RICARDO AND THE LONG-PERIOD PROSPECTS OF THE ECONOMY
Classical analysis of the problem of value underwent a subtle but profound change from Smith to Ricardo. Ricardo's approach, imperfect and approximate though it was, not only yielded fresh findings but buttressed a number of familiar ones.
In his hands, the analysis of value provided an underpinning to the long-term prognosis of economic expansion. With its support, he could write: 'The reason then, why raw produce rises in comparative value, is because more labour is employed in the production of the last portion obtained, and not because rent is paid to the landlord. The value of corn is regulated by the quantity of labour bestowed on its production on that quality of land, or with that portion of capital, which pays no rent.'12The implications of this conclusion extended far beyond their direct bearing on differential rates of change in the prices of agricultural and manufactured goods. Among other things this analysis pinned down the connexions between economic expansion and income distribution. As population growth was thought likely to accompany economic expansion, food requirements - which could only be satisfied at substantially higher cost - would grow. Higher money wages would be called for in order to maintain real wages at their conventional level. The profit share of income would thus be squeezed. Meanwhile, the distribution of income would shift in favour of rents. This outcome, however, was directly linked to 'the increasing difficulty of making constant additions to the food of the country'. Conversely, Ricardo maintained, 'if the necessaries of the workman could be constantly increased with the same facility, there could be no permanent alteration in the rate of profits or wages, to whatever amount capital might be accumulated'.13
The upshot of this argument was that the process of economic expansion might erode its own foundation - i.e. accumulation out of the profit share of income.
Ultimately, as the rate of profit fell, the stationary state would emerge when further net accumulation would behalted. Nor was it necessary for profits to be eliminated altogether before growth was checked. Ricardo anticipated that a critical point might be reached earlier. As he put it:
The farmer and manufacturer -can no more live without profit, than the labourer without wages. Their motive for accumulation will diminish with every diminution of profit, and will cease altogether when their profits are so low as not to afford them an adequate compensation for their trouble, and the risk which they must necessarily encounter in employing their capital productively.14
The day when growth was halted could, however, be postponed by measures that reduced the labour costs involved in enlarging food supplies. The tendency of profits to fall, Ricardo noted, 'is happily checked at repeated intervals by the improvements in machinery, connected with the production of necessaries, as well as by discoveries in the science of agriculture which enable us to relinquish a portion of labour before required, and therefore to lower the price of the prime necessary of the labourer'.15 But relief via technological innovations could not be predicted with confidence. The upward pressure on the prices of subsistence goods and, in turn, on money wage rates, might be more reliably restrained through the importation of food stuffs from lower-cost producers abroad. This consideration figured prominently in Ricardo's hostile attitude toward the protection to home agriculture afforded by the Corn Laws.
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