fl.-i;;
THE LIBRARY
OF
THE UNIVERSITY
OF CALIFORNIA
RIVERSIDE
GIFT OF
Dr. Gordon Watkins
Industrial Freedom:
^ ^tutrg in IpoUtira.
> ^
B. R. WISE,
III
Sovietinie Attorney-General of New South Wales, and Honorary
Member of the Cobden Club.
"War and Tariffs these are the two great enemies of mankind
John Br ght.
" Becau';e right is right, to follow the right is wisdom, in the
scorn of consequence." Tennyson.
CASSELL & COMPANY, Limited
LONDON, PARIS <S- MELBOURNE.
1892.
HFZO^S
L05
0.0
SIR HENRY PARKES, G.C.M.G., etc. etc.
AN HONOURED CHIEF AND FRIEND.
PREFACE.
During the years 1880-82, a few Oxford graduates and under-
graduates, who had been brought together by the influence of
the late Arnold Toynbee, used to meet once a month during
term time, alternately in Oxford and London, for the purpose
of discussing in detail, and with complete frankness, some
specified political or social question.*
One of the subjects frequently referred to at these meetings
was the attitude of the working classes towards Free Trade ;
and it was agreed that some member of the Society should
prepare a paper, under Toynbee's supervision, on the best
means of fixing popular attention on the relation of political
economy to fiscal questions.
The execution of this idea was allotted to the present
writer, and an outline of a pamphlet was prepared and sub-
mitted to Toynbee for criticism in 1882. Toynbee in that
year was engaged upon the London lectures which led to his
last illness, and was, consequently, unable to carry out his plan
of a conjoint work. He did, however, discuss very fully with
the writer, in several conversations, the scheme of the intended
work, and suggested many modifications of that which had
* The nicinbers of this Society, wliich liad no name, vere Arnold Toynbee ;
Alfred Milner, New College, Editor of Toynbee's posthumous work, "The
Industrial Revolution "' ; P. L. (jell, Balliol College ; F. C. Montague, Balliol
College; E. T. Cook, Xew College; D. G. Ritchie, Jesus College; J. A.
Hamilton, Balliol College; J. D. Rogers, Balliol College; Hon. W. Bruce,
Balliol College ; and B. R. Wise, Queen's College. Mr. Ritchie's essay on
"Darwinism and Politics," in Swan Sonnenschein & Co.'s "Social Science
Series," and Mr. Montague's book on "The Limits of Individual Liberty"
(Kegan Paul >S: Co., 1884), both originated in these meetings.
vi Preface.
been originally proposed. The result was that, in 1883, the
manuscript of a pamphlet of about fifty pages, of which the
spirit was Toynbee's, although the words were not, was sub-
mitted to the Cobden Club for publication. By a series of
mischances, this manuscript, of which no copy had been kept,
was lost, and the loss was not made known to the writer until
after the lapse of twelve months, A\hen it was too late to recall
even the form of the argument which Toynbee had suggested.
The original idea was not, however, left unexecuted. In 1885,
the writer embodied something of Toynbee's opinions in a
pamphlet published in Sydney under the title of " Free Trade
and Wages," which is now out of print.
The present work was first intended as a new edition of
this pamphlet ; but as it proceeded, and the stress of controversy
with Protectionists compelled attention to other aspects of the
fiscal question, it gradually assumed a new and distinct form,
until there is now left in it nothing of Toynbee, save some
traces of his influence, and the pious feeling which acknow-
ledges that, as the inception of the work was due to him, so its
execution should be taken as a tribute to his memory. The
writer's best hope is that those who knew Toynbee, and those
who trace no small portion of their better selves to the influence
of his luminous enthusiasm, may not think the tribute alto-
gether unworthy.
One word more upon tlie scope and method of the work.
Written, as it has been, at intervals during the rare and busy
leisure of an active ijrofessional and public life, it cannot lay
claim to either literary or scientific completeness. Its merit, if
any, lies in the directly practical character of its arguments and
illustrations. For seven years the writer has been engaged by
the side of Sir Henry Parkes in the forefront of an active
political controversy with the Protectionists of his native
Preface. vii
country, until he has gained an exceptional familiarity with the
modes of thought and expression that win favour for Protection
among voters. The aim of the work is to make use of this special
knowledge of Protectionist arguments to put together a complete
and scientific statement of the Free Trade case, from the point
of view of one who is addressing himself to the voters of a
Democratic country. There is thus no intention to rival or
supplant other well-known text-books of Free Trade, but rather
to write a work which shall be complementary both to Professor
Fawcett's carefully tabulated index of arguments, and to the
elaborate rhetorical presentment of the case by Mr. Henry
George. If the writer has in places gone beyond this aim, or
departed from his proper method, his excuse is offered in the
language of a fellow-student who, defending himself by antici-
pation from the same charge, urges as follows : " I cannot,"
he says, "think that any man with open and attentive eyes,
and with confidence in his own impartiality, as based upon a
rational view of life, does wrong in uttering the best reflections
he can make on the way in which things are going, or the way
in which he thinks they should go." *
* "Essays and Addresses," by Eerr.ard Eosar.quet, M.A. (London : Swan
Sonnenschein & Co., 1889), p. vi.
Sydney, Fehniarv loth, i8qi.
CONTENTS.
PREFACE
fart X.
THE REVIVAL OF FROTECTION.
CHAPTER I. Its Nature i
II. Its Causes 7
,, III. Its Sigmkicance 19
,, IV. Illustrations 23
{a) Great Britain ... 23
(6) The Continent of Euroie . 42
{c) The United States . . .48
(d) The British Colonies. . . ;6
part XX.
PREPARING THE ARENA.
CHAPTER I. Definition of Free Trade
,, II. Division of the Arguments
,, III. Economics and Politics ....
,, IV. Economics and the Tariff
,, V. Nationalist Economics ....
,, VI. Nationalist Economics and the Tariff
,, VII. Free Trade and Laissez-faire
,, VIII. Protection and Socialism
73
77
87
97
I OS
129
138
159
llart XXX.
THE ECONOMIC ARGUMENT.
CHAPTER I. Free Trade and Production .
,, II. Protection and Production
,, III. Free Trade and Prices
IV. Protection and Prices
165
167
173
181
X Contents.
I'AGE
CHAPTER V. Free Trade and Wages 187
,, VI. Protection and Wages 204
,, VII. Do High Prices make High Wages? . . 207
VIII. Does more Work mean more Money ? . . 221
fart lY.
THE POLITICAL ARGUMENT.
CHAPTER I. The Arguments Classified .... 237
,, II. The Infant Industry Argument . . . 241
,, III. The "Diversification OF Industry"Argument 259
(rt) The Argument Stated . . 259
(b) The Argument Tested bv Facts . 265
(c) The Argument Tested bv Theory . 273
(d) Thb Other Side of the Shield . 278
,, IV. The Home Market Argument. . . . 286
V. The Paui'er Labour Argument . . . 302
VI. The Cost of Protection 323
^ppcntiicc!:
APPENDIX I. Tables of Wages in the English Cotton,
Woollen, Worsted, and Iron Trades . 337
,, II. An Examination of J. S. Mill's supposed
approval of Protective Tariffs in a
Young Country 343
,, III. Comparison of the Progress of New South
Wales under Free Trade with that of
Victoria under Protection .... 347
INDUSTRIAL FREEDOM:
A STUDY IN POLITICS.
SUMMARY.
flart Im
THE PROTECTIONIST REVIVAL.
CHAPTER I.
ITS NATURE.
THE CHARACTERISTICS OF THE MODERN PROTECTIVE
SPIRIT Page I
Modern Protection differs from the old form of that poHcy
{a) In the composition of the party who support it.
{b) In its objects.
In consequence of this difference, EngHsh Free Trade argu-
ments are not necessarily applicable to the present dispute.
CHAPTER II.
ITS CAUSES.
CAUSES WHICH HAVE AIDED THE REVIVAL OF
PROTECTION Page 7
The revival of Protection has been assisted by a misconception
of the nature of Free Trade, arising from several circumstances,
viz. :
{a) The mistake of Free Traders in directing their
arguments principally to the effect of Free Trade
upon the production of wealth, instead of to the
question of its effect on wages.
xii " Summary.
{b) The supposition that Free Trade is hostile to the
working classes.
{c) The supposition that Free Trade requires a general
adoption of the principle oi laissez faire.
{d) The supposition that Free Traders are indifterent
to the evils of the competitive system.
ie) The growing discontent with existing social con-
ditions.
Summary.
CHAPTER III.
ITS SIGNIFICANCE .... Page 19
1. The Protectionist revival is often exaggerated, both
{a) In its extent.
{b) In its significance.
2. The mere fact of Protection creates no inference against
the wisdom of Free Trade. The truth is that Protection has
been adopted for varying reasons of a special, local, and tem-
porary character. There has been no general revolt against
Free Trade, and no deliberate rejection of the policy.
THE REVIVAL OF RESTRICTION.
CHAPTER IV.
ILLUSTKAl IONS.
SECTION I. GREAT BRITAIN. . . Page!},
I. Protectionists treat the example of Great Britain in two
ways : either, they admit that Free Trade is proved to be a
success for her ; or, they say it is a " one-sided Free Trade,"
and not the Free Trade that was desired.
Summary. xiii
2. The success of Free Trade in Great Britain is an incon-
testable historical fact.
3. Summary of investigation of the subject : Mr. Giffen's
researches on the magnitude of the general advance in pro-
sperity since Free Trade.
4. The Protectionist assertion that this increase has been
caused entirely by railways and other mechanical improvements
is improbable, because
{a) A sudden or (except on the hypothesis that it is
due to Free Trade) an inexplicable advance in
trade has taken place after every dose of Free
Trade legislation.
{/i) The mechanical factor, when working without
Free Trade, has produced a less result.
5. Examination of the statement, that England adopted
Free Trade under the mistaken belief that other nations would
follow her example.
6. The statement is not historically true. Conclusion :
The significance of the Anti-Corn Law agitation, and the
arguments by which it was supported, are in no way weakened,
either by the experience of forty-five years, or by inquiries into
the motives and anticipations of the Free Trade leaders.
Notes on the condition of England under Protection :
XoTi-: A, Extract from Mattineau"s History of the Peace.
N'oTK B. I'xtract from I'apor by George \V. Medley.
SECriOX II. THE CONTIXKNT OF EUROPE . . . f age 0^2
1. A\'hen England adopted Free Trade, the general belief
in the peaceful tendencies of the age caused an over-sanguine
anticipation of the universal triumph of Free Trade.
2. This anticipation was to some extent shared by Cobden.
3. Owing cliiefly to the si)irit of Nationalism, the period of
peace came to an end.
4. Ford Sandon's Return of Tariff changes, since 1S50,
xiv Summary.
shows, that until the effects of the Franco-German War were
fully felt, there was a steady movement throughout Europe in
the direction of Free Trade.
5. The modern revival of Protection in Europe is intimately
connected with the growth of militarism, which is the chief
reason why European nations have ceased to follow in the Free
Trade footsteps of Great Britain.
CHAPTER IV.
ILLUSTRATIONS.
SECTION III. THE UNITED STATES Page ^^
1. Difficulty of Studying tariff movements in the United
States.
2. The revolt of the American Colonies was largely a revolt
against Protection.
3. The tariffs from 1789 to 1861.
4. Connection between tariffs and prosperity.
5. Conclusion : High tariffs have generally been the result
of some morbid industrial condition. The recent growth of
Protection is directly traceable to the Civil War.
CHAPTER IV.
ILLUSTRATIONS.
SECTION IV. THE HRITISH COLONIES .... /rt,7<' 56
1. The most deliberate repudiation of Free Trade has
occurred in the British Colonies.
2. This is largely owing to the influence of Victoria,
5. Which is now decreasing, owing to a decline in the com-
parative importance of the colony. Protection in the other
Summary. xv
colonies is mainly traceable to a desire to retaliate upon
Victoria.
4. Protection in Canada originated partly in retaliation on
the United States, and partly
5. As a revenue measure, owing to the difficulty, with such
a scattered population, of devising any acceptable system of
direct taxation.
6. The Revenue Question in Australia. The tendency is
for the rich men to become Protectionists in order to escape
direct taxation. The struggle is becoming one between the
classes and the masses.
7. This was not the case in the Victorian struggle of 1866
and onward, which began as a Democratic struggle against the
large land-owners. Characteristics of the struggle.
8. Summary.
Note. Extract from " The Tariff on Trial," by Sir Richard
Cartwright, N. Am. Rev., May, 1890.
Part II.
PREPARING THE ARENA.
CHAPTER I.
DEFINITION- OF FREE TRADE . . ra;;e 73
1. The revival of Protection not being the result of a new
economic doctrine, but of indifference to the old, it is necessary
to re-state the Free Trade case.
2. Free Trade may be used in several senses ; but in this
controversy it bears the limited meaning of " the absence of
duties of a protective character."
3. Illustrations of this from Mr. Cobden's speeches.
4. Necessity for so limiting the meaning of the term.
Xvi SUMMARV.
' CHAPTER 11.
DIVISION OF THE ARGUMENT . . Page 77
1. The issue between Protectionists and Free Traders is
often obscured by neglect to observe the distinction between
the poHtical and the economic arguments, which may be
adduced on either side.
2. Nature of the distinction between poHtical and economic.
3. The political argument considered and illustrated.
4. Application to the tariff controversy. Economic argu-
ments deal solely with the effect of a policy on the production
of wealth ; while the political arguments suggest other tests of
its merits.
5. The economic argument ought to be considered before
the political, both because most of the political arguments in
favour of Protection tacitly assume an economic basis, and
because the economic result of a policy is always an important,
and often the only, test of its political soundness.
CHAPTER HI.
KCONOMICS AND POLITICS: OR, THE VALUE OF THE ECONOMIC
ARCLMENT Page ?>1
1. The validity of any economic argument in a political
discussion is sometimes denied. It is therefore necessary to
consider the relation between politics and economics.
2. The nature of economic assumptions.
3. The assumption of the universality and dominance of
self-interest is said to be unreal.
4. Consideration of this criticism. It is partly true ; but
it does not affect the validity of economic arguments when
these are applied to discussions upon the best means of in-
creasing natural produrtivencss.
Summary. xvii
5. Secondly, it is said "the term wealth is incapable of
definition."
6. This criticism ignores the distinction between the pro-
vinces of politics and economics. Moreover, it is not quite
correct. Political economy does take some account of the
differences in the kinds of wealth.
7. Conclusion. Economic conclusions must be applied
cautiously, and have only a limited range ; but inasmuch as
they concern the production of material wealth, no politician
can discard them. Importance of wealth to a modern indus-
trial community.
CHAPTER IV.
ECONOMICS AND THE TARIFF . . Tage 97
1. Since a tariff is intended to directly affect national
productiveness, the economic conclusions as to the best methods
of production cannot be ignored, if the circumstances are such
as to allow of economic conclusions being applied at all. Do
the assumptions of political economy square with the facts of a
tariff controversy ?
2. The first postulate of economics as to the predominance
of self-interest is not unreal in tariff discussions. A tariff is
concerned directly with tlie production of wealth, and appeals
entirely to the motive of self interest.
3. The second postulate of economics, as to the equality of
the competing units, is also sufficiently true to facts, wlien the
matter of consideration is the ])rcduction of wealth.
4. Nor does it lie in the mouths of Protectionists to evade
economic conclusions by asserting that the acc^uisition of
wealth is of little importance as compared with its right use.
This may be true, but wlien tlie material advancement of a
country is the thing aimed at, the degree of national produc-
tiveness is of primary importance. Besides, the political
A
Xvlii Si'.UMAKi'.
arguments in favour of Protection really postulate an economic
basis.
5. Summary. Full weight may be given to the objections
against political economy without weakening the economic
argument in fiivour of Free Trade.
CHAPTER V.
NATIONALIST ECONOIHICS . . . pa^e 105
1. The consensus of scientific opinion against Protection
has led to an attempt to frame a new syste:-a of economics.
2. It must, however, be remembered that the term
"economic," as used by nationalists, no longer connotes
exclusively material wealth, but includes everything which
has any relation to national well-being. This leads to the
result that
3. Economic investigation becomes historical and not
deductive, and the tests of economic conformity alter.
4. A science of this nature cannot answer the individualist
conclusions. It may justify the passing of them by, but it
does not meet them on the sanie plane, because it does
not propose to consider tlic effect of a tariff upon wealth
production.
5. The fundamental difference between the new and the
old system is that the former adopts the nation as the in-
dustrial unit instead of the individual.
6. The " science " tested by reference to its scope and
method. No sciciilifu results are possible from a "science"
whose subject is "the comfort and happiness of a nation."
7. The "science" further tested by its practical maxims.
{a) National self-dependence : Impossible in point of
fact and not theoretically desirable.
Summary. xix
{b) The duty of developing the productive powers of a
nation, rather than increasing its wealth.
8. Conclusion. The study has no claim to be considered
a science, but is useful in its historical investigations and
political suggestions.
Note.- On the Characteristics of Nationalist Writers.
CHAPTER \T.
NATIONALIST ECONOMICS AND THE TARIIF . . . Pa^c 129
1. Further test of the so-called " science,'' by applying it to
the tariff dispute. Materials.
2. The argument stated.
3. It rests on two assumptions
{a) That manufacturing excellence is more productive
than rural skill of national intelligence and
character.
{b) That manufacturing excellence cannot be attained
without Protection.
But {a) is beside the mark at present, because (i.)
No country to-day is without a high degree of
manufacturing ski!!, and (ii.) Under jjresent con-
ditions, country pursuits are more favourable than
manufacturing to tlic culiivation of character and
intelligence.
4. {b) rests on the assumption that stlf-inlcicsl cannot be
relied upon to establish profitable manufactures, 'i he alleged
reasons for this stated and considered.
5. Conclusion: The so-called "economic"' case for Pro-
tection is really a iSeries of doubtful political propositions.
Note. On Nationalists and Protection.
A 2
CHAPTER VII
FREE TRADE AND LAISSEZ FAIRE Ta^e I38
1. Protection and Free Trade are almost always discussed
with reference to their cognate political theories of socialism
and Laissez faire.
2. Historical reasons of this : The negative character of
Adam Smith's work was not at first perceived, and his doctrine
of " natural liberty " was perverted to their own purposes by
the opponents of all remedial legislation.
3. Laissez faire, however, is not a part of economic
teaching.
4. Free Traders, who believe in Laissez faire, have a logical
advantage in arguing about Protection ; but no arguments
which are based upon this maxim will ever convince.
5. The extension of a rule of practice justified by Free Trade
within its own province to another department of human
activity is neither sound in theory nor possible in practice.
The maxim of Laissez faire can never be applied within the
field of the distribution of wealth, both because
(a) The postulate of equality of the competing units is
unreal.
(i') The political considerations would overwhehn any
economic conclusions.
6. The recognition of these truths was very slow. But
practical necessities gradually broke down the opposition which
was founded upon " Laissez faire."
7. Conclusion : The Free Trade argument is independent of
any political theory.
Summary. xxi
CHAPTER VIII.
PROTECTION AND SOCIALISM . . Page 159
1. The po'itical arguments in favour of Protection are
at bottom socialistic.
2. Some Free Traders {e.g., Professor Sumner) consider this
to be condemnatory of Protection. Many Protectionists are
inconsistent enough to denounce socialism.
3. On the other hand, many Free Traders are ready to
support socialistic measures under certain circumstances, viz.,
provided that (i.) The end desired is on a balance of advan-
tages and disadvantages found to be good, (ii.) That State
action can achieve it. (iii.) That private enterprise cannot.
Protection fails to satisfy these three conditions of legiti-
mate State action.
Note. The limits of State interference.
fart IIX.
THE ECONOMIC ARGUMENT.
CHAPTER I.
i'RKE TRADE AND PRODUCTION . . Fagc 165
1. The material prosperity of a country must in the long
run depend upon its capacity to produce wealth.
2. Free Trade increases national productiveness by applying
the princii)le of division of employment on a large scale.
Under Free Trade, men choose their own occupations.
If, then, some industries are not followed, this is a sign that
they are believed to be less profitable than others.
xxii Summary'.
CHAPTER 11.
PROTECTION AND PRODUCTION . . Page 167
Protection lessens the power to produce in three ways :
(i.) Under Protection men are attracted by the pro-
mise of State aid from the industries they would
naturally follow if left to themselves, into others
from which, if left to themselves, they would hold
aloof.
Protection, therefore, diminishes natural productiveness by
attracting capital and labour from the more to the less profit-
able occupations.
This source of loss, however, will be avoided if the new
industries are started with imported labour and capital.
(ii.) A second cause of diminution in the national
productiveness arising from Protection is the loss
of wealth which is occasioned by the necessity of
providing a fund, out of which the profits in the
protected industries may be made equal to those
of the national industries,
(iii.) A third loss arises from the decrease in the pur-
chasing power of the customer, arising from the
increase of prices occasioned by protective duties.
CHAPTER in.
FREE TRADE AND PRICES . . Page ly^
1. The complaint against Free Trade of causing an exces-
sive cheapness is due to a misconception of the effect of low
prices on prothirtion.
2. A low level of prices may be due to one or more of
three causes, \\/.. -.
(i.) To a lessened cost of i)roduction.
SuMMAKV. xxiii
(ii.) To a decreased power of consumption,
(iii.) To a scarcity of gold.
The cheapness which was the chief characteristic of the
recent industrial depression arose from all three causes.
3. Free Trade lowers prices by cheapening the processes
of production ; of this sort of cheapness there can never be
too much, because every fall in prices arising from this cause
only, must stimulate demand.
4. Free Trade, besides lowering prices, also steadies them :
((-?) I')y widening the area of production.
(/>) By widening tlie area of consumption.
{c) By giving a more accurate knowledge of the state
of markets.
5. Free Trade cannot, however, prevent commercial crises,
or the disastrous falls in prices which accompany commercial
crises.
CHAPTER IV.
PROTECTION' AND TRICES . . Pa^e 181
1. The argument of the preceding chapters rested on the
unexpressed assumption that Protection raised prices.
2. Although this is sometimes denied. Protection must
raise prices or else it fails to protect.
3. Protection may have been supposed not to raise prices
owing to
(i.) The fact that prices generally have fallen all over
the world,
(i'.) That a later effect of Protection is often to reduce
particular prices by encouraging an excessive in-
ternal com|)ctition.
4. The tendency of Protection to lower prices when the
supply has exceeded the demand of the home market is
generally checked by trusts, podls. and other forms of com-
bination.
Xxiv Sl'Af^JAKV.
CHAPTER V.
FREE TRADE AND WAGES . . fa^e 187
1. Wages arc the labourer's sliare of the product.
2. Free Trade acts on wages by improving the efficiency of
labour.
3. First objection to this view T/ia/ competition betiveen a
country of high 7uages and one of low wages, tends to depress the
rate of the former to that of the latter.
4. The fallacy of this lies in comparing the rate of wages
with the labour-cost of production.
5. Second objection 77/c7/ Free Trade depresses wages to
the prof t of rent. This can only be the case when Free Trade
acts as a di':couragcment of industrial variety. The case of
Ireland considered.
6. The objection is theoretically sound under some circum-
stances, but these circumstances are in practice non-existent.
Free Trade docs not, in fact, discourage industrial variety;
nor, if it did, is Protection the best remedy.
7. Free Trade also steadies wages. Importance of this.
CHAPTER \l.
PROTEC'JION AND WAGES . . , Pa^e 204
1. Protection affects wages by diminishing the efficiency of
labour.
2. The allegations to the contrary refer to the influence of
Protection in encouraging new industries. Consideration ot
this deferred.
CHAPTER \ll.
DO HIGH I'RICKS MAKl', HIGH V,-AGi;S? .... Pa ^e 2oy
1. Consideration of the i'rotcctionist argument that em-
ployment is better than rhcai^icss.
2. 'Phis really rests on the as'^umption that " high prices
make high wages."
Sl/MMAKV. 3{XV
3. This assumption is unlikely to be true on a priori
grounds.
4. It is also unsupported by evidence, and is contradicted
by the records of six centuries of English industrial history,
and by a comparison between wages in New South Wales and
Victoria.
5. If Protection were limited to one trade, it might cause
a temporary rise of Vf ages in that trade.
6. Even if a rise occur in nominal wages, real wages may
remain unaltered.
7. Protectionist?, however, advocate " all-round " Pro-
tection.
8. This is impossible.
9. The argument that " high prices make high wage:; " is
inconsistent with the argument that Protection lowers prices.
CH.VrTER VIII.
DDKS MORK WORK Ml.AN MORE MONEY? . . . /'j.^ 221
1. Statement of the Protectionist argument, which is really
rather an allegation of fact.
AMiether employment is better than cheapness is a question
of evidence. Protectionists make the statement, but fail to
support it by facts.
2. Discussion of the Protectionist tlieory of the importance
"of employment." The question is not "Whether Protection
causes an increase of employment in this or that trade?" but
" A\"hether it causes an increase all round ? ''
Now, since the admitted object and effect of Protection is
to cause something to be made in one country which, in a state
of freedom, would be made in another. Protection must cause
a waste of labour.
3. Put labour which is wasted cannot be a source of
wealth.
xxvi Summary.
The question to be considered is not whether Protection
gives employment, but whether the employment which it gives
is more productive than that which it destroys.
Illustration from the kerosene industry of New South Wales,
showing that Protection is a raost costly form of outdoor relief.
4. The fallacy of the Protectionist argument lies in the
assumption that the persons who are employed in protected
trades would be unemployed, if there were no Protection.
This assumption, however, cannot be true, generally ; since
in so far as Protection causes unnecessary labour, must it
diminish the labour available for productive employment.
Protection changes the nature of employment, but does not
increase the total.
Illustration from Canadian trade,
5. The foregoing conclusions are conceivably open to
qualifications in practice ; it is, however, most questionable
whether under any circumstances Protection is a good mea-ns
for giving State assistance to the labour market.
Whatever employment is given by Protection must be given
at the expense of others.
Protection is thus only a form of legalised plunder, and
those who benefit by it are, in reality, the recipients of public
charity.
fart lY.
THE POLITICAL ARGUMENT IN FAVOUR OP
PROTECTION.
CHAPTER I.
THK AROU.MIA'IS CLASSIFIED . . Page 2^7
I. All the political arguments arc reducible on analysis to
one of four, viz. :
{a) The Infant Industry Argument.
(/') The Variety of Industry Argument.
SuAfMARv. xxvii
{c) The Home Market Argument,
{d) The Pauper Labour Argument.
2. These have had a distinct historic sequence and con-
nection, both in America and AustraHa.
CHAPTER n.
THE INFANT INDUSTRY ARGUMENT Page 2^1
I. The argument stated.
2. Its assumption is, that a time will come, when the young
industry can stand alone.
3. Test of this assumption by the tariff changes of the
United States, with special reference to the cotton and iron
industries.
4. And by the tariff changes of Victoria.
5. These tests lead to the conclusion of fact, that the
infants never grow up.
6. The assumption tested by theory : It ignores the weak-
ness of human nature, and overlooks both the natural and the
artificial inter-dependence of trades.
7. Conclusion : Protection can be established only for a
time j nor can it be limited to specific industries.
CHAPTER III.
THE DIVERSIFICATION OF INDUSTRY ARGU^ilENT . . rai;e 2$<j
I. THE ARGU.MICNT S'JAIED.
I. The origin of the argument is partly the sentiment of
national sufficiency, and partly the economic conditions of
a young country.
XXviii Si'MMAKV.
2. The assumptions of the argument are (i.) That there is
in fact no sufficient diversity; (ii.) That sufficient diversity
cannot be obtained without Protection ; (iii.) That Protection
is a less evil than want of diversity.
3. Admission that diversity of industry is desirable.
4. Method of argument. What has to be proved.
11. THE ARGUMENT TESTED BY FACTS.
5. Has any country in fact suffered from want of diversity?
6. Instance of America under the Colonial system.
7. Instance of the industrial growth of the Western States.
8. Instance of the industrial growth of Victoria.
III. THE ARGUMENT TESTED BY THEORY.
9. It is theoretically most improbable that any country
should suffer from industrial uniformity, if capital accumulates
and population increases.
10. The conditions of manufacturing success are
(/?) A large and concentrated population, which Free
Trade is at least as likely to give as Protection.
{/>) Abundance of capital, which Free Trade is more
likely to give.
IV. -THE OTHER SIDE OF THE (QUESTION.
1 1. There arc certain natural limits to diversification, which
cannot be passed without great risk.
12. 'J'he cost of diversification may be excessive.
13. The argument can never be used as a general defence
of protective policy.
SiT.UMAKV. XXIX
CHAPTER IV.
THE HOME MARKET ARGUMENT . . /"a^v 286
1. The economic basis of the argument is the fallacy that
home trade is more profitable than foreign.
2. Political supports to the argument are
(a) The dread of war, which is the only logical basis
of Protection.
{d) The idea that foreign trade is more precarious than
home. List's views stated and examined.
(c) The idea that the home market causes land to be
profitably put to new uses.
{d) The idea that a home market increases the number
of customers. This is really an appeal to the
farmer to subsidise persons to buy his products.
{e) The idea first propounded by Mr. Hoyt, that the
home market enables the requirements of a com-
munity for manufactured goods to be fully supplied.
This ignores the danger of an over-supply.
3. The theory of the argument is opposed at every point
by facts.
CHAPTER V.
THE PAUl'KR LAliOUR ARCUMKXT. . Aioe 202
1. Increasing importance of this argument.
2. What is " pauper " labour ? Difiiculty of getting accurate
information about wages : necessity of limiting comparison to
specific trades in specific places.
3. Neverthele3s, for the sake of argument, it may be
admitted that wages are higlier in a young than an old
community.
4. The argument can only apply to those industries which
are exposed to foreign competition. These are chiefiy handi-
crafts.
XXX Summary.
5. The price of goods does not depend upon the rate of
wages, but upon the cost of labour.
6. Since the "cost of labour" depends upon the natural
and the acquired efficiency of the labourer, and since a
labourer is both more intelligent and more assisted by nature
and machinery in a young than in an old country, the cost of
labour is likely to be less in the former than the latter, except
in the lowest and most degrading forms of handicraft, which it
is undesirable to introduce into a young country.
7. The argument is also inconsistent with the theory that
Protection lowers prices.
8. It is incapable of any jast application, because a scale of
duties would be required varying according to the rate of wages
paid in every competing community.
9. Protection is generally demanded against high-waged
countries.
10. But a low labour cost makes a high rate of wages.
1 1. Free Trade is more favourable than Protection to a low
labour cost.
12. Protection hastens a fall in wages.
CHAPTER VI.
THE COST OF PROTECTION . . I\ioe 323
1. The only way to conii)letely meet Protectionist sirgu-
menls is to treat the question as one of expediency ; granted
that Protection will do all that is claimed for it, is not the price
too high ?
2. Protection is an economic evil, because it is always
a waste of productive power.
3. It is a political evil, because it causes inequality and
corruption, and destroys the value of self-reliance.
4. It is a social evil, because it is antagonistic to progress.
5. It is a moral evil in its operation both abroad and at home.
6. Conclusion.
Summary.
APPENDICES
I. Rates of wages in the cotton, woollen, worsted, and iron
industries of Great Britain since 1830 . . Page ^37
II. Examination of Mill's Defence of Protection in young
countries Faq-e 343
III. Comparison between the progress of New South Wales
and of Victoria , rai^e 347
INDUSTRIAL FREEDOM.
THE REVIVAL OF PROTECTION.
CHAPTER I.
CHARACTERISTICS OF MODERN PROTECTION.
^ I. Anyone who writes a new book upon Free Trade
ought, if he is not wholly graceless, to begin his work with
an apology. The subject has been worn so threadbare,
both by economists and politicians, that any novelty of treat-
ment or illustration is almost impossible ; while the arguments
on either side of the fiscal controversy seem to possess the
theological characteristic of only carrying conviction to the
minds of those who are previously disposed to believe.
Nevertheless, while men continue to be exercised over
tariff disputes, and while so many interests are affected by
the taxation measures of Protectionists, there must always
be room for a well-considered monograph upon the leading
features of the controversy, especially if care be taken in
compiling it to avoid the extremes of arid abstraction and
partisan rhetoric.
Therefore, in this attempt to revive an old argument
an efifort will be made to present both sides impartially ;
and to present them in such a way and with so sparing a
use of illustration from passing phenomena or special trades,
that the application of the arguments may not be confined
to parlicular countries or industries, but may extend over
B
2 IXDUSTRIAL FREEDOM.
as large an area and for as long a time as the nature of
the subject will permit.
First, then, let us enquire into the reasons which make
a restatement of the points in controversy necessary.
By a turn of the political wheel Free Trade has gone under
for a time, although its triumphant reappearance is already
heralded by many signs. Still it cannot be denied that
the doctrine which was thought to be dead forty years ago,
and was even then spoken of as "dead and disgusting,"
is now full of life and vigour. That such a phenomenon,
startling and disappointing as it must be to those who,
only a generation past, successfully maintained the battle
of industrial freedom, cannot be entirely owing to the in-
capacity of mankind to understand economic abstractions,
nor to what Professor Sidgwick has termed " the selfish
activity of the protected classes," will be readily admitted by
all who recognise that e.yery widespread popular delusion must,
if it is honestly believed, contain at least a modicum of truth.
What, then, is the explanation of the survival of Protec-
tion, and how comes it that a doctrine so discredited by
reason and experience is able at the present time to command
the support of intelligent and honest men ? To answer these
questions as they should be answered, it will be necessary
to pass in review and compare with each other the character-
istics of Protection in its earlier and its later stage.
2. A glance beneath the surface of events will soon reveal
the fact, that the contest which is raging now about protective
tariffs resembles that about the Corn Laws in little more than
name. The old battle-cries, indeed, are still in use ; but the
composition of the contending forces has been changed, and
the battle is being fought upon a different ground.
Broadly speaking, the old Free Trade movement was
an assertion on the part of the middle classes of their rights as
The Revival of Protection: 3
Pt. I., Ch. i., ? 3]
consumers ; while the Protectionist movement of to-day is an
effort on the part of the manufacturing classes to obtain
privileges as producers.
This difference is illustrated by a comparison of the compo-
sition of the Anti-Corn Law League in England, and that of the
Protectionist party in Australia and America. The League
was in its origin a movement of the manufacturers and middle
classes, which gradually attracted to itself the more intelligent
among the artisans. In Australia and America, however, the
purses of the manufacturers support Protection, and the work-
ing classes, who were at first inclined to follow their employers,
are gradually returning to Free Trade. Nor is this the only
point of contrast between the new and the old Protectionism.
In England, it was only the aristocracy of labour which
became Free Traders; while the "residuum," under the
leadership of Feargus O'Connor, furiously denounced the
Anti-Corn Law League. In Australasia and America, on the
contrary, the aristocracy of labour, as represented by the Trade
Unions, is inclined to be Protectionist, while disorganised
labour leans more towards Free Trade. Lastly strangest con-
trast of all the farmers and landlords, who in England were
the backbone of Protection, are in Australasia and America
its weakest adherents. ^
3. The reason for this change in the composition of the
two parties is easily found.
1 During the last three years there has been a tendency in New South
Wales and Tasmania, on the part of land-owners of all classes, to support
Protectionist candidates. But this attitude is not owing to any dislike of Free
Trade, but to a belief on the part of the great land-owners that Free Trade involves
direct taxation with a view to agricultural settlement ; and, on the part of the
small farmers, that Protection will enable them to retaliate on the neighbouring
colony of Victoria. The Free Trade movement in Victoria is almost exclusively
confined to farmers. Out of thirty-five agricultural associations, thirty have,
up to the present date (June, 1890), declared in favour of a return to Free
Trade. A Free Trade Democratic Association has now been started in Mel-
bourne, and will soon make its influence felt in the politics of the colony.
B 2
4 Industrial Freedom.
The manufacturers and artisans of Australasia and America
look upon a different side of the question of Free Trade from
that which was perceived in England. It is not with them
a question of obtaining cheap raw materials these they have
always to their hands but a question of establishing new
industries. They desire to create, while the Englishman
desired to develop what was already created. Consequently,
the classes which in England encouraged the competition of
foreigners, because only foreigners could offer them the neces-
sary raw material, wish now, in Australasia and America, to
exclude the same competition, for fear it may destroy their
infant industries.
4. The change in the composition of the two parties has
materially affected the arguments by which either policy is
supported, and rendered necessary an alteration in the manner
of their presentment. At the present time the feelings of un-
reasoning men are enlisted on the side of Protection. At the
time of the Corn Laws in England it was just the reverse.
Then the cry for cheap food aroused such general sympathy,
that feelings made clear what the intellect might fail to grasp.
But in Australasia and America similar feelings lead further
on the path of error. Labour is scarce, land is cheap, capital
abundant. The spectacle is consequently presented of the
simultaneous existence of high wages and large profits, so that
the foundation is laid for the misleading argument, that such a
country cannot successfully compete against another country of
low wages and small profits. This at once gives rise to the
cry, that Protection is required to prevent wages and profits
from sinking to the European level. Such a cry attracts the
working classes, and gains the ear of the philanthropist. The
Protectionist appears to be the patriot who is desirous of de-
veloping the resources of his native land, and trying to prevent
a national stagiiation. He is the man wlio would guard the well
paid "native"' against the competition of the ill-paid European,
The Revival of Protection. 5
Pt. I., Ch. i., \ 5.]
and who, by legislative interference, would maintain that union
of high wages and large profits, which is the striking economic
feature of a young country. The activity of the state in a
young country is extended, so that the idea that legislation can
accomplish even this result, arouses no misgiving in the minds
of men who ardently desire it. Nor is it of any avail in a
young country, where wages are high, to urge that Protection
must increase the price of articles in daily use. An intelligent
Protectionist would reply at once that he admits this fact, but
that he is prepared to undergo a private inconvenience for the
public benefit. He would say, as the Ballarat digger said to
Sir Charles Uilke, that "he preferred to pay dearer for his
jacket and moleskins, because by so doing he aided in build-
ing up in the colony such trades as the making of clothes, in
which his brother and other men, physically too weak to be
diggers, could gain an honest living."
