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38 ANALYSIS AND PROSPECTIVE STUDIES CULTIVAR Issue 22 APRIL 2021 set the short-term destruction of employment and restore employment levels in the long term. These offsetting effects include: (a) jobs involved in making machines; (b) reinvestment by capitalists of the sav- ings from replacing workers with machines; (c) lower wages caused by short-term unemployment and the consequent reabsorption of the unemployed at lower “wage costs”; (d) lower consumer goods prices enabled by mechanisation and the resulting rise in real income and demand; (e) the creation of new products and the resulting creation of jobs to make them. 11 Technological unemployment In 1821, after the publication of McCulloch’s second article, Ricardo came to the conclusion that the ideas he had defended with regard to the consequences of introducing machinery were wrong. In a new chap- ter to the 3rd edition of On the Principles of Political Economy and Taxation , he criticised the “compensa- tion theory”, concluding that the “use of machinery may be attended with a diminution of gross produce [intended to pay wages]; and whenever that is the case,itwillbeinjurioustothelabouringclass.”Inshort, it could cause unemployment and lower wages. 12 Ricardo’s use of the word “may” is important, since despite everything, he actually continued to believe that circumstances existed when the destruction of employment could be compensated by new invest- ment. He believed above all that “The employment of machinery could never be safely discouraged in a State, for if a capital is not allowed to get the great- est net revenue that the use of machinery will afford here, it will be carried abroad …” 13 11 Piva, Mariacristina and Vivarelli, March (2017), “Technological Change and Employment: Were Ricardo and Marx Right?”, IZA DP No. 10471, IZA – Institute of Labor Economics. 12 Ricardo, David (1817), On the Principles of Political Economy and Taxation , 3 rd Edition (1821). London, John Murray, Albemarle Street, p. 454. To McCulloch’s shock, Ricardo granted that “the opinion entertained by the labouring class, that the employment of machinery is frequently detrimental to their interests, is not founded on prejudice and error, but is conformable to the correct principles of political economy” ( ibid. , p. 456). In reply, McCulloch wrote that if Ricardo’s new opinions were correct “the laws against the Luddites are a disgrace to the Statute book” (quoted in Sraffa, ibid. , p. lviii, note 6). 13 Ricardo, ibid. , p. 480. 14 Marx, Karl (1867), Capital: A Critique of Political Economy , Vol. 1, Chapter XV, note 132. 15 Ibid ., Chapter XV, section 6. 16 “The new labour spent on the instruments of labour … must necessarily be less than the labour displaced by the use of the machinery; otherwise the product of the machine would be as dear, or dearer, than the product of the manual labour.” Marx, ibid. In the section of Capital criticising the “compensa- tion theory”, Marx praises Ricardo for the “scientific partiality and love of truth characteristic of him” 14 and targets other “bourgeois political economists” such as James Mill, McCulloch, Torrens, Senior and John Stuart Mill, who “insist that all the machinery that displaces workmen, simultaneously and nec- essarily sets free an amount of capital adequate to employ the same identical workmen”. 15 In contrast, Marx argues that: (a) the destruction of jobs due to the introduction of machinery into the productive process cannot be compensated for by the creation of employment to make the same machinery; 16 (b) the destruction of work due to the mechanisation of an industry may be accompanied by the creation of jobs in other industries of a number (higher or lower than that of the jobs destroyed) that depends on changes to the length of the working day in different industries and the ratio of components of constant capital (applied to the means of production) to vari- ables (applied to wages). Chapter 25 of Capital is dedicated exactly to an anal- ysis, firstly, of the effect of capital accumulation on employment in conditions in which this accumu- lation occurs while the ratio between the constant and variable elements of capital remains constant (i.e. if labour were not replaced by machinery) and, secondly, in conditions closer to the historical expe- rience in which the ratio between constant capital and total capital increases. Marx concludes by saying that if capital accumulates while the ratio between the constant and variable elements of capital remain constant (without the replacement of labour by machinery), the relation-