Ricardo says,
“In an improving state of society, the net produce of land is always diminishing in proportion to its gross produce” (l. c., p. 198).” (p 465)
By an improving society, Ricardo means one where social productivity is rising, technological developments are being introduced, the consequence of which is that variable capital falls relative to constant capital. The rate of profit falls, and along with it rent decreases. Ricardo, however, like Smith, has no concept of constant capital, and views it only in terms of fixed capital. He also equates circulating capital only with labour, with the variable-capital laid out in wages. He says,
““In rich and powerful countries, where large capitals are invested in machinery, more distress will be experienced from a revulsion in trade, than in poorer countries where there is proportionally a much smaller amount of fixed, and a much larger amount of circulating capital, and where consequently more work is done by the labour of men. It is not so difficult to withdraw a circulating as a fixed capital, from any employment in which it may be engaged. It is often impossible to divert the machinery which may have been erected for one manufacture, to the purposes of another; but the clothing, the food, and the lodging of the labourer in one employment may be devoted to the support of the labourer in another; or the same labourer may receive the same food, clothing and lodging, whilst his employment is changed. This, however, is an evil to which a rich nation must submit; and it would not be more reasonable to complain of it, than it would be in a rich merchant to lament that his ship was exposed to the dangers of the sea, whilst his poor neighbour’s cottage was safe from all such hazard” (l. c., p. 311).” (p 465)
There is indeed here, in Ricardo's comment, a realisation of the way in which capitalism proper, industrial capitalism, and machine industry, turns what were previously, under petty commodity production, and handicraft manufacture, potential causes of crisis into the inevitability of crisis. Yet, as will be seen in the next chapter, Ricardo, himself resting upon Say's Law, continued to deny the possibility of general crises of overproduction. But, as Marx says, that is not altogether surprising, because Ricardo never saw the recurring crises of overproduction that occurred after 1825. The crises that Ricardo witnessed were all financial crises, arising within the banking system, and financial markets.
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