Ricardo continues,
“The rise in the price of necessaries and in the wages of labour is however limited; for as soon as wages should be equal … to £720, the whole receipts of the farmer, there must be an end of accumulation; for no capital can then yield any profit whatever, and no additional labour can be demanded, and consequently population will have reached its highest point. Long indeed before this period the very low rate of profits will have arrested all accumulation, and almost the whole produce of the country, after paying the labourers, will be the property of the owners of land and the receivers of tithes and taxes” (l.c., pp. 120-21).” (p 544)
In a mocking tone, Marx comments of this catastrophist conclusion of Ricardo,
“This, as Ricardo sees it, is the bourgeois “Twilight of the Gods”—the Day of Judgement.” (p 544)
As Marx points out elsewhere, this doom laden view of Ricardo is itself a reflection of the fact that he is unable to acknowledge the fact that capitalism is merely a stage in social development. As Marx pointed out, early in the chapter, as against Smith, there are no permanent crises, but the regular crises are themselves an indication that capital itself forms, periodically, a barrier to its own expansion. The crises are the means by which the contradictions which create that constraint are reconciled, and a further upward trajectory is resumed, and not as Ricardo and other catastrophists, including those of today, believe, an indication of some inevitable trajectory towards some ultimate crisis of capitalism, representing its denouement.
So, today, for example, we see explanations of a low rate of investment and growth, of some kind of secular stagnation, or long depression explained in similar terms to that put forward by Ricardo, here, where he writes,
““Long before this state of prices was become permanent, there would be no motive for accumulation; for no one accumulates but with a view to make his accumulation productive, and […] consequently such a state of prices never could take place. The farmer and manufacturer can no more live without profit, than the labourer without wages. Their motive for accumulation will diminish with every diminution of profit, and will cease altogether when their profits are so low as not to afford them an adequate compensation for their trouble, and the risk which they must necessarily encounter in employing their capital productively” (l.c., p. 123).” (p 544)
But, this is clearly wrong, for all the reasons Marx has already set out, as against Ricardo, and others. In other words, yes, Smith was absolutely right that during some periods capital accumulates faster than the growth of the supply of labour-power; yes, the consequence of this is is that wages rise, even beyond the value of labour-power, but, Smith is wrong to think this is a constantly developing process. The very fact that wages rise, and start to squeeze profits, provides an incentive for capital to invest! As Marx puts it, the time when capital invests in all of that new technology is not when labour-power is plentiful, and profits are high, but when labour-power is relatively scarce, wages are high, and profits are being squeezed.
And so, Ricardo and all those modern day economists who follow him in arguing that investment is driven by profits are wrong. A high rate and mass of profit can and does drive accumulation, particularly in those spheres where the rate of profit is higher than the average. But, this accumulation is extensive in nature. In other words, if labour is plentiful, and the rate and mass of profit is high, there is no reason for capital to spend money unnecessarily on research and development, or introducing new technologies, that may themselves be unproven. As Marx says, in Capital I, larger firms may allow smaller, newer firms to test out such new technologies, and iron out the wrinkles before they invest in them wholesale themselves. Instead, it simply opens up new additional factories and floorspace, buys in more of the tried and tested machines it already has, orders in additional materials to be processed, and hires additional workers.
It is this very process that ultimately uses up existing labour supplies, as the growth in productivity slows down, as a result of merely extending the existing labour processes. But, this process also implies higher rates of growth, because the additional workers means additional wages, and aggregate demand, as the demand for wage goods rises. And, as wages themselves rise, even as employment growth slows, as full employment is approached, these higher wages also increase the demand for wage goods, and even for those luxury goods that formerly were the preserve of the rich.
And so, Ricardo is also wrong, here, because this squeeze on profits is what then promotes investment in research and development, in the production of new labour-saving technologies that form the next phase of intensive accumulation, where these new technologies and techniques replace labour, creating a relative surplus population, rising unemployment, and slower growth, as wages fall, and employment falls, resulting in a relative decline in the demand for wage goods and so on.
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