CHAPTER III: THE PESSIMISTS

A new point of view is presented to us by the economists of whom we are now going to speak. Hitherto we have heard with admiration of the discovery of new facts and of their beneficent effects both upon nations and individuals. We are now to witness the enunciation of new doctrines which cast a deepening shadow across the radiant dawn of economics, giving it that strangely sinister aspect which led Carlyle to dub it “the dismal science.”

Hence the term “Pessimists,” although no reproach is implied in our use of that term. On the contrary, we shall have to show that the theories of the school are often truer than those of the Optimists, which we must study at a later stage of our survey. While nominally subscribing to their predecessors’ doctrine concerning the identity of individual and general interests, the many cogent reasons which they have adduced against such belief warrants our classification. The antagonism existing between proprietors and capitalists, between capitalists and workmen, is a discovery of theirs. Instead of the “natural” or “providential” laws that were to secure the establishment of the “order” provided they were once thoroughly understood and obeyed, they discovered the existence of other laws, such as that of rent, which guaranteed a revenue for a minority of idle proprietors—a revenue that was destined to grow as the direct result of the people’s growing need; or the “law of diminishing returns,” which sets a definite limit to the production of the necessaries of life. That limit, they asserted, was already being approached, and mankind had no prospect of bettering its lot save by the voluntary limitation of its numbers. There was also the tendency of profits to fall to a minimum—until it seemed as if the whole of human industry would sooner or later be swallowed up by the stagnant waters of the stationary State.

Lastly, they deserve to be classed as pessimists because of their utter disbelief in the possibility of changing the course of these inevitable laws either by legislative reform or by organised voluntary effort. In short, they had no faith in what we call progress.

But we must never imagine that they considered themselves pessimists or were classed as such by their contemporaries. This verdict is posterity’s, and would have caused them no little surprise. As for themselves, they seem to stand aloof from their systems with an insouciance that is most disconcerting. The “present order of things” possessed no disquieting features for them, and they never doubted the wisdom of “Nature’s Lord.” They believed that property had been put upon an immovable basis when they demonstrated the extent of its denotation, and that the spirit of revolt had been disarmed by impressing upon the poor a sense of responsibility for their own miseries.[286]

The best known representatives of the school are Malthus and Ricardo. They claimed to be philanthropists and friends of the people, and we have no reason to suspect their sincerity.[287] Their contemporaries, also, far from being alarmed, received the new political economy with the greatest enthusiasm. A warm welcome was extended to its apostles by the best of English society,[288] and ladies of distinction contended with one another for the privilege of popularising the abstract thoughts of Ricardo in newspaper articles and popular tales.[289]

Neither should we omit to pay them full homage for the eminent services rendered to the science, and among these not the least important was the antagonism which their theories aroused in the minds of the working classes. Pessimists unwittingly often do more for progress than optimists. To these two writers fell the task of criticising economic doctrines and institutions, a task that has been taken up by other writers in the course of the century, but which seems as far from completion as ever. Karl Marx, another critic, is intellectually a scion of the Ricardian family. It would be a mistake to imagine that all their theories savour of pessimism, but their reputation has always been more or less closely linked with the gloomier aspect of their teaching.

I: MALTHUS [290]

Malthus is best known for his “law of population.” That he was a great economist, even apart from his study of that question, might easily be proved by reference to his treatise on political economy, or by a perusal of the many miscellaneous articles which he wrote on various economic questions. A consideration of many of these theories, notably the theory of rent, must be postponed until we come to study them in connection with the name of Ricardo.

The Law of Population

Twenty years had elapsed since the publication of Smith’s immortal work, without economics making any advance, when the appearance of a small anonymous volume, known to be the work of a country clergyman, caused a great sensation. Even after the lapse of a century the echo of the controversy which it aroused has not altogether passed away. At first sight one might be led to think that the book touches only the fringe of economics, seeing that it is chiefly a statistical study of population, or demography, as the science is called to-day. But this new science, of which Malthus must be regarded as the founder, was separated from the main trunk of economics at a much later date. Furthermore, we shall find that the influence of his book upon all economic theories, both of production and distribution, was enormous. The essay might even be considered a reply to that of Adam Smith. The same title with slight modification would have served well enough, and James Bonar wittily remarks that Malthus might have headed it An Essay on the Causes of the Poverty of Nations.

The attempt to explain the persistence of certain economic phenomena by connecting them with the presence of a new factor, biological in its character and differing in its origin both from personal interest and the mere desire for profit, considerably expanded the economic horizon and announced the advent of sociology. We know that Darwin himself acknowledged his indebtedness to the work of Malthus for the first suggestion of what eventually became the most celebrated scientific doctrine of the nineteenth century, namely, the conception of the struggle for existence and the survival of the fittest as one of the mainsprings of progress.

There is no necessity for thinking that the dangers which might result from an indefinite growth of population had not engaged the attention of previous writers. In France Buffon and Montesquieu had already shown some concern in the matter. But a numerous population was usually regarded as advantageous, and fear of excess was never entertained inasmuch as it was believed that the number of people would always be limited by the available means of subsistence.[291] This was the view of the Physiocrat Mirabeau, stated in his own characteristic fashion in his book L’Ami des Hommes, which has for its sub-title Traité de la Population. Such a natural fact as the growth of population could possess no terrors for the advocates of the “natural order.” But in the writings of Godwin this “natural” optimism assumed extravagant proportions. His book on Political Justice appeared in 1793 and greatly impressed the public. Godwin, it has been well said, was the first anarchist who was also a doctrinaire. At any rate he seems to have been the first to employ that famous phrase, “Government even in its best state is an evil.” His illimitable confidence in the future of society and the progress of science, which he thought would result in such a multiplicity of products that half a day’s work would be sufficient to satisfy every need, and his belief in the efficacy of reason as a force which would restrain personal interest and check the desire for profit, really entitles him to be considered a pioneer. But life having become so pleasant, was there no possibility that men might then multiply beyond the available means of subsistence? Godwin was ignorant of the terrible intricacies of the problem he had thus raised, and he experienced no difficulty in replying that such a result, if it ever came to pass, must take several centuries, for reason may prove as powerful in controlling the sexual instinct as in restraining the desire for profit. Godwin even goes so far as to outline a social State in which reason shall so dominate sense that reproduction will cease altogether and man will become immortal.[292]

Almost at the same time there appeared in France a volume closely resembling Godwin’s, entitled Esquisse d’un Tableau historique des Progrès de l’Esprit humain, written by Condorcet (1794). It displays the same confidence in the possibility of achieving happiness through the all-powerful instrumentality of science, which, if not destined actually to overcome death, was at least going to postpone it indefinitely.[293] This optimistic book, written by a man who was about to poison himself in order to escape the guillotine, cannot leave us quite unmoved. But, death abolished, Condorcet finds that he has to face the old question propounded to Godwin: “Can the earth always be relied upon to supply sufficient means of subsistence?” To this question he gives the same answer: either science will be able to increase the means of subsistence or reason will prevent an inordinate growth of population.

It was inevitable, in accordance with the law of rhythm which characterises the movements of thought no less than the forces of nature, that such hasty optimism should provoke a reaction. It was not long in coming, and in Malthus’s essay we have it developed in fullest detail.

To the statement that there are no limits to the progress of mankind either in wealth or happiness, and that the fear of over-population is illusory, or at any rate so far removed that it need cause no apprehension, Malthus replied that, on the contrary, we have in population an almost insurmountable obstacle, not merely looming in the distant future, but pressing and insistent [294]—the stone of Sisyphus destined to be the cause of humanity’s ceaseless toil and final overthrow. Nature has planted an instinct in man which, left to itself, must result in starvation and death, or vice. This is the one fact that affords a clue to men’s suffering and a key to the history of nations and their untold woes.

Everyone, however little acquainted with sociological study, knows something of the memorable formula by which Malthus endeavoured to show the contrast between the frightful rapidity with which population grows when it is allowed to take its own course and the relative slowness in the growth of the means of subsistence. The first is represented by a geometrical series where each successive number is a multiple of the previous one. The second series increases in arithmetical progression, that is, by simple addition, the illustration being simply a series of whole numbers:

1	2	4	8	16	32	64	128	256
1	2	3	4	5	6	7	8	9

Every term corresponds to a period of twenty-five years, and a glance at the figures will show us that population is supposed to double every twenty-five years, while the means of subsistence merely increases by an equal amount during each of these periods. Thus the divergence between the two series grows with astonishing rapidity. In the table given above, containing only nine terms, the population figure has already grown to twenty-seven times the means of subsistence in a period of 225 years. Had the series been extended up to the hundredth term a numerical representation of the divergence would have required some ingenuity.

The first progression may be taken as correct, representing as it does the biological law of generation. The terms “generation” and “multiplication” are not used as synonyms without some purpose. It is true that doubling supposes four persons to arrive at the marriageable age, and this means five or six births if we are to allow for the inevitable wastage from infant mortality. This figure appears somewhat high to those who live in a society where limitation of the birth-rate is fairly usual. But it is certain that among living beings in general, including humankind, who are least prolific, the number of births where no restraint of any kind exists is really much higher. Women have been known to give birth to twenty or even more children. And there are no signs of diminishing capacity among the sexes, for population is still growing. In taking two as his coefficient Malthus has certainly not overstepped the mark.[295]

The period of twenty-five years as the interval between the two terms is more open to criticism.[296] The practice of reckoning three generations to a century implies that an interval of about thirty-three years must elapse between one generation and another.

