The Comparative Value Of Gold, Corn, And Labour, In Rich And In Poor Countries
Table of Contents
Gold and silver, like all other commodities naturally seek the market where the best price is given for them; and the best price is commonly given for every thing in the country which can best afford it. Labour, is the ultimate price which is paid for every thing; and in countries where labour is equally well rewarded, the money price of labour will be in proportion to that of the subsistence of the labourer. But gold and silver will naturally exchange for a greater quantity of subsistence in a rich than in a poor country; in a country which abounds with subsistence, than in one which is but indifferently supplied with it.
But corn is a commodity, as well as gold, silver, and other things.
If all commodities, therefore, have a high exchangeable value in a rich country, corn must not be excepted; and hence we might correctly say, that corn exchanged for a great deal of money, because it was dear, and that money too exchanged for a great deal of corn, because that also was dear; which is to assert that corn is dear and cheap at the same time.
The best established point in political economy that the difficulty of progressively providing food prevents population growth both in a rich and a poor country.
That difficulty must necessarily raise the relative price of food, and give encouragement to its importation. How then can money, or gold and silver, exchange for more corn in rich, than in poor countries? It is only in rich countries, where corn is dear, that landholders induce the legislature to prohibit the importation of corn.
Who ever heard of a law to prevent the importation of raw produce in America or Poland?—Nature has effectually precluded its importation by the comparative facility of its production in those countries.
How then can it be true, that “if you except corn, and such other vegetables, as are raised altogether by human industry, all other sorts of rude produce—cattle, poultry, game of all kinds, the useful fossils and minerals of the earth, &c., naturally grow dearer as the society advances.”
Why should corn and vegetables alone be excepted?
Smith’s error throughout his whole work, lies in supposing that the value of corn is constant; that though the value of all other things may, the value of corn never can be raised. Corn, according to him, is always of the same value, because it will always feed the same number of people. In the same manner it might be said, that cloth is always of the same value, because it will always make the same number of coats. What can value have to do with the power of feeding and clothing?
Corn, like every other commodity, has in every country its natural price, viz. that price which is necessary to its production, and without which it could not be cultivated: it is this price which governs its market price, and which determines the expediency of ex530porting it to foreign countries. If the importation of corn were prohibited in England, its natural price might rise to 6l. per quarter in England, whilst it was only at half that price in France.
If at this time, the prohibition of importation were removed, corn would fall in the English market, not to a price between 6l. and 3l., but ultimately and permanently to the natural price of France, the price at which it could be furnished to the English market, and afford the usual and ordinary profits of stock in France; and it would remain at this price, whether England consumed a hundred thousand, or a million of quarters.
If the demand of England were for the latter quantity, it is probable that, owing to the necessity under which France would be, of having recourse to land of a worse quality, to furnish this large supply, the natural price would rise in France; and this would of course affect also the price of corn in England. All that I contend for is, that it is the natural price of commodities in the exporting country, which ultimately regulates the prices at which they shall be sold, if they are not the objects of monopoly, in the importing country.
Smith has so ably supported the doctrine of the natural price of commodities ultimately regulating their market price.
But he has supposes that the market price would not be regulated either by the natural price of the exporting or of the importing country.
The price of corn will rise to the price of a famine in the Netherlands or Genoa when they reduce their wealth or territory while keeping the same population size and corn imports.
I think that that the very reverse would take place.
The reduced purchasing power of the Dutch or Genoese might depress the price of corn for a time below its natural price in the exporting and importing countries.
But it is impossible that it could ever raise it above that natural price.
Only the increasing opulence of the Dutch or Genoese can you increase the demand, and raise the price of corn above its former price.
This would happen only for a very limited time unless new difficulties arise in obtaining the supply.
When necessaries are lacking, we must part with superfluities which would then sink in times of poverty and distress just as superfluities rise during opulence and prosperity. It is otherwise with necessaries. Their real price, the quantity of labour which they can purchase or command, rises in times of poverty and distress, and sinks in times of opulence and prosperity, which are always times of great abundance, for they could not otherwise be times of opulence and prosperity. Corn is a necessary, silver is only a superfluity."
