Economies of scale

“ The increased effectiveness which comes by reason of the increased population attaches to all labour, and the gain on the superior qualities of land will more than compensate for the diminished production on the quality last brought in. The aggregate wealth production, as compared with the aggregate expenditure of labour, will be greater, though its distribution will be more unequal. ”

“ I maintain, as I think you have done, that consumption as compared with production is always greatest where capital is most accumulated. Diminish the capital of England one half, and you undoubtedly augment profits, but it will not be in consequence of a greater proportion of demand but of a greater proportion of production; demand as compared with production could hardly fail to diminish. Individuals do not estimate their profits by the material production, but nations invariably do. ”

“ Bulky commodities and the price of labour will only be raised in this particular country, because the level of currency will be somewhat raised; labour will in the real measure of value be rather lowered, that is to say, the portion of produce paid to the labourer, manufactured and raw produce, together, will probably be rather increased, but in consequence of free trade and a better distribution of capital, the proportion of the whole produce of a given capital which the labourer will receive, will be diminished ”

“ Thus when the scale of demand is found to preponderate, he ought to give encouragement to the establishment of new undertakings, for augmenting the supply, and for preserving prices at their former standard: when the scale of work is on the preponderating hand, then every expedient for increasing exportation must be employed, in order to prevent profits from falling below the price of subsistence. ”

“ To the superficial observer the collateral conditions of the scale would appeal with force; but men who look at the fitness of things, and who do not measure that fitness by a small period or single phase of our industrial life, are fully aware that all kind of trade seasons are required to supply a proper test—these recognise that the scale, with proper adjustments, is bound to be an equitable means of adjusting wages. ”

“ We have investigated the laws which determine the value of two classes of commodities: the small class which, being limited to a definite quantity, have their value entirely determined by demand and supply, save that their cost of production (if they have any) constitutes a minimum below which they cannot permanently fall; and the large class, which can be multiplied ad libitum by labour and capital, and of which the cost of production fixes the maximum as well as the minimum at which they can permanently exchange. ”

“ There is another balance, indeed, which has already been explained, very different from the balance of trade, and which, according as it happens to be either favourable or unfavourable, necessarily occasions the prosperity or decay of every nation. This is the balance of the annual produce and consumption. If the exchangeable value of the annual produce, it has already been observed, exceeds that of the annual consumption, the capital of the society must annually increase in proportion to this excess. ”

“ We increase, therefore, in population, at the rate of about four per centum per annum. Supposing the increase of our production to be in the same ratio, we should, every succeeding year, have of surplus produce, four per centum more than that of the preceding year, without taking into the account the differences of seasons which neutralize each other. If, therefore, we are to rely upon the foreign market exclusively, foreign consumption ought to be shown to be increasing in the same ratio of four per centum per annum, if it be an adequate vent for our surplus produce. ”

“ He who produces from and upon better grades will naturally achieve greater or better results with the same expenditure of Labor than he who produces from poorer grades. This difference is measureable by variations in the productive grades of Land, from nothing in excess of production cost on the lower side of the Margin of Production—the poorest in demand, the Economic frontier—to something in excess of production cost on the higher side of the Margin, the hither side of the Economic frontier, and to more and more for higher and higher grades up to the best. ”

“ It will be seen that the quantity of capital which will, or even which can, be accumulated in any country, and the amount of gross produce which will, or even which can, be raised, bear a proportion to the state of the arts of production there existing; and that every improvement, even if for the time it diminish the circulating capital and the gross produce, ultimately makes room for a larger amount of both than could possibly have existed otherwise. ”

“ But, as I have supposed the measure of our increasing production to be furnished by that of our increasing population, so the measure of their power of consumption must be determined by that of the increase of their population. Now, the total foreign population, who consume our surplus produce, upon an average, do not double their aggregate number in a shorter term than that of about one hundred years. Our powers of production increase then, in a ratio four times greater than their powers of consumption. ”

“ If we had then an invariable standard, by which we could measure the variation in other commodities, we should find that the utmost limit to which they could permanently rise, was proportioned to the additional quantity of labour required for their production; and that unless more labour were required for their production, they could not rise in any degree whatever. ”

“ A kind of equilibrium establishes itself between the value of all the productions of the land, the consumption of the different kinds of commodities, the different sorts of works, the number of men employed at them, and the price of their wages.
Wages can be fixed and remain constantly at a definite point only in virtue of this equilibrium, and of the influence which all the parts of the society, all the branches of production and commerce, exercise upon one another. ”

“ The natural price of all commodities excepting raw produce and labour has a tendency to fall, in the progress of wealth and population; for though, on one hand, they are enhanced in real value, from the rise in the natural price of the raw material of which they are made, this is more than counterbalanced92 by the improvements in machinery, by the better division and distribution of labour, and by the increasing skill, both in science and art, of the producers. ”

