Now, unless Mr. Mill is ready to maintain that people would still say that the supply of a commodity was accommodated to the demand for it, whether it were selling at three times the cost of its production, or only one-third of that cost, he cannot maintain his definition. He cannot, for instance, deny that hats and shoes may be both selling below the costs of production, although they may exchange for each other in such proportions, that the hats produced by a certain quantity of labour may exchange for the shoes produced by the same quantity of labour. But can it be said on this account, that the supply of hats is suited to the demand for hats, or the supply of shoes suited to the demand for shoes, when they are both so abundant that neither of them will exchange for what will fulfil the conditions of their continued supply? And supposing that, while both are selling below the costs of production, shoes should fall still lower than hats, what would be the consequence? According to Mr. Mill, “shoes would then be in more than due abundance. Why? Because in them the produce of a certain quantity of labour would not exchange for the produce of an equal quantity. But for the very same reason, hats would be in less than due abundance, because the produce of a certain quantity of labour in them would exchange for the produce of more than an equal quantity in shoes.”[[19]]
It will be most readily allowed that, in the case supposed, shoes will be in more than due abundance, though not for the reason given by Mr. Mill. But how can it be stated, with the least semblance of truth, that hats would be in less than due abundance, when, by the very supposition, they are selling at a price which will not re-purchase the quantity of labour employed in producing them.
Nothing can show more distinctly than the very case here produced by Mr. Mill, that his proposition or definition, which is to clear up everything, is wholly inapplicable to the question; and that to represent the abundance or deficiency of the supply of one commodity, as determined by the deficiency or abundance of another, is to give a view of the subject totally different from the reality, and calculated to lead to the most absurd conclusions. There is hardly any stage of society subsequent to the division of labour, where the state of the supply compared with the demand of shoes is essentially affected by the state of the supply compared with the demand for hats; and in the present state of society in this country, where the question of a general glut has arisen, it is still more irrelevant to advert to any other objects as efficient causes of demand for a particular commodity, except those which relate to the costs of producing it.
The hop-planter who takes a hundred bags of hops to Weyhill fair, thinks little more about the supply of hats and shoes than he does about the spots in the sun. What does he think about, then? and what does he want to exchange his hops for? Mr. Mill seems to be of opinion that it would show great ignorance of political economy, to say that what he wants is money; yet, notwithstanding the probable imputation of this great ignorance, I have no hesitation in distinctly asserting, that it really is money which he wants, and that this money he must obtain, in the present state of society, in exchange for the great mass of what he has brought to market, or he will be unable to carry on his business as a hop-planter; and for these specific reasons; first, that he must pay the rent of his hop grounds in money; secondly, that he must pay for his poles, his bags, his implements, &c., &c., in money; thirdly, that he must pay the numerous labourers which he employs on his grounds, during the course of the next year, in money; and fourthly, that it is in money, and in money alone of all the articles brought to the fair, that he can calculate his profits.
It is perfectly true, that both the landlords and the labourers who are paid in money will finally exchange it for something else, as no one enjoys money in kind, except the miser; but the landlord who may spend perhaps a good deal in post-horses, dinners at inns, and menial servants, would be little likely to accept from the hop-planter the articles which he could get at the fair in exchange for his hops; and though the expenditure of the labourer is much more simple, and may be said to consist almost entirely in food and clothing, yet it is quite certain that the power of commanding a given quantity of labour can never be represented, with any approach towards correctness, by a given quantity of corn and clothing. As a matter of fact, the labourer in this country is paid in money; and while it often happens that for many years together the money-price of labour remains the same, the money-price of corn is continually altering, and the labourer may, perhaps, receive the value of twice as much corn in one year as he does in another.
What an entirely false view, then, does it give of the real state of things, what a complete obscuration instead of illustration of the subject is it, to represent the demand for shoes as determined by the supply of hats, or the demand for hops by the supply of cloth, cheese, or even corn. In fact, the doctrine that one half of the commodities of a country necessarily constitute an adequate market or effectual demand for the other half, is utterly without foundation. The great producers who are the great sellers, before they can venture to think about the supplies of hats, shoes, and cloth, on which they may perhaps expend a tenth part of a tenth part of what they have brought to market, must first direct their whole attention to the replacing of their capital, and to the question whether, after replacing it, they will have realized fair profits. Whatever may be the number of intermediate acts of barter which may take place in regard to commodities—whether the producers send them to China,[[20]] or sell them in the place where they are produced: the question as to an adequate market for them, depends exclusively upon whether the producers can replace their capitals with ordinary profits, so as to enable them successfully to go on with their business.
