Letters to Malthus on Political Economy and Stagnation of Commerce
Jean Baptiste Say (1821)
SIR,
I have sought in your Principles of Political Economy, for something wherewith to confirm the opinion of the public, relative to machines, and generally relatively to expeditious processes, which, in the arts, shorten manual labor and multiply productions without increasing the expence of production. I should wish to find in them those fixed principles, that rigorous mode of reasoning which carries conviction with it, and to which your Essay on Population has accustomed the public. But this is not an Essay on Population. It appears to me, (for I am sometimes reduced to the necessity of making use of this form, after having read your demonstrations,) it appears to me that all the advantage you admit in machinery, and generally in expeditious means of production, is reduced to the fact of multiplying productions to such an extent, that even when their selling value is lessened the total amount still exceeds what it was before the improvement.(36) The advantage you point out is incontrovertible; and it has been already remarked, that the total value of cotton goods, as well as the total number of workmen employed in this branch, had singularly increased since the introduction of expeditious means. An analogous remark had been made relative to the printing press; this machine employed in the multiplication of books, a production which employs at this moment, without reckoning the authors, a much greater number of persons than when they were copied by hand, and which is worth a much larger sum than when books were dearer.
But this very decided advantage, is only one among the many which nations have reaped by the employment of machinery. It only relates to certain productions, the consumption of which was susceptible of sufficient extension to balance the diminution in their price, whilst there is an advantage in the introduction of machines common to all economical and expeditious processes in general; an advantage which would be felt even when the consumption of the production should be no longer capable of any extension; an advantage which ought to be highly valued in the principles of Political Economy. Have the goodness to excuse me, if, in order to make myself understood, I am obliged to revert to a few elementary ideas.
Machines and tools are both productions, which immediately after their production rank in the class of capital, and are employed in the perfection of other productions. The only difference there is between machines and tools, is that the former are complex tools, and the latter simple machines. As there are no machines or tools existing which engender force we must still consider them as the means of transmitting an action, an active force of which we dispose, towards an object which is to be modified by it. Thus a hammer is a tool by means whereof we employ the muscular strength of a man in flattening, in certain cases a leaf of gold; and the mill hammers of a large forge are also tools by means whereof we employ a fall of water in flattening iron bars.
The employ of a voluntary force, with which Nature has gifted us, does not deprive it of its nature of a tool. The weight increased by velocity, which constitutes the power of a gold beater's hammer, is not less a natural physical power than the weight of the water which falls from a mountain.
What is our industry altogether, but the employ, more or less understood, of the laws of Nature. It is by obeying Nature, says Bacon, that we learn to command it. What difference do you see between knitting needles and a stocking frame, except that the latter is a more complicated and a more powerful tool than the needles; but for the rest, employing with greater or less advantage the properties of the metal, and the power of the lever to manufacture the articles with which we cover our legs and feet.
The question then resolves itself to this: it is an advantage to man to take in his hand a more powerful tool, capable of doing much more work, or of doing it better, rather than a still larger but imperfect tool, with which he works slower with more difficulty and not so well.
I think I should offer an insult to your good sense and to that of our readers, if I doubted the answer a moment.
The perfection of our tools, Sir, is connected with the perfection of our species. It is that which makes the difference which is observable between us and the savages of the South Seas, who have axes of flint, and sewing needles made of fish bones.
It is no longer admissible, for any one who writes upon Political Economy to endeavor to circumscribe the introduction of the means which chance or genius may put into our hands, with a view of preserving more work for our laborers; such a one would expose himself to have all his own arguments made use of to prove to him that we ought, (retrograding instead of advancing in the career of civilisation,) successively to renounce all the discoveries we have already made, and to render our arts more imperfect in order to multiply our labor by diminishing our enjoyments.
No doubt there are inconviences in the transit from one order of things to another, even from an imperfect to a better order. What person in his senses would all at once take off the shackles which obstruct industry, and remove the Custom Houses which separate nations, prejudicial as they are to their prosperity? In these eases the duty of well informed persons does not consist in producing motives for keeping back and proscribing every kind of change, under pretence of the inconviences they carry with them; but in appreciating these inconviences, in pointing out the practicable means of preventing or diminishing them as much as possible, for the purpose of facilitating the adoption of a desirable amendment.
