31: On Machinery
Ricardo means to address the consequences of technology (in his time, machinery) to production - as it is a topic of great interest that has not been given sufficient consideration in terms of its economic impact.
His general opinion of machinery has been that it is good for the economy: it lowers the cost of production, lowering the price of goods. Producers make more, consumers enjoy more product. Both capitalists and landlords enjoy a better return, as their land and capital results in more production. The labor and capital that are freed by the implementation of machinery (as a machine must require less labor and/or capital, or there would be no sense in adopting it) can then be devoted to other pursuits.
A quote from Smith: "The desire for food is limited in every man by the narrow capacity of the human stomach, but the desire of the conveniences and ornaments ... seems to have no limit or certain boundary." Thus there is never a time when labor and capital to produce goods will be unnecessary or undesirable: when man has all he needs, he can pursue what he fancies, and such conveniences give quality to life.
Ricardo maintains that these opinions continue unaltered for most parties, but has come to believe that the substitution of machinery to labor is "often very injurious to the interests of the class of laborers."
The core problem is that the application of machinery reduces the need for labor, and that there is a delay between the time labor is freed for other use, and the time that other uses are found for this labor. This has two direct effects on labor: that there are more laborers looking for work (supply of labor exceeding demand, decreases price), and that laborers freed from one industry are not as valuable in others (a master weaver, displaced by a weaving machine, is unskilled at other crafts).
From the perspective of the market, these effects are temporary and of no concern to the consumer: the labor freed by mechanization will eventually find another employment, and will eventually recover its value through training and experience. From the perspective of the displaced laborer, who has lost his income and must cover his costs of living until he is again gainfully employed, the effects are also temporary but much more poignant.
Various contrivances of accounting are provided to "prove" this point - but the figures are imaginary and the equations rigged. Even so, the observation seems entirely reasonable.
In a period where some invention of machinery impacts a large number of workers in a single industry, or a large number across various industries, a significant shock can occur to the labor market, as many workers are displaced at once.
This also is a shock to the market for goods, as the loss of their income requires them to consume savings and reduce consumption. Consumers will be thus affected until the surplus population emigrate or demand for labor increases.
And because the aggregate demand of goods in the market is sharply reduced, the need to produce goods for domestic consumption is also reduced. Suppliers are thus affected until demand for goods in the local market increases or a market to which surplus goods can be exported is identified.
It must also be acknowledged that the ability of machinery to produce goods in increased amounts depends on the availability of raw materials in increased amounts. Where a mill is consuming all the cotton that can be had to produce cloth, a machine enables the same amount to be produced more cheaply by fewer workers, but unless more cotton can be supplied, it can produce no more cloth than before. (EN: which seems to address in part the problem of unemployed weavers - there should be opportunity for some part of their number to become farmers.)
Based on this consideration, Ricardo draws some general conclusions:
- The discovery and application of technology will lead to an increase in the net produce of a market, but it may not increase the value of the product and, by its greater abundance, may decrease it.
- There can be an increase in net product with a diminution of gross product as a result of efficiency gained in the employment of technology.
- The opinion that the working class are harmed by technology is not founded on prejudice and irrational fear, but is based on sound principles.
- When the market recovers from the shock of the introduction of new technology, the resulting situation is better for all classes: landlord, capitalist, laborer, and consumer. The net result is an increase in the quantity of goods produced given the same amount of labor and capital as was previously require to produce less, resulting in a greater share of the necessities and conveniences of life at a lower cost to all consumers in the market.
Ricardo takes an odd left turn here, about the way that the wealthy class spend their money - his notion is that if a wealthy persons spends money on retainers or servants, it creates more employment than if he had spent it on luxury items. It seems to make sense, as the money spent on servants employs people directly whereas money spent on goods is indirect and the producers of goods keep some profit for themselves - but it seems a complete non sequitur.
Another stray note is that a nation engaged in war employs more men as soldiers and sailors. By the same principle, the wages paid directly to these men, drawn from taxes, creates greater employment than it would if the taxpayers were allowed to keep their money and spent it on other things. So long as war can be financed from the revenue of a nation, rather than require the liquidation of its capital, it is highly profitable for a nation.
Back to technology, Ricardo uses beasts of burden as an example that demonstrates that improvements in efficiency are not unprecedented. Prior to the use of horses and oxen for planting, many more men were employed in agriculture - but a single beast can do the work of a dozen men, meanwhile consuming less food. In that way, agriculture employs a fraction of the number of farm laborers who were once required. When the great majority of the population still involved in farm labor, the condition of men was miserable - and while there may have been a clamor at the time to desist in the use of beasts to save the employment of men, it is fortunate that this course was not taken.
With this in mind, Ricardo hopes that his reckoning about the influence of technology on the laboring class should not support the notion that machinery should be demonized. While negative effects cannot be altogether denied, they are poignant only when technological advances are sudden and extensive. If the advance is gradual and limited, the transition of labor to more effective purposes can be made more gracefully.
Where population increases rapidly, so does the demand for food. The increased demand for food results in an increase in its price, and the price demanded for labor. Increased (farm) labor costs further increases the price of food, again increases demand for wages, and the cycle continues, causing food to be more dear than other commodities. This is the reason many markets remain "stuck" at the agricultural level of development: unless and until technology enables more food to be produced with less labor, the cycle of price-wage increases for basic necessities is perpetuated.
In Ricardo's time, food could be produced very cheaply in colonies, and sufficient profit enjoyed in agricultural markets to import other goods, such that there was no incentive to enter manufacturing; meanwhile in developed nations of Europe, the cost of labor made it less profitable to produce food for domestic consumption than to produce goods that could be traded abroad for food. This will perpetuate until the cost of labor abroad increases, encouraging development in colonies and food production in their mother countries: while land is available cheaply, labor is in limited supply.
The employment of machinery, Ricardo asserts, "could never be safely discouraged." People will always seek to apply their time and resources to those productive tasks that provide the greatest value, and so long as technology is more cost-effective than labor, it will be adopted. (EN: There is no mention of quality, but my sense is that no generalizations can be made. The conclusion remains the same regardless of whether the demand for a certain quality of good is either dismissed or taken entirely for granted.)
Where a State forbids the adoption of technology for domestic producers, they are not able to be competitive with producers from abroad who use the technology. The goal of protecting the livelihood of the people is therefore still not accomplished, and likely exacerbated, as the market loses not only those jobs eliminated by the efficiency of production, but also the jobs that would have remained.
As such, the greater threat to the State is not the loss of some employment in a given industry as a result of technological advancement, but the loss of all employment in a given industry if other nations avail themselves of the advantages that the State forbids to domestic producers, as well as the employment of industries that produce and supply raw materials.