'On The Principles of Political Economy, and Taxation: Chapter V* - On Profits' nonfiction classiceconomicsbooks
Supposing corn and manufactured goods always to sell at the same price, profits would be high or low in proportion as wages were low or high. But suppose corn to rise in price because more labour is necessary to produce it; that cause will not raise the price of manufactured goods in the production of which no additional quantity of labour is required.
If both the manufacturer and farmer employed ten men, on wages rising from 24l. to 25l. per annum. per man, the whole sum paid by each would be 250l. instead of 240l. This is, however, the whole addition that would be paid by the manufacturer to obtain the same quantity of commodities; but the farmer on new land would probably be obliged
It may be said for example, that when corn rose from 4l. to 10l., the 180 quarters obtained from the best land would sell for 1800l. instead of 720l.; and therefore, though the landlord and labourer be proved to have a greater value for rent and wages, still the value of the farmer's profit might also be augmented. This however is impossible, as I shall now endeavour to shew.
When the price of corn was at 4l., the whole 180 quarters belonged to the cultivator, and he sold it for 720l. When corn rose to 4l. 4s. 8d. he was obliged to pay the value of ten quarters out of his 180 for rent, conse 180 quarters, with the rise of price, he would retain the value of a less quantity for himself, and give the value of a larger quantity to his landlord; but the deduction would be such as to leave him always the same sum of 720l.
If a manufacturer had also employed 3000l. in his business, he would be obliged in consequence of the rise of wages, to increase his capital, in order to be enabled to carry on the same business. If his commodities sold before for 720l., they would continue to sell at the same price; but the wages of labour, which were before 240l., would rise when corn was at 5l. 2s. 10d. to 274l. 5s. In the first case he would have a balance of 480l. as profit on 3000l.
The effects produced on profits, would have been the same, or nearly the same, if there had been any rise in the price of those other necessaries, besides food, on which the wages of labour are expended. The necessity which the labourer would be under of paying an increased price for such necessaries, would oblige him to demand more wages; and whatever increases wages, necessarily reduces profits.
It should be recollected that prices always vary in the market, and in the first instance, through the comparative state of demand and supply. Although cloth could be furnished at 40s. per yard, and give the usual profits of stock, it may rise to 60 or 80s. from a general change of fashion, or from any other cause which should suddenly and unexpectedly increase the demand, or diminish the supply of it.
which enable us to relinquish a portion of labour before required, and therefore to lower the price of the prime necessary of the labourer. I have already said, that long before this state of prices was become permanent, there would be no motive for accumulation; for no one accumulates but with a view to make his accumulation productive, and it is only when so employed that it operates on profits. Without a motive there could be no accumulation, and consequently such a state of prices never could take place. The farmer and manufacturer can no more live without profit, than the labourer without wages.
We should also expect that, however the rate of the profits of stock might diminish in consequence of the accumulation of capital on the land, and the rise of wages, yet the aggregate amount of profits would increase. Thus supposing that, with repeated accumulations of 100,000l., the rate of profit should fall from 20 to 19, to 18, to 17 per cent.
When the accumulation of capital, however, becomes very great, notwithstanding this increased value, it will Now if the capital employed were so large as to yield a hundred thousand times 720l. or 72,000,000l. the aggregate of profits would be 48,000,000l. when wheat was at 4l. per quarter; and if by employing a larger capital, 105,000 times 720l. were obtained when wheat was at 6l., or 75,600,000l., profits would actually fall from 48,000,000l. to 44,100,000l. or 105,000 times 420l., and wages would rise from 24,000,000l. to 31,500,000l.