It is plain that men who act under feelings like these must
be approached with very different arguments from those which
would appeal to working men in Europe.
5. Nor are the English arguments always applicable to the
circumstances of a young country, where (as has been already
pointed out) labour is scarce, land is cheap, and capital
abundant. The requisites of production stand to each other,
in Australasia and America, in such an abnormal relation, that
the abstractions of the English economists have often to be
qualified before they can be taken as an explanation of facts.
This is of itself a fruitful source of economic error, and offers
some excuse for the popular impatience of scientific arguments.
At times, indeed, the language of Free Trade arguments even
gives a confirmation to the popular delusion. For example, as
Professor Sidgwick has pointed out, 1 much that was urged
upon the English people as an argument in favour of Free
Address delivered before the British Association in 1886, since published
under the title of " The Scope and Method of Economics."
6 Industrial Freedom.
Trade, is capable of being turned against Free Trade by those
who regard the question from another standpoint. Such an
argument, for instance, as that which appeared in the July
number of the Edinburgh Review for 1841, and which has
been repeated by many writers in various forms, would appeal
in very different ways to a patriotic Australian and to a patriotic
Englishman. " The early progress of any nation," says the
Free Trade writer, " that attempts to rival England in manu-
factures must be slow, for it has to contend with our great
capital, our traditionary skill, our almost infinite division of
labour, our long-established perseverance, energy, and enter-
prise, our knowledge of markets, and with the habits of those
who have been brought up to be our customers. ... If these
difficulties were once surmounted, this superiority so far at
least as respects the commodity in which we find ourselves
undersold would be gone for ever, in consequence of the
well-known law of manufacturing industr}', that ccekris
paribus with every increase of the quantity produced, the
relative cost of production is diminished." This argument
might have come straight out of a Melbourne Protectionist
newspaper instead of from the Edinhirgh Revietv. For it
cannot be denied (to quote the words of Professor wSidgwick
again) that "a consideration of the above law, and of the vis
inertice here attributed to an established superiority in manu-
factures and commerce, supplies an important qualification of
the general argument for Free Trade. For along with the
tendency of industry to go where it could be most economically
carried on, we have also to recognise the tendency for it to
stay and develop where it has once been planted ; and the
advantage of leaving this latter tendency undisturbed would
naturally be less clear to the patriotic foreigner than to the
patriotic Englishman. The proclamation of a free race for all,
just when England had a start which she might keep up for
centuries, would not seem to him a manifest realisation of
eternal justice ; to delay the race for a generation or two, and
The Revival of Protection. 7
Pt. I., Ch. ii., \ 2]
meanwhile apply judiciously disturbing causes, in the form of
protective duties, would seem likely to secure a fairer start for
other nations, and ultimately, therefore, a better organisation of
the world's industry even from a cosmopolitan point of view."
6. It is apparent from the considerations expressed in the
preceding pages, that modern Protection requires to be met by
a line of argument different from that which was in use at an
earlier period. This is a truth which Free Trade writers have
been slow to recognise. They have not always seen that the
two most striking features of the new form of Protection,
namely, the expressed intention of creating new industries, and
the readiness to submit to temporary sacrifices for the purpose
of securing this result, can both lay claim to be justified by the
reasoning of English economists ; and they have consequently
fallen into the error of repeating old truths to opponents who
do not deny them. The extent of this error and its results will
form the subject of the following chapter.
CHAPTER II.
CAUSES WHICH HAVE AIDED THE REVIVAL OF PROTECTION.
I. The difficulty of applying the economic arguments in
their old form to the circumstances of a young country has been
already incidentally referred to in discussing the characteristics
of the Protectionist revival. It remains to consider how other
causes have assisted the progress of Protection. Among these
the mistakes and omissions of the Free Trade party must take
a prominent place.
% 2. It is certain that an error has been made by many Free
Tr.ide writers in approaching the question of Protection from
8 Industrial Freedom.
the wrong side, and contemplating it in a different aspect from
that which is regarded by Protectionists themselves. Most
of these writers deal almost exclusively with the influence of
Free Trade upon the production of wealth, while the Pro-
tectionists chiefly direct their attention to the influence of a
fiscal policy upon the distribution of wealth. The consequence
has been that the arguments and the illustrations of Free
Traders have failed to appeal, as effectively as they deserve, to
the mass of Protectionist voters.
Such a mistake was natural to men reared in the midst of
the old controversy, and living for the most part in Free Trade
England. But in young countries, and, of late years, even in
England, it is necessary to put forward the cause of Free Trade
in another and more attractive light, and to consider it in its
effect upon the distribution of wealth as distinguished from its
effect upon production.
The reason for thus changing the point of view is the altera-
tion which has been made during recent years in the centre of
political power. In the days of Cobden and the Anti-Corn Law
League, when the middle classes formed the bulk of English
voters, it was most politic to dwell upon the influence of Free
Trade in cheapening the price of goods ; but in young countries
and at the present time in England, where the electorates are
controlled by working men, the voters wish to understand the
influence of that policy in raising wages. Accordingly, although
the old arguments remain quite true, it is desirable now, if we
wish to arrest general attention, to lay them aside for a time,
and bring out others which are more attractive to working men.
Unfortunately Free Traders have been slow to recognise
that, under the altered circumstances of an extended suffrage,
they must change the popular presentment of their views. As a
rule they still deal only with the figures of production. They tell
us, for example, that tke trade of England has advanced by
leaps and bounds ; that since Free Trade was introduced, the
income-tax returns are ten times what they were ; that the
The Revival of Protectiojst. 9
Pt. I., Ch. ii., \ 3.]
quantity of funded wealth is daily growing larger, and the popu-
lation is increasing with an unsurpassed rapidity. They point
to the table of exports, to the growing cities, to the decline of
pauperism and of crime, and to the many signs of English in-
dustry and enterprise in every quarter of the globe, and, rolling
out their columns of magnificent statistics, they expect the
world to be convinced ! But working men, particularly in
Australasia and America, know well that this is not the last
word upon the subject ! The matter of concern to them is not
so much that goods should be produced in plenty, as that they
should have an opportunity to use their skill ; and, even in
England, the working classes care more for a policy which
promises high wages than for one which promises cheap goods.
It is hardly reasonable to expect that a man, who has but six-
pence in his pocket, should be greatly moved by hearing that
the price of silk has been reduced to half-a-crown !
Accordingly, Free Trade must be justified in young countries
and to working men in quite another way than by a catalogue
of its effects upon production. It must be shown that Free
Trade has also an effect in raising wages ; that, whilst suggesting
desires, it gives means to satisfy them by cheapening most
articles of common use, and by bringing about the conditions
which are most favourable to a fairer distribution of wealth, and
most conducive in any community to a lasting rise in the
average standard of comfort. In making this investigation, the
real effect on wages of any fiscal policy will have to be con-
sidered, and the futility of attempting to raise wages by merely
altering a customs tariff ought to be made plain. It is certain
that, until such an inquiry is attempted, the Free Trade argu-
ments will fly above the heads of those whom it is intended to
convince.
3. Partly in consequence of having directed so much
attention to the effect of Free Trade upon capital, and
partly for other reasons to be mentioned, Free Traders have
lo Industrial Freedom.
incurred the charge of being hostile to the working-classes. No
one, who has lived in a country where the fiscal controversy is
active, can have failed to notice the strong and bitter feeling with
which Free Traders are denounced by those who aspire to a
political position by the aid of the working-classes. This feeling
is, no doubt, to a great extent fictitious. It is necessary at times
for the "friend of the working man" and "friendship for the
working man" is a recognised profession in most English-
speaking countries to use strong language if he would not
have his sincerity suspected. Free Trade and Free Traders
offer a convenient object of attack, the more so that Free Trade
has been identified with an unpopular party both in Australasia
and America. The Free Traders in Victoria, where the fiscal
battle was first fought, were land-monopolists and Tories.
The Free Traders in America were Southern slave-owners.
It has taken a whole generation in both countries to dissociate
Free Trade from these unpopular causes.
4. Independently, however, of these local causes of ill-
feeling, there is a more general ground for the popular idea that
Free Traders have no sympathy with the aspirations of the
working-classes. This arises from the attitude which has been
adopted by many Free Trade writers towards the measures of
reform demanded by the working-classes.
Most of those whom the public regard as the champions of
Free Trade, from Ricardo to Professor Fawcett (with the two
notable, but often unperceived, exceptions of Richard Cobden and
John Stuart Mill), have been pedantically attached to that declin-
ing school of political thought which would restrict the action
of the State within the narrowest bounds. In consequence of
this, Free Trade has come to be identified with the general
principle of " Laisser faire." Indeed, so deeply rooted is this
confusion of ideas, that it is not uncommon, even in Radical
journals, to find Trade Unions denounced as a violation of
Free Trade principles, and a system of unregulated competition
The Revival of Proiection. ii
Pt. I., Ch. ii., \ 5.]
between masters and men justified by an appeal to the same
authority.
Rightly or wrongly, however, working-men have believed
that their condition could never be permanently bettered until
the Government should interfere actively and widely upon
their behalf; and they have accordingly demanded and ob-
tained a long series of Acts of Parliament, to regulate and
protect labour, of which the Factory Acts are the best-
known examples.
All these measures have been opposed in the name of Free
Trade, although (as will be shown later in these pages) Free
Trade is an influence which works in the field of Production,
and offers no argument either for or against the interference of
Government within the field of Distribution. What wonder,
then, that working-men, when they have found Free Traders
confronting them at every effort to alleviate their lot by law,
have ceased to take an interest in the promised benefits of
Free Trade, and have regarded it as a middle-class doctrine,
comforting enough to the well-to-do, but offering no help to
them in their especial needs.
If, therefore, we would justify Free Trade to working-men,
we must break away from the ancient argument and show the
true relation of Free Trade to a general scheme of government.
This will be attempted later in these pages. At present the
misconception which exists upon this point is only mentioned
as one reason for the prevalent mistrust of Free Trade doctrines,
and as a special reason for their discredit among working-men.
5. Not less dangerous to the influence of P'ree Trade than
its supposed hostility to the interests of the working-classes, has
been its supposed indifference to the evils of the competitive
system.
Philanthropists and writers of the type of Mr. Ruskin have
exhausted themselves in denunciation of the immorality and
narrowness of the Free Trade systemi
12 Industrial Freedom.
It is needless to say that these denunciations have been for
the most part ignorant and misdirected. But they have had so
much influence on a large class of benevolent people, who do
not reason closely or at all on economic questions, that it is
necessary to give them a passing attention.
It is said that Free Trade is indifferent to everything except
material \vealth, and that its last word is " to buy in the
cheapest and sell in the dearest market."
This is a charge which, from the modicum of truth which
it contains, has been peculiarly destructive.
Free Traders have, no doubt, written with only one object
that of showing the effect of a Free Trade policy upon national
wealth ; and it may be, that in looking at this single point, they
have seemed to attach an excessive importance to material
wealth. But this limitation of view no more justifies the asser-
tion that Free Traders have no regard for the higher objects of
national life, than the omission to mention pictures in a work
on mathematics would justify a charge against its writer of
ignorance of art. Because a Free Trader advocates the aboli-
tion of taxes on imports, it does not, therefore, follow that he
regards this measure as a panacea for every industrial evil ; nor,
because he urges the advantages of free exchange, must he be
supposed to hold that the highest social ideal is reached by
merely buying in the cheapest and selling in the dearest market.
The very silliness of a contrary supposition ought to be its own
refutation. Yet, no one who has read Protectionist literature, or
Mr. Ruskin's writings upon economics, can deny that even
patent silliness is no impediment to the popularity of a ground-
less charge.
The only excuse for this wild vilification is a misapprehen-
sion of the attitude of Free Traders towards the doctrine of
free competition.
6. The Ricardian assumption of the existence within the
industrial field of an universal and ever-active competiton an
The Revii^al of Protection. 13
Pt. 1., Ch. u., \ 6.]
assumption which was in accordance with facts at the time
Ricardo wrote has been taken by newspaper writers and
others to be an assertion of principle. This imaginary prin-
ciple has been erected into a "natural law," which is
supposed to have been discovered by political economists !
Then, by a confusion in the use of the term " law," political
economy has been invoked by way of protest against every
attempt to regulate or interefere with competition !
In fact, however, as every economist has pointed out, the
" laws " of political economy are mere expressions of the
regular sequence of certain events under certain assumed con-
ditions. The most important of these conditions is that of
free competition. It is assumed that there is a never-ceasing
competition between the units of every industrial system,
although it is admitted that this assumption only applies in
fact to the wholesale trade and the great articles of commerce.
Nor is this the whole of the assumption. The competition of
abstract political economy is not the competition of masters
and men as we see them in every-day life, but it is the com-
petition of certain imaginary industrial units. These units are
spoken of sometimes as individuals, and at other times as groups
of individuals; but they are always supposed to have this
characteristic the units are equal to one another. It cannot
be too often repeated that the competition of abstract political
economy that competition through which alone political
economy has any pretension to the character of a science is a
competition between equal units. This is no place to consider
whether this assumption still holds true in these days of " pools
and combinations," (i) or whether it was not always too far re-
moved from facts to be of great practical value. It is enough
to point out here how a misconception of its true nature has
prejudiced the progress of f'ree Trade. It has been imagined
that Free Trade being a doctrine founded upon political
Sec, for a discussion of this point, an article by Piof. Jolr.'i !'. ( ''..irl< in
tlie Political Science Quarterly for Marcli, 1887, vol. ii., p. 62.
14 Industrial Freedom.
economy, justified the universal reign of lawless and unregulated
competition. Nothing could be further from the truth.
7. So far from justifying the universal reign of competition,
the doctrines of Free Trade have no application outside of
their own limited sphere. Free Trade is simply an expedient
for carrying the principles of division of employment into inter-
national commerce. It is merely a means of facilitating the
greatest possible production of wealth through facilitating
exchange. Having accomplished that, its work is ended, and
it leaves to other agencies the work of distribution.
Free Trade, in other words (using the term in its proper sense,
to mean " the absence of protective duties "), operates exclu-
sively within the field of production. Now, within the field of
production there happens to be a competition between equal
units. There is, as a general rule, an equality between those
who buy and those who sell commodities, since both goods
and capital can be removed from place to place, and the post-
ponement of a sale or purchase causes at the worst a loss of
money.
But once within the field of distribution, circumstances
alter. The wages of labour and the price of goods are not in
fact now, nor have they ever been, determined by the same
forces ; nor is that condition of free and equal competition,
which political economy assumes to exist when it determines
the laws of production and exchange, generally, or often,
present at the time of the division of the product between those
who have co-operated to produce it. That effective competi-
tiouj which is the fundamental assumption of abstract political
economy, does not as a rule exist between a labourer on the one
side, and an employer on the other ; and, therefore, to rigidly
apply the principles which determine the price of goods to a
determination of the rate of wages, would be in a high degree
misleading. Buyers and sellers may, for the purposes of an
abstract argument, be presumed to stand towards each other on
The Revival of Protection. 15
Pt. I., Ch. ii., \ 8.]
a footing of equality ; but to assume that the competition
between the employer on the one hand, and the wage-earners
on the other, when the latter are unorganised and unprotected
by law, is a competition between equal units, is so fanciful and
contrary to fact, that any conclusions drawn from such an
assumption can have little value under present circumstances.
Unfortunately, however, many Free Traders have not recog-
nised this fact, but have attempted to apply maxims which are
true when applied to the production of wealth, where there is
an effective and equal competition between buyer and seller
to the case of labourers seeking to obtain for themselves a
higher rate of wages, although the determinant of the rate of
wages is composed of such incalculable elements as the habits,
desires, and customs of human beings.
It follows, from the fact that the laws of the distribution of
wealth are less absolute and more changeable than those of its
production, and from the fact that Free Trade operates chiefly
within the field of production, that, although it may be demon-
strable that government ought to leave men free to produce
and exchange commodities when and how they please, it does
not follow that the same policy should be applied to propor-
tioning the distribution of commodities among those who have
produced them. Unlimited competition may be good in the
one case and evil in the other, without Free Trade giving us
any guide for pronouncing a judgment. ^ The evils, therefore,
of unlimited competition within the field of distribution offer
no argument against the removal of protective tariffs.
8. The last cause which may be mentioned as having had
an influence in the revival of Protectionism, is the discontent
with existing industrial conditions, which is a prevalent sign of
the times.
It is not easy to trace this cause in actual operation, but no
reader of Protectionist literature can fail to recognise its
1 See further on tliis subject infra Part II., chap. 7.
1 6 Industrial FrerdoM.
presence. The jealousy of wealth, the dislike of " laisser
faire," the pressure of the competitive system, all give rise to a
profound dissatisfaction with existing social conditions. The
evils of the day are felt to be intolerably irksome, until it seems
as if the wished-for blessing might be found in any change of
policy. There can be no question that, as the labour party in
America, under the leadership of Henry George, is turning
against Protectionism, so in England and Australia, discontent
creates antagonism towards Free Trade.
It ought to be needless to point out that the remedy for the
evils which create this discontent lies altogether outside the
influence of Protection or Free Trade. Neither Free Trade
nor Protection is a panacea for industrial evils, nor will either
policy satisfy the wants of working men. Irregular employ-
ment, crowded homes, an existence without pleasure, an
insecure old age these are causes of complaint which
cannot be removed by any changes in a fiscal policy. No
mere tariff reform will give the poorer workmen regular employ-
ment, nor build them healthy dwellings near their work, nor
find them openings for secure investment, nor relieve the
monotony of their dull existence. All that can be done by
the agency of taxation is to mitigate as far as possible the evils
which exist, and to guard against creating others. Free Traders
hold, that under their policy the remedial agencies will work
with the greatest force ; but they do not say that Free Trade
has of itself the power to remove industrial grievances.
9. To sum up the conclusions of this chapter, we have
noted that the revival of Protection is largely due to the follow-
ing causes, viz, :
I. To the fact that Free Trade writers have directed
their chief attention to the effect of the policy in
increisin^r wealth, instead of considering its effect
on wages.
The Revival of Protection. 17
Pt. I., Ch. ii., \ 9.]
2. To the discredit which has attached to Free Trade
through being associated with unpopular or aristo-
cratic parties.
3. To the idea that Free Trade is identical with a
general policy of "laisser faire."
4. To the idea that Free Traders are indifferent to the
evils of the competitive system.
5. To the prevailing discontent with existing social and
industrial conditions.
The mere enumeration of these causes proves the necessity
for a restatement of the Free Trade case. We have to deal
with a new class of opponents, variously prejudiced against us,
and suffering from real grievances, to all of which they imagine
Free Traders are indifferent, and some of which they trace
directly to the policy.
We have, therefore, to be careful to show that we do not
gloss over any facts, nor disregard any interest. We have to
be careful, also, to look at many facts from the standpoint of
working-men and yet not to raise excessive hopes in the minds
of those whom we address. Above all, we have to dissociate
Free Trade from the policy of laisser fai7'e. Some Free
Traders may be advocates of laisser /aire ; but there are many,
and their numbers are growing, who look upon Free Trade
simply as an instrument which destroys one form of State
interference, in order to leave the ground clear for more
effective action by the State in new directions.
Nor are Free I'radcrs necessarily wedded to the present
social system. Free I'rade is merely voluntary trade : a Free
Trader only maintains that men should be allowed to buy and
sell where and what they will. But he does not say that men's
freedom should in no case be controlled by voluntary associa-
tion, nor by public opinion. There is nothing inconsistent
with Free Trade in a body of men agreeing to pay more
than necessary for any article, provided they do not force
c
1 8 Industrial Freedom.
other people to follow their exaniple. Finally, there is
nothing in the doctrines of Free Trade which requires their
disciple to make a fetish of universal and unregulated competi-
tion. A Free Trader can admit as evils many things of which
Protectionists complain. He can join with a Protectionist in
his protest against labour being bought and sold like a bale of
goods. He, too, may refuse to believe that masters and men
can never be secured against the misery of fluctuating trade,
and can prefer that the evils of dependence should be lessened,
rather than that the number of millionaires should be increased
with an unparalleled rapidity.
In short, the final aim of an honest Free Trader differs but
little from that of an honest Protectionist, however much they
may dispute with one another as to means. The ideal of both
is, or ought to be, the same, namely : to prevent the labourer
sinking into the mere drudge of a machine, and to make him
once again a craftsman with an artistic love and knowledge of
his work.
But, while thus recognising the evils of our present indus-
trial system, a Free Trader would desire it to be understood
by those who suffer that, if Free Trade has proved an im-
perfect remedy, Protection is a poison. The grievances of
the Protectionists are real enough, but their hostility is mis-
directed. The remedy, as will be pointed out later in these
pages, is independent either of Protection or Free Trade. But,
while Protection aggravates existing evils, Free Trade not only
does much to mitigate them, but also brings about many con-
ditions under which these evils can be more easily removed.
The Revival of Protection. 19
Ft. I., Ch, iii., ? I.]
CHAPTER III.
THE SIGNIFICAN'CE OF A PROTECTIONIST REVIVAL.
I. In the inquiry which has been conducted through the
last two chapters into the nature and the causes of the Protec-
tionist revival, no direct reference has been made to its extent
or its significance. Yet both of these are so often overstated or
misunderstood, that it is desirable to give them some attention
before entering upon a discussion of the merits of the rival
fiscal policies.
The impression of many Protectionists if we may judge
Protectionist voters by the speeches and writings of their
political leaders would appear to be that Great Ikitain stands
alone, among civilised nations, in her acceptance of the
doctrine of Free Trade, and that all other countries have
deliberately declined to follow her example. From this it is
argued that, if the pol'cy were good, its merits would have been
so decisively established by Great Britain's forty years' experi-
ment, that the fact of its universal rejection is conclusive
against it.
It is hardly necessary to point out that this is both an in-
correct statement of facts and an unsound argument.
i; 2. In the first place it is not true that England is the only
Free Trade country. Neither Holland, Norway, Belgium,
Switzerland, nor Denmark can be called protected countries ;
and some of them notably Holland have tariffs very little
higher than that of England. These countries are, of course,
not to be compared in extent of territory with their Pro-
tectionist neighbours; but they are not one whit behind them
in the other elements of national greatness. They are free,
wealthy, peaceful, and progressive 1 Can any of the European
countries which have adopted Protection be characterised in
the same terms? Without over-estimating the importaic; of
c 2
20 Industrial Freedom.
a fiscal policy, it is at least noticeable that those European
countries, which are most free from clerical and military
domination, are precisely the countries which most incline
towards an unrestricted commerce ; while the military and
reactionary governments favour Protection.
3. Suppose, however, it were otherwise, and that England
stood absolutely alone in her adherence to Free Trade it
is surely plain that this fact would not justify a conclusion
that the policy was unsound, unless we first knew the
reasons which induced other countries to adopt or retain
Protection? It might be that these had no reference to the
fiscal controversy, but were local and special reasons of a
political and temporary character. If, for example, one country
imposed protective duties, for the purpose of retaliating upon a
hostile neighbour, or another imposed them because the
Custom House offered the easiest means of raising a large
revenue for wasteful expenditure it could hardly be contended
that the action of either of these countries raised even a pre-
sumption against the expediency of Free Trade in a country of
different industrial and political conditions. The fiscal problem
is emphatically one which cannot be decided by the method of
counting heads. Every country must work out a solution for
itself according to its own conditions and its own needs. The
experience of one country, although it may be valuable as a
test of theory, is seldom useful to other countries as a guide to
practice, since the necessary conditions of a just comparison
are seldom, if ever, present.^
1 Mr. Giffen, in his paper on "The Use of Import and Export
.Statistics" (" Essays in Finance," Second Series, p. 200), makes the followin;^
remarks in this connection :
" To make any statistical comparison at all possible between different
regimes, it would be necessary, either to find two coimtries practically alike in their
economic and industrial circumstances, and in the character of their people,
subject ihem to the opposite rJ^i.yus, and then ascertain and compare their
relative material progress : or, to find a particular country subjected at different
The Revival of Protection. 21
Pt. '., Ch. iil., \ 4.]
4. Thus, although the results of either fiscal policy in
any particular case can never be ignored, yet the greatest
caution must be exercised in drawing inferences. Still more
is caution necessary, when it is proposed to draw an inference,
not from results, but from motives. There is no better instance
of want of caution in this respect than the familiar Protectionist
cry which we are now considering.
There is, indeed, no doubt but that the disinclination of
many countries, both new and old, to abandon their Protective
policies, and the inclination of others to adopt Protection, is a
phenomenon, which requires careful explanation in view of the
signal and incontestable success of the British experiment. But
while giving full weight to any inference that can be legitimately
drawn from the conduct of the citizens of one country for the
guidance of citizens of another, and recognising that Free
Trade has not spread so rapidly as might have been expected,
it would be a mistake to assume that the doctrine of Free Trade
has been impeached in any material point, cither by the ex-
perience of Great Britain after forty years of a Free Trade
policy, or by the Protectionist proclivities of other countries,
periods to the two opposite regimes without any other differences, and then
compare the different results, if any such are appreciable. Experience does not
supply us with such cases. No two communities are sufficiently alike to be
comparable in strict logic. The slightest differences in the race or moral con-
dition of the two communities, which are to outward appearance much the
same, might make a great deal of difference to their material progress. If the
two are subjected to different economic riSginies, how are we to tell whetlier the
inferior progress of the one materially even when we are sure about the
inferiority is due to the tei^iine, and not to other differences in the character
of the communities which we cannot so well appreciate ? The same with a
community at different periods of its own history. How can we tell that there
is no moral difference of a serious kind to affect the economic progress of the
community between one period and another? External economic circumstances
are, besides, incessantly changing, and may affect two communities apiiarently
of nmch the same character and position quite differently. If it were possible
to institute many points of comparison and exhibit an uniform result in all, it
might be safe to infer that it was the regime which did make the difference, no
other imiform cause of difference being assignable; but this condition, of
course, it is impossible to fulfil."
22 Industrial Freedom.
The contrary is rather the case. Enghsh experience has indis-
putably shown the wisdom of a Free Trade poHcy, so that there
is hardly an intelligent American or Australian Protectionist,
who does not readily admit that Free Trade is a necessity for a
manufacturing or commercial country in the situation of Great
Britain. Nor are the Protectionist inclinations of other countries
really an impeachment of Free Trade, when the circumstances
attendant on their origin are understood. Moreover, so far
from English example having carried no weight, it will be
found, that after the adoption of Free Trade by Great Britain,
there was a marked and steady movement in the same direction
throughout the continent of Europe. It is true that this move-
ment has been interrupted during the last twenty years, but an
examination of the facts reveals that every country, with the ex-
ception of Canada and Victoria, that has adopted a Protectionist
policy during this period, has done this under the stress of war,
and that the influences which have bean at work in favour of
restriction have already begun to wane.
The truth, accordingly^ is that this so-called revival of Pro-
tection has very little significance in the fiscal controversy. It
hag proceeded from circumstances which have only a remote
connection with Protection and Free Trade, and has seldom
been due to any deliberate rejection of a Free Trade policy. In
every case, moreover, even when it has proceeded from
an avowed adherence to Protectionist doctrines, it has
originated under the stress of exceptional and peculiar
difiicultics, arising from a morbid and abnormal industrial con-
dition. Thirdly, in most cases, it has been an interruption of
an earlier and well defined movement in the direction of
Free Trade, which, accordmg to present indications, is likely
to be renewed. Under these circumstances the much vaunted
Protectionist revival is not likely to be of much use to logical
champions of commercial restrictions. As, however, the Pro-
tectionist voter attaches great importance to the argument from
numbers, it will be advisable to make a more detailed examina-
The Revival of Protection. 23
Pt. I., Ch. iii., \ 4.]
tion of the causes which have led the principal countries to raise
their tariffs, because it must be admitted that, if these causes
vary, or if they are mutually inconsistent, or if they have no
application to the conditions of the country in which the
example is quoted, the strength of the Protectionist's assertion,
that all the wisdom of the world is upon his side, becomes con-
siderably diminished.
It will be convenient, in pursuing this inquiry, to deal
separately with the examples of Great Britain, the continent of
Europe, the United States of America, and the British
Colonies.
CHAPTER IV.
ILLUSTRATIONS. t
SECTION I. GREAT BRITAIN.
I. It is not easy to understand the fashion in which Pro-
tectionists treat Great Britain's forty-five years' experience of
a Free Trade policy. At one time they admit that it has been
such as to establish once for all the superiority of Free Trade
for a country situated like Great Britain. At another they assert,
that Free Trade was adopted under a mistaken view as to the
probable effect of English example upon foreign nations; and that,
if tlie leaders of the Anti-Corn Law League could have foreseen
that, after forty-five years, England would stand almost alone in
the practice of commercial freedom, they would never have
begun their famous agitation. Forgetful of the Free Trade
maxim that " the best way to fight hostile tariffs is by free
imports," these disputants assert that the Free Trade, which
the exertions of the Liberal party won for England, is not the
Free Trade for which the leaders strove, but a " one-sided "
Free Trade, which Bright and Cobden in their earlier days
24 Industrial Freedom.
would have regarded as little less pernicious than a close
Protection.
Either of these methods of treatment allows the Pro-
tectionist orator to put English experience upon one side.
2. If all Protectionists agreed that Free Trade had proved
a great success in England, there would be no need to insist
upon this fact in any controversial work. Unfortunately, how-
ever, the native-born Australian, and, in a less degree, the
native-born American, often prides himself upon his indifference
to the history of other countries. Absorbed in the great work of
making a new nation, and rightly impatient of the vapid affecta-
tion of English ways and indiscriminate reliance upon English
taste, which seems inevitable in a subordinate community, he is
apt to confound the callow criticisms of the English traveller with
the sohd teachings of English experience, and dismiss each
with the same contempt. This tendency has, until quite
recently, been fostered in Australia by the omission from the
school and university curriculum of any teaching of history the
reason assigned for this being the remarkable fear that to teach
history might wound religious susceptibilities ! The conse-
quence is that, in spite of the disavowals of responsible Pro-
tectionist writers, voters are still found in Australasia and
America who believe that the condition of England has not
materially improved either subsequently to or in consequence
of the adoption of Free Trade.
3. It may be doubted whether any fact of industrial
history is capable of easier or more conclusive proof than that
Great Britain has enormously advanced in every direction of
national progress since the adoption of Free Trade. All the
evidence points to the same conclusion^ and is, as Mr. Giffcn
has insisted, cumulative ; so that it must be disproved in each
particular item, if any doubt is to be thrown upon the im-
pression created by a survey of the whole. " 'I'o justify the
The Revival of Protection. 25
Pt. I., Ch. iv., 5 3-1
belief," says this eminent writer, " that there has been no great
general advance, every one of the propositions stated [by him]
would have to be disproved, and an opposite set of statements,
all hanging together and all supporting the view of retrogression,
or no advance, or very little advance, would have to be made
good. There are too many facts to permit the setting up of a
plea of ignorance, or impossibility of arriving at any con-
clusion." ^
Nor, indeed, is the one fact of a stupendous growth in
material wealth denied by any but a few fanatics the signs of
it are too manifest to the eye to admit of question or to require
demonstration by figures ~ but those who desire to depreciate
the English example, content themselves with making the
assertion that the chief benefit of their improvement has gone to
the rich, while the poor have been growing poorer year by year.
Such a statement naturally appeals to many prejudices, and
often finds acceptance among men who do not know the
facts.
In reality the assertion is almost unsupported by evidence.
All the facts tell the other way. Official and private records of
rates of wages and hours of labour show, that the workman
receives to-day from 50 to 100 per cent, more money for 20 per
cent, less work than was the case under Protection ; and that,
owing to a large fall in the prices of the chief articles of con-
sumption, the purchasing power of his wages is considerably
increased. In addition to this improvement in his relations
with employers, the workman to-day gets the benefit of largely
increased Government expenditure. He not only pays less
taxes, but he gets more much more from the Government
than he ever received under the Protective system. He
is now better fed, better clothed, better housed, better
educated, better cared for in his health and amusements
' " Essays in Finance " ; Second Series.
2 The paper by Mr. Medley, printed as a note to this cliaptcr, contains
some of the more striicing facts.
26 Industrial Freedom.
than at any other period in Enghsh history. All the facts
agree to prove that the poor have not grown poorer. Pauperism
has diminished ; crime has diminished ; the deposits in the
Savings Bank have increased ; the funds of the Friendly and
Benefit Societies have increased ; the investments of small
savings are greater than they were ; life is in every direction
longer, easier, and more comfortable ; even the rate of mortality
has declined, so that on an average a man lives two years, and a
woman three and a half years longer than was the case before
Free Trade. Is, then, the other part of the assertion true, and
have the rich grown richer ? The facts again agree to support
a negative answer ! The returns to the Income Tax and to
the Probate Duties demonstrate conclusively that the number
of the moderately rich has been increasing, and that the
increase of capital per head of the capitalist classes is
by no means so great as the increase of working-class in-
comes.
It may be that Protectionists will take exception to the value
of the evidence by which these facts are sustained ; and, no
one would deny that the relations between evidence and con-
clusions in matters of this nature are always diificult to deter-
mine. But is any other kind of evidence forthcoming? Is it
possible to get any other accumulation of facts, whether of the
same or of a different character, to support the conclusion that
the condition of the working-classes in Great Britain has become
worse, instead of better, since the introduction of Free Trade ?
And if it is not possible to do this, it must surely be admitted
that the experience of Great Britain has a certain bearing on
the fiscal controversy . No doubt Protection may be sup-
ported by different arguments in different countries ; but
English experience is at least of so much value, that it justifies
Free Traders in putting Protectionists to proof of their assertions.
They tell us that Free Trade creates monopolies ; that it in-
creases profits at the expense of wages ; that it produces
paupers j that it destroys manufactures ! The contrary has
The REVirAL of Protection. 27
Pt. I., Ch. iv., \ 3.]
been the case in England ; let them, therefore, prove their
statements. 1
1 It will be apparent to all who are familiar with the subject, that the
passages in the text about the condition of the working-classes are only a
summary of Mr. Giffen's two Essays oa the " Progress of the Working-
Classes," since re-published in the author's second series of "Essays on
Finance." This masterpiece of statistical investigation is supported in its
conclusions by the analysis, which the late Mr. Brassey has made public,
of the pay-sheets of his enormous business as contractor. This gives a
faithful record of the rise and fall of wages, during that period, in the two
great trades of the builders and the engineers {see "Work and Wages").
In addition to this there is a collection of statistics made in 1866 by
Professor Leone Levi and Mr. Dudley Baxter under the title of " Wages and
Earnings of the Working-Classes." These are collected chiefly from private
sources, and most of the information appears to be drawn from the more
favoured trades, so that, without questioning the accuracy of the figures, it is
possible to believe that these gentlemen have made too high an estimate of the
average earnings of the working-classes. Another useful source of authentic
information is the annual return furnished by the Chamber of Commerce in
different centres to the English Board of Trade, which are published among
the miscellaneous statistics of the United Kingdom. The Board of Trade
Journal now contains regular returns of wages, compiled from the best official
and private sources.
In a note to this chapter the writer has put together the results of some
independent investigations which he made in 1883 on the variation in wages in
the four great English industries the cotton, woollen, worsted, and iron trades
which, together, employ about one-half of the artisan population, to which
the reader is refeired for further information.
There is especial reason at the present time for emphasising the fact of
the great and continuous advance in the well-being of the poorer classes,
because a most active section of Free Traders have been misled by Mr. Henry
George into an assertion to the contrary, and have thus considerably weakened
the force of their attack upon Protection. Mr. George's work on " Progress and
Poverty," which was his earliest important writing, begins, as is well known,
with the assertion that "the poor have grown poorer and the rich richer."
Although this is the fundamental proposition of the work, no tittle of evidence
is advanced in its support. Its truth is quietly assumed. Vet all the known
evidence as to the condition of old countries tells the other way. It may
indeed be the case although Mr. Giffen doubts this that the agricultural
labourers in Great Britain were better off in the middle of the last century than
they ever have been since ; but there is atnple evidence to show that the con-
dition of the great body of labourers was worse [e.i;., sec Eden's " State of the
Poor"). Mr. Giffen quotes from M. Yves Guyot ("Principles of Social
Economy" [linglish Translation], Swan Sonnenschein li Co.), to show that
there has been a similar improvement in France and (jermany. Perhaps Mr.
George in penning the phrase only had in mind the Western States of .America,
with regard to which it is probably true.
