An Inquiry into the Nature and Progress of Rent Part 2

These I consider as the two alternatives necessarily belonging to a great comparative increase of wealth; and the supposition here made will, with proper restrictions, apply to the state of Europe.

In Europe, the expenses attending the carriage of corn are often considerable. They form a natural barrier to importation; and even the country which habitually depends upon foreign corn, must have the price of its raw produce considerably higher than the general level.

Practically, also, the prices of raw produce, in the different countries of Europe, will be variously modified by very different soils, very different degrees of taxation, and very different degrees of improvement in the science of agriculture. Heavy taxation, and a poor soil, may occasion a high comparative price of raw produce, or a considerable dependence on other countries, without great wealth and population; while great improvements in agriculture and a good soil may keep the price of produce low, and the country independent of foreign corn, in spite of considerable wealth. But the principles laid down are the general principles on the subject; and in applying them to any particular case, the particular circ.u.mstances of such case must always be taken into consideration.

With regard to improvements in agriculture, which in similar soils is the great cause which r.e.t.a.r.ds the advance of price compared with the advance of produce; although they are sometimes very powerful, they are rarely found sufficient to balance the necessity of applying to poorer land, or inferior machines. In this respect, raw produce is essentially different from manufactures.

The real price of manufactures, the quant.i.ty of labour and capital necessary to produce a given quant.i.ty of them, is almost constantly diminis.h.i.+ng; while the quant.i.ty of labour and capital, necessary to procure the last addition that has been made to the raw produce of a rich and advancing country, is almost constantly increasing. We see in consequence, that in spite of continued improvements in agriculture, the money price of corn is ceteris paribus the highest in the richest countries, while in spite of this high price of corn, and consequent high price of labour, the money price of manufactures still continues lower than in poorer countries.

I cannot then agree with Adam Smith, in thinking that the low value of gold and silver is no proof of the wealth and flouris.h.i.+ng state of the country, where it takes place. Nothing of course can be inferred from it, taken absolutely, except the abundance of the mines; but taken relatively, or in comparison with the state of other countries, much may be inferred from it. If we are to measure the value of the precious metals in different countries, and at different periods in the same country, by the price of corn and labour, which appears to me to be the nearest practical approximation that can be adopted [and in fact corn is the measure used by Adam Smith himself], it appears to me to follow, that in countries which have a frequent commercial intercourse with each other, which are nearly at the same distance from the mines, and are not essentially different in soil; there is no more certain sign, or more necessary consequence of superiority of wealth, than the low value of the precious metals, or the high price of raw produce. [15]

It is of importance to ascertain this point; that we may not complain of one of the most certain proofs of the prosperous condition of a country.

It is not of course meant to be a.s.serted, that the high price of raw produce is, separately taken, advantageous to the consumer; but that it is the necessary concomitant of superior and increasing wealth, and that one of them cannot be had without the other. [16]

With regard to the labouring cla.s.ses of society, whose interests as consumers may be supposed to be most nearly concerned, it is a very short-sighted view of the subject, which contemplates, with alarm, the high price of corn as certainly injurious to them. The essentials to their well being are their own prudential habits, and the increasing demand for labour. And I do not scruple distinctly to affirm, that under similar habits, and a similar demand for labour, the high price of corn, when it has had time to produce its natural effects, so far from being a disadvantage to them, is a positive and unquestionable advantage. To supply the same demand for labour, the necessary price of production must be paid, and they must be able to command the same quant.i.ties of the necessaries of life, whether they are high or low in price. [17]

But if they are able to command the same quant.i.ty of necessaries, and receive a money price for their labour, proportioned to their advanced price, there is no doubt that, with regard to all the objects of convenience and comfort, which do not rise in proportion to corn [and there are many such consumed by the poor], their condition will be most decidedly improved.