But these are unimportant details. It is immaterial whether we lengthen the interval between the two terms from twenty-five to thirty-three years, or reduce the ratio from 2 to 1½, or even to something between 1¼ and 1¹/₁₀. The movement will be a little slower, but it is enough that its geometrical character should be admitted, for however slow it moves at first it will grow by leaps and bounds until it surpasses all limits. These corrections fail to touch the real force of Malthus’s reasoning concerning the law of reproduction.

The series representing the growth of the means of subsistence is also open to criticism. It is evidently of a more arbitrary character, and we cannot say whether it is simply supposed to represent a possible contingency like the first, or whether it pretends to represent reality. At least it does not correspond to any known and certain law, such as the law of reproduction. As a matter of fact it rather seems to give it the lie; for, in short, what is meant by means of subsistence unless we are to understand the animal and vegetable species that reproduce themselves according to the same laws as human beings, only at a much faster rate? The power of reproduction among plants, like corn or potatoes, or among animals, like fowls, herrings, cattle even, or sheep, far surpasses that of man. To this criticism Malthus might have replied as follows. This virtual power of reproduction possessed by these necessaries of life is in reality confined to very limited areas of the habitable globe. It is further restricted by the difficulty of obtaining the proper kind of nourishment, and by the struggle for existence. But if we admit exceptions in the one case why not also in the other? It certainly seems as if there were some inconsistency here. As a matter of fact we have two different theses. The one attempts to show how multiplication or reproduction need not of necessity be less rapid among plants or animals than it is among men. The other expresses what actually happens by showing that the obstacles to the indefinite multiplication of men are not less numerous than the difficulties in the way of an indefinite multiplication of vegetables or animals, or, in other words, that the former is a function of the latter.

In order to grasp the true significance of the second formula it must be translated from the domain of biology into the region of economics. Malthus evidently thought of it as the amount of corn yielded by a given quantity of land. The English economists could think of nothing except in terms of corn! What he wished to point out was that the utmost we can expect in this matter is that the increase in the amount of the harvest should be in arithmetical progression—say, an increase of two hectolitres every twenty-five years. This hypothesis is really rather too liberal. Lavoisier in 1789 calculated that the French crop yielded on an average about 7¾ hectolitres per hectare. During the last few years it has averaged about 16, and if we admit that the increment has been regular throughout the 120 years which have since elapsed we have an increase of 2 hectolitres per 25 years. This rate of increase has proved sufficient to meet the small increase which has taken place in the population of France. But would it have sufficed for a population growing as rapidly as that of England or Germany? Assuredly not, for these countries, despite their superior yields, are forced to import from outside a great proportion of the grain which they consume. The question arises whether France can continue indefinitely on the same basis during the course of the coming centuries. This is, indeed, unlikely, for there must be a physical limit to the earth’s capacity on account of the limited number of elements it contains. The economic limit will be reached still earlier because of the increasing cost of attempting to carry on production at these extreme limits. Thus it seems as if the law of diminishing returns, which we must study later, were the real basis of the Malthusian laws, although Malthus himself makes no express mention of it.

It is a truism that the number of people who can live in any place cannot exceed the number of people who can gain subsistence there. Any excessive population must, according to definition, die of hunger.[297] This is just what happens in the animal and vegetable kingdoms. Germs are extraordinarily prolific, but their undue multiplication is pitilessly retarded by a law which demands the death of a certain proportion, so that life, like a well-regulated reservoir, always remains at a mean level, the terrible gaps made by death being replenished by a new flow. Among savages, just as among animals, which they much resemble, a large proportion literally dies of hunger. Malthus devoted much attention to the study of primitive society, and he must be regarded as one of the pioneers of prehistoric sociology—a subject that has made much headway since then.

He proceeds to show how insufficient nourishment always brings a thousand evils in its train, not merely hunger and death, but also epidemics and such terrible practices as cannibalism, infanticide, and slaughter of the old, as well as war, which, even when not undertaken with a definite view to eating the conquered, always results in robbing them of their land and the food which it yielded. These are the “positive” or “repressive” checks.

But it may be replied that both among savages and animals the cause of this insufficiency of food is an incapacity for production rather than an excess of population.

Malthus has no difficulty in answering this objection by showing how savage customs prevailed among such civilised people as the Greeks. And even among the most modern nations the repressive checks, somewhat mitigated it is true, are never really absent. Famine in the sense of absolute starvation is seldom experienced nowadays, except in Russia and India, perhaps, but it is by no means a stranger even to the most advanced communities. Tuberculosis, which involves such terrible bodily suffering, is nothing but a deadly kind of famine. Lack of food is also responsible for the abnormally high rate of infant mortality and for the premature death of the adult worker. As for war, it still demands its toll. Malthus was living during the wars of the Revolution and the First Empire—bloody catastrophes that caused the death of about ten million men, all in the prime of life.

In civilized communities equilibrium is possible through humaner methods, in the substitution of the preventive check with its reduced birth-rate for the repressive check with its abnormal death-rate. Here is an expedient of which only the rational and the provident can avail themselves, an expedient open only to man. Knowing that his children are doomed to die—perhaps at an early age—he may abstain from having any. In reality this is the only efficacious way of checking the growth of population, for the positive check only excites new growth, just as the grass that is mown grows all the more rapidly afterwards. The history of war furnishes many a striking illustration of this. The year following the terrible war of 1870-71 remains unique in the demographic annals of France on account of the sudden upward trend of the declining curve of natality.

It was in the second edition of his book that Malthus expanded his treatment of the preventive checks, thus softening the somewhat harsher aspects of his first edition. It is very important that we should grasp his exact meaning. We therefore make no apology for frequently quoting his views on one point which is in itself very important, but upon which the ideas of the reverend pastor of Haileybury have been so often misrepresented.

The preventive check must be taken to imply moral restraint. But does this mean abstaining from sexual intercourse during the period of marriage after the birth, say, of three children, which may be taken as sufficient to keep the population stationary or moderately progressive? We cannot find that Malthus ever advocated such abstention. We have already seen that he considered six children a normal family, implying the doubling of the population every twenty-five years. Neither is it suggested that six should be the maximum, for he adds: “It may be said, perhaps, that even this degree of prudence might not always avail, as when a man marries he cannot tell what number of children he shall have, and many have more than six. This is certainly true.” (P. 536.)

But where does moral restraint come in? This is how he defines it: “Restraint from marriage which is not followed by irregular gratifications may properly be termed moral restraint” (p. 9); and to avoid any possible misunderstanding he adds a note: “By moral restraint I would be understood to mean a restraint from marriage from prudential motives with a conduct strictly moral during the period of this restraint, and I have never intentionally deviated from this sense.” All this is perfectly explicit. He means abstention from all sexual intercourse outside the bonds of marriage, and the postponement of marriage itself until such time as the man can take upon himself the responsibility of bringing up a family—and even the complete renunciation of marriage should the economic conditions never prove favourable.

Malthus unceremoniously rejected the methods advocated by those who to-day bear his name, and expressly condemned all who favoured the free exercise of sexual connection, whether within or without the marriage bond, through the practice of voluntary sterilization. All these preventive methods are grouped together as vices and their evil effects contrasted with the practice of moral restraint. Malthus is equally explicit on this point. “Indeed, I should always particularly reprobate any artificial and unnatural modes of checking population. The restraints which I have recommended are quite of a different character. They are not only pointed out by reason and sanctioned by religion, but tend in the most marked manner to stimulate industry.” (P. 572.) And he adds these significant words, so strangely prophetic so far as France is concerned: “It might be easy to fall into the opposite mistake and to check the growth of population altogether.”

It is quite needless to add that if Malthus thus made short work of conjugal frauds he all the more strongly condemned that other preventive method, namely, the institution of a special class of professional prostitutes.[298] He would similarly have condemned the practice of abortion, of which scarcely anything was heard in his day, but which now appears like a scourge, taking the place of infanticide and the other barbarous practices of antiquity. Criminal law seems powerless to suppress it, and it has already received the sanction of a new morality.

But apart from the question of immoral practices, did Malthus really believe that moral restraint as he conceived of it would constitute an effective check upon population?

He doubtless was anxious that it should be so, and he tried to rouse men to a holy crusade against this worst of all social evils. “To the Christian I would say that the Scriptures most clearly and precisely point it out to us as our duty to restrain our passions within the bounds of reason.… The Christian cannot consider the difficulty of moral restraint as any argument against its being his duty.” (P. 452.) And to those who wish to follow the dictates of reason rather than the observances of religion he remarks: “This virtue [chastity] appears to be absolutely necessary in order to avoid certain evils which would otherwise result from the general laws of nature.” (P. 452.)[299]

At bottom he was never quite certain as to the efficacy of moral restraint. The threatening hydra always peered over the fragile shield of pure crystal with which he had hoped to do battle.[300] He also felt that celibacy might not merely be ineffective, but would actually prove dangerous by provoking the vices it was intended to check. Its prolongation, or worse still its perpetuation, could never be favourable to good morals.

Malthus was faced with a terrible dilemma, and the uncompromising ascetic is forced to declare himself a utilitarian philosopher of the Benthamite persuasion. He has now to condone those practices which satisfy the sexual instinct without involving maternity, although at an earlier stage he characterised them as vices. It seemed to him to be the lesser of two evils, for over-population [301] is itself the cause of much immorality, with its misery, its promiscuous living and licence. All of which is very true.[302] At the same time the rule of conduct now prescribed is no longer that of “perfect purity.” It is, as he himself says, the grand rule of utility. “It is clearly our duty gradually to acquire a habit of gratifying our passion, only in that way which is unattended with evil.” (P. 500.) These concessions only served to prepare the way for the Neo-Malthusians.

