But to return more particularly to Mr. Mill. After asserting that the supply is the demand, and the demand is the supply, so frequently, that the unwary reader must feel quite at a loss to know which is which, he comes to a distinct conclusion, which is so directly contradicted both by theory and experience, as to show either that his premises must have been false, or that what he calls his indissoluble train of reasoning consists of mere unconnected links. He says, “It is therefore universally true, that as the aggregate demand and aggregate supply of a nation never can be unequal to one another, so there never can be a superabundant supply in particular instances, and hence a fall in exchangeable value below the cost of production, without a corresponding deficiency of supply, and hence a rise in exchangeable value beyond cost of production in other instances. The doctrine of the glut, therefore, seems to be disproved by a chain of reasoning perfectly indissoluble.”[[26]]
While commodities are merely compared with each other, it is unquestionably true that they cannot all fall together, or all rise together. But when they are compared with the costs of production, as they are in the above passage, it is evident that, consistently with the justest theory, they may all fall or rise at the same time. For what are the costs of production? They are either the quantity of money necessary to pay the labour worked up in the commodity, and in the tools and materials consumed in its production, with the ordinary profits upon the advances for the time that they have been advanced; or they are the quantity of labour in kind required to be worked up in the commodity, and in the tools and materials consumed in its production with such an additional quantity as is equivalent to the ordinary profits upon the advances for the time that they have been advanced.
Now it surely cannot be denied theoretically, that all commodities produced in this country may fall in comparison with a commodity produced in Mexico. As little can it be denied theoretically that all commodities produced by British labour may fall as compared with that labour, either from an unusually increased supply of such commodities, or a diminution of demand for them. And when, from these theoretical concessions, required by the universally acknowledged laws of demand and supply, we turn to the facts, we see with our own eyes, and learn from authority which there is no reason whatever for doubting, that a very large mass of commodities does at times fall below the costs of production, whether those costs be estimated in money or labour, without the slightest shadow of pretence for saying that any other equally large mass is raised proportionally above the costs of production.
Even within the very last year, it is a matter of the most public notoriety that the cotton manufactures, the woollen manufactures, the linen manufactures, the silk manufactures, have all fallen below the costs of production, including ordinary profits. To go no further, the amount of these manufactures, taken together, must, on a rough estimate, exceed seventy millions of pounds sterling. And if this mass of commodities, partly from over production and over trading, and partly from their necessary consequences, the shock to confidence and credit and the diminution of bills of exchange and currency, have fallen below the ordinary costs of production, what man is there credulous enough to believe that there must have been, according to the language of Mr. Mill, “a corresponding deficiency of supply, and hence a rise of exchangeable value beyond cost of production in other instances”? I doubt, indeed, much, whether satisfactory evidence could be brought to show that a single million’s worth of goods has risen above the cost of production, while seventy millions’ worth have fallen below it.
Consequently, if the definition of a general glut be a fall in a great mass of commodities below the costs of production, not counterbalanced by a proportionate rise of some other equally large mass of commodities above the costs of production, Mr. Mill’s conclusion against the existence of a general glut, founded on “a chain of reasoning perfectly indissoluble,” seems to be utterly without foundation.
If facts so notorious as these to which I have adverted are either boldly denied, or considered as undeserving attention, in founding the theories of political economy, there is an end at once to the utility of the science.
On the subject of the wages of labour, Mr. Mill has added his authority to the peculiar views and language of Mr. Ricardo. He says, “Whatever the share of the labourer, such is the rate of wages; and, vice versâ, whatever the rate of wages, such is the share of the commodity or commodities’ worth which the labourer receives.”[[27]] Perhaps the term rate of wages used by Mr. Mill to express the proportion of the produce which falls to the share of the labourer is in some respects preferable to the term real wages, used by Mr. Ricardo for the same purpose; but still it is highly objectionable, because it is an old and familiar term used in an entirely new sense. When the expressions high or low rates of wages were used, before the time of Mr. Ricardo and Mr. Mill, no one understood them to mean the proportion of the produce awarded to the labourer. In fact, this meaning had not been before conveyed by any appropriate terms in the language of political economy; yet it is a meaning the expression of which was much wanted in explaining the theory of profits. To express it, therefore, a new term should certainly have been chosen, and not an old one, which was familiar in a different sense. There seems to be no objection to the term proportionate wages, which has been used by Mr. Macculloch.
On the whole, it must be allowed, that Mr. Mill in his Elements of Political Economy has but little attended to the most obvious rules which ought to guide political economists in the definition and application of their terms. They are often unsanctioned by the proper authorities, and rarely maintained with consistency.
Chapter VII.
ON THE DEFINITION AND APPLICATION OF TERMS, BY MR. MACCULLOCH, IN HIS “PRINCIPLES OF POLITICAL ECONOMY.”
However incautious Mr. Ricardo and Mr. Mill may have been in the definition and application of their terms, I fear it will be found that Mr. Macculloch has been still more so; and that, instead of growing more careful, the longer he considers the subject, he seems to be growing more rash and inconsiderate.