The Principles of Political Economy and Taxation

By David Ricardo | Go to book overview

CHAPTER XXI

EFFECTS OF ACCUMULATION ON PROFITS AND INTEREST

FROM the account which has been given of the profits of stock, it will appear that no accumulation of capital will permanently lower profits unless there be some permanent cause for the rise of wages. If the funds for the maintenance of labour were doubled, trebled, or quadrupled, there would not long be any difficulty in procuring the requisite number of hands to be employed by those funds; but owing to the increasing difficulty of making constant additions to the food of the country, funds of the same value would probably not maintain the same quantity of labour. If the necessaries of the workman could be constantly increased with the same facility, there could be no permanent alteration in the rate of profit or wages, to whatever amount capital might be accumulated. Adam Smith, however, uniformly ascribes the fall of profits to the accumulation of capital, and to the competition which will result from it, without ever adverting to the increasing difficulty of providing food for the additional number of labourers which the additional capital will employ. " The increase of stock," he says, " which raises wages, tends to lower profit. When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profit; and when there is a like increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in all." Adam Smith speaks here of a rise of wages, but it is of a temporary rise, proceeding from increased funds before the population is increased; and he does not appear to see that at the same time that capital is increased the work to be effected by capital is increased in the same proportion. M. Say has, however, most satisfactorily shown that there is no amount of capital which may not be employed in a country, because a demand is only limited by production. No man produces but with a view to consume or sell, and he never sells but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either

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