5。Wehaveconsidered，ontheonehand，themannerinwhich
thedistributionoftheproduceintorent，profits，andwages，is
affectedbytheordinaryincreaseofpopulationandcapital，and
ontheother，howitisaffectedbyimprovementsinproduction，
andmoreespeciallyinagriculture。Wehavefoundthattheformer
causelowersprofits，andraisesrentandthecostoflabour:
whilethetendencyofagriculturalimprovementsistodiminish
rent;andallimprovementswhichcheapenanyarticleofthe
labourer’sconsumption，tendtodiminishthecostoflabourand
toraiseprofits。Thetendencyofeachcauseinitsseparate
statebeingthusascertained，itiseasytodeterminethe
tendencyoftheactualcourseofthings，inwhichthetwo
movementsaregoingonsimultaneously，capitalandpopulation
increasingwithtolerablesteadiness，whileimprovementsin
agriculturearemadefromtimetotime，andtheknowledgeand
practiceofimprovedmethodsbecomediffusedgraduallythrough
thecommunity。
Thehabitsandrequirementsofthelabouringclassesbeing
given（whichdeterminetheirrealwages），rents，profits，and
moneywagesatanygiventime，aretheresultofthecomposition
oftheserivalforces。Ifduringanyperiodagricultural
improvementadvancesfasterthanpopulation，rentandmoneywages
duringthatperiodwilltenddownward，andprofitsupward。If
populationadvancesmorerapidlythanagriculturalimprovement，
eitherthelabourerswillsubmittoareductioninthequantity
orqualityoftheirfood，orifnot，rentandmoneywageswill
progressivelyrise，andprofitswillfall。
Agriculturalskillandknowledgeareofslowgrowth，and
stillslowerdiffusion。Inventionsanddiscoveries，too，occur
onlyoccasionally，whiletheincreaseofpopulationandcapital
arecontinuousagencies。Itthereforeseldomhappensthat
improvement，evenduringashorttime，hassomuchthestartof
populationandcapitalasactuallytolowerrent，orraisethe
rateofprofits。Therearemanycountriesinwhichthegrowthof
populationandcapitalisnotrapid，butintheseagricultural
improvementislessactivestill。Populationalmosteverywhere
treadscloseontheheelsofagriculturalimprovement，and
effacesitseffectsasfastastheyareproduced。
Thereasonwhyagriculturalimprovementseldomlowersrent，
isthatitseldomcheapensfood，butonlypreventsitfrom
growingdearer;andseldom，ifever，throwslandsoutof
cultivation，butonlyenablesworseandworselandtobetakenin
forthesupplyofanincreasingdemand。Whatissometimescalled
thenaturalstateofacountrywhichisbuthalfcultivated，
namely，thatthelandishighlyproductive，andfoodobtainedin
greatabundancebylittlelabour，isonlytrueofunoccupied
countriescolonizedbyacivilizedpeople。IntheUnitedStates
theworstlandincultivationisofahighquality（except
sometimesintheimmediatevicinityofmarketsormeansof
conveyance，whereabadqualityiscompensatedbyagood
situation）;andevenifnofurtherimprovementsweremadein
agricultureorlocomotion，cultivationwouldhavemanystepsyet
todescend，beforetheincreaseofpopulationandcapitalwould
bebroughttoastand;butinEuropefivehundredyearsago，
thoughsothinlypeopledincomparisontothepresentpopulation，
itisprobablethattheworstlandundertheploughwas，fromthe
rudestateofagriculture，quiteasunproductiveastheworst
landnowcultivated;andthatcultivationhadapproachedasnear
totheultimatelimitofprofitabletillage，inthosetimesasin
thepresent。Whattheagriculturalimprovementssincemadehave
reallydoneis，byincreasingthecapacityofproductionofland
ingeneral，toenabletillagetoextenddownwardstoamuchworse
naturalqualityoflandthantheworstwhichatthattimewould
haveadmittedofcultivationbyacapitalistforprofit;thus
renderingamuchgreaterincreaseofcapitalandpopulation
possible，andremovingalwaysalittleandalittlefurtheroff，
thebarrierwhichrestrainsthem;populationmeanwhilealways
pressingsohardagainstthebarrier，thatthereisneverany
visiblemarginleftforittoseize，everyinchofgroundmade
vacantforitbyimprovementbeingatoncefilledupbyits
advancingcolumns。Agriculturalimprovementmaythusbe
consideredtobenotsomuchacounterforceconflictingwith
increaseofpopulation，asapartialrelaxationofthebonds
whichconfinethatincrease。
Theeffectsproducedonthedivisionoftheproducebyan
increaseofproduction，underthejointinfluenceofincreaseof
populationandcapitalandimprovementsofagriculture，arevery
differentfromthosededucedfromthehypotheticalcases
previouslydiscussed。Inparticular，theeffectonrentismost
materiallydifferent。Weremarkedthat—whileagreat
agriculturalimprovementmadesuddenlyanduniversallywouldin
thefirstinstanceinevitablylowerrent—suchimprovements
enablerent，intheprogressofsociety，torisegraduallytoa
muchhigherlimitthanitcouldotherwiseattain，sincethey
enableamuchlowerqualityoflandtobeultimatelycultivated。
Butinthecasewearenowsupposing，whichnearlycorrespondsto
theusualcourseofthings，thisultimateeffectbecomesthe
immediateeffect。Supposecultivationtohavereached，oralmost
reached，theutmostlimitpermittedbythestateofthe
industrialarts，andrent，therefore，tohaveattainednearlythe
highestpointtowhichitcanbecarriedbytheprogressof
populationandcapital，withtheexistingamountofskilland
knowledge。Ifagreatagriculturalimprovementweresuddenly
introduced，itmightthrowbackrentforaconsiderablespace，
leavingittoregainitslostgroundbytheprogressof
populationandcapital，andafterwardstogoonfurther。But，
takingplace，assuchimprovementalwaysdoes，verygradually，it
causesnoretrogrademovementofeitherrentorcultivation;it
merelyenablestheonetogoonrising，andtheotherextending，
longaftertheymustotherwisehavestopped。Itwoulddothis
