London, 27th March, 1815.
My dear Sir,
No particular event which I recollect ever occasioned so great a gloom as the late lamentable reverse. At present we have the most dismal forebodings of war and its consequences on our finances; the truth is our courage is not screwed up to the proper pitch; like everything else, we shall be easy under our new situation in another fortnight. I am glad, however, to turn my attention to other subjects.
I have observed in the bullion pamphlet[97] that many who say they consider money only as a commodity, and subject to the same laws of variation in value from demand and supply as other commodities, seldom proceed far in their reasoning about money without showing that they really consider money as something peculiar, varying from causes totally different from those which affect other commodities. Do you not fall into this error when you say, 'In the first place all depends upon the relation between corn and other commodities, and, as labour and corn enter into the prices of all commodities, the difference between corn and other commodities cannot possibly increase in any proportion to the increase in the money price of corn'? If money be a commodity does [sic] not corn and labour enter into its price or value? And, if they do, why should not money vary as compared with corn and labour by the same law as all other commodities do? As far as this question regards the importation of corn, you are much more interested than I am in maintaining the uniform value of commodities, because if the rise of the price of corn and labour will as you contend raise the price of our commodities, this is an additional reason why we should not impose restrictions on the importation of corn, as it will subject us to a decided disadvantage in our competition with foreigners for the sale of our commodities.
Not however to dwell on this very essential point, I agree with you that a rise in the price of corn occasions a different distribution of the produce from the old land. It does this by lowering profits. Instead of a manufacturer having it in his power to maintain a servant or mechanic who may contribute to his enjoyment, that power will be transferred to the landlord, and this will arise from the lower corn value of manufactured goods. Indeed I see no limit to the fall of the corn value of goods but the impossibility of manufacturing them with any the least return of profit, and this will not happen till the landlord has appropriated to himself in the form of rent nearly the whole surplus produce of the land. It appears to me that the progress of wealth, whilst it increases accumulation, has a natural tendency to produce this effect and is as certain as the principle of gravitation.
You have, I think, totally changed your proposition. You before contended that, in consequence of increasing wealth and the cultivation of poorer land, the whole corn cost of production on the land would bear a less proportion to the whole corn produce; but now you say that the money cost of production on the land will bear a less proportion to the money value of the whole produce. Between these propositions there is a very material difference, as the latter might be true at the very time that the former was false. To admit what you now contend for would not affect my theory, as, though it would prove that the landlord and tenant (together) got more money revenue, or, if you will, a greater proportion of money revenue as compared to the money capital employed, yet the tenant might and I think would get a less proportion, and therefore the rate of profits would fall. Such a state of price [sic] is quite compatible with a greater proportion of men, as compared with the produce obtained, being employed on the land; but it is wholly irreconcileable with the net corn produce bearing a larger proportion to the gross corn produce, which was the principle before contended for. I agree with you that the increased price of corn in the order of things is rather a cause than a consequence of a greater than the usual number of men being employed to obtain the same quantity of produce from new land, because profits from such an employment of capital may be higher than other profits; but this difference of profit may be owing to a general fall in the rate of profits on other concerns rather than to the actual elevation of the profits on land; and I am of opinion that a rise in the price of corn always lowers general profits by increasing wages. I can in no way satisfy myself that general profits can rise with a rising price of corn and fall with falling prices, unless they are raised or lowered by diminishing or increasing wages, and then they can be but of short duration. In the ordinary course of things, as a high price of corn attends a state of progression, wages of labour will be really high, and profits cannot rise because of wages being low.
I am decidedly of opinion that Torrens[98] has treated you unjustly in his remarks in the preface of his book. If I recollect, you acknowledged an alteration in your opinion respecting the corn laws, since you wrote your essay on population, in your 'Observations on the Corn Laws.' I think too that you have always held the opinion you now do that the difference between the value of gold and paper was partly owing to the rise of the value of gold. Is not his criticism very much strained as to the use of the word depreciation? But, if he be right in all, the instances are much too few to justify his severe observation. At the Geological Club[99] his book was spoken of the other day with great approbation. Mr. Blake[100] and Mr. Greenough[101] think that he has exhausted the subject, and that his arguments cannot be controverted. I should think that he is very generally read. 'If I would lay a tax on foreign corn,' you ask, 'on account of a tax on our own, does not the same principle apply to the indirect taxes that raise the price of labour?' I think not, because a tax on corn will raise the price of corn twice, once on account of the tax, and a second time on account of the rise of wages; but, as this second rise is common to all things in which labour enters, and will be corrected by a new value of money, it will not be of long duration. The indirect taxes which only raise the wages of labour produce, I think, the same effects as the second rise in the price of corn, of which I have just been speaking. Whenever a tax bore with unequal effect on the land, when it did not affect labour bestowed in other employments, a countervailing duty on importation should, I think, be also imposed. I fear I cannot be with you on Saturday. If you do not hear from me by Wednesday's post, conclude that I cannot leave home....
Ever yours,
David Ricardo.
Note.—Robert Torrens, the soldier economist, began his literary career with 'The Economist Refuted' (1808), in answer to William Spence, who in 1807 tried to persuade his countrymen that Napoleon's blockade mattered little to them, Britain being 'independent of commerce.' In the winter of 1810-11, Torrens was Major Commandant of the Royal Marines, doing garrison duty on the island of Anholt in the Kattegat. The frost gave him time to re-read his Adam Smith and write his 'Essay on Money and Paper Currency' (publ. 1812). In his 'Essay on the External Corn Trade' (see above, page 65), Torrens characterizes the writings of Malthus as suggestive and candid and full of 'facts,' but ill-reasoned and inconsistent. Mr. Malthus, he says, scarcely ever embraced a principle which he did not subsequently abandon; his Essay on Population was a plagiarism from Wallace; and he refuted it himself by introducing the influence of Moral Restraint; in regard to Corn Bounties and in regard to the Currency, his later writings have contradicted his earlier. (Pref. pp. viii. to xii.) Torrens compared the Political Economy of Malthus with that of Ricardo, greatly to the advantage of the latter, in his 'Production of Wealth' (1821). See 'Malthus and his Work,' pp. 265-6. Compare also Note to Letter XLIV.