I cannot then agree with Adam Smith, in thinking that the low value of gold and silver is no proof of the wealth and flourishing state of the country, where it takes place. Nothing of course can be inferred from it, taken absolutely, except the abundance of the mines; but taken relatively, or in comparison with the state of other countries, much may be inferred from it. If we are to measure the value of the precious metals in different countries, and at different periods in the same country, by the price of corn and labour, which appears to me to be the nearest practical approximation that can be adopted [and in fact corn is the measure used by Adam Smith himself], it appears to me to follow, that in countries which have a frequent commercial intercourse with each other, which are nearly at the same distance from the mines, and are not essentially different in soil; there is no more certain sign, or more necessary consequence of superiority of wealth, than the low value of the precious metals, or the high price of raw produce. [15]
It is of importance to ascertain this point; that we may not complain of one of the most certain proofs of the prosperous condition of a country.
It is not of course meant to be asserted, that the high price of raw produce is, separately taken, advantageous to the consumer; but that it is the necessary concomitant of superior and increasing wealth, and that one of them cannot be had without the other. [16]
With regard to the labouring classes of society, whose interests as consumers may be supposed to be most nearly concerned, it is a very short-sighted view of the subject, which contemplates, with alarm, the high price of corn as certainly injurious to them. The essentials to their well being are their own prudential habits, and the increasing demand for labour. And I do not scruple distinctly to affirm, that under similar habits, and a similar demand for labour, the high price of corn, when it has had time to produce its natural effects, so far from being a disadvantage to them, is a positive and unquestionable advantage. To supply the same demand for labour, the necessary price of production must be paid, and they must be able to command the same quantities of the necessaries of life, whether they are high or low in price. [17] But if they are able to command the same quantity of necessaries, and receive a money price for their labour, proportioned to their advanced price, there is no doubt that, with regard to all the objects of convenience and comfort, which do not rise in proportion to corn [and there are many such consumed by the poor], their condition will be most decidedly improved.
The reader will observe in what manner I have guarded the proposition. I am well aware, and indeed have myself stated in another place, that the price of provisions often rises, without a proportionate rise of labour: but this cannot possibly happen for any length of time, if the demand for labour continues increasing at the same rate, and the habits of the labourer are not altered, either with regard to prudence, or the quantity of work which he is disposed to perform.
The peculiar evil to be apprehended is, that the high money price of labour may diminish the demand for it; and that it has this tendency will be readily allowed, particularly as it tends to increase the prices of exportable commodities. But repeated experience has shown us that such tendencies are continually counterbalanced, and more than counterbalanced by other circumstances. And we have witnessed, in our own country, a greater and more rapid extension of foreign commerce, than perhaps was ever known, under the apparent disadvantage of a very great increase in the price of corn and labour, compared with the prices of surrounding countries.
On the other hand, instances everywhere abound of a very low money price of labour, totally failing to produce an increasing demand for it. And among the labouring classes of different countries, none certainly are so wretched as those, where the demand for labour, and the population are stationary, and yet the prices of provisions extremely low, compared with manufactures and foreign commodities. However low they may be, it is certain, that under such circumstances, no more will fall to the share of the labourer than is necessary just to maintain the actual population; and his condition will be depressed, not only by the stationary demand for labour, but by the additional evil of being able to command but a small portion of manufactures or foreign commodities, with the little surplus which he may possess. If, for instance, under a stationary population, we suppose, that in average families two thirds of the wages estimated in corn are spent in necessary provisions, it will make a great difference in the condition of the poor, whether the remaining one third will command few or many conveniencies and comforts; and almost invariably, the higher is the price of corn, the more indulgences will a given surplus purchase.
The high or low price of provisions, therefore, in any country is evidently a most uncertain criterion of the state of the poor in that country. Their condition obviously depends upon other more powerful causes; and it is probably true, that it is as frequently good, or perhaps more frequently so, in countries where corn is high, than where it is low.
At the same time it should be observed, that the high price of corn, occasioned by the difficulty of procuring it, may be considered as the ultimate check to the indefinite progress of a country in wealth and population. And, although the actual progress of countries be subject to great variations in their rate of movement, both from external and internal causes, and it would be rash to say that a state which is well peopled and proceeding rather slowly at present, may not proceed rapidly forty years hence; yet it must be owned, that the chances of a future rapid progress are diminished by the high prices of corn and labour, compared with other countries.
It is, therefore, of great importance, that these prices should be increased as little as possible artificially, that is, by taxation. But every tax which falls upon agricultural capital tends to check the application of such capital, to the bringing of fresh land under cultivation, and the improvement of the old. It was shown, in a former part of this inquiry, that before such application of capital could take place, the price of produce, compared with the instruments of production, must rise sufficiently to pay the farmer. But, if the increasing difficulties to be overcome are aggravated by taxation, it is necessary, that before the proposed improvements are undertaken, the price should rise sufficiently, not only to pay the farmer, but also the government. And every tax, which falls on agricultural capital, either prevents a proposed improvement, or causes it to be purchased at a higher price.