Ricardo admits that his own theory of rent is simply a farther development of the Malthusian. In an essay on The Influence of a low price of Corn on the Profits of Stock, showing the inexpediency of Restrictions on Importation (1815),[[535]] published in answer to the two tracts of Malthus above mentioned, he makes this quite clear, and, unlike his disciples, is warm in praise of his rival’s powers as an economist.[[536]] He agrees with the definition (of the Tract on Rent) that rent is “that portion of the value of the whole produce which remains to the owner after all the outgoings belonging to its cultivation have been paid,” including an ordinary rate of profits for the employed.[[537]]
But, whereas Malthus regards rent as increased by whatever lessens the outgoings in any shape or form, Ricardo considers that can happen in one way only, namely, by the increased cost of raising the last part of the necessary supplies. Arithmetically it was clear that, if you had four items making up the total expense of cultivation, whatever reduced any one of the items pro tanto reduced the total.[[538]] Accordingly, Malthus said that rent could be increased by such an accumulation of capital as will lower the profits of stock,—such an increase of population as will lower the wages of labour,—such agricultural improvements or such increase of the cultivator’s exertions as will diminish the number of labourers needed,—or such an increase in the prices of produce from increased demand as will increase the difference between the expense of production and the price of produce.[[539]] Ricardo, on the other hand, says that profits can never be reduced by mere accumulation of capital or competition of capitals, but only by the progressively less fruitful character of the investments to be found for capital as accumulation goes on. As long as there is fertile land to be had, yielding a rich return to capital, no one will accept a poor return. “If in the progress of countries in wealth and population new portions of fertile land can be added to such countries with every increase of capital, profits would never fall nor rents rise.”[[540]] In things as they are, capital soon accumulates beyond the rich investments and has to take the poorer. Sooner or later, even in a new colony, a point is reached where fertile land will not supply food enough for the growing population except at an increased cost.[[541]] Now, if the supply is absolutely required, the most costly portion of it, whether it be got by an extension of cultivation to poorer lands, or by a more thorough cultivation of the richer, will determine the price of all the rest, for there cannot be two prices in the same market; and the profits of the producer of it will determine the profits of all his fellow-cultivators, for there cannot be two rates of profit in the same business. Furthermore, the agricultural profits will determine the rate in other businesses, for in a full-formed society the rate in the others must bear a fixed relation to the rate in this business, so that the one cannot materially vary without the other.[[542]] Therefore the greater cost of the last portion of the necessary supply of food will lower profits generally, will thereby increase the range of extra profits from the richer soils, and will thereby raise rents.
The difference between the two men is, that what Malthus makes only one cause, Ricardo makes the only one, the increased cost of cultivation.[[543]] Ricardo and his friends have certainly put cause for effect.[[544]] It is of course in the first instance the high prices that lead to the costly cultivation, and not vice versâ, for without the high prices the produce of the costly cultivation would not be profitable.
Malthus was asked by the Committee on Emigration: “Among other effects of resorting to a soil inferior to any now in cultivation, which is involved in the proposition of cultivating waste lands, would not one be to raise the rents of all the landlords throughout Great Britain and Ireland?”—He answered: “I think not. The cultivating of poor lands is not the cause of the rise of rents; the rise of the price of produce compared with the costs of production, which is the cause of the rise of rents, takes place first, and then such rise induces the cultivation of the poorer land. That is the doctrine I originally stated, and I believe it to be true; it was altered by others afterwards.”[[545]]
On the other hand, what makes the high prices permanent instead of temporary, is the fact that the cultivation essential to the completeness of the supply cannot be other than costly.[[546]] It is, therefore, not wrong to consider costly cultivation as one cause of the permanence of high prices, and therewith of high rents. But Ricardo goes further, and counts it the only cause.
Through the whole progress of society, he says, profits are regulated by the difficulty or facility of procuring food; and, “if the smallness of profits do not check accumulation, there are hardly any limits to the rise of rent and the fall of profit.” Nothing can increase the general rate of profit but the cheapening of food;[[547]] as by improvements in agriculture, which, by securing the same production with less labour, for the time increase the profits and lower the rents.[[548]] The landlord’s interest is therefore at all times opposed to that of every other class in the community,[[549]] for it means dear food, low profits, and high rents. Still, high rents are not the cause either of the dear food or the low profits, but are, equally with them, the effect of a common cause, more costly cultivation. The effect of a costly cultivation on wages might seem vi terminorum to be a raising of them, for wages depend on the proportion of the supply of labourers to capital’s demand[[550]] for them, and by assumption there was a greater demand. But since the cause of the rise of price was in the first instance an increase of population, it follows that the increased cost of raising the most costly supplies of corn will be incurred not by higher payment of old labourers, but by employment of new. Wages again will buy less corn, for corn has risen. “While the price of corn rises ten per cent., wages will always rise less than ten per cent., but rent will always rise more; the condition of the labourer will generally decline, and that of the landlord will always be improved.”[[551]] In his statement of the doctrine of wages, Ricardo is perhaps more careful in 1815 than he is in 1817, saying that, “as experience demonstrates that capital and population alternately take the lead, and wages in consequence are liberal or scanty, nothing can be positively laid down respecting profits as far as wages are concerned.”[[552]] But even in 1817 his exposition is hardly more rigid than that of Malthus himself. So far is he from recognizing an iron law driving wages down to “the natural price” or bare necessaries, that he thinks the market rate may be constantly above the natural for an indefinite period, and he regards the natural itself as expansive. The whole chapter on wages[[553]] shows a just understanding of the Essay on Population. Nevertheless, if Ricardo in one sense made too much of the principle of population in relation to Rent, in another sense he made too little of it. He does not see that in a progressive country it counteracts the tendency of improvements in agriculture to cheapen produce, and thereby reduce rents;[[554]] agricultural rents have risen since 1846 largely because of high farming. He does not grant that high or low wages can affect rent, because he regards them as purely relative to profits, and making with profits a total amount, of which only the proportions vary; but it is difficult to believe that the rise in agricultural wages since 1873 or so can have failed to play a part in keeping down farmers’ rents since that date. As, however, our view of the power or powerlessness of lowered profits or lowered wages to increase rent will be found to depend on our view of the causes of value, and as the difference of the two economists on the relation of wages to profits might have the appearance of a technical subtlety, these two items of the total may be passed by for the present.
In regard to agricultural improvements the issue seemed plainer, and the evidence seemed all for Ricardo and against Malthus. In a country depending chiefly on itself for grain, a general adoption of improvements would seem to make supplies cheaper because less costly, and therefore to lower rents because forcing farmers to lower prices. Even Mr. Mill did not break away from Ricardianism at this point,[[555]] though he speaks less unreservedly than Ricardo upon it. Malthus, on the other hand, who regards rent as depending largely on the ability of the agricultural supply to create its own demands, regards rent, accordingly, as at all times keeping pace with the increase of grain caused by improvements, unless the improvements outrun population. What cheapness does in other cases is to make an article accessible to a circle of buyers previously excluded from it. Every one is a buyer of agricultural produce and no one is excluded; but the temporary cheapness of grain creates new buyers by making marriage accessible to a wider circle.
The progress of rents in fact results from the conflict of two economical tendencies—the tendency of economical expedients to lower prices, and the tendency of an increasing population to raise them. If Malthus’ ripest view of population be true, then a cheapening of food among a civilized people by no means leads to a corresponding increase of their numbers, and therefore the course of improvement would tend so far towards a diminution of price, and therewith of rent. If rents depended on the price of corn alone, economical expedients (including not only the direct aids to tillage, mechanical and chemical inventions directly applied to it, but the indirect aids, free trade, railways, and steamers) must certainly have lowered rents in the last hundred years. But the reverse is true,[[556]] chiefly because the produce of a farm is ceasing to mean wheat, and coming more and more to mean cattle and dairy produce, which have not fallen but risen in price in one hundred years, while corn has actually fallen. This variety of productions has proved financially an equivalent to what Malthus (seventy years ago) considered the main cause of greater extra profits to the farmer and greater money rents to the landlord——the increased fertility of the soil in the matter of grain, and an increased price keeping pace with it.
The commercial policy of England has become what Malthus describes in the latter part of the Essay on Population as a combination of the agricultural and the commercial systems. His views on this subject became modified as he grew older. In the second edition he says:[[557]] “Two nations might increase exactly with the same rapidity in the exchangeable value of the annual produce of their land and labour; yet ... in that which had applied itself chiefly to agriculture, the poor would live in greater plenty, and population would rapidly increase; in that which had applied itself chiefly to commerce, the poor would be comparatively but little benefited, and consequently population would either be stationary or increase very slowly.” “In the history of the world the nations whose wealth has been derived principally from manufactures and commerce have been perfectly ephemeral beings compared with those the basis of whose wealth has been agriculture. It is in the nature of things that a state which subsists upon a revenue furnished by other countries must be infinitely more exposed to all the accidents of time and chance than one which produces its own.”[[558]] It is not, he thinks, because of her trade, but because of her agriculture that England is so rich in resources; it is not without danger that our commercial policy has diverted capital from agriculture into manufacture and commerce. About the middle of the eighteenth century we were strictly an agricultural nation, and we were safe, for in a country whose commerce and manufacture increase from and with the improvement in agriculture there is no discoverable germ of decay. But all is changed now; and there is reason to fear that our prosperity is temporary, and we have only risen by the depression of other nations.[[559]] When the nations that now supply us with cheap corn shall have prospered like ourselves and increased their population till corn is dear among them, then we shall be ruined. The evils of scarcity are so dreadful that it is worth our while to give special encouragements to agriculture, and, in order to be certain to have enough, to have in general too much.[[560]] Otherwise “we shall be laid so bare to the shafts of fortune that nothing but a miracle can save us from being struck.”[[561]] “If England continues yearly her importations of corn, she cannot ultimately escape that decline which seems to be the natural and necessary consequence of excessive commercial wealth; and the growing prosperity of those countries which supply her with corn must in the end diminish her population, her riches, and her power,”—not indeed in the next twenty or thirty years, but “in the next two hundred or three hundred.”[[562]] In 1803 Malthus had much in common with the author of Great Britain independent of Commerce, to say nothing of the French economists. He cannot be said to have entirely lost the bias in favour of Agriculture in later years. In the Political Economy, reviewing the last five centuries of English work and wages,[[563]] he tries to explain away the instances where rising prices of corn and an “influx of bullion” seem to have injured the condition of the labourer; and there can be little doubt he was indirectly answering an objection to Corn Laws. When depreciation of the currency, whether through American discoveries or suspensions of cash payment, has occurred, the rebound from it (he says) has made prices fall much more than wages, and so (we are to infer), when prices are kept high, wages will follow. It may be doubted if he had weighed the full consequences of such a contention in the light of his own principles of free trade. Professor Rogers[[564]] has had the valuable aid of old College accounts. Malthus had little besides Eden, Arthur Young, and the Reports to the Board of Agriculture; and it is doubtful if he fully understood the effects on the labourer of Henry VII.’s debasement of the currency, or could apply the analogy to the depreciation in his own day.[[565]] But on the whole, as years went on, he became less physiocratic. He came to acknowledge that, if a purely agricultural country might in some cases, like America, be the best possible for the labourer, it might in other cases, like Poland or Ireland, be the worst possible for him. If we hear that the labourer in one country earns in a year fifteen and in another nine quarters of wheat, we cannot be sure that the former is the better off till we know the value of other things in the country in comparison with wheat. If manufactures were very dear in comparison, then the labourer’s wages except in food would go very little way, unless in a case like America, where the quantity is so great that it makes up for the little value of corn wages. In Poland the value of corn is so low, and there is so little capital in the country, that the high corn wages mean low real wages, and the population is either stationary or very slow in its increase. The prosperity of an agricultural country, then, depends on other causes than the direction of its attention to the one industry of agriculture, and without knowing these we could not infer or predict it.[[566]]
Malthus in fact reached the point at which he was always glad to arrive, the medium between two extreme views.[[567]] He would neither approve of a purely agricultural nation, whose danger was want of capital, nor of a purely commercial, whose danger was want of food. In a purely commercial, everything depends on a superiority in industry, machinery, and trade, which from the nature of things cannot last. Not only foreign but domestic competition will bring down profits, and thereby, by discouraging saving and enterprise, diminish the demand for labour and bring the population to a standstill. Christendom has seen Venice, Bruges, Holland lose their trade by their neighbours’ gain.[[568]] To say that the nations of the world ought to be allowed to develope their trade as freely as the provinces of a single empire, is, in his opinion, to overlook the reality of political obstacles. If England were still separated into the kingdoms of the Heptarchy, London could not be what it is. The interest of a province and the interest of an independent state are never the same.[[569]] To one who believes political divisions inevitable, there can be little hope for universal free trade. Malthus is unable to rise to the cosmopolitan view of Cobden, and he never seems to see that by ignoring political barriers, free trade may really weaken them. His ideal is a state which combines agriculture and commerce in equal proportions.[[570]] The prosperity of the latter implies the decay of feudalism and the establishment of secure government; with security comes the spontaneous extension of enterprise and a steady demand for labour. Since the two great classes of producers provide a market for each other, wealth will constantly grow, and without risk of sudden check by a foreign influence. The prosperity of such a country may (he thinks) last practically for ever, and we might answer in the affirmative for our own country the query of Bishop Berkeley about his.[[571]] “The countries which unite great landed resources with a prosperous state of commerce and manufactures, and in which the commercial part of the population never essentially exceeds the agricultural part, are eminently secure from sudden reverses. Their increasing wealth seems to be out of the reach of all common accidents, and there is no reason to say that they might not go on increasing in riches and population for hundreds, nay almost thousands of years.”[[572]] They would go on in fact till they reached the extreme practical limits of population, which under the system of private property would mean such a state of the land as would “enable the last employed labourers to produce the maintenance of as many probably as four persons,” the man, his wife, and two children. As soon as the labour ceases to produce more than this, it ceases to be worth the employer’s while to give the wages and employ the labour. These practical limits are far from the limits of the earth’s power to produce food, and a Government which compelled every member of society to devote himself wholly to the raising of food and necessaries, would succeed in coming nearer to those farther limits, though at the expense of everything we mean by civilization.[[573]] As a matter of fact, even the practical limit is not approached by way of a uniform decline of profits and of population. Various causes, acting at irregular intervals, stave off the event. The decline of general profits, the introduction of long leases and large farming, would bring more capital to the land; improvements in agriculture will increase the produce, inventions in manufacture will lessen the cost of the agriculturist’s comforts, and make his wages and profits go farther; the opening of a foreign market may raise home prices; a temporary rise in the value of agricultural produce may stimulate the investment of capital in farming. So Malthus concludes, for reasons not unlike Cliffe Leslie’s,[[574]] that, though there is a tendency of profits to fall, yet the tendency is often defeated. Though there is much truth still in many of his statements, the conclusion he draws from them,[[575]] that we ought by a judicious system of corn duties and corn bounties to keep the price of food steady and secure a large home supply, is quite out of court now. The variations in price have been under free trade very moderate; and the supply from one quarter or another has never failed us. Free trade is no longer among our problems.