The inconvience in this ease is a removal of income, which when it is sudden, is more or less injurious to the class whose income it diminishes. The substitution of machinery diminishes (sometimes, but not always,) the income of the class whose funds consist of corporeal and manual faculties, to augment the income of the class whose funds consist in intellectual faculties and in capitals. In other words, expeditious machines, being in general more complex, require more considerable capitals; consequently they compel the enterpriser who employs them to purchase more of what we have called productive service of capital, and less of what we call productive services of laborers. At the same time, as perhaps they require greater attention and more care in their general and particular management, they employ more of that kind of productive service from whence the enterpriser's income proceeds. A cotton spinner who uses the small wheel, as we see in many places in Normandy, scarcely deserves the name of enterpriser, whilst a large wholesale cotton manufactory is an enterprise of magnitude.
But the most important effect, although perhaps the least perceptible, which proceeds from the employment of machinery in general, of all other expeditious processes, is the increase of income which results from them to the consumers of their productions; an increase which costs nothing to any body, and of which it is worth while to give some detail.
If wheat were pounded in our days, as it was by the ancients, by the strength of the arm, I apprehend it would take twenty men to grind as much flour as one pair of stones in a mill can grind. These twenty men, in the neighbourhood of Paris, being continually employed, would cost 40 francs per day, at 300 days' work in the year they would cost per year fr.. 12,000
The machine and the stones cost suppose 20,000 fr. a year's interest on which would be -- 1,000 No enterpriser would probably be found to undertake such an enterprise, unless it brought him in yearly about - 3,000 The cost, therefore, of the flour that may be obtained from a pair of stones in one year would, by this means, amount to about .... fr. 10,000. Instead of which a miller now a days can hire a windmill for - 2,000 He pays his man -- 1,000 I suppose he gains for his labor and abilities -- 3,000 The same quantity of flour can therefore be ground for -- fr. 6;000 instead of 16,000, which it would have cost if we still followed the custom of our ancestors.
The same population can be fed, for the mill does not diminish the quantity of flour ground: the profit gained in society serves to pay for fresh productions, for the moment the 6,000 francs cost of production are paid, a profit of 6,000 francs is gained; and society enjoys this essential advantage, that mankind who compose it, whatever be their means of existence or their income, whether they live upon their labor, their capital, or their stock of land, reduce the portion of their expences destined to the payment of the cost of the flour in the proportion of sixteen to six or five-eighths. He who spent eight francs annually for his food would only spend three, which is exactly equal to an increase of income; for the five francs saved in this article can be employed in any other. If an equal improvement had taken place in all the productions in which we employ our incomes, they would really have been increased five eighth; and a man who gains three thousand francs, either in making flour, or in any other manner, would actually be as rich as if he had eight thousand and the improved method had not been discovered.
M. Sismondi has not .aid attention to this, when he wrote the following passage.
"Every time," he says,(37) "that the demand for consumption exceeds the means of the population to produce, every new discovery in mechanism or the arts is a benefit to society, because it gives the means of satisfying existing wants. Every time, on the contrary, that the production is fully adequate to the consumption every such discovery is a calamity, because it only adds to the enjoyment of consumers by satisfying them at a cheaper rate, whilst it suppresses the life itself of the producers. It would be odious to weigh the advantage of a cheap rate against that of existence.."
M. Sismondi, as appears, does not sufficiently appreciate the advantage of a cheap rate, and does not feel that by giving less for one article we can afford to give more for another, beginning with the most indispensable.
Up to this time no inconvenience is perceptible in the invention of flour mills, but the advantage of a diminution in the price of the production is very visible, which is equal to an increase of income to all those who use them.
But this increase of income procured for the consumers, is taken away from the nineteen unfortunate men whom the mill has thrown out of work. This I deny. The nineteen laborers have their industrious faculties left, with the same strength, the same capacities, the same means of labor as before. The mill does not compel them to remain unemployed, but only to seek another occupation. Many circumstances occasion a similar inconvenience without carrying with them the same remedy.
