Impact of the Corn Laws

The Corn Laws were a series of policies which aimed to stabilize the price of corn by imposing some tariffs and restrictions on corn imports. For example, they prohibited the importation of wheat when the home price fell below 80 shillings a quarter. The Parliament discussed them between the 1815 and 1846. The issue interested all the social classes, as corn was the principal food of the labouring class and farm animals, and its price variations concerned landlords’ rents. The heated debate involved several economists and statesmen, who argued on the benefits and disadvantages of the policies from different perspectives. One of its most fervid supporter was Thomas Malthus, who gave a particular contribution on the Corn Laws debate between 1814 and 1815. Although Malthus was, in general, in favour of the principle of free trade, he argued that Corn Laws could have been a stimulus for the British agricultural production. He thought that, in order to protect the agricultural sector and promote the expansion of grain production, was necessary to set a high tariff on the import of wheat and other grains, as “Great Britain should naturally grow an independent supply of corn.” (Malthus 1814, p.7), to be less dependent from grain imports. In this particular circumstance, a system of free trade would have created supply problems in period of scarcity, whilst Corn Laws would have protected crop prices and landlords’ rents.

On the issue Malthus wrote, first in 1814, Observations on the effect of the corn laws and, then in 1815, Grounds of an opinion on the policy of restricting the importation of foreign corn. Through his essays, he attempted to enlighten the pro and the cons of the policies aiming “to state […] what appear to me to be the advantages and disadvantages of each system” (Malthus 1815, p.1). He thought that was needed a clarification about the issue as “some important considerations have been neglected on both sides of the question” (Malthus 1814, p.1). At the beginning of his Observations (1814)he concentrated his analysis in refusing the Adam Smith’s argument in favour of corn export, labelling the idea as “fundamentally erroneous” (p.1). Malthus (1814) wrote that Adam Smith considered the corn

             so peculiar a nature, that its real price cannot be raised by an

             increase of its money price […] the rise of money price […] can

             have no such effect. (p.2).

In Adam Smith’s view, it was not possible to stimulate the economic production by setting tariffs to alter the money price of corn. An incentive on corn export would have increased just the nominal price of corn, leading to an equivalent increase in the wages and in the prices of all other commodities. However, he believed that it is only through variations in the real price of corn that it was possible to encourage economic production. Malthus (1814) opposed the Adam Smith’s argument, stating that, since corn is conditioned by the general principles of demand and supply, like other commodities, “it is possible to encourage cultivation by Corn Laws” (p.5). Malthus wrote that workers do not spend all their wages in corn or grain, and so wages do not adjust exactly in proportion to corn price variations in presence of free trade, but at a slower rate. Because of that, a tariff or a restriction on the importation of grain would have increased the real price of the corn, and so given an economic incentive to expand and invest in agricultural production.

It is of interest to observe that, in his analysis, Malthus is particularly concerned with the condition of the labouring class believing that “a high money price of corn would give the labourer a very great advantage in the purchase of the conveniences and luxuries of life” (Malthus 1815, p.10). Opponents, like Ricardo, argued, in favour of extending the free trade, that corn restrictions should have been reduced and tariffs removed to bring down the price of corn. That would have help the poor and permit a significant reduction of the wage by raising the profits. On the contrary, Malthus stated that free trade in grain imports would have worsen labouring class conditions and reduced British agricultural production, believing that

                    a considerable fall in the price of corn could not take place,

                    without throwing much poor lad out of cultivation, and […]

                    preventing […] further improvements in agriculture, which have

                    for their object an increase of produce. (Malthus 1815, p.2).

The problem is that a fall in the price could not be balanced by a reduction of the expenditures as

                    It is a great mistake to suppose that the effects of a fall in

                    the price of corn on cultivation may be fully compensated

                    by a diminution of rents (Malthus 1814, p.7).

Because of that, if a diminution in the price is not proportionally balanced by a reduction in the expenses,

                    the price of the produce will not leave a fair remuneration for

                    the capital employed […] no sufficient motive can exist to undertake

                    the projected improvement (Malthus 1814, p.7).