Malthus gives us a picture of man at the cross-roads. Straight in front of him lies the road to misery, on the right the path of virtue, while on the left is the way of vice. Towards the first man is impelled by a blind instinct. Malthus warns him to rein in his desires and seek escape along either by-road, preferably by the path on his right. But he fears that the number of those who will accept his advice and choose “the strait road of salvation” will be very small. On the other hand, he is unwilling to admit, even in the secrecy of his own soul, that most men will probably follow the road that leads on to vice, and that masses will rush down the easy slope towards perdition. In any case the prospect is anything but inviting.

No doctrine ever was so much reviled. Imprecations have been showered upon it ever since Godwin’s memorable description of it as “that black and terrible demon that is always ready to stifle the hopes of humanity.”

Critics have declared that all Malthus’s economic predictions have been falsified by the facts, that morally his doctrines have given rise to the most repugnant practices, and not a few French writers are prepared to hold him responsible for the decline in the French birth-rate. What are we to make of these criticisms?

History certainly has not confirmed his fears. No single country has shown that it is suffering from over-population. In some cases—that of France, for example—population has increased only very slightly. In others the increase has been very considerable, but nowhere has it outstripped the increase in wealth.

The following table, based upon the decennial censuses, gives the per capita wealth of the population of the United States, the country from which Malthus obtained many of his data:

Year	Dollars
1850	308
1860	514
1870	780
1880	870
1890	1036
1900	1227
1905	1370

In fifty years the wealth of every inhabitant has more than quadrupled, although the population in the same interval also shows a fourfold increase (23 millions to 92 millions).[303]

Great Britain, i.e. England and Scotland, at the time Malthus wrote (1800-5), had a population of 10½ millions. To-day it has a population of 40 millions. Such a figure, had he been able to foresee it, would have terrified Malthus. But the wealth and prosperity of Great Britain have in the meantime probably quadrupled also.

Does this prove the claim that is constantly being made, that Malthus’s laws are not borne out by the facts? We think that it is correct to say that the laws still remain intact, but that the conclusions which he drew from them were unwarranted. No one can deny that living beings of every kind, including the human species, multiply in geometrical progression. Left to itself, with no check, such increase would exceed all limits. The increase of industrial products, on the other hand, must of necessity be limited by the numerous conditions which regulate all production—that is, by the amount of space available, the quantity of raw material, of capital and labour, etc. If the growth of population has not outstripped the increase in wealth, but, as appears from the figures we have given, has actually lagged behind it, it is because population has been voluntarily limited, not only in France, where the preventive check is in full swing, but also in almost every other country. This voluntary limitation which gave Malthus such trouble is one of the commonest phenomena of the present time.

Malthus’s apprehensions appear to involve some biological confusion. The sexual and the reproductive instincts are by no means one and the same;[304] they are governed by entirely different motives. Only to the first can be attributed that character of irresistibility which he wrongly attributes to the second. The first is a mere animal instinct which rouses the most impetuous of passions and is common to all men. The second is frequently social and religious in its origins, assuming different forms according to the exigencies of time and place.

To the religious peoples who adopted the laws of Moses, of Manu, or of Confucius to beget issue was to ensure salvation and to realise true immortality.[305] For the Brahmin, the Chinese, or the Jew not to have children meant not merely a misfortune, but a life branded with failure. Among the Greeks and Romans the rearing of children was a sacred duty laid upon every citizen and patriot. An aristocratic caste demanded that the glories of its ancestors and founders should never be allowed to perish for the want of heirs. Even among the working classes, whose lot is often miserable and always one of economic dependence, there are some who are buoyed up by the hope that the more children they have the larger will be their weekly earnings and the greater their power of enlisting public sympathy. And in every new country there is a demand for labourers to cultivate its virgin soil and to build up a new people.

The reproductive instinct, on the other hand, may be thwarted by antagonistic forces—by the selfishness of parents who shun their responsibilities, or of mothers who dread the pains and perils of child-bearing; by the greed of parents who would endow old age rather than foster youth; by the desire of women to enjoy independence rather than seek marriage; by the too early emancipation of children, which leaves to the parents no gains and no joys beyond the cost and trouble of upbringing; by insufficient house-room or exorbitant taxation, or by any one of a thousand causes.

Thus the considerations that influence reproduction are infinitely varied, and being of a social character they are neither necessary nor permanent, nor yet universal. They may very well be defeated by motives that belong to the social order, and this is just what happens. And it is at least possible to conceive of a state of society where religious faith has vanished and patriotism is dead, where the family lasts only for one generation, and where all land has been appropriated so that the calling of the father is denied to the son; where existence has again become nomadic and suffering unbearable, and where marriage, easily annulled by divorce, has become more or less of a free union. In such a community, with all incentives to reproduction removed and all antagonistic forces in full operation, the birth-rate would fall to zero. And if all nations have not yet arrived at this stage they all seem to be tending towards it. It is true that a new social environment may give rise to new motives. We believe that it will, but as yet we are ignorant of the nature of these promptings.

Paradoxical as it may seem, the sexual instinct plays quite a secondary rôle in the procreation of the human species. Nature doubtless has united the two instincts by giving them the same organs, and those who believe in final causes can admire the ruse which Nature has adopted for securing the preservation of the species by coupling generation with sexual attraction. But man has displayed ingenuity even greater than Nature’s by separating the two functions. He now finds that (since he has known how to get rid of reproduction) he can gratify his lust without being troubled by the consequences. The fears of Malthus have vanished: the other spectre, race suicide, is new casting a gloom over the land.

Malthus’s condemnation of such practices was of little avail. Other moralists more indulgent than the master have given them their sanction by endeavouring to show that this is the only way in which men can perform a double function, on the one hand giving full scope to sexual instinct in accordance with the physiological and psychological laws of their being, and on the other taking care not to leave such a supreme duty as that of child-bearing to mere chance and not to impose upon womankind such an exhausting task as that of maternity save when freely and voluntarily undertaken. This is quite contrary to the pastor’s teaching concerning moral restraint. The Neo-Malthusians, on the other hand, consider his teaching very immoral, as being contrary to the laws of physiology, infected with ideas of Christian asceticism, and altogether worse than the evil it seeks to remedy. His rule of enforced celibacy might, in their opinion, involve more suffering even than want of food, and late marriages simply constitute an outrage upon morality by encouraging prostitution and increasing the number of illegitimate births. The Neo-Malthusians [306] persist in regarding themselves as his disciples because they think that he clearly demonstrated, despite himself perhaps, that the exercise of the blind instinct of reproduction must result in the multiplication of human beings who are faced by want and disease and liable to sudden extinction or slow degradation, and that the only way of avoiding this is to check the instinct.

There is reason to believe, however, that were Malthus now alive he would not be a Neo-Malthusian. He would not have willingly pardoned his disciples the perpetration of sexual frauds which enable man to be freed from the responsibilities which Nature intended him to bear. Nevertheless we must recognise that the concessions which he made prepared the way for this further development.

Malthus did not seem to realise the full import of these delicate questions which contributed so powerfully to the overthrow of his doctrine. Especially is this true of the emphasis which he laid upon chastity, involving as he thought abstention from the joys of marriage. Such celibacy he would impose only upon the poor.[307] The rich are obviously so circumstanced that children cannot be a hindrance. We know well enough that it was in the interests of the poor themselves that Malthus imposed his cruel law “not to bring beings into the world for whom the means of support cannot be found.” But that does not prevent its emphasising in the most heartless fashion imaginable the inequality of their conditions, forcing the poor to choose between want of bread and celibacy. Malthus gave a quietus to the old song which eulogises love in a cottage as the very acme of happiness. It is only just to remark, however, that he does not go so far as to put an interdict upon marriage altogether, which is actually the case in some countries. The old liberal economist asserts himself here. He sees clearly enough that, leaving aside all humanitarian considerations, the remedy offered would be worse than the evil, for its only result would be a diminution in the number of legitimate children and an increase in the number of those born out of wedlock.[308]

When telling the poor that they themselves were the authors of their misery,[309] because of their improvident habits, their early marriages, and their large families, and that no written law, no institution, and no effort of charity could in any way remedy it, he failed to realise that he was furnishing the propertied classes with a good pretext for dissociating themselves from the fate of the working classes.[310] And during the century which has passed since he wrote the way to every comprehensive scheme of socialistic or communistic organisation has been barred and every projected reform which claimed to ameliorate the condition of the poor effectively thwarted by the argument that the only result would be to increase the number of participators as well as the amount to be distributed, and that consequently no one would be any the better off.

Whatever opposition Malthus’s doctrines may have aroused, his teaching has long since become a part and parcel of economic science. Occasionally it has thwarted legitimate claims, while at other times it has been used to buttress some well-known Classical doctrine, such as the law of rent or the wages fund theory. On more than one occasion it has done service in the defence of family life and private property, two institutions which are supposed to act as effective checks upon the growth of population, because of the responsibilities which they involve.[311]

The population question has lost none of its importance, although it has somewhat changed its aspect. What Malthus called the preventive check has got such a hold of almost every country that modern economists and sociologists are concerned not so much with the question of an unlimited growth of population as with the regular and universal decline of the birth-rate. Everyone is further agreed that the causes must be social.

