The Possibility of a General Glut
Another major subject of disagreement with Ricardo concerns Malthus’s assertion of the possibility for the progress of wealth to be checked while the powers of production remain undiminished or, even, are increased, throwing labourers out of employment.
This possibility rests on the lack of willingness among capitalists to consume unproduc- tively, to spend their revenue either on luxuries or on employing unproductive labourers. In his Principles of Political Economy, published in 1820, Malthus considers that, after a great and sudden increase in agricultural and manufacturing productivity, farmers and manufacturers might choose not to convert their new increased revenue into capital and, given that the taste for luxuries is “a plant of slow growth” (Malthus 1820b: 314), might prefer indolence, that is to say “the luxury of doing little or nothing to the luxury of possessing conveniences and luxuries” (ibid.: 337). This would “occasion a want of demand for the returns of the increased powers of production supposed and throw labourers out of employment” (ibid.: 313). However, in Malthus’s eyes, two points are much more important and preoccupying than indolence. On the one hand there is the possibility that capitalists, after such a great increase in the powers of production, choose neither indolence nor unproductive consumption, but to convert their new increased revenue into productive consumption, into capital. On the other hand the possibility exists that capitalists decide to deprive themselves of their usual conveniences and luxuries and to convert unproductive labourers into productive labourers, saving from their revenue to add to their capital. In these two cases, the lack of willingness amongst capitalists to consume unproductively results in an increase in production and supply of commodities destined for the maintenance of labour.For Malthus, commodities are produced by numerous capitalists. When the increase in production is excessive, each capitalist becomes afraid of not being able to sell all his commodities. The competition between capitalists leads them to lower the money prices of commodities “in a much greater degree than in proportion to the increase” in production (Malthus 1823a [1963]: 200), which sinks “their value below the costs of production” (1820b: 374). Considering that “for many years together the money-price for labour remains the same” (1827: 55), Malthus concludes that “the same produce, though it might have cost the same quantity of labour as before, would no longer command the same quantity” (1820b: 309, author’s emphasis). Since Malthus considers that “we must at last resort to labour as the only standard of the real value of everything, and of the effectual demand for it” (1836: 319) - that is, the quantity of labour which commodities command - the situation described above means for him that sometimes “an increase of supply is so far from increasing demand that it diminishes it” (1827: 45). When this happens for all commodities, there is a glut which is “evidently general not partial” (1820b: 308). Thus:
If the conversion of revenue into capital pushed beyond a certain point must, by diminishing the effectual demand for produce, throw the labouring classes out of employment, it is obvious that the adoption of parsimonious habits in too great a degree may be accompanied by the most distressing effects at first, and by a marked depression of wealth and population permanently. (1820b: 325)
In his Notes on Malthus, Ricardo comments on this passage: “Here the difference between Mr. Malthus and me is fairly stated. The reader must judge on which side truth lies” (Ricardo in Malthus 1820b: 325). The difference is clear and consists in the fact that Ricardo does not agree with his friend on the very possibility for what Malthus calls a general glut: a deficiency in effectual demand for all commodities, which throws labourers out of employment.
Obviously, this difference is not of the same nature as that which Ricardo stated a few years previously in a letter to his friend, on 24 January 1817, according to which Malthus is more interested in “the immediate and temporary effects of particular changes”, whereas Ricardo put these effects aside, fixing his attention “on the permanent state of things which will result from them” (Ricardo 1951-73, VII: 120). Malthus answered two days later: “I agree with you that one cause of our difference in opinion is that which you mention” (in Ricardo 1951-73, VII: 121-2).Of course, the “certain point” beyond which the conversion of revenue into capital is pushed too far, “the resources of political economy are unequal to determine. It must depend upon a great variety of circumstances, particularly upon fertility of soil and the progress of invention in machinery” (Malthus 1820b: 422). Nevertheless, what is sure is that one cannot rely on capitalists to realize the adequate proportion between productive and unproductive consumption: the latter one “is not consistent with the actual habits of the generality of capitalists. The great object of their lives is to save a fortune” (ibid.: 423). The passion for accumulation is inherent in the nature of capitalists, and constitutes a threat to society, to labourers and to capitalists themselves. On the basis of this analysis, Malthus advises not only that: “a knowledge of the effects of unproductive consumers on national wealth will make us proceed with more caution in our efforts to diminish them” (ibid.: 446), but also that “public works, the making and repairing the roads, and a tendency among persons of fortune to improve their grounds, and keep more servants, are the most direct means within our power of restoring the demand for labour” (ibid.: 446).
Even if Marx disagreed with Malthus’s analysis, should not he have praised him for highlighting the dangers of the passion for the accumulation of capital, as he did himself? As for Keynes, even if he agreed with Malthus with regard to the possibility for effectual demand to be deficient, and its consequence concerning employment, should not he have underlined the differences between their analyses? In particular, this possible deficiency is caused for Malthus by the desire to accumulate too much, for Keynes by a lack of incentive to invest.
Catherine Martin
See also:
British classical political economy (II); Bullionist and anti-bullionist schools (II); Population (III); David Ricardo (I).