Ricardo and the Corn Laws: a revision Samuel Hollander I was delighted to observe in your book how forcibly you de- scribed the inexhaustible energies of this tight little Island. -HUTCHES TROWERto Ricardo, 9 November I817 I Perhaps the best-known feature of Professor J. A. Schumpeter’s fa- mous account of Ricardian economics in his History of Economic Analysis is the severe criticism of the so-called Ricardian Vice-“the habit of piling a heavy load of practical conclusions upon a tenuous groundwork, which was unequal to it yet seemed in its simplicity not only attractive but also convincing.”’ More specifically: His interest was in the clear-cut result of direct, practical signifi- cance. In order to get this he cut that general system to pieces, bundled up as large parts of it as possible, and put them in cold storage-so that as many things as possible should be frozen and “given.” He then piled one simplifying assumption upon another until, having really settled everything by these assumptions, he was left with only a few aggregative variables between which, given these assumptions, he set up simple one-way relations so that, in the end, the desired results emerged almost as tautologies. The habit of applying results of this character to the solution of practical problems we shall call the Ricardian Vice. SAMUELHOLLANDER is Professor of Economics at the University of Toronto. I. Schumpeter, A History ofEconomic Analysis (New York, 1954), p. 1171. 2. Ibid., pp. 472-3. See also pp. 541, 618, 653 n., 668. In his exhaustive new study of McCulloch, Professor O’Brien draws a sharp distinction between the procedures of his subject and those of Ricardo: “Ricardo was the abstractionist par excellence: and as a pure theoretician he has had very few intellectual equals.” By contrast, for McCul- loch, “abstract ideas on their own were of very little interest, it was their practical conclusions, taking account of peculiar circumstances, which were important to McCul- loch. He was sufficiently well informed of the facts to be relatively free from the ‘Ricardian Vice.’ ” Cf. D. P. O’Brien, J. R. McCulloch: A Study in CIassical Econom- ics (London, 1970), p. 403. Downloaded from http://read.dukeupress.edu/hope/article-pdf/9/1/01/431569/ddhope_9_1_1.pdf by guest on 23 September 2021 2 History of Political Economy 9:l (1977) A second and related feature of Schumpeter’s account-an illus- tration, as it were, of the Ricardian Vice-is his scathing criticism of Ricardo’s “pessimistic” conception of economic development (attrib- uted, however, also to Malthus, West, and James Mill), that is, an emphasis upon population pressure and diminishing agricultural re- turns, a declining rate of profit, and approximate constancy of real wages: The most interesting thing to observe is the complete lack of imagination which that vision reveals. Those writers lived at the threshold of the most spectacular economic development ever witnessed. Vast possibilities matured into realities under their very eyes. Nevertheless they saw nothing but cramped econ- omies, struggling with ever-decreasing success for their daily bread, They were convinced that technological improvement and increase in capital would in the end fail to counteract the fateful law of decreasing returns. In other words, they were all stagnationists. Or, to use their own term, they all expected, for the future, the advent of the stationary state, which here no longer means an analytical tool but a future realitye3 Schumpeter’s primary charge is by no means to be lightly dis- missed. Ricardo’s use of Say’s Law is so rigid and unqualified, com- pared for example with the applications made by Say himself, that Schumpeter’s harsh words appear to be substantiated. But as far as concerns the Corn Law issue it will be our contention that Schumpe- ter has drawn a misleading picture of Ricardo’s economics. We shall try to show, by reference to his argument for Corn Law repeal, that Ricardo did not envisage the “pessimistic” predictions which appar- ently flow from the theoretical growth model to be of great practical relevance and this because of the allowances he made for technolog- ical progress not only in agriculture but, equally significantly, also in In some respects Schumpeter’s conception of Ricardo was also that of Keynes: “Ricardo offers us the supreme intellectual achievement, unattainable by weaker spirits, of adopting a hypothetical world remote from experience, as though it were the world of experience, and living in it consistently.” The General Theory of Em- ployment, Interest and Money (London, 1936), p. 192. J. L. Mallet, diarist of the Political Economy Club made a similar criticism. Ricardo, he complained in 1820, “is as the French would express it ‘he‘risse‘ de principes,’ he meets you upon every subject that he has studied with a mind