It is not enough to say that the cause is a deliberate determination of parents to have no children or to have only a limited number. The question is, Why do they decide to have none or to limit their family to a certain number only? Why is this limitation more marked in France than elsewhere, and why is it more pronounced there to-day than it was say two or three generations ago? The special causes which apply to the France of to-day must somehow be discovered, and such causes may be expected to be less active elsewhere. It may be that Paul Leroy-Beaulieu is right when he claims that the progress of civilisation must always mean a declining birth-rate, because the fresh needs and desires and the extra expenditure which it necessarily involves are incompatible with the duties and responsibilities of maternity. It is possible that it diminishes as democracy advances, because the latter strengthens the telescopic faculty and quickens the desire to rise in the social scale as rapidly and as effectively as possible. M. Dumont, who advocates this view, has happily named it the law of capillarity. More precise causes are sometimes invoked, but they vary according to the particular school that formulates them. Le Play thinks that it is due to the practice of social inheritance. Paul Bureau takes it as a sign of the weakening of moral and religious belief, and of the growth of intemperate habits of every kind—alcoholism, debauchery, etc. Unfortunately none of the explanations given seem quite satisfactory, and a second Malthus is required to open up a new chapter in the history of demography.[312]

II: RICARDO

Next to Smith, Ricardo is the greatest name in economics, and fiercer controversy has centred round his name than ever raged around the master’s. Smith founded no school, and his wisdom and moderation saved him from controversy. Hence every economist, whatever his views, is found sitting at his feet straining to catch the divine accents as they fall from his lips.

But Ricardo was no dweller in ethereal regions. He was in the thickest of the fight—the butt of every shaft. In discussions on the question of method the attack is always directed against Ricardo, who is charged with being the first to lead the science into the fruitless paths of abstraction. The Ricardian theory of rent affords a target for every Marxian in his general attack upon private property. The Ricardian theory of value is the starting-point of modern socialism—a kinship that he could never have disavowed, however little to his taste. The same thing is true of controversies concerning banks of issue and international trade: Ricardo’s place was ever with the vanguard.

His defects are as interesting as his merits, and have been equally influential. Of his theories, especially his more characteristic ones, there is now little left, unless we recall what is after all quite as important—the criticisms they aroused and the adverse theories which they begot. The city banker was a very indifferent writer, and his work is adorned with none of those beautiful passages so characteristic of Smith and Stuart Mill. No telling phrase or striking epithet ever meets the eye of the reader. His principal work is devoid of a plan, its chapters being mere fragments placed in juxtaposition. His use of the hypothetical method and the constant appeal to imaginary conditions makes its reading a task of some difficulty. This abstract method has long held dominion over the science, and it is still in full activity among the Mathematical economists. His thoughts are penetrating, but his exposition is frequently obscure, and a remark which he makes somewhere in speaking of other writers, namely, that they seldom know their own strength, may very appropriately be applied to him. But obscurity of style has not clouded his fame. Indeed, it has stood him in good stead, as it did Marx at a later date. We hardly like to say that a great writer is unintelligible—a feeling prompted partly by respect and partly arising out of fear lest the lack of intelligence should really be on our side. The result is an attempt to discover a profound meaning in the most abstruse passage—an attempt that is seldom fruitful, especially in the case of Ricardo.

It is clearly impossible to outline the whole of this monumental work. We shall content ourselves with an attempt to place the leading conceptions clearly before our readers.[313]

Speaking generally, Ricardo’s chief concern is with the distribution of wealth. He was thus instrumental in opening up a new field of economic inquiry, for his predecessors had been largely engrossed with production. “To determine the laws which regulate this distribution is the principal problem in political economy.” We have already some acquaintance with the tripartite division of revenues corresponding with the threefold division of the factors of production—the rent of land, the profits of capital, and the wages of labour. Ricardo wanted to determine the way in which this division took place and what laws regulated the proportion which each claimant got. Although unhampered by any preconceptions concerning the justice or injustice of distribution, we can easily understand how he ushered in the era of polemics and of socialistic discussion, seeing that the natural laws pale into insignificance when contrasted with the influence wielded by human institutions and written laws. The latter override the former, and individual interests which may co-operate in production frequently prove antagonistic in distribution.

We shall follow him in his exposition of the laws of rent, wages, and profits, but especially rent, for according to him the share given to land determines the proportions which the other factors are going to receive.

One would imagine that an indispensable preliminary to this study would be an examination of the Ricardian theory of value, especially when we recall the importance of his theory of labour-value in the history of economics doctrine and how it prepared the way for the Marxian theory of surplus value, which is the foundation-stone of contemporary socialism. Despite all this we shall only refer to his theory of value incidentally, and chiefly in connection with the laws of distribution. We have Ricardo’s own authority for doing this: “After all, the great problem of rent, of wages, or of profits might be elucidated by determining the proportions in which the total product is distributed between the proprietors, the capitalists, and the workers, but this is not necessarily connected with the doctrine of value.”[314]

It is, moreover, probable that Ricardo himself did not begin with an elaborate theory of value from which he deduced the laws of distribution, but after having discovered, or having convinced himself that he had discovered, the laws of distribution he attempted to deduce from them a theory of value. One idea had haunted him his whole life long, namely, that with the progress of time nature demanded an ever-increasing application of human toil. No doubt it was this that suggested to him that labour was the foundation, the cause, and the measure of value. But he never came to a final decision on the question, and his statements concerning it are frequently contradictory. We must also confess that his theory of value is far from being his most characteristic work. In the elucidation of that difficult question, vigorous thinker though he was, he has not been much more fortunate than his predecessors. He himself acknowledged this on more than one occasion, and shortly before his death, with a candour that does him honour, he recognised his failure to explain value.[315]

1. The Law of Rent

Of all Ricardian theories that of rent is the most celebrated, and it is also the one most inseparably connected with Ricardo’s name. So well known is it that Stuart Mill spoke of it as the economic pons asinorum, and it has always been one of the favourite subjects of examiners.

The question of rent—that is, of the return which land yields—had occupied the attention of others besides Ricardo. It was the burning question of the day. The problem of rent dominated English political economy during the first half of the nineteenth century, and a later period has witnessed a revival of it in the land nationalisation policy of Henry George. In France there was but a feeble echo of the controversy, for France even long before the Revolution had been a country of small proprietors. Landlordism was far less common there, and where it existed its characteristics were very different. That threefold hierarchy which consisted of a worker toiling for a daily wage in the employ of a capitalist farmer who draws his profits towered over by a landlord in receipt of rents formed a kind of microcosmic picture of the universal process of distribution, but it was seldom as clearly seen in France as it was in England.

The first two incomes presented no difficulties. But how are we to explain that other income—that revenue which had created English aristocracy and made English history? The Physiocrats had named it the “net product,” and they argued a liberality of nature and a gift of God. Adam Smith, although withholding the title of creator from nature and bestowing it upon labour, nevertheless admits that a notable portion—perhaps as much as a third of the revenue of land—is due to the collaboration of nature.[316]

Malthus had already produced a book on the subject,[317] and Ricardo hails him as the discoverer of the true doctrine of rent. Malthus takes as his starting-point the explanation offered by the Physiocrats and Adam Smith, namely, that rent is the natural outcome of some special feature possessed by the earth and given it by God—that is, the power of enabling more people to live on it than are required to till it. Rent is the result, not of a merely physical law, but also of an economic one, for nature seems to have a unique power of creating a demand for its products, and consequently of maintaining and even of increasing indefinitely both its own revenue and value. The reason for this is that the population always tends to equal and sometimes to surpass the means of subsistence. In other words, the number of people born is seldom less than the maximum number that the earth can feed. This new theory of rent is a simple deduction from Malthus’s law concerning the constant pressure of population upon the means of subsistence.

Malthus emphasised another important feature of rent, and it was this characteristic that especially attracted Ricardo. Seeing that different parts of the earth are of unequal fertility, the capitals employed in cultivation must of necessity yield unequal profits. The difference between the normal rate of profit on mediocre lands and the superior rate yielded by the more fertile land constitutes a special kind of profit which is immediately seized by the owner of the more fertile land. This extra profit afterwards became known as differential rent.

To Malthus, as well as to the Physiocrats, this kind of rent seemed perfectly legitimate and conformed to the best interests of the public. It was only the just recompense for the “strength and talent” exercised by the original proprietors. The same argument applies to those who have since bought the land, for it must have been bought with the “fruits of industry and talent.” Its benefits are permanent and independent of the proprietor’s labour, and in this way the possession of land becomes a much-coveted prize, the otium cum dignitate which is the just reward of meritorious effort.

Ricardo enters upon an entirely new track. He breaks the connection with Smith and the Physiocrats—a connection that Malthus had been most anxious to maintain. All suggestion of co-operation on the part of nature is brushed aside with contempt. Business-man and owner of property as he was, he had no superstitious views concerning nature, whose work he contemplated without much feeling of reverence. As against the celebrated phrase of Adam Smith he quotes that of Buchanan: “The notion of agriculture yielding a produce and a rent in consequence because nature concurs with human industry in the process of cultivation is a mere fancy.”[318] He proceeds to defend the converse of Smith’s view and to show how rent implies the avarice rather than the liberality of nature.