evenwithoutthenecessityofresortingtoaworsequalityof
land;simplybyenablingthelandsalreadyincultivationto
yieldagreaterproduce，withnoincreaseoftheproportional
cost。Ifbyimprovementsofagricultureallthelandsin
cultivationcouldbemade，evenwithdoublelabourandcapital，
toyieldadoubleproduce，（supposingthatinthemeantime
populationincreasedsoastorequirethisdoublequantity）all
rentswouldbedoubled。
Toillustratethepoint，letusreverttothenumerical
exampleinaformerpage。Threequalitiesoflandyield
respectivelylOO，8o，and60bushelstothesameoutlayonthe
sameextentofsurface。IfNo。1couldbemadetoyield200，No。
2，160，andNo。3，120bushels，atonlydoubletheexpense，and
thereforewithoutanyincreaseofthecostofproduction，andif
thepopulation，havingdoubled，requiredallthisincreased
quantity，therentofNo。1wouldbe80bushelsinsteadof40，
andofNo。2，40insteadof20，whilethepriceandvalueper
bushelwouldbethesameasbefore:sothatcornrentandmoney
rentwouldbothbedoubled。Ineednotpointoutthedifference
betweenthisresult，andwhatwehaveshownwouldtakeplaceif
therewereanimprovementinproductionwithouttheaccompaniment
ofanincreaseddemandforfood。
Agriculturalimprovement，then，isalwaysultimately，andin
themannerinwhichitgenerallytakesplacealsoimmediately，
beneficialtothelandlord。Wemayadd，thatwhenittakesplace
inthatmanner，itisbeneficialtonooneelse。Whenthedemand
forproducefullykeepspacewiththeincreasedcapacityof
production，foodisnotcheapened;thelabourersarenot，even
temporarily，benefited;thecostoflabourisnotdiminished，nor
profitsraised。Thereisagreateraggregateproduction，a
greaterproducedividedamongthelabourers，andalargergross
profit;butthewagesbeingsharedamongalargerpopulation，and
theprofitsspreadoveralargercapital，nolabourerisbetter
off，nordoesanycapitalistderivefromthesameamountof
capitalalargerincome。
Theresultofthislonginvestigationmaybesummedupas
follows。Theeconomicalprogressofasocietyconstitutedof
landlords，capitalists，andlabourers，tendstotheprogressive
enrichmentofthelandlordclass;whilethecostofthe
labourer’ssubsistencetendsonthewholetoincrease，and
profitstofall。Agriculturalimprovementsareacounteracting
forcetothetwolasteffects;butthefirst，thoughacaseis
conceivableinwhichitwouldbetemporarilychecked，is
ultimatelyinahighdegreepromotedbythoseimprovements;and
theincreaseofpopulationtendstotransferallthebenefits
derivedfromagriculturalimprovementtothelandlordsalone。
Whatotherconsequences，inadditiontothese，orinmodification
ofthem，arisefromtheindustrialprogressofasocietythus
constituted，Ishallendeavourtoshowinthesucceedingchapter。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book4
Chapter4
OftheTendencyofProfitstoaMinimum
1。Thetendencyofprofitstofallassocietyadvances，which
hasbeenbroughttonoticeintheprecedingchapter，wasearly
recognizedbywritersonindustryandcommerce;butthelaws
whichgovernprofitsnotbeingthenunderstood，thephenomenon
wasascribedtoawrongcause。AdamSmithconsideredprofitsto
bedeterminedbywhathecalledthecompetitionofcapital;and
concludedthatwhencapitalincreased，thiscompetitionmust
likewiseincrease，andprofitsmustfall。Itisnotquitecertain
whatsortofcompetitionAdamSmithhadhereinview。Hiswords
inthechapteronProfitsofStock（1*）are，’Whenthestocksof
manyrichmerchantsareturnedintothesametrade，theirmutual
competitionnaturallytendstoloweritsprofits;andwhenthere
isalikeincreaseofstockinallthedifferenttradescarried
oninthesamesociety，thesamecompetitionmustproducethe
sameeffectinthemall。’Thispassagewouldleadustoinfer
that，inAdamSmith’sopinion，themannerinwhichthe
competitionofcapitallowersprofitsisbyloweringprices;that
beingusuallythemodeinwhichanincreasedinvestmentof
capitalinanyparticulartrade，lowerstheprofitsofthat
trade。Butifthiswashismeaning，heoverlookedthe
circumstance，thatthefallofprice，whichifconfinedtoone
commodityreallydoeslowertheprofitsoftheproducer，ceases
tohavethateffectassoonasitextendstoallcommodities;
because，whenallthingshavefallen，nothinghasreallyfallen，
exceptnominally;andevencomputedinmoney，theexpensesof
everyproducerhavediminishedasmuchashisreturns。Unless
indeedlabourbetheonecommoditywhichhasnotfalleninmoney
price，whenallotherthingshave:ifso，whathasreallytaken
placeisariseofwages;anditisthat，andnotthefallof
prices，whichhasloweredtheprofitsofcapital。Thereis
anotherthingwhichescapedthenoticeofAdamSmith;thatthe
supposeduniversalfallofprices，throughincreasedcompetition
ofcapitals，isathingwhichcannottakeplace。Pricesarenot
determinedbythecompetitionofthesellersonly，butalsoby
thatofthebuyers;bydemandaswellassupply。Thedemandwhich
affectsmoneypricesconsistsofallthemoneyinthehandsof
thecommunity，destinedtobelaidoutincommodities;andas
longastheproportionofthistothecommoditiesisnot
diminished，thereisnofallofgeneralprices。Now，howsoever
capitalmayincrease，andgiverisetoanincreasedproductionof
commodities，afullshareofthecapitalwillbedrawntothe
businessofproducingorimportingmoney，andthequantityof
moneywillbeaugmentedinanequalratiowiththequantityof
commodities。Forifthiswerenotthecase，andifmoney，
therefore，were，asthetheorysupposes，perpetuallyacquiring
increasedpurchasingpower，thosewhoproducedorimportedit
wouldobtainconstantlyincreasingprofits;andthiscouldnot
happenwithoutattractinglabourandcapitaltothatoccupation
fromotheremployments。Ifageneralfallofprices，and
increasedvalueofmoney，werereallytooccur，itcouldonlybe
asaconsequenceofincreasedcostofproduction，fromthe
gradualexhaustionofthemines。
Itisnottenable，therefore，intheory，thattheincreaseof
capitalproduces，ortendstoproduce，ageneraldeclineofmoney
prices。Neitherisittrue，thatanygeneraldeclineofprices，
ascapitalincreased，hasmanifesteditselfinfact。Theonly
thingsobservedtofallinpricewiththeprogressofsociety，
arethoseinwhichtherehavebeenimprovementsinproduction，
greaterthanhavetakenplaceintheproductionoftheprecious
metals;asforexample，allspunandwovenfabrics。Otherthings，
again，insteadoffalling，haveriseninprice，becausetheir
costofproduction，comparedwiththatofgoldandsilver，has
increased。Amongtheseareallkindsoffood，comparisonbeing
madewithamuchearlierperiodofhistory。Thedoctrine，
therefore，thatcompetitionofcapitallowersprofitsbylowering
prices，isincorrectinfact，aswellasunsoundinprinciple。
ButitisnotcertainthatAdamSmithreallyheldthat
doctrine;forhislanguageonthesubjectiswaveringand
unsteady，denotingtheabsenceofadefiniteandwell—digested
opinion。Occasionallyheseemstothinkthatthemodeinwhich
thecompetitionofcapitallowersprofits，isbyraisingwages。
Andwhenspeakingoftherateofprofitinnewcolonies，heseems
ontheveryvergeofgraspingthecompletetheoryofthesubject。
’Asthecolonyincreases，theprofitsofstockgradually
diminish。Whenthemostfertileandbestsituatedlandshavebeen
alloccupied，lessprofitcanbemadebythecultivatorsofwhat
isinferiorbothinsoilandsituation。’HadAdamSmithmeditated
longeronthesubject，andsystematizedhisviewofitby
harmonizingwitheachotherthevariousglimpseswhichhecaught
ofitfromdifferentpoints，hewouldhaveperceivedthatthis
lastisthetruecauseofthefallofprofitsusuallyconsequent
uponincreaseofcapital。
2。MrWakefield，inhisCommentaryonAdamSmith，andhis
importantwritingsonColonization，takesamuchclearerviewof
thesubject，andarrives，throughasubstantiallycorrectseries
ofdeductions，atpracticalconclusionswhichappeartomejust
andimportant;butheisnotequallyhappyinincorporatinghis
valuablespeculationswiththeresultsofpreviousthought，and
reconcilingthemwithothertruths。SomeofthetheoriesofDr
Chalmers，inhischapter’OntheIncreaseandLimitsofCapital’，
andthetwochapterswhichfollowit，coincideintheirtendency
andspiritwiththoseofMrWakefield;butDrChalmers’ideas，
thoughdelivered，asishiscustom，withamostattractive
semblanceofclearness，arereallyonthissubjectmuchmore
confusedthaneventhoseofAdamSmith，andmoredecidedly
infectedwiththeoftenrefutednotionthatthecompetitionof
capitallowersgeneralprices;thesubjectofMoneyapparently
nothavingbeenincludedamongthepartsofPoliticalEconomy
whichthisacuteandvigorouswriterhadcarefullystudied。
MrWakefield’sexplanationofthefallofprofitsisbriefly
this。Productionislimitednotsolelybythequantityofcapital
andoflabour，butalsobytheextentofthe’fieldof
employment’。Thefieldofemploymentforcapitalistwofold;the
landofthecountry，andthecapacityofforeignmarketstotake
itsmanufacturedcommodities。Onalimitedextentofland，onlya
limitedquantityofcapitalcanfindemploymentataprofit。As
thequantityofcapitalapproachesthislimit，profitfalls;when
thelimitisattained，profitisannihilated;andcanonlybe
restoredthroughanextensionofthefieldofemployment，either
bytheacquisitionoffertileland，orbyopeningnewmarketsin
foreigncountries，fromwhichfoodandmaterialscanbepurchased
withtheproductsofdomesticcapital。Thesepropositionsare，in
myopinion，substantiallytrue;and，eventothephraseologyin
whichtheyareexpressed，consideredasadaptedtopopularand
practicalratherthanscientificuses，Ihavenothingtoobject。
TheerrorwhichseemstomeimputabletoMrWakefieldisthatof
supposinghisdoctrinestobeincontradictiontotheprinciples
ofthebestschoolofprecedingpoliticaleconomists，insteadof
being，astheyreallyare，corollariesfromthoseprinciples;
thoughcorollarieswhich，perhaps，wouldnotalwayshavebeen
admittedbythosepoliticaleconomiststhemselves。
ThemostscientifictreatmentofthesubjectwhichIhavemet
with，isinanessayontheeffectsofMachinery，publishedin
theWestminsterReviewforJanuary1826，byMrWilliamEllis;（2*）
whichwasdoubtlessunknowntoMrWakefield，butwhichhad
precededhim，thoughbyadifferentpath，inseveralofhis
leadingconclusions。Thisessayexcitedlittlenotice，partly
frombeingpublishedanonymouslyinaperiodical，andpartly
becauseitwasmuchinadvanceofthestateofpoliticaleconomy
atthetime。InMrEllis’sviewofthesubject，thequestionsand
difficultiesraisedbyMrWakefield’sspeculationsandbythose
ofDrChalmers，findasolutionconsistentwiththeprinciplesof
politicaleconomylaiddowninthepresenttreatise。
3。Thereisateverytimeandplacesomeparticularrateof
profit，whichisthelowestthatwillinducethepeopleofthat
countryandtimetoaccumulatesavings，andtoemploythose
savingsproductively。Thisminimumrateofprofitvaries
accordingtocircumstances。Itdependsontwoelements。Oneis，
thestrengthoftheeffectivedesireofaccumulation;the
comparativeestimatemadebythepeopleofthatplaceandera，of
futureinterestswhenweighedagainstpresent。Thiselement
chieflyaffectstheinclinationtosave。Theotherelement，which
affectsnotsomuchthewillingnesstosaveasthedispositionto
employsavingsproductively，isthedegreeofsecurityofcapital
engagedinindustrialoperations。Astateofgeneralinsecurity，
nodoubtaffectsalsothedispositiontosave。Ahoardmaybea
sourceofadditionaldangertoitsreputedpossessor。Butasit
mayalsobeapowerfulmeansofavertingdangers，theeffectsin
thisrespectmayperhapsbelookeduponasbalanced。Butin
employinganyfundswhichapersonmaypossessascapitalonhis
ownaccount，orinlendingittootherstobesoemployed，there
isalwayssomeadditionalrisk，overandabovethatincurredby
keepingitidleinhisowncustody。Thisextrariskisgreatin
proportionasthegeneralstateofsocietyisinsecure:itmaybe
equivalenttotwenty，thirty，orfiftypercent，ortonomore
thanoneortwo;something，however，itmustalwaysbe:andfor
this，theexpectationofprofitmustbesufficienttocompensate。
Therewouldbeadequatemotivesforacertainamountof
saving，evenifcapitalyieldednoprofit。Therewouldbean
inducementtolaybyingoodtimesaprovisionforbad;to
reservesomethingforsicknessandinfirmity，orasameansof
leisureandindependenceinthelatterpartoflife，orahelpto
childrenintheoutsetofit。Savings，however，whichhaveonly
theseendsinview，havenotmuchtendencytoincreasetheamount
ofcapitalpermanentlyinexistence。Thesemotivesonlyprompt
personstosaveatoneperiodoflifewhattheypurposeto
consumeatanother，orwhatwillbeconsumedbytheirchildren
beforetheycancompletelyprovideforthemselves。Thesavingsby
whichanadditionismadetothenationalcapital，usually
emanatefromthedesireofpersonstoimprovewhatistermed
theirconditioninlife，ortomakeaprovisionforchildrenor
others，independentoftheirexertions。Now，tothestrengthof
theseinclinationsitmakesaverymaterialdifferencehowmuch
ofthedesiredobjectcanbeeffectedbyagivenamountand
durationofself—denial;whichagaindependsontherateof
profit。Andthereisineverycountrysomerateofprofit，below
whichpersonsingeneralwillnotfindsufficientmotivetosave
forthemerepurposeofgrowingricher，orofleavingothers
betteroffthanthemselves。Anyaccumulation，therefore，bywhich
thegeneralcapitalisincreased，requiresasitsnecessary
conditionacertainrateofprofit;aratewhichanaverage
personwilldeemtobeanequivalentforabstinence，withthe
additionofasufficientinsuranceagainstrisk。Therearealways
somepersonsinwhomtheeffectivedesireofaccumulationis
abovetheaverage，andtowhomlessthanthisrateofprofitisa
sufficientinducementtosave;butthesemerelystepintothe
placeofotherswhosetasteforexpenseandindulgenceisbeyond
theaverage，andwho，insteadofsaving，perhapsevendissipate
whattheyhavereceived。
Ihavealreadyobservedthatthisminimumrateofprofit，
lessthanwhichisnotconsistentwiththefurtherincreaseof
capital，islowerinsomestatesofsocietythaninothers;andI
mayadd，thatthekindofsocialprogresscharacteristicofour
presentcivilizationtendstodiminishit。Inthefirstplace，
oneoftheacknowledgedeffectsofthatprogressisanincrease
ofgeneralsecurity。Destructionbywars，andspoliationby
privateorpublicviolence，arelessandlesstobeapprehended;
andtheimprovementswhichmaybelookedforineducationandin
theadministrationofjustice，or，intheirdefault，increased
regardforopinion，affordagrowingprotectionagainstfraudand
recklessmismanagement。Therisksattendingtheinvestmentof
savingsinproductiveemploymentrequire，therefore，asmaller
rateofprofittocompensateforthemthanwasrequiredacentury
ago，andwillhereafterrequirelessthanatpresent。Inthe
secondplace，itisalsooneoftheconsequencesofcivilization
thatmankindbecomelesstheslavesofthemoment，andmore
habituatedtocarrytheirdesiresandpurposesforwardintoa
distantfuture。Thisincreaseofprovidenceisanaturalresult
oftheincreasedassurancewithwhichfuturitycanbelooked
forwardto;andis，besides，favouredbymostoftheinfluences
whichanindustriallifeexercisesoverthepassionsand
inclinationsofhumannature。Inproportionaslifehasfewer
vicissitudes，ashabitsbecomemorefixed，andgreatprizesare
lessandlesstobehopedforbyanyothermeansthanlong
perseverance，mankindbecomemorewillingtosacrificepresent
indulgenceforfutureobjects。Thisincreasedcapacityof
forethoughtandself—controlmayassuredlyfindotherthingsto
exerciseitselfuponthanincreaseofriches，andsome
considerationsconnectedwiththistopicwillshortlybetouched
upon。Thepresentkindofsocialprogress，however，decidedly
tends，thoughnotperhapstoincreasethedesireofaccumulation，
yettoweakentheobstaclestoit，andtodiminishtheamountof
profitwhichpeopleabsolutelyrequireasaninducementtosave
andaccumulate。Forthesetworeasons，diminutionofriskand
increaseofprovidence，aprofitorinterestofthreeorfourper
centisassufficientamotivetotheincreaseofcapitalin
Englandatthepresentday，asthirtyorfortypercentinthe
BurmeseEmpire，orinEnglandatthetimeofKingJohn。In
Hollandduringthelastcenturyareturnoftwopercent，on
governmentsecurity，wasconsistentwithanundiminished，ifnot
withanincreasingcapital。Butthoughtheminimumrateofprofit
isthusliabletovary，andthoughtospecifyexactlywhatitis
wouldatanygiventimebeimpossible，suchaminimumalways
exists;andwhetheritbehighorlow，whenonceitisreached，
nofurtherincreaseofcapitalcanforthepresenttakeplace。
Thecountryhasthenattainedwhatisknowntopolitical
economistsunderthenameofthestationarystate。
4。Wenowarriveatthefundamentalpropositionwhichthis
chapterisintendedtoinculcate。Whenacountryhaslong
possessedalargeproduction，andalargenetincometomake
savingsfrom，andwhen，therefore，themeanshavelongexistedof
makingagreatannualadditiontocapital;（thecountrynot
having，likeAmerica，alargereserveoffertilelandstill
unused;）itisoneofthecharacteristicsofsuchacountry，that
therateofprofitishabituallywithin，asitwere，ahand’s
breadthoftheminimum，andthecountrythereforeonthevery
vergeofthestationarystate。BythisIdonotmeanthatthis
stateislikely，inanyofthegreatcountriesofEurope，tobe
soonactuallyreached，orthatcapitaldoesnotstillyielda
profitconsiderablygreaterthanwhatisbarelysufficientto
inducethepeopleofthosecountriestosaveandaccumulate。My
meaningis，thatitwouldrequirebutashorttimetoreduce
profitstotheminimum，ifcapitalcontinuedtoincreaseatits
presentrate，andnocircumstanceshavingatendencytoraisethe
rateofprofitoccurredinthemeantime。Theexpansionofcapital
wouldsoonreachitsultimateboundary，iftheboundaryitself
didnotcontinuallyopenandleavemorespace。
InEngland，theordinaryrateofinterestongovernment
securities，inwhichtheriskisnexttonothing，maybe
estimatedatalittlemorethanthreepercent:inallother
investments，therefore，theinterestorprofitcalculatedupon
（exclusivelyofwhatisproperlyaremunerationfortalentor
exertion）mustbeasmuchmorethanthisamount，asisequivalent
tothedegreeofrisktowhichthecapitalisthoughttobe
exposed。LetussupposethatinEnglandevensosmallanet
profitasonepercent，exclusiveofinsuranceagainstrisk，
wouldconstituteasufficientinducementtosave，butthatless
thanthiswouldnotbeasufficientinducement。Inowsay，that
themerecontinuanceofthepresentannualincreaseofcapital，
ifnocircumstanceoccurredtocounteractitseffect，would
sufficeinasmallnumberofyearstoreducetherateofnet
profittoonepercent。
Tofulfiltheconditionsofthehypothesis，wemustsuppose
anentirecessationoftheexportationofcapitalforforeign
investment。Nomorecapitalsentabroadforrailwaysorloans;no
moreemigrantstakingcapitalwiththem，tothecolonies，orto
othercountries;nofreshadvancesmade，orcreditsgiven，by
bankersormerchantstotheirforeigncorrespondents。Wemust
alsoassumethattherearenofreshloansforunproductive
expenditure，bythegovernment，oronmortgage，orotherwise;and
noneofthewasteofcapitalwhichnowtakesplacebythefailure
ofundertaking，whichpeoplearetemptedtoengageinbythehope
ofabetterincomethancanbeobtainedinsafepathsatthe
presenthabituallylowrateofprofit。Wemustsupposetheentire
savingsofthecommunitytobeannuallyinvestedinreally
productiveemploymentwithinthecountryitself;andnonew
channelsopenedbyindustrialinventions，orbyamoreextensive
substitutionofthebestknownprocessesforinferiorones。
Fewpersonswouldhesitatetosay，thattherewouldbegreat
difficultyinfindingremunerativeemploymenteveryyearforso
muchnewcapital，andmostwouldconcludethattherewouldbe
whatusedtobetermedageneralglut;thatcommoditieswouldbe
produced，andremainunsold，orbesoldonlyataloss。Butthe
fullexaminationwhichwehavealreadygiventothis
question，（3*）hasshownthatthisisnotthemodeinwhichthe
inconveniencewouldbeexperienced。Thedifficultywouldnot
consistinanywantofamarket。Ifthenewcapitalwereduly
sharedamongmanyvarietiesofemployment，itwouldraiseupa
demandforitsownproduce，andtherewouldbenocausewhyany
partofthatproduceshouldremainlongeronhandthanformerly。
Whatwouldreallybe，notmerelydifficult，butimpossible，would
betoemploythiscapitalwithoutsubmittingtoarapidreduction
oftherateofprofit。
Ascapitalincreased，populationeitherwouldalsoincrease，
oritwouldnot。Ifitdidnot，wageswouldrise，andagreater
capitalwouldbedistributedinwagesamongthesamenumberof
labourers。Therebeingnomorelabourthanbefore，andno
improvementstorenderthelabourmoreefficient，therewouldnot
beanyincreaseoftheproduce;andasthecapital，however
largelyincreased，wouldonlyobtainthesamegrossreturn，the
wholesavingsofeachyearwouldbeexactlysomuchsubtracted
fromtheprofitsofthenextandofeveryfollowingyear。Itis
hardlynecessarytosaythatinsuchcircumstancesprofitswould
verysoonfalltothepointatwhichfurtherincreaseofcapital
wouldcease。Anaugmentationofcapital，muchmorerapidthan
thatofpopulation，mustsoonreachitsextremelimit，unless
accompaniedbyincreasedefficiencyoflabour（throughinventions
anddiscoveries，orimprovedmentalandphysicaleducation），or
unlesssomeoftheidlepeople，oroftheunproductivelabourers，
becameproductive。
Ifpopulationdidincreasewiththeincreaseofcapital，and
inproportiontoit，thefallofprofitswouldstillbe
inevitable。Increasedpopulationimpliesincreaseddemandfor
agriculturalproduce。Intheabsenceofindustrialimprovements，
thisdemandcanonlybesuppliedatanincreasedcostof
production，eitherbycultivatingworseland，orbyamore
elaborateandcostlycultivationofthelandalreadyunder
tillage。Thecostofthelabourer’ssubsistenceistherefore
increased;andunlessthelabourersubmitstoadeteriorationof
hiscondition，profitsmustfall。InanoldcountrylikeEngland，
if，inadditiontosupposingallimprovementindomestic
agriculturesuspended，wesupposethatthereisnoincreased
productioninforeigncountriesfortheEnglishmarket，thefall
ofprofitswouldbeveryrapid。Ifboththeseavenuestoan
increasedsupplyoffoodwereclosed，andpopulationcontinuedto
increase，asitissaidtodo，attherateofathousandaday，
allwastelandwhichadmitsofcultivationintheexistingstate
ofknowledgewouldsoonbecultivated，andthecostofproduction
andpriceoffoodwouldbesoincreased，that，ifthelabourers
receivedtheincreasedmoneywagesnecessarytocompensatefor
theirincreasedexpenses，profitswouldverysoonreachthe
minimum。Thefallofprofitswouldberetardedifmoneywagesdid
notrise，orroseinalessdegree;butthemarginwhichcanbe
gainedbyadeteriorationofthelabourers’conditionisavery
narrowone:ingeneraltheycannotbearmuchreduction;whenthey
can，theyhavealsoahigherstandardofnecessaryrequirements，
andwillnot。Onthewhole，therefore，wemayassumethatinsuch
acountryasEngland，ifthepresentannualamountofsavings
weretocontinue，withoutanyofthecounteractingcircumstances
whichnowkeepincheckthenaturalinfluenceofthosesavingsin
reducingprofit，therateofprofitwouldspeedilyattainthe
minimum，andallfurtheraccumulationofcapitalwouldforthe
presentcease。
5。What，then，arethesecounteractingcircumstances，which，
intheexistingstateofthings，maintainatolerablyequal
struggleagainstthedownwardtendencyofprofits，andprevent
thegreatannualsavingswhichtakeplaceinthiscountry，from
depressingtherateofprofitmuchnearertothatlowestpointto
whichitisalwaystending，andwhich，lefttoitself，itwould
sopromptlyattain？Theresistingagenciesareofseveralkinds。
Firstamongthem，wemaynoticeonewhichissosimpleandso
conspicuous，thatsomepoliticaleconomists，especiallyM。de
SismondiandDrChalmers，haveattendedtoitalmosttothe
exclusion。ofallothers。Thisis，thewasteofcapitalin
periodsofover。tradingandrashspeculation，andinthe
commercialrevulsionsbywhichsuchtimesarealwaysfollowed。It
istruethatagreatpartofwhatislostatsuchperiodsisnot
destroyed，butmerelytransferred，likeagambler’slosses，to
moresuccessfulspeculators。Butevenofthesemeretransfers，a
largeportionisalwaystoforeigners，bythehastypurchaseof
unusualquantitiesofforeigngoodsatadvancedprices。Andmuch
alsoisabsolutelywasted。Minesareopened，railwaysorbridges
made，andmanyotherworksofuncertainprofitcommenced，andin
theseenterprisesmuchcapitalissunkwhichyieldseitherno
return，ornoneadequatetotheoutlay。Factoriesarebuiltand
machineryerectedbeyondwhatthemarketrequires，orcankeepin
employment。Eveniftheyarekeptinemployment，thecapitalis
nolesssunk;ithasbeenconvertedfromcirculatingintofixed
capital，andhasceasedtohaveanyinfluenceonwagesor
profits。Besidesthis，thereisagreatunproductiveconsumption
ofcapital，duringthestagnationwhichfollowsaperiodof
generalovertrading。Establishmentsareshutup，orkeptworking
withoutanyprofit，handsaredischarged，andnumbersofpersons
inallranks，beingdeprivedoftheirincome，andthrownfor
supportontheirsavings，findthemselves，afterthecrisishas
passedaway，inaconditionofmoreorlessimpoverishment。Such
aretheeffectsofacommercialrevulsion:andthatsuch
revulsionsarealmostperiodical，isaconsequenceofthevery
tendencyofprofitswhichweareconsidering。Bythetimeafew
yearshavepassedoverwithoutacrisis，somuchadditional
capitalhasbeenaccumulated，thatitisnolongerpossibleto
investitattheaccustomedprofit:allpublicsecuritiesriseto
ahighprice，therateofinterestonthebestmercantile
securityfallsverylow，andthecomplaintisgeneralamong
personsinbusinessthatnomoneyistobemade。Doesnotthis
demonstratehowspeedilyprofitwouldbeattheminimum，andthe
stationaryconditionofcapitalwouldbeattained，ifthese
accumulationswentonwithoutanycounteractingprinciple？But
thediminishedscaleofallsafegains，inclinespersonstogive
areadyeartoanyprojectswhichholdout，thoughattheriskof
loss，thehopeofahigherrateofprofit;andspeculations
ensue，which，withthesubsequentrevulsions，destroy，or
transfertoforeigners，aconsiderableamountofcapital，produce
atemporaryriseofinterestandprofit，makeroomforfresh
accumulations，andthesameroundisrecommenced。
This，doubtless，isoneconsiderablecausewhicharrests
profitsintheirdescenttotheminimum，bysweepingawayfrom
timetotimeapartoftheaccumulatedmassbywhichtheyare
forceddown。Butthisisnot，asmightbeinferredfromthe
languageofsomewriters，theprincipalcause。Ifitwere，the
capitalofthecountrywouldnotincrease;butinEnglanditdoes
increasegreatlyandrapidly。Thisisshownbytheincreasing
productivenessofalmostalltaxes，bythecontinualgrowthof
allthesignsofnationalwealth，andbytherapidincreaseof
population，whiletheconditionofthelabourersiscertainlynot
declining，butonthewholeimproving。Thesethingsprovethat
eachcommercialrevulsion，howeverdisastrous，isveryfarfrom
destroyingallthecapitalwhichhasbeenaddedtothe
accumulationsofthecountrysincethelastrevulsionpreceding
it，andthat，invariably，roomiseitherfoundormadeforthe
profitableemploymentofaperpetuallyincreasingcapital，
consistentlywithnotforcingdownprofitstoalowerrate。
6。Thisbringsustothesecondofthecounter。agencies，
namely，improvementsinproduction。Theseevidentlyhavethe
effectofextendingwhatMrWakefieldtermsthefieldof
employment，thatis，theyenableagreateramountofcapitalto
beaccumulatedandemployedwithoutdepressingtherateof
profit:providedalwaysthattheydonotraise，toaproportional
extent，thehabitsandrequirementsofthelabourer。Ifthe
labouringclassgainthefulladvantageoftheincreased
cheapness，inotherwords，ifmoneywagesdonotfall，profits
arenotraised，northeirfallretarded。Butifthelabourers
peopleuptotheimprovementintheircondition，andsorelapse
totheirpreviousstate，profitswillrise。Allinventionswhich
cheapenanyofthethingsconsumedbythelabourers，unlesstheir
requirementsareraisedinanequivalentdegree，intimelower
moneywages:andbydoingso，enableagreatercapitaltobe
accumulatedandemployed，beforeprofitsfallbacktowhatthey
werepreviously。
Improvementswhichonlyaffectthingsconsumedexclusivelyby
thericherclasses，donotoperatepreciselyinthesamemanner。
Thecheapeningoflaceorvelvethasnoeffectindiminishingthe
costoflabour;andnomodecanbepointedoutinwhichitcan
raisetherateofprofit，soastomakeroomforalargercapital
beforetheminimumisattained。It，however，producesaneffect
whichisvirtuallyequivalent;itlowers，ortendstolower，the
minimumitself。Inthefirstplace，increasedcheapnessof
articlesofconsumptionpromotestheinclinationtosave，by
affordingtoallconsumersasurpluswhichtheymaylayby，
consistentlywiththeiraccustomedmannerofliving;andunless
theywerepreviouslysufferingactualhardships，itwillrequire
littleself—denialtosavesomepartatleastofthissurplus。In
thenextplace，whateverenablespeopletoliveequallywellona
smallerincome，inclinesthemtolaybycapitalforalowerrate
ofprofit。Ifpeoplecanliveonanindependenceof500l。ayear
inthesamemannerastheyformerlycouldononeof1000l。，some
personswillbeinducedtosaveinhopesoftheone，whowould
havebeendeterredbythemoreremoteprospectoftheother。All
improvements，therefore，intheproductionofalmostany
commodity，tendinsomedegreetowidentheintervalwhichhasto
bepassedbeforearrivingatthestationarystate:butthis
effectbelongsinamuchgreaterdegreetotheimprovementswhich
affectthearticlesconsumedbythelabourer，sincetheseconduce
toitintwoways;theyinducepeopletoaccumulateforalower
profit，andtheyalsoraisetherateofprofititself。
7。Equivalentineffecttoimprovementsinproduction，isthe
acquisitionofanynewpowerofobtainingcheapcommoditiesfrom
foreigncountries。Ifnecessariesarecheapened，whethertheyare
sobyimprovementsathomeorimportationfromabroad，isexactly
thesamethingtowagesandprofits。Unlessthelabourerobtains，
andbyanimprovementofhishabitualstandard，keeps，thewhole
benefit，thecostoflabourislowered，andtherateofprofit
raised。Aslongasfoodcancontinuetobeimportedforan
increasingpopulationwithoutanydiminutionofcheapness，so
longthedeclensionofprofitsthroughtheincreaseofpopulation
andcapitalisarrested，andaccumulationmaygoonwithout
makingtherateofprofitdrawnearertotheminimum。Andonthis
grounditisbelievedbysome，thattherepealofthecornlaws
hasopenedtothiscountryalongeraofrapidincreaseof
capitalwithanundiminishedrateofprofit。
Beforeinquiringwhetherthisexpectationisreasonable，one
remarkmustbemade，whichismuchatvariancewithcommonly
receivednotions。Foreigntradedoesnotnecessarilyin。crease
thefieldofemploymentforcapital。Itisnotthemereopening
ofamarketforacountry’sproductions，thattendstoraisethe
rateofprofits。Ifnothingwereobtainedinexchangeforthose
productionsbuttheluxuriesoftherich，theexpensesofno
capitalistwouldbediminished;profitswouldnotbeatall
raised，norroommadefortheaccumulationofmorecapital
withoutsubmittingtoareductionofprofits:andifthe
attainmentofthestationarystatewereatallretarded，itwould
onlybebecausethediminishedcostatwhichacertaindegreeof
luxurycouldbeenjoyed，mightinducepeople，inthatprospect，
tomakefreshsavingsforalowerprofitthantheyformerlywere
willingtodo。Whenforeigntrademakesroomformorecapitalat
thesameprofit，itisbyenablingthenecessariesoflife，or
thehabitualarticlesofthelabourer’sconsumption，tobe
obtainedatsmallercost。Itmaydothisintwoways;bythe
importationeitherofthosecommoditiesthemselves，orofthe
meansandappliancesforproducingthem。Cheapironhas，ina
certainmeasure，thesameeffectonprofitsandthecostof
labourascheapcorn，becausecheapironmakescheaptoolsfor
agricultureandcheapmachineryforclothing。Butaforeigntrade
whichneitherdirectly，norbyanyindirectconsequence，
increasesthecheapnessofanythingconsumedbythelabourers，
doesnot，anymorethananinventionordiscoveryinthelike
case，tendtoraiseprofitsorretardtheirfall;itmerely
substitutestheproductionofgoodsforforeignmarkets，inthe
roomofthehomeproductionofluxuries，leavingtheemployment
forcapitalneithergreaternorlessthanbefore。Itistrue，
thatthereisscarcelyanyexporttradewhich，inacountrythat
alreadyimportsnecessariesormaterials，comeswithinthese
conditions:foreveryincreaseofexportsenablesthecountryto
obtainallitsimportsoncheapertermsthanbefore。
Acountrywhich，asisnowthecasewithEngland，admitsfood
ofallkinds，andallnecessariesandthematerialsof
necessaries，tobefreelyimportedfromallpartsoftheworld，
nolongerdependsonthefertilityofherownsoiltokeepupher
rateofprofits，butonthesoilofthewholeworld。Itremains
toconsiderhowfarthisresourcecanbecountedupon，formaking
headduringaverylongperiodagainstthetendencyofprofitsto
declineascapitalincreases。
Itmust，ofcourse，besupposedthatwiththeincreaseof
capital，populationalsoincreases;forifitdidnot，the
consequentriseofwageswouldbringdownprofits，inspiteof
anycheapnessoffood。SupposethenthatthepopulationofGreat
Britaingoesonincreasingatitspresentrate，anddemandsevery
yearasupplyofimportedfoodconsiderablybeyondthatofthe
yearpreceding。Thisannualincreaseinthefooddemandedfrom
theexportingcountries，canonlybeobtainedeitherbygreat
improvementsintheiragriculture，orbytheapplicationofa
greatadditionalcapitaltothegrowthoffood。Theformeris
likelytobeaveryslowprocess，fromtherudenessandignorance
oftheagriculturalclassesinthefood—exportingcountriesof
Europe，whiletheBritishcoloniesandtheUnitedStatesare
alreadyinpossessionofmostoftheimprovementsyetmade，so
farassuitabletotheircircumstances。Thereremainsasa
resource，theextensionofcultivation。Andonthisitistobe
remarked，thatthecapitalbywhichanysuchextensioncantake
place，ismostlystilltobecreated。InPoland，Russia，Hungary，
Spain，theincreaseofcapitalisextremelyslow。InAmericait
israpid，butnotmorerapidthanthepopulation。Theprincipal
fundatpresentavailableforsupplyingthiscountrywitha
yearlyincreasingimportationoffood，isthatportionofthe