The reader will observe in what manner I have guarded the proposition. I am well aware, and indeed have myself stated in another place, that the price of provisions often rises, without a proportionate rise of labour: but this cannot possibly happen for any length of time, if the demand for labour continues increasing at the same rate, and the habits of the labourer are not altered, either with regard to prudence, or the quant.i.ty of work which he is disposed to perform.

The peculiar evil to be apprehended is, that the high money price of labour may diminish the demand for it; and that it has this tendency will be readily allowed, particularly as it tends to increase the prices of exportable commodities. But repeated experience has shown us that such tendencies are continually counterbalanced, and more than counterbalanced by other circ.u.mstances. And we have witnessed, in our own country, a greater and more rapid extension of foreign commerce, than perhaps was ever known, under the apparent disadvantage of a very great increase in the price of corn and labour, compared with the prices of surrounding countries.

On the other hand, instances everywhere abound of a very low money price of labour, totally failing to produce an increasing demand for it. And among the labouring cla.s.ses of different countries, none certainly are so wretched as those, where the demand for labour, and the population are stationary, and yet the prices of provisions extremely low, compared with manufactures and foreign commodities. However low they may be, it is certain, that under such circ.u.mstances, no more will fall to the share of the labourer than is necessary just to maintain the actual population; and his condition will be depressed, not only by the stationary demand for labour, but by the additional evil of being able to command but a small portion of manufactures or foreign commodities, with the little surplus which he may possess. If, for instance, under a stationary population, we suppose, that in average families two thirds of the wages estimated in corn are spent in necessary provisions, it will make a great difference in the condition of the poor, whether the remaining one third will command few or many conveniencies and comforts; and almost invariably, the higher is the price of corn, the more indulgences will a given surplus purchase.

The high or low price of provisions, therefore, in any country is evidently a most uncertain criterion of the state of the poor in that country. Their condition obviously depends upon other more powerful causes; and it is probably true, that it is as frequently good, or perhaps more frequently so, in countries where corn is high, than where it is low.

At the same time it should be observed, that the high price of corn, occasioned by the difficulty of procuring it, may be considered as the ultimate check to the indefinite progress of a country in wealth and population. And, although the actual progress of countries be subject to great variations in their rate of movement, both from external and internal causes, and it would be rash to say that a state which is well peopled and proceeding rather slowly at present, may not proceed rapidly forty years hence; yet it must be owned, that the chances of a future rapid progress are diminished by the high prices of corn and labour, compared with other countries.

It is, therefore, of great importance, that these prices should be increased as little as possible artificially, that is, by taxation.

But every tax which falls upon agricultural capital tends to check the application of such capital, to the bringing of fresh land under cultivation, and the improvement of the old. It was shown, in a former part of this inquiry, that before such application of capital could take place, the price of produce, compared with the instruments of production, must rise sufficiently to pay the farmer. But, if the increasing difficulties to be overcome are aggravated by taxation, it is necessary, that before the proposed improvements are undertaken, the price should rise sufficiently, not only to pay the farmer, but also the government. And every tax, which falls on agricultural capital, either prevents a proposed improvement, or causes it to be purchased at a higher price.

When new leases are let, these taxes are generally thrown off upon the landlord. The farmer so makes his bargain, or ought so to make it, as to leave himself, after every expense has been paid, the average profits of agricultural stock in the actual circ.u.mstances of the country, whatever they may be, and in whatever manner they may have been affected by taxes, particularly by so general a one as the property tax. The farmer, therefore, by paying a less rent to his landlord on the renewal of his lease, is relieved from any peculiar pressure, and may go on in the common routine of cultivation with the common profits. But his encouragement to lay out fresh capital in improvements is by no means restored by his new bargain. This encouragement must depend, both with regard to the farmer and the landlord himself, exclusively on the price of produce, compared with the price of the instruments of production; and, if the price of these instruments have been raised by taxation, no diminution of rent can give relief. It is, in fact, a question, in which rent is not concerned. And, with a view to progressive improvements, it may be safely a.s.serted, that the total abolition of rents would be less effectual than the removal of taxes which fall upon agricultural capital.