28 Industrial Freedom.
It is, indeed, possible that the arguments of those who
insist upon the great improvement which has taken place in
the condition of the working-classes under Free Trade are
open to criticism upon one point, viz. that the increase in
money wages is sometimes exaggerated. Mr, Giffen estimates
that the average rate of wages in England has doubled since
1830. This may be the case and no one can differ from
Mr. Giffen on such a matter without hesitation but the
average advance in wages as disclosed by the Board of Trade
returns from 1830 to 1833, in the four principal English
industries the cotton, woollen, worsted, and iron trades
does not appear to have been so great. The question is
dealt with in detail in the note at the end of this chapter,
so that it will be sufficient here to summarise the con-
clusions.
Mr. Giffen's statement appears to be borne out by the
figures returned for those four trades as the wages paid to
skilled labour. I'he increase in these cases has often been
more than double. But among the body of unskilled lal)Ourers,
the increase, so far as can be gathered from the Board of
Trade Statistics, is not more -than from twenty-five to fifty
per cent. In fact, it is a remarkable illustration of the truth
that the stronger the labourer^ and the better he is able
to protect himself, the more likely is he to obtain good
wages, that these figures show, that not only is it the class
of skilled labourers who have benefited most, but in almost
every case they have been the first to get the advantage of
a rising market. Indeed, the figures of the cotton, woollen,
worsted, and iron trades lead to these two conclusions : first, that
the increase of wages has been largest among the best-paid
class of artisans, less among the class of medium ability, and
least among the common labourers ; and, secondly, that a rise
in wages comes earliest to the best-paid class, later to the
middle class, and latest to the unskilled workman. These asser-
tions are not put forward as the invariable laws of rising wages,
The Revival of Protection. 29
Pt. I., Ch. iv., ? 3.]
but they are certainly conclusions from a large number of
important observations.
But it may be said, the unskilled labourers form the mass
of the community, and since it is the poorest classes that suffer
most, it is in their prosperity that the country is most interested.
This leads to another branch of our inquiry, viz., whether wages
have increased beyond the greater cost of living ? There can
be no doubt that even the poorest workman receives more
money than he used ; but does a sovereign in England go as
far now as it did thirty years ago ? In the hands of a workman
it does. If anyone will make a table of the articles of a
labourer's consumption, and, by a reference to any book on
prices, estimate the cost of living, say thirty years ago, and at
the present time, he will find that in respect of most items of a
labourer's expenditure there has been a marked decrease of
price, and that in respect of only two items has there been any
increase. These two are meat and house-rent. The price of
meat has nearly doubled, and rent has increased one and a-half
times. But none the less, it is not true, as has been written,
that rent has swallowed up the whole of the increase in work-
men's wages. Theoretically, Mr. George's views are sound
enough. Imagine a country with entirely unrestrained com-
petition, with a limited quantity of land in private hands, shut
out from all foreign trade, and its people prohibited from
emigrating then undoubtedly rent would increase at tlie
expense of both wages and profits. But these theoretical con-
ditions do not prevail in any country in the world, not even in
Ireland, and in a Free Trade country least of all.
In fact, ncitlicr the rise in rent, ^ nor the greater cost of
meat has reduced the workman's real income below what it
was under Protection. By making a table of the average
iiccc-ssary expenses of a wor'rcman, with a wife and three
children, in 1840, and at the present day, it will l)e found
' Part of the rise in rent is due to improved house accommodation.
30 Industrial Freedom.
that, while in 1840 an unskilled workman seldom had meat
more than once a week, now, allowing for meat every day, and
also for the rise in rent, he has a larger balance than he used
to have.i That is to say, under Free Trade, even when the
rise in wages has been lowest, namely, among the class of un-
skilled labourers, it has at least outpaced the increase in the
cost of living. Other facts point to the same conclusion. The
consumption of tea and sugar, for example, per head of the
population, is four times what it used to be in the days of Pro-
tection. It is the same with the consumption of rice, tobacco,
spirits, and similar luxuries. What better evidence could be
given that the prosperity of the last forty years has been diffused
among the masses ? The articles named are emphatically poor
men's luxuries, and not such that an increased consumption of
them by the rich could make much difference to the (quantity
consumed. But, as has already been observed, all the facts
agree. There is no test by which improvement in material
prosperity can be measured, which does not bear out the
1 Weekly necessary expenses of a carpenter, with a wife and three children :
1840. 1890.
s. d. s. d.
8 quartern loaves ... S ^ 4
Bibs, meat ... ... ... ... ... 44 60
i^lbs. butter 16 19
lib. cheese ... ... ... ... ... 07 08
2lbs. sugar ... ... ... ... ... i 2 04
jlb. tea 16 o 45
lib. soap ... ... ... ... ...05 04
lib. candles ... ... ... ... ... 06 05
lib. rice... ... ... ... ... ...04 02
2 gals, milk ... ... ... .. ..04 08
Vegetables ... ... ... ... ... 06 10
Coals, firing ... ... ... ... ...10 16
Rent ... ... ... . , ...40 6 6
Clothes and sundries ... ... ... ...30 30
24 10 26 8^
The increase on a wage of 24s. lod. since 1846 has been to at least 28s., and
in most cases to ^os.
The Revival of Fkotection: 31
Pt. I., Ch. iv.,54.]
assertion that there has been a great and general advance in well-
being among the masses of Great Britain since the abolition of
a protective tariff. No one would say that the advance has
been sufficient. The condition of the poor in England is
terrible, and their improvement has been little enough, even
when measured by a low ideal, so that it is hard to see things
as they are without desiring something like a revolution for the
better. Still, the fact of an enormous progress must be kept in
view, progress which may not be recognised until comparison
is made with the former state of things. As Mr, Giffen warns
us, " discontent with the present must not make us forget that
things have been so much worse."
4. The prosperity of Great Britain under Free Trade is
logically fatal to the protective dogma, that the only way to
secure prosperity is by means of protective duties against
foreign imports. The prosperity of a protected country is not,
by a parity of reasoning, fatal to Free Trade, because Free
Trade is not a dogma, but a mere negative assertion of the
errors of Protection. Protection, on the other hand, not only
asserts the wisdom of protective duties, but justifies its action by
the tacit and expressed assumption that national wealth cannot
be produced or diffused without them. Hence, as Professor
Sumner has pointed out, " either prosperity in a Free Trade
country, or distress in a Protectionist country, is fatal to Pro-
tectionism ; while distress in a Free Trade country, or pro-
sperity in a Protectionist country, proves nothing against Free
Trade." 1
Nevertheless, it is frequently asserted that the prosperity of
Great Britain proves nothing in the fiscal controversy, because
the credit of it cannot be claimed entirely for Free Trade, but
must be shared by the mechanical and scientific improvements
which have characterised the period since Protection was
' " Protectionism the -ism which teaches that Waste makes Wealth.''
New York : Holt & Co., 1885 ; p. 26.
32 Industrial Freedom.
abolished. It is plain that this argument effectually prevents
Protectionists from taking credit to their system for the progress
of the United States, since not only has the invention of
machinery played a most important part in their industrial
development, hut it has been aided by unparalleled natural
resources. In the United States are millions of acres of fertile
land, with soil thirty feet deep ; there are minerals of every
kind in useful proximity to each other; there are coal-fields,
oil-wells, and every sort of natural product in astonishing abun-
dance ; and all these resources are not locked up in inacces-
sible regions, but are brought near to the markets of the world
by a most extensive system of railway and river communication.
Add to all this, that on an average half a million immigrants are
being poured into the country every year, representing each of
them a capital expenditure of ;j^2oo, or, in a body, a total incre-
ment of one hundred million pounds per annum to the national
capital ; that there is little or no expenditure for military pur-
poses, and that there is an unrestricted system of Free Trade
from one end of the vast continent to the other, and we have a
combination of every circumstance which is most favourable to
the increase of wealth. Under such conditions, it would be
miraculous if America had not become a great manufacturing
country. Her present inferiority in this respect to Great
I'ritain is probably solely due to her protective tariff.
Disregarding, however, the logical irrelevance of the inquiry,
and admitting that an assent to its necessity cuts both ways, it
is expedient, for controversial purposes, to ascertain, if possible,
v.-hat portion of Great Britain's prosperity has l)ccn due to Free
Trade, and what portion to other causes.
No one can deny that railways, telegraphs, and every other
improvement in the means of intercourse and production, have
had a great influence in every part of the world in extending
commerce and increasing wealth ; but, nevertheless, it can be
shown, with as much certainty as such an investigalion admit:-,
that a chief part of the increase in the wealth of Great Britain,
The Revival of Protection. 33
Pt. I., Ch. !v., \ 4.]
during the last forty years has been due to the abolition of the
protective system. It can also be shown h-^ a priori reasoning,
that a nation cannot reap the full advantages of improvements
in locomotion and mechanical processes under any systen which
restricts the intercourse between its citizens and foreigners.
There are two methods of conducting this inquiry. The
first is by comparing the condition of trade in the year imme-
diately preceding the remission of a tax on imports, with its
condition in the year immediately following. If, then, it is
found, that in every case a dose of Free Trade has been followed
by an otherwise inexplicable increase in the volume of com-
merce, it may be fairly concluded that there is a connection
between this increase and the legislation which preceded it.
The second method is to estimate the influence of the mechan-
ical or locomotive agencies, when they are at work without
Free Trade, in order to deduct what ought to be assigned to
them from the total increase of wealth. This method is ex-
tremely complicated, and not, perhaps, altogether satisfactory,
owing to the difficulty of making an accurate estimate of the
value of the mechanical and locomotive factor.
Both methods, however, have been used by Mr. Gladstone,
in an article which is now lost in the kaleidoscopic pages of a
monthly magazine. 1 It may accordingly be useful to indicate
the character of Mr. Ghdstoiii's conc'.usions, without attempt-
ing to summarise his article.
He first estimates the average annual increase in the volume
of British trade, from the date of the first use of railways up to
1842, which was the first year of any large instalment of Free
Trade, by the following method : He finds that, for the twenty
years from 1 810-1830, English trade was almost stationary ; but
that in 1830, with the use of raihvays, there came a suddea
increase, which continued year by year as new railways were
opened. Consequently, he sets down the growth of trade from
' Nineteenth Century, February, 1880.
34 Industrial Freedom.
1830 to 1842 to what, for the purposes of this calculation,
he terms the locomotive factor.
Assuming this method to be correct, and that the period is
not too short to form the basis of such an estimate, the difficult
question still remains, how to use the figures, which have
been thus obtained, for the purpose of comparison with other
periods.
Mr, Gladstone attempts to get over this difficulty in the
following way : ^He takes the number of miles of railway open
during the years 1830-42, together with the mileage receipts
during the same year, and, on the assumption that the increase
before referred to during that period was owing to the locomo-
tive agencies alone, he arrives at a rough estimate of the effect
of each new mile of railway upon the volume of English trade.
Then he calculates from this basis the deductions which have
to be made from the yearly increase in that volume subse-
quently to 1842, on account of railways, and making an equal
allowance on account of telegraphs and ocean steamships, and
recognising that the influence of these factors has been increas-
ing, and not constant, he reaches the conclusion that by far
the larger portion of the increase in Enghsh trade during the
last forty years must be assigned to other causes than improve-
ments in the means of locomotion.
This conclusion is, at best, imperfect ; but it is at least
as worthy of attention as the unsupported statements of Pro-
tectionist orators and letter-writers, that the whole of the
improved condition of English trade in recent years is owing
to mechanical improvements in the means of intercourse.
Mr. Gladstone also attempts the first of the two methods,
which have been already mentioned as suitable to an enquiry
into the causes of the growth of England's trade, and which,
although it is not so strictly scientific as the other, enables us,
to arrive at more accurate results, and estimate with a greater
degree of precision the effect upon trade by the removal of
Protectionist restrictions.
The Revival of Protection. 35
Pt. I., Ch. iv., \ 4.]
Mr, Gladstone takes the fluctuations in the export trade as
an index of prosperity, because any increase in the export of
home-made articles is an unerring indication of general indus-
trial activity ; and because any increase in the export trade of a
country which lends, and does not borrow capital, is always
accompanied by all those other signs of progress for which an
explanation is being sought in this inquiry. He begins with
the period 1816-30, when railways were not invented, and Pro-
tection had the field to itself. It is instructive to find that during
those fifteen years of peace, down to 1830 inclusive, although
mechanical invention was in constant growth, the value of British
exports remained almost stationary at about ;^36, 000,000,
or, if account were taken of the growth of population during
that period, that there was an actual decline in the value per
head of the population. Well may Mr. Gladstone say that
during those years Protection proved itself to be, in the United
Kingdom at least, but another name for paralysis !
The first instalment of Free Trade legislation was granted
in 1842, by which time, thanks to the growth of railways,
English exports had increased to ^^5 1,400,000, but the remis-
sions of duty did not take effect until 1843. That year is con-
sequently the first in which the influence of Free Trade can be
perceived. The concession to freedom was very slight, con-
sisting almost entirely of a permission to import certain articles,
which had previously been prohibited, at reasonable duties ;
yet, slight as the concession was, the three years, 1843-45,
showed an average export of ^57,000,000, an aggregate growth,
that is, of ^6,000,000, and an annual growth, one year with
another, of two millions.
The second instalment of Free Trade was given by Sir Robert
Peel in the year 1845. By the tariff of that year all export
duties were abolished, and 430 out of the 813 articles of raw
material were admitted free of duty ; but the Corn Laws, the
Navigation Laws, and the Sugar Duties remained untouched.
The three years during which this tariff was in force were
D 2
36 Industrial Freedom.
marked by three great calamities. The first, scarcity in Eng-
land and famine in Ireland ; the second, commercial panic
with the suspension of the Bank Charter Act in 1847 ; and the
third, in 1848, wars and revolutions on the continent, which in
one year drove British exports down by ;^6,ooo,ooo. In the
days of more stringent Protection, any one of similar occur-
rences had caused a disastrous decline ; under Free Trade,
however, the result of all of them combined was little more than
a stoppage of growth. The average of the exports for the
three years, 1845-8, was ;^'56, 500,000, as compared with
^57,000,000, which had been the average of the period from
1842 to 1845.
The third dose of Free Trade was given in 1849, ^y ^^^ ^o'^^
cessation of the Corn Duties at the beginning of that year, and
the abolition of more tlian 100 other taxes upon imports, together
with the repeal of the Navigation Acts later in the Parliament-
ary session. For that year the exports rose suddenly frcm
;j"5 2,800,000 to ;^63, 500,000. The rise steadily continued,
so that the average annual value of exports for the three years,
1849 to 1852, was ;^7 2,000,000, representing an increase of
;^i 5,000,000 per annum over the preceding triennium.
The fourth instalment of Free Trade legislation began with
the new tariff of 1853. The three years from 1853-55, not-
withstanding the Crimean War, show an average export of
;^97, 000,000. From 1853, a very flourishing year, with an
export of ^78,000,000, we pass to 1854, with the enormous
increment of ;2{^2o,ooo,coo, and a total export value of
;;/^98, 000,000. The effect of the war is seen during the next
two years by the exports remaining about stationary ; but, in
spite of this, the average for the three years, 1853-55, is
^94,000,000, or an increase of _;;^2 2,000,000 on the previous
triennium. This increase continued steadily up to 1859.
The fifth and last Free Trade period is marked by Mr.
Cobden's French Treaty, and by the Customs Act of i860,
which finally established the principle that no protective duties
The Revival of Protection. 37
Pt. I., Ch. iv., \ 5.]
should be charged, and by the repeal of the paper duties.
This was again followed by an increase in our exports ; but it
is not possible to estimate the quantity of this increase for any
purpose of comparison, since we have no limit provided by any
fresh epoch of Free Trade legislation. It is, however, very
noteworthy that, since the removal of the Free Trade stimulus
if we leave out of account the exceptional years 1870-75, when,
owing to the consequences of the Franco-German war, trade
advanced by leaps and bounds the increase in English exports
tends to become more regular and steady, as if it were hence-
forward to be attributed mainly to the growth of population.
It may be that these figures are not rigidly conclusive,
because social problems do not admit of being demonstrated
like a rule of mathematics. But let any candid man put this
question to himself " Supposing that in any other case but
one in which Protection was at issue with Free Trade, I found
that legislation of a certain character was always followed by
the same results, for which no other cause can be suggested,
must I not therefore conclude that there is a close connection
between this legislation and the subsequent events ? " This is
a test which would be recognised in every other matter of
political experience ; why, then, should Free Traders have to
ask that the same openness of mind, and readiness to look at
facts, should be displayed by everyone who enters upon the
fiscal controversy ?
>5 5. Protectionists, who cannot deny the fact of English
progress under Free Trade, adopt, as has been observed
already, another method of disparaging the vali:e of her
example. They insist that the anticipations of the Free
Trade leaders have not been realised, and that, as the struggle
was conducted under the belief that other nations would be
compelled to follow England, if she adopted Free Trade, the
whole case is now re-opened, and the old arguments cease to
apply.
38 Industrial Freedom.
The motives and anticipations of the leaders of the Anti-
Corn Law I^eague are, of course, wholly immaterial to the
question, " Whether Free Trade or Protection is the better
policy for Australasia or America ? " Nevertheless, the state-
ment that Gobden only fought for universal Free Trade, and
that, being disappointed of this, he would have ceased his
efforts, has obtained a vogue in both these countries, which
would be surprising in any other controversy. It is used in
two ways first, as an easy justification for abuse of the Free
Trade leaders ; and, secondly, as an excuse for disregarding
English experience. No one, therefore, who defends the Free
Trade cause in either Australasia or America, can afford to
treat this statement as it deserves ; he must show once more
that the Corn Laws fell by their own weight, and that the dis-
appointment of any expectations, that the restrictive laws of any
other countries would fall in the same way, has in no degree
weakened the significance of the British uprising against the
misery and injustice of a protective tariff. To assert the con-
trary, is one of those perversions of historical fact which are,
unhappily, only too frequent in the fiscal controversy.
The basis of the charge is a speech of Mr. Cobden's in the
House of Commons on January 15, 1846, in which he said, " I
believe that if you abolish the Corn Laws honestly, and adopt
Free Trade in its simplicity, there will not be a tariff in Europe
that will not be changed in less than five years to follow your
example." Speaking again at a public meeting in 1852, he
made a similar prophecy ; and on these two passages, Protec-
tionists have raised a structure of abuse and ridicule, every one
of them, from Mr. Serjeant Byles to Mr. James G. Blaine, con-
tributing his little stone !
Yet, after all, what do the words amount to, even reading
them literally and without the explanation of surrounding
facts ? They are, at most, an impeachment of Mr. Cobden's
political judgment. To take them as expressive of the general
opinion of his party, and then to say that it was this opinion
The Revival of Protection: 39
Pt. I., Ch. iv., } 5.]
which stimulated the party to its exertions, is to disregard the
whole weight of evidence upon the other side. Quotations
might be multiplied to fill a volume, to show from the pages
of Hansard, and from the speeches of the Free Trade
leaders as reported in The League, which was their organ in
the Press, that the English people were under no misapprehen-
sion as to what would be the conduct of other nations, when
they adopted Free Trade ; but that they deliberately aban-
doned Protection, because, after a fair trial, it had proved,
in the words of Lord John Russell's resolution, "the blight
of commerce, the bane of agriculture, the source of bitter
divisions between classes, the cause of poverty, fever, mort-
ality, and crime among the people." ^ No fact in history is
more certain, and iQ.\v are more easily demonstrated, than
that the Corn Laws were abolished because they injured
England, and that the advocates of industrial freedom were
indifferent to the course which other nations might pursue
so long as Englishmen obtained bread.
Thus Sir R. Peel, in a speech on the Corn Laws, in the
House of Commons, Jan. 27th, 1846, said :
" I fairly avow to you that, in making this great reduction
upon the import of articles the produce and manufacture of
foreign countries I have no guarantee to give you that other
countries will immediately follow our example. I give you that
advantage in the argument. Wearied with our long and un-
availing efforts to enter into satisfactory commercial treaties
with other nations, we have resolved at length to consult our
own interests, and not to punish those other countries for
the wrong they do us in continuing their high duties upon
the importation of our products and manufactures by con-
tinuing high duties ourselves, encouraging unlawful trade. We
have had no communication with any foreign government upon
1 See nolo at end of this chapter (p. 65) on the condition of llngland
"Under Protection,
40 Industrial Freedom.
the subject of these reductions. We cannot promise that France
will immediately make a corresponding reduction in her tariff.
I cannot promise that Russia will prove her gratitude to us for
our reduction of duty on her tallow by any diminution of her
duties. You may, therefore, say, in opposition to the present
plan, what is this superfluous liberality, that you are going to
do away with all these duties, and yet you expect nothing in
return ? I may, perhaps, be told that many foreign countries,
since the former relaxation of duties on our part and that
would be perfectly consistent with the fact foreign countries
which have benefited by our relaxation, have not followed our
example, nay, have not only not followed our example, but
have actually applied to the importation of British goods higher
rates of duties than formerly. I quite admit it. I give you all
the benefit of that argument. I rely upon the fact as conclu-
sive proof of the policy of the course we are pursuing. It is
a fact that other countries have not followed our example,
and have levied higher duties in some cases upon our
goods. But what has been the result upon the amount of
your exports? You have defied the regulations of those
countries. Your export trade is greatly increased."
On July 6th, 1849, wiih reference to Mr. Disraeli's assump-
tion, " that you cannot fight hostile tariffs with free imports,"
Sir R. Peel said :
" I so totally dissent from that assumption that I maintain
that the best way to compete with hostile tariffs is to encourage
free imports. So far from thinking the principle of Protection
a salutary principle, I maintain that the more widely you extend
it, the greater the injury you will inflict on the national wealth,
and the more you will cripple the national industry.
******
" To re establish duties upon the import of foreign produce
to be regulated by the principle of reciprocity, would be
accompanied with insuperable difficulties. You have, in my
The Revival of Protection, 41
Pt. I., Ch. iv., \ 5.)
opinion, no alternative but to maintain that degree of Free
Trade you have established, and gradually to extend it so far
as considerations of revenue will permit"
Finally, if further evidence be wanted, there is this state-
ment from a letter from Mr. John Bright to the writer, dated
shortly before his death : -
" I never," he says, "held the opinion that the reform of
the tariff would be at once followed by a like change of policy
in other countries. If Mr. Cobden expressed such an opinion,
of which I have no recollection, I can only say that he had
more faith in the common sense of other nations than I had." ^
1 The whole of the letter is worth publishing
One Ash, Rochdale,
December loth, 1887.
My Dear Sir, I never held the opinion that the reform of the tariff
would be at once followed by a like change of policy in other countries. If Mr.
Cobden expressed such an opinion, of which I have no recollection, I can
only say that he had more faith in the common sense of other nations than
I had. As to the changes of circumstances since the year 1846, it is every
way in our favour, for we have had forty years of Free Trade, and all the
facts are wonderfully on our side. Further, I would assert without fear of
error, that our adherence to our Free Trade policy is the more necessary and
advantageous to us seeing that other countries have not yet followed our
example. Surely, if other nations injure us by their high duties, it would be
no compensation to us to put difficulties in the way of our buying what we
want. It would be better if we were free to buy and to sell, but to make it
difficult to buy by high duties in our tariff, because foreign tariff makes it
difficult to sell, seciTis to me an idea that can only be entertained by men who
are totally unable to reason.
The high tariffs of European countries are in great part the result of the
great armaments of those countries. The tariff of the United States Ts breaking
down, and must break down. If the Protectionists of America could persuade
or permit the Government to spend annually twenty millions sterling on a great
army, and a great navy, their tariff might be sustained, but that being impossible,
the tariff must be reformed, and some approach will be made in the direction
of Free Trade. As to your Colonies, their true interest is in the adoption of t! e
Free Trade policy. In our individual life every man is a Free Trader. He buys
as cheaply as he can, and sells at the best price he can get. Why should not
multitudes of men do the same ?
In .\merica there are some forty States, and there is no tariff between these
Slaves there is a perfect Free Trade between them why should not the same
42 Industrial Freedom,
The matter might fairly rest here.i But the disappointment
of Mr. Cobden's hopes is such a constant source of satisfaction
of Protectionists, and has so disturbed the minds of many of
the faithful, that it will not be waste of time to pursue the in-
vestigation further, and, if possible, discover the sources of Mr.
Cobden's error. Those who regard the reputation of its great
men as the most precious heritage of the English-speaking race
will be the less averse to this inquiry because it will be
incidentally the means of vindicating the sagacity of Mr.
Cobden from many undeserved reproaches.
Let us proceed, therefore, to discuss the causes of that Pro-
tectionist revival upon the Continent of Europe which is
supposed by some to be a proof of the foolishness of Free Trade
anticipations.
SECTION II. THE CONTINENT OF EUROPE.
I. The full significance of the Protectionist revival on the
Continent of Europe cannot be understood without some
reference to the circumstances under which Great Britain
entered on her Free Trade policy. How came Mr. Cobden,
who was the most sagacious of men, to indulge in his sanguine
hopes, and why were they not fulfilled? Few subjects of
historical inquiry better repay investigation.
freedom prevail between the States and Canada, and between both and the
United Kingdom ? And why not between your Austrahan Colonies and between
them and this, their Mother Country?
Free Trade is the policy of wisdom and peace between nations.
I am, Sir, yours faithfully,
John Bright.
To the Hon. B. R. Wise, Sydney.
1 Sir T. Farrer in his " Free Trade v. Fair Trade," refers to the following
further passages from the speeches of Free Trade leaders ;
Hansard, vol. 68 of 1843.
,, vol. 'J J, of 1844.
,, vol. 106 of 1849.
The Revival of Protectiox. 43
Pt. I., Ch. iv., Sec. II., { 2.]
During the years of the Free Trade agitation and triumph
in Great Britain the European world was in a dream of
universal peace. There had been no great war since the con-
clusion of the second Treaty of Paris in 1815; while the
revolutionary explosion of 1848 only seemed to most onlookers
to have ended those dynastic struggles which had been the
principal cause of war for many centuries. It was not then
perceived that the growing force of nationalism would prove
even more fruitful than the jealousies and intrigues of rival
potentates in creating international hostilities. The peaceful
enthusiasm culminated in the International Exhibition of 1851,
when people for the first time realised the enormous strides
which Europe had made in its industrial progress since the
Napoleonic wars. The praises of industry and commerce
were in everybody's mouth : and it was thought incredible
that, after so plain a proof of the paramount interest which
the toiling masses have in the preservation of peace, their
rulers would ever again be able to induce men to record their
votes in favour of aggressive war. Commerce was thus
naturally regarded as the handmaid of peace, teaching nations
to know each other better, and breaking down the prejudice?
which the interests of selfish rulers had sedulously fostered.
The interests of the people were to overcome the ambition of
princes, and all the nations of the world were to be joined
together by the golden tie of peaceful trade.
2. Nor were these only the idle dreams of a few
enthusiasts. Men most competent to judge saw no reason for
believing that the frequent and rapid intercourse between
people of foreign countries, which railways and steamships were
rendering possible, could have any other result than that of
destroying international enmities, and creating a common
commercial interest in the continuance of peace. Even Mr.
Cobden, as we have seen, yielded to the influences of his
time, and ventured on that prophecy which, in a'l his copious
44 Industrial Freedom.
forecasts of the commercial future, is the only one that can be
quoted to his discredit, and which is always quoted by Pro-
tectionists who know nothing else of all that Mr. Cobden wrote
or spoke. Everything else which he anticipated as a result
of Free Trade has been realised in the manner and by the means
which he foretold. Surely, if he had been a mere quack, this
could never have happened ? Correct judgments upon politics
and accurate forecasts of the course of commerce during many
years must be something more than lucky guesses.^ If the
matter in controversy were anything else except Protection
and Free Trade, we should not hesitate to say that Cobden's
accurate prognostications of the future arose from his firm
grasp of a principle which rested upon sound knowledge, and
was in accord with the deepest sentiments of human nature.
The controversy being as it is, we will merely note the fact
of his general accuracy, and, admitting that he was wrong in
one instance, proceed to examine into the causes of his error.
Perhaps at the end of such an inquiry it may be seen that it is
sometimes better to be wrong with Cobden than to be right
with his critics.
3. The face of the scene suddenly changed. The thirty-
eight years of peace came to an end, and the Crimean War and
the growth of the new spirit of nationalism destroyed for
a time all hopes of its return.
The Crimean War was followed by the American War, the
Danish War, the Austrian War, the French War, the Turkish
War, and no one can say at what time another war may not be
added to this gloomy list. Profoundly peaceful Europe was
thus suddenly changed into an armed camp ; and con-
temporaneously with this, the Europe which was advancing
1 If Uie famous saying, that a copy of the Times was of more value than
the whole of Thucydides, is to be taken literally, it is an error of literary and
nc t of poli ical judgment.
The Revival of Protection. 45
Pt. I., Ch. iv., \ 4.]
towards Free Trade has gone back towards Protection. The
weapons of commercial warfare have been called to the
assistance of national armies.
4. In the year 1879 a return was moved for in the
English House of Commons, by Lord Sandon, of the changes
which had been made by foreign nations in their tariffs since
the year 1850. It was perhaps expected that this return would
prove to demonstration the absurdity of Mr. Cobden's expecta-
tion and the rapid progress of Protection.
In fact, it proved the opposite.
The information collected showed beyond a doubt that,
until the results of the Franco-Prussian War began to be felt in
their full stress, there had been a steady progress towards Free
Trnde on the part of almost all civilised nations.
From 1850 to 1874 the alterations in the tariffs of Russia,
Germany, France, Italy, Holland, Belgium, Sweden and
Norway, Austria, Spain, and Portugal, had been steadily in the
direction of Free Trade.
It was about the year 1874 that Europe entered into the
full enjoyment of the legacy of evil left behind by the war of
1870. In that year the prodigious armaments of European
countries seemed to have reached a limit; yet still they increased,
and still it was necessary to raise taxes for their support.
Direct taxation was resorted to in many forms ; and when the
wealthy classes came to the conclusion that this means of
raising revenue was exhausted, resort was had to tlie Customs
House.
In this way the progress towards Free Trade has been
checked, and been perhaps delayed for two generations.
Military rulers cannot be exi)ected to have sympathy with free-
dom in any form ; while the vested interests which have grown
up under the Protection thus incidentally conferred form
ano.her force to bar the path of commercial liberty. Yet even
now the peaceful, liberal, and progressive nations such as
46 Industrial Freedom.
Holland, Switzerland, Belgium, Norway, Italy, and Denmark
are also nations which incline towards Free Trade. ^
5. It is no part of this treatise to inquire how far the
rulers of these different countries were justified, from their own
points of view, in fighting their neighbours by means of re-
taliatory duties, or in selecting the Customs House as an easy
means of raising revenue for a wasteful expenditure. It is only
intended to draw attention to the reasons which falsified the san-
guine expectations of some of the early Free Traders. It would
no doubt have been a gain to Mr. Cobden's reputation if he had
foreseen the tremendous change which was about to take
place in international relations. But that he failed to do so,
and that, in consequence, some of his hopes were disappointed,
is no reflection on the soundness of his views, nor any reason
for depreciating the wisdom of his policy.
1 The Protective reaction on the Continent has also been assisted by the
changed conditions of agricultural production. The development of the
American, Australian, and Indian wheat fields not only shut the farmers of
Eastern and Central Europe out of the English market, of which they had had
possession since the Peace of 1815, but also exposed all European agriculturists
to a new and fierce competition, to which they have been slow to adapt them-
selves. Simultaneously with the development of these new sources of produc-
tion, came the cheapening in the cost of transportation both by sea and land,
which is perhaps the most notable industrial phenomenon of the present century.
The Protective duties imposed since 1873 in France, Germany, Austria, and
Italy, are in part due to an attempt to stave off or mitigate the effects of these
great changes. The process is thus described by M. Alexandre Peer in an
article on the fiscal situation in the February number of ' ' La Revue d'Economie
Politique " of the year 1891 : " Alors commen^a la stagnation sur le Continent.
A Test, les produits russes et roumains exer^aient une pression ; a I'ouest, les
marches etaient en partie fermes et en partie occup^s par les produits meilleur
marche d'outre-mer. L'Europe Centrale commen(;a a se sentir mal a I'aise :
I'Empire d'Allemagne, repousse par I'Angleterre, interdit les transports de
I'Autriche-Hongrie, et rAutricbe-Hongrie, de son cote, ferma ses frontieres a
la Russie et a la Roumanie ; il s'ensuivit uii mouvement pareil a celui que
provoque I'arret subit d'un train, quand les wagons sont successivement un i
un refoules en arriere. " Professor Taussig, on p. 326 of the first volume of
the Economic Journal, has some suggestive remarks upon these occurrenceF,
which need not, however, be referred to at greater length in the present
connection.
The Revival of Protection. 47
Pt. I., Ch iv., \ 5.]
The tariff changes of the Continental States since 1850 have
also another bearing on the fiscal controversy. They show that
the example of these States is of little or no value to Australasia
or America. The inclination of mankind towards war must,
no doubt, be taken into account by politicians ; but the fact
that nations when disposed towards war adopt Protective tariffs
is no reason why peaceful nations such as the Australian
Colonies should do the same. When a Protectionist orator in
Sydney or Melbourne proclaims, in his large and disdainful
way, that nine-tenths of the civilised world agree with him,^ we
may fairly remind him that nine-tenths of the civilised world is
also in favour of the conscription. And if he should reply that
that coincidence has nothing to do with his argument, we may
call in the aid of Lord Sandon's return,- and point out the
close connection which exists in Europe between the growth of
Protection and the advance of militarism.
Protection is, in fact, the natural weapon of military rulers.
It is a system which flourishes in proportion to the strength of
militarism, and everywhere decreases in favour as a people
becomes freer and more peaceful. Such is the system which,
in the name of " Liberalism," certain politicians introduced into
Victoria.^ But the growth of Protection in that Colony is
a subject for another chapter. Let us first, however, treat of
the United States.
' The Free Trade minority is always overlooked in these ingenious
calculations.
2 This is dealt with in detail by Sir T. Farrer in his " Free Trade v. Fair
Trade."
3 The Protectionists in Victoria call themselves. "Liberals." In New
South Wales, as in Canada, the nomenclature of parties is more appropriate
and the Liberals are the advocates of industrial freedom. It would be strange
indeed if the party which fought for civil and religious freedom should try to
put fetters upon freedom of industry.
48 Industrial Freedom.
section iii. the united states.'
I. One of the most instructive economic works which
yet remain to be Avritten is an adequate history of the
Protective movement in the United States. The difficulties
of such a work are enormous. The tariffs, as enacted from
time to time, have always been extraordinarily complex ;
while the large powers of construing Acts of Congress
conferred upon the Customs Boards have still further in-
creased the complexity of legislation. The consequence is,
that an adequate treatment of the subject would not only
require a knowledge of the processes of manufacture in all
branches which can hardly be possessed by any individual,
since no one is acquainted with the secrets of every trade but
would also involve an accurate consideration of the fluctuations
in prices, the conditions of trade, and the course of industrial
development during the last hundred years ; and even if the
initial difficulty were overcome of understanding the precise
nature of tariff legislation, the obscure problem of tracing its
effects would still present itself for a solution. The tariff in the
United States has seldom, if ever, worked alone, but other
influences have almost always obscured its operation. Currency
delusions, war, the development of the interior, immigration,
improvement in the means of locomotion, have all, at one
time or another, rendered the precise effect of a tariff difficult
to trace, eitlaer by prejudicing its working when it has been low,
or hiding its injurious influence when it has been high. The
one fact which stands out plainly from this intricate confusion
is, that in all periods of American history high tariffs have
resulted from a morbid condition of national affairs.
v^ 2. Noone, for instince, could contend that the circumstances
1 For the contents of this section the wri'.er is largely indebted to Professor
Sumner's " Lectures on the History of Protection in the United States," and to
Professor Taussig's "Tariff History of the United States," two admirable
works which are too little known in England and Australia.
The Revival of Protection. 49
Pt. I., Ch. iv., Sec. III., 2.]
which led to the passing of the first Tariff Act of 1789
have any application to the present time. That measure had
two objects the first was to raise a Federal revenue from the
only source then open to the Federal Government ; the second
was to re-establish the natural industries of the United States,
and to restore them to the same position which they would
have held if they had not been crushed for many years by the
protective legislation of Great Britain. The revolt of the
American Colonies was very largely a revolt against Protection.
It was an effort on the part of the Americans to secure the
benefits of a larger commerce. The policy of the British
Government had been to cramp American trade, and thwart
the development of American industry. Bancroft, the great
American historian, says : " American independence, like the
great rivers of the country, had many sources, but the head-
spring that coloured all the stream was the British Navigation
Act. . . . This odious measure provided that no com-
modities whatever, being the growth, product, or manufacture
of Asia, Africa, or America, should be imported into Eng-
land or her Colonies except in ships belonging to English
subjects, and of which the master and the greater part of the
crew were also English. Subsequently, the ordinance was re-
enacted with additional clauses, virtually excluding foreign
ships from American harbours, and sacrificing to English
monopoly the natural rights of the Colonies."
Nor were the efforts of the English Protectionists directed
only against external commerce. Their despotic regulations
were equally directed towards the suppression of manufactures
and the destruction of internal trade.
" In 1699 the British Parliament prohibited the Colonies
from exporting wool, jam, or woollen fabrics, and from carry-
ing them coastwise from one Colony and place to another. In
1719 Parliament declared that the erection of manufactories in
the Colonies tended to lessen their dependence on the
Mother Country ; and the EngUsh manufacturers memorialised
E
50 Industrial Freedom.
Parliament that the Colonies were carrying on trade and erecting
manufactories, with a view to obtainmg legislation to arrest it.
