[6. Ricardo’s Thesis on the Constant Rise in Corn Prices. Table of Annual Average Prices of Corn from 1641 to 1859]
Another question remains for Ricardo. As population expands, the demand for agricultural products expands. For Ricardo, this expansion of demand leads to rising prices and it is only in response to these higher prices that additional supply is generated. But, there seems to be a difference between agriculture and industry. In industry, as demand rises, and supply rises along with it, the new supply is generally a lower value. In terms of orthodox economics, the marginal cost of production is falling. There are a number of reasons for this. Firstly, the fact that production takes place on a larger scale brings with it all of the advantages of the economies of scale. As Marx sets out, in Capital I and III, beyond a minimum scale of operations, capital is extremely elastic in expanding output with little additional cost. Existing fixed capital, in the shape of buildings and equipment, can usually be used more intensively and extensively without additional investment, and the increase in wear and tear is usually not proportional to the increase in usage and output.
The share of fixed capital cost per unit of output can, therefore, decline significantly as output is ramped up. Labour power can also often be used more extensively and intensively without a proportionate rise in costs, even where overtime payments are made. The amount laid out for constant capital will rise, but again the cost per unit of output is likely to remain constant or even fall. Moreover, the rise in output may be achieved alongside a rise in the rate of turnover of capital, so that the annual rate of profit rises. Firms may take advantage of this higher annual rate of profit, to expand their market share further, by shaving profit margins, so as to continue producing at very high volumes. But, there is another reason that this new industrial production is likely to be lower cost, and so reduce the value of such commodities below their previous level. It is that even where the new fixed capital, introduced, is technologically identical to the existing fixed capital, all of the lessons learned in the production of that equipment will have been absorbed and resulted in the value of such equipment being reduced. In addition, however, technological progress, even in times when advances are not rapid, always results in some improvements in such equipment.
The value of any new fixed capital, introduced, will inevitably be lower than the existing fixed capital. As Marx pointed out earlier, capitalists do not introduce new machines and equipment that are less efficient than the ones they already have. But consequently this new lower value fixed capital brings about a moral devaluation of all the existing fixed capital, so that the value of wear and tear, as a component of the value of commodities, falls. But, Ricardo believes that this is not the case with agriculture. He notes that the increased demand causes prices to rise, which then causes supply to rise, but that the prices remain high. The reason, he believes, is because it shows that the new production must be higher cost, than the old production – rising marginal cost.
“But in industry, this rise in price ceases as soon as demand has become effective and brought about an increased supply of commodities. The product now falls to the old, or rather below the old, level of value. But in agriculture this additional product is thrown on to the market neither at the same price nor at a 1ower price. It costs more and effects a constant rise in market-prices and along with that, a raising of rent. How is this to be explained if not by the fact that ever less fertile types of land are being used, that ever more labour is required in order to produce the same product, that agriculture becomes progressively more sterile?” (p 133)
Marx points out that, between 1797 and 1815, there was a rapid increase in population, and during this time, agricultural prices rose sharply. Ricardo bases his analysis, and application of Anderson's theory of rent on this period. Part of the explanation of the rise in prices was the cutting off of external supplies of grain, due to the Napoleonic Wars. But, it was because of the removal of this supply, Ricardo argues, that resort to the less fertile lands became necessary. It is to keep prices at these high levels, and to maintain the rents that result from them, that the Corn Laws were introduced. During this period, not only does the rental rise, i.e. the rent per acre, but also the rate of rent. In other words, it cannot be explained by the fact that just more land is cultivated, or that land is cultivated more intensively.
Some explanation of rising food prices could be put down to inflation, or a depreciation of the currency. Ricardo also based himself on Hume's theory of money and interest, to analyse the depreciation of the currency during this period. As Marx says, inflation was highest in 1811 and 1812. But, such inflation applies to industrial prices as well as agricultural prices, and the fact remained that agricultural prices rose relative to industrial prices.
“It cannot be explained by depreciation because although this might well explain why, with greater productivity in industry, industrial products fell, hence why the relative price of agricultural products rose, it would not explain why in addition to this relative rise, the prices of agricultural products were continuously rising absolutely. Similarly, it cannot be explained as a consequence of the fall in the rate of profit. This would never explain a change in prices, but only a change in the distribution of value or of price between landlord, manufacturer and worker. (p 134)
Marx then provides a series of tables so as to estimate average wheat prices over successive 50 year periods starting in 1641, and ending in 1859.
I
If we take the period 1650 to 1699 then (yearly) average price for these 50 years is 44s. 21/5d.
Average
Wheat Prices
Yearly
average price
|
Highest
price
|
Lowest
price
|
|
1641-1649
|
60s.
