[263] _Ibid._ ii. 300 (bk. iv. ch. v.).

[264] _Ibid._ ii. 405 (bk. iv. ch. xiii.).

[265] _Ibid._ i. 343 (bk. ii. ch. v.).

[266] _Essay_, ii. 424 (bk. iv. ch. xiii.).

[267] _Ibid._ ii. 304 (bk. iv. ch. v.).

[268] _Essay_, i. 75 (bk. i. ch. v.).

[269] _Ibid._ (bk. ii. ch. vi.).

[270] _Essay_, ii. 318 (bk. iv. ch. vi.).

[271] _Essay_, ii. 315 (bk. iv. ch. v.).

[272] _Ibid._ ii. 326 (bk. iv. ch. vi.).

[273] _Ibid._ ii. 78 (bk. iii. ch. v.).

[274] _Essay_, ii. 454 (Appendix).

[275] _Ibid._ ii. 82 (bk. iii. ch. vi.).

[276] _Ibid._ ii. 90 (bk. iii. ch. vi.).

[277] Senior's _Three Lectures_, p. 86.

[278] Senior's _Three Lectures_, p. 60.

[279] _Essay_, i. 534 (bk. ii. ch. xiii.).

[280] Smith's _Works_ (1859), i. 295.

[281] _Observations on the Effects of the Corn-laws, 1814; Inquiry into the Nature and Progress of Rent, 1815_; and _The Grounds of an Opinion on the Policy of restricting the Importation of Foreign Corn_, intended as an appendix to the _Observations on the Corn-laws_, 1815.

[282] _Inquiry into Rent_, p. 1.

[283] _Ibid._ p. 16.

[284] _Essay_, ii. 35 (bk. iii. ch. ii.).

[285] _Inquiry into Rent_, p. 20.

[286] _Ibid._ p. 18.

[287] _Ibid._ p. 38.

[288] _Inquiry into Rent_, p. 20.

[289] _Ibid._ p. 37.

[290] _Essay on the Application of Capital to Land, by a Fellow of University College, Oxford, 1815._

[291] _Essay_, p. 19.

[292] _In An Inquiry into the Nature of the Corn-laws_, and again (1801) in _Observations on Agriculture_, etc., vol. v. 401-51.

[293] _Political Works_, i. 485, etc. In this paper, I may add, Cobbett, not yet a Radical, accepts Malthus's view of the tendency of the human species to multiply more quickly than its support. He does not mention Malthus, but speaks of the belief as universally admitted, and afterwards ill.u.s.trates it amusingly by saying that, in his ploughboy days, he used to wonder that there was always just enough hay for the horses and enough horses for the hay.

CHAPTER V

RICARDO

I. RICARDO'S STARTING-POINT

David Ricardo,[294] born 19th April 1772, was the son of a Dutch Jew who had settled in England, and made money upon the Stock Exchange.

Ricardo had a desultory education, and was employed in business from his boyhood. He abandoned his father's creed, and married an Englishwoman soon after reaching his majority. He set up for himself in business, and, at a time when financial transactions upon an unprecedented scale were giving great opportunities for speculators, he made a large fortune, and about 1814 bought an estate at Gatcombe Park, Gloucestershire. He withdrew soon afterwards from business, and in 1819 became member of parliament. His death on 11th September 1823 cut short a political career from which his perhaps too sanguine friends antic.i.p.ated great results. His influence in his own department of inquiry had been, meanwhile, of the greatest importance. He had shown in his youth some inclination for scientific pursuits; he established a laboratory, and became a member of scientific societies.

The perusal of Adam Smith's _Wealth of Nations_ in 1799 gave him an interest in the application of scientific methods to the questions with which he was most conversant. Accepting Adam Smith as the leading authority, he proceeded to think out for himself certain doctrines, which appeared to him to have been insufficiently recognised by his teacher. The first result of his speculations was a pamphlet published in 1809 upon the depreciation of the currency. Upon that topic he spoke as an expert, and his main doctrines were accepted by the famous Bullion Committee. Ricardo thus became a recognised authority on one great set of problems of the highest immediate interest. Malthus's _Inquiry into Rent_ suggested another pamphlet; and in 1817, encouraged by the warm pressure of his friend, James Mill, he published his chief book, the _Principles of Political Economy and Taxation_. This became the economic Bible of the Utilitarians. The task of a commentator or interpreter is, for various reasons, a difficult one.