I believe it to be the prevailing opinion, that the greatest expense of growing corn in this country is almost exclusively owing to the weight of taxation. Of the tendency of many of our taxes to increase the expenses of cultivation and the price of corn, I feel no doubt; but the reader will see from the course of argument pursued in this inquiry, that I think a part of this price, and perhaps no inconsiderable part, arises from a cause which lies deeper, and is in fact the necessary result of the great superiority of our wealth and population, compared with the quality of our natural soil and the extent of our territory.

This is a cause which can only be essentially mitigated by the habitual importation of foreign corn, and a diminished cultivation of it at home.

The policy of such a system has been discussed in another place; but, of course, every relief from taxation must tend, under any system, to make the price of corn less high, and importation less necessary.

In the progress of a country towards a high state of improvement, the positive wealth of the landlord ought, upon the principles which have been laid down, gradually to increase; although his relative condition and influence in society will probably rather diminish, owing to the increasing number and wealth of those who live upon a still more important surplus [18] --the profits of stock.

The progressive fall, with few exceptions, in the value of the precious metals throughout Europe; the still greater fall, which has occurred in the richest countries, together with the increase of produce which has been obtained from the soil, must all conduce to make the landlord expect an increase of rents on the renewal of his leases. But, in reletting his farms, he is liable to fall into two errors, which are almost equally prejudicial to his own interests, and to those of his country.

In the first place, he may be induced, by the immediate prospect of an exorbitant rent, offered by farmers bidding against each other, to let his land to a tenant without sufficient capital to cultivate it in the best way, and make the necessary improvements upon it. This is undoubtedly a most short-sighted policy, the bad effects of which have been strongly noticed by the most intelligent land surveyors in the evidence lately brought before Parliament; and have been particularly remarkable in Ireland, where the imprudence of the landlords in this respect, combined, perhaps, with some real difficulty of finding substantial tenants, has aggravated the discontents of the country, and thrown the most serious obstacles in the way of an improved system of cultivation. The consequence of this error is the certain loss of all that future source of rent to the landlord, and wealth to the country, which arises from increase of produce.

The second error to which the landlord is liable, is that of mistaking a mere temporary rise of prices, for a rise of sufficient duration to warrant an increase of rents. It frequently happens, that a scarcity of one or two years, or an unusual demand arising from any other cause, may raise the price of raw produce to a height, at which it cannot be maintained. And the farmers, who take land under the influence of such prices, will, in the return of a more natural state of things, probably break, and leave their farms in a ruined and exhausted state. These short periods of high price are of great importance in generating capital upon the land, if the farmers are allowed to have the advantage of them; but, if they are grasped at prematurely by the landlord, capital is destroyed, instead of being acc.u.mulated; and both the landlord and the country incur a loss, instead of gaining a benefit.

A similar caution is necessary in raising rents, even when the rise of prices seems as if it would be permanent. In the progress of prices and rents, rent ought always to be a little behind; not only to afford the means of ascertaining whether the rise be temporary or permanent, but even in the latter case, to give a little time for the acc.u.mulation of capital on the land, of which the landholder is sure to feel the full benefit in the end.

