the trade be opened than, it is self-evident, the value of
the two commodities, estimated in each other, would come to a level in
both countries.
If we knew what this level would be, we should know in what proportion
the two countries would share the advantage of the trade.
When each country produced both commodities for itself, 10 yards of
broad cloth exchanged for 15 yards of linen in England, and for 20 in
Germany. They will now exchange for the same number of yards of linen in
both. For what number? If for 15 yards, England will be just as she was,
and Germany will gain all. If for 20 yards, Germany will be as before,
and England will derive the whole of the benefit. If for any number
intermediate between 15 and 20, the advantage will be shared between the
two countries. If, for example, 10 yards of cloth exchange for 18 of
linen, England will gain an advantage of 3 yards on every 15, Germany
will save 2 out of every 20.
The problem is, what are the causes which determine the proportion in
which the cloth of England and the linen of Germany will exchange for
each other?
This, therefore, is a question concerning exchangeable value. There must
be something which determines how much of one commodity another
commodity will purchase; and there is no reason to suppose that the law
of exchangeable value is more difficult of ascertainment in this case
than in other cases.
The law, however, cannot be precisely the same as in the common cases.
When two articles are produced in the immediate vicinity of one another,
so that, without expatriating himself, or moving to a distance, a
capitalist has the choice of producing one or the other, the quantities
of the two articles which will exchange for each other will be, on the
average, those which are produced by equal quantities of labour. But
this cannot be applied to the case where the two articles are produced
in two different countries; because men do not usually leave their
country, or even send their capital abroad, for the sake of those small
differences of profit which are sufficient to determine their choice of
a business, or of an investment, in their own country and neighbourhood.
The principle, that value is proportional to cost of production, being
consequently inapplicable, we must revert to a principle anterior to
that of cost of production, and from which this last flows as a
consequence,--namely, the principle of demand and supply.
In order to apply
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