There is a certain a.n.a.logy between Ricardo and a very different writer, Bishop Butler. Each of them produced a great effect by a short treatise, and in each case the book owed very little to the ordinary literary graces. Ricardo's want of literary training, or his natural difficulty of utterance, made his style still worse than Butler's; but, like Butler, he commands our respect by his obvious sincerity and earnestness. He is content when he has so expressed his argument that it can be seized by an attentive reader. He is incapable of, or indifferent to, clear and orderly exposition of principles. The logic is there, if you will take the trouble to look for it. Perhaps we ought to be flattered by this tacit reliance upon our patience. 'You,'

Ricardo, like Butler, seems to say to us, 'are anxious for truth: you do not care for ornament, and may be trusted to work out the full application of my principles.' In another respect the two are alike.

Butler's argument has impressed many readers as a demolition of his own case. It provokes revolt instead of adhesion. Ricardo, an orthodox economist, laid down principles which were adopted by Socialists to upset his own a.s.sumptions. Such a G.o.d as you worship, said Butler's opponents, is an unjust being, and therefore worse than no G.o.d. Such a system as you describe, said Ricardo's opponents, is an embodiment of injustice, and therefore to be radically destroyed. Admitting the logic, the argument may be read as a _reductio ad absurdum_ in both cases.

Ricardo has involved himself in certain special difficulties. In the first place, he presupposes familiarity with Adam Smith. The _Principles_ is a running comment upon some of Smith's theories, and no attempt is made to reduce them to systematic order. He starts by laying down propositions, the proof of which comes afterwards, and is then rather intimated than expressly given. He adopts the terminology which Smith had accepted from popular use,[295] and often applies it in a special significance, which is at least liable to be misunderstood by his readers, or forgotten by himself. It is difficult, again, to feel sure whether some of his statements are to be taken as positive a.s.sertions of fact, or merely as convenient a.s.sumptions for the purposes of his argument. Ricardo himself, as appears in his letters, was painfully aware of his own awkwardness of expression, and upon that point alone all his critics seem to be in tolerable agreement. Happily, it will be enough for my purpose if I can lay down his essential premises without following him to the remoter deductions.

Ricardo's pamphlet upon Malthus (1815) gives a starting-point. Ricardo cordially adopts Malthus's theory of rent, but declares that it is fatal to some of Malthus's conclusions. Malthus, we have seen, wished to regard rent as in some sense a gift of Providence--a positive blessing due to the fertility of the soil. Ricardo maintains, on the contrary, that 'the interest of the landlord is necessarily opposed to the interest of every other cla.s.s in the community.'[296] The landlord is prosperous when corn is scarce and dear; all other persons when it is plentiful and cheap. This follows upon Malthus's own showing. As men are forced to have recourse to inferior soils, the landlord obtains a larger share of the whole produce; and, moreover, since corn also becomes more valuable, will have a larger share of a more valuable product. The question apparently in dispute--whether we should be glad that some land is better than the worst, or sorry because all is not equal to the best--seems rather idle. The real question, however, is whether rent, being a blessing, should be kept up by protection,[297] or, being a curse, should be brought down by compet.i.tion? What is the real working of the system? Set the trade free, says Ricardo, and the capital will be withdrawn from the poor land and employed upon manufactures, to be exchanged for the corn of other countries.[298] The change must correspond to a more advantageous distribution of capital, or it would not be adopted. The principle involved in this last proposition is, he adds, one of the 'best established in the science of political economy, and by no one is more readily admitted than by Mr. Malthus.' To enforce protection would be, on Malthus's ill.u.s.tration, to compel us to use the 'worst machines, when, at a less expense, we could hire the very best from our neighbours.'[299] Briefly, then, the landlord's interest is opposed to the national interest, because it enforces a worse distribution of capital. He compels us to get corn from his worst land, instead of getting it indirectly, but in greater quant.i.ty, from our spinning-jennies.

For Ricardo, as for Malthus, the ultimate driving force is the pressure of population. The ma.s.s of mankind is always struggling to obtain food, and is able to multiply so rapidly as to exhaust any conceivable increase of supplies. The landlord cla.s.s alone profits.

The greater the struggle for supply the greater will be the share of the whole produce which must be surrendered to it. Beyond this, however, lies the further problem which specially occupied Ricardo.

How will the resulting strain affect the relations of the two remaining cla.s.ses, the labourers and the capitalists? The ultimate evil of protection is the bad distribution of capital. But capital always acts by employing labour. The farmer's capital does not act by itself, but by enabling his men to work. Hence, to understand the working of the industrial machinery, we have to settle the relation of wages and profits. Ricardo states this emphatically in his preface.

Rent, profit, and wages, he says, represent the three parts into which the whole produce of the earth is divided. 'To determine the laws which regulate this distribution is the princ.i.p.al problem in political economy'; and one, he adds, which has been left in obscurity by previous writers.[300] His investigations are especially directed by the purpose thus defined. He was the first writer who fairly brought under distinct consideration what he held, with reason, to be the most important branch of economical inquiry.