In 1 73 1 the Board of Trade were instructed to inquire as to the
Colonial laws made to encourage manufactures, as to manu-
factories set up, and as to trade carried on in the Colonies, and
to report thereon. In 1732 they reported that Massachusetts
had passed a law to encourage manufactures ; that the people
of New York, Connecticut, Rhode Island, and Maryland had
fallen into the manufacture of woollen and linen for the use of
their own families, and of flax and hemp into coarse bags and
halters, all of which interfered with the profits of the British
merchants. The Board recommended that the minds of the
people of those Colonies should be immediately diverted, and a
stop be put to it, or the practice would be extended. The same
year Parliament prohibited the exportation of hats from the
Colonies, and trading in them from one Colony to another by
ships, carts, or horses. No hatter should set up in business
who had not served seven years, nor have more than two
apprentices ; and no black person should work at the trade.
Iron mills for slitting and rolling, and plating-forges, were pro-
hibited under a penalty of ;^5oo. This system of prohibition
and restriction continued to increase till the Colonies rebelled,
and declared independence in 1776."
As might have been expected after such a history, the first
effort of the independent States was to retaliate upon Great
Britain by cutting off the trade which she had ende<ivoured to
preserve by such injurious measures.
3. The first Tariff Act was passed in 1789. The preamble
of this Act limited the duration of the Protective duties to
seven years, that being the time after which, according to the
Protectionists of that day, the infant industries would be able
to stand alone. Before the seven years expired, the Act had
been altered many times, and every alteration was in the
direction of higher duties ; while, it is almost needless to say.
The Revival of Protection. 51
Pt. I., Ch. iv., \ 3.]
the infants or that day continue to be infants still. After one
hundred years of Protection, not one of them can walk alone.
In spite, however, of the alterations in the original Act, the tariff
remained for twenty years a revenue measure. The duties were
in all cases moderate, ranging from five per cent, ad valorem
to fifteen per cent, on articles of luxury, and the ostensible
ground for such increases as were made was the necessity for
raising a larger revenue.
The first great change occurred in 1808, when, as Professor
Taussig says, " the complications with England and France led
to a series of measures which mark a turning-point in the
industrial history of the country." The Berlin and Milan
Decrees, the English Orders-in-Council, the Embargo, the
Non-Intercourse Act (1809), practically destroyed all foreign
commerce. War with England followed in 18 12. Then, as
always, tariffs provoked war, and war in its turn provoked still
higher tarifTs. The first serious agitation in favour of Pro-
tection dates, in the opinion of Professor Taussig who has
made a more careful study of the question than any other
writer from the period of 180815, when measures of overt
hostilities terminating in open war, fanned that flame of discord
and suspicion in which the fetters of a tariff are always forged.
The conclusion of peace led to a slight reduction in duties ;
but in 18 16 the manufacturers' agitation was successful, and
duties of twenty-five per cent, were imposed upon iron, wool,
cotton, and other articles of domestic manufacture.
The next alteration of the tariff occurred in 1824, and was
due, as has often been the case, to the pressure of a financial
crisis. The termination of the Continental wars caused com-
mercial unsettlement throughout the civilised world, so that it
was many years before trade flowed again in its natural channels.
The period of transition from war to peace was necessarily
attended with much distress. This was aggravated in America
by an excessive issue of paper money, until a crash occurred in
1819, from which the country did not recover for four years.
E 2
52 Industrial Freedom.
During that period the Protectionists were active. Periods of
national distress are always the opportunity of financial quacks.
Defeated only by the vote of one State in 1820, they obtained
a high tariff in 1824, which they again increased in 1828, being
aided in the latter undertaking by the English crisis of 1825-26.1
In the tariff of 1828 the Protective movement reached its
highest point before the Civil War. The measures which
followed in 1832 and 1833 the year of Clay's compromise
tariff moderated the peculiarly offensive provisions of the Act
of 1828, and provided for the gradual reduction of duties to a
uniform rate of twenty per cent, by the year 1842. In that
year, however, the tariff, instead of being reduced, was again
raised. Again we can trace in this fresh instalment of Pro-
tection the influence of currency delusions. The crisis of
1837 is described by the Hon. Hugh McCulloch, who was
Secretary to the Treasury in three Administrations, as the most
severe ever experienced in the United States, both in its
immediate and its after-consequences. Every bank in America,
except the Chemical Bank of New York, suspended specie
payments, and the country did not recover from the disaster
until 1843. The collapse was due, said Mr. McCulloch, in
his first report to Congress, as was the great expansion of 1835
and 1836, which immediately preceded it, to "excessive bank
circulation and discounts, and an abuse of the credit system,
stimulated in the first place by Government deposits with the
State Banks, and swelled by currency and credits until, under
the wild spirit of speculation which invaded the country, labour
and production decreased to such an extent that the country
which should have been the great food-producing country of
the world became an importer of bread-stuffs." ^ The Act of
1 .\ graphic description of this crisis, wliich was largely due to wild specula-
tion in South America, and was one of the fiercest ever experienced, is contained
in Martineau's " History of the Peace," book ii. , chapter viii.
2 Sec " Men and Measures of Haifa Century," by Hugh McCulloch (Samp-
son Low & Co., London, 1888), a work of extreme interest, which throws
many side-lights upon economic questions.
The Revival of Protection. 53
Pt. I., Ch. iv., 54.]
1842 continued in force for ten years, when it was superseded
by the Act of 1846, which greatly lowered the range of duties.
In 1857 duties were again reduced, and remained low until
the Morrill Tariff of 186 r. This was passed in 1859-60, when
Congress was once more under the influence of the feelings
inspired by a commercial crisis. This had occurred in 1857
as a consequence of similar causes to that which had produced
the crisis of 1837 namely, the unhealthy extension of various
forms of credit. The Morrill Tariff, however, made only slight
increases in existing duties, and professed to make the increases
even less than they were. Its chief effect, according to Pro-
fessor Taussig, was to alter the mode of collection. Hardly
had this tariff come into operation when the Civil War began.
From that moment dates the orgie of Protectionists. The
exigencies of the war were everywhere seized upon as an excuse
for the foundation of tariff monopolies ; and the history of
tariff legislation since that date is one of the most disgraceful
examples ever offered to the world of the methods by which
organised wealth is able to corrupt a legislative body. The
framing of a tariff has been aptly described as a game of grab,
in which every interest tries to steal some public money, and
in which one robber assists another in return for the permission
to do more plundering on his own account. The world, per-
haps, has never afforded a more striking instance of the
inherent evils of a Protective system than is offered by the
debasement of American politics, and the unhappy condition
of the industrial classes during the last five-and-twenty years.
Fortunately, the writing on the wall is plain. The system of
Protection cannot last for many years, now that the adoption
of the Australian ballot system has restored freedom of voting
to the mass of American citizens.
4. It would unduly protract this inquiry if any attempt
were made to investigate the connection between the fluctu-
ating tariff legislation of the United States and the general
54 Industrial Freedom.
prosperity of the country. Both Free Traders and Protec-
tionists have asserted that such a connection exists ; and each
has claimed, with much parade of facts, that the tariff which
they favour has produced prosperity, and that depressions have
been due to changes in an opposite direction. Professor
Taussig, in his chapter on "The Tariff, 1830 1860," has
summarised all that can be said upon this point by either
side with an impartiality which is as rare in tariff contro-
versies as it is commendable. He concludes his remarks as
follows :
"In truth, there has been a great deal of loose talk about
tariffs and crises. Whenever there has been a crisis, the
Free Traders or Protectionists, as the case may be, have been
tempted to use it as a means for overthrowing the system they
opposed. . . . But the effect of tariffs cannot be traced by
any such rough-and-ready method. The tariff system of a
country is but one of many factors entering into its general
prosperity. Its influence, good or bad, may be strengthened
or may be counteracted by other causes ; while it is exceedingly
difficult, generally impossible, to trace its separate effect.
Least of all can its influence be traced in those variations of
outward prosperity and depression which are marked by ' good
times ' and crises. A Protective tariff may sometimes strengthen
other causes which are bringing on a commercial crisis. Some
such effect is very likely traceable to the tariff in the years
before the crisis of 1873. It may sometimes be the occasion
of a revival of activity, when the other conditions are already
favourable to such a revival. This may have been the case in
1843. But these are only incidental effects, and lie quite out-
side the real problem as to the results of Protection. As a
rule, the tariff system of a country operates neither to cause nor
to prevent crises. They are the results of conditions of ex-
change and production on which it can exercise no great or
permanent influence. . . . There is no way of eliminating
The Revival of Protection. 55
Pt. I., Ch. iv., } 5.]
the other factors and determining how much can be ascribed
to the tariff alone." 1
5. These conditions prevent the example of America
from being of much value to other countries. The conditions
of the United States, both physical and political, are unique.
In no other country in the world is there an extent of territory
so great or of such varied resources ; and over no other portion
of the globe of equal extent is trade so perfectly untrammeled.
When Protectionists point to American prosperity as a con-
sequence of Protection, they forget that no other country offers
such an example of the wisdom of Free Trade. Over an area
of 3,547,390 square miles there is no Customs House, and
goods can pass as freely from New York to San Francisco,
as they can from Birmingham to London. The rapid
development of new countries, the growth of arts, the
enormous influx of immigrants, have all combined to obscure
the influences of the American tariff. No other country
is so well adapted both by nature and art to endure the
burdens of high taxation. But such a fact gives little
warrant for the assertion that high taxation is a universal
good. America is a country by itself, whose conditions
are so peculiar, and whose growth has been so rapid,
that it affords but little instruction to tariff disputants in
other lands. All that this chapter has endeavoured to make
plain is, that in America, as in Europe, high tariffs have
originated in an unhealthy condition of the body politic.
Sometimes this condition is the result of war, sometimes
of speculation, sometimes of delusions about currency ; but
whenever it exists, from any cause, Protection flourishes.
Quack doctors have no chance when the patient is in health. 2
1 " T.iriff History of the United States," Taussig, pp. 121, 122. (G. P.
Putnam's Sons, New York and London, 1888.)
^ Colonel Grosvenor's "Does Protection Protect?" contains a mass of
information on this subject. The tracts of the Tariff Reform League and
56 Industrial Freedom.
SECTION IV. THE BRITISH COLONIES.
I. While the causes which have contributed to the revival
of Protection in Europe and the United States have not been
such as to give rise to permanent anxiety for the ultimate
success of Free Trade, no candid supporter of that policy can
view without disquietude the fiscal legislation of the British
Colonies.
Colonial tariffs have had two distinguishing characteristics
in having been adopted more deliberately for the sake of
Protection than has been the case elsewhere, and in being
the direct result of those misapprehensions and mistakes
which have been noticed in an earlier chapter as inducing a
mistrust of Free Trade among the working classes.
This has been especially the case in the Colony of Vic-
toria. The first restrictive tariff in Victoria was passed in
1865. Since that date it has been altered four times
without counting unimportant modifications namely, in 1870,
1872, 1880, and 1889. On each occasion the scale of duties
has been raised and their scope widened, until duties averaging
30 per cent, ad valorem are now levied on nearly a thousand
the " Economic Monographs," issued by G. P. Putnam's Sons, are also well
worthy of attention.
Of the authors who have tried to deal with this great subject, Professor
Taussig, and Professor Sumner of Yale, appear to have been the most
successful. Professor Taussig, in his " Tarift History,'' gives an admir-
able survey of the course of fiscal legislation ; while Professor Sumner, in his
" Lectures on the History of Protection," aims rather at illustrating the effects
of the various tariffs upon the condition of the country. In addition to these
principal works, much information is contained in the tracts of the Tariff Reform
League. The reports presented by Mr. Secretary McCulloch during his terms
of office at the Treasury are also very valuable in showing the intimate
connection which exists between Protection and currency delusions.
It would lie outside the scope of the preseat work to enter upon any
detailed inquiry into the causes or effects of Protection in the United States.
All that is desirable in the present connection is to indicate the special nature of
the crises which in America, as in Europe, have led to an apparent and (as
events will prove) a temporary abandonment o'" the principle of industrial
freedom.
The Revival of Protection. 57
Pt. I., Ch. jv., \ 2]
articles of commerce. The tariff occupies twenty-five pages ot
close print ; and no visitor can pass from Sydney to Melbourne
although these cities are as closely related by ties of business
and friendship as Liverpool is to Manchester, or Boston to New
York without being subjected to a tiresome delay of thirty
minutes while his person is inspected by detectives and his
luggage searched as if he were a suspected thief. Such is
commerce as it is understood in Victoria, and this is the way
in which Protectionists testify to their belief in the unity of
Australasia.
2. Unfortunately for the interests of Free Trade, Victoria
was the foremost Colony in the Australasian group at the time
when she entered upon her reactionary policy. She then held
the lead in population, wealth, trade, commerce, shipping,
manufactures, agriculture ; and although she has for several
years lost her position of supremacy in all these signs of
material progress, except agriculture, to the Free Trade Colony
of New South Wales^ she exercised in 1865 a dominating
influence throughout Australia. The effect of this extended
even into New South Wales, so that shrewd observers like Sir
Charles Dilke, visiting the Mother Colony in 1866, could
publish the opinion that " the pastoral tenants of the Crown
stood alone in their support of Free Trade." - It is a
striking instance of the difficulty which must beset even ex-
perienced publicists in attempting to catch the drift of foreign
opinion that, within twelve months of this sentence being
penned, one of the strongest Colonial Ministries that ever
existed that under the leadership of Sir James Martin was
so hopelessly beaten at the polls upon the straight issue of
Protection that the Protectionists did not exist again as a
party in New South Wales until 1886. In spite of this
reversal of his expectations, Sir Charles Dilkc has had the
1 See Appendix N'o. III.
2 "Greater Britain," First Edition, vol. ii., p. 59 (London, 1S6S).
58 Industrial Freedom.
courage, in the last edition of his work, published in 1890, to
repeat his gloomy forecast of the prospects of Free Trade in
New South Wales in almost the same language which he used
in 1866.1 A stopped clock must point to the right hour at
least once in a day ; but it has yet to be seen whether, in
spite of an accidental victory, the permanent triumph of Pro-
tection in New South Wales is not even farther off from 1890
than 1890 was from 1866.
The younger Colonies of South Australia and New Zealand
were necessarily more exposed than New South Wales to the
influence of Victorian opinion. Not only were they largely
developed by Victorian capital, but many of their press-men
and politicians received their earliest training in the Protec-
tionist struggles of the Southern Colony. The consequence
was that both in South Australia, Queensland, and New
Zealand, there was a steady drift of opinion in favour of Vic-
torian views. At the same time the movement towards Pro-
tection was assisted by the totally different feeling of an-
tagonism to Victoria. The policy of extreme provincialism
which that Colony has pursued, not only in her Customs
tariff, but in other departments of administration, naturally
aroused a bitterness of feeling in the neighbouring Colonies,
which gave rise in South Australia and Queensland to an
1 The portion of Sir Charles Dilke's book which deals with New South
Wales is full of strange errors, both in the estimate of persons and of policies.
He appears to have written the Australian portion of his work entirely under
Victorian influences, and to have looked at everything through Protectionist
spectacles. It is a great pity that a work which contains so much valuable
niatter, and gives so admirable a survey of the institutions and development of
the English dominions, should be so unreliable when it treats of the progress
and opinijns of the Free Trade Colony of New South Wales. It is natural
that Protectionists should strive, by all means in their power, to decry the pro-
gress of a Frei Trade country, and to conceal the fact of its supremacy ; but
it is surprising that an English statesman should not have informed himself
more accurately of the reasons which have induced New South Wales, alone of
the Australian Colonies, to adhere to a policy of commercial freedom. Sir
Charles Dilke, however, appears in all pans of his work to hold a brief for
Protection,
The Reviva^ of Protection. 59
Pt. I., Ch. iv., 5 3.]
irresistible demand for retaliation. New South Wales up to the
present time has been sufficiently powerful to treat the
jealousies of her southern neighbour with a good-humoured in-
difference; but even in New South Wales the desire to
retaliate upon Victoria is the strongest element in the Pro-
tectionist cause.i This is especially the case among the
farmers.
3. The friends of Victoria were naturally unable to resist
this legitimate appHcation of their favourite doctrines ; and
thus, by a strange irony of fate, Victoria has been confined on
every side, except that bordering upon New South Wales, by
fetters of her own forging. The limits thus placed upon her
trade have reduced her to a condition of grave financial
difficulty. Her exports have failed for many years past to keep
pace with the increase of population. In the meantime her
debts have been increasing by leaps and bounds. She
has borrowed twenty millions of pounds upon her public
credit during the last ten years ; while the increase of her
private indebtedness during the same period has been
enormous.^ Naturally the expenditure of so much capital
in a compact community of less than a million souls,
produced that boom of which Sir Charles Dilke has written
in such glowing terms. The boom, however, has ended
as booms will; and at the time of writing (1890) the
Colony of Victoria, which, according to Protectionists, is the
paradise of working men, is suffering from a protracted agony
of hard times. The Protectionist Ministry proposes the familiar
remedy of more borrowing. Railways are to be made with
English money at a cost of fourteen millions ! Should this
proposal be adopted, and should England be inclined to lend
the money, the crash may be postponed. But in the mean-
1 Thus all the constituencies along the border return Protectionist
members.
' Sft Appendi.x,
6o Industrial Freedom.
time, unless the experiment of irrigation succeeds beyond the
most sanguine expectations in giving the Colony new articles
of export, or unless her hot-house manufactures can expand
into new commercial channels, the necessary payments of
interest to her foreign creditors will form every year an in-
creasing proportion of the total value of her exports. It is no
wonder that Victorian Protectionists have so suddenly become
converted to the merits of Federation !
4. The desire to retaliate upon a Protectionist neighbour
which has stimulated the Protective movement in Australia,
has operated in the same direction in the case of Canada.
Although the Canadian tariff was adopted mainly as a revenue
measure, the commercial tactics of the manufacturers of the
United States undoubtedly affected the result. Secure within
their own market, it was a common practice of the New
England and Pennsylvania manufacturers to treat Canada as a
useful outlet for surplus stock. This was sold at any price
that would secure a buyer, until Canadian manufacturers com-
plained that they could find no market for their goods in the
face of competition of this nature. The Canadian people
were appealed to by their pride not to allow their country
to be the dumping-ground of American rubbish, but to
establish for themselves a firm and national system of trade
and manufacture. How far the attempt to do this by means
of Protection has proved to be successful is an inquiry that
would lie outside the province of this work. It is enough to
state that while Canadian trade has developed since the tariff
of 1879 i"^ some directions, the signs of progress in others are
by no means satisfactory.^ A full examination, however, into
Canadian progress under Protection would require a detailed
investigation of many complicated figures, the value of which
would diminish as each year a'Med new facts and fresh
1 See extract in note at end of this section fr5ni " 'Y\\i Tariff on Trial, " by
Sir Richard Cartwright {The Xorih Amciican A'eviav, May, ifgo).
Th Revival of Protection. 6i
Pt. I., Ch. iv., \ 5.]
statistics to Canadian history. All that is desired in the
present connection is to indicate the causes which have led to
the adoption of Protection, and not to estimate the results of
the system.
5. But, although retaliation was a powerful motive in
inducing the acceptance of the Canadian tariff, it is doubtful
wliether the measure was not finally accepted rather for revenue
than for fiscal reasons. It is certain that the leaders of both politi-
cal parties evaded a contest upon the strictly fiscal issue. Thus
the Hon. Edward Blake, leader of the Liberal or low-tariff party,
used the following words in his electoral manifesto in 1882:
" Our adversaries wish to present to you an issue as between
the present tariff and absolute Free Trade. That is not the
true issue. Free Trade is, as I have repeatedly explained, for
us impossible ; and the issue is, whether the present tariff is
perfect, or defective and unjust."
Similar views were expressed in 1877 by Mr. Mackenzie,
then the leader of the sa called Free Trade party: "My
honourable friend (Sir J. Macdonald) has stated very correctly
the position I have taken up that is, that we have not
really the questions of Protection and Free Trade as
political principles of action to define or expose in this
country."
Similar extracts might be made from the speeches and
writings of other Canadian politicians ; but enough has been
quoted to show that the Canadian tariff was regarded by many
of its friends and opponents as an exceptional piece of legisla-
tion, demanded by the circumstances of the country, and was
not a deliberate rejection of the principles of Free Trade.
\\'ithout entering into details, which would lie outside the
scope of this work, it is enough to say that the supposed excep-
tional circumstances which justified the tariff were those
physical and national characteristics which were thought to
render impossible any form of direct taxation.
62 INDUSTRIAL FREEDOM.
6. The same difificulty of obtaining revenue without
resorting to the Customs House has been felt very strongly
in Australia, Direct taxation must always be a matter of
difficulty in young and sparsely settled countries. If land is
taxed, the cry is raised that the development of the country is
being retarded ; if realised wealth is taxed, the Government is
denounced for discouraging the investment of foreign capital.
And whether the taxes are levied on land or personalty, it must
always be difficult in a young country, where local and personal
feeling runs so high, either in friendship or enmity, to obtain
satisfactory assessments without incurring the charge of
favouritism or needlessly exposing private affairs. The con-
sequence is that every Government, whatever may be its fiscal
creed, is tempted to raise taxes by the easy method of the
Customs House. Directly this is attempted the " interests "
combine ; and, sometimes before the country has had time to
realise what is being done, and contrary to the intention of the
Ministry, a Protective tax is sneaked into the tariff. One tax
of this kind soon leads to another, until the country finds
itself committed to a Protective policy.
This explains why the Free Trade party in the Australian
Colonies is everywhere the party of economy. The aim of Pro-
tectionists is to increase public expenditure beyond the annual
revenue, in the assurance that the difficulty of raising fresh
taxation by any other means, except through the Customs
House, will be so great as to necessitate a revision of the tariff.
They then anticipate a general scramble, in which the highly
organised manufacturers' rings will be able to obtain an ample
share of public money. The Protectionists have hitherto been
assisted in this object by the Colonial Upper Houses, which
give the wealthy land-owning class a degree of influence far
greater than that which is possessed by the same classes in
communities whose form of government is outwardly less
democratic. Thus, the Upper House in New South Wales,
although it contains a large majority of Free Traders, has
TtiE Revival of Protection. 63
Pt. I., Ch. iv., \ 7.]
consistently thrown out every measure to impose direct taxation.
The fiscal struggle in New South Wales has thus entered on a
new phase ; it has become a struggle of the masses against
the classes, and the men of wealth are being driven slowly but
surely into the camp of the Protectionists.
7. This has not always been the case in the course of this
controversy. In Victoria, indeed, the position of parties in the
early days of the struggle was quite the opposite. The land-
owners and men of wealth were the Free Traders, the masses
were Protectionists.
This was not owing to any special characteristics of either of
the rival doctrines, but to the political accidents of the time. The
real struggle in Victoria in 1865-6 was not between Free Traders
and Protectionists, but between the landowners and the people.
It happened that the landowners were closely connected,
both socially and by their financial relations, with the banking
corporations and the mercantile classes, and thus the merchants
and the banks were drawn into the struggle in self-defence. But
primarily the movement was against landowners and not against
merchants. As the contest continued, the issue of Protection
was put more plainly forward, both in order to attract the
manufacturing classes to the popular side, and because the anti-
popular party happened to hold Free Trade views. The feel-
ings generated in this bitter struggle have spread from Victoria
to the rest of Australia, and the Protectionist party in that
continent endeavours by every means in its power to associate
Free Traders with Conservatism.
In truth, however, except in New South Wales, where
parties are divided by their fiscal opinions, and where Free
Traders are the democratic and popular party, there has been no
straight fight upon the simple issue of Protection and Free
Trade. Protection has been adopted for a variety of differing
and sometimes inconsistent reasons, among which positive
hostility towards Free Trade has had but little influence.
64 iNbVSTklAL pR p. EDO St.
In practice it matters, of course, very little with what
object Protective duties are imposed whether it is to maintain
costly armies or to save property owners from bearing their
share of the national taxes. But when the conduct of a nation
in adopting Protection is quoted as an example, then the motives
which induced it to take that step become of the utmost im-
portance ; because if the motives are such as might reasonably
affect our minds, then the case of that country is in point for us ;
but if the motives are altogether exceptional and far removed
from those which either do or ought to operate upon us, then
the example is of no value, except in so far as it illustrates the
working and effect of the policy in question. The issue,
whether Protection or Free Trade should be adopted in any
particular country, is not one that ought to be decided by
counting heads. But when an appeal is made to the conduct
of other nations, it is necessary to bear in mind the facts and
circumstances by which they have been controlled.
As a result of our inquiry we see that there has been
no deliberate rejection of Free Trade as a sound principle, but
only an abandonment of its practice under the stress of great
and exceptional difficulties. It has still to be proved whether
the rulers of many of the now Protected countries would not
have acted more wisely by adhering under all difficulties
to the natural policy of allowing men to buy and sell wherever
they please ; and it has yet to be seen whether, in the crash of
the first great civil commotion, these childish impediments
to human intercourse will not tumble to the ground.
There are already many signs that the evils which arise
from a disorganisation of industrial relations are the greatest in
those countries which have strayed the farthest from the path
of freedom. 1
It is not, however, intended to investigate tlie working of
' Thus the report of the Enghsh Royal Commission on the Depression of
Trade [ci)-c. 1883-7) shows that the depression was greater in the Protected
than in the Free Trade countries.
The Revival of Protection. 65
Pt. 1., Ch. iv., \ 7.]
Protective tariffs in this treatise. The materials for such an
investigation are very voluminous and of uncertain value; while
the circumstances which have to be taken into account in draw-
ing a comparison between the industrial conditions of several
countries are so numerous and impalpable that no sound
practical conclusion can be based on such an inquiry. There
are indeed a few points in which comparisons can be drawn
between Great Britain and the United States, and between the
Colonies of New South Wales and Victoria ; while if the com-
parison is limited to particular industries, other countries may
be added to the list. But, for the most part, each country
must stand by itself; and the question between the rival
policies must be decided upon facts drawn from its own history,
and conclusions based on its own conditions. It is generally
waste of power and a cause of confusion to draw arguments
from the circumstances of other countries for any other pur-
pose than that of estimating with correctness the actual opera-
tion of a fiscal policy. A knowledge of the industrial
conditions of other countries is more generally useful as a
check upon rash inferences than as a guide for our own
conduct.^
1 See Appendix III. : Comparison between the Progress of Victoria and
New South Wales since 1866.
Note i.
The condition of England under protection.
(Extract from Martineau's " Plistory of the Peace.")
In Carlisle the Committee of Inquiry reported that a fourth of the popular
tion wrs in a state bordering on starvation actually cet-tain to die of famine,
unless relieved by extraordinary exertions. In the woollen districts of Wilt-
shire the allowance to the independent labourer was not two- thirds of the
viinimum in the workhouse ; and the large existing population consumed only
a fourth of the bread and meat required by the much smaller population of
1S20. In Stockport more than half the master-spinners had failed before the
clo'e of 1842 ; dwelling-liouses to the number of 3,000 were shut up ; and the
occupiers of many hundreds more were unable to pay rates at all. I'ivc
thousand persons were walking the streets in compulsory idleness ; and the
Burnley (Guardians wrote to the Secretary of State that the distress was far
66 Industrial Freedom.
beyond their managc;Tient ; so that a Government Commissioner and Govern-
ment funds were sent down without delay. At a meeting at Manchester, where
humble shopkeepers were the speakers, anecdotes were related which told
more than declamation. Rent-collectors were afraid to meet their principals,
as no money could be collected. Provision dealers were subject to incursions
from a wolfish man prowling for food for his children, or from a half-frantic
woman with her dying baby at her breast, or from parties of ten or a dozen
desperate wretches who were levying contributions along the street. The linen-
draper told how new clothes had become out of the question among his
customers, and they bought only remnants and patches to mend the old ones.
The baker was more and more surprised at the number of people who bought
halfpennyworths of bread. A provision dealer used to throw away outside
scraps of bacon ; but now respectable customers of twenty years' standing
bought them in pennyworths to moisten their potatoes. These shopkeepers
contemplated nothing but ruin from the impoverished condition of their
customers. While rates were increasing beyond all precedent, their trade was
only one-half or one-third, or even one-tenth what it had been three years
before.
**
At Leeds the pauper stone-heap amounted to 150,000 tons ; and the
Guardians offered the paupers 6s. per week for doing nothing, rather than
7s. 6d. per week for stone-breaking. The millwrights and other trades were
offering a premium on emigration, to induce their "hands" to go away. At
Hinckley one-third of the inhabitants were paupers ; more than a fifth of the
houses stood empty ; and there was not work enough in the place to employ
properly one-third of the weavers. In Dorsetshire a man and his wife had for
wages 2S. 6d. per week and three loaves ; and the ablest labourers had
63. or 7s.
There were riots of nailers and miners at Dudley and .Stourbridge, and
tumult over the whole district, requiring the active services of the military. The
rioters resisted a reduction of wages, and hustled some of the masters, as did
other rioters in Wales, where a gentleman of property had a narrow escape
with his life. In the Potteries a force of 6,000 malcontents, spread over an
extent of seven miles, and occasionally comrnitting violence on recusant masters
or men, kept Staffordshire in alarm. Troops were encamped- on the Pottery
racecourse, and magistrates tried to conciliate and mediate, but with little effect.
In Manchester the influx of malcontents became alarming in August, 1842.
Mills were stopped, and in some the windows broken and machinery injured.
The Riot Act was read four times in one day, and prisoners were taken by
scores at once. A large attendance of military was necessary, as there were
threats of tearing up the railings and cutting the gas-pipes. At one time all
the chief towns in the manufacturing district seemed to be in the hands of
the mob.
Further and detailed information on the subject is to be
found in Karl Marx's " Essay on Capital '' and in Engel's " Con-
The Revival of PkotectioiV. 67
Pt I., Ch. iv., Note i.]
dition of the Working Classes in 1844." The novels of " Sybil"
and " Yeast " also give an insight into the true nature of the
time.
Mr. Medley has collected some of the more striking facts
in a leaflet which is published by the Cobden Club, and is
here in part reprinted :
"During these thirty years (1815-45) the state of the country was simply
awful.
"At one time, one out of every eleven of the population was a pauper.
"Some idea of the state of things may be gained from Xhe facts which
follow :
"In 1816, at Hinckley, Leicestershire, the Poor Rate was 52s. in the
pound.
" In 1817, at Langdon, Dorsetshire, 409 out of 575 inhabitants were receiv-
ing relief ; while in Ely three-fourths of the population were in the same
plight.
" In 1819, 1820, and 1822, agriculture was in a state of universal distress,
and petitions for relief were presented to Parliament.
" During the time these laws were in force, there were no fewer than five
Parliamentary Committees to inquire into the cause of the distress.
" Farmers were ruined by thousands. One newspaper in Norwich adver-
tised 120 sales of stock in one day.
"In 1 89 the workhouses in some parts of the country were so crowded
that at times four, five, or si.x people had to sleep in one bed.
"Sheffield had 20,000 and Leeds 30,000 people dependent on the
rates.
" Whole families were reduced to live on bran. In Huddersfield 13,000
people were reduced to semi-starvation.
" In 1839-42, in Stockport, one-half the factories were closed ; 3,000 dwell-
ings unoccupied ; artisans were breaking stones on the road ; the Poor Rate
was 10s. in the pound ; and outside scraps of bacon were bought in penny-
worths by respectable people to moisten their potatoes.
" At Leeds the pauper stone-heap amounted to 150,000 to'nS.
" In Dorsetshire a man and his wife had for wages 2S. 6d. a week and
their house, and the ablest labourers had but 6s. or 7s.
" In 1839, in Devonshire, the whole of a poor man's wages would scarcely
produce dry bread for a family of four or five children.
" As to meat, in those times it was scarcely ever touched.
" In 1840 Lord John Russell told the House of Commons that the people
were in a worse condition than the negroes in the West Indies.
" In 1842, in Bolton, there were 6,995 applicants for relief to the Poor Pro-
tection Society, whose weekly earnings averaged only 13d. per head; 5,305
persons were visited, and they had only 4^6 blankets amongst them, or about
one blanket to every eleven perstns,
F 2
68 Industrial Freedom.
"In one district in Manchester there were 2,000 families without a
bed.
" In Glasgow 12,000 people were on the relief funds,
"In Accrington, out of a population of 9,000, only 100 were fully
employed.
"The reports of the factory inspectors showed that 10 per cent, of the
cotton mills, and 12 per cent, of the woollen mills of Lancashire and Yorkshire
were standing idle, and that of the rest, only one-fourth were working full time.
As Cobden showed, in answer to Sir Robert Peel, the stocking-frames of
Nottingham were as idle as the looms of Stockport ; the glass-cutters of Stour-
bridge, and the glovers of Yeovil, were undergoing the same privations as the
potters of Stoke and the miners of Staffordshire, where 25,000 men were
destitute of employment. He knew of a place where 100 wedding-rings were
pawned in a single week to provide bread, and of another place where men and
women subsisted on boiled nettles, and dug up the decayed carcase of a cow
rather than perish of hunger.
"Such was the state of things which existed under a system which was
called Protection.
"In those days the population of Great Britain was about fifteen millions ;
it is now over thirty millions.
"In 1884, under Free Trade, there is not a man, woman, or child who i3
not better off than he or she would have been under the old starvation
lasvs.
" Labourers get higher wages than they did under these laws, and with the
same money they command more of the necessaries and conveniences of life
than they could then.
" With these facts before them, they will not listen to those who, under
pretence of protecting their interests, would induce them to vote for putting a
duty on Foreign Wheat that is, levying a Bread Tax."
Note 2.
FACTS SHOWING THE PROGRESS OF ENGLAND UNDfiR
FREE TRADE.
British Produce and Manuf.\ctures Exported.
UNDER PROTECTION'.
UNDER FREE TRADE.
Year.
1815
Total Value.
51,603,000
Per Head of
Population.
. s. d.
Year.
1846
Tot.-il Value.
52,786,000
Per Head o(
Population.
s. d.
... 2 I 5
1821
... 36,659,000
I 14 7
1856
... 115,826,000
4 2 10
1831
37,164,000
I 10 7
1866
... 188,917,000
..657
1835
47,372,000*
1876
... 200,639,000
... 6 I 3
1842
47,284,000
... I 15
1884
232,927,000
696
' This increase was caused by fiscal reforms, duties upon more than 700 articles
being reduced and modified between 1F31 and i?3.).
Pt,
The Revival of Protection.
I,, Ch. iv., Note 2.
Analysis of Imports and Exports for i
69
Living Animals, Food, Spirits, Wine, Tobacco, "
Seeds, and Oil Cake 172,104,684
Raw Materials, and other Materials of Manufactuie,
including Cotton, Wool, Ores, Hides, Skins,
Coal, &c
Leather ...
Cotton, Linen, Jute, Silk, Woollen, and other Tex-
tile Manufactures, including Yarns
Metals in Various Stages of Manufacture ...
Steam Engines, Machinery, Tools, Hardware, and
Cutlery ... ... (Import trifling, not stated separately
Exports of British
Produce and
Imports. Manufactures,
11,076 558
146,489,696
5. 41 1. 253
21,813,819
14,773,281
Alkali Chemicals and Drugs ...
Other Manufactured Articles ...
Miscellaneous Articles ...
Total Exports, British Produce and Manufactures
E.xports of Foreign and Colonial Produce ...
Total real value of Imports and Exports
Gold and Silver Bullion and Specie
13.469.551
2.016,136
109,844,281
37,162,152
13,051,028
7,839.516
38,468,353
232,927.575
62,443,715
389.774.589 295,371,290
20,321,853 21,999,222
2,362,093
23.337,202
3,482,521
;^4io,096,402 ^^317,370.512
British Shipping under Protection and under Free Trade.
total tonnage belonging to
THE united KINGDO.M.
under
protection.
Tons.
1816 . 2,504,000
1845 3.123,000
Increase 619,000
under
free trade.
Tons.
1845 . 3,123,000
1880 . 6,574,000
Increase 3, 45 1, 000
total tonnage entered and
cleared with cargoes.
UNDER
protection.
r845. Tons.
British 6,617,000
Foreign 2,715,000
Total 9,332,000
UNDER
FREE TRADE.
1884. Tons.
British 40,156,000
Foreigni3,8f4,coo
Total 53,970,000
It was prophesied that the repeal of the Navigation Laws would ruin British
shipping, but it still maintains its supremacy.
Consumption of Articles of I.mpoktkd Food per Head of the
Population.
Under Protection, 1840.
Bacon and Hams, asmall fraction of ilb.
P.utter
lib.
Cheese
nearly lib.
Wheat and Flour
42Mbs.
Eggs
... 3^ in number
Rice
nearly lib.
Sugar, raw
i5lbs.
Tea
... nearly i.]lb.
Under Free Trade, 1883.
Bacon and Hams ... nearly nibs.
Butter above 7lbs.
Cheese above 5^ lbs.
Wheat and Flour ... nearly 251 lbs.
Eggs above 26 in number
Rice nearly i2{lbs.
Sugar, raw nearly 62lbs.
Tea above 4^1bs.
70
Industrial Freedom.
Protection Prices, 1841.
Tea Ss. per lb.
Coffee 2S. per lb.
Sugar 9d. per lb.
Free Trade Prices, 1?
Tea
Coffee
Sugar
2S. per lb.
IS. per lb.
2d. per lb.
Social and Economic Results of Free Trade.
