16: Wealth and Happiness
Wealth and happiness are often connected, but it cannot be assumed that one relies completely upon the other. Upon further consideration, wealth is a means by which other things are obtained - an in many instances, those things obtained by wealth are a means to achieving a state of happiness, or a relief from the causes of unhappiness - if they can be obtained.
A wealthy man, distracted by hunger, uses his wealth to buy food to consume to alleviate the unpleasant distraction and return to a state of happiness - even though this diminishes his wealth. However, a man with great wealth who is miserly, and prefers his coin to a meal, will remain hungry, hence unhappy; and even a man who has much wealth in a situation where there is no food to be purchased remains unhappy.
It's noted that Adam Smith defines the wealth of a nation to consist of the productivity of the land and labor, rather than the possession of currency, which itself is merely a token of exchange.
This also holds true on the grander scale of a society: to merely increase the assets of the poor, by charity or a mandated wage, does nothing to increase the stock of goods available to the society: where people are paid more to produce the same amount, there is ultimately no benefit because there is nothing more to be had for the additional wealth. Prices merely rise, as labor is an input to their production, but without additional goods to be purchased, the nominal increase in the amount of money has no real effect on the welfare of the people.
The problem is most obviously demonstrated in the condition of the laboring poor. There can be no doubt that an increase in wages without an increase in the quantity of goods can only result in an increase in the price of goods (the wages of labor being an expense of production), and the two balance to leave the laborer in the same state as before.
It may be said in the short term that the rise in wages give the laboring class additional purchasing power until the price of goods has adjusted. But again, additional purchasing power does not mean that there exist any more goods to be purchased. Those who rush to spend their wages will clean out the market, creating scarcity of goods for those who spend their wages more conservatively. So the situation is better for some than others, but the overall equation remains balanced - the newfound benefit of some countered by the newfound misery of others.
It might also be said that the increase in wages in one market would encourage the import of provisions from another. But not only is this likely to harm domestic production (people buy cheaper foreign goods rather than domestic ones, means less production, labor, and wages), but it overlooks that trade among nations is akin to trade among men. For a period of time, one may be at advantage to another - but over the long run, the trade of goods for money will balance.
He takes England itself as an example to illustrate this point, and the changes that have been noted since the revolution in America divested her of a host. While this was a relatively recent event, it is already being felt in the decrease in demand for English manufactures and the movement of labor from industry to agriculture as the nation must return to producing food domestically.
An interesting side-effect can be seen in the increasing price of meat. When food could be imported, vast tracts of farmland went fallow and could be used for grazing. Now that this land is again being plowed to produce wheat, there is less pasture, and the price of beef is increasing.
Another oblique observation is the change in fashion which, while capricious, does much to reflect the wealth of a nation. The changes Malthus observed in his time was that people were abandoning silk for muslin (cotton) cloth, metal shoe-buckles were being replaced with strings, and the like.
But the most direct effect has been the significant increase of the ranks of the poor. During the time that the colonies provided trade for manufacturers, labor moved from farm to factory, and the farmers learned to be more productive with fewer workers. Now that this demand has fallen, labor is no longer needed in the factories, but there are fewer agricultural jobs to which the displaced factory workers can return.
Adam Smith also made certain observations of China, in which commerce is held in low esteem and merchants are considered the lowest class. Were it not so, it is believed that China, with its great population and tremendous resources, would be a very wealthy nation - or perhaps "more wealth" as the exportation of luxury goods has granted it considerable wealth. However, it is observed that "no labor is spared in the production of food." That is, the technology of agriculture remains extremely primitive because, given the multitude of population, there is no incentive for farmers to seek to be more efficient, and no better opportunity for laborers given the low level of manufacturing. While both of these conditions persist, there can be no real improvement in the conditions of the lowest class of laborer: workers would move from "the healthy labors of agriculture" to "the unhealthy occupations of manufacturing" while the real wages of labor would remain stationary or even decline.