There was clearly a gap in the economic doctrine represented by the _Wealth of Nations_. Adam Smith was primarily concerned with the theory of the 'market.' He a.s.sumes the existence of the social arrangement which is indicated by that phrase. The market implies a const.i.tution of industrial agencies such that, within it, only one price is possible for a given commodity, or, rather, such that a difference of price cannot be permanent. According to the accepted ill.u.s.tration, the sea is not absolutely level, but it is always tending to a level.[301] A permanent elevation at one point is impossible. The agency by which this levelling or equilibrating process is carried out is compet.i.tion, involving what Smith called the 'higgling of the market.' The momentary fluctuation, again, supposes the action of 'supply and demand,' which, as they vary, raise and depress prices. To ill.u.s.trate the working of this machinery, to show how previous writers had been content to notice a particular change without following out the collateral results, and had thus been led into fallacies such as that of the 'mercantile system,' was Smith's primary task.

Beyond or beneath these questions lie difficulties, which Smith, though not blind to their existence, treated in a vacillating and inconsistent fashion. Variations of supply and demand cause fluctuations in the price; but what finally determines the point to which the fluctuating prices must gravitate? We follow the process by which one wave propagates another; but there is still the question, What ultimately fixes the normal level? Upon this point Ricardo could find no definite statement in his teacher. 'Supply and demand' was a sacred phrase which would always give a verbal answer, or indicate the immediate cause of variations on the surface. Beneath the surface there must be certain forces at work which settle why a quarter of corn 'gravitates' to a certain price; why the landlord can get just so many quarters of corn for the use of his fields; and why the produce, which is due jointly to the labourer and the farmer, is divided in a certain fixed proportion. To settle such points it is necessary to answer the problem of distribution, for the play of the industrial forces is directed by the const.i.tution of the cla.s.ses which co-operate in the result. Ricardo saw in Malthus's doctrines of rent and of population a new mode of approaching the problem. What was wanted, in the first place, was to systematise the logic adopted by his predecessors. Rent, it was clear, could not be both a cause and an effect of price, though at different points of his treatise Smith had apparently accepted each view of the relation. We must first settle which is cause and which effect; and then bring our whole system into the corresponding order. For the facts, Ricardo is content to trust mainly to others. The true t.i.tle of his work should be that which his commentator, De Quincey, afterwards adopted, the _Logic of Political Economy_. This aim gives a partial explanation of the characteristic for which Ricardo is most generally criticised. He is accused of being abstract in the sense of neglecting facts. He does not deny the charge. 'If I am too theoretical (which I really believe to be the case) you,' he says to Malthus, 'I think, are too practical.'[302] If Malthus is more guided than Ricardo by a reference to facts, he has of course an advantage. But so far as Malthus or Adam Smith theorised--and, of course, their statement of facts involved a theory--they were at least bound to be consistent. It is one thing to recognise the existence of facts which your theory will not explain, and to admit that it therefore requires modification. It is quite another thing to explain each set of facts in turn by theories which contradict each other. That is not to be historical but to be muddleheaded. Malthus and Smith, as it seemed to Ricardo, had occasionally given explanations which, when set side by side, destroyed each other. He was therefore clearly justified in the attempt to exhibit these logical inconsistencies and to supply a theory which should be in harmony with itself. He was so far neither more nor less 'theoretical' than his predecessors, but simply more impressed by the necessity of having at least a consistent theory.

There was never a time at which logic in such matters was more wanted, or its importance more completely disregarded. Rash and ignorant theorists were plunging into intricate problems and propounding abstract solutions. The enormous taxation made necessary by the war suggested at every point questions as to the true incidence of the taxes. Who really gained or suffered by the protection of corn? Were the landlords, the farmers, or the labourers directly interested?

Could they shift the burthen upon other shoulders or not? What, again, it was of the highest importance to know, was the true 'incidence' of t.i.thes, of a land-tax, of the poor-laws, of an income-tax, and of all the mult.i.tudinous indirect taxes from which the national income was derived? The most varying views were held and eagerly defended. Who really paid? That question interested everybody, and occupies a large part of Ricardo's book. The popular answers involved innumerable inconsistencies, and were supported by arguments which only required to be confronted in order to be confuted. Ricardo's aim was to subst.i.tute a clear and consistent theory for this tangle of perplexed sophistry. In that sense his aim was in the highest degree 'practical,' although he left to others the detailed application of his doctrines to the actual facts of the day.

II. THE DISTRIBUTION PROBLEM