I think these luxuries and necessities are not connected with each other.
I do not believe that corn would sell at a higher money price, that it would exchange for more silver.
It might be true, if corn were at the same time scarce, if the usual supply had not been furnished. But in this case it is abundant, it is not pretended that a less quantity than usual is imported, or that more is required.
To purchase corn, the Dutch or Genoese want money, and to obtain this money, they are obliged to sell their superfluities. It is the market value and price of these superfluities which falls, and money appears to rise as compared with them.
But this will not tend to increase the demand for corn, nor to lower the value of money, the only two causes which can raise the price of corn. Money, from a want of credit, and from other causes, may be in great demand, and consequently dear, comparatively with corn; but on no just principle can it be maintained, that under such circumstances money would be cheap, and therefore, that the price of corn would rise.
When we speak of the high or low value of gold, silver, or any other commodity in dif534ferent countries, we should always mention some medium in which we are estimating them, or no idea can be attached to the proposition. Thus, when gold is said to be dearer in England than in Spain, if no commodity is mentioned, what notion does the assertion convey? If corn, olives, oil, wine, and wool, be at a cheaper price in Spain than in England; estimated in those commodities, gold is dearer in Spain. If again, hardware, sugar, cloth, &c. be at a lower price in England than in Spain, then, estimated in those commodities, gold is dearer in England. Thus gold appears dearer or cheaper in Spain, as the fancy of the observer may fix on the medium by which he estimates its value. Adam Smith, having stamped corn and labour as an universal measure of value, would naturally estimate the comparative value of gold by the quantity of those two objects for which it would exchange: and, accordingly, when he speaks of the comparative value of gold in two countries, I understand him to mean its value estimated in corn and labour.
Estimated in corn, gold may be of very different value in 2 countries.
I have shown that it will be low in rich countries, and high in poor countries.
Smith thinks differently: the value of gold estimated in corn is highest in rich countries.
But either way, gold will not necessarily be lower in those countries which are in possession of the mines, though this is a proposition maintained by Adam Smith.
Suppose England to be possessed of the mines, and Adam Smith’s opinion, that gold is of the greatest value in rich countries, to be correct: although gold would naturally flow from England to all other countries in exchange for their goods, it would not follow that gold was necessarily lower in England, as compared with corn and labour, than in those countries.
In another place, however, Adam Smith speaks of the precious metals being necessarily lower in Spain and Portugal, than in other parts of Europe, because those countries happen to be almost the exclusive possessors of the mines which produce them.
“Poland, where the feudal system still continues to take place at this day as beggarly a country as it was before the discovery of America. The money price of corn, however, has risen; the real value of the precious metals has fallen in Poland, in the same manner as in other parts of Europe.
Their quantity, therefore, must have increased there as in other places, and nearly in the same proportion to the annual produce of the land and labour. This increase of the quantity of those metals, however, has not, it seems, increased that annual produce, has neither improved the manufactures and agriculture of the country, nor mended the circumstances of its inhabitants.
Spain and Portugal possess the mines. After Poland, they are the 2 poorest countries in Europe. The value of the precious metals, however, must be lower in Spain and Portugal than in any other parts of Europe, loaded, not only with a freight and insurance, but with the expense of smuggling, their exportation being either prohibited, or subjected to a duty.
In proportion to the annual produce of the land and labour, therefore, their quantity must be greater in those countries than in any other part of Europe: those countries, however, are poorer than the greater part of Europe.
Though the feudal system has been abolished in Spain and Portugal, it has not been succeeded by a much better.”
Smith’s argument appears to me to be this:—Gold, when estimated in corn, is cheaper in Spain than in other countries, and the proof of this is, not that corn is given by other countries to Spain for gold, but that cloth, sugar, hardware, are by those countries given in exchange for that metal.