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.