52/3d.
|
[75s.
6d. (1645)]
|
[42
s. 8d. (1646)]
|
1650-1659
|
45s.
89/10d.
|
63s.
1d. (1650)
|
23s.
1d. (1651)
|
1660-1669
|
44s.
9d.
|
65s.
9d. (1662)
|
32s.
0d. (1666 & 1667)
|
1670-1679
|
44s.
89/10d.
|
61s.
0d. (1674)
|
33s.
0d. (1676)
|
1680-1689
|
35s.
78/10d.
|
41s.
5d. (1681)
|
22s.
4d. (1687)
|
1690-1699
|
50s.
4/10d.
|
63s.
1d. (1695)
|
30s.
2d. (1691)
|
If we take the period 1650 to 1699 then (yearly) average price for these 50 years is 44s. 21/5d.
During the period (9 years) from 1641 to 1649, the biggest yearly average price is 75s. 1d. for 1649, year of the revolution, then 71s. 1d. for 1649, 65s. 5d. for 1847 and the lowest price, 42s. 8d. for 1646.
II
Yearly
average price
|
The
highest
|
and
lowest
|
|
prices
in each decennial period
|
|||
1700-1709
|
35s.
1/10d.
|
69s.
9d. (1709)
|
25s.
4d. (1707)
|
1710-1719
|
43s.
67/10d.
|
69s.
4d. (1710)
|
31s.
1d. (1719)
|
1720-1729
|
37s.
37/10d.
|
48s.
5d. (1728)
|
30s.
10d. (1723)
|
1730-1739
|
31s.
55/10d.
|
58s.
2d. (1735)
|
23s.
8d. (1732)
|
1740-1749
|
31s.
79/10d.
|
45s.
1d. (1740)
|
22s.
1d. (1743 & 1744)
|
Average price (yearly) for the 50 years [from] 1700 to 1749: 35s. 920/50 d.
III
III
Yearly
average price
|
The
highest
|
and
lowest
|
|
prices
in each decennial period
|
|||
1750-1759
|
36s.
45/10d.
|
53s.
49d. (1757)
|
28s.10d.
(1750)
|
1760-1769
|
40s.
49/10d.
|
53s.
9d. (1768)
|
26s.
9d. (1761)
|
1770-1779
|
45s.
32/10d.
|
52s.
8d. (1744)
|
33s.
8d. (1779)
|
1780-1789
|
46s.
92/10d.
|
52s.
8d. (1783)
|
35s.
8d. (1780)
|
1790-1799
|
57s.
65/10d.
|
78s.
7d. (1796)
|
43s.
0d. (1792)
|
Yearly average for the 50 years [from] 1760 to 1799: 45s. 313/50 d.
IV
IV
Yearly
average price
|
The
highest
|
and
lowest
|
|
yearly
average prices in each decennial period
|
|||
1800-1809
|
84s.
85/10d.
|
119s.
6d. (1801)
113s. 10d. (1800) |
58s.
10d. (1803)
|
1810-1819
|
91s.
48/10d.
|
126s.
6d. (1812)
109s. 9d. (1813) 106s. 5d. (1810) |
65s.
7d. (1815)
74s. 4d. (1814) 74s. 6d. (1819) |
1820-1829
|
58s.
97/10d.
|
68s.
6d. (1825)
|
44s.
7d. (1822)
|
1830-1839
|
56s.
85/10d.
|
66s.
4d. (1831)
|
39s.
4d. (1835)
|
1840-1849
|
55s.
114/10d.
|
69s.
5d. (1847)
|
44s.
6d. (1849)
|
1850-1859
|
53s.
47/10d.
|
74s.
9d. (1855)
|
40s.
4d.(1850)
|
Yearly average for the 50 years [from] 1800 to 1849: 69s. 6 9/50 d.
Yearly average for the 60 years [from] 1800 to 1859: 66s. 914/15d.
Hence
yearly average
1640-1649
|
60s
52/3d.
|
1650-1699
|
44s.
21/5d.
|
1700-1749
|
35s.
929/50d.
|
1750-1799
|
45s.
313/50d.
|
1800-1849
|
69s.
69/50d.
|
1850-1859
|
53s.
47/10d
|
The tables show that over these different periods, despite constantly rising population, and so demand for agricultural products, there is no general rise in average wheat prices, with it falling in the 50 years (1650 – 1699, and again 1700 – 1749, before rising again in 1750 – 1799, and 1800 – 1849, before falling in the 10 year period between 1850 – 1859.) Marx analyses the meaning of the changes in prices indicated in the tables in subsequent sections, and thereby answers the question posed for Ricardo.
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