The number of paupers relieved in England and Wales on the istof January,
1849, the first year of the present statistics, was 934,419, the population being
17,564,000 ; on the ist of January, 1884, the number of paupers was 774,310,
and the population 26,951,000. In 1849 the proportion relieved to population
was I in 18 ; in 1884 it was i in 34.
The amount expended in poor relief per head of the population was the same
in 1883 as in 1845 viz., 6s. a fact largely attributable to increased humanity in
the treatment of the poor ; but the rateable value of the property assessed to
the Poor Rate increased from ^^62, 540,000 in 1841, to _^i4t,407,686 in 1883.
The total capital of the savings banks was ^^24, 474,000 in 1841 ; it was
^^86,756,000 in 1884.
The total traffic receipts of railways were ^4,535,000 in 1843, and _^7i, 062,000
in 1883.
The total assessment of Income Tax in Great Britain in 1842 was
^^251, 000,000 ; in 1882 it was ,^565, 25 1,000,
Note 3.
NORTH AMERICAN REVIEW {s'o\.(iX\., "^o. '^y May, 1890.
Extracts from "The Tariff on Trial," by Sir Richard J. Cartwright, K.C.M.G.,
and Thomas G. Shearman.
One of the most remarkable, and in many ways one of the most important,
results of the Protectionist propaganda which was preached very successfully in
Canada in 1877 and 1878, and which was actually reduced to practice in 1879,
was that the good old wholesome dislike to taxation (and consequently to undue
and extravagant expenditure) was for the time being completely rooted up from
the minds of the majority. As very often happens, the indirect and secondary
result of a false theory is not the least mischievous. In this case it has
practically removed all check on expenditure by the Government.
Once imbue the minds of a large section of the people with the idea that
wealth can be created by imposing taxes, and it is obvious that they have no
longer any reason for opposing the imposition of new taxation, and that when
the Government wants money it need only profess that it desires to encourage
new industries to find a ready excuse for refilling its coffers. The present
Government of Canada have not been slow to learn and profit by this lesson.
Under a system of taxation for purposes of revenue only, the total expendi-
ture of Canada for the year 1874 was i?23, 316,316. In 1878, under the same
svstem, it had increased to .$23,519,301, being an increase of barely .?203,coo
in four years, in spite of the fact that a very large sum of money had been
The Revival of Protection. 71
Pt. I., Ch. iv., Note 3.]
expended in the interval upon public works. Under a system of taxation for
Protection the total expenditure of Canada for the year 1889 was $36,917,834,
having increased by an amount of 13,398,531 in eleven years. So in 1878 the
actual taxation of Canada was .$17,841,938, though, as there was a deficit in
that year, the necessary taxation might Le placed at 19,000,000. In 1889
the actual taxation was 30,613,522, being an increase of 11,613,522, taking
the necessary taxation (so-called) of 1878 as a basis,
**
Unfortunately there is a yet darker shade to the picture. What the result
may have been in other countries I cannot say, but in Canada (over and above
the extravagant expenditure above referred to) one most important consequence
of the introduction of the Protective system has been at the same time to make
provision for a large and permanent corruption fund, to be applied with the
effect and regularity of a machine to debauching the Press and Electorate as
occasion serves.
It is probable that this result is inherent in the system. Speaking with
knowledge, I say deliberately that I can conceive no more effectual method of
installing and intrenching corruption in the politics of any country than to give
a large number of active, energetic business men frequently persons possessed
of great wealth, and almost always having a large control of money a direct
pecuniary interest in controlling legislation and in supporting any particular
political party. Of course they will do it, and there is but one way in which
they can do it. Being subsidised, they must subsidise in return. It is quite
impossible to pause to point out the innumerable ways in which this corrupt
system works for evil at all times and periods ; but I will give one notable ex-
ample. Shortly before one of our General Elections the present Premier of the
Dominion (Sir John Macdonald), being pressed for funds, deliberately sum-
moned some eighty or ninety of the principal Protected manufacturers in Canada
to meet him at the Queen's Hotel in Toronto ; and then and there, in good set
phrase, told them that as the Government had helped them to enrich them-
selves at the public expense, they in return must help the Government to keep
in place ; nor did he dismiss them till they had assessed themselves in a large
amount for the purpose of providing a fund wherewith to corrupt the electors
of the Dominion.
* * * * *
To put the matter briefly, the results of the introduction of the Protective
system in Canada have been :
1. To remove all check on the expenditure of the Government, and to
encourage a reckless extravagance on their part which has resulted in an annual
expenditure for Federal purposes of nearly 50 per cent, more (after making all
deductions), for a population of less thanyf zr millions, than the sum required by
the United States for the like objects when their population was over tzccnty
millions.
2. To Fvstematise and intensify the tendency (always so perilous to the
welfare of representative Governments) to use corrupt means for the purpose of
influencing the Press and the Electorate, and to make it the direct pecuniary
interest of a very active and influential class to provide a regular and large fund
for such purposes.
72 Industrial Freedom.
3. To aggravate and accelerate the tendency to accumulate large fortunes
in few hands, and at the same time to increase the indebtedness and depreciate
the value of the property owned by the mass of the community, more especially
in the case of the agricultural class.
4. To favour the growth of a few large towns at the expense of the smaller
ones and of the rural population, which latter has been reduced to an absolutely
stationary condition over very large portions of the Dominion, in spite of a
large (alleged) immigration and of the fact that much new territory has been
thrown open.
fart XI.
PREPARING THE ARENA.
CHAPTER I.
DEFINITION OF FREE TRADE.
I. The discussion which has been carried through the first
four chapters upon the nature and the causes and the sig-
nificance of modern Protectionism ought, at least, to have
suggested the reflection that there is nothing new in the Pro-
tectionist doctrine as it is preached in America and the British
Colonies. These countries have not been perverted through
the discovery of any new economic doctrine, but simply from
indifference to the old, under the stress of new political
conditions. Men who have no knowledge either by personal
experience or through books of the appalling misery of
England under its Protective policy have accepted in an un-
thinking way the general tenets of Free Trade ; but they have
not reasoned for themselves upon the application of these
tenets, nor traced them to the facts on which they rest. Con-
sequently many inhabitants of a young country have come to
think that Free Trade is something peculiarly British and be-
longing to the Old World, with which they themselves need have
nothing to do. They sec that all the conditions of production
are different from what they arc in Europe; that instead cf
labour being abundant and land scarce, labour is scarce and
land abundant ; that capital is cfear and wages are liigh, where
in older countries capital is cheap and wages are low. Under
such circumstances they are inclined to take a merely academic
interest in discussions on Free Trade and to lend a rcadv car
74 Industrial Freedom,
to those who tell them that the old truths have no application
to their new conditions.
It is therefore desirable, even at the risk of going over
often-trodden ground, to re-state the economic argument
in favour of Free Trade, in order to show that in all its
bearings it has the same application to the circumstances
of all countries.
2. But first let us be sure in what sense we are using the
term Free Trade.
In its political and controversial sense Free Trade simply-
mean s the absence of duties of a Protective character.
It is sometimes used, in a wider sense, to denote the absence
of all Customs duties ; but this is not the meaning which it
bears when it is used in opposition to the term "Protection."
In that sense it is simply the absence of duties of a Protective
character.
It is no mere pedantry to insist upon this simple definition,
because much of the confusion and heat of the controversy
between Free Traders and Protectionists arises from neglecting
to remember it.
How often, for example, in New South Wales, have we not
heard Protectionists maintain their arguments against the
differential railway rates ! And in England trades unions have
been frequently declared, even by those who ought to have
known better, to be a violation of the principles of Free
Trade. Now diff'erential railway rates and trades unions may
be in themselves good things or bad things ; but neither the
one nor the other has anything to do with the imposition of
Customs duties. It would be just as logical to denounce them
in the name of Gothic architecture as in the name of Protection
or Free Trade ! Of course, if the term Free Trade is used in
an altogether different sense, and extended to mean "a general
principle of non-interference in industrial matters either by the
Government or by organised public opinion," the complaints to
Preparing the Arena. 75
Pt. II., Ch. i., \ 3.]
which reference has been made are logical enough. But not
only is the term not generally used in this wide sense, but it
would be impossible to carry on an argument upon the fiscal
controversy if the meaning of the words " Free Trade " were so
indefinite and large.
3. Cobden, with his usual sagacity, perceived this long ago,
when replying to the argument (which is one that seems to
exercise a strange fascination over a certain class of minds)
that because the commerce of no country is absolutely free, it
is justifiable to make the commerce of any particular country
less free than it is, he used the following words : " We do not
want to touch duties simply for revenue, but we want to prevent
certain parties from having a revenue which is of benefit to
themselves, but advantage to none else. On the contrary, what
we seek for is the improvement of Her Majesty's revenue ;
what we wish to gain is that improvement. We say that your
monopoly gives you a temporary advantage a temporary, not
a permanent advantage, and that you thereby cripple the
resources of the revenue." ^
And again: "One of your candidates actually says that
Free Trade means the abolition of all Customs House
duties. We have said, thousands of times, that our object
is not to take away the Queen's officers from the Customs
House, but to take away those officers who sit at the
receipt of custom to take tithe and toll for the benefit of
peculiar classes."-
4. The practical importance of recognising that Free
Trade is not inconsistent with a tariff for revenue purposes has
become greater by reason of the growing political power of
those who earnestly advocate the abolition of all indirect taxes.
Cobden himself belonged to this party, and his last political
1 Mouse of Commons, May 15th, 1843.
- I-ondon, Oct. 13th, 1843.
76 Industrial Freedom.
utterance was in favour of its views ; but Cobden was pre-
eminently a man of practical sagacity, who recognised, as the
more far-seeing members of the single-tax party ought also to
recognise, that in politics only one thing can be done at a time.
It is idle to rail against revenue duties when an active agitation
is on foot to replace them by Protective duties ; and it can
only encumber the supporters of Free Trade to have to fight in
a double controversy.
It cannot be too clearly recognised that the present struggle
between Free Traders and Protectionists is being fought upon
a single issue. We are not now discussing the respective
merits of direct and indirect taxation, but we are endeavouring
to clear the ground for such a discussion by beating out of the
field those who maintain as the cardinal maxim of their creed
that duties of a Protective character must exist. Until this
belief is destroyed, it is idle to argue the larger question
whether there should be any Customs duties at all. Protection
is wholly inconsistent with direct taxation ; Free Trade is not
inconsistent with it, but it stands apart as an independent fiscal
principle.
But if it is important to bear in mind that the question at
issue is not between direct and indirect taxation, it is even more
important to remember that we are not disputing about rival
principles of government. Free Trade, as opposed to Pro-
tection, in the sense in which it has been defined, is not
a principle of government, but a principle of sound finance.
It is a commercial expedient for securing the easiest inter-
change of commodities. A discussion of Free Trade need
not, therefore, raise the question whether individualism ought
to prevail in all industrial matters to the exclusion of any
direction or control either by Government or by organised
opinion, but only the small question whether Customs duties
ought to be of a revenue or a protective character. If poli-
ticians and newspaj)er writers would once perceive within
what narrow limits this controversy should be waged, there
Preparing the Arena. 77
Pt. n., Ch. i!.,5 I.]
would be less exaggeration in the language upon either
side, and the working of either policy would be better
understood.^
CHAPTER 11.
DIVISION OF THE ARGUMENTS INTO CLASSES ECONOMIC AND
POLITICAL.
I. It is of the highest importance in the fiscal controversy
to keep in mind a division of the arguments into two classes
the political, and the economic. The omission to observe this
fundamental distinction has been the source of much confusion
and ill-feeling.
No one can read discussions about a tariff without being
struck by the tendency, which exists on both sides, to under-
estimate either the intelligence or honesty of opponents. There
would seem at first sight to be no reason in the nature of things
why Customs duties should not be discussed with as much
calmness as any other form of taxation. Yet no one will deny
that this is not the case. Probate duties, stamp duties, house
duties, taxes upon income, taxes upon land, are gloomy subjects
of discussion in the most exciting times ; but let a word be
dropped about an increase or reduction in the tariff, and sober
men on either side are smitten with an almost fanatical frenzy.
1 The necessity for keeping strictly to tliis definition of Free Trade is
illustrated by a common Protectionist argument, which seems to be used partly
by way of exhortation to Protectionists and partly by way of depreciating Free
Traders.
The argument is this : " No country," it is said, "is a Free Trade
country. Even England levies Customs duties."
It is dificult to sec how the violation of a principle in one point is an
nrgument in favour of further violations, nor how the imperfection of a Free
Trade system justifies its total ovcrthrowal. Yet such is the enthusiasm of some
advocates of free exchange (who, it may be remarked, generally vote with Pro-
tectionists), that because our commerce is not absolutely free, they arc prepared
out of pure regard for consistency to make it less free than it is !
7 8 Industrial Freedom.
Free Traders consider the unwillingness to accept what appears
to them to be elementary and axiomatic truths, demonstrable
as any proposition in Euclid, to be a sign of perverseness or
stupidity ; while Protectionists do not hesitate to attribute the
most sinister motives to all the advocates of free exchange.
This curious state of affairs is no doubt partly owing to the
fact that fiscal arguments are still enveloped in the atmosphere
of party controversy, in which the doctrines of Free Trade
were first carried into practice ; but it is also, in no small
degree, the result of a failure to perceive that fiscal contro-
versies involve several distinct issues, which require to be dealt
with by different classes of arguments. Thus, whatever the
cause may be, it is quite certain that, after years of controversy,
the issue is no clearer than it was, nor the end nearer. Each
party is still fighting in the air, and neither meets the other's
arguments.
2. One way to make an end of this confusion is to state
the point which is at issue.
Neither Protection nor Free Trade can be discussed as
a purely economic question. Each policy involves political as
well as economic considerations. Each may therefore be
supported by political as well as economic arguments.
Free Traders, as a rule, confine their attention to the
economic arguments that is to say, they demonstrate that
Protection causes a diminution of material wealth, and are
then content ; Protectionists, on the other hand, without openly
ignoring economic conclusions, rest their advocacy almost en-
tirely upon considerations of politics.
Now, it is true that economic and political considerations
are in practical life inextricably interblended ; and that no one
can form a sound opinion whether Protection or Free Trade is
good for a particular country without taking both into account.
Nevertheless, it does not require much reflection to see that the
two considerations must be kept apart in argument ; and that one
Preparing the Arena. 79
Pt. IL.Ch. ii., 5 3.]
of two disputants can never convince the other if each is
looking at a different side of the shield.
What, then, is the broad distinction between the economic
and the political aspects of the fiscal controversy ?
It is this : Viewed as a question to be settled by economic
arguments, the test of either policy is its result upon the pro-
duction of wealth using the term " production " in its largest
sense to include exchange and every other form of wealth-
creation. If it increases the aggregate of wealth possessed by
a country, a fiscal policy is economically good ; if it lessens the
aggregate, it is economically bad.
Viewed, however, as a question of politics, the test of
a fiscal policy is not so simple, because it depends upon the
determination of the question, " What is best for the well-being
of the nation as a whole?" Some politicians, for instance,
may desire to divide the aggregate of wealth among a greater
variety of industries, even at the risk of lessening the total
amount to be divided ; others, again, may have such a dread
of the interruption of commerce by war as to wish their
country to be independent of all foreign supplies, and with this
end in view may be indifferent to the quantity of wealth pro-
duced or the cost of its production. And in many other ways
political considerations may be brought forward to override
conclusions of economic reasoning. " .' . "
3. It will accordingly be conceded at the outset of this
argument that no mere economic demonstration is able to solve
the fiscal problem.
The welfare of a nation is composed of many elements,
and the paths towards it are extremely numerous, so that many
aspects of a political question must of necessity lie beyond the
range of any purely economic argument.
Everyone who has had to come to a reasoned conclusion
upon political questions must have felt himself pressed by these
considerations. Even the most extreme Free Trader using
So Industrial Frredom,
the term in its wide Spencerian sense, to mean an advocate of
universal and unrestricted competition would hesitate before
he allowed a foreign line of steamers to have the exclusive
carriage of 'the ocean mails between Great Britain and her
Colonies. Yet it might be that the foreign company wou'd
carry the mails for nothing, while an English company would
charge a high price for the same work. It is obvious that mere
economic considerations hardly enter into a case of this kind.
Another familiar instance of the overriding of economic by
political considerations is offered by the salutary practice of
subsidising ocean-going merchant steamers of a high class on
condition that they comply with certain requisites which will
enable them in time of war to take their place as cruisers in
protecting commerce. An incidental result of these subsidies
may be to keep up freights by excluding competition, and to
that extent they will be harmful to commerce. But neverthe-
less the nation may gain from them more than it loses, because
every such subsidised vessel is in reality part of the naval reserve.
Consequently, if the net result be that a larger sum is saved on
the naval estimates than the total cost of the subsidies in-
cluding in their cost the indirect losses which they cause to
merchants and producers the transaction is on balance
profitable.
Occasions must also arise in the history of a nation when
motives of humanity, regard for safety, or other urgent reasons,
compel wise rulers to subordinate considerations of economic?.
The Irish famine was such an occasion. Cobden thought
that another had arisen in his lifetime owing to the congested
state of population in tlie English towns. He proposed to
correct this consequence of bad land laws by employing the
Queen's ships in the free transport of emigrants from Great
Britain to the Colonies. Whether this temporary measure
of alleviation would have been successful is open to argument,
but there is no inconsistency between such a proposal and a
most vehement oppo :it!on to Protective taxes.
Preparing the Arena, 8i
Pt. ir., Ch. ii., \\.\
4. Let us now apply these distinctions to arguments about
the tariff.
The economic argument which will be developed at length
in later chapters of this work is exclusively directed to a con-
sideration of the effect of Free Trade upon the production and
accumulation of material wealth. It starts with the assumptions
of the Individualist school of political economy as to the
strength and universality of the desire for wealth, and as to the
existence of an ever-active competition between equal units.
It then proceeds to show that under natural conditions trade
will develop according to the requirements of a country, with-
out any encourngement from Protective tariffs ; that every in-
dustry which rests upon Protection must divert labour and
capital from the more to the less profitable employments, and
that, consequently. Protection must be less favourable than
Free Trade to the accumulation of material wealth.
The political argument passes by these economic con-
clusions, and, ignoring the effect of tariffs upon the production
of wealth, considers them as means of securing a more equal
distribution of advantages and comforts among the labouring
classes, and of encouraging the developement of latent national
resources.
If the Protectionist argument were stated with reference to
economic conclusions which is seldom or never the case it
would read something as follows : "We admit your demonstra-
tion to be correct. We allow that under Free Trade wealth is
produced most rapidly and accumulates in the largest quanti-
ties ; but we say that Protection gives other advantages which
Free Trade does not give, and which more than compensate a
country for its lessened wealth."
This is a fair and logical position if it can be held. Un-
fortunately Free Traders are not always willing to attack it with
any but economic weapons. Yet it is idle to expect to make
much impression wiih the weapons of economics upon the
mind of a man who is impervious to all considerations except
G
82 Industrial Freedom.
those which are poUtical. Free Traders, therefore, if they are to
make converts, must go beyond their economic demonstrations
and fight the battle on the ground which the Protectionists
themselves have chosen.
The question then will be " Whether there is any good
reason for the opinion that Protection, though it reduces wealth
and lessens national productiveness, adds to a nation elements
of strength and happiness which greater riches could not give."
In order to answer this it will be necessary to consider
separately each of the advantages which Protection is sup-
posed to confer.
If as a result of the inquiry it shall be found that these ad-
vantages are either non-existent or illusory cadit qucestio ; but,
on the other hand, it will by no means follow that the question
must be answered in favour of Protection, even although it be
found that some substantial advantages are given by that
policy. The only consequence of such a discovery will be to
necessitate a further inquiry, " Whether Protection does not
bring with it certain political or social disadvantages which far
outweigh the benefits which it may be supposed to confer."
Whenever political considerations enter into the inquiry, the
question in every case whether it relates to a whole tariff or
to a single duty will always be one of a balance of advan-
tages. The absolutely best is never possible in politics. Every
political measure, whether it relates to industry or not, must
steer a middle course between the evils which it remedies and
those which it creates. The utmost certainty a statesman can
obtain will rest upon a reasonable hope that he is not making
a mistake. He will assure himself of this in the first instance
by evidence ; and where evidence fails, by reference to
principles and experience. But even with all precautions,
the wise application of scientific conclusions to the facts of
daily life must be to a large extent the result of empirical
knowledge. When it is otherwise and when it is possible to
frame exact rules for the constitution and working of political
Preparing the Arena. 83
Pt. II., Ch. ii. t 5.]
societies human nature will have become less variable or more
accurately known.
5. Free Traders have, accordingly, to prove two points :
They must show first, that Free Trade is more efficient than
Protection as a means of increasing national productiveness ;
and, secondly, that it is more conducive to the general well-
being of the nation as a whole. They must prove the economic
issue by economic reasoning, and defeat the political objections
which Protectionists may urge to the economic conclusions
by political reasoning.
It is sometimes, however, contended that the political con-
siderations should be dealt with in the first instance, and that
economic reasoning ought only to be brought into play when
political arguments have failed. The ground of this contention
is the paramount importance of the political considerations
which are involved in the tariff controversy.
There is no doubt that these considerations are paramount
to anything which can be urged on purely economic grounds,
since the right distribution of wealth and the due development
of national powers are of far greater importar.ce to a State than
the mere possession of riches. It does not, however, follow
that the economic argument upon the tariff can be subordinated
to the political. The contrary is the case.
In the first place, it happens that most of the political argu-
ments in favour of Protection tacitly assume an economic
basis that is to say, they really depend upon the assumption
that Protection is more favourable than Free Trade to national
productiveness.
A Free Trader says that a high tariff must lessen wealth.
The Protectionist replies that the effect of a tariff on the pro-
duction and accumulation of wealth must not be considered by
itself ; that the real object of inquiry is as to its effect upon
the national welfare. Free Traders will accede to this state-
ment of the case ; but having done so they are entitled to call
G 2
84 Industrial Freedom.
for some evidence, even if proof be not forthcoming, that
a policy which increases the aggregate of wealth can in any way
diminish the general happiness. When once it is proved or
admitted that Free Trade is more favourable than Protection
to the production of material wealth, a strong presumption
arises that it is also more conducive to national welfare. This
presumption may be overcome ; but while it stands, it puts a
heavy burden of proof upon Protectionist shoulders. If the
sum to be divided among all citizens is increased by Free
Trade, the share of each is not likely to be diminished by an in-
crease in the dividend. No doubt it may be shown that an
increase in the aggregate of wealth gives rise to inequalities of
distribution, but no one is entitled to assume this result.
Therefore, although for purposes of controversy it is necessary
to consider all Protectionist arguments even when they are
mutually destructive such a concession ought not to be in-
terpreted as a waiver of the demand that Protectionists should
first show " Ho\v and why a policy which increases wealth
injures the national welfare."
There is also another reason why the economic argument
should take priority.
Suppose that each party agree that the final test of any
measure is its effect upon the national welfare, still its effect
upon the production and accumulation of material wealth must
be considered first, because there is no available test of national
well-being except material prosperity. The only known
measure of national progress or retrogression is increase or
decrease of material wealth. No one suggests that this is a
perfect measure, or that it supplies a final test, but it is the
first test, and none otiier can be used without it.
Suppose, for instance, that Free Traders accept the standard
proposed by Protectionists, that the comfort and happiness of
a nation is greatest when its wealth is most equally divided
among all its citizens, so that the standard of comfort among
the producing classes is highest, still the question will be,
PkEPARlKG THE AreNA. 85
Pi. n., Ch. ;i., if.]
" What have the producing classes got to spend ? " It is true
that their standard of Hving can be tested by statistics of crime,
education, and disease, and is not always indicated by the rate
of wages. But all these tests are, in their final analysis, in <o
far as an analysis of such things is possible, dependent on the
material prosperity of the classes with reference to which they
are used. A poor man may be virtuous and well educated ;
but a virtuous and well-educated class of wage-earners is always
a symptom of a high relative standard of material comfort.
Consequently after all political arguments on the tariff question
have spent their force, and even before one of them can be
applied, the economic argument must be considered ; because
the production of material wealth is both a necessary founda-
tion and the only available test of progress in national well-
being. Accordingly, whenever the political considerations
which are urged against the economic conclusions, either ex-
pressly or impliedly assume that Protection increases national
wealth, then the economic argument in favour of Free Trade
has first to be disposed of.
6. It may be thought that these concessions to the Pro-
tectionist side of the controversy materially weaken the force
of the economic argument in favour of Free Trade.
This belief, as will be seen later in these pages, rests upon
a misai)prehension of the true nature of the fiscal controversy,
which, although it must be affected to a large extent by con-
siderations of politics, is yet determined in its final issue by the
effect of either policy upon the material wealth-producing power
of the community in question. A correct perception of this
is of so much importance to a right handling of the arguments
on either side that it will be desirable to clear the ground still
further before making use of them.
A\'e shall see, as the lines of the controversy become
clearer, that the distinction which has been insisted upon in
the preceding pages between the ecoroniic and political argu-
86: Industrial Freedom.
ments is very seldom regarded. We shall find also that when
it is regarded in name it is ignored in practice, and that the
attempts which have been made to evade the sledge-hammer
blows of economic reasoning by the construction of a new
theory of economics have really ended in throwing a few
political catchwords such as " national welfare," " the comfort
and happiness of the people," " national development," and
the like into a large phrase, and pretending thus to have
obtained a new basis for a scientific system. But this is to
anticipate the remaining chapters of this part, which will be
devoted to an inquiry into the relation of economics to
politics as a whole, and to a tariff in particular, in order to
understand better how an economic argument upon the tariff
is likely to be modified by that class of political considerations
which peculiarly affect fiscal problems. Next an attempt will
be made to ascertain whether it is possible to frame an
economic defence of a Protective tariff upon any other basis
than that upon which the Free Trade argument is usually
erected. Finally, this being done, the economic and the
political aspect of the controversy will each be separately con-
sidered.
At present it is sufficient to bear in mind that if the com-
batants would really grapple with each other which they
seldom, if ever, do at present they must meet economic
arguments with economic arguments, and political with political.
And if Protectionists should say that they have all along been
willing to adopt this course, and that none of their recognised
leaders attempt to defend Protection upon economic grounds
as the term " economic " is understood by the followers of
Adam Smith the answer is, that they are right in their state-
ment, but that the leaders cannot control the rank and file of
Protectionist voters. No doubt most Protectionist writers
admit that Free Trade is unassailable if the postulates and
definitions of Individualist political economy are once admitted
this is whnt the unlearned voter means when he savs, "Free
Preparing the Arena. 87
Pt. II., Ch. iii., \ I.]
Trade is good in theory, but of no use in practice " but even
learned writers, after making this admission, often drop into
vulgar errors, and talk about " the excess of imports," or " the
drain of gold," or the need for " keeping the money in the
country," or some other catch-phrase, which has no mean-
ing apart from the arguments and conclusions of that form of
economic science which they have openly disavowed. Thus,
then, is the necessity great for clear distinctions, if we would
avoid confusion in this very dusty fight.
CHAPTER III.
ECONOMICS AND TOLITICS, OR THE VALUE OF THE ECONOMIC
ARGUMENT.
I. The last two chapters ought to have disclosed the object
of the controversy, and the lines upon which it has to be
conducted. The time, however, is not yet arrived for entering
upon the argument. The ground must first be cleared of
those objectors who insist that economic argument is, from its
nature, of no value in a practical discussion. The next four
chapters will, accordingly, be devoted to considering the
limitations which attach to any economic argument, and to an
inquiry into the application of the economic argument in
favour of Free Trade to a tariff controversy. In other words,
we must see whether those Protectionists are right who object
to the use of any economic conclusions in a discussion about
Protection.
This objection takes a double form.
First, it is said that economic assumptions are of such an
abstract character, and so far removed from the facts of life,
that they can never have much importance for practical men ;
88 Industrial Freedom
and, secondly, it is denied that the tariff is in any aspect an
economic question.
The latter of these objections plainly depends upon the
question whether the political arguments in favour of Protection
not only override the economic argument in favour of Free
Trade, but are wholly independent of economic considera-
tions. This can only be determined after each of the
political arguments have been considered, which will be done
in the later chapters of this work.^
The first objection, however, plainly strikes at the root of
all economic discussions, by denying the utility of political
economy in affording any aid to the comprehension of
practical problems. It will accordingly be necessary, even
at the risk of covering familiar ground, to examine briefly
into the relation between politics and economics, as it is
understood by those who claim to defend Free Trade by
economic conclusions.
2. Political economy, as the term is understood in
England, rests upon two fundamental assumptions viz..
First, that the universal and dominant instinct of human
nature, in its relation to non-human and material objects, is to
endeavour to satisfy desires by the least possible expenditure
of time and labour; and, secondly, that the struggle for
existence in the industrial world, as it is at present organised,
necessitates competition, and that the competing units
whether the unit be an individual or a group of individuals
are equal.
Starting from these assumptions, political economy attempts
a scientific investigation into the influences which affect the
production and the distribution of wealth. Sometimes the
inquiry into the influences which affect the exchange of wealth
is made a third division of the science; but, properly speaking,
' Sec infra, Part III., Chapters 6 and 7.
Preparing the Arena 89
Pt. II., Ch. Hi., \ 3.]
exchange is a method of production, similar in its action, with
regard to completed articles of commerce, to the method of
division of employment with regard to articles in process of
completion. Exchange is, in fact, only a manifestation on a
large scale of a well-known method of facilitating production
by the co-operation of different sorts of labour.
Political economy is thus a formal science, which occupies
towards the art of politics much the same relation as the
formal science of jurisprudence occupies towards the art of
legislation. Its principal function is analysis. It analyses, first
distinguishing the action of each the three factors (land,
labour, and capital) which co-operate in the production of
wealth ; and secondly, it analyses the causes which affect
the distribution of wealth after it has been produced. In
every process, however, its method rests upon the assumptions
already mentioned ; and its conclusions derive their practical
value from the nearness or remoteness of the assumed con-
ditions to actual facts.
This is the point of attack.
Political economy in the sense of the English or In-
dividualist school, which owes its paternity to Adam Smith
is declared to be an idle study, for two reasons : Eirst, it is
said, " Its fundamental assumption is untrue, since men are
not, in fact, dominated by the desire for gain."
Secondly, it is said, " Even if the desire for wealth is
universal and supreme, the term ' wealth ' is incapable of
definition."'
There is, unquestionably, much truth in both these
criticisms. The question, however, is whether they destroy
the value of economic conclusions. Let us examine them in
detail.
3. The first of these objections is expressed with great
force and lucidity by Mr. Henry Sidgwick in a passage of his
" Political Economy," which is mucli relied upon by an able
90 Industrial Freedom.
opponent of economics whose work will have to be considered
later in some detail, Mr. H. M. Hoyt.^ The passage is in
these terms :
"The first and most fundamental [assumption] is that all
persons engaged in industry will, in selling or lending goods, or
contracting to render services, endeavour, cater is paribus, to get as
much wealth as they can in return for the commodity they offer.
This is often more briefly expressed by saying that political
economy assumes the universality and unlimitedness of the desire
for wealth. Against this assumption it has been argued that men
do not, for the most part, desire wealth in general, but this or that
particular kind of wealth ; in fact, that ' the desire of wealth ' is
an abstraction] compounding a great variety of different and
heterogeneous motives, which have been mistaken for a single
homogeneous force There are other things obtainable by
labour, besides wealth, which mankind generally, if not universally,
desire, such as power and reputation ; and it is further undeniable
that men are largely induced to render services of various kinds
by family affection, friendship, compassion, national and local
patriotism, and other kinds of esprit de corps, and other motives.
The amount of unpaid work which is done from such motives in
modern civilised society, forms a substantial part of the whole,
and political economists are, perhaps, fairly chargeable with an
omission in making no express reference to such work with the
exception of the mutual services rendered by husbands and wives,
by parents and children."
4. The soundness of this criticism may be at once ad-
mitted. But what does it amount to ? Simply to this : That
many matters lie beyond the ken of economic science, and
that of those that come within it, none can be completely
dealt with in every aspect. But to admit that great caution
must be exercised in applying economic conclusions to the
facts of industrial life is very different from denying that they
' " Protection versus Free Trade. The Scientific Validity and I'"conomic
Operation of Defensive Duties in the United St ites." By Henry M. Iloyt.
3rd Edit. New York : D. Appleton & Co. 1886.
It must be remembered that the term "political economy" in this and
the following chapter always means English or Individualist political
economy,
Preparing the Arena. 91
Pt. II., Ch. iii., \ 4.]
can have a practical value under any circumstances. As a
rule, those writers who, like Mr. Sidgwick, are most keenly
alive to the imperfections which are charged against political
economy, are the very men who insist most strongly on its
practical advantages. Granted that men desire other things
than wealth, and that this desire is in some instances stronger
than the desire of wealth, this does not invalidate the assump-
tion that when men are engaged in acquiring wealth, their desire
for it is universal and unlimited.
The economic man, whose structure has been the butt of
much cheap derision, is admittedly an abstraction moved by one
idea ; and in real life men do, no doubt, move and have their
being in a multitude of other motives and desires. Love of
country, family or reputation, pride,'comradeship, artistic im-
pulses, charily, politeness, loyalty to class or tradition all
these are influences which are unquestionably more potent in
many cases than the desire of gain. But have any of them the
same effect upon the production of material wealth ? Pro-
tectionist critics of political economy appear to forget that
economics only profess to deal with material wealth. Of wliat
use is it, then, to point out that certain motives impel men to
neglect wealth, if there is one powerful and universal motive
which urges men to its production and acquisition ? So far as
motives of the former class prevail, by so much will the scope
of economic science be diminished ; but wherever wealtli
is not neglected, but pursued, there an example is presented
of the operation of the economic motive. It would be absurd
to apply economic tests to the decision of questions of con-
science or duty ; but it does not therefore follow that it
is absurd to eliminate all motives but the desire for profit, when
we are treating of men's conduct in trading with each other.
Suppose, for the sake of argument, that an individual here and
there starts a business from philanthropic motives, so that he is
pecuniarily indifferent to its success or failure, can such a rare
instance justify the statement that men are not as a rule
92 Industrial Freedom.
dominated by the desire for gain when they enter upon corr-
mercial enterprises ? When men are brought into a direct
relation with the tangible material objects which we call
" wealth," either by way of producing them for others or of
acquiring them for themselves, what motive has a wider range
or a more powerful influence than self-interest? Certainly,
there can be no valid objection in such a case to eliminating
all other motives for the purposes of scientific study, provided
that due caution is exercised in applying any conclusions
arrived at by this process. And the test of applicability will
be the nearness or remoteness of the assumption to the facts of
the particular case. Where self-interest dominates, economic
conclusions apply; where it is overridden by other motives,
they must be corrected. AVhat, then, is the applicability of
economic conclusions to a discussion about tariffs ? This is a
subject which it will be convenient to defer until the next
chapter, in order that we may continue our examination into
the objections which are urged against the applicability of
economics to any practical case.
5. The second objection to the use of political economy
in practical discussions is that the term "wealth" is incapable
either of analysis or definition. Here, again, the criticism is
best expressed in the words of a Free Trade economist of high
repute, the late Mr. Walter Bagehot :
"Just as this science [polilical economy] takes an abstract and
one-sided view of man, who is one of its subjects, so it also takes an
abstract and one-sided view of wcaUh, which is its other subject.
Wealth is infinitely various ; as the wants of human nature are
almost innumerable, so the kinds of wealth are various. \Yhy
man wants so many things is a great subject, fit for inquiry ;
which of them it would be wise for men to want more of, and which
of them it would be wise to want less of, are also great subjects, equally
fit. But with these subjects political economy does not deal at all.
It leaves the first to the metaphysician, who has to explain, if he
can, the origin and order of human wants ; and the second to the
moralist, who is to decide to the best of his ability which of these
Preparia-g the Arena. 93
Pt. II., Ch. ili., J 6.]
tastes are to be encouraged and when, which to be discouraged
and when. The only peculiarity of wealth with which the economist
is concerned is its differentia specijiea ihai which makes it wealth.
. . . . He regards a pot of beer and a picture, a book of
religion and a pack of cards, as all equally wealth, and therefore,
for his purpose, equally worthy of regard."
6. Thus the defect in the scope of political economy
which Mr. Ruskin believes himself to have discovered was
not after all unknown or disregarded by the professors of
the science ! It is not, however, quite correct to say, as Mr.
Bagehot does, that an economist does not concern himself with
the sort of wealth which is produced, or the uses to which
wealth is put. It is true that wealth is defined simply by
reference to its possession of an exchange value, and that
whatever possesses an exchange value is, economically speaking,
" wealth ; " but the nature and uses of wealth are important
considerations in dealing with the methods of production. It
certainly falls within the purview of the economist to discuss
how the accumulated wealth of a society can be most effectively
employed in the creation of more wealth.
Nevertheless, the criticism is, in the main, sound. It is a
limitation to the practical value of economics that it is unable
to differentiate the various forms of wealth. But this is just
one of the limitations, already referred to, which necessitate
the correction of economic conclusions by reference to political
considerations. It is clear that " wealth," which means one thing
to the economist, may mean another to the politician. The
love of gin, for example, is the desire for one kind of wealth,
which, as Mr. Cliffe Leslie has observed, " often competes in
the mind of a poor man with the love of a decent dwelling."