annualsavingsofAmericawhichhasheretoforebeenappliedto
increasingthemanufacturingestablishmentsoftheUnitedStates，
andwhichfreetradeincornmaypossiblydivertfromthat
purposetogrowingfoodforourmarket。Thislimitedsourceof
supply，unlessgreatimprovementstakeplaceinagriculture，
cannotbeexpectedtokeeppacewiththegrowingdemandofso
rapidlyincreasingapopulationasthatofGreatBritain;andif
ourpopulationandcapitalcontinuetoincreasewiththeir
presentrapidity，theonlymodeinwhichfoodcancontinuetobe
suppliedcheaplytotheone，isbysendingtheotherabroadto
produceit。
8。Thisbringsustothelastofthecounter—forceswhich
checkthedownwardtendencyofprofits，inacountrywhose
capitalincreasesfasterthanthatofitsneighbours，andwhose
profitsarethereforenearertotheminimum。Thisis，the
perpetualoverflowofcapitalintocoloniesorforeigncountries，
toseekhigherprofitsthancanbeobtainedathome。Ibelieve
thistohavebeenformanyyearsoneoftheprincipalcausesby
whichthedeclineofprofitsinEnglandhasbeenarrested。Ithas
atwofoldoperation。Inthefirstplace，itdoeswhatafire，or
aninundation，oracommercialcrisiswouldhavedone:itcarries
offapartoftheincreaseofcapitalfromwhichthereductionof
profitsproceeds。Secondly，thecapitalsocarriedoffisnot
lost，butischieflyemployedeitherinfoundingcolonies，which
becomelargeexportersofcheapagriculturalproduce，orin
extendingandperhapsimprovingtheagricultureofolder
communities。ItistotheemigrationofEnglishcapital，thatwe
havechieflytolookforkeepingupasupplyofcheapfoodand
cheapmaterialsofclothing，proportionaltotheincreaseofour
population;thusenablinganincreasingcapitaltofind
employmentinthecountry，withoutreductionofprofit，in
producingmanufacturedarticleswithwhichtopayforthissupply
ofrawproduce。Thus，theexportationofcapitalisanagentof
greatefficacyinextendingthefieldofemploymentforthat
whichremains:anditmaybesaidtrulythat，uptoacertain
point，themorecapitalwesendaway，themoreweshallpossess
andbeabletoretainathome。
Incountrieswhicharefurtheradvancedinindustryand
population，andhavethereforealowerrateofprofit，than
others，thereisalways，longbeforetheactualminimumis
reached，apracticalminimum，viz。whenprofitshavefallento
muchbelowwhattheyareelsewhere，that，weretheytofall
lower，allfurtheraccumulationswouldgoabroad。Inthepresent
stateoftheindustryoftheworld，whenthereisoccasion，in
anyrichandimprovingcountry，totaketheminimumofprofitsat
allintoconsiderationforpracticalpurposes，itisonlythis
practicalminimumthatneedsbeconsidered。Aslongasthereare
oldcountrieswherecapitalincreasesveryrapidly，andnew
countrieswhereprofitisstillhigh，profitsintheold
countrieswillnotsinktotheratewhichwouldputastopto
accumulation;thefallisstoppedatthepointwhichsends
capitalabroad。Itisonly，however，byimprovementsin
production，andevenintheproductionofthingsconsumedby
labourers，thatthecapitalofacountrylikeEnglandis
preventedfromspeedilyreachingthatdegreeoflownessof
profit，whichwouldcauseallfurthersavingstobesenttofind
employmentinthecolonies，orinforeigncountries。
NOTES:
1。WealthofNations，Bk。I，Ch。9。
2。Nowsomuchbetterknownthroughhisapostolicexertions，by
pen，purse，andperson，fortheimprovementofpopulareducation，
andespeciallyfortheintroductionintoitoftheelementsof
practicalPoliticalEconomy。
3。Bkiii，Ch。XIV。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book4
Chapter5
ConsequencesoftheTendencyofProfitstoaMinimum
1。Thetheoryoftheeffectofaccumulationonprofits，laid
downintheprecedingchapter，materiallyaltersmanyofthe
practicalconclusionswhichmightotherwisebesupposedtofollow
fromthegeneralprinciplesofPoliticalEconomy，andwhichwere，
indeed，longadmittedastruebythehighestauthoritiesonthe
subject。
Itmustgreatlyabate，orrather，altogetherdestroy，in
countrieswhereprofitsarelow，theimmenseimportancewhich
usedtobeattachedbypoliticaleconomiststotheeffectswhich
aneventorameasureofgovernmentmighthaveinaddingtoor
subtractingfromthecapitalofthecountry。Wehavenowseen
thatthelownessofprofitsisaproofthatthespiritof
accumulationissoactive，andthattheincreaseofcapitalhas
proceededatsorapidarate，astooutstripthetwo
counter—agencies，improvementsinproduction，andincreased
supplyofcheapnecessariesfromabroad:andthatunlessa
considerableportionoftheannualincreaseofcapitalwere
eitherperiodicallydestroyed，orexportedforforeign
investment，thecountrywouldspeedilyattainthepointatwhich
furtheraccumulationwouldcease，oratleastspontaneously
slacken，soasnolongertooverpassthemarchofinventionin
theartswhichproducethenecessariesoflife。Insuchastate
ofthingsasthis，asuddenadditiontothecapitalofthe
country，unaccompaniedbyanyincreaseofproductivepower，would
bebutoftransitoryduration;sincebydepressingprofitsand
interest，itwouldeitherdiminishbyacorrespondingamountthe
savingswhichwouldbemadefromincomeintheyearortwo
following，oritwouldcauseanequivalentamounttobesent
abroad，ortobewastedinrashspeculations。Neither，onthe
otherhand，wouldasuddenabstractionofcapital，unlessof
inordinateamount，haveanyrealeffectinimpoverishingthe
country。Afterafewmonthsoryears，therewouldexistinthe
countryjustasmuchcapitalasifnonehadbeentakenaway。The
abstraction，byraisingprofitsandinterest，wouldgiveafresh
stimulustotheaccumulativeprinciple，whichwouldspeedilyfill
upthevacuum。Probably，indeed，theonlyeffectthatwould
ensue，wouldbethatforsometimeafterwardslesscapitalwould
beexported，andlessthrownawayinhazardousspeculation。