There is no just reason to believe, that if the lands were to give the whole of their rents to their tenants, corn would be more plentiful and cheaper. If the view of the subject, taken in the preceding inquiry, be correct, the last additions made to our home produce are sold at the cost of production, and the same quant.i.ty could not be produced from our own soil at a less price, even without rent. The effect of transferring all rents to tenants, would be merely the turning them into gentlemen, and tempting them to cultivate their farms under the superintendence of careless and uninterested bailiffs, instead of the vigilant eye of a master, who is deterred from carelessness by the fear of ruin, and stimulated to exertion by the hope of a competence. The most numerous instances of successful industry, and well-directed knowledge, have been found among those who have paid a fair rent for their lands; who have embarked the whole of their capital in their undertaking; and who feel it their duty to watch over it with unceasing care, and add to it whenever it is possible. But when this laudable spirit prevails among a tenantry, it is of the very utmost importance to the progress of riches, and the permanent increase of rents, that it should have the power as well as the will to acc.u.mulate; and an interval of advancing prices, not immediately followed by a proportionate rise of rents, furnishes the most effective powers of this kind. These intervals of advancing prices, when not succeeded by retrograde movements, most powerfully contribute to the progress of national wealth. And practically I should say, that when once a character of industry and economy has been established, temporary high profits are a more frequent and powerful source of acc.u.mulation, than either an increased spirit of saving, or any other cause that can be named. [19] It is the only cause which seems capable of accounting for the prodigious acc.u.mulation among individuals, which must have taken place in this country during the last twenty years, and which has left us with a greatly increased capital, notwithstanding our vast annual destruction of stock, for so long a period.

Among the temporary causes of high price, which may sometimes mislead the landlord, it is necessary to notice irregularities in the currency.

When they are likely to be of short duration, they must be treated by the landlord in the same manner as years of unusual demand. But when they continue so long as they have done in this country, it is impossible for the landlord to do otherwise than proportion his rent accordingly, and take the chance of being obliged to lessen it again, on the return of the currency to its natural state.

The present fall in the price of bullion, and the improved state of our exchanges, proves, in my opinion, that a much greater part of the difference between gold and paper was owing to commercial causes, and a peculiar demand for bullion than was supposed by many persons; but they by no means prove that the issue of paper did not allow of a higher rise of prices than could be permanently maintained. Already a retrograde movement, not exclusively occasioned by the importations of corn, has been sensibly felt; and it must go somewhat further before we can return to payments in specie. Those who let their lands during the period of the greatest difference between notes and bullion, must probably lower them, whichever system may be adopted with regard to the trade in corn.

These retrograde movements are always unfortunate; and high rents, partly occasioned by causes of this kind, greatly embarra.s.s the regular march of prices, and confound the calculations both of the farmer and landlord.

With the cautions here noticed in letting farms, the landlord may fairly look forward to a gradual and permanent increase of rents; and, in general, not only to an increase proportioned to the rise in the price of produce, but to a still further increase, arising from an increase in the quant.i.ty of produce.

If in taking rents, which are equally fair for the landlord and tenant, it is found that in successive lettings they do not rise rather more than in proportion to the price of produce, it will generally be owing to heavy taxation.

Though it is by no means true, as stated by the Economists, that all taxes fall on the net rents of the landlords, yet it is certainly true that they are more frequently taxed both indirectly as well as directly, and have less power of relieving themselves, than any other order of the state. And as they pay, as they certainly do, many of the taxes which fall on the capital of the farmer and the wages of the labourer, as well as those directly imposed on themselves; they must necessarily feel it in the diminution of that portion of the whole produce, which under other circ.u.mstances would have fallen to their share. But the degree in which the different cla.s.ses of society are affected by taxes, is in itself a copious subject, belonging to the general principles of taxation, and deserves a separate inquiry.

FOOTNOTES:

[Footnote 1: I cannot, however, agree with him in thinking that all land which yields food must necessarily yield rent. The land which is successively taken into cultivation in improving countries, may only pay profits and labour. A fair profit on the stock employed, including, of course, the payment of labour, will always be a sufficient inducement to cultivate.]

[Footnote 2: Vol II. p. 124. Of this work a new and much improved edition has lately been published, which is highly worthy the attention of all those who take an interest in these subjects.]

[Footnote 3: Vol. I. p. 49.]

[Footnote 4: Vol IV. p. 134.]

[Footnote 5: Vol. III. p. 272.]

