All capital itself is ultimately the product of labour,and thus,as Ricardo incidentally says,may be regarded as 'accumulated labour.'38This phrase sums up the doctrine which underlies his theory of value and indicates its connection with the theory of distribution.Ricardo had perceived that the supply and demand formula which would serve sufficiently in problems of exchange,or the fluctuations of market-price,could not be made to solve the more fundamental problem of distribution.We must look beneath the superficial phenomena and ask what is the nature of the structure itself:what is the driving force or the mainspring which works the whole mechanism.We seem,indeed,to be inquiring into the very origin of industrial organisation,the foundation of a sound doctrine comes from Adam Smith,Smith had said that in a primitive society the only rule would be that things should exchange in proportion to the labour of getting them,if it cost twice as much labour to kill a beaver as to kill a deer,one beaver would be worth two deer,in accepting this bit of what Smith's commentator,Dugald Stewart,39calls 'theoretical'or 'conjectural'history,Ricardo did not mean to state a historical fact.He was not thinking of actual Choctaws or Cherokees.The beaver was exchanged for the deer about the time when the primitive man signed the 'social contract.'He is a hypothetical person used for purposes of illustration and simplification.Ricardo is not really dealing with the question of origins;but he is not the less implying a theory of structure.
It did not matter that the 'social contract'was historically a figment;it would serve equally well to explain government.It did not matter that actual savages may have exchanged beavers and deer by the help of clubs instead of competition in the market.The industrial fabric is what would have been had it been thus built up.It can be constructed from base to summit by the application of his formula.As in the imaginary state of deer and beaver,we have a number of independent persons making their bargains upon this principle of the equivalence of labour;and that principle is supposed to be carried out so that the most remote processes of the industrial machinery can be analysed into results of this principle.This gives a sufficient clue to the whole labyrinth of modern industry,and there is no need of considering the extinct forms of social structure,which we know to have existed,and under which the whole system of distribution took place under entirely different conditions,40A great change has taken place since the time of the deer and beaver:the capitalist has been developed,and has become the motive power.The labourer's part is passive;and the 'value'is fixed by the bargaining between the proprietors of 'accumulated labour,'forced by competition to make equal profits,instead of being fixed by the equitable bargain between the two hunters exchanging the products of their individual labour.Essentially,however,the principle is the.same.In the last as in the first stage of society,things are exchanged in proportion to the labour necessary to produce them.Now it is plain enough that such a doctrine cannot lead to a complete solution of the problem of distribution.It would be a palpably inadequate account of historical processes which have determined the actual relation of classes.
The industrial mechanism has been developed as a part of the whole social evolution;and,however important the economic forces,they have been inextricably blended with all the other forces by which a society is built up.For the same reason,Ricardo's theorem would be inadequate 'sociologically,'or as a formula which would enable us to predict the future distribution of wealth.It omits essential factors in the process,and therefore supposes forces to act automatically and invariably which will in fact be profoundly modified in societies differently organised and composed of individuals differing in character.The very fundamental assumptions as to the elasticity of population,and the accumulation of capital as wages and profits fluctuate,are clearly not absolute truths.An increase of the capitalist's share,for example,at the expense of wages,may lead to the lowered efficiency of the labourer;and,instead of the compensating process supposed to result from the stimulus to accumulation,the actual result may be a general degeneration of the industry.Or,again,the capacity of labourers to combine both depends and reacts upon their intelligence and moral character,and will profoundly modify the results of the general competition.41Such remarks,now familiar enough,are enough to suggest that a full explanation of the economic phenomena would require reference to considerations which lie beyond the proper sphere of the economist.Yet the economist may urge that he is making a fair and perhaps necessary abstraction.He may consider the forces to be constant,although he may be fully aware that the assumption requires to be corrected when his formula are applied to facts.He may consider what is the play at any given time of the operations of the market,though the market organisation is itself dependent upon the larger organisation of which it is a product.He does not profits to deal in 'sociology,'but 'pure political economy.'In that more limited sphere he may accept Ricardo's postulates.The rate of wages is fixed at any given moment by the 'labour market.'That is the immediate organ through which the adjustment is effected.