The proof that the earth’s fertility, taken by itself, can never be the cause of rent is easily seen in the case of a new country. In a newly founded colony, for example, land yields no rent, however fertile, if the quantity of land is in excess of the people’s demand. “For no one would pay for the use of land when there was an abundant quantity not yet appropriated, and therefore at the disposal of whosoever might choose to cultivate it.”[319] Rent only appears “when the progress of population calls into cultivation land of an inferior quality or less advantageously situated.” Here we have the very kernel of Ricardo’s theory. Instead of being an indication of nature’s generosity, rent is the result of the grievous necessity of having recourse to relatively poor land under the pressure of population and want.[320] “Rent is a creation of value, not of wealth,” says Ricardo—a profound saying, and one that has illuminated many a mystery attaching to the theory of rent. In that sentence he draws a distinction between wealth born of abundance and satisfaction and value begotten of difficulty and effort, and he declares that rent is of the second category and not of the first.

Still, this cannot be accepted as the final explanation. It is difficult to understand how a purely negative condition such as the absence of fertile land could ever create a revenue. It were better to say that the want of suitable land supplies the occasion for the appearance of rent, although it is not its cause. The cause is the high price of agricultural products—say corn—due to the increased difficulty of cultivating the less fertile lands.[321] In short, the cause and the measure of the rent of corn-land are determined by the quantity of labour necessary to produce corn under the most unfavourable circumstances, “meaning by the most unfavourable circumstances the most unfavourable under which the quantity of produce required renders it necessary to carry on production.”[322]

Let us assume, as Ricardo did, that first-class land yields a bushel of corn as the result of ten hours’ work, the corn selling for ten shillings a bushel.[323] In order to supply a population that is increasing in accordance with the Malthusian formula, land of the second class has to be cultivated, when the production of a bushel requires fifteen hours’ work. The value of corn will rise proportionately to fifteen shillings, and landed proprietors of the first class will draw a surplus value or a bonus of five shillings per bushel. So rent emerges. Presently the time for cultivating lands of the third class will approach, when twenty hours’ labour will be necessary for the production of a bushel. The price of corn goes up to twenty shillings, and proprietors of the first class see their gift increased or their rent raised from five to ten shillings per bushel, while the owners of the second-class land obtain a bonus of five shillings per bushel. This marks the advent of a new class of rent-receivers, who modestly take their place a little below the first class. The third class of landowner will receive a rent whenever the cultivation of fourth-class land becomes a necessity.[324]

It has been said in criticism of the theory that the hierarchy of lands has simply been invented for the purpose of illustrating the theory. But what Ricardo has really done is to put in scientific language what every peasant knows—what has been handed down to him from father to son in unbroken succession, namely, that all land is not equally fertile.

Ricardo, so often represented as a purely abstract thinker, was in reality a very practical man and a close observer of those facts that were then occupying the attention of both public and Parliament. High rents, following upon high prices, constituted the most important phenomenon in the economic history of England towards the end of the eighteenth and the beginning of the nineteenth centuries. Right through the eighteenth century—that is, up to 1794—the highest price paid for corn was only a few pence above 60s. per quarter. But in 1796 the price rose to 92s., and in 1801 it reached 177s.—nearly three times the old price. The exceptionally high price, due to extraordinary causes, chief among them being the Napoleonic wars and the Continental blockade, could not last long, although the average during the years 1810-13 remained as high as 106s.[325]

This high price of corn was not entirely due to accidental causes. Something must be attributed to the fact that the available land was insufficient for the upkeep of the population, and that new land had to be cultivated irrespective of situation or degree of fertility. The pastures which had formerly covered England were daily disappearing before the plough. It was the period of the iniquitous Enclosure Acts, when landlords set their hearts upon enclosing the common lands. Professor Cannan has drawn up an interesting chart to show the close correspondence between the progress of the enclosure movement and the high price of corn.[326]

In 1813 a Commission appointed by the House of Commons to inquire into the price of corn—for the proprietors dreaded the day when the return of peace would allow of importation—came to the conclusion that new lands could not produce corn at a less cost than 80s. a quarter. What an argument for Ricardo’s theory![327]

But is there no possible means of avoiding the cultivation of lands of the second and third order? Intensive cultivation might doubtless do something to swell the returns on the older lands, but only up to a certain point. It would be absurd to imagine that on a limited area of land an unlimited quantity of subsistence can be produced. There must be a limit somewhere—an elastic limit perhaps, and one which the progress of science will push farther and farther away, even beyond our wildest hopes. But the cultivator stops long before this ideal limit is reached, for practice has taught him that the game is not worth the candle, because the outlay of capital and labour exceeds the profits on the return. This practical limit is determined for him by the law of diminishing returns.[328]

That law is indispensable to an understanding of the Ricardian theory, and is implied in Malthus’s theory of population. Its discovery is still earlier, and we have an admirable statement of it in Turgot’s writings: “It can never be imagined that a doubling of expenditure would result in doubling the product.” Malthus, unconsciously no doubt, repeated Turgot’s dictum.[329] It is evident, says he, that as cultivation extends, the annual addition made to the average product must continually diminish.[330] Ricardo witnessed the operation of the law under his very eyes, and he frequently hinted at the decreasing returns yielded by capital successively applied to the same land. Even in cases of that kind, where recourse to new lands was impossible, rents were bound to increase.

Taking again land No. 1, which yields corn at 10s. a bushel, let us imagine that there is an increased demand for wheat. Instead of breaking up land No. 2 an attempt might be made to increase the yield on No. 1, but nothing will be gained by it because the new bushel produced on No. 1 will cost 15s., which is just what it would cost if raised on second-class land. Furthermore, the price will now rise to 15s., and the two bushels will be disposed of for 30s., thus giving the proprietor a rent of 5s., because they have only cost 25s. to produce.[331]

There is still another possibility, however. Resort might be had to emigration and colonists might be encouraged to cultivate the best soils of distant lands, soils equal in fertility to those in the first class. The products of such lands would be got in exchange for the manufactured goods of the home country, to which the law of diminishing returns does not apply. But some account of the cost of transport, which increases the cost of production, must be taken, and this leads to the same result, namely, a rent for those nearest the market, because of the advantages of a superior situation. Distance and sterility, as J. B. Say remarks, are the same thing. If land in America yields corn at 10s. a bushel and freightage equals 5s., it is clear that corn imported into England must sell for 15s.—exactly the same condition of things as if land of the second order had been cultivated, and English landlords of the first class will still draw a rent of 5s. This third possibility was scarcely mentioned by Ricardo, and he could hardly have foreseen the wonderful developments in transportation that took place during the next fifty years, which resulted in a reversal of the law of diminishing returns and the confuting of the prophets.[332]

The great Ricardian theory, prima facie self-evident, is in reality based upon a number of postulates to which we must pay more attention. Some of them must be regarded as economic axioms, but the validity of others is somewhat more doubtful.

In the first place there is the assumption that the produce of lands unequally fertile and representing unequal amounts of labour will always sell at the same price, or, in other words, will always possess the same exchange value. Is this proposition demonstrably sound? It is true when the product in question—for example, corn—is of uniform quality and kind. When the goods offered on the same market are so much alike that it is a matter of indifference to the buyer whether he takes the one or the other, then it is true that he will not pay a higher price for the one than he will for the other. This is what Jevons called the “law of indifference.”[333] In the second place it is implied that this exchange value, uniform for all identical products, is determined by the maximum amount of labour required for its production, or, in other words, by the amount of labour necessary for the production of the more costly portion.

This brings us to the Ricardian theory of value. We know that he considered that the value of everything was determined by the amount of labour necessary for its production.[334] Adam Smith had already declared that value was proportional to the amount of labour employed, but that this was the case only in primitive societies. “In civilised society, on the contrary, there is a still smaller number [of cases] in which it consists altogether in the wages of labour.” Labour was regarded by Smith as one of the factors determining value—though by no means the only one, land and capital being obviously the others.

But Ricardo simplified matters, as abstract thinkers frequently do, by neglecting the last-named factors. This leaves us only labour. Land is dismissed because rent contributes nothing to the creation of value, but is itself entirely dependent upon value.[335] Corn is not dear because land yields rent, but land yields rent because corn is dear. “The clearly understanding this principle is, I am persuaded, of the utmost importance to the science of political economy.” As for capital, why should we make a special factor of it, seeing that it is only labour? Its connotation might be extended so as to include “the labour bestowed not on their immediate production only, but on all those implements or machines required to give effect to the particular labour to which they were applied.”[336] But Ricardo was not thoroughly satisfied with this identification of capital and labour, and, great capitalist that he was, it must have caused him much searching of heart. Furthermore, it was not very easy to apply the conception to such commodities as timber and wine, which increase in value as they advance in age. In a letter to McCulloch he admits the weakness of his theory. After all the study that he had given to the matter, he had to confess that the relative value of commodities appeared to be determined by two causes: (1) the relative quantity of labour necessary for its production; (2) the relative length of time required to bring the commodity to market. He seems to have had a presentiment of the operation of a new and distinct factor, to which Böhm-Bawerk was to ascribe such importance.

The usual method of stating the Ricardian theory of value is to say that value is determined by cost of production. It is also the correct way, inasmuch as he stated it thus himself. It is, however, quite a different thing to say on the one hand that value is determined by labour and on the other that it depends upon the sum of wages and profits (supposing we omit rent).[337] On this point, as on several others, obscurity of thought alone saves Ricardo from the reproach of self-contradiction.

