Classical economists: toward the stationary state

As far as population theory is concerned, the period from the publication of the first edition of Malthus’s Essay (1798) until the publication of John Stuart Mill’s Principles of Political Economy (1848 [1963—91]) saw substantial support for Malthus’s model from the major classical economists.

1. The size of the population was regulated by the availability of means of subsistence.

2. The population increased with the increase in the means of subsistence available for the feeding of wage earners.

3. Wage earners had the sole responsibility for their situation of need since they were the ones mainly responsible for population growth.

Taken together these three concepts are fundamental in the theory of Jean Baptiste Say, David Ricardo, John Ramsey McCulloch, and John Stuart Mill.

For Ricardo the workers’ poverty could be attributed to the fact that population growth outpaced the growth of capital for investment and therefore the demand for labour. This position was different from that of Malthus, deriving from a different view of the effects that diminishing returns in agriculture had on development: for Ricardo diminishing returns raised the cost of producing wage goods and were therefore respon­sible for the slowing down of the process of capital accumulation, while for Malthus diminishing returns were fundamental in explaining the fact that the growth of means of subsistence did not proceed at the same pace as population growth.

By analysing Ricardo’s Principles of Political Economy (1817 [1951—73]) we will try to show that the points shared by the theories of Malthus and Ricardo are, however, significant, above all in the aspects concerning the proposals to solve the problem of working-class poverty.

As we know, the basic aim of the work done by Ricardo in Principles is to examine the laws regulating the distribution of a country’s production among the different classes of society, namely landowners, capitalists and workers.

In the chapter discussing Malthus’s theory of rent, Ricardo introduced the argument by claiming that despite the criticisms levelled at it, Malthus’s Essay was a fundamental work, which would in time reveal all its value. In the same way Ricardo argued for the important role played by Malthus’ rent theory in economic debate, but he was ready to challenge its conclusions. He maintained that “the general progress of population is affected by the increase of capital, the consequent demand for labour, and the rise of wages; and that the production of food is but the effect of that demand” (Ricardo 1817 [1951-73]: 406). For Ricardo, Malthus was wrong to assert that the greater availability of food was the main factor encouraging new marriages and therefore the increase in population. The increase was caused by higher wages.

For Ricardo, as for Smith, the population grew only after a higher demand for labour had been manifested in the labour market. The repercussions of this event affected the economic system in the following way: “If wages rose, profits, and not rent, would fall. The rise of rent and wages, and the fall of profits, are generally the inevitable effects of the same cause-the increasing demand for food, the increased quantity of labour required to produce it, and its consequently high price” (Ricardo 1817 [1951-73]: 411).

Turning however to the practical implications, in the sense of remedies of political economy deriving from Ricardo’s analysis on population, we again come up against the conclusions put forward by Malthus. For Ricardo in fact the Malthusian principle that the greater availability of resources for the worker meant an increase in the size of the family group, and therefore of the population, remained essentially valid, even though he did not agree with Malthus about the causes of the increase in the demand for food.

The increase of population, and the increase of food will generally be the effect, but not the necessary effect of high wages. The amended condition of the labourer, in consequence of the increased value which is paid him, does not necessarily oblige him to marry and take upon himself the charge of a family... but with the remainder he may, if it please him, purchase any commodities that may contribute to his enjoyments... But although this might be the consequence of high wages, yet so great are the delights of domestic society, that in practice it is invariably found that an increase of population follows the amended condition of the labourer; and it is only because it does so, that, with the trifling exception already mentioned, a new and increased demand arises for food. This demand then is the effect of an increase of capital and population, but not the cause. (Ricardo 1817 [1951-73]: 406-7)

Malthus’s reasoning was therefore essentially confirmed. According to Ricardo, only in very few cases did the worker use the greater availability of income to improve his stand­ard of living by consuming a wider range of goods. In most cases higher wages translated into an increase in population and in the demand for the food needed for its upkeep.

A further confirmation of the support for the Malthusian model came from Ricardo’s rejection of the system of assistance of the Poor Laws. In concluding his chapter on wages in Principles, Ricardo states that the wage for work should not be subjected to any control by the legislative authority. Every intervention in the issue of regulating the income of the poor had the effect of generating a worsening of the initial situation because it precluded the operation of “stimuli” to “prudence and foresight”. Only by acquiring these values could poor workers be sure that the higher income would not be “wasted” by a later increase in population.

In the period of classical economics another author who analyses the issue of popula­tion is McCulloch.

In his Principles of Political Economy McCulloch devoted an entire chapter to the issue of population, explaining that population was proportional to the means of subsistence (McCulloch 1825 [1995]: 227-30), and that thanks to the action of moral restraint a more advanced state of development and well-being could be achieved by the whole of society (ibid.: 230-31). The continuous increase in population was yet again seen as the strong­est stimulus in the battle against natural human laziness and, as McCulloch underlined, also became a potent stimulus for research into new inventions. Population growth however became a positive factor of development only if it was associated with certain moral qualities in individuals.

A far more articulate position was taken by John Stuart Mill, not only towards Malthusian theory but, more particularly, towards the role played by population in a perspective of long-term growth, in other words, in the situation leading towards the stationary state.

For Mill the Malthusian principle contained a strong message which, if interpreted properly - namely, as a theoretical tool in support of human perfectibility - would lead to a decided improvement in the living conditions of the wage earning class.

In his Principles ofPolitical Economy of 1848 Mill analysed the effects of excessive pop­ulation growth on the economic system and adopted the scheme developed by Ricardo. When market wages were above their natural level then the population increased. At the same time, high wages discouraged investments and generated a drop in the demand for labour. As a result of this last effect, wages returned to subsistence level and the working population fell until there was another increase in the market wage.

Mill’s study, especially the chapters on wages, therefore examines the conditions and the policies that can counteract population growth (Mill 1848 [1963-91] bk I: ch.

The only difference from the Malthusian approach came from considering the fact that the change in the workers’ perspective did not derive exclusively from their individ­ual growth and empowerment, but could actually be the result of a government policy. Overall, in his Principles the population issue was associated with three main aspects: (1) the limitation of family size had a significant effect on workers’ income; (2) the reduc­tion of the number of children was a fundamental aspect in the process of emancipation of women; and (3) population size regulated income level and therefore well-being in the stationary state. As for the last point, for Mill, approaching the stationary state was one of the typical features of the development of the capitalist system of production. The “natural” outcome of the process of accumulation, given the diminishing returns of agri­culture and the progressively diminishing performance of capital, would be the situation of equilibrium where the same quantities would be reproduced over time and where, if the population remained stationary, a higher level of wealth could be achieved.