Yet the moralist and the politician will obviously regard it as
a matter of very unequal importance, both to the individual and
the State, which of these desires be satisfied. In short, while
tlie economist fixes his attention on the production and ex-
change of material wealth, and deals with distribution only as
94 Industrial Freedom.
a part of the process of its production, the politician has
further to consider what kinds of wealth should be produced,
and to what uses it should be put. On these questions a
purely economic argument, although it is not quite silent, offers
very little guidance. It deals with the uses to which wealth
should be put, only in so far as it attempts to prove that un-
productive expenditure checks the further production of wealt'n,
while a different mode of expenditure would encourage it ; and
it deals with the manner in which wealth is distributed, only
as a question which arises in the course of production, when
the rules have to be determined under which the portions of
wealth in process of production will be divided between those
who are actually engaged in producing it. It does not, how-
ever, decide the ends of civil society ; nor does it say anything
as to the uses to which wealth may be put in any other
direction than that of wealth-production. It is probable that
this defect in the range of economic science ought to be
remedied. Such, at least, is the opinion of Professor Walker,
the eminent American economist and Free Trader, who thus
emphasises the Protectionist criticisms of the point now under
discussion : ^
" It is," he says, " in the use made of the existing body of wealth
that the wealth of the next generation isdetermined. It matters far less
for the future greatness of a nation what is the sum of its wealth to-
day, whether large or small, than what are the habits of its people
in the daily consumption of that wealth ; to what use those means
are devoted, whether to ends which inspire social ambition, which
restrict population within limits consistent with a high per capita
production, which increase the efficiency of the labourer and supply
instrumentalities for rendering his labour still more productive ; or
to ends which allow the increase of population in the degree that of
itself involves poverty, squalor, and disease, which debauch the
labourer morally and physically, striking at both his power and
1 Lest any reader might think it unfair to express Protectionist criticisms
in the words of Free Trade economists, it may be stated that all the quotations
in this chapter have been adopted by Mr. Hoyt as correct expressions of, to
his mind, fatal defects in the value of Individualist economics.
Preparing the Arena, 95
Pt. II., Ch. iii., \ 7.]
disposition to work hard and continuously, and which waste in idle or
vicious indulgences the wealth which should go to increase capital.
" To trace to their effects upon production the forces which are
set in motion by the uses made of wealth, to show how certain
forms of consumption clear the mind, strengthen the hand, and
elevate the aims of the individual economic agent while promoting
that social order and mutual confidence which are favourable con-
ditions for the complete development and harmonious action of the
industrial system ; how other forms of consumption debase and
debauch man as an economic agent, and introduce disorder and
waste here is the opportunity for some great moral philosopher to
write the most important chapter in political economy, now, alas !
almost a blank."
7. Professor Walker's words will dose the subject for
most Free Traders. ^ Individualist economics are admittedly
defective upon that side which deals with the consumption of
wealth. But is this a proof that the science is inapplicable
to political discussions? Or to carry the matter a step
further has it any bearing at all upon the applicability of
economic conclusions to a tariff controversy? Has a tariff
more to do with the manner in which wealth is used, or with
the manner and the quantity in which it is produced ?
1 In the following passage from a little volume by R. R. Bowker, entitled
" Of Work and We.ilth," which is published at New York in the " Questions
of the Day " series, the distinctions in the text are thus referred to: "The
wealth of nations with which, as a state-craft, economics deals, is of two
orders wealth potential, and wealth produ:ed. Potential wealth is, in truth,
' abundance of life : ' to a nation, the amount of living vigour, present and pro-
spective, applicable, within the limits of over-populat'on, to produce work; as to
each man, health, length of years, natural capacity for production increased by
skill. Every ' able-bodied' immigrant is thus said to be worth to the United
States, whose land still invites labour, a thousand dollars. It is this wealt'i
which Ruskin regaids, fulminating against economists for their narrow defini-
tions ; and Adam Smith himself included it in reckoning the capital of a
country. It is this with whicli a statesman largely concerns himself in his
economic direction of tlie State. But this wealth cannot be exchanged ; like
all higher things, it is beyond value and 'without price.' Produced wealth
alone has value, in the economic sense of power in exchange ; and it is this with
which economists, as such, primarily deal. When, then, we speak of weahh,
we mean usually the fruits of work, not the possibilities of it ; wealth is labour
stored by combination with materials.
96 Industrial Freedom.
To neglect the conclusions of a science which deals with
the production and distribution of wealth, because it does not
also deal adequately with its consumption, is to ignore the im-
portance which the possession of material wealth has always
played in the political development of an industrial people.
The mere possession of wealth in large quantities does not, it is
true, make a nation great ; nor does extent of territory ; but
just as extent of territory is often a powerful influence in
liberating the forces which contribute to national greatness, so
is the possession of wealth. And wealth is even more import-
ant to the national welfare of an industrial State than is
extent of territory. " Man," it is true, " does not live by bread
a^-one " ; but without bread the existence of an industrial
community would at least be cramped ! Riches alone cannot
give a nation happiness or greatness ; but without riches a
nation will have difficulty in obtaining either ! In fact, as
political societies are now constituted, the possession of
material wealth is the basis of all national development. The
days of the hardy barbarian are gone by ; and though abuse of
wealth may still create effete societies, the want of it will cer-
tainly prevent the full realisation of all the capacities whether
moral, intellectual, or material which are latent in an industrial
community.
To refuse, therefore, to consider the economic effect of any
political measure, on the ground that economics only concerns
itself with the production and accumulation of wealth, and not
with its uses, is equivalent to a refusal to regard the operation
of the measure upon that which underlies and stimulates the
beneficial influence of every quickening force of national life.
It is true that a nation is the resultant of many forces ; but it
is not true that the economic is the least important.
It is beside the mark for Protectionists to take up time by
ridiculing the imperfections and limi'ations of political economy.
No one is more alive to these than the economists themselves.
It is admittedly impossible to obtain precision in the postulates
Preparing the Arena. 97
Pt. II., Ch. iv.,? I.]
and definitions of the science except at some sacrifice of reality.
But in that department of its investigations which deals with
the production and exchange of wealth, the postulates and
definitions of political economy do square fairly with facts.
While men are engaged in buying and selling, they are domin-
ated by the desire to make good bargains. Such persons, too,
while they are so engaged, do compete with one another upon
terms of practical equality; and the object of their desire is
capable of being defined by its " sj^ecijica differentia'' the
possession of exchange value. Consequently, an analysis of
the influences which affect the production of wealth may
suggest practical tests of the value of any political measure
which is designed to make a nation richer. It remains to
consider how far a Protective tariff is a measure within this
category, and with what degree of correctness its pretensions
may be tested by the conclusions of economic reasoning.
CHAPTER IV.
ECONOMICS AND THE TARIFF.
I. It has already been observed that the economic test of
any political measure is its effect upon the production and
accumulation of material wealth. Can this test be usefully
applied to a tariff? If it can be, then economic analysis will
help to a decision in the tariff controversy ; if it cannot be,
then Protectionists are right in saying that, so far as the tariff
is concerned, political economy is an " idle study.''
Now a tariff is essentially a measure which is designed to
affect in some way the production of material wealth ; and
therefore, since economics is the science which deals with the
I)roduction of material wealth, economic conclusions must
influence a right decision on tarjT questions, if they can have
H
98 Industrial Freedom.
any weight in politics at all. If this were not so, the framer or
supporter of a tariff might logically refuse to consider its effect
upon the production of wealth. Let any Protectionist, then,
who questions the applicability of economics to tariff issues
truthfully answer the questions, " Whether he would dare to
disregard the possible effect of any tariff upon national pro-
ductiveness." Whether he supports Protection because it
" diversifies industries," or because it gives a "home market,"
or because it encourages " infant industries," or for any other
reason the basis of his argument must always be that it
affects, by increase or decrease, or alteration in kind, the actual
or potential wealth of the community.
The direct object of a Protective tariff is to induce some
citizens to follow a certain calling. Why have they held aloof
from that calling previously? Because it would not have
returned them a sufficient profit. The tariff is to remedy this.
By the imposition of a Protective duty it is to give a profit
where there was none before. Bearing in mind, then, the
argument of the last chapter, it is clear that, since a Protective
tariff is primarily intended to operate upon the production of
wealth by appealing to the motive of self-interest, all tariff argu-
ments will have an economic basis. Whatever may be the
political or social benefits which are supposed to accrue from
tariff legislation, these must all depend upon a previous acquisi-
tion of material wealth. Consequently, the extent to which a
Protective tariff affects the aggregate of national wealth can
never be disregarded by those who advocate a tariff with the
immediate object of encouraging new forms of productiveness.
The supposed advantages of a tariff all spring from the fact that
wealth is produced. It is the qualities which arise from labour
in wealth-producing, and the power of enjoyment which arises
from the profits of wealth-producing, that the Protectionist
legislator seeks to conserve. The kind of wealth which he
seeks to produce is also, no doubt, important in his eyes ; and
to this extent he is entitled to modify an economic conclusion-
Preparing the Arena. 99
Pt. IT., Ch. iv., ? 2.]
by reference to the political considerations which may determine
his selection of desirable occupations for his fellow-citizens.
But he cannot ignore the science which deals with every form
of wealth-production, by saying that he desires to encourage
only certain forms of it. The larger must include the less.
Admitting, then, that it is a question of the first importance
whether Free Trade or Protection gives more effective help in
producing and accumulating wealth, the next matter for con-
sideration is the applicability of economic methods in discover-
ing the answer.
2. Now the practical utility of economic analysis depends,
as has been seen, upon the reality of the two assumptions of
an active and dominating self-interest, and an active and equal
competition. Are these mere assumptions true in the case of
tariff problems ? If they are, the economic analysis can be
used in their solution ; if they are not, it must be discarded.
Let us examine first the suggestion that the postulate of
economics is unreal, when the subject of consideration is the
motives which induce men to support a Protective tariff.
The denial that men as a rule are moved by the desire of
gain is, as has been already mentioned, probably open to ques-
tion, since it is difficult to see what other motive has a wider
range or a more powerful influence. But when we are dealing
only with tariff discussions it is many times harder to under-
stand what possible objection there can be to eliminating other
motives than self-interest, for the purposes of scientific study.
It is unquestionable that in the pursuit of material wealthy the
desire for gain, or (what is the same thing in other words) the
impulse to gratify desires with the least possible expenditure of
effort, is so largely predominant over all others that it may
fairly be considered by itself. As has been said by an Ameri-
can writer^ : " Between one dollar and two dollars a man has
' Mr. John Bascom, quoted by Professor Perry.
loo Industrial Freedom.
no choice he must take the greater ; between one day and two
days of labour he must take the less ; between the present and
the future he must take the present. This is not a sphere of
caprice, or scarcely even of liberty the actions themselves
present no alternative." But the effect of a tariff upon the
production and accumulation of rraterial wealth is admittedly
of great importance. There cannot, therefore, be much un-
reality in assuming that the citizens of the community whose tariff
is in question desire to produce and retain wealth witli as little
sacrifice as possible ; nor is it unpractical, in considering the
effect of a tariff upon wealth, to eliminate from the discussion
all the motives which may influence those who pursue wealth,
except that which is everywhere supreme in prompting to the
pursuit. To quote again from Mr. John Bascom : " Which-
ever one of a thousand motives engages man in the pursuit of
wealth, once in that pursuit these all conform to one method,
and acknowledge one law." If the elimination of all motives
save one is ever permissible and it is only by such means
that abstractions can be formed it must be so where the
motive which remains is that which predominates so largely in
the majority of concrete specimens that all others are reduced
to insignificance. This is the case with the motive of self-
interest when the citizens of a State desire a Protective tariff.
3. Assuming, then, that the first postulate of economic
science as to the predominance of self-interest is sufficiently
close to the truth to justify it being taken as the basis of a
scientific abstraction for purposes of tariff disputes, let us see
whether the second postulate as to the equality of the com-
peting units is also applicable.
The competition which political economy assumes to be
ever active a competition the existence of which alone gives
political economy a claim to be regarded as a science is a
competition of equal units. These may be individuals or
groups of individuals, but they are always assumed to be equal
Preparing the Arena. ioi
pt. ir.,ch. iv.,$3.)
to one another. In practice, no doubt, an exact equality docs
not exist. In many cases such as the competition between
landlords and tenants in Ireland, or usurers and peasants in
Eastern Europe the superiority of one side or the other is
so marked that the parties can never discuss a bargain upon
equal terms. This was the chronic condition of whole classes
in earlier periods of European history a fact which explains
the inapplicability of modern economic ideas to the indus-
trialism of the Middle Ages. It is the condition now of all
classes in the East, where economic ideas are equally inapplic-
able. It is the condition still of many individuals even in the
most advanced communities. The progress of society from
status to contract, which Sir Henry Maine has lucidly illus-
trated, is not yet complete. The environment of an individual
citizen has not yet become the result of his own choice,
although the tendency in every democratic country is to
enlarge the sphere of individual freedom. Even now, however,
class traditions, oppressive customs, bad land laws, lack of
education, difficulties of locomotion, mere localism, and many
other causes, tend in a greater or less degree to impede the
exercise of a free volition by classes or by individuals. Never-
theless, political economy takes no account of these fetters
upon individual freedom. It assumes that every man is or
may become equally equipped for the struggle of existence, and
that as a fact the active combatants do engage upon equal
terms. This assumption is true, for all practical purposes, as
regards the competition of wholesale traders.
Men who buy and sell on a large scale, whether as merchants
or producers, do practically stand upon a footing of equality.
Unlike the artisan, who (unless he belong to a trade union)
must accept work when it is offered or starve, the capitalist
merchant or manufacturer can afford to let his prices be
determined by the higgling of the market. Such compulsion
as may exist in certain cases to buy or sell is the consequence
of abnormal causes, and does not permanently or materially
UB'^ARY
UNIVERSITY C: CALiFORNlA
102 Industrial Freedom.
affect the general range of prices. The only modification
which is required in the assumption of an equality of the
competing units, before it is made the basis of an economical
analysis of tariff questions, is owing to the effect produced on
competition by the existence of trusts and combines. But even
in this case the modification is more apparent than real at
least, so far as it affects the dispute between Protection and Free
Trade ; because, although trusts and combines, when favoured
by Protection, may destroy competition in a particular trade
within the Protected country, they do not invalidate the
assumption upon which the economic analysis is based
namely, that free competition would exist if it were not for the
Protective tariff. Moreover, even if trusts could be formed
in a Free Trade country and no trust has been permanently
successful when it is exposed to foreign competition they
could, ex hypothesis be formed in all trades ; so that their only
effect, so far as the economic assumption is concerned, would
be to alter the nature of the competing units.
4. It remains to be seen whether the refusal to submit a
tariff to economic tests can be justified by the objection to
political economy that it treats the acquisition of wealth, which
is really a matter of minor importance, as if it were a matter of
the first importance.
This may be a perfectly valid objection in certain cases
as, for instance, where the question was the desirability of
forming a State collection of pictures, or of subsidising a
National Theatre but it can have little or no applicability
where the material advancement of a country is the special
object aimed at. But every one of the advantages which a
Protective tariff is supposed to give is, in its ultimate analysis,
material.
" Men are to develop their various faculties." How, but
by being encouraged to follow profitable trades? "Men are
to have a home market." How, but by producing something
Preparing the Arena. 103
Pt. II., Ch. iv., \ s.]
to sell ? " All the capacities and faculties of a nation are to
be developed." Upon what other foundation than material
prosperity is this development to rest ?
It is true that, after economic arguments have been con-
sidered, a wise politician should direct his mind to the best
uses to which wealth can be put ; but it would surely be the
height of absurdity so to fix attention on the mode of spending
as to render a community neglectful of the best means of
acquisition. Protectionists who attack economic arguments on
account of imperfections and limitations which nobody denies,
omit to notice that their own political arguments assume an
economic basis. They begin by declaring that the narrow field
of political economy renders it an "idle study;" and yet the
moment they test their own conclusions, they take their stand
within the much-derided limits of economic science, and cannot
move a step outside without falling into an unfathomable bog.
It is not sufficient in a tariff controversy to attack economic
arguments in general terms ; Protectionists should go further,
and prove that the particular economic argument in favour
of Free Trade is overridden by political considerations. In
other words, although circumstances may render economic
reasoning inapplicable to all the facts of life, it does not
follow that the existence of these circumstances can be
assumed, in order to invalidate the economic argument against
Protection.
S 5. To sum up, then, the results of this inquiry into the
relation of economics to the tariff, we may say that those wlio
condemn the use of economic analysis in the solution of tariff
problems are, as might have been expected, partly right and
partly wrong. They are right in insisting that economic
methods should be used with extreme caution ; Ijut they are
wrong in saying that they cannot be used at all. The argu-
ments for or against any tariff are in part economic and in part
political ; and while the economist cannot safely refuse to
104 Industrial Freedom.
qualify his abstract conclusions by considerations of politics,
the politician cannot find a basis for any of his arguments
against Free Trade unless he openly or tacitly adopt the
methods and conclusions of an economic science. Economic
conclusions therefore, so far from being valueless, possess a
high importance as a test of fiscal legislation.
But when it is once conceded and few disputants would
refuse the concession were it openly demanded of them that
no sound political judgment can be formed about a tariff if
its effect upon the increase of wealth is disregarded, a very
significant factor has entered into the fiscal controversy
namely, the contrast between the attitudes of Protectionists and
Free Traders towards economic arguments.
The Free Traders have never been afraid to frame a scientific
statement of their case. They have, indeed, erred in the other
extreme of making their arguments too scientific. They have
proved, with a wearisome iteration, that Protective tariffs cannot
increase wealth, and have insisted, until the world is tired, that
it is mathematically demonstrable that their efi"ect is to diminish
wealth. The unanimity of condemnation has, indeed, been
remarkable. Mr. Mongredien, in his admirable essay " Free
Trade and English Commerce," mentions (p. 32) that in 1883
the British Museum Library, under the catalogue title " Political
Economy," contained the names of seventy-seven authors of
various nationalities and languages; of these, only tivo advo-
cated Protection !
Such a consensus of expert opinion can only be set aside in
one of two ways namely, either by denying the applicability of
economic reasoning, or by impeaching its validity. Some Pro-
tectionists adopt the former course, by insisting that although
Free Trade may be economically sound, the political advantages
of Protection more than countervail its economic inferiority.
Others take a more courageous stand, and, denying the scien-
tific value of Individualist economics, proceed to determine the
laws of national well-being by a new economic system of their
Preparing the Arena. 105
Pt. II., Ch. V.,? I.]
own construction. A consideration of the views of the former
class may be deferred until the political aspect of the fiscal
argument comes under review. For the present we may con-
fine our attention to an inquiry into the nature of this new
system and its application to tariff disputes. This will form
the subject of the next chapter.
CHAPTER V.
NATIONALIST ECONOMICS.
I. It has been implied in the argument of the preceding
chapter that no systematic defence of Protection upon economic
grounds has been attempted. As this statement might be
denied by the more ardent partisans of a restrictive policy,
some further explanation of its meaning is desirable.
The term "economic" has already been defined as "that
which relates to the production and accumulation of material
wealth." An economic argument is, thus, an argument which
is directed exclusively to the consideration of the effect of a
fiscal policy upon wealth in its production and accumulation.
The necessity for considering this has been already pointed
out, and it has also been observed that Protectionists have
usually directed their attention to other matters.
In taking this course, Protectionists often claim to be
making use of the conclusions of political economy. They
have founded, they say, a political economy of their own, the
conclusions and methods of which are free from all the objec-
tions that are urged against the school of Ricardo and Mill.
From this study they deduce general rules of policy which,
as tliey maintain, are a sufficient economic justification for
Protective tariffs.
As it would be idle to dispute about terms, and make
ic6 Industrial Freedom.
differences where none exist, there can be no objection to
assenting to a new use of the term " potitical economy," if the
methods and conclusions of Protectionists can justify the change.
This, however, is a fitting subject for inquiry " Are there any
other modes of economic reasoning ? Is it possible to frame
any general argument in favour of Protection, which shall be
independent of empiricism and expediency, by applying the
conclusions of a new science of economics with different defini-
tions, different methods, and different scope?" Should Pro-
tectionists succeed in doing this, they will, undoubtedly, have
turned the flank of their opponents.
2. The first point to be observed about the new science is
that the meaning of the word " economic " has been changed.
Economic, with writers of the Individualist school, always con-
noted material wealth. With writers of the new school its
meaning is enlarged to include everything which has any rela-
tion to national well-being.
" Political economy," says the Hon. Thomas Reed, Speaker of
the House of Representatives, in one of tlie tersest and most com-
plete defences of Protective tariffs which have ever been penned, " is
an idle study except when it concerns itself with everything that
adds to the comfort and happiness of the people."
"The political economy of a nation," says List,- "is a com-
pound of the economy of the people and the financial economy of
the State, when the State embraces a whole nation fitted for inde-
pendence by the number of its population, the extent of its territory ;
by its political institutions, civilisation, wealth, and power and
thus fitted for stability and political influence." The economy of
the people is thus defined : "Those institutions, regulations, laws
and conditions on which the economy of the individual subjects of a
State is dependent, and by which it is regulated." The financial
^Delford's Magazine, Oct., 1889. The article was intended as a Protec-
tionist manifesto, addressed to the educated classes of the Western States.
2 "The National System of P0litic.1l Economy." By Friedrich List. English
translation, p. 195. (Longmans & Co., London, 1885.) The first German
edition of this work appeared in 1841. It has had a vogue in .America which is
quite out of proportion to its merits.
Preparing the Arena. 107
Pt. II., Ch. v., \ 3.]
economy of a people is thus defined : " That which has reference to
the raising, the expending, and the administration of the material
means of government of a community."^
The same author expresses this idea in another passage in
the following terms :
"National economy is that science which, correctly appreciating
the existing interests and the individual circumstances of nations,
teaches how every separate nation can be raised to that stage of in-
dustrial development in which union with other nations equally
well developed, and consequently freedom of trade, can become
possible or useful to it" (p. 127).
It will be apparent from these extracts that an economic
argument, in the language of writers of this school, no longer
means an argument which is exclusively devoted to the con-
sideration of changes in the degree of national productiveness of
material wealth, but one which takes within its purview every
fact whether it be an intellectual concept, or a tangible phe-
nomenon, or a condition of the senses which may, either
directly or indirectly, promote the well-being of the citizens of
a State.
3. It follows from this use of terras that economic in-
vestigation ceases to be conducted by abstract processes, and
becomes an historical inquiry into the social, political, moral,
and religious conditions of a nation. The opposing methods
are thus contrasted by Professor Sumner and Mr. H. M.
Hoyt :
"We have," says Professor Sumner, "to understand that an
economic investigation may be carried on just as independently as
1 Mr. H. M. Hoyt ("Protection lersiis fVee Trade. The Scientific Validity
and I'^conomic Operation of Defensive Duties in the United States." By Henry
M. floyt. New York: D. Appleton c^ Co. Third Edition, Revised. 1886)
adopts a similar view of the meaning of the term. (5^e pp. 74, 79, 391, 396 )
This is the most elaborate defence of Protection yet published.
Professor Thomson, a disciple of List, without rejecting Individualist
economics, treats its conclusions as valueless. ("Political Economy, with Especial
Reference to the Industrial History of Nations." By R. E. Thompson, MA.
Philadelphia; Porter- Coates. 1882.)
io8 Industrial Freedom,
a chemical or physical or biological investigation. The economist
does not need to be on the look-out all the time to correct his
results by reference to some outside considerations, or to the dogmas
of jejune and rickety systems of metaphysical speculation. On the
contrary, he should regard the introduction of extraneous e'ements
no matter under what high-sounding names of moral, politica',
and social as sure signs of impending confusion and fallacy
{Princeton Review, March, 1882).
To this Mr. Hoyt replies (p. 74 [n.]) :
" Professor Sumner's form of economic investigation might be
adequate to effect the immediate exchange of commodities existing
on a given day. It would not account for the existing stock, nor
would it furnish a clue to the nature or amount of to-morrow's
supply, or where tomorrow's supply was to come from. A given
kind of moral, political, and social man n ust, at last, be a definite
kind of economic man in correspondence with himself. His wants
are peculiar to his traits, and the preparations to meet them must
grow out of his environment. You cannot expect a human being
with one sort of aptitudes, to go off and live in a part of the world
and in pursuits which do not engage those aptitudes. lie will
make the arena of his struggle such that it will engage his best
efforts physical, mental, and moral. Then the economic results
will take care of themselves."
It will follow, also, from this change in the scope of
"economic" science, that if the new subjects introduced into
it are capable of scientific treatment, fresh tests must be
devised of the value of any fiscal policy. It will not be
enough to demonstrate that Protection lessens national pro-
ductiveness, because Protectionists will apply some other
formula by which to estimate the influence of tariffs upon the
political, moral, social, and religious environment of a whole
nation. It will be matter for inquiry later whether it is
possible to frame a satisfactory formula for this purpose.
4. It is, as has already been admitted, quite legitimate
for Protectionists to adopt any basis for their science that they
please. Nevertheless, it must not be forgotten, in following
their attempt to establish a new economic science, with
PRErARlNG THE ArEJVA. IO9
Pt. II., Ch. v., \ 4.]
different definitions, methods, and scope, that its conclusions,
whatever they may be, will not answer the conclusions of the
Individualist political economy. They may justify a busy man
in passing these by as verbal conceits, but they cannot meet
them, because they stand on a different plane. If it be once
admitted that the effect of a tariff upon the production of
wealth is an important element in its success, then a scientific
demonstration that a tariff lessens the wealth-producing power
of a community is not disproved by showing that the same tariff
advances national welfare in the direction of morals, politics,
or religion. It may have such an effect, and the Individualist
arguments may, in consequence, be overridden ; but, for what
it may be worth, the economic demonstration, as such, remains
unassailed. But we have seen in a previous chapter that a
Protectionist cannot ignore the influence of a Protective tariff
upon national productiveness. U, therefore, he wants to
disprove the proposition that Protection lessens the aggregate
of national wealth, he must do more than show that his
policy carries with it other advantages which compensate for
its impoverishing influence ; he must himself demonstrate
that Protection increases national wealth. But where is the
man courageous enough to maintain the simple proposition
that the best way to increase the aggregate of material wealth
in any community is by preventing or restricting international
exchange ?
Professor Sumner has pointed out, in the article in the
Princeton Fevieiv which has been already quoted from,^ what
the work is which lies before any ambitious man who is
desirous of becoming a Protectionist Ricardo. Such an one
" must boldly declare that there is a science of wealth based
on restrictions; that he can discover the principles of it, and
reduce them to a theory ; that trade between countries is a
mischievors thing at least, if it runs on parallels of latitude;
1 See above, p. 108.
no Industrial Freedom.
that isolation and antagonism of nations is the law of Nature
upon which wealth and civilisation depend ; and that there is
therefore no universal science of wealth, but only a national
science of wealth, and that this science is, in its final ana-
lysis, only a generalisation from certain empirical maxims of
economic policy." And when our aspiring theorist has reached
this point, he must then frame his tests of the effect of a tariff
upon national productiveness. To use again the words of
Professor Sumner, he must answer these questions : *' Does a
tariff enable the population of a country to command greater
material good for a given effort?" and "Does it lessen the
ratio of effort and sacrifice to comfort and enjoyment ?"i It
is only by this means that any direct answer can be given to
the economic solution of the fiscal problem as it is arrived at
by the Individualist.^
It will be necessary to keep these considerations in mind, in
order to understand the logical significance of the Protectionist
theory of economics and its proper use in a tariff dispute.
After these preliminary explanations we are in a position to
begin a critical examination of the theory and precepts of
" Nationalist economics."
5. The essential divergence between the Nationalists and
1 Professor Sumner also suggests two other test questions : ' ' Does the
statute enacted by the Legislature alter the distribution of property so that
one man enjoys another man s earnings ? Has the State a law in operation
which enables one citizen to collect taxes of another?" and " Does the tariff
prevent me from supporting myself and my family by my labour as well as I
could do if there were no Protecting taxes? "
- " If Protection be good, it is good in and of itself; if it is bad, it has
no business to be begging to lean on something so respectable as revenue.
The burden of proof, at any rate, lies upon the man who brings in a theory
interrupting the play of natural laws. Let him bring forward and prove his
theory of res'riction. Let us hear the arguments and see the grounds that
justify the prohibition of an advantageous trade." (Professor Perry, quoted
by Mr. Hoyt, p. 196,) So Professor Walker. [The Protectionist must give]
"an analysis of the conditions of production, which shall disclose the law
which makes trade within the lines of sovereignty beneficial, and trade across
the boundaries of separate States deleterious to one or both parties."
Preparing the Arena. in
Pt. II., Ch. iv., 55.]
Individualists is, as the terms import, that the one adopts the
nation as the industrial unit, the other the individual. This
leads to a radical difference of scope and method.
The "Nationalists" (as the members of thi^s school like to
designate themselves) view every nation as a whole, and treat
of its national development. In their eyes a political com-
munity is not a congeries of individual atoms, but a sentient
living organism, with roots in the past and branches reaching
to the future. The scope of economics, as these writers
understand the term, is to discover the laws of national
growth, and to define the rules by which each nation may
achieve its complete development. This body of laws and
rules may differ for different peoples, since they are determined
by the history, temperament, and capacities of each political
community. The "economist" will, however, deal primarily
with the economics of his own country, and will endeavour to
indicate the measures by which the acquired and latent
capacities of the whole body of citizens may be most fully and
harmoniously developed.
As a consequence of this widened scope, the method of the
science alters. It no longer deduces the industrial movement
of a nation from a consideration of the industrial movements
of its individual citizens ; but starting with the nation as the
unit, and explaining its existing industrial condition by refer-
ence to historical, political, moral, and religious considerations,
it proceeds to discuss the power of free industrial movement
which the individual has from time to time possessed, and the
power which, in the present interest of the State, it is desirable
to give him. The following extracts will make the contentions
clearer :
"Every distinct community," says Mr. Hoyt, "society, state,
nation, every political entity, is to be discussed as an industrial
entity y It is impossible to conceive of the terms of an industrial
economic problem except under the condition of nationality
^ The italics are in the original.
112 Industrial Freedom.
The difference between civilisation and barbarism lies in the desires
to be satisfiei, the things to be exchanged, and their mode of pro-
duction. These depend on moral, intellectual, and political con-
sideration-, as well as economic" (pp. 79, 80).
And again he says :
"No real scientific results can be obtained by the atomistic view
of the co-workers in a given society or nation. . . . The attempt
to deal with the individuals as units involves us in the vicious error
to which Mr. Herbert Spencer has called our attention that of
' mistaking a part for a whole,' and thus * its relations to existence
in general will be misapprehended.' By this discrete treatment the
whole is completely lost sight of, and the aggregates which the
whole involve disappear from our investigations " (p. 234).
The problem which is to be solved by this repudiation of
Individualist econoniics is thus stated :
"The real problem is, then, to ascertain how the industry of a
nation may be made to yield the greatest annual product " (p. 89).
List expresses the same ideas in more sonorous language :
"The system of the school [of Adam Smith] suffers," he says,
"from three main defects : firstly, from boundless cosmopolitanism,
which neither recognises the principle of nationality, nor takes into
consideration the satisfaction of its interests ; secondly, from a dead
viateriaHsm, which everywhere regards the mere exchangeable value
of things without taking into consideration the mental and polit'cal,
the present and the future interests, and the productive powers of
the nation ; thirdly, from a disorganising particularism and indi-
vidualism, which, ignoring the nature and character of social labour,
and the operation of the union of powers in their higher conse-
quences, considers private industry only as it would develop itself
under a state of free interchange with society [i.e., with the whole
human race) were that race not divided into separate national
societies.
"Between each individual and entire humanity, however, stands
the nation, with its special language and literature, with Hs peculiar
origin and history, with its special manners and customs, laws and
institutions, with the claims of all these for existence, independence,
perfection, and continuance for the future, and with its separate
territory ; a society which, united by a thousand ties of mind and of
interests, combines itself into one independent whole, which recog-
nises the law of right for and within itself, and in its united
Pruparing the ARL^*A. 113
Pt. II., Ch. v., \ 6.]
character is still opposed to other societies of a similar kind in thtir
national liberty, and consequently can only under the existing con-
ditions of the world maintain self-existence and independence by its
own power and resources. As the individual chiefly obtains by
means of the nation, and in the nation, mental culture, power of pro-
duction, security and prosperity, so is the civilisation of the human
race only conceivable and possible by means of the civilisation and
development of the individual nations.
" Meanwhile, however, an infinite difference exists in the condi-
tion and circumstances of the various nations : we observe among
them giants and dwarfs, well-formed bodies and cripples, civilised,
half-civilised, and barbarous nations ; but in all of them, as in the
individual human being, exists the impulse of self-preservation, the
striving for improvement which is implanted by Nature. It is the
task of politics to civilise the barbarous nationalities, to make the
small and weak ones great and strong, but, above all, to secure to
them existence and continuance. It is the task of national economy
to accomplish the economical development of the nation, and to pre-
pare it for admission into the universal society of the future."
6. Let us pause a moment to estimate the value of this
new " science " by reference to its avowed range. We recall
that the main objection to Individualist economics was the diffi-
culty of making any useful abstraction of a being so infinitely
mixed and various as " the individual citizen." Yet an abstrac-
tion of some sort must be made if the " science " of political
economy is to be anything more than the study of history. If
generalised conclusions are to be reached as to the laws of
national progress, or if a scientific analysis is to be attempted
of the elements of national greatness and it is only by per-
forming both these tasks that Nationalist economics can justify
its claim to being scientific the variant and accidental elements
must be eliminated from the object of study. But let any one
attempt to eliminate the variant and accidental elements from
" a nation." How is he even to make a beginning in such a
task ? Merely to enumerate the forces which compose the
stream of a nation's life would be hardly possible without a
wider range of knowledge than mankind as yet possesses ;
while even if the difficulties of enumeration could be success-
I
114 Industrial Freedom.
fully overcome, the work of separating the permanent from the
transitory elements would prove insuperable. Who is to
decide upon the precise degree of influence to be given to any
of the constituent elements of national greatness ? Take only
one example. Religion has been at all times a powerful factor
in national development; but could any one estimate its
influence in any but the vaguest terms? If Individualist
economics were objectionable because its scope was too
narrow, Nationalist economics manifestly errs upon the other
side by covering an illimitable field. The " welfare of a
nation " is a conception of so vague a character that it cannot
be submitted to any scientific analysis. Its elements are not
only doubtful, but illusory ; because, even were it possible to
come to an agreement upon the nature of national well-being,
still the things which admittedly go to make a nation great and
prosperous such as morality, high spirit, orderliness, capacity
to govern, love of beauty, obedience, spirituality, intellectual
force, and many other qualities and conditions are of a
character which cannot be measured by any known standard,
or reduced to any common denomination. Were it not that
large phrases possess an irresistible attraction for a certain
class of minds, it might be thought unnecessary to pursue this
subject further. But this so-called science wraps itself in such
high-sounding jargon and, as Professor Sumner says, " mas-
querades under such an affectation of learning and philosophy "
that it has met with more than the ordinary success of economic
quackery. Take away, however, all verbiage, drop such talk
as " the operation of the union of powers in their higher con-
sequences," and present the theory for consideration in the
simple language of Mr. Reed ! It becomes at once apparent
that a science which deals with everything that adds to the
*' comfort and happiness of the people " is defining its objects
in terms of the unknown. Who shall say in what " the comfort
and happiness " of a nation consist ? Or are there to be as many
sciences of political economy as there are professors ? Certainly,
Preparing the Arena. T15
Pt. II., Ch. v., {6.]
it would seem that if practical conclusions of precision cannot
be obtained from the science the scope of which is limited to a
consideration of the individual, none can be looked for from
that the range of which is boundless. The unscientific
character of the inquiry is further illustrated by also putting into
plain language the problem which is proposed for investiga-
tion " Analyse the causes and expound the nature of
national well-being." Such a problem may be studied historic-
ally, and history may often suggest an empirical solution, just
as the historical studies of the Nationalist school have been par-
ticularly fruitful in throwing light upon the complexities of
modern industrialism. But an attempt in our present state
of knowledge to treat this problem scientifically can only result
in the creation of utterly useless abstractions, or the pronounce-
ment of a series of inconsequent dogmas.
Let it, however, be assumed, for purposes of argument^ that
the subject-matter of Nationalist economics is capable of scien-
tific treatment still Individualists, whose studies are so con-
temptuously cast upon one side, will want to know what
measure of national happiness and comfort these new philo-
sophers desire them to adopt ; because if no such measure can
be found, students have no means of testing the conformity of
a legislative act to the scientific rule. But we have only to run
over in our minds a few of the constituent elements of happi-
ness or comfort to see that they consist of things which are
quite immeasurable. What means exist by which we can esti-
mate the value of different qualities, conditions, or ideas ?
And yet these things enter very largely into the concept of
national well-being. Or, again, suppose that any of these things
could be measured separately from the others, to what common
denominator can they all be reduced in order that their values
may be compared? Yet it is upon a "science" such as this
that Protection rests as if the framing of a large and general
statement were the same thing as the construction of a scientific
theory. No wonder that Professor Sumner, after many years
I 2
11 6 Industrial Freedom.
of active battle with " scientists " of tliis school, denounces
their pretensions as " an arrant piece of economic quackery."
Our business, however, is to investigate this science further,
without resort to terms of contumely. Let us test it again by
reference to its practical conclusions.
