difference between notes and
bullion,
must probably lower them, whichever system may be adopted
with
regard to the trade in corn. These retrograde movements
are
always unfortunate; and high rents, partly occasioned
by causes
of this kind, greatly embarrass the regular march of
prices, and
confound the calculations both of the farmer and landlord.
With the cautions here noticed in letting farms, the
landlord
may fairly look forward to a gradual and permanent increase
of
rents; and, in general, not only to an increase proportioned
to
the rise in the price of produce, but to a still further
increase, arising from an increase in the quantity of
produce.
If in taking rents, which are equally
fair for the landlord
and tenant, it is found that in successive lettings they
do not
rise rather more than in proportion to the price of produce,
it
will generally be owing to heavy taxation.
Though it is by no means true, as stated by the Economists,
that all taxes fall on the net rents of the landlords,
yet it is
certainly true that they are more frequently taxed both
indirectly as well as directly, and have less power of
relieving
themselves, than any other order of the state. And as
they pay,
as they certainly do, many of the taxes which fall on
the capital
of the farmer and the wages of the labourer, as well
as those
directly imposed on themselves; they must necessarily
feel it in
the diminution of that portion of the whole produce,
which under
other circumstances would have fallen to their share.
But the
degree in which the different classes of society are
affected by
taxes, is in itself a copious subject, belonging to the
general
principles of taxation, and deserves a separate inquiry.
NOTES:
1. I cannot, however, agree with him in thinking that
all land
which yields food must necessarily yield rent. The land
which is
successively taken into cultivation in improving countries,
may
only pay profits and labour. A fair profit on the stock
employed,
including, of course, the payment of labour, will always
be a
sufficient inducement to cultivate.
2. J.B. Say, Traite d'economie politique, 2nd ed., 2 vols.
(Paris, 1814) ii, p. 124. Of this work a new and much
improved
edition has lately been published, which is highly worthy
the
attention of all those who take an interest in these
subjects.
3. J.C.L.S. de Sismondi, De la richesse commerciale, 2
vols.
(Geneva, 1803), i, p. 49.
4. Adam Smith, An inquiry into the nature and causes of
the
wealth of nations, ed. D. Buchanan, 4 vols. (Edinburgh,
1814) iv,
p. 134.
5. Smith, Wealth of nations, iii, p. 212.
6. It is, however, certain, that if either these materials
be
wanting, or the skill and capital necessary to work them
up be
prevented from forming, owing to the insecurity of property,
to
any other cause, the cultivators will soon slacken in
their
exertions, and the motives to accumulate and to increase
their
produce, will greatly diminish. But in this case there
will be a
very slack demand for labour; and, whatever may be the
nominal
cheapness of provisions, the labourer will not really
be able to
command such a portion of the necessaries of life, including,
of
course, clothing, lodging, etc. as will occasion an increase
of
population.
7. I have supposed some check to the supply of the cotton
machinery in this case. If there was no check whatever,
the
effects wold show themselves in excessive profits and
excessive
wages, without an excess above the cost of production.
8. Smith, Wealth of nations, iv, p. 35.
9. The more general surplus here alluded to is meant to
include
the profits of the farmer, as well as the rents of the
landlord;
and, therefore, includes the whole fund for the support
of those
who are not directly employed upon the land. Profits
are, in
reality, a surplus, as they are in no respect proportioned
(as
intimated by the Economists) to the wants and necessities
of the
owners of capital. But they take a different course in
the
progress of society from rents, and it is necessary,
in general,
to keep them quite separate.
10. According to the calculations of Mr Colquhoun, the
value of
our trade, foreign and domestic,and of our manufactures,
exclusive of raw materials, is nearly equal to the gross
value
derived from the land. In no other large country probably
is this
the case. P. Colquhoun, Treatise on the wealth, power,
and
resources of the British Empire, 2nd ed. (1815), p. 96.
The whole
annual produce is estimated at about 430 millions, and
the
products of agriculture at about 216 millions.
