Marx quotes Ricardo's polemic against Smith, in relation to the necessity of the external market. Ricardo writes that Smith was right to note that the demand for food is limited by the human stomach, ““‘but the desire of the conveniences and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary.”
“Nature” (Ricardo continues) “then has necessarily limited the amount of capital which can at any […]time be profitably engaged in agriculture,”.
Smith was wrong, Marx notes, because he fails to account for the luxury products of agriculture, but Ricardo is also wrong, in his comments about the limitation of capital investment in agriculture. Some countries, Marx notes, specialise in capital investment in agriculture, the products of which they export into the world market, but even within the internal market there are extensive opportunities for capital investment in agriculture not to mention the continued requirement of investment for the expansion of production of raw materials.
In so far as other products are concerned, Ricardo says,
“To procure these gratifications in the greatest abundance is the object in view, and it is only because foreign trade, or the carrying trade, will accomplish it better, that men engage in them in preference to manufacturing the commodities required, or a substitute for them, at home. If, however, from peculiar circumstances, we were precluded from engaging capital in foreign trade, or in the carrying trade, we should, though with less advantage, employ it at home; and while there is no limit to the desire of ‘conveniences, ornaments of building, dress, equipage, and household furniture,’ there can be no limit to the capital that may be employed in procuring them, except that which bounds our power to maintain the workmen who are to produce them.” (p 526)
Setting out Smith's claim that capital is invested abroad, or in the carrying trade, because it would be unable to be used productively in the home market, Ricardo continues,
““But could not this portion of the productive labour of Great Britain be employed in preparing some other sort of goods, with which something more in demand at home might be purchased? And if it could not, might we not employ this productive labour, though with less advantage, in making those goods in demand at home, or at least some substitute for them? If we wanted velvets, might we not attempt to make velvets; and if we could not succeed, might we not make more cloth, or some other object desirable to us?” (p 526)
The only downside of this investment in the home market, for Ricardo, is that there is a comparative advantage in importing these commodities, where they are produced under more favourable conditions. But, that only leads to the conclusion that the capital be invested in the production of commodities that can be exported in exchange for these imports.
““We manufacture commodities, and with them buy goods abroad, because we can obtain a greater quantity” [the qualitative difference does not exist!] “than we could make at home. Deprive us of this trade, and we immediately manufacture again for ourselves.” (p 526)
The poor, Ricardo continues, compete to produce the desires of the rich, and not only does the quantity of labourers increase, but the productivity of each rises too, so that the quantity and variety of material used in production increases. There is an echo of Ricardo's words here in Marx's description of The Civilising Mission of Capital, described in The Grundrisse.
“Hence arises a demand for every sort of material which human invention can employ, either usefully or ornamentally, in building, dress, equipage, or household furniture; for the fossils and minerals contained in the bowels of the earth, the precious metals, and the precious stones.’
“It follows then from these admissions, that there is no limit to demand— no limit to the employment of capital while it yields any profit, and that however abundant capital may become, there is no other adequate reason for a fall of profit but a rise of wages, and further it may be added, that the only adequate and permanent cause for the rise of wages is the increasing difficulty of providing food and necessaries for the increasing number of workmen” (l.c., pp. 344-48).” (p 527)
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