9. Nationalist economists profess to have discovered two
fundamental rules for the guidance of their political disciples.
The first of these is, " That every nation must be entirely self-
supporting ; " and the second, " That the development of
productive powers, and not the increase of national wealth, is
the object of wise statesmanship." Let us treat of each of these
rules in turn.
The notion that every nation must be self-supporting is
worked out by List in the following series of propositions :
"The idea of independence and pcwer originates in the very
idea of ' the nation '"' (p. 181).
" Nations have to pass through the following stages of economical
development : original barbarism, pastoral condition, agricultural
condition, agricultural-manufactuiing condition, and agricultu'-al-
manufacturing-commercial condition " (p. 177).
" In a country devoted to mere raw agriculture, dulness of mind,
awkwardness of body, obstinate adherence to old notions, custom",
methods and processes, want of culture, of prosperity, and of liberty,
prevail" (p. 197).
' Manufacturing occupations [on the other hand] develop and
bring into action an incomparably greater variety and higher type
of mental qualities and abilities" (p. 199). " They are at once the
offspring, and at the same time the supporters and nurses, of science
and the arts " (p. 200).
[Statesmen must accordingly encourage manufactures by pre-
venting the competition of any nation in a higher manufacturing
stage than has been reached in their own country (Chaps. XVII.
XX.).]
Mr. H. M. Hoyt expresses the same idea thus :
" It is indispensable, if a given nation is to live on a given area,
that opportunity should be afforded them to render mutual services
to each other, or to somebody else somewhere else. If there were
no such opportunity, the nation would be non-existent. There is no
Preparing the Arena. 117
Pt. II., Ch. v., 5 9]
existing or historical nation in which the vast mass of services by
which men satisfy each other's desires have not been rendered
within the lines of the political entity. To that extent the political
entity and the industrial entity, as a matter of fact, do correspond"
(p. 361).
And again :
"The external relations of nations have not grown out of
economic movements " (p. 362). " [If they had] no economic
reason could be given why the industrial entity should correspond to
the political entity" (p. 367). "[But in fact] the people of a
nation are bound together by sentiments different in degree, not in
kind, from those which bind together the members of a household.
In the nation, as in the family, there is a vast multitude of services
exchanged between its members which are not economic. The
economic and non-economic services are grounded in the same sub-
stratum of humanity ; and the effort to separate them, and render
one here, and the other with people in another family, simply means
disintegration. It is the union and mutual exchange of these two
kinds of services which result in our welfare and create the senti-
ment known as patriotism. It is a genuine emotion, and is a true
economic force. It reconciles us, also, to accept the averaged
results of our efficiency expended on our own physical conditions.
It engenders that sense of community which operates with such force
in family and nation. Thanks to this feeling for the commonweal,
the eternal and destructive war the belluvi omttiuin contra omnes
which an unscrupulous self-interest would not fail to generate among
men engaged in the isolated prosecution of their own economic
interests, ceases in the higher well-ordered organisation of society.
On it are based the various forms of economy in common family
economy, corporation or association economy, municipal economy,
and national economy. And these forces of economy in common
are so essentially the condition and complement of industrial
economy, that the latter without them could either not be main-
tained at all, or at least only in the very lowest stage of civilisation."
From these considerations it follows that
" The problem is simply to provide the opportunity of economic
labour for a population born or thrown together on a given geo-
graphical area, on which area there are overruling political motives
for maintaining a political entity. The industrial entity must then
be made to conform to the political entity, or both perish. Drop
all considerations of patriotism, social ties, kindred, politics, and sub-
mit to the economic forces alone, and I grant there would be no
ii8 Industrial Freedom.
economic reason for any correspondence of the industrial and
political entities. But then there might be no economic reason for
the existence of Germany or France " (p. 369).
Again there is reason to complain of the unnecessary use
of pompous language. All this talk about the necessity for a
correspondence between the political and the industrial entity
only itieans that it is desirable, for political reasons, to develop
every national resource, and that this object is best achieved
by a policy of Protection. We may agree with the object, and
dispute the efficacy of the means ; but we cannot now project
this political discussion into the middle of an economic
argument. That must be reserved until a later chapter.^
But an admission that it is desirable, in the interests of a nation,
that all the capacities of all its citizens should have an oppor-
tunity of coming into play, does not require us to prohibit
trade with any nation more developed than ourselves. Nor is
it by any means clear that a nation advances most rapidly by
concerning itself exclusively with its own affairs, at the cost of
an industrial warfare with all the rest of the world. Yet,
according to List, " Each nation, like each individual, has its
own interests nearest at heart. Russia is not called upon to
care for the welfare of Germany ; Germany must care for
Germany, and Russia for Russia " (p. 93). Nor must your
Nationalist statesman stand upon the fear of war. " War," says
List again, " acts on a State like a prohibitive tariff system.
It thereby becomes acquainted with the great advantages of a
manufacturing power of its own. ... A war which leads
to the change of the purely agricultural State into an agricul-
tural-manufacturing State is therefore a blessing to the nation."
Notable conclusions these for a philosopher who repudiated
the economics of Adam Smith because they took no notice of
religion or morality !
The mischievous idea that every nation must be independ-
ent of all others like the Stoic idea that every individual
1 ScehdQw, Part III.
Preparing the Arena. 119
Pt. II., Ch. v., \ 8.]
must be self-sufficing is best refuted by history and experi-
ence. Such an achievement, even if it be desirable, has never
yet been possible. Nations, Hke men, grow stagnant by non-
intercourse ; their latent capacities wither, and the impulse of
ambition dies.i
Mr. Hoyt may be right in his assertion that " considerations
of patriotism, social ties, kindred and politics," require a nation
in its best interest to trade as little as possible with the inhabit-
ants of other countries. No one can dispute an ex cathedra
statement ; but in that case the Chinese reached the perfection
of economic wisdom when, in the true spirit of Nationalist
philosophy, they built a wall around their territory in order to
maintain, by the most efficient means possible, the " corre-
spondence of their political and industrial entities." And how
distressing is the lack of correspondence between these
" entities " in the case of Great Britain !
The Nationalist champions have, at any rate, this advan-
tage their rule is unassailable by logic. Let who will declare,
with numerous rhetoric and sonorous phrase, that the interests
of the State require an independence of the foreigner
no one can say him nay. He has Providence behind him,
and natural rights, and knowledge of the future, and, failing
these, he is at least entitled to his own opinion. Those
who are not of the faithful can only wonder and look
at a map.
8, We pass now from the Nationalist rules for inter-
national dealings to those for internal statesmanship. These
are summed in the maxim " That it is the duty of statesmen
' The commercial, rather than the manufacturing, nations have been in the
forefront of civilisation: e.g., Carthaginians, Ilanseatic Towns, Venice and
Holland, in older times; while European nations might fairly be ranked
according to their civilisation by looking at the magnitude per head of the
population of their foreign trade.
"If trade pinches tlie mind," says Lowell, in his "Essay on Josiah
Quincv," " the influence of commerce is liberating and cnlarsjing.''
I20 Industrial Freedom.
to develop a nation's productive powers." This is thus ex-
pounded by its author, List :
" The prosperity of a nation is not greater in the proportion in
which it has amassed more wealth [ie., vaUies of exchange), but in
the proportion in which it has more developed its powers of produce
tion.^ Although laws and public institutions do not produce im-
mediate values, they nevertheless produce productive powers ; and
Say is mistaken if he maintains that nations have been enabled to
become wealthy under all forms of government, and that by means
of laws no wealth can be created " (p. 144).
Mr. Hoyt says, in effect, the same thing in answer to the
well-known Free Trade inquiry, " How can taxes create
wealth?":
" The Protectionist proposes to create nothing. He can create
neither matter nor material forces. The energy he proposes to set
free is already in the men and things he deals with. . . . The
Protective statute renders possible the formation of the structural
organisation peculiar to a given country through which the pro-
ductive forces take effect" (pp. 380, 383).
The theoretical basis of this maxim is a denial of Adam
Smith's proposition that " Industry can only be increased by
the increase of capital."- This is thus expressed by a Pro-
tectionist writer, Mr. George Basil Dixwell, in a passage quoted
by Mr. Hoyt (p. 388) :
"To make the proposition [that laws and government cannot
increase industry] a vast gap has to be filled. It requires to be
proved that in a normal condition of things there is no unemployed
capital and no funds wliich, although intended for unproductive
consumption, are capable of being instantly turned to the support
of production the moment that a new industry introduced by a Pro-
tective law presents a profitable field of employment."
This is simply the old economic exposure of the fallacy of
Mill's statement that "a demand for commodities is not a
1 The italics are in the Knglisli translation.
2 "Wealth of Xation=," l^ook IV., Chapter 11. " Th*? industry of the
community can only be augmented in proportion as its capital increases, and
the capital of the conitnunity can only incrensc in accordance with the savings
which it gradually makes from its income." [Sec List, pp. 225 and 597.)
Preparing the Arena. 121
Pt. II., Ch. v., } 8.]
demand for labour;" and it is perfectly sound. The Nationalists
are right in asserting that the development of productive
powers is a most important element in national greatness^
which, under certain circumstances, may be of greater importance
than the accumulation of exchange values. Their error consists
in failing to observe that, on the Individualist theory, there is
a necessary connection between the accumulation of exchange
values, or "capital," and the development of new industries;
and that as capital accumulates, the self-interest which prompts
to its profitable use will direct it into new channels of pro-
ductiveness. Nationalists admit that self-interest will endeavour
to use capital in this way, but they deny its power to do so
without Government assistance. They assert that the competi-
tion of more highly developed nations will prevent the establish-
ment of the desired industry ; and that, therefore, this competi-
tion must be prevented by restrictive duties. The difference
between the two parties is, therefore, largely one of fact, not
theory : " Does foreign competition in fact prevent the
development of a nation's productive powers ? " And, secondly,
" If so, are restrictive laws the best means of encouraging this
development ? " But these are plainly questions of politics,
which are out of place in a discussion about the value of a
scientific theory. They will be examined fully in a later portion
of this work, when the time comes for dealing with the political
arguments in favour of Protection.
The maxim which, for the sake of brevity, may be termed
" the productive powers maxim " is also supported on another
ground. It is said that the self-interest of individuals cannot be
relied upon to develop natural resources without aid from the
Government. The reason given for this assertion is so
curious and difficult to understand that it will be better to
express it in the words of List :
" It is a further sophism," he says, "arrived at by confounding
the llieory of mere values with that of the powers of production,
when the popular school infers from the doctrine that ' The wealth
122 Industrial Freedom.
of the nation is merely the aggregate oj the -wealth of all individuals
in it, and that the private interest of every individual is better able
than all State regulations to incite to production and accumulation
^w^a//A,' the conclusion that the national industry would prosper
best if only every individual were left undisturbed in the occupation
of accumulating wealth. That doctrine can be conceded without
the conclusion resulting from it at which the school desires thus to
arrive ; for the point in question is not that of immediately increasing
by commercial restrictions the amount of the values in exchange in
the nation, but of increasing the amount of its productive powers. But
that the aggregate of the productive powers of the nation is not
synonymous with the aggregate of the productive powers of all in-
dividuals, each considered separately that the total amount of these
powers depends chiefly on social and political conditions, but
especially on the degree in which the nation has rendered effectual
the division of labour and the confederation of the powers of pro-
duction within itself we believe we have sufficiently demonstrated
in the preceding chapters" (pp. 169, 170).
Nothing could illustrate more clearly than this passage the
danger of confusing an empiric statement of facts with a
scientific argument. But it will be well to defer criticism until
the maxims of the school are fully stated. It remains to point
out how the object of the Nationalists is to be achieved. This
is also explained by List.
The care of a statesman, as has been said, ought to be not
so much the increase of wealth as the development of a nation's
productive powers. This is to be achieved by the temporary
sacrifice of wealth.
"The nation must sacrifice and give up a measure of material
property in order to gain culture, skill, and power of united pro-
duction ; it must sacrifice some present advantages in order to
secure to itself some future ones" (p. 144).
To this end it must restrict its trade with foreign countries,
and prevent individuals from following their own interests. If a
statesman should permit citizens merely to concern themselves
with getting rich, he is like an improvident landowner who
" puts out his savings at interest, and keeps his sons at common hard
work, instead of foregoing his interest and submitting to a present
loss ill order to give his sons the benefit of education " (p. 13S).
Preparing the Arena. 123
Pt. II Ch. v., } 9.]
The above extracts will have given a brief but sufficient
summary of the practical conclusions of Nationalist economists.
Do these confirm its pretensions to be regarded as a science ?
Certainly they do not commend themselves to unassisted
reason.
In the first place, they utterly repudiate the notion that the
maxims of morality have any place in international transac-
tions. Every nation is to be for itself, at whatever cost of
injury to others. Secondly, they display the utmost mistrust of
the individual citizen. They treat him in all industrial matters
as a person who cannot be allowed a free choice. He is to be
driven into this trade or that, as the changing wisdom of law-
givers may determine ; and in no case is it to be conceded
that he is the man of all others who is most likely to know and
pursue his own interest. Legislative restrictions trammel him
on every side, and Parliament, and not himself, determines what
pursuits he is to follow and what avoid. In all this Nationalists
are, of course, determined by the highest considerations for the
well-being of the person whom they so insult ; just as slavery
was never supported for any other reason than because it
increased the happiness of the slaves !
Time can be the only judge of such expedients; but while
waiting for the verdict of posterity, it is not out of place
to remind these doctors of human character that a narrow
and vulgar provinciality is not patriotism, and that human
nature reaches its highest development when it consciously,
a fid of its oivfi free will, enjoys at all times that which is best.
The question, however, which we are now discussing is not
about expediency, but about principles.
9, We are now in a position to pass judgment on the
scientific character of Nationalist economy. We have traced
this system through its definitions, scope, methods, and con-
clusions; but are wc any nearer the perception of a single
general principle ? The scope of the science is ludicrously
124 Industrial Freedom.
vague; its method is empiric; its conclusions are immoral
according to the prevalent ideas of morality. At best, it has
furnished a few political arguments by which to test the
conclusions of Individualistic economics ; but it has never
really grappled with economic problems, while its criticisms
generally fall short because it misconceives the character of
the individualistic science.
Take, for instance, its cardinal maxim : that the increase of
the wealth of all individual citizens is not the same thing as
the development of productive powers ! This is valueless as a
scientific statement, although it may lead to useful political
results, while as a piece of criticism it is beside the mark,
because it ignores the limitations of the scientific school. It is
idle to impeach the validity of the individualist methods by
mentioning the social and political conditions under which the
work of a nation can be most effectively performed, and then
complaining that the Individualistic science does not take all'
of these into account. No Individualist would deny that the
efficacy of a labourer depends in a great degree upon his social
and political environment. In fact, this is the reason why
economic conclusions about the products of labour have
constantly to be corrected by reference to the conditions of
the workman. But this admission is not inconsistent with a
belief in Individualist methods.
The "individual" of Adam Smith's political economy is
not, as Mr. Hoyt imagines, " a niasterless, clanless man," but
a citizen. His citizenship is assumed, so that there is no
necessity to devote chapters to discussing its component
elements. And not only is citizenship assumed, but that
kind of citizenship which is only possible in highly civilised
communities of the modern type, and which is described as
citizenship in an industrial community. It is true that these
assumptions are not made in so many words in every economic
writing, but they are implied in the postulates. The free play
of self-interest and the equality of competing units are only
Preparing the Arena. 125
Pt. II., Ch. v., 5 9.]
possible in a highly organised industrial State. Consequently,
the tests of economics which Nationalists afifect to make by
applying its conclusions to conditions of savagery and isolation
have no reference to the case.
Nor do Nationalists fare any better when they accuse the
Individualist of ignoring the productive force of civil and social
organisation. The theory of man's economic perfectibility
runs through the whole scheme of economic study. It may
be that, in fact, the individual's efforts are hampered, either
because he cannot, for some reason, use his full productive
powers, or because capital cannot find a safe investment in
developing a latent national resource ; but the only scientific
consequence of this is a necessity in such a case of correcting
an economic conclusion. The inability of the "economic"
individual in certain cases to do all that he desires does not
invalidate the scientific investigation of what the results would
be if he were able to have his way. Indeed, the practical
utility of economics often consists in indications of legislative
hindrances to the free and most effective exercise of human
industry.
So, on the other hand, the mere enumeration of the social
and political conditions under which the work of a nation
can be most effectively performed is in no sense the con-
struction of a science. It is, at most, a useful study in history
or politics.
The conclusion is inevitable to anyone who reads Nationalist
writings, that every attempt to found an economic science on
any other basis than that of Individualism inevitably becomes
empiric, both in its scope and method. Whatever may be the
value of the arguments and the conclusions of the Nationalists,
they are at best historical ; they establish no general principle,
but depend upon varying conditions of local circumstances.
This is not necessarily an impeachment of their bearing on the
fiscal controversy. It may yet turn out that Protection and
Free Trade are only, after all, matters of expediency, and not
126 Industrial Freedom.
of principle : in which case the pohtical investigations of the
Nationalists may possibly correct our economic conclusions
almost beyond recognition. At present, however, we are only
considering the claim of Nationalist economics to be regarded
as a science, and we have come to the conclusion that it
cannot be substantiated.
Note to Chapter V.
THE CHARACTERISTICS OF NATIONALIST WRITERS.
No attempt has been made in the present chapter to estimate the
importance of the Nationalistic school of writers, or to exhibit all their
characteristics. The references to their writings have been strictly limited
to the requirements of the present argument that is to say, only those
passages have been referred to which seemed to affect the validity of the
methods and conclusions of individualist economics as applied to tariff
controversies. This leaves a large part of their work untouched.
It would be absurd to deny that many writers of this school of whom
Roscher may be considered the head exhibit in a notable degree many of
the best attributes of scientific investigators. Their historical investigations
have been particularly fruitful in showing the modem character of economic
ideas and their inapplicability to undeveloped communities, such as those
of Europe in the Middle Ages or of Asia at the present time ; while their
analysis of existing social conditions has thrown a clearer light upon many
of the complexities of modern industrialism. It is now, for instance,
generally recognised that the growth of trusts and combines has materially
qualified the old assumptions about competition, and that within the field
of distribution these assumptions were always so wide of the mark as to
possess very little scientific value. But it is in the change of temper in
which economics are studied that the influence of the school is most
perceived. There is no longer any inclination to include all phenomena in
a few neat theories, and judge of facts by them ; but in its place is a readi-
ness to test, theories by fact and observation, and a growing caution in
applying them.
But this recognition of the services rendered by some Nationalist writers
to the study of economic questions must not blind us to the serious evils of
their influence. They have caused the pendulum to swing so far upon the
other side, that it is hardly possible to obtain a respectful hearing for
deductive reasoning. The recent publication of Mr. Marshall's " Principles
of Economics" will, it is hoped, have a corrective influence ; but no lapse
of time can impair the merits of John Stuart Mill's epoch-making work.
Sober wisdom, whether in economics or politics, is at a discount in this
a^e of fanatics and cranks, but every succeeding generation, for many years
Preparing the Arena. 127
Pt. II., Ch. v., ? 9 ]
to come, will testify to the sound judgment, foresight, and sagacity of that
great thinker.
Nor must we forget that a wide distinction exists between the greater
and the lesser writers of this new school. Just as in time past every
newspaper writer had " The Laws of Political Economy " always on his
pen, and was ready to say, with Mr. Lowe, " Political economy belongs to
no nation : it is of no country. ... It will assert itself, whether you
wish it or not. It is founded on the attributes of the human mind, and no
power can change it " so theMr. Lowes of to-day exhaust their stock of vitu-
perative epithets in condemnation of the idea that any scientific analysis of
economic facts is ever possible. Chief among offenders of this sort are
List and H. B. Carey ; while as for Mr. Ruskin, it were only charitable to
assume that his writings upon economics ought not to be taken seriously. i
One characteristic of these writers, and the swarm of pamphleteers they
have created, is the infinite variety of their topics. They write voluminously
on every subject, human and divine, except economics ; they indulge freely
in misty speculations on the nature and the destiny of man ; they discourse
upon distinctions of race and climate, and know exactly what the world
was intended to be and what it is going to become ; and in every case their
authority is unimpeachable by human reason, because all of them are
believers in "natural rights," and some of them are theologians ! This is
not pleasantry, but a literalstatement of facts. Theintrusionof theology and
transcendentalism into reasonings upon economic subjects is a distinguish-
ing feature of the Nationalist school. Sometimes the result is most grotesque.
Mr. Carey, for instance, who has been regarded as a prophet in America for
many years, has attested that "Trade between nations is illegitimate if it
runs along parallels of latitude, but legitimate along meridians of longi-
tude." No one can dispute this astonishing discovery, because Mr. Carey
makes it under the express authority of " Providence" and "Nature" !
Fortunately, the best work in economics is now being done in America
under theinfluence of ihepolitical science schools in more than oneuniversity,-
' Mr. E. T. Cook, in "Studies on Ruskin," p. 29 (n.), has ingeniously
suggested as an excuse for Mr. Ruskin's worst extravagances of vilification
that he was criticising not the teachings of political economy, but " luhat is
the same thing what it loas believed to teach." A plain man, who was not if
the brotherhood, might be disposed to think that a special duty was cast upon
a teacher of tlie gospel of " truth, sincerity, and nobleness" to ascertain wha',
for instance, J. S. Mill did really teach, before terming him "a one-eyed flat-
fish " on account of what " he was supposed to teach " which in this case w, s
not by any means " the same thing."
- The Political Science Quarterly, The Economic Science Quarterly,
and the studies of the Johns Hopkins University, are the current sources of
information as to what is being done in the United States in the prosecution c f
economic studies.
128 Industrial Freedom.
so that it may be hoped that before many years have gone by the
class of literature of which Mr. Carey's writings are a sample will only
possess an antiquarian interest ; at present it is a melancholy fact that they
are regarded by many voters as scientific revelations.
The elucidation of those matters of universal interest which occupy the
province of economics requires the exercise in an exceptional degree of the
rare, but humble, qualities of patience and sagacity. In no intellectual pur-
suit is it more dangerous than in political economy to give rein to the imagi-
nation. In tracing the working of society through all its manifold connections,
brilliance, enthusiasm, sympathy, and even genius, must always be subor-
dinated to an accurate regard for detail and a more than judicial hesitancy
in the adoption of conclusions. This is especially necessary in dealing
with questions of international commerce, because, owing to the minute
and ever-changing inter-dependence of trades, no one can be sure that he
sees any commercial transaction in all its bearings. There is a tendency
to give undue weight to the facts which first meet the eye, although these
are often of less importance than those which are concealed from the
general public, and known only to the experts of the particular trade. Nor
must the student of commerce ignore the danger of mistaking local and
passing for permanent phenomena. Even ten years is but a short time in
the industrial history of a nation ; yet, let any country pass through only a
three years' depression of trade, and how many quack remedies and revo-
lutionary schemes will be put forward by its inhabitants, and gravely
considered by so-called economic writers !
These dangers to the scientific character of economic studies are
increasing as civilisation becomes more complex and a survey of the whole
more difficult. Added to this is a temporary cause of danger from the
wave of mere expansive benevolence, which is based on no reflection and
holds before itself no definite aim, that threatens now to submerge all
serious and detailed treatment of social problems. On the one side, the
intellect of the country is being repelled from the study of politics and
driven into the pursuit of physical science ; on the other, the sentimentalists,
without knowledge, are encouraging disturbance and aggravating diffi-
culties. The risk of such a state of affairs is only dimly perceived at
present ; but it may yet be that Liberal institutions will go under before the
indifference of one class of their supporters and the ignorance of another.
The forc-'s of reaction are always organised and watchful, and every social
trouble or disorder make; in their favour. The greater, then, is the reason
for showi.ig that political economy is capable of scientific treatment, and
that, while not ignoring the just claims of sentiment to find legitimate
expression in an organised national existence, its conclusions are capable of
being expressed in general terms, which are something more than abstiact
generalities.
Preparing the Arena. 129
Pt. II., Ch. vi., \ I.]
CHAPTER VI.
NATIONALIST ECONOMICS AND THE TARIFF.
I. It will be remembered that, before entering upon the
economic argument in favour of Free Trade, it became neces-
sary to clear the ground for a fair fight by getting rid of a con-
tention that economic arguments could not lead to any results
in the present case. This contention was supported by the
statement that there was a new science of economics, witli
a different definition, scope, and method, the results of which
completely invalidated all the investigations of Individualists.
Inquiry has proved that this claim cannot be justified ; but it
will be well to probe the pretensions of the science still
further by showing how its so-called principles are applied to
the issues in the tariff dispute.
This task is fortunately rendered easier by the admirable
monograph of Mr. H. M. Hoyt, to which such frequent
reference has already been made.^ Most Nationalist writers
touch incidentally upon the question of the tariff; and it is
believed that all of them, except Roscher, advocate Protection.-
But, so far as the writer is aware, no one, except Mr. Hoyt, has
devoted a separate treatise to a justification of Protection by
reference to Nationalist principles. But whether Mr. Hoyt
stands alone or not, his work is certainly an elaborate, careful,
and ingenious statement of the Protectionist case, expressed
with a temperateness of language that is unhappily rare.
He begins with a criticism and repudiation of the In-
dividualist doctrines, tlien states the doctrines of the Nationalist
school, and then finally a])plies these to the tariff controvcrs;;.
1 " rrotoction versus Five Trntle. The Scientific Validity and Economic
Operation of IJifensive Duties in the I'nited States." By I.'cnry M. l]u\t.
Third Ivlition, Revised. New Yoff., i835
- Sec note at end of cliaptcr.
J
130 Industrial Freedom.
His illustrations and arguments are, naturally, directed prin-
cipally to American voters ; but they are, nevertheless, of a
sufficient general application to interest a foreign reader. In
fact, the treatise is regarded as a text-book in Australia ; and
that it has largely influenced American thought would be
apparent to any reader of the Forum, Belford's Magazi?ie, the
North American Review, and the Ailantic Monthly, during
the Presidential campaign of 1888. A less connected view of
the Protectionist argument is afforded by the Congressional
speeches on the tariff question. The six best of these on
either side have been collected and published in a cheap form,
under the title of "An Appeal to the American People as
a Jury," which forms an invaluable handbook of the fiscal
policy from an American standpoint. It naturally, however,
lacks the consecutive character of Mr. Hoyt's treatise, and is
more useful for its graphic illustrations of the actual working
of the tariff in the United States.
The argument has three steps : (ist) That a high degree
of manufacturing skill is necessary to the best national develop-
ment ; and (2nd) That this cannot be obtained without Pro-
tection ; (3rd) That the loss in money values which Protection
causes is more than recouped by the advantages which it
confers.
List expresses the whole argument in the folloNving
passage :
" Tlie nation must sacrifice and give up a measure of material
property in order to gain culture, skill, and powers of united pro-
duction ; it must sacrifice some present advantages in order to
ensure to itself future ones. If, therefore, a manufacturing power,
developed in all its branches, forms a fundamental condition of all
higher advances in civilisation, material prosperity, and political
power in e\-ery nation (a fact which, we think, we have proved from
history) : if it be true (as we believe we can prove) that in the
present condition of the world a mere unprotected manufacturing
power cannot possibly be raised up under free competition with a
power which has long since grown in strength, and is protected on
its own territory ; how can anyone possibly undertake to prove by
Preparing the Arena. 131
Pt. II., Ch. vL, \ 3.]
arguments only based on the mere theory of values that a nation
ought to buy its goods, like individual merchants, at places where
they are to be had the cheapest : that we act foolishly if we manu-
facture anything at all which can be got cheaper from abroad : that
we ought to place the industry of the nation at the mercy of the
self-interest of individuals? that Protective duties constitute
monopolies, which are granted to the individual home manufac-
turers at the expense of the nation? It is true that Protective duties
at first increase the price of manufactured good>, but it is just as
true, and, moreover, acknowledged by the prevailing economical
school, that in the course of time, by the nation being enabled to
build up a completely developed manufacturing power of its own,
those goods are produced more cheaply at home than the price at
which they can be imported from foreign parts. If, therefore, a
sacrifice of value is caused by Protective duties, it is made good by
the gain of a prnver of production, which not only secures to the
nation an infinitely greater amount of material goods, but also
industrial independence in case of war. Through industrial inde-
pendence, and the internal prosperity derived from it, the nation
obtains the means for successfully carrying on a foreign trade and
for extending its mercantile marine ; it increases its civilisation,
perfects its institutions internally, and strengthens its external
power. A nation capable of developing a manufacturing power, if
it makes use of the system of Protection, thus acts quite in the same
spirit as that landed proprietor did who, by the sacrifice of some
material wealth, allowed some of his children to learn a productive
trade."
3. Each step in this argument is open to dispute. It
is beside the mark to " prove from history that a manufac-
turing power, developed in all its branches, forms a funda-
mental condition of all higher advances in civilisation,"
because there is no civilised country at the present time
which is not far superior in its manufacturing power to the
most completely developed rnanufacturing countries of the
days before steam-power. History furnishes no guide under
these altered circumstances. 'J'he question now is, not
" Wliether manufactures are necessary to national greatness?"
but "^Vhetl1er the best interests of tlie particular country
whose tariff is in question would be advanced by the establish-
ment, through the agency of Protection, of this or that manu-
J 2
132 Industrial Freedom.
facture ? " List's arguments give us very little aid to a correct
answer. He dwells at great length on the superiority of an
artisan in character and intelligence to an agricultural labourer,
and argues from this that it is to the advantage of a country to
over-balance its "dull-witted" agriculturists by a greater
number of manufacturing hands. But those who live in younger
countries, where the rural labourer's intelligence is not depressed
by traditions of caste or exclusive land laws, will be very slow
to believe that the monotonous drudgery of tending a machine
inside the walls of an unwholesome factory is more conducive
to the cultivation of intelligence and character than the
healthy open-air and self-dependent Hfe of the Australian bush
or the Western' prairies. The increasing number of '' larrikins "
and " hoodlums " seems rather to suggest the opposite remedy
of distributing the city populations. Yet the argument that
Protection will increase the number of factory hands at the
expense of the agricultural part of the community lies at the
very foundation of the Nationalist defence of Protection. Are
Protectionists prepared to take this step ? Does any number
of them in a young country seriously believe that the urban
population is not already excessive in number and inferior in
character ?
4. Let us, however, grant that the first step in the argu-
ment can be established, and that it is desirable to establish
certain manufactures, does it follow that this cannot be done
without Protection? The Individualist answer is an emphatic
negative. The establishment of manufactures (he says) may
safely be left to private enterprise, because so soon as capital
accumulates it will be eager to find investment. INIr. Hoyt,
however, and his scliool, entertain a profound mistrust of un-
directed individual clTort. Tlicy will not believe that any hoiie
of profit can be relied upon to attract capital into an industry
that is exposed to the competition of a foreign country. It
may face the competition of a countryman, but it would be
Preparing the Arena. 133
Pt. II., Ch. vi., ? 4.]
dangerous to the community to let it run the ribk of the
competition of a foreigner ! Here are his words :
" While considered as individuals, men may be trusted to pursue
the industry which seems to offer the best returns ; when we come
to international exchanges, we must abandon this atomistic view of
the co-workers in an organised nation. Our scientific standpoint
must be at an elevation which places the given nation in proper per-
spective with all the other political and industrial units which com-
pose the commercial nations of the world, who also have 'desires'
which they wish to gratify. The wants of a nation as a whole, and
its powers of supplying them as a whole whether by domestic
production or foreign exchange, or by their joint operation are
aggregates. The nature of our surplus production and the relation
of that surplus to the markets of the world, involve aggregate esti-
mates. The amount of foreign products needed, and the nature of
the purchase money which we carry in our hands, are to be treated
as aggregates, and the means of buying their gratification is an
aggregate. ... So some one, statesman or layman, must take
the trouble to sum up the details of a nation's industrial resources
and liabilities into the correct aggregate " (pp. 234, 235).
Again words ! Words !
" Men may be trusted as individuals to follow their
private interest in internal commerce, but in international
commerce they must be guided by legislation." But are
the legislators any more to be trusted than the individuals ?
and if so, why ? Is it not notorious that legislators are
not chosen for their business knowledge, or their delicate
appreciation of the higher spiritual and social necessities of
the "individual citizen"?
Again, in what sense are the ''' wants of a nation " an aggre-
gate, except that they are resultant of the wants of individuals ?
To supply the wants of a nation, "as a whole/' is, surely, the
same thing as supj^lying the wants of each individual citizen.
Else could the parts be full and the whole empty ? But let
Mr. Hoyt speak in his own defence :
" If men could be born where they pleased, or if men could and
would go freely from one country to another when the demand for
the products of their industry in their native land failed, or when the
134 Industrial Freedom.
pursuit of an occupation in which they had special aptitude is in-
capable of being carried on if men did not care where they lived
and where they died we might assent to speculations as to what
would be. If, on the other hand, all the motives of life except
economic ones keep him in his political home, the capacity and
opportunity of a man to work at all may depend on governmental
restraints on the products of foreign labour, and the industrial entity
must be conterminous with the political entity. It is not a question
of protecting the weak against the strong, or the high-priced labourer
against the low-priced labourer. It is giving to the labourer of a
given country the market for the products of his labour. It is to
prevent the labourer himself from being removed from the country,
and substituting therefor a trade in the product of his lal:)our. The
argument does go equally well with either end first. Germany success-
fully keeps its lower-priced labour in German industries on German
soil by protecting her home market ; and so does France, Otherwise,
it might conceivably happen that there would be no occasion for a
German to live in Germany."
And in another place :
"The problem, therefore, is not ' How far for a given exeilion
and sacrifice to get the maximum of material good,' but rather, ' How
we may so occupy our field of employment that we can expend upon
it all the exertions and all the sacrifices which we, as a people, are
willing and able to make. How we may get the maximum for all
which is possible when all our abilities and all our energies are called
into play' " (p. 201).
But again we ask, why cannot this problem be solved by the
free play of enlightened self-interest ? Why cannot individuals
be trusted to use their industrial organisation to the best ad-
vantage of the whole ? And if they cannot be trusted, who are
the persons to direct them ? Why should men lose their sense
of what is best for their own interests when they engage in
foreign trade ? If every man knows his own interest best, and
may be trusted to follow it, as, Mr. Hoyt admits, he may in in-
ternal trade, does not the presumption arise that national
industry will be most wisely organised by leaving the producing
class alone ? But to Mr. Hoyt, the idea of organisation and
the idea of individual action seem incompatible. He regards
the " individual " as " a masterless, clanless man," fighting
Preparing the Arena. 135
Pt. IL, Ch. vi., \ s.]
against every one else, and indifferent to everything but the
momentary gratification of his desires. Yet there is no incon-
sistency between individuaUsm and organisation ; rather the
organisation that is firmest and directed to the highest ends
can only be created by freemen. Spontaneous recognition of
the necessity for union is an essential condition of strength.
But it will be just to hear Mr. Hoyt further. He thus works
out the application of his conception to fiscal policies ^ :
" Under Free Trade, men would follow certain natural industries.
The only natural industries are those connected with the land and
the product of raw material." (This fundamental position is assumed
without proof.) " The surplus of these is to be exchanged for
foreign manufactures. A time, however, will come when the surplus
of these industries will be more than foreigners can take, and, at the
same time, the demand for manufactures may be greater than
foreigners can satisfy. Under these circumstances, the theory of
Exchange breaks down, and the surplus of the natural industries is
unsaleable. To remedy this state of things, it is proposed to en-
courage the direct production in America of the goods which would,
in a state of freedom, be purchased from abroad. By such a direct
production, the market for the surplus of the natural industries is
enlarged, and the supply of the qualifications which are desired by
the producers of this surplus is rendered longer and more constant.
"The effect of this direct production is beneficial in another
way. It provides employment for the rapidly increasing stream of
immigrants, and enables the State to utilise the various capacities
which may be possessed both by the original inhabitants of the
country and by the new arrivals. It calls into play all our abilities
and all our energies."
5. The time for criticising this argument will come later,
when each of its parts is separately considered. It is sufficient,
for the present, to point out that it rests on several unexpressed
and unproved assumptions, of which the chief are, that without
Protection, direct production would not have taken place ; and
that under Free Trade there would have been no manufacturing
industries. A Free Trader, replying to the argument, would first
require some proof of the assumption that manufacturing
1 In this summary Mr. Hoyt's language has been adhered to very closely.
136 Industrial Freedom.
industries were not " natural " to a country of such unequalled
wealth in raw materials as the United States ; and he would ask
next whether, if it should happen that, under Free Trade,
foreigners could not supply the American demand, anything
would stand in the way of the Americans supplying themselves ?
The " natural " course of events would be that, as population
increased, and the demand for manufactured goods became
sufficient to justify the erection of costly works, labour and
capital would be employed in a great variety of manufacturing
industries.
Mr. Hoyt's argument, however, whether good or bad, is
clearly not " economic " in the sense in which we have used
the term. It is, in fact, only the expression in larger terms
of the two stock phrases of Protectionist manufacturers :
" Keep the home market for the home labourer " and " Secure
diversity of industry."
Mr. Hoyt himself seems to recognise the political nature of
his argument at a later period of his work, when he admits that
he is driven to his conclusions by considerations of " patriotism,
social ties, kindred, and poliiics, and that, submitting to the
economic forces aloae, there would be no economic reason
for any correspondence of the industrial and political entities "
(P- 3(^9)-
It would be impossible to have a plainer avowal that the
so-called " economic " argument in favour of Protection is, in
all its attributes, political and moral. The admission is plain
that if it can be proved that the acquisition of material wealth
is the principal element of national productiveness, and the
most potent stimulus of latent energies, there is then no
reason why nations should not trade with one another.
