His second part is chiefly remarkable for his defence of what is known as the wages fund doctrine,to which we advertedwhen speaking of Senior.(58)Mill had given up this doctrine,having been convinced by Thornton that it was erroneous;butCairnes refused to follow his leader,who,as he believes,ought not to have been convinced.(59)After having given what iscertainly a fallacious reply to Longe's criticism of the expression "average rate of wages,"he proceeds to vindicate thedoctrine in question by the consideration that the amount of a nation's wealth devoted at any tie to the payment of wages--ifthe character of the national industries and the methods of production employed remain the same--is in a definite relation tothe amount of its general capital;the latter being given,the former is also given.In illustrating his view of the subject,heinsists on the principle (true in the main,but too absolutely formulated by Mill)that "demand for commodities is notdemand for labour,"It is not necessary here to follow his investigation,for his reasoning has not satisfied his successors,with the exception of Fawcett,and the question of wages is now commonly treated without reference to a supposeddeterminate wages fund,Cairnes next studies trades-unionism in relation to wages,and arrives in substance at the conclusionthat the only way in which it can affect their rate is by accelerating an advance which must ultimately have taken placeindependently of its action.He also takes occasion to refute Mr.(now Lord)Brassey's supposed law of a uniform cost oflabour in every part of the world.Turning to consider the material prospects of the working classes,he examines thequestion of the changes which may be expected in the amount and partition of the fund out gf which abstinence and labourare remunerated.He here enunciates the principle (which had been,however,stated before him by Ricardo and Senior)thatthe increased productiveness of industry will not affect either profit or wages unless it cheapen the commodities which thelabourer consumes.These latter.being mostly commodities of which raw produce is the only or principal element,their costof production,notwithstanding improvements in knowledge and art,will increase unless the numbers of the labouring classbe steadily kept in check;and hence the possibility of elevating the condition of the labourer is confined within very narrowlimits,if he continues to be a labourer only.The condition of any substantial and permanent improvement in his lot is that heshould cease to be a mere labourer--that profits should be brought to reinforce the wages fund,which has a tendency,in thecourse of industrial progress,to decline relatively to the general capital of a country.And hence Cairnes--abandoning thepurely theoretic attitude which he elsewhere represents as the only proper one for the economist-recommends the system ofso-called co-operation (that is,in fact,the abolition of the large capitalist)as offering to the working classes "the sole meansof escape from a harsh and hopeless destiny,"and puts aside rather contemptuously the opposition of the Positivists to thissolution,which yet many besides the Positivists,as,for example,Leslie and F,A.Walker,regard as chimerical.
The third part is devoted mainly to an exposition of Ricardo's doctrine of the conditions of international trade and Mill'stheory of international values.The former Cairnes modifies by introducing his idea of the partial influence of reciprocaldemand,as distinguished from cost of production,on the regulation of domestic prices,and founds on this rectification aninteresting account of that connection between the wages prevailing in a country and the character and course of its externaltrade.He emends Mill's statement,which represented the produce of a country as exchanging for that of other countries atsuch values "as are required in order that the whole of her exports may exactly pay for the whole of her imports "bysubstituting for the latter phrase the condition that each country should by means of her exports discharge all her foreignliabilities-in other words,by introducing the consideration of the balance of debts.This idea was not new.it had beenindicated by John Leslie Foster as early as 1804,(60)and was touched on by Mill himself;but Cairnes expounds it well;and itis important as clearing away common misconceptions,and sometimes removing groundless alarms.(61)Passing to thequestion of free trade,he disposes of some often-repeated protectionist arguments,and in particular refutes the Americanallegation of the inability of the highly-paid labour of that country to compete with the "pauper labour "of Europe.He is notso successful in meeting the "political argument,"founded on the admitted importance for civilization of developingdiversified national industries;and he meets only by one of the highly questionable commonplaces of the doctrinaireeconomists Mill's proposition that protection may foster nascent industries really adapted to a country till they have struckroot and are able to endure the stress of foreign competition.
We have dwelt at some length on this work of Cairnes,not only because it presents the latest iorms of several acceptedeconomic doctrines,but also because it is,and,we believe,will remain,the last important product of the old English school.