Suppose we proceed a step farther. The statement that value is determined by labour is not enough to account for the phenomenon of rent. Let us imagine a market where three sacks of corn are available for sale. Let us further suppose that the production of each involved a different quantity of labour, one being produced on land that was very fertile, the other on soil that was less generous, etc. Every sack will sell at the same price, but the question is, which of those different quantities of labour is the one that determines the price? Ricardo replies that it is the maximum quantity, and the value of the corn is determined by the value of that sack which is produced under the greatest disadvantages. But why should it not be determined by the value of the sack grown under the most favourable circumstances, or by the value of that other sack raised under conditions of average difficulty?

That is impossible. Let us imagine that the three sacks of corn came from three different kinds of land, A, B, and C, where the necessary quantities of labour were respectively 10, 15, and 20. It is inconceivable that the price should fall below 20, the cost of production of corn grown on C, for if it did C would no longer be cultivated; but the produce of C is ex hypothesi indispensable. The market price cannot rise above 20, for in that case lands of the fourth class would be brought under cultivation, and their yield would be added to the quantity already on the market. The supposition is that the quantity of corn on the market is already sufficient to meet the demand, and the increase in supply would soon cause the price to fall again to the irreducible minimum of 20.

We cannot but admire the ingenuity of a demonstration that seeks to explain a phenomenon like rent—which is a revenue obtained independently of all labour—by the aid of a generalisation which regards labour as the one source of value. But the explanation is ingenious rather than convincing, for it is quite clear that only in the case of one of the sacks do value and amount of labour actually coincide. In the two other instances the quantity of labour and exchange value are absolutely and indefinitely divergent.

Most contemporary economists, while denying that value is solely the product of labour and preferring to regard it as a reflection of human preferences, would willingly recognise the element of truth contained in the Ricardian view. But it must be understood in the sense that competition, although tending to reduce price to the level of cost of production, cannot reduce it below the maximum cost of production, or the price necessary to repay the expenses of producing the most costly portion of the total amount demanded by the market.[338] In this sense it is true not only of agricultural but also of all other products, and it has a wider scope than was at first ascribed to it by its authors. Rent is nowadays recognised as an element which enters into all incomes. But with an extension of sway has gone attenuation, and the term has lost something of its original significance and precision. To-day rent is treated as the outcome of certain favourable conjunctures, which are to be found in all stations in life, and it is no uncommon thing to speak of consumer’s rent even.

The Ricardian theory, moreover, presupposed the existence of a class of land which yielded no rent, the returns which it gave being only just sufficient to cover cost of production. In other words, Ricardo only recognised the existence of differential rents, and dismissed the other cases mentioned by Malthus.

It really seems as if Malthus were in this instance more correct than Ricardo. It is quite possible that in the colonies, for example, there may be lands which yield no rent because of the superabundance of fertile land. Or the same thing may occur in an old country because of the extreme poverty of the land. But it is quite evident that in a society having a certain density of population the mere fact that there exists only a limited amount of land is enough to give to all lands and to their products a scarcity value independent of unequal returns. Nor would the case be materially different if all lands were supposed to be of equal fertility, for who would be willing to cultivate land which only yielded the bare equivalent of the expenses of production?

Ricardo’s unwillingness to recognise this other class of rent, which depends solely upon the limited quantity of land, was due to the fact that it would have contradicted his other theory that there is no value except labour. It is true that he made an exception of some rare “products,” such as valuable paintings, statuary, books, medals, first-class wines, etc., the quantity of which could not be increased by labour. Nobody would have taken any notice of such a slight omission as that, but had he left out such an important item of wealth as the earth itself there would be great danger of the whole theory crumbling to dust.[339]

Such is the theory of rent, celebrated above all economic doctrines, and concerning which it might be said that no doctrine, not even that of Malthus, has ever excited such impassioned criticism. For this there are several reasons.

In the first place, it led to an overthrow of the majesty of the “natural order” by simply depicting some of its gloomier aspects. Men had been led to believe that the “order” was for ever beyond challenge. Now, however, it seemed that if the new doctrine was true then the interests of the landed proprietors were opposed not only to those of every other class in the community—for sharing always begets antagonism—but also to the general interest of society as a whole.

For what are the real interests of proprietors? First, that population and its demands should increase as rapidly as possible in order that men may be forced to cultivate new lands, and that these new lands should be as sterile as possible, requiring much toil and thus causing an increase in rents. Exhaustive labour bestowed upon the cultivation of land that is gradually becoming poorer and poorer would soon make the fortune of every landlord.

As a class, proprietors have every interest in retarding the progress of agricultural science, a paradox which the slightest reflection will show to be true. Every advance in agricultural science must mean more products from the same amount of land and a check upon the law of diminishing returns, resulting in lower prices and reduced rents, since it would no longer be necessary to cultivate the poorer soils. In a word, since rent is measured by reference to the obstacles which thwart cultivation, just as the level of water in a pond is determined by the height of the sluice, everything that tends to lower this obstacle must reduce the rent. In mitigation of this charge it must, however, be noted that, taken individually, every proprietor is of necessity interested in agricultural improvement, because he may have an opportunity of benefiting by larger crops before the improvements have become general enough to lower prices and to push back the margin of cultivation. If every proprietor argued in this way, individual interest would finally cheat itself, to the advantage of the general public. But this is nothing to be very proud of.

Ricardo set out to demonstrate the antagonism,[340] and with what a vigorous pen does he not picture it! The study of this question of rent made of him a Free Trader stauncher than Adam Smith, more firmly convinced than the Physiocrats. Free Trade was for them founded upon the conception of a general harmony of interests, while Ricardo built his faith upon one clearly demonstrated fact—the high price of corn and its concomitant, high rents. Free Trade seemed to be the means of checking this disastrous movement. The free importation of corn implied the cultivation of distant lands as rich as or even richer than any in Britain. All this meant avoiding the cultivation of inferior lands and reducing the high price of corn.

He was also desirous of proving to the proprietors that the practice of free exchange, even though it might involve some loss of revenue to them, was really to their interest. Their opposition, he thought, was very short-sighted. “They fail to see,” he writes, “that commerce everywhere tends to increase production, and that as a result of this increased production general well-being is also improved, although there may be partial loss as the result of it. To be consistent with themselves they ought to try to arrest all improvement in agriculture and manufacture and all invention of machinery.”[341]

The theory of rent, in the second place, endangered the reputation of landowners by showing that their income is not the product of labour, and is consequently anti-social. No wonder that it has been so severely criticised by conservative economists. Ricardo himself, however, seemed quite unconscious of the nature of the blow thus aimed at the institution of private property. His indifference, which appears to us so surprising, is partly explained by the fact that the theory absolved the proprietor from all responsibility in the matter. Unlike profits and wages, rent does not figure in cost of production because it makes no contribution to the price of corn, but is itself wholly determined by that price.[342] The landed proprietor thus appears as the most innocent of the co-partners, playing a purely passive rôle. He does not produce rent, but simply accepts it.

That may be; but the fact that the proprietor plays no part in the production of rent, whilst exonerating him from complicity in its invidious consequences, spells ruin to his title of proprietor—that is, if we consider labour to be the only title to proprietorship. It was just this aspect of the question that drew the attention of Ricardo’s contemporary James Mill. Mill advocated the confiscation of rent or its socialisation by means of taxation.[343] He thus became a pioneer in the movement for land nationalisation, a cause that has since been championed by such writers as Colins, Gossen, Henry George, and Walras.

Finally, the theory of rent seems to give colour to certain theories which predict an extremely dark future for the race, corroborating the gloomy forebodings of Malthus. As society grows and advances it will be forced to employ lands that are less fertile and means of production that are more onerous. It seems as if the curse uttered in Genesis has been scientifically verified. “Thorns also and thistles shall it bring forth to thee; … in the sweat of thy face shalt thou eat bread.”

True, he did not carry his pessimism so far as to say that as the result of this fatal exhaustion of this most precious instrument of production the progress of mankind would for ever be arrested by the ravages of famine. Other beneficent forces, the progress of agricultural science and a larger employment of capital, would surmount the difficulty. “Although the lands that are actually being cultivated may be inferior to those which were in cultivation some years ago, and consequently production is becoming more difficult, can anyone doubt that the quantity of products does not greatly exceed that formerly produced?”

Ricardo’s theory does not involve a denial of progress. But it shows how the struggle is becoming more and more difficult, and how scarcity and want, if not actual famine, must lie in the path along which we are advancing. Suppose Great Britain were now to attempt to feed her 45 million inhabitants from her own soil, would there be much doubt as to the correctness of Ricardo’s prophecy?

It is an easy matter to reproach Ricardo [344] with his failure to foresee the remarkable development in the methods of transport and cheap importation which resulted in the arrest, if not the reversal, of the upward movement of the rent curve. The complaints of landlords both in England and Europe seem to belie the Ricardian theory.[345] But who can tell whether the peril is finally removed or not? The inevitable day will arrive when new countries will consume the corn which to-day they export. This may not come about in the history of England and Europe for some centuries yet, but when it does happen, rent, instead of being stationary and retrogressive, as it has been so long, will again resume its upward trend.

It is true that we may reckon upon the aid of agricultural science even if foreign importation should fail us. Ricardo was ever mindful of the great possibilities of human industry. Other economists, notably Carey and Fontenay, one of Bastiat’s disciples, have propounded a theory which is the exact antithesis of the Ricardian, namely, that human industry in its utilisation of natural forces always begins with the feeblest as being more easily tamed, the more powerful and recalcitrant forces only coming in for attention later on. The earth is no exception to the rule, and agricultural industry might well become not less but more productive.