But that is the very proposition which is demonstrated by
the Individualist economist, which Mr. Hoyt believes himself
to be refudng.
The truth is that Mr. Hoyt and the economists are not
arguing about the same point.
Preparing the Arena. 137
Pt. IL, Ch. vi., \ 5.]
It is obvious that a purely economic argument cannot be
refuted by a process of reasoning which starts with an assump-
tion that the acquisition and production of wealth are matters of
trifling importance. The utmost which Mr. Hoyt's method
can achieve is to suggest reasoning for disregarding the eco-
nomic conclusions. The questions which he raises are of great
importance ; but it is a cause of confusion to term them
" economic." They are really the stock political arguments of
the Protectionist armoury, " Keep the money in the country,"
" Diversify employment," " Encourage infant industries," and
" Preserve the home market for the home labourer." Any or all
of these phrases may contain reasons for modifying the eco-
nomic conclusions about the tariff; but we are not considering
them at present in that aspect, but only inquiring into their
effect in impugning, by economic methods, the validity of an
economic argument. The conclusion is inevitable that they
have failed to do this. The " economic " argument stands
firm against all " economic assaults."
Note to Chatter VI.
"nationalism and rROTECTION."
No reference has been made in the course of this chapter to the
particular Protectionist conclusions expressed by the various writers of
the Nationalist school ; but those of List are particularly noticeable,
in view of the importance attached to his pretentious work. He
is a strong opponent to any protection of agriculture (p. 214), and
advocates the free admission of all the raw materials of manufactur-
ing,' industry (pp. 217, 316, and 324). He was also of opinion that
" where any technical industry cannot be established by means of an
orijrjnal protection of forty to sixty per cent., and continue to maintain
itself under a continued protection of twenty to thirty per cent., the funda-
mental conditions of manufacturing power are lacking " (p. 313). The
length of time for \\ hich Protection was required for European nations wa'^,
he thought, "ten or fifteen years" from the date of writing (1841):
(p. 1S4;.
List, like most Protectionists, has the prospect of war ever before his
eyes. The bugltear of a general blockade scares him from one extreme to
another, and is the chief reason for his anxiety to make every nation self-
138 Industrial Freedom.
supporting. His morbid and diseased mind he suffered from chronic
ill-health, and died by his own hand is also haunted by the spectre of
" perfidious Albion " ; he sees wickedness in every action of Great Britain,
and seriously warns his countrymen that the Secret Service money is spent
in bribing Continental countries to adopt Free Trade, just as the
average American voter is instructed to beware of " British gold " and the
"Cobden Club." Such are the writers to whose judgment we are asked
to entrust the delicate duty of adjusting the rival interests of the individual
and the vState !
Mr. Hoyt seems to have taken warning by the failure of List's
prophecies,! and is more cautious of committing himself to any definite
statement as to the amount of Protection that is needed, or the length of
time for which it must be maintained. He also, however, objects to
Protection upon raw materials ; and in a noticeable passage admits the
injury which the American tariff has inflicted on the welfare of the
Southern States (p. 373).
CHAPTER VII.
FREE TRADE AND LAISSEZ FAIRE.
I. The lists are not even yet clear for the entry of the con-
testing arguments. The obstacles have been removed, but
the boundaries have still to be defined, lest the disputants
might never meet each other in a field which stretches from
the quicksands of Socialism to the arid waste of " LaissezfaireT
Yet the real battle-ground on which the contest must take
place is equally removed from each extreme. Unhappily, the
champions on either side are so unwilling to observe the proper
limits of their controversy, that it is necessary, if we would avoid
confusion, to define, with as much exactitude as the subject
will permit, the true relations of either fiscal policy to its cog-
nate political system.
It has already been observed, in the chapter which defined
the meaning of the term that Free Trade is not a principle of
1 An instructive test of the soundness of List's principles is furnished by
comparing his anticipations of the future with the actual course of events {see
especially pp. 104, 158, 184, 191).
Preparing the Arena, 139
Pt. II., Ch. vii., \ 2.]
government, but an expedient of commerce. Commerce has
many other aids to its enlargement and extension of which
bank-notes and a system of credit are two familiar examples.
Each of these works within a special sphere by its own method,
and under its own rules. The sphere of Free Trade is the
production of exchange values, and its method is the extension
of the principle of division of employment into international
transactions. Not much room here, it would seem, for any
wide excursion into the philosophy of politics !
It happens, however, that while exercising within its own
province its especial functions of cheapening products, steady-
ing prices, and equalising markets, Free Trade has established
an important rule of political conduct, which is capable of
being applied to many other departments of civil activity. This
is the well-known rule of Laissez faire. The principles by
which the practice of Free Trade is justified, and the practice
of the policy itself, have both shown that, in the case of inter-
national exchanges, it is wiser for a Government to allow its
traders to have a free choice in the selection of their articles of
barter than to attempt to control their sales and purchases
by the means of Customs duties. But that is a rule which is
strictly limited by its terms to international exchanges. How
has its extension been brought about ?
The theory and practice of banking have established
certain rules as to the right proportion which should be main-
tained between the value of a note issue and a gold reserve ;
yet no banker has thought of applying these rules without
modification to the issue of Exchequer bonds. Why should
not Free Traders and Protectionists be equally ready to confine
their fiscal rules to fiscal matters ? The answer to this question
is to be found in the historical circumstances under which
this rule was first pronounced and carried into practice.
2. When Adam Smith wrote the first systematic explana-
tion of the phenomena of an industrial and commercial society,
140 - Industrial Freedom.
labour and capital were hampered at every turn by regulations
and restrictions. It requires a vigorous effort of the imagi-
nation to picture the conditions of industry prior to the great
industrial revolution which marked the close of the last century.
Wages, prices, processes of manufacture, migrations of labourers
in search of work, meetings of workmen, the transport of
goods, the wholesale trade, and all international commerce,
were either forbidden or regulated by law or custom down to
the minutest detail. Some industries were forbidden to be
carried on except by certain persons or at certain places.
Over-sea goods were only allowed to be carried in English
ships, or in ships of the nation whose product they were ; while
a high, and often prohibitive, tariff closed our ports still further.
The trade guilds, although their influence was on the wane,
still exercised a legal and customary right of hindering the
processes of manufacture, by applying their old rules to the
altered conditions of production by machinery and steam-
power.i But if the position of employers was rendered
irksome by their wide-reaching system of restraint and regula-
tion, the position of the workman was hardly that of a free
man. Whatever may have been his happiness in the possession
of regular employment and sufficient food and there is a
tendency now to over-estimate his condition of prosperity and
contentment he had little or no hope of ever altering his
mode of life. He worked, it is true, in a cottage instead of a
factory, and breathed pure air, and he fed at his master's table,
and served no other all his life ; but behind this idyllic picture
is another of a gross animal, unable to leave his parish because
he lacked the means of gaining a "settlement" in another
by forty days' continuous residence, subject to the brutality of
a master hardly more refined than himself, his wages fixed for
him by Justices in Quarter Sessions, prohibited by the laws of
apprenticeship from trying his hand at a new trade, without
1 See Brentano's " Essay on Trades Unionism."
Preparing the Arena. 141
Pt. II., Ch. vii.,?3.]
interest, without hope, sunk in ignorance, bestiality, and vice.i
In the meantime, the conditions of industry were everywhere
changing. Even before the period of great mechanical discoveries
(1770 90) the old system of domestic industry was breaking
down before the growth of foreign trade and the accumulation
of capital. At the conclusion of the Seven Years' War (1763)
industry required new outlets in all directions. The old order
was passing away, but the old rules remained. It was the aim
of Adam Smith's great work to show how the industrial organisa-
tion should be made to correspond to the existing needs. ^
3. It is a mistake to regard Adam Smith as a deductive
economist, theorising from abstract postulates. On the con-
trary, he was essentially an observer of the things about him,
and his method of study is chiefly, although not exclusively,
historical. He did so far yield to the influences of his time as
to take the doctrine of "natural liberty" as tlie philosophical
justification of his attacks upon the existing restrictions; but
he nowhere developes this into the extreme theory " that every
man in pursuance of his own advantage at the same time
furthers the good of all !" This later growth was due almost
entirely to the success of Adam Smith's proposals. The
doctrine of "natural liberty" gained a reflected glory from the
' The pictures of the condition of the poor given in the'novels of Smollett
and Fielding are very instructive, and should be read as a corrective of the often
quoted passages from Defoe's "Tour through Great Britain."
- Toynbee's "Industrial Revolution ' gives the best, although frag-
mentary, account of the industrial changes during this period.
Professor Thorold Rogers' "Six Centuries of Work and Wages," and his
"Lectures on the Economic Interpretation of History,'' contain, perhaps, the
greatest quantity of systematised information upon the sul)ject ; while Professor
Ashley's " Introduction to English Economic History and Theory," and a
nst'ful Compendium, pre|)and by Mr. Gibljins for the University Extension
Se: i'-s, undir the title of ' ' 'ri.e liidr.'trinl History of Fnglan;!," are two notable
additions by Oxford nir-n to a sti'.dy v.hich the University of Oxford is making
peculiarly her own.
Eden's " State of the Poor," Xicliol's " History of the Poor Law," Baines'
" History of the Cotton Trade," and Scrivener's " History of the Iron Trade,"
arc indispensable as works of rcfcrcr.ce.
142 Industrial Freedom.
immediate and striking results which followed its practice. As
restriction after restriction fell before the force of law or
custom, the belief gained ground that some new principle of
policy had been discovered or revealed.
The same work was proceeding in France as in England,
only that the need for it was greater. From the time that the
merchant Legendre returned his famous answer to Colbert's
question, " How he might best protect French commerce ? "
'' Laissezfaire, laissez passer''^ until the Revolution, the aim
of every wise ruler was to lessen the restrictions upon the
passage, manufacture, and exchange of goods. The odious
ingenuity of these impediments, and the vigour with which
they were supported in the name of religion and order, caused
Turgot to adopt Legendre's saying as the cardinal maxim of
sound administration. From France it passed to England,
where it was received for a time as a new gospel by all those
and at that time they were many who suffered in their
fortunes or their ease in consequence of the corrupt and
injudicious interferences of Government with the private affairs
of citizens. It has not, however, been accepted as a scientific
principle by any economist or writer of repute, except Mr.
Herbert Spencer. This will probably be a hard saying to
many Nationalists ; yet, in truth, the reputation of the older
economists has suffered by the indiscretions of their thoughdess
followers. They never did, in fact, teach, as a scientific triith,
that "the road to national prosperity lies in the unchecked
and competitive pursuit of material wealth," i in spite of the
belief of many estimable persons to the contrary. Their
conclusions were strictly limited by their premisses, and were
only applicable to the facts of daily life, when the conditions,
which were assumed to exist universally, were present. Their
so called " natural laws " were mere statements of the regular
' "Studies in Ruskin," by E. T. Cook (p. 30). It is only fair to mention
th.1t this is Mr. Cook's summary of Mr. Ruskin's opinion of economic teaching,
not a statement of his own.
Preparing the Arena, 143
Pt. II., Ch. vii., \ 3.]
sequence in which certain results would follow from certain
combinations of ascertained facts.
Journalists and politicians, however, who were anxious to
clinch an argument, and busy men who wished to avoid one,
used the economic conclusions as statements of a natural law.
Ignoring the limitations under which their masters wrote, and
forgetful of the nature of their assumptions, these incautious dis-
ciples treated a scientific deduction as if it were a formula for daily
use ; and, not perceiving that the reforms which had been carried
by the influence of Adam Smith were purely negative, and
that the abolition of the antiquated legislation of restriction
would become useless if the labourer was prevented by the
changed conditions of his life from exercising his newly won
freedom of movement, they applied the arguments of Adam
Smith to every species of Protective legislation. Yet, in fact,
the position had entirely altered. The watchword, which had
been "Remove the shackles!" had become "Prevent the
forging of new shackles I"
It happened that Ricardo and many other economists
although John Stuart Mill was not of the number honestly
believed that many of the efforts to preserve the working-
classes against the dangers of their new condition would be
ineffective and mischievous ; and Ricardo gave evidence to
this effect before a Committee of the House of Commons.
The general public, not unnaturally, failed to discriminate
between these political opinions and the conclusions to which
the same men had arrived as scientific economists. It
happened also that most of the Free Trade manufacturers,
who were the backbone of the Anti-Corn-Law League, took
the same view of the new legislation, under the impression
that legal equality and freedom of contract were the only
conditions that were needed to secure the working-classes in
their just rights. Here, again, the greatest of the Free
Traders, Richard Cobden, held aloof. But the public have
been in no mood to discriminate, and Free Traders have
144 Industrial Freedom.
been joined with the economists in a general condemna-
tion.
The same display of feeling is observable in the United
States, and is to some extent justified by the writings of Free
Traders. Not only have most American Free Traders been
unswerving devotees of Laissez /aire as a political maxim
moved thereto, no doubt, by the wonderful achievements of
Individualism in the United States and the frequent corrupt-
ness of Government action but they have assumed the
universality of the maxim as the basis of their justification of
Free Trade. Professor Sumner of whom all lovers of clear
thought and precise expressions must speak with unfeigned
respect has been the leader of this school,^ of which Professor
Fawcett, whose work upon Free Trade has been largely
circulated in the United States, is an English disciple. On
the other hand. Professor Walker and the younger school of
economists among whom may be named Professor Clark,
Professor Ely, Professor Richmond Mayo Smith, and Professor
Taussig have never supported Laissez /aire, either as a
political or scientific doctrine. It is to be feared, however,
that some time must elapse before the new school of writers
can clear the reputation of Free Trade from the effects of its
unfortunate association with an unpopular doctrine.
We are now in a position to understand the combination
of influences under which the notion has grown up to wliich
reference was made in the second chapter of this work that
Free Traders were fanatical adherents of Laissez /aire, and
that " Administrative Nihilism " (to use Professor Huxley's
expressive synonym) was the last word of economic teaching.
' la tlie present state of tl;e law as to inienia'ional copyright, American
writings on political and economic subjec's are almost unknown in Great
Britain or Australia. Yet no one has ever penned a more kicid statement in
a shorter space, of the economic argument against Protection, from the stand-
point of a believer in Laissez faire, than is contained in Professor Sumner's
httle book entitled " Protectionism the ism which teaches that waste makes
wealth."
Prep AH im the Aren-a. 145
Pt. II., Ch. vii.,54.]
No reader of Protectionist literature can entertain a doubt of
the wide influence of this misapprehension, to which the
rejection of the individual as the industrial unit, and the
adoption of Nationalism, is almost entirely due.^ The dislike
of Laissez /aire, which is the governing inspiration of
Nationalists, is so intense that it prevents a fair appreciation
of the meaning of the maxim. The same blindness of rage
obscures the vision of the fighting Protectionist. Remembering
that many prominent Free Traders are ardent believers in
this maxim, he has come to regard it as an essential part of
Free Trade, and as the logical outcome of Individualist
political economy, and has consequently sought for a new
basis for economics which will not lead to such an unworkable
conclusion. Popular impressions die hard ; and it will probably
be as difficult to persuade Protectionists and Socialists that
Laissez /aire is not a necessary part of economic teaching as
it is to persuade Individualists that Socialism does not mean
either a re-distribution of private property or the abolition of
capital. Nevertheless, the attempt must be made.
4. Whatever may be the merits of Laissez /aire and,
according to Mr. Herbert Spencer, they are great the maxim
is certainly not an expression of a scientific principle. It is
at best only the correct application of a principle being a
term of political art which does not belong to science.
An attempt has been made earlier in these pages- to define
the limits within which the maxim may be safely applied; and
it was suggested that within the field of the production of
wealth, where the economic postulate of an ever-active com-
petition between equal units is practically in accord with facts,
the best results were obtained under a policy of strict non-
interference ; but it was pointed out that, within the field of
the distribution of wealth, the conditions of competition were
so altered that no such general rule could be safely adopted.
' 5(?6' List : Thookll. passim, Iloyt : Cliaps. II., IV., V. , and /,r^j/;//.
Sec above, p. 11-13.
K
146 Industrial Freedom.
It is not to be expected that so fragmentary a discussion
of a large question should carry conviction to the minds of
those who are already believers in the universal applicability
of Laissez faire; nor is it desired in this treatise to enter
upon any long discussion of the subject. We are not now
concerned with principles of government, but with the smaller
question of a fiscal policy. There is no need to do more
than show the independence of the Free Trade argument of
this or any other political theory.
The Free Traders who have pressed into their service the
doctrine oi Laissez faire have certainly adopted a most con-
venient course ; because, if it can once be proved that
Governmental interference is always wrong, any argument
against the particular kind of interference known as Protection
becomes a work of supererogation. But although most Free
Traders who give up Laissez faire such as Mill, Cobden,
Jevons, and Toynbee in England, and Professors Walker,
Clark, Mayo Smith, Ely, and Taussig in the United States
undoubtedly yield a great advantage to their opponents, it
would be idle to expect to convince Protectionists of the
futility of Protection by any demonstration that the individual
always knows his interests best in the sense in which they are
identical with the interests of society. The mistrust of the
doctrine of Administrative Nihilism is so widespread and
deep-rooted that it may be doubted whether any Protectionist
writer could be induced to read a refutation of Protection
which rested on a proof of this kind. Accordingly, from
motives of controversial expediency, if for no other reason, it
will be well to meet Protectionists upon their own ground,
and discuss the interference of a Government in matters of
trade and tariffs as if there were no presumption either against
or in favour of interference in that or any other case. A few
words more in explanation of the reasons for taking this
course are, however, due to a deserved respect for the eminent
names of those who have conducted the dispute on other lines.
Preparing the Arena. 147
Pt. II., Ch. vii., \ 5.1
5. The political maxim of Laissez faire is arrived at
partly by a process of induction, and partly by deduction from
economic principles. But since economic principles rest upon
an assumption of an ever-active competition between equal
units, no rule of practice can be founded upon economic
reasoning where there is either no competition at all or a com-
petition between unequal units. Now, it has already been ob-
served that the peculiar province of economic reasoning is the
production and accumulation of material wealth. Accord-
ingly, if the merits of a fiscal policy depend to an appreciable
extent upon its effect upon the production and accumulation of
material wealth, they can be tested to that extent by economic
rules. This is the justification of applying the " let alone "
maxim to all commercial dealings between foreign countries.
When, however, we enter the province of the distribution ot
wealth, and have to deal not with goods and prices, but with
human beings and wages, we are confronted by a totally
different set of facts. Our postulate becomes at once of
questionable accuracy. The competing units are not, in fact,
upon a footing of equality.
There is some approach to an equality between those who
buy and sell commodities, because goods and capital can both
be moved from place to place, and the postponement of a sale
or purchase only leads to a loss of money. But between the
labourer who is unaided by a union and unprotected by law,
and his employer, equality rarely exists. He is seldom, if ever,
in a position to make terms as to the price at which he shall
sell his labour. Being seldom capable of more than one occu-
pation, he must find work at that or starve. This disadvantage
is to some extent removed by the institution of Trade Unionism,
which is to the labourer what capital is to his employer, in that
it enables him to delay the sale of his services until the market
for them rises. But even trade unions do not bring about a
sufficiently real equality between labourers and employers to
justify the use of economic rules in regulating their mutual
K 2
148 Industrial Freedom.
relations. The value of human labour cannot under any circum-
stances be determined, like that of a commodity, simply by the
higgling of the market, because labour cannot be stored,
moved, or sampled, like a bale of goods. Mr. Frederic
Harrison! has very happily expressed this difference. "For
those," he says, " who have commodities to sell there is a true
market. Here competition acts rapidly, fully, simply, fairly.
It is totally otherwise with a day-labourer, who has no com-
modity to sell. He must be himself present at every market
which means costlypersonal locomotion. He cannot correspond
with his employer : he cannot send a sample of his strength :
nor do employers knock at his cottage door. Moreover, when
buyer and seller meet, the bargain is made; his price is paid,
the goods change hands, they part ; the contract is complete
the transaction ends. But the relation of employer and em-
ployed is permanent, or at least continuous. It involves the
entire existence of one at least ; it implies sustained co-opera-
tion. This is no contract to sell something ; it is the contract
to do something : it is a contract of partnership or joint
activity : it is an association involving every side of life."
These words contain the kernel of the labour question,
which Free Traders who believe in Laissez faire are apt to over-
look. And yet, if we would persuade the working-classes to
support Free Trade, it cannot be too often repeated that such
sentiments are not at variance with the practice of that policy.^
1 Fortnightly Review, 1878.
2 Professor R. T. Ely, whose work on " The Labour Movement in
America " was not known to the writer when he penned the text, expresses the
same idea with admirable perspicuity (pp. 101-3). "The labourer,'' he says,
"must offer labour in the labour market in which he resides, and cannot seek
the best market, or even a better market, like others who sell commodities.
He is often too uneducated to know the conditions of the labour market in other
localities, and too ignorant to be able to pass judgment on such data as are at
Lis command. When he does know, his poverty frequently prevents his re-
moval ; for he cannot sell his commodity in a remote place unless he removes
his own person thither, nor can he ship, as others do, a sample of his
commodity.
" If the demand fall^, labour cannot be withdrawn from the market, like other
Preparing the Arena. 149
Pt. II., Ch. vii.,?s.]
There is also another reason why economic conclusions can
seldom be applied with any confidence to a d'scussion abouc
wages, besides the unreality, in such cases, of the economic
postulate : namely, the paramount importance of the political
considerations by which they must be modified. These arise
from the very nature of the subject. Human beings cannot be
wares. On the contrary, as the demand decreases the supply nmst increase, by
reason of competition of a- greater number of labourers. There are several
causes for this. Members of the family who before did not work outside the
home chiefly children and women will seek labour to eke out the father's in-
come. A decreased demand usually occurs at time of a general depression,
and the ranks of the working-men are enlarged by accessions from other social
classes. Competition may thus increase in severity almost to an unliinited ex-
tent between labourers to secure what little work there is. Thus it happens
that when demand for labour diminishes, the fall in wages is apt to be more
than in proportion to this diminution in demand.
' ' The cost of production is the limit below which the price of other commodi-
ties cannot permanently fall, for the production is diminished as the price falls,
and at times ceases almost altogether. But the individual labourer cannot
diminish his supply of labour so long as he lives, and misery and death ' are the
factors which must bring about a decrease in the supply of his commodity, and
raise its price to the cost of production : in other words, to what it costs the
labourer and his family to live and to maintain the customary standard of life
among the members of bis class.
" Closely connected with the foregoing is the fact that the price of labour does
not at once rise when the demand increases, as is usually the case with other
commodities, for the first effect is that the unemployed receive wovk ; and after
the ' reserve army ' finds employment competition among purchasers of labour
raises its price.
" Finally, the on'y way to diminish the supply of the commodity labour in the
market in the future is, by prudence in marriage, to diminish the birth-rate.
But to accomplish this, will and intelligence are necessary, and some prob-
ability that the labourer would reap the fruits of his self-denial. No such
guarantee exists, because the folly of his fellows will render h's prudence of no
avail. In addition to this, the labotiier in America can hope to influence the
supply of labour offered in the market of the future only when he gains some
control over immigration."
' "The way these operate is so simple th.it it 0'.if;ht to be better understooH. Fe.v now
st.iive oulrljjht ; but a large numljci', especially of the youne;, starve gr.-'t'i-rJ'y. as has
been abuncjantly shown by iece.it inveslijaiions ; but many more depths are occasioned
in other ways. A carpenter is i I, aad previous hard times have exhausted his resources.
He dies ; wliereas a more generous supply of de'icacies, better iiuising, and more skdful
medical attendance, would Iiave saved his hfe. A seco.id mechanic is so poo. that he feels
that he cannot afford an umbrella. In a severe rain storm to which he is cxpo'-ed the
seeds of consumption are laid. A third is unable to afford new shoes, and wet feet at a
150 Industrial Freedom.
argued about as if they were inanimate objects, but account
must be taken of their variations in desires, capacities^ and
action. It is impossible to argue about labouv as if it were a
commodity, both because the labourer himself is a conscious
beiii^, who may at any tin-e refi^se to ^ct r.'.cording to our con-
clusions, and bee. use the State has an overwhelming interest in
the character of his actions. The purchase; of wealth fulfils
his purpose when he buys his goods ; and the final end of the
goods themselves is to be used. But the purchaser of labour
buys that with which he desires to enter into relations of
a more or less permanent character. His object is to keep the
labour for future use. The object of the labourer, on the con-
trary, is to sell his labour upon such terms that he may be able
to use it afterwards in furtherance of his own purposes. And
by the side of both employer and labourer stands the State,
whose interest is that neither party should be injuriously affected
in his power to perform the duties of citizenship. But if the
bargain is unrestricted, the employer might gain such a control
over the other's labour that he would be able to defeat the
object of the seller by dictating all or most of the uses to which
it might afterwards be put. This is a necessary consequence
of the relationship of employer and employed, so that it is the
duty of the State to watch, lest the terms of the bargain should
be such as to destroy or stunt the moral or political existence
of its actual or unborn citizens.
Professor R. T. Ely suggests a third distinction between
labour and other commodities in " the uncertainty of existence,
which, more than actual difference in possessions, distinguishes
time of feebleness, and insutTicient nourishment, cause his death. The most distinguished
statistician of our day. Dr. Engel, calls the causes of most deaths ' social.' The difficulty
is not to prescribe a remedy, but to apply it. A physician cannot tell a man earning a
dollar a day to take a trip to Egypt for weak lungs. No current fiction is more widely
removed from the truth than the common assertion that working-men and their families
enjoy exceptionally good health. The exact opposite is the truth ; and statistics have
established the fact beyond controversy that labourers are shorter-lived by many years
than those who belong to the wealthier social classes. Dr. Lyman Abbott quotes some
interesting statistics on this subject in a recent article in the Century Magazine."
Preparing the Arena. 151
Pt. II., Ch. vii., \ 5.]
the well-to-do from the poor." The whole passage in which
Mr. Ely criticises the "natural liberty views" of Adam Smith
is worth quoting. {" The Labour Movement in America,"
pp. 97-100.)
" The economic philosophers of the time believed that legal
equality and freedom of contract were the sole conditions
needed to enable the working-classes to secure a share of the
product of national industry sufficient to serve as a basis for
their physical, ethical, and spiritual development. This theory
was based on two fallacies : the first was the assumption of the
natural equality of men. The differences found among men, in
their opinion, were not due to original native qualities, but were
the result of education, legislation, and government
The second fallacy was the assumption that labour was a com-
modity just like other commodities, and the labourer a man
with a commodity for sale just like other men who offer their
wares to the public. It is true that labour is a commodity, for
it is bought and sold, but there are peculiarities about it which
distinguish it from other commodities, and that most radically.
" While labour is a commodity, it is an expenditure of human
force which involves the welfare of a personality. It is a com-
modity which is inseparably bound up with the labourer; and
in this it differs from other commodities. The one who offers
other commodities for sale reserves his own person. The
farmer who parts with a thousand bushels of wheat for money
reserves control of his own actions ; they are not brought in
question at all. Again, the man of property who sells other
commodities has an option. He may part with his wares and
maintain his life from other goods received in exchange, or he
can have recourse to his labour-power. The labourer, however,
has, as a rule, only the service residing in his own person with
wliich to sustain himself and his family. Again, a machine a
locomotive, for example and a working-man resemble each
other in this : they both render services, and the fate of both
depends upon the manner in which these services are extracted.
152 Industrial Freedom.
But there is this radical difference : the machine which yields
its service to man is itself a commodity, and is only a means to
an end, while the labourer who parts with labour is no longer
a commodity in civilised lands, but is an end in himself, for
man is the beginning and termination of all economic life. The
consequence for the great mass of labourers possessed of only
average qualities are as follows, provided there is no interven-
tion of legislation, and provided the working-classes are not or-
ganised : While those who sell other commodities are able to
influence the price by a suitable regulation of production, so as
to bring about a satisfactory relation between supply and de-
mand, the purchaser of labour has it in his own power to
determine the price of this commodity and the other conditions
of sale. There may be exceptions for a time in a new country,
but these are temporary, and often more apparent than real.
Even now in the United States the right of capital to rule is
generally assumed as a matter of course, and when labour
would determine price and conditions of service, it is
called dictation. The reason is that man comes to this world
without reference to supply and demand,^ and the poverty of
the labourer compels him to offer the use of his labour-power
unreservedly and continuously. The purchase of labour gives
control over the labourer, and a far-reaching influence over his
physical, intellectual, social, and ethical existence. The con-
ditions of the labour contract determine the amount of this
rulership. Again, while illness, inability to labour by reason
of accident, or old age and death, do not destroy other com-
modities, or their power to support life, when these misfortunes
overtake the person of the labourer, he loses his power to sell
his only property, the commodity labour, and he can no longer
support himself and those dependent upon him."
1 " There are certain qualifications to what is here said which the limits of
this book will not allow me to ^numerate. It would he far too large a work
for present purposes were every to])ic to be treated exliausiively. I aUays
take it for granted that my reader is possessed of common sense, and will not
raise trivial objections ; also that he is to do some thinking himself.
PflEPARlNG THE ArENA. 153
Pt. II., Ch. vii., 16.)
For these reasons, and for others which will readily suggest
themselves to a reader's mind, it follows that there is a radical
distinction between the ideas which may be applied in the pro-
duction of wealth and those which may be applied in its distri-
bution. Working-men have always insisted by their actions, if
not by words, that this distinction existed, although it
must be confessed that many Free Traders have been slow to
perceive that this contention was no less sound in theory than
it is true in fact. The wages of labour and the price of goods
are not in fact now, nor have they ever been, determined by the
same forces ; nor is it possible to use the processes of economic
reasoning in a discussion of this topic without adopting the
most fanciful assumptions.
6. The ideas which are expressed in the foregoing obser-
vations were only slowly recognised by politicians and eco-
nomists ; but in this respect the politicians led the way.
What is termed the great industrial revolution, consequent
upon the invention of machinery and the use of steam as a
motive power, came upon England with appalling suddenness.
The centres of industry shifted when its methods changed, and
great towns grew up upon the sides of what only ten years pre-
viously had been silent valleys. Population naturally followed
to the new workshops, and, once there, changed every habit of
its ancient life. The system of domestic industry under which
men worked in their own homes, employing a few apprentices
or journeymen, whom they treated as members of the family,
vanished utterly, and almost in a moment, before the institution
of the factory. The consequence was that all the old relation-
ships of industrial life were wrenched asunder, and for the first
time in English history the labourer was left entirely unpro-
tected in making terms with his employer. I'efore this date
he had always been strengthened by some support, whether of
legislation or custom. Even the laws which he was beginning
to find oppressive, sucli as those against apprenticeship or those
154 Industrial Freedom,
which fixed wages, operated not infrequently to his advantage ;
while when laws failed custom intervened. " Custom," as
Mill observed, ** has always been the great protector of the
weak against the strong," In England it had turned the
villeins into copyholders, and to this day it forms the basis of
that benevolent despotism which the best of squires and
parsons exercise in many English parishes. Among the
artisans it had worked principally through the Trade Guilds,
whose customary regulations, harassing as they were beginning
to become, were originally designed to help the labourer to a
better footing, and to prevent unscrupulous employers from
taking an advantage of his weakness. All these safeguards
disappeared at the inauguration of the new industrial era. A
new set of employers grew up, having no high traditions of their
class, and subject to the restraints of no public opinion in their
dealings with workmen. The consequence was that for some
sixty years from 1770 to 1830 the relations between em-
ployers and employed were largely determined by an unre-
stricted competition, with a result so frightful in its cruelty and
horror that the experiment will never be repeated.^ Whatever
1 The story is well known, and w-ould in any case be out of place in the
present treatise. It may be read in the works of Karl Marx, or in the pages of
" Yeast," " Sybil," or "Alton Locke." One phase of it will illustrate the whole,
and may be told in the words used by Mr. Gibbins in his " Industrial History
of England " (pp. 178-9) : "When factories were first built there was a strong
repugnance on the part of parents, who had been accustomed to the old family
life under the domestic system, to send their children into these places. It was,
in fact, considered a disgrace so to do : the epithet of ' factory girl ' was the most
insulting that could be applied to a young woman, and girls who had once been
in a factory could never find employment elsewhere. It was not until the wages
of the workmen had been reduced to a starvation level that they consented to
their children and wives being employed in the mills. But the manufacturers
wanted labour by some means or other, and they got it. They got it from the
workhouses. They sent for parish apprentices from all parts of England, and
pretended to apj^rentice them to the new employments just introduced. The
mill-owners systematically conmiunicated with the overseers of the poor, who
arranged a day for the inspection of pauper children. Those chosen by the
manufacturer were then conveyed by waggons or canal-boats to their destina-
tion, and from that moment were doomed to slavery. Sometimes regular
traffickers would take the place of the manufacturer, and transfer a number of
Preparing the Arena, 155
Pt. II., Ch. vii., 5 6.]
may be the evils of State interference, freedom of contract in
the determination of wages inevitably leads to industrial
anarchy. The working-classes instinctively felt that their only
children to a factory district, and there keep them, generally in some dark
cellar, till they could hand them over to a mill-owner in want of hands, who
would come and examine their height, strength, and bodily capacities, exactly
as did the slave-dealers in the American markets. After that the children were
simply at the mercy of their owners, nominally as apprentices, but in reality as
mere slaves, who got no wages, and whom it was not worth while even to feed
and clothe properly, because they were so cheap, and their places could be so
easily supplied. It was often arranged by the parish authorities, in order to
get rid of imbeciles, that one idiot should be taken by the mill-owner with every
twenty sane children. The fate of these unhappy idiots was even worse than
that of the others. The secret of their final end has never been disclosed, but
we can form some idea of their awful sufferings from the hardships of the other
victims to capitalist greed and cruelty. Their treatment was most inhuman.
The hours of their labour were only limited by exhaustion, after many modes
of torture had been unavailingly applied to force continued work. Children
were often worked sixteen hours a day, by day or by night. Even Sunday was
used as a convenient time to clean the machinery." The author of the
" History of the Factory Movement " writes : "In stench, in heated rooms,
amid the constant whirling of a thousand wheels, little fingers and little feet
were kept in ceaseless action, forced into unnatural activity by blows from the
heavy hands and feet of the merciless over-looker, and the infliction of bodily
pain by instruments of punishment invented by the sharpened ingenuity of in-
satiable selfishness. They were fed upon the coarsest and cheapest food, often
with the same as that served cut to the pigs of their master. They slept by
turns and in relays in filthy beds which were never cool, for one set of children
were sent to sleep in them as soon as the others had gone off to their daily or
nightly toil. There was often no discrimination of sexes, and disease, misery,
and vice grew as in a hotbed of contagion. Some of these miserable beings
tried to run away. To prevent their doing so, those suspected of this tendency
had irons riveted on their ankles with long links reaching up to the hips, and
were compelled to work and sleep in these chains, young women and girls, as
well as boys, suffering this brutal treatment. Many died, and were buried
secretly at night in some desolate spot, lest people should notice the number of
the graves ; and many committed suicide. 'I'he catalogue of cruelty and misery
is too long to recite here ; it may be read in the ' Memoirs of Robert Blincoe,"
himself an apprentice, or in the pages of the Blue-books of the beginning of this
century, in which even the methodical, dry, official language is startled into life
by the misery it has to relate. It is, perhaps, not well for me to say more about
the subject, for one dares not trust oneself to try and set down calmly all that
might be told about this awful page in the history of industrial England. I
need only remark that during this period of unheeded and ghastly suffering in
the mills of our native land the British philanthropist was occupying himself
with agitating for the relief of the very largely imaginary woes of negro slaves
156 Industrial Freedom.
safeguard was Protective legislation. Being forbidden by law
to combine in their own defence, or even to meet for the pur-
pose of discussing grievances,! they were of necessity compelled
to rely upon an outside power. Their demands were supported
by the Tory party, in part from genuine sympathy, and in part
from a feeling of hostility towards the class of manufacturers.
The first ameliorative measure was passed in 1803, for the better
regulation of the labour of children ; and then began that long
series of enactments designed to place the workman in a posi-
tion of equality with his employer, which has been more
characteristic of the legislation of Great Britain than of any
other country, and which, even in Great Britain, is not yet
completed. The Factory Acts, the Mining Acts, the Friendly
Societies and Trades Union Acts, the Education Acts, the
Employers' Liability Act, the Pawnbrokers' Act, the Ground
Game Act, the Agricultural Holdings Act, the Truck Acts,
the Irish Land Act of 1881, and many others, are illustrations
of this movement. All of these were, in the strict sense of the
word, Socialistic measures. They all invoked the intervention
of the State to remedy artificial inequalities, and place the
competitors in the industrial strife more nearly on a footing of
equality. All of these, as has been said, were opposed in the
name of Free Trade, and as an interference with freedom of
in other countries. He, of course, succeeded in raising the usual amount of
sentiment, and perhaps more than the usual amount of money, on behalf of an
inferior and barbaric race, who have repaid him by relapsing into a contented
indolence and a scarcely concealed savagery which have gone far to ruin our
possessions in the West Indies. The spectacle of England buying the freedom
of black slaves by riches drawn from the labour of her white ones affords an
interesting study for the cynