Conclusion: Diversification of Goods as the Driving Force of Accumulation

In conclusion, both parties failed to show a credible employment of the surplus, which could allow accumulation to go on. In the historical experience, such an employment was the investment in human capital.

Sismondi, for instance, calls for increasing wages (but also for hindering technical pro­gress). Wage increase has actually been the main process that has driven accumulation during 150 years. However, Sismondi does not connect this process with the most impor­tant consequence of it, that is, an increase in productivity due to skill. In the short run, wage growth increases demand and avoids gluts; it also increases productivity to some extent, due to comforts. But in the long run, wage growth allows workers’ children to go to school and acquire skills, and thus it supports a proper investment in human capital.

For Mill (1824, 38-41), the education of workers in knowledge and intelligence is nec­essary both for their happiness and for the higher productivity it allows. Mill, however, does not connect these statements with the analysis of accumulation. The latter remains based on the postulate of subsistence wages.

Differently from Sismondi, Malthus praises technical progress and its main conse­quence: making commodities cheaper and cheaper.²⁷ However, he says, if it arrives at the point of producing an overabundance of goods, it leads to lower profits. It is true, as Smith (1776, 164-65) states, that comforts have no certain limits, but Malthus (1820, 401-2) writes that there are limits to saving and investment.

As to Ricardo, Samuel Hollander (1983) a variable-wage interpretation in opposition to George Stigler’s fix-wage interpretation of Ricardo’s model (wages fixed at the subsis­tence level). However, for Ricardo, accumulation is always pressed by the increase in the cost of subsistence goods, due to the decreasing productivity of land. This limit makes comforts actually unattainable for workers.

In any case, the crucial point is Say’s law. In the short run, this law does not provide evidence for its postulate,²⁸ and ends by denying the evidence of crises. To say that crises are simply due to temporary imbalances among sectors, not to lack of demand, is not a solution. Imbalances are due to a lack of demand considered as a whole. Actually, nearly always (at least in this period) the law is expressed as a false syllogism. Moreover, there is a sort of trick in saying that “to save is to spend.” There is a big difference between the two types of spending, whether for final consumption or for investment. The first absorbs production, and the second generates more production, so the proportion between the two matters.²⁹

Ronald Meek has argued that Say’s law is far from being the analytical basis of Ricardian economics, as Keynes maintains. Although Ricardo uses it for answering Malthus, he does not attribute real importance to it. On the political level, Meek (1950) adds, things change. Ricardo and his disciples were keen to defend capital accumulation against rent, while Malthus had the opposite interest.

Nevertheless, in a very few cases the representation of Say’s law lets us dimly see a real prospect of long-run development. Say and Ricardo both state, against Malthus, that human needs are unlimited. Say (1828-29, tome 2: 210-13) declares, “You cannot say that production is in excess until all people are provided of all things and nobody has anything more to desire.” He soon adds that the fulfillment of needs cannot be limited to elementary needs; it must also involve nonmaterial needs, which are unlimited.

However, no supply can be unlimited unless it continually varies its products. The diversification of goods is the driving force of accumulation. The two authors are well aware of this fact. Say (1803, bk. 1, chap. 15: 92) states, “In order to encourage industry, mere consumption is not sufficient. We need foster the development of taste and needs which generate among people the desire of consuming.” And Ricardo (1821, 343-44) writes, “If every man were to forego the use of luxuries, and be intent only on accumula­tion [i.e., to investment in labor], a quantity of necessaries might be produced, for which there could not be any immediate consumption. Of commodities so limited in number, there might undoubtedly be an universal glut.”

This was a decisive achievement. But why is it that these economists never connected it with the increase in productivity of human capital? Because the conditions of the time appeared to deny any connection of the kind. An enormous gap divided factory work and professional labor, workers’ wages and the incomes of the intellectual labor. Of course, even then, there was a connection between the increase in consumption and the increase in productivity of human capital. Factory machines were invented, built up, checked and repaired by skilled producers. The same happened for the organization of labor as well as of trade and for the various aspects of business.

However, this kind of labor was unnoticed; there was no room for it in the classical accumulation model. One could think that as technical progress went on, the role of skilled and technical labor would appear more and more central. Unfortunately, the two decades we have examined were the blueprint for the following economics on our sub­ject. When the concept of human capital was finally acquired, one-and-a-half centuries had passed and economic categories were radically changed. Very few people still used to think in terms of accumulation and productive consumption.