This can be illustrated by supposing that the whole capital is handed out to the producers in a vessel which is returned full at the end of the period of production with the original outlay, plus an advance called profit. B C represents the total outlay, A C the total produce, and A B the profit on B C. Now, since the conditions of production remain the same, the same number of laborers can produce, as before, no more than A C; even though in the second year some of last year's profit, represented by D B, is saved and added to the outlay by the capitalist. If D C is now the outlay of capital, the profit can only be A C, minus D C, or A D; that is, the profit of the second year is diminished by D B, exactly the amount of savings of the year before. And this would be repeated each successive year, each saving added to B C being “exactly so much subtracted from the profits of the next and of every following year.”
It is hardly necessary to say that in such circumstances profits would very soon fall to the point at which further increase of capital would cease. An augmentation of capital, much more rapid than that of population, must soon reach its extreme limit, unless accompanied by increased efficiency of labor (through inventions and discoveries, or improved mental and physical education), or unless some of the idle people, or of the unproductive laborers, became productive.
If population did increase with the increase of capital and in proportion to it, the fall of profits would still be inevitable. Increased population implies increased demand for agricultural produce. In the absence of industrial improvements, this demand can only be supplied at an increased cost of production, either by cultivating worse land, or by a more elaborate and costly cultivation of the land already under tillage. The cost of the laborer's subsistence is therefore increased, and, unless the laborer submits to a deterioration of his condition, profits must fall. In an old country like England, if, in addition to supposing all improvement in domestic agriculture suspended, we suppose that there is no increased production in foreign countries for the English market, the fall of profits would be very rapid. If both these avenues to an increased supply of food were [pg 504] closed, and population continued to increase, as it is said to do, at the rate of a thousand a day, all waste land which admits of cultivation in the existing state of knowledge would soon be cultivated, and the cost of production and price of food would be so increased that, if the laborers received the increased money wages necessary to compensate for their increased expenses, profits would very soon reach the minimum. The fall of profits would be retarded if money wages did not rise, or rose in a less degree; but the margin which can be gained by a deterioration of the laborers' condition is a very narrow one: in general, they can not bear much reduction; when they can, they have also a higher standard of necessary requirements, and will not. On the whole, therefore, we may assume that in such a country as England, if the present annual amount of savings were to continue, without any of the counteracting circumstances which now keep in check the natural influence of those savings in reducing profit, the rate of profit would speedily attain the minimum, and all further accumulation of capital would for the present cease.
Mr. Carey, on the other hand, asserts the existence of a law of increasing returns from land, and that, while wages are constantly increasing with the progress of society, there is a diminution in the rate of profit, although the increasing returns permit an increase of absolute, if not of proportional, profit. That is, although wages increase more in proportion than profit, there is still a larger gross amount to be divided among capitalists as profit, out of a larger product.
§ 4. —prevented from reaching it by commercial revulsions.
What, then, are these counteracting circumstances which, in the existing state of things, maintain a tolerably equal struggle against the downward tendency of profits, and prevent the great annual savings which take place in this country from depressing the rate of profit much nearer to that lowest point to which it is always tending, and which, left to itself, it would so promptly attain? The resisting agencies are of several kinds.
First among them is the waste of capital in periods of overtrading and rash speculation, and in the commercial revulsions [pg 505] by which such times are always followed. Mines are opened, railways or bridges made, and many other works of uncertain profit commenced, and in these enterprises much capital is sunk which yields either no return, or none adequate to the outlay. Factories are built and machinery erected beyond what the market requires, or can keep in employment. Even if they are kept in employment, the capital is no less sunk; it has been converted from circulating into fixed capital, and has ceased to have any influence on wages or profits. Besides this, there is a great unproductive consumption of capital during the stagnation which follows a period of general overtrading. Establishments are shut up, or kept working without any profit. Such are the effects of a commercial revulsion; and that such revulsions are almost periodical is a consequence of the very tendency of profits which we are considering. By the time a few years have passed over without a crisis, so much additional capital has been accumulated that it is no longer possible to invest it at the accustomed profit; all public securities rise to a high price, the rate of interest on the best mercantile security falls very low, and the complaint is general among persons in business that no money is to be made. But the diminished scale of all safe gains inclines persons to give a ready ear to any projects which hold out, though at the risk of loss, the hope of a higher rate of profit; and speculations ensue, which, with the subsequent revulsions, destroy, or transfer to foreigners, a considerable amount of capital, produce a temporary rise of interest and profit, make room for fresh accumulations, and the same round is recommenced.
This, doubtless, is one considerable cause which arrests profits in their descent to the minimum, by sweeping away from time to time a part of the accumulated mass by which they are forced down. But this is not, as might be inferred from the language of some writers, the principal cause. If it were, the capital of the country would not increase; but in England it does increase greatly and rapidly. This is shown by the increasing productiveness of almost all taxes, [pg 506] by the continual growth of all the signs of national wealth, and by the rapid increase of population, while the condition of the laborers certainly is not on the whole declining.[301]