Note 200-3 — Chapter VI

We very frequently hear that countries with high wages must be outflanked in a neutral market by countries with a low rate of wages. Ricardo's disciples reject this, because a decrease in the profit would put the undertaker in a condition to bear the loss caused by the high wages paid. See Report of the Select Committee on Artisans and Machinery. Senior ridicules such reasoning very appropriately by inquiring: "Might not the loss enable him to bear the loss?" Outlines, 146. And so J. B. Say thinks that wages are always lowest when undertakers are earning nothing. The truth is rather this: a country with a relatively high rate of wages cannot, in a neutral market, offer those commodities the chief factors required for the production of which is labor; but the comparatively low rate of interest or low rents, or the lowness of both found in connection therewith, must fit it to produce other commodities very advantageously. If, therefore, the rate of wages rises, the result will be to divert production and exports into other channels than those in which they have hitherto flowed. The old complaint of Saxon agriculturists, that there is a lack of labor in the country, is certainly very surprising in a nation as thickly populated as Saxony. But the remedy proposed by the most experienced practitioners consists chiefly in a higher rate of wages to enable workmen to care for themselves in old age, the introduction of the piece-work system and an increase of agricultural machines. But it seems to me, that the whole situation there points to the advantage of in part limiting the large farming hitherto practiced to live-stock raising and other branches in which labor may be spared, and in part of replacing it, by small farming of plants which are objects of trade.

Many points belonging to this subject have been very well discussed by J. Tucker, in his refutation of Hume's theory on the final and inevitable superiority of poor countries over rich ones in industrial matters. (Four Tracts on political and commercial Subjects, 1774, No. 1; L. Lauderdale, Inquiry, 206.)