This thesis, which implies a negation of the law of diminishing returns, is based upon a very debatable analogy.

When speaking of the future of industry it is well to remember that forces now seldom used, and perhaps seldom thought of, such as the energies liberated by chemical and intermolecular action, may hold infinite resources in reserve for mankind. But agriculture is different. Admitting that with nitrogen got from the atmosphere, or with phosphorus extracted from the subsoil, we may enrich the land indefinitely, still we are continually confronted with the limitations of time and space, which must determine the development of living things, and of agricultural products among them. When albumen can be scientifically produced then will the Ricardian theory become obsolete. Until then it holds the field.

2. Of Wages and Profits

Let us now approach these two laws of Malthus and Ricardo—the law of population and the law of rent—and ask what effect they are likely to have upon the condition of the worker and the amount of his wages. The answer is not very reassuring. On the one hand there is an indefinite increase in the numbers of the proletariat—the result of unchecked procreation, for “the moral restraint” can hardly be said to have influence at all. The inevitable result is the degradation of human labour. On the other hand, the law of diminishing returns causes a continuous rise in the price of necessaries. Between low wages on the one hand and high prices on the other, the worker feels himself crushed as between the hammer and the anvil.

Turgot had long since given utterance to the tragic thought that the wages of the worker are only just sufficient to keep him alive. His contemporary Necker gave expression to the view in terms still more melancholy. “Were it possible,” writes Necker, “to discover a kind of food less agreeable than bread but having double its sustenance, people would then be reduced to eating only once in two days.” These must be looked upon as mere isolated statements, sufficiently well attested by contemporary facts, perhaps, but laying no claim to be considered general, permanent, and inevitable laws such as Ricardo and Malthus would have regarded them.

And Ricardo still more emphatically declares that “the natural price of labour is that price which is necessary to enable the labourers one with another to subsist and to perpetuate their race without either increase or diminution.” Note the last words, “without increase or diminution”; that is, if a working man has more children than are necessary for replacing their parents, then their wages will fall below the normal rate until increased mortality shall have again established equilibrium.

This is not tantamount to saying that nominal wages measured in terms of money cannot increase. Indeed, it is absolutely necessary that they should increase, seeing that the price of commodities is continually rising. If they were to remain the same the workman would soon be reduced to starvation. Wages accordingly will show a tendency to rise in sympathy with the rising price of corn, so that the workman will always be able to procure just the same quantity of bread, no more and no less. It is his real wages measured in corn that remain stationary, and upon this depends the well-being of the working class.

But do they really remain stationary? Ricardo does not seem to think so. “In the natural advance of society the wages of labour will have a tendency to fall, as far as they are regulated by supply and demand; for the supply of labourers will continue to increase at the same rate, whilst the demand for them will increase at a slower rate.”[346]

It is even possible that an increase in nominal wages may hide a decrease in real wages. In that case, of course, wages will appear to rise, but “the fate of the labourer will be less happy; he will receive more money wages it is true, but his corn wages will be reduced.” Only when the working classes are sufficiently thoughtful to limit the number of their children will it be possible to hope for a preservation of the status quo. “It is a truth which admits not a doubt, that the comforts and well-being of the poor cannot be permanently secured without some regard on their part or some effort on the part of the legislature to regulate the increase of their numbers, and to render less frequent among them early and improvident marriages.”

In other words, there will always be a demand for a certain number of individuals in order to supply the needs of industry. So long as this indispensable minimum is not exceeded the wages even of the very lowest order must be sufficient to maintain existence, for they must all be kept alive at any rate. But should the working population exceed this demand nothing can prevent wages falling even below the minimum necessary for existence, for there will no longer be any necessity for keeping them all alive.

It must be remarked here that on this question, as on that of rent, Malthus is less pessimistic than Ricardo. Far from maintaining that every rise in wages of necessity involves an excess of population and a consequent lowering of wages, Malthus believed that a capacity for forethought, which constitutes the most efficacious check upon the operation of blind instinct, may be engendered even among the working classes, and that a high standard of life once secured may become permanent. All this may be very true, but the reasoning involves us in a vicious circle. In order that a high rate of wages may produce its beneficial effects it must first of all be established, but how can it possibly be established as long as the working classes remain steeped in the misery caused by not exercising this forethought?

An exit from the circle is only possible by recalling the fact that the market wage incessantly oscillates about the natural wage according to the exigencies of demand and supply. If this accidental rise could be prolonged a little it might become permanent and modify the workman’s standard of life.[347]

Such is the law of wages, which has long since passed into an axiom, and whose authority is invoked in every discussion on social reform. To every socialistic scheme, to every proposal for social reform, there is always one answer: “There is no means of improving the lot of the worker except by limiting the number of his children. His destiny is in his own hands.”[348] Latter-day socialism, commencing with Lassalle, makes a careful study of the law, and returns to the charge against the existing economic order by affirming that in no respect is it a natural law, but merely a result of the capitalist régime, upon which it supplies an eloquent commentary.

We must not fail to note that in the Ricardian theory there is not what we can exactly call antagonism between the landed proprietor and the proletarian. To the latter it is a matter of indifference whether rents be high or low, for his money wages move in sympathy with the price of corn, but his real wages never change. The proprietor on his side is equally indifferent to rising or falling wages, for they never affect his receipts. His rent, as a matter of fact, is determined by the quantity of labour employed on the least fertile lands, but this quantity of labour has nothing to do with the rate of wages. The landlords are the grandees of a different order.[349]

The real struggle lies between capitalist and worker. Once the value of corn has been determined by the cost of producing it on the least favoured land, the proprietor seizes whatever is over and above this, saying to both worker and capitalist, “You can divide the rest between you.” This clearly is Ricardo’s view.[350] “Whatever raises the wages of labour lowers the profits of stock.” Wages can only rise at the expense of profits, and vice versa—a terrible prophecy that has been abundantly illustrated by the fortunes of the labour movement, but never more clearly than at the present moment.

But the mere statement of the fatal antagonism between capitalist and workman must have caused both grief and surprise to those economists who had endeavoured to demonstrate the solidarity of interests between them as between brothers. Bastiat was one of these, and he tried to show that in the course of economic evolution the share of each factor tends to grow, but that labour’s shows the greatest increase.

There can be no objection to Ricardo’s method of stating the law. The whole thing is so evident that it is almost a truism. A cake is being shared between two persons. If one gets more than his due share is it not evident that the other must get less? It may be pointed out, on the other hand, that the amount available for distribution is continually on the increase, so that the share which each participant gets may really be growing bigger. But that is hardly the problem to be solved.[351] Increase the cake tenfold, even a hundredfold, but if one person gets more than half of it the other must have less. Ricardo’s implication is just that. His law deals with proportions and not with quantities.

Admitting that the proportion which one of the two factors receives can be increased only if the other is lessened, the problem is to discover which of the two, capital or labour, has the bigger portion. It really seems as if it were labour, for Ricardo speaks of another law of profits, namely, “the tendency of profits to a minimum.” Here is another thesis which has had a long career in the history of economics, but what are the reasons that can be adduced in support of it? The natural tendency of profits, then, is to fall; “for in the progress of society and wealth the additional quantity of food required is obtained by the sacrifice of more labour.” It is determined by the same cause as determined rent—the system is a solid piece of work at any rate.

But how does the cultivation of inferior land affect the rate of profits? We have already seen how the worker’s share, the minimum necessary for keeping body and soul together, goes to swell the high price of corn.[352] But the manufacturer cannot transfer the cost of high wages to the consumer, for the rate of wages has no effect on prices. (Labour has, but wages have none.) As a consequence, the capitalist’s share must be correspondingly reduced. We must remember that the workman gains nothing by the high rate of wages, for his consumption of food is limited by nature, but this does not hinder the capitalist losing a great deal by it.

And so there must come a time when the necessary wage will have absorbed everything and nothing will remain for profit. There will be a new era in history, for every incentive to accumulate capital will disappear with the extinction of profit. Capital will cease growing, no new lands will be cultivated, and population will be brought to a sudden standstill.[353] The stationary state with its melancholy vistas will be entered upon. Mill has described it in such eloquent terms that we are almost reconciled to the prospect. But it could hardly have been a pleasant matter for Ricardo, who was primarily a financier and had but little concern with philosophy. He was very much attached to his prophecies, and there is a delicate piece of irony in the thought that the tendency of profits towards a minimum should have been first noted by this great representative of capitalism. At the same time he felt a little reassured when he thought of the opposing forces which might check its downward trend and arrest the progress of rent. In both instances the best corrective seemed to lie in the freedom of foreign trade.

The general lines of distribution are presented to us in a strikingly simple fashion. The demonstration is neater even than the famous Tableau économique, and it has the further merit of being nearer the actual facts as they appeared in Ricardo’s day, for they are no longer quite the same. It may be represented by means of a diagram consisting of three lines.

At the top is an ascending line representing rent—the share of Mother Earth. The proprietor’s rent reveals a double increase both of money and kind, for as population and its needs grow it requires an increasing quantity of corn at an increased price. Still, the high price cannot be indefinitely prolonged, for beyond a certain point a high price of corn would arrest the growth of population and at the same time the growth of rent; then it would no longer be necessary to cultivate new lands.

