In treating on the subject of the profits of capital, it is necessary to consider the princples which regulate the rise and fall of rent; as rent and profits, it will be seen, have a very intimate connexion with each other. The principles which regulate rent are briefly stated in the following pages, and differ in a very slight degree from those which have been so fully and so ably developed by Mr Malthus in his late excellent publication, to which I am very much indebted. The consideration of those principles, together with those which regulate the profit of stock, have convinced me of the policy of leaving the importation of corn unrestricted by law.
From the general principle set forth in al Mr Malthus's publications, I am persuaded that he holds the same opinion as far as profit and wealth are concerned with the question; -- but, viewing, as he does, the danger as formidable of depending on foreign supply for a large portion of our food, he considers it wise, on the whole, to restrict importation. Not participating with him in those fears, and perhaps estimating the advantages of a cheap price of corn at a higher value, I have come to a different conclusion. Some of the objections urged in his last publication, --
"Grounds of an Opinion," &c. I have endeavoured to answer; they appear to me unconnected with the political danger he apprehends, and to be inconsistent with the general doctrines of the advantages of a free trade, which he has himself, by his writings, so ably contributed to establish.
On the Influence, &c.
Mr Malthus very correctly defines, "the rent of land to be that portion of the value of the whole produce which remains to the owner, after all the outgoings belonging to its cultivation, of whatever kind, have been paid, including the profits of the capital employed, estimated according to the usual and ordinary rate of the profits of agricultural stock at the time being."
Whenever, then, the usual and ordinary rate of the profits of agricultural stock, and all the outgoings belonging to the cultivation of land, are together equal to the value of the whole produce, there can be no rent.
And when the whole produce is only equal in value to the outgoings necessary to cultivation, there can neither be rent nor profit.
In the first settling of a country rich in fertile land, and which may be had by any one who chooses to take it, the whole produce, after deducting the outgoings belonging to cultivation, will be the profits of capital, and will belong to the owner of such capital, without any deduction whatever for rent.
Thus, if the capital employed by an individual on such land were of the value of two hundred quarters of wheat, of which half consisted of fixed capital, such as buildings, implements, &c. and the other half of circulating capital, -- if, after
Space for Notes
↓Ricardo on Corn Laws 2 replacing the fixed and circulating capital, the value of the remaining produce were one hundred quarters of wheat, or of equal value with one hundred quarters of wheat, the neat profit to the owner of capital would be fifty per cent or one hundred profit on two hundred capital.
For a period of some duration, the profits of agricultural stock might continue at the same rate, because land equally fertile, and equally well situated, might be abundant, and therefore, might be cultivated on the same advantageous terms, in proportion as the capital of the first, and subsequent settlers augmented.
Profits might even increase, because the population increasing, at a more rapid rate than capital, wages might fall; and instead of the value of one hundred quarters of wheat being necessary for the circulating capital, ninety only might be required: in which case, the profits of stock would rise from fifty to fifty-seven per cent.
Profits might also increase, because improvements might take place in agriculture, or in the implements of husbandry, which would augment the produce with the same cost of production.
If wages rose, or a worse system of agriculture were practised, profits would again fall. These are circumstances which are more or less at all times in operation -- they may retard or accelerate the natural effects of the progress of wealth, by rising or lowering profits -- by increasing or diminishing the supply of food, with the employment of the same capital on the land.(1*)
We will, however, suppose that no improvements take place in agriculture, and that capital and population advance in the proper proportion, so that the real wages of labour, continue uniformly the same; -- that we may know what peculiar effects are to be ascribed to the growth of capital, the increase of population, and the extension of cultivation, to the more remote, and less fertile land.
In this state of society, when the profits on agricultural stock, by the supposition, are fifty per cent the profits on all other capital, employed either in the rude manufactures, common to such a stage of society, or in foreign commerce, as the means of procuring in exchange for raw produce, those commodities which may be in demand, will be also, fifty per cent.(2*) If the profits on capital employed in trade were more than fifty per cent capital would be withdrawn from the land to be employed in trade. If they were less, capital would be taken from trade to agriculture. After all the fertile land in the immediate neighbourhood of the first settlers were cultivated, if capital and population increased, more food would be required, and it could only be procured from land not so advantageously situated. Supposing then the land to be equally fertile, the necessity of employing more labourers, horses,
&c. to carry the produce from the place where it was grown, to the place where it was to be consumed, although no alteration were to take place in the wages of labour, would make it necessary that more capital should be permanently employed to obtain the same produce. Suppose this addition to be of the value of ten quarters of wheat, the whole capital employed on the new land would be two hundred and ten, to obtain the same return as on the old; and, consequently the profits of stock would fall from fifty to forty-three per cent or ninety on two hundred and ten.(3*)
On the land first cultivated, the return would be the same as before, namely, fifty per cent or one hundred quarters of wheat; but, the general profits of stock being regulated by the profits made on the least profitable employment of capital on Ricardo on Corn Laws 3 agriculture, a division of the one hundred quarters would take place, forty-three per cent or eighty-six quarters would constitute the profit of stock, and seven per cent or fourteen, quarters, would constitute rent. And that such a division must take place is evident, when we consider that the owner of the capital of the value of two hundred and ten quarters of wheat would obtain precisely the same profit, whether he cultivated the distant land, or paid the first settler fourteen quarters for rent.
In this stage, the profits on, all capital employed in trade would fall to forty-three per cent.
If, in the further progress of population and wealth, the produce of more land were required to obtain the same return, it might be necessary to employ, either on account of distance, or the worse qualIty of land, the value of two hundred and twenty quarters of wheat, the profits of stock would then fall to thirty-six per cent or eighty on two hundred and twenty, and the rent of the first land would rise to twenty-eight quarters of wheat, and on the second portion of land cultivated, rent would now commence, and would amount to fourteen quarters.
The profits on all trading capital would also fall to thirty-six per cent.
Thus by bringing successively land of a worse quality, or less favourably situated into cultivation, rent would rise on the land previously cultivated, and precisely in the same degree would profits fall; and if the smallness of profits do not check accumulation, there are hardly any limits to the rise of rent, and the fall of profit.
If instead of employing capital at a distance on new land, an additional capital of the value of two hundred and ten quarters of wheat be employed on the first land cultivated, and its return were in like manner forty-three per cent or ninety on two hundred and ten; the produce of fifty per cent on the first capital, would be divided in the same manner as before forty-three per cent or eighty-six quarters would constitute profit, and fourteen quarters rent.
If two hundred and twenty quarters were employed in addition with the same result as before, the first capItal would afford a rent of twenty-eight; and the second of fourteen quarters, and the profits on the whole capital of six hundred and thirty quarters would be equal, and would amount to thirty-six per cent.
Supposing that the nature of man was so altered, that he required double the quantity of food that is now necessary for his subsistence, and consequently, that the expenses of cultivation were very greatly increased. Under such circumstances the knowledge and capital of an old society employed on fresh and fertile land in a new country would leave a much less surplus produce; consequently, the profits of stock could never be so high. But accumulation, though slower in its progress, might still go on, and rent would begin just as before, when more distant or less fertile land were cultivated.
The natural limit to population would of course be much earlier, and rent could never rise to the height to which it may now do; because, in the nature of things, land of the same poor quality would never be brought into cultivation; -- nor could the same amount of capital be employed on the better land with any adequate return of profit.(4*)
The following table is constructed on the supposition, that the first portion of land yields one hundred quarters profit on a capital of two hundred quarters; the second portion, ninety quarters on two hundred and ten, according to the foregoing calculations.(5*) It will be seen that during the progress of a country the whole