[Footnote 6: It is, however, certain, that if either these materials be wanting, or the skill and capital necessary to work them up be prevented from forming, owing to the insecurity of property, to any other cause, the cultivators will soon slacken in their exertions, and the motives to acc.u.mulate and to increase their produce, will greatly diminish. But in this case there will be a very slack demand for labour; and, whatever may be the nominal cheapness of provisions, the labourer will not really be able to command such a portion of the necessaries of life, including, of course, clothing, lodging, etc. as will occasion an increase of population.]

[Footnote 7: I have supposed some check to the supply of the cotton machinery in this case. If there was no check whatever, the effects wold show themselves in excessive profits and excessive wages, without an excess above the cost of production.]

[Footnote 8: Vol. iv. p. 35.]

[Footnote 9: The more general surplus here alluded to is meant to include the profits of the farmer, as well as the rents of the landlord; and, therefore, includes the whole fund for the support of those who are not directly employed upon the land. Profits are, in reality, a surplus, as they are in no respect proportioned (as intimated by the Economists) to the wants and necessities of the owners of capital. But they take a different course in the progress of society from rents, and it is necessary, in general, to keep them quite separate.]

[Footnote 10: According to the calculations of Mr Colquhoun, the value of our trade, foreign and domestic, and of our manufactures, exclusive of raw materials, is nearly equal to the gross value derived from the land. In no other large country probably is this the case. P. Colquhoun, Treatise on the wealth, power, and resources of the British Empire, 2nd ed. 1815, p. 96. The whole annual produce is estimated at about 430 millions, and the products of agriculture at about 216 millions.]

[Footnote 11: To the honour of Scotch cultivators, it should be observed, that they have applied their capitals so very skilfully and economically, that at the same time that they have prodigiously increased the produce, they have increase the landlord's proportion ot it. The difference between the landlord's share of the produce in Scotland and in England is quite extraordinary--much greater than can be accounted for, either by the natural soil or the absence of t.i.thes and poor's rates. See Sir John Sinclair's valuable An account of husbandry in Scotland, (Edinburgh) not long since published--works replete with the most useful and interesting information on agricultural subjects.]

[Footnote 12: See Evidence before the House of Lords, given in by Arthur Young. p. 66.]

[Footnote 13: In all our discussions we should endeavour, as well as we can, to separate that part of high price, which arises from excess of currency, from that part, which is natural, and arises from permanent causes. In the whole course of this argument, it is particularly necessary to do this.]

[Footnote 14: It will be observed, that I have said in a progressive country; that is, in a country which requires yearly the employment of a greater capital on the land, to support an increasing population. If there were no question about fresh capital, or an increase of people, and all the land were good, it would not then be true that corn must be sold at its necessary price. The actual price might be diminished; and if the rents of land were diminished in proportion, the cultivation might go on as before, and the same quant.i.ty be produced. It very rarely happens, however, that all the lands of a country actually occupied are good, and yield a good net rent. And in all cases, a fall of prices must destroy agricultural capital during the currency of leases; and on their renewal there would not be the same power of production.]

[Footnote 15: This conclusion may appear to contradict the doctrine of the level of the precious metals. And so it does, if by level be meant level of value estimated in the usual way. I consider the doctrine, indeed, as quite unsupported by facts, and the comparison of the precious metals to water perfectly inaccurate. The precious metals are always tending to a state of rest, or such a state of things as to make their movement unnecessary. But when this state of rest has been nearly attained, and the exchanges of all countries are nearly at par, the value of the precious metals in different countries, estimated in corn and labour, or the ma.s.s of commodities, is very far indeed from being the same. To be convinced of this, it is only necessary to look at England, France, Poland, Russia, and India, when the exchanges are at par. That Adam Smith, who proposes labour as the true measure of value at all times and in all places, could look around him, and yet say that the precious metals were always the highest in value in the richest countries, has always appeared to me most unlike his usual attention to found his theories on facts.]