11. To the honour of Scotch cultivators, it should be
observed,
that they have applied their capitals so very skilfully
and
economically, that at the same time that they have prodigiously
increased the produce, they have increase the landlord's
proportion ot it. The difference between the landlord's
share of
the produce in Scotland and in England is quite extraordinary
--
much greater than can be accounted for, either by the
natural
soil or the absence of tithes and poor's rates. See Sir
John
Sinclair's valuable An account of husbandry in Scotland
(Edinburgh, 1812) and General Report, 4 vols. (Edinburgh,
1814)
not long since published -- works replete with the most
useful
and interesting information on agricultural subjects.
12. See BPP, 1814-5, V, p. 66, evidence before the House
of
Lords, given by Arthur Young.
13. In all our discussions we should endeavour, as well
as we
can, to separate that part of high price, which arises
from
excess of currency, from that part, which is natural,
and arises
from permanent causes. In the whole course of this argument,
it
is particularly necessary to do this.
14. It will be observed, that l have said in a progressive
country; that is, in a country which requires yearly
the
employment of a greater capital on the land, to support
an
increasing population. If there were no question about
fresh
capital, or an increase of people, and all the land were
good, it
would not then be true that corn must be sold at its
necessary
price. The actual price might be diminished; and if the
rents of
land were diminished in proportion. the cultivation might
go on
as before, and the same quantity be produced lt very
rarely
happens, however, that all the lands of a country actually
occupied are good, and yield a good net rent. And in
all cases, a
fall of prices must destroy agricultural capital during
the
currency of leases; and on their renewal there would
not be the
same power of production.
15. This conclusion may appear to contradict the doctrine
of the
level of the precious metals. And so it does, if by level
be
meant level of value estimated in the usual way. I consider
the
doctrine, indeed, as quite unsupported by facts, and
the
comparison of the precious metals to water perfectly
inaccurate.
The 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, estimated in
corn and
labour, or the mass of commodities, is very far indeed
from being
the same. To be convinced of this, it is only necessary
to look
at England, France, Poland, Russia, and India, when the
exchanges
are at par. That Adam Smith. who proposes labour as the
true
measure of value at all times and in all places, could
look
around him, and vet say that the precious metals were
always the
highest in value in the richest countries, has always
appeared to
me most unlike his usual attention to found his theories
on
facts.
16. Even upon the system of importation, in the actual
state and
situation of the countries of Europe, higher prices must
accompany superior and increasing wealth.
17. We must not be so far deceived by the evidence before
Parliament, relating to the want of connection between
the prices
of corn and of labour, as to suppose that they are really
independent of each other. The price of the necessaries
of life
is, in fact, the cost of producing labour. The supply
cannot
proceed, if it be not paid; and though there will always
be a
little latitude, owing to some variations of industry
and habits,
and the distance of time between the encouragement to
population
and the period of the results appearing in the markets:
yet it is
a still greater error, to suppose the price of labour
unconnected
with the price of corn, than to suppose that the price
of corn
immediately and completely regulates it. Corn and labour
rarely
march quite abreast; but there is an obvious limit, beyond
which
they cannot be separated. With regard to the unusual
exertions
made by the labouring classes in periods of dearness,
which
produce the fall of wages noticed in the evidence, they
are most
meritorious in the individuals, and certainly favour
the growth
of capital. But no man of humanity could wish to see
them
constant and unremitted. They are most admirable as a
temporary
relief; but if they were constantly in action, effects
of a
similar kind would result from them, as from the population
of a
country being pushed to the very extreme limits of its
food.
There would be no resources in a scarcity. I own I do
not see,
with pleasure, the great extension of the practice of
task work.
To work really hard during twelve or fourteen hours in
the day,
for any length of time, is too much for a human being.
Some
intervals of ease are necessary to health and happiness:
and the
occasional abuse of such intervals is no valid argument
against
their use.
18. I have hinted before, in a note, that profits may,
without
impropriety, be called a surplus. But, whether surplus
or not,
they are the most important source of wealth, as they
are, beyond
all question, the main source of accumulation.
19. Adam Smith notices the bad effects of high profits
on the
habits of the capitalist. They may perhaps sometimes
occasion
extravagance; but generally, I should say, that extravagant
habits were a more frequent cause of a scarcity of capital
and
high profits, than high profits of extravagant habits. |