“ Men may compute the probable profits of labour employed in manufacturing, by computing the cost of raw material with the expense of manufacturing it, and what it sold for. But the enormous wealth that has accrued to America,—by the increase of population incident to manufacturing, by the development of its resources, and the gigantic improvements that have followed it—would be utterly out of the reach of all human industry to compute. ”

“ This negative balance for the means of production may be only imaginary in part. The increasing productivity of labour ensures that the means of production grow faster in bulk than in value, in other words: means of production become cheaper. As it is use value, i.e. the material elements of capital, which is relevant for technical improvements of production, we may [Pg 338] assume that the quantity of means of production, in spite of their lower value, will suffice for progressive accumulation up to a certain point. ”

“ In manufactures, accordingly, the causes tending to increase the productiveness of industry, preponderate greatly over the one cause which tends to diminish it: and the increase of production, called forth by the progress of society, takes place, not at an increasing, but at a continually diminishing proportional cost. ”

“ And so, where production is carried on by the division of labour between individuals, an increase in the power of producing one of the things sought by production in the aggregate adds to the power of obtaining others. It will increase the production of the other things to an extent determined by the proportion that the saving of labour bears to the total amount of labour expended, and by the relative strength of desires. ”

“ The materials of manufacture being all drawn from the land, and many of them from agriculture, which supplies in particular the entire material of clothing; the general law of production from the land, the law of diminishing return, must in the last resort be applicable to manufacturing as well as to agricultural history. As population increases, and the power of the land to yield increased produce is strained harder and harder, any additional supply of material, as well as of food, must be obtained by a more than proportionally increasing expenditure of labour. ”

“ Commodities, though they continue to rise and fall, in proportion as more or less labour is necessary to their production, are also affected in their relative value by a rise or fall of profits, since equal profits may be derived from goods which sell for 2,000l. and from those which sell for 10,000l.; and consequently the variations of those profits, independently of any increased or diminished quantity of labour required for the goods in question, must affect their prices in different proportions. ”

“ In assuming that capital earns a twentieth of itself in a year, we may use a commodity standard of measurement. A grocer's capital of twenty barrels of sugar may become twenty-one barrels, and his flour and his tea increase in a like proportion. In the simplest illustration that could be given of a capital earning five per cent a year, we should assume that each kind of productive instrument in a man's possession increases in quantity, during the year, by that amount. If he be a manufacturer, his mill becomes a hundred and five feet long, instead of a hundred feet. ”

“ If we are at all to distinguish a natural or normal rate of wages from the fluctuating rates of the market, that natural or normal rate will be found really to depend, not on the cost of producing subsistence, but on the amount or rate of general production, or the amount of production per capita in the community, or, in other words, on the average productivity of labour. ”

“ As I said, we've got experts from a wide range of business sectors, and what we're going to talk about is, are there mechanisms that we can start putting in place where we see the kind of growth that used to characterize the U.S. economy -- export-driven growth, manufacturing growth, growth that pays high wages and provides high living standards for a broad-based middle class. ”

“ We may confine our attention to the system of distribution which is the most complex, and which virtually includes all others—that in which the produce of manufactures is shared between two classes, labourers and capitalists, and the produce of agriculture among three, labourers, capitalists, and landlords.
The characteristic features of what is commonly meant by industrial progress, resolve themselves mainly into three, increase of capital, increase of population, and improvements in production ”

“ We demand that the volume of circulating medium be speedily increased to an amount sufficient to meet the demands of the business population of this country and to restore the just level of prices of labor and production. ”

“ The efficiency of the new manufacturing processes has provided a large surplus of goods that must be taken somewhere, exchanged for food and raw materials, which must, in turn, be brought to the producers of manufactured goods. In the course of these transactions, a generous share of the values produced goes, in the form of profit, to the owners of the industry, another considerable portion goes into reinvestment, thus swelling the volume of productive capital.
The increased wealth, the larger capital and the greater amount of surplus all make possible the maintenance of a larger population. ”

“ But, in the other sense, that of cost, a country gets a commodity cheaper when it obtains a greater quantity of the commodity with the same expenditure of labor and capital. In this sense of the term, cheapness in a great measure depends upon a cause of a different nature: a country gets its imports cheaper, in proportion to the general productiveness of its domestic industry; to the general efficiency of its labor. ”

“ If, instead of growing our own corn, or manufacturing the clothing and other necessaries of the labourer, we discover a new market from which we can supply ourselves with these commodities at a cheaper price, wages will fall and profits rise; but if the commodities obtained at a cheaper rate, by the extension of foreign commerce, or by the improvement of machinery, be exclusively the commodities consumed by the rich, no alteration will take place in the rate of profits. ”

“ The power of permanently underselling can only, generally speaking, be derived from increased effectiveness of labour; and this, when obtained by a more extended division of employment, or by a classification tending to a better economy of skill, always implies a greater produce from the same labour, and not merely the same produce from less labour: it increases not the surplus only, but the gross produce of industry. ”