But what are their capitals? They are, as Adam Smith states, the tools to work with, the materials to work upon, and the means of commanding the necessary quantity of labour. Colonel Torrens, therefore, is quite right, when he says, “that an increased production of those articles which do not form component parts of capital, cannot create an increased effectual demand, either for such articles themselves, or for those other articles which do form component parts of capital.”[[21]] And, perhaps, he may be considered as making some approaches towards the truth, when he says, that “effectual demand consists in the power and inclination, on the part of consumers, to give for commodities, either by immediate or circuitous barter, some greater proportion of all the ingredients of capital than their production costs.”[[22]] But in this latter position, he is still very far from representing what actually takes place. When we consider how much labour is directly employed in the production of the great mass of commodities, and recollect further, that raw materials and machinery, the other two branches of capital, are mainly produced by labour, it is obvious that the power of replacing capitals will mainly depend on the power of commanding labour: but a given quantity of what Colonel Torrens calls the ingredients of capital, can never represent a given quantity of labour; and consequently, if a given quantity of labour be necessary in any production, a very different quantity of the ingredients of capital would be required at different times, to occasion the same effectual demand for it. It is far, therefore, from being true, that if the ingredients of capital, represented by a hundred and ten quarters of corn, and a hundred and ten suits of clothing, were increased to “two hundred and twenty quarters of corn, and two hundred and twenty suits of clothing, the effectual demand for the article would be doubled.”[[23]]
It is still further from the truth, “that increased supply is the one and only cause of increased effectual demand;”[[24]] and most happy is it for mankind that this is not true. If it were, how difficult would it be for a society to recover itself, under a temporary diminution of food and clothing! But by a kind provision of nature, this diminution, within certain limits, instead of diminishing, will increase effectual demand. The theory of demand and supply, shows that the food and clothing thus diminished in quantity, will rise in value; and universal experience tells us, that, as a matter of fact, the money-price of the remaining food and clothing will for a time rise in a greater degree than in proportion to the diminution of its quantity, while the money-price of labour may remain the same. The necessary consequence will be, the power of setting in motion a greater quantity of productive industry than before.[[25]]
There is no assumption so entirely fatal to a just explanation of what is really taking place in society, as the assumption, that the natural wages of labour in food and clothing are always nearly the same, and just about sufficient to maintain a stationary population. All the most common causes of an acceleration or retardation in the movements of the great machine of human society, involve variations, and often great variations, in the real wages of labour. Commodities in general, and corn most particularly, are continually rising or falling in money-price, from the state of the supply as compared with the demand, while the money-price of labour remains much more nearly the same. In the case of a rise of corn and commodities, the real wages of common day-labour are necessarily diminished: the labourer obtains a smaller proportion of what he produces; profits necessarily rise; the capitalists have a greater power of commanding labour; more persons are called into full work, and the increased produce which follows, is the natural remedy for that state of the demand and supply, from whatever cause arising, which had occasioned the temporary rise in the money-price of commodities. On the other hand, if corn and other commodities fall in money-price, as compared with the money-price of labour, it is obvious that the day-labourer, who gets employment, will be able to buy more corn with the money which he receives; he obtains a larger proportion of what he produces; profits necessarily fall; the capitalists have a diminished power of commanding labour; fewer persons are fully employed, and the diminished production which follows, is the natural remedy for that state of the demand and supply, from whatever cause arising, which occasioned the temporary fall in the money-price of commodities. The operation of these remedial processes to prevent the continuance of excess or defect, is so much what one should naturally expect, and is so obviously confirmed by general experience, that it is inconceivable that a proposition should have obtained any currency which is founded on a supposed law of demand and supply diametrically opposed to these remedial processes.
It will be recollected, that the question of a glut is exclusively whether it may be general, as well as particular, and not whether it may be permanent as well as temporary. The causes above mentioned act powerfully to prevent the permanence either of glut or scarcity, and to regulate the supply of commodities so as to make them sell at their natural prices. But this tendency, in the natural course of things, to cure a glut or a scarcity, is no more a proof that such evils have never existed, than the tendency of the healing processes of nature to cure some disorders without assistance from man, is a proof that such disorders have not existed.