A fashion out of use, a war which blocks up a vent, a commerce which changes its course, do a hundred times more injury to the laboring classes than any new invention whatever.
I suppose that it will be said and insisted on, that the nineteen vacant laborers, supposing even they immediately find capitals to set them to work at a fresh business, could not sell their production because the mass of production of society would be thereby increased, but not the amount of their income. It has then been forgotten that the incomes of society are increased by the very fact of the production of the nineteen new laborers. The salary for their labor is the income which enables them to acquire the produce of their labor, or to exchange it against any other equivalent production: this is sufficiently established in my preceding letters.
Nothing therefore remains, strictly speaking, but the inconvenience of being obliged to change the occupation. Now the progress which is made in one kind in particular, is beneficial to industry in general. The increase of income, which results to society from a saving in expences, is carried towards other articles. A single occupation is interdicted to nineteen men who, till then, pounded grain, and a hundred fresh occupations, or a hundred extensions of old occupations, have been opened to them. I desire no other proof of this than the increase which has taken place in the labor and population, in every place where the arts have been improved. The constant habit we are in of seeing the productions of new arts causes us to disregard them, but how would they strike our ancestors, if they could again come amongst us! Let us picture to ourselves for a moment some of the most enlightened amongst them, such as Pliny or Archimedes, coming to walk round one of our modern cities; they would fancy themselves surrounded by miracles. The abundance of our crystals and glasses, the great quantity of our large mirrors, our docks, watches, embroidery, iron bridges, warlike instruments, and ships, would astonish them beyond all conception. And if they were to go into our work-shops, what a multiplicity of occupations would they see of which they could not have the smallest conception. Would they even believe that thirty thousand men were nightly employed in Europe in printing newspapers, which are read every morning over the breakfast-table whilst taking tea, coffee, chocolate, or other food, quite as new to them as the papers themselves? Do not let us doubt, Sir, that if the arts still improve, as I flatter myself they will, that is, that they will produce more at less expence, fresh millions of men in the course of a few ages will produce objects, which would excite in our minds, could we see them, a surprise equal to that which the great Archimedes and Pliny would experience could they revisit us. Let us take care, we who scribble in search of truth, if our writings descend to posterity, that the apprehension with which those improvements inspire us (but which they will then have far surpassed) do not appear ridiculous. And as to the workmen of your country, at once so able and so wretched, our descendants may well look upon them as men who were compelled to get their living by dancing on the rope, with a weight attached to their feet. They will read in history, that in order that these men might continue their dance, some fresh plan was daily suggested to them, indeed every plan except the very one which would have been efficacious, viz. that of taking off the weight: then our descendants after having derided us might very well conclude the whole by pitying us.
I have said that a useful improvement may be attended with temporary inconvenience; fortunately those inconveniences which are occasioned by expeditious processes, are mitigated by some circumstances which have been already noticed, and by others of which no mention has been made. It has been said (and you yourself, Sir, look upon this circumstance as capable of over balancing the inconvenience) that the low price which results from an economical process favors the consumption of the article to so great a degree, that the same production employs more people than before; as has been remarked in spinning and weaving cotton. I shall add that, as machinery and expeditious means increase, it will be more difficult to discover fresh ones, particularly in an established art in which workmen are already initiated. The most simple machines appeared first, afterwards came the more complicated: they cost more to erect, and require more workmen to manoeuvre them, which partly recompenses that class for the occupation they have lost in the adoption of the new process. The complexity and costliness of a machine are obstacles to its too prompt adoption.. The cloth shearing machine by means of a turning motion, cost in the origin from 25 to 30 thousand francs.. Many manufacturers cannot in the first instance lay out such a sum, others consider and reconsider before they buy it, and await for a decided proof of its success. This tardiness in the introduction of new machines nearly prevents all the inconveniences attending them.
In fact, I confess to you, that in practice I have always seen new machines occasion more fear of harm, than harm itself. As to the good, it is sure and lasting.
M. de Sismondi opposes a fact that occurred, in which a hundred thousand stocking-knitters with their needles, and a thousand workmen provided with frames, each manufactured ten thousand pair of stockings. The result was, that in the latter case the consumers of stockings only saved 50 centimes per pair, and still a manufactory which used to employ a hundred thousand work-people, now only employed twelve hundred. But he only comes to this conclusion by suppositions which are not admissible.