The economist Jean-Baptiste Say was convinced that supply created its own demand as we can deduct from his Treatise (1855) “leads us to a conclusion […] it is production which opens a demand for products” (p.99). In his view, a general glut was impossible, as everything that was produced was also consumed, so was not dangerous for British economy to import commodities from abroad. In Say’s view of economy every good is exchanged with another one as the production of a good creates also a market in which exchanges it. However, Malthus recognized that he was not thinking in terms of effectual demand. He thought that is not only through the power of purchase, but is also the willingness to paid for something that the effective is created. In Malthus’ view, to create a good level of effectual demand was necessary “an adequate taste for unproductive consumption” (Malthus 1836, p.217) to cope “periods of commodity glut and capital redundancy” (Rima 2009, p.139). Through Corn Laws, corn price would have risen and so lands’ rents, thus creating a source of ‘unproductive consumption’. Malthus (1903, quoted in Rima 2009, p.133) was particularly concerned with the increase of rents as an incentive to British agricultural production, “has perhaps a particular claim to our attention […] respecting the Corn Laws, and the effects of rent of […] the progress of agricultural improvement.”

Furthermore, Malthus (1836) pointed out that economies did not take into account the increase in the size of population that makes a “pressure […] against the limits of subsistence” (p.16) and so “does not furnish an effective stimulus to the continued increase of wealth” (p.16). He considered impossible for Britain to build a real independence from foreign corn as he wrote in his Observations (1814)

                    few things seem less probable, than that Great Britain should

                    naturally grow an independent supply of corn (p.7).

Malthus observed that the food insufficiency is due to the free trade which, offering the grain at a cheaper price, stimulates population growth. Malthus showed that population grows geometrically while food supply grows arithmetically and so “if the ports were open, the usual price of corn would certainly fall, and probably the average price” (Malthus 1815, p.10), and that would stimulate population growth whose food demand would be higher than the supply.

Not only the labouring class but also the farmers, in his opinion, will suffer from the opening of the ports, as the only ones who would benefit from that are “those who are directly engaged in foreign trade” (Malthus 1815, p.10). Malthus (1815) recognized that wealth consist primarily in the quantity of produce so was “necessary that commerce should make a very powerful start” (p.10). However, he also pointed out that the conditions in the current state of Europe were not optimal because of the “prevailing jealously of our manufactures, such a start seems quite doubtful” (p.10).

The debate around Corn Laws involved economist who tried to prove their ideas providing example taken from economic realities of other countries and theoretical concepts like the general principles of supply and demand. In particular, Malthus’s reasoning was based on rejecting the current economic framework, supporting the Corn Laws through concrete examples and logical arguments.

References:

• Malthus, T. R. (1814). Observations on the Effects of the Corn Laws. London: J.Murray. p.1-7.

• Malthus, T. R. (1815). Grounds of an opinion on the Policy of Restricting the Importation of Corn. London: Murray. p.1-2, 9-13.

• Malthus, T. R. (1836). Principles of Political Economy. London: W. Pickering. p.214-226

• Malthus, T. R. (1903). An Inquiry into the Nature of Rent. Edited by J. R. Hollander. Baltimore, John Hopkins Press. Quoted in Rima, Ingrid Hahen (2009). Development of Economic Analysis. London: Routledge. p. 133

• Rima, Ingrid Hahen (2009). Development of Economic Analysis. London: Routledge.

• Say, J-B. (1855). A Treatise on Political Economy; or the Production, Distribution, and Consumption of Wealth. 4th ed. Philadelphia: Lippincott, Grambo & Co. p.99-104.

• Sowell, Thomas (2008). Say’s Law. The New Palgrave Dictionary of Economics, Second Edition, 2008. URL: http://www.dictionaryofeconomics.com/article?id=pde2008_S000028&edition=current&q=say&topicid=&result_number=3