In the first case, Ricardo says, the country would become rich (more use values) and the value of the riches would rise.
“It would become rich by parsimony; by diminishing its expenditure on objects of luxury and enjoyment; and employing those savings in reproduction.” (p 536)
In the second case, Ricardo says, there may be no reduction in the labour used in producing luxuries etc., and no reduction in such consumption. Instead, the workers employed in productive activities simply produce more of that output, but its value remains the same. Moreover, as I set out earlier, this rise in productivity of labour could mean that more luxuries are also produced, or the same quantity of luxuries are produced with less value.
“Of these two modes of increasing wealth, the last must be preferred, since it produces the same effect without the privation and diminution of enjoyments, which can never fail to accompany the first mode. Capital is that part of the wealth of a country which is employed with a view to future production, and may be increased in the same manner as wealth. An additional capital will be equally efficacious in the production of future wealth, whether it be obtained from improvements in skill and machinery, or from using more revenue reproductively; for wealth always depends on the quantity of commodities produced, without any regard to the facility with which the instruments employed in production may have been procured. A certain quantity of clothes and provisions will maintain and employ the same number of men, and will therefore procure the same quantity of work to be done, whether they be produced by the labour of 100 or 200 men; but they will be of twice the value if 200 have been employed on their production” (l.c., pp. 327-28).” (p 536-7)
In one case, accumulation rises, because the commodities consumed unproductively become cheaper, so more profit is left over to be accumulated. In the other case, accumulation rises because the commodities that comprise the elements of capital become cheaper, so the rate of profit rises. In Marx's expanded formula of the circuit of capital, the rate of profit is expressed by the ratio of c/C, or m/M, where M represents the current money equivalent of the value of C.
“In this case, accumulation depends neither on a rising rate of profit, nor on a greater portion of revenue being converted into capital as a result of parsimony, nor on a smaller portion of the revenue being spent unproductively as a result of a reduction in the price of those commodities on which revenue is expended. It depends here on labour becoming more productive in the spheres of production which produce the elements of capital itself, thus lowering the price of the commodities which enter into the production process as raw materials, instruments etc.” (p 537)
The productivity of labour may rise because the amount of fixed capital rises relative to variable-capital. This does not even require that the technology improves. It only requires that machines of the existing type be rolled out in larger number. This has two effects. Firstly, the increased quantity of fixed capital means a greater value of wear and tear is transferred to production. Secondly, higher productivity means a greater value of output is produced, and this means also a greater value of materials in that output. Each machine introduced where none existed before, raises productivity, which has the effect of saving labour. That does not necessarily mean displacing actual workers, as Marx explained in Capital I, It only means that output can rise without employing the number of additional workers that previously would have been required. So, population may rise, and the number of machines employed may also rise. A greater absolute number of workers is employed, and so more labour means a greater mass of value is produced. But, the amount of labour employed falls relative to the volume of output produced.
“There is therefore a growth, not only of wealth, but of value, and a larger quantity of living labour is set in motion, although the labour has become more productive and the quantity of labour in proportion to the quantity of commodities produced, has decreased. Finally, variable and constant capital can grow in equal degree with the natural, annual increase in population while the productivity of labour remains the same. In this case, too, capital will accumulate in volume and in value. These last points are all disregarded by Ricardo.” (p 538)
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