In the middle is a horizontal line representing wages—labour’s share. The real wages of labour remain stationary, for it simply receives the quantity of corn necessary to keep it alive. It is true that as the corn is gradually becoming dearer the worker’s nominal wages increase, but with no real benefit to him.

Below this is a descending line representing profits—capital’s share.[354] It shows a downward trend for the simple reason that it finds itself squeezed between the proprietor’s share, which tends to increase, and the labourer’s, which is stationary. The capitalist is brought to our notice in the guise of an English farmer who is obliged to raise his servants’ wages as the corn becomes dearer, but who gains nothing by this rise because the extra revenue is taken by the proprietor in the form of higher rent. But profits cannot fall indefinitely, for beyond a certain point it would involve an end to the employment of old capital and the formation of new capital. This would hinder the cultivation of new lands, and would arrest the high price of corn and lower rent.

3. The Balance of Trade Theory and the Quantity Theory of Money

Such are the more characteristic of Ricardo’s doctrines—at any rate, those that left the deepest impression upon his successors and caused the greatest stir among his contemporaries. There are other doctrines besides which, regarded as contributions to the science, are much more important and more definite; but just because they figured almost directly in the category of universally accepted truths whose validity and authorship have never been questioned they have contributed less to his fame. Such are his theories of international trade and banking, where the theorist becomes linked to a first-rate practical genius. Here at any rate there is no note of pessimism and no suggestion of conflicting interests. On the contrary, he was able to point out that “under a system of perfectly free commerce the pursuit of individual advantage is admirably connected with the universal good of the whole.”

In the matter of international trade he showed himself a more resolute Free Trader than either Smith or the Physiocrats. It seemed to him that the only way of arresting the terrible progress of rent and of checking the rising price of corn and the downward tendency of profits was by the freest importation of foreign corn.[355]

In addition to this twofold argument in favour of Free Trade, Ricardo brings forward another which is of considerable importance even at the present time. This argument is based upon the advantages which accrue from the territorial division of labour. “By stimulating industry, by rewarding ingenuity, and by using most efficaciously the peculiar powers bestowed by Nature, it distributes labour most effectively and most economically.”

It may be worth while remarking that his illustrious contemporary Malthus remained more or less of a Protectionist.[356] It might seem strange that Malthus, continually haunted as he was by the spectre of famine, should refuse to welcome importation. But his point of view was doubtless largely that of the modern agricultural Protectionist, who believes that the surest way of preserving a country from famine is not to abandon its agriculture to the throes of foreign competition, but, on the contrary, to strengthen and develop the home industry by securing it a sufficiently high price for its products. We must also remember that Malthus’s theory of rent differed somewhat from Ricardo’s, and that he was not so violently opposed to State intervention.[357]

But Ricardo’s principal contribution to the science was his discovery of the laws governing the movements of commodities and the counter-movements of money from one place to another, and the admirable demonstration which he has given us of this remarkable ebb and flow.

As soon as the balance of commerce becomes unfavourable to France, let us say—that is, as soon as importation exceeds exportation say by £1,000,000—money is exported to pay for this excessive importation. Money becomes scarce, its value rises, and prices fall. But a fall in price will check foreign importation and will encourage exportation, so that imports will show signs of falling off while exports will grow. Money will no longer be sent abroad, and the current will begin to run the other way, until the £1,000,000 sent abroad is returned again. Moreover, the £1,000,000 sent abroad will cause a movement in the opposite direction—superabundance and a depreciation in the value of money, high prices, a premium on importation and a check upon exportation. Accordingly economic forces on both sides will conspire to bring back the balance of commerce to a position of equilibrium—that is, to that position where each country will possess just the quantity of money that it needs.

It might be pointed out, on the other hand, that this somewhat complicated mechanism can only operate very slowly, and that considerable time must elapse before the prices of goods begin to respond to the change in the quantity of money. But as a matter of fact it is not necessary to wait until this phenomenon becomes established, for another striking feature precedes it and announces its approach so to speak, and this is, as Smith had already noted, a change in the value of bills drawn on foreign countries. The foreign exchanges are so sensitive that the slightest rise is enough to stimulate exportation and to check importation.

Accordingly money seldom leaves a country, or only leaves it for a short time. In other words, contrary to the generally accepted opinion, silver and gold in international trade do little more than oil the wheels of commerce. The trade is carried on as if the metals were non-existent. In short, it is essentially of the nature of barter.[358]

The explanation is very schematic. Every incidental phenomenon is omitted, and the whole theory implies the validity of the quantity theory of money, which is now open to considerable criticism as being altogether inadequate for an explanation of the facts involved. But this theory of the automatic regulation of the balance of trade by means of variations in the value of money, although already hinted at by Hume and Smith, is none the less a discovery of the first order, and one that has done service as a working hypothesis for a whole century.[359]

Its explanation turns upon a particular theory of international trade which we can only mention in passing, but which we shall find more fully developed in Stuart Mill’s theory of international values.

4. Paper Money, its Issue and Regulation

The enunciation of the principles which should govern the conduct of bankers in issuing paper money is another debt that we owe to the genius of Ricardo. The Bank Act of 1822, and that of 1844 especially, which laid down the future policy of the Bank of England, represent an attempt on the part of the Government to put his principles into practice.

Ricardo was an eye-witness of the great panic of February 26, 1797, when the reserves of the Bank of England fell from ten millions to a million and a half, necessitating an Order in Council suspending cash payments. The suspension, which was supposed to be a temporary expedient, extended right up to 1821. The depreciation in the value of the bank-note averaged about 10 per cent., but at one period towards the end of the Napoleonic wars it rose as high as 30 per cent. He also witnessed the suffering which such depreciation caused. Landlords demanded the payment of their rents in gold, or claimed an increase in the rent equal to the fall in the value of the note.

Ricardo tried to unravel the causes of this depreciation in his pamphlet entitled The High Price of Bullion, published in 1809, and came to the conclusion that there was only one cause, namely, an excessive supply of paper. At this distance of time it might not be thought such an extraordinary discovery after all. Still, he had the greatest difficulty in getting people to admit this, and in refuting the absurd explanations which had previously been suggested. He showed how a depreciation in the value of the note necessarily resulted in the exportation of gold, although most of his contemporaries, on the contrary, believed that the exportation of gold was the cause of all the mischief which they sought to check by an Act of Parliament. “The remedy which I propose for all the evils in our currency is that the Bank should gradually decrease the amount of their notes in circulation until they shall have rendered the remainder of equal value with the coins which they represent, or in other words till the prices of gold and silver bullion shall be brought down to their Mint price.”[360]

But if that is the case why not cut the Gordian knot and suppress paper money altogether? The reply shows how well Ricardo had studied Smith: “A well-regulated paper currency is so great an improvement in commerce that I should greatly regret if prejudice should induce us to return to a system of less utility.” “The introduction of the precious metals for the purposes of money may with truth be considered as one of the most important steps towards the improvement of commerce and the arts of civilised life; but it is no less true that with the advancement of knowledge and science we discover that it would be another improvement to banish them again from the employment to which, during a less enlightened period, they had been so advantageously applied.”[361]

Proceeding, he points out that where you have only metallic money it might happen that the production of gold fails to keep pace with the growth of population, in which case you have a rise in the value of gold accompanied by a fall in prices. This danger might be obviated by a careful issue of notes in accordance with the demands of society. In short, Ricardo is so little disposed to abandon the system of paper money and to return to the previous system of metallic money that, on the contrary, he would prefer to abolish the metallic system altogether, taking good care that paper money did not become superabundant.

So convinced was he of the superiority of paper money that he had no desire to see the Bank resume cash payment. The result of the resumption would be a demand on the part of the public for a conversion of their paper money, “and thus, to indulge a mere caprice, a most expensive medium would be substituted for one of little value.”

But if the notes are not convertible into cash, what is there to guarantee their value or to regulate their issue and prevent depreciation? This can be done merely by keeping a reserve of gold at the bank, not necessarily in the form of money, but in the form of ingots. The bank would not be allowed to issue any notes beyond the value of these ingots. This regulation would have the effect of keeping the value of the note at par, for bankers and money-dealers would immediately proceed to convert these notes into gold as soon as they showed any signs of depreciation. This would not mean, however, that the public at large would again return to the use of metallic money, for these ingots would be of little use for purposes of everyday life.

It is a curious system. One would hardly expect the great champion of Liberal political economy to outline a banking system which could only operate through a State bank. This was clearly his opinion, however. He declared himself utterly opposed to the free banking system, and doubted the ability of such a system to regulate the currency. “In that sense there can be no excess whilst the bank does not pay in specie, because the commerce of the country can easily employ and absorb any sum which the bank may send into circulation.”[362] This shows what little confidence a Liberal individualist like Ricardo had in the liberty of individuals and their ability to judge of the kind of money that is most serviceable.

Ricardo’s disciples are legion, and among them is every economist of standing of the earlier part of the nineteenth century. The best known among these are the three writers who immediately follow him in chronological order: James Mill, the father of John Stuart Mill (Elements of Political Economy, 1821), his friend McCulloch (Principles of Political Economy, 1825), and Nassau Senior (Political Economy, 1836).

The two first-named writers contented themselves with a vigorous defence of the master’s views without contributing anything very new. We have already referred to the very different conclusions which James Mill draws from the theory of rent, and how he became an advocate of land nationalisation. McCulloch also was one of the earliest advocates of the right to strike.

Senior deserves a few pages to himself, for his work in systematising the Classical doctrines. We shall deal with him in our chapter on John Stuart Mill.