made up, and opinions in the nature of mathematical truths. It is this very quality of the man’s mind, his entire disregard of experience and practice, which makes me doubtful of his opinions on political economy.” The Political Economy Club: Centenary Volume (London, 1921), p. ix. 3. Schumpeter, p. 571. Downloaded from http://read.dukeupress.edu/hope/article-pdf/9/1/01/431569/ddhope_9_1_1.pdf by guest on 23 September 2021 Hollander - Ricardo and the Corn Laws 3 manufacturing. Ricardo had great faith in British prospects despite agricultural protection, and neither the charge of too rapid a transfer from theory to policy in this context nor that of a failure to allow sufficiently for technological developments stands up to close exami- nation. We must distinguish at the outset the proposition that the Corn Laws rendered the profit rate in Britain, and accordingly the rate of capital accumulation, lower at any and every point of time than would otherwise be the case in an open economy-so that repeal would entail a once-and-for-all rise in the profit rate-from the “prediction” that in a protected regime the rate of profit will undergo a secular decline. Ricardo frequently emphasized that the price of corn would fall and the profit rate rise if import restrictions were abolished. This “prediction” obviously entailed certain estimates relating to domestic and foreign cost structures in the agricultural sector and the commod- ity wage rate. But this kind of proposition-of a comparative statics order-is very different from and in no way necessarily implies a historical generalization whereby in a closed system the rate of return will undergo a decline or probable decline with the passage of time. It stands whether or not the rate of profit was actually falling or could be expected to fall in the future (and we may add whether or not the domestic rate was below that of foreign countries). The present article provides evidence which confirms the validity of the opinion given by Dr. G. S. L. Tucker in his work Progress and Profits that “Ricardo’s principal conclusion, immanent throughout his work, was that profits and the rate of new capital accumulation were lower in Britain than they might otherwise have been under a more enlightened economic policy; in this sense he believed an important benefit was being sac- rificed merely for the sake of promoting the self-interest of land- owners. But even if the Corn Laws were not repealed, Englishmen could still look forward to a long period of economic pr~gress.”~ In addition to his objection to agricultural protection turning upon the effect upon the rate of profits in the sense outlined above, Ricardo also opposed the Corn Laws as a source of severe short-run or sea- sonal fluctuations in British grain prices and as a source of serious allocative inefficiency. The relative weight placed upon these three major objections to protection cannot be easily ascertained. But as they are in any event complementary to one another it is not really essential to carry the issue very far for an appreciation of Ricardo’s hostility towards the Corn Laws. 4. Tucker, Progress and Profits in British Economic Thought: 1650-1850 (Cam- bridge, 1960), p. 162. Downloaded from http://read.dukeupress.edu/hope/article-pdf/9/1/01/431569/ddhope_9_1_1.pdf by guest on 23 September 2021 4 History of Political Economy 9:l (1977) There is a considerable body of recent secondary literature which goes some way towards qualifying Ricardo’s supposed historical bbpessimism.” Professor Mark Blaug’s study Ricardian Economics illustrates what we have in mind. We are told that in Ricardo’s view “if the corn laws are not abolished to permit the transfer of resources to industry, the course of events must undermine the possibilities of further capital accumulation and retard industrial progress,”5 while in the absence of the Corn Laws “Ricardo believed that England was capable of becoming ‘the workshop of the world.’ . Indeed, the alleged ‘pessisism’ of Ricardo was entirely contingent upon the main- tainence of the tariff on raw produce.”6 By contrast, Schumpeter does not qualify in this manner his “pessimistic” attributions to -Ricardo regarding British prospects. The theoretical background against which this approach to the Corn Laws is viewed remains, however, ’much the same as that outlined in our compte rendu of Schumpeter’s position, namely, diminishing agricultural returns cou- pled with Malthus’s population doctrine, which together imply a con- stant rate of commodity wages and a downward trend in the rate of profits until that minimum acceptable level which characterizes the advent of the so-called “stationary state” of zero net accumulation and population growth: “without what Ricardo called ‘a substantially free trade in corn,’ the Ricardian ‘engine of analysis’ predicted a 5.