To prove that consumers obtained the stockings only 50 centimes less, he supposes that the cost of production would be, in the first case, as follows:
10 millions, for the purchase of the material.
40 millions, wages to a hundred thousand work-people, at 400 francs each.
Total 50 millions, 40 of which paid to the work-people.
And in the second ease, he supposes the cost as follows:
10 millions, for the material.
30 millions, for interest of fixed capital and enterpriser's profits.
2 millions, for interest of circulating capital.
2 millions, for repairs and new machines.
1 million, wages of 1200 workmen.
Total 45 millions, of which 1 is paid to the workmen instead of 40.
Now I see that this item of 30 millions for interest of fixed capital, and enterpriser's profit, taken on the supposition of an enterprise capable of employing twelve hundred work-people, and of yielding 15 per cent on their capitals, supposes a capital of two hundred millions, a supposition truly preposterous.
One workman cannot work at two frames at once, a thousand workmen would therefore require a thousand frames to be employed. A good stocking-frame costs 600 francs, consequently the thousand would cost six hundred thousand francs; add to this capital, a like capital for the other utensils, work-shops, etc. still we should only have occasion for a. capital of twelve hundred thousand francs. We admit that the interest and the enterpriser's profit on the capital would be 15 per cent, which is very moderate, for a current business which produced more would so on by competition be brought to this rate. Admitting this, we shall find for the interest and the enterpriser's profit, 180 thousand francs, instead of 30 millions!
The same observation applies to the 2 millions for expences of keeping and repairing the machines; for if, instead of repairing the frames, new ones were bought yearly, still they would only cost 600 thousand francs.
Nor would the circulating capital cost 2 millions, for in Mr. Sismondi's hypothesis, of what does it consist? Of the raw material, which he quotes at 10 millions, and wages, which he calls 1 million, together 11 millions, the interest of which, at 5 per cent, is 550 thousand francs. But as in this business the production may be completed and sold within 6 months, the capital paid for if the author has quoted the capital for the machines cost each time 275 thousand francs, instead of 2 millions.
All these expences together still only make 12,055,000 francs, instead of 50 millions, which stockings knit with the needle would cost, according to M. Sismondi. I am far from thinking that the saving could be so great, for if the author has quoted the capital for the machines too high, he has attributed too great a facility to them, in supposing that by their means twelve hundred workmen could do as much as a hundred thousand; but I say that if the saving in this production were so great, the low price of stockings or any other article of that nature would so favor the consumption, that instead of seeing the hundred thousand work-people, as is supposed, employed, we should probably see the number increase to two hundred thousand.
And if the consumption of this article in particular, .did not admit this excessive multiplication of the same production, the demand would increase in respect to many others; for observe, that after the introduction of machinery, the same revenue is still found in society, that is, the same number of workmen, the same amount .of capital, and the same portion of land. Now if, instead of devoting out of this mass of revenue 50 millions yearly for stockings, it is only necessary, in consequence of the frames, to employ 12, the 38 millions remaining may be applied to other consumptions, if not to the extension of this.
This is what principles teach, and experience confirms. The misery suffered by the population of England, and which M. Sismondi deplores with a truly philanthropic feeling, arises from other causes, principally from the poor laws, and, as I have hinted, from a weight of taxation which makes production too expensive; so much so, that when the articles are finished, a great part of the consumers do not get sufficient to obtain them, at the price that is obliged to be asked for them.
36. "When a machine is invented, which by saving manual labor brings the commodities to a lower price the ordinary effect is an increase in the demand, so that the total value of the quantity of commodities thus made far exceeds the total former value of the same commodities; whereby the number of workmen employed in the manufacture is increased rather than diminished." Malthus's Principles of Political Economy, page 402.
"But we must admit that the principal advantage arising from the substitution of machines for manual labor. depends upon the extent of the sale. and the encouragement which results from it for consumption, and that without this the advantage of this substitution is all but lost." Page 412.
37. New Principles of Political Economy, vol. 2, page 317.