In proportion as this machine were less durable, prices would be less affected by the fall of profit, and the rise of wages. If, for example, the machine would last only ten years, when profits were at 10 per cent.
| the goods should sell for | £3254 | ||
| when at | 5 per cent. | 2590 | |
| 4 per cent. | 2465 | ||
| 3 per cent. | 2344 | ||
for such are the sums requisite to place his profits on a par with others, and to replace his capital at the end of ten years; or, which is the same thing, such are the annuities which 20,000l. would purchase for ten years at those rates. If the machine would last only three years, when profits were 10 per cent.
| the price of the goods would be | £8042 | ||
| at | 5 per cent. | 7344 | |
| 4 per cent. | 7206 | ||
| 3 per cent. | 7070 | ||
If it would last only one year, when profits were 10 per cent.
| the goods would sell for | £22,000 | ||
| at | 5 per cent. | 21,000 | |
| 4 per cent. | 20,800 | ||
| 3 per cent. | 20,600 | ||
therefore when profits fell from 10 to 3 per cent. the goods, which were produced with equal capitals, would fall
| 68 per cent. if the machine would last | 100 years. |
| 28 per cent. if the machine would last | 10 years. |
| 13 per cent. if the machine would last | 3 years. |
| And little more than 6 per cent. if it would last only | 1 year. |
These results are of such importance to the science of political economy, yet accord so little with some of its received doctrines, which maintain that every rise in wages is necessarily transferred to the price of commodities, that it may not be superfluous to elucidate the subject still further.
A manufacturer of hats employs a hundred men at an annual expense of 50l. each, who produce him commodities of the value of 8000l. A machine calculated to last precisely a year, and to do equally well the same work as the 100 men, is offered to him for 5000l., the sum, exactly, that he is expending on wages. It will be a matter of indifference to the manufacturer, whether he purchase the machine, or continue to employ the men. Now if the wages of labour rise 10 per cent. and an additional capital of 500l. be consequently required to enable him to employ the same labour, whilst his commodities continue to sell for 8000l., he will no longer hesitate, but will at once purchase the machine, and will do the same annually, while wages continue above the original 5000l. But will he be able now to purchase the machine at the former price? will not its value be increased, in consequence of the rise of labour? It would be increased, if there were no stock employed in its construction, and no profits to be paid to the maker of it. If, for example, the machine were produced by 100 men working one year upon it with wages of 50l. each, and its price were 5000l., should those wages rise to 55l. its price would be 5500l.: but this cannot be the case; less than 100 men are employed, or it could not be sold for 5000l.; for out of the 5000l. must be paid the profits of the stock which employed the men. Suppose then that only eighty-five men were employed at an expense of 4250l. per annum, and that the 750l., which the sale of the machine would produce over and above the wages advanced to the men, constituted the profits of the engineer's stock. When wages rose 10 per cent., he would be obliged to employ an additional capital of 425l., and would therefore employ 4675l., instead of 4250l., on which capital he would only get a profit of 325l. if he continued to sell his machine for 5000l.; but this is precisely the case of all manufacturers and capitalists; the rise of wages affects them all. If therefore the maker of the machine should raise the price of his machine in consequence of a rise of wages, an unusual quantity of capital would be employed in the construction of such machines, till their price afforded only the usual profits. The manufacturer of hats, by the employment of the machine, if he sells his hats for 8000l., is precisely in the same situation as before; he employs no more capital, and obtains the same profits. The competition of trade would not long allow this; for as capital would flow to the most profitable employment, he would be obliged to lower the price of hats, till his profits had sunk to the general level. Thus then is the public benefited by machinery: these mute agents are always the produce of much less labour than that which they displace, even when they are of the same money value. Through their influence, an increase in the price of provisions which raises wages, will affect fewer persons: it will reach, as in the above instance, eighty-five men instead of a hundred; and the saving which is the consequence, shews itself in the reduced price of the commodity manufactured. Neither machines nor any other commodities are raised in price, but all commodities which are made by machines fall, and fall in proportion to their durability.
It appears, then, that in proportion to the quantity and the durability of the fixed capital employed in any kind of production, the relative prices of those commodities on which such capital is employed, will vary inversely as wages; they will fall as wages rise. It appears too that no commodities whatever are raised in absolute price, merely because wages rise; that they never rise unless additional labour be bestowed on them; but that all commodities in the production of which fixed capital enters, not only do not rise with a rise of wages, but absolutely fall; fall too as much as 68 per cent., with a rise of seven per cent. in wages, if fixed capital be exclusively employed, and be of the duration of 100 years.
The above statement, which asserts the compatibility of a rise of wages, with a fall of prices, has, I know, the disadvantage of novelty, and must trust to its own merits for advocates; whilst it has for its opponents, writers of distinguished and deserved reputation. It should however be carefully remembered, that in this whole argument I am supposing money to be of an invariable value; in other words, to be always the produce of the same quantity of unassisted labour. Money, however, is a variable commodity; and the rise of wages as well as of commodities, is frequently occasioned by a fall in the value of money. A rise of wages from this cause will indeed be invariably accompanied by a rise in the price of commodities: but in such cases, it will be found that labour and all commodities have not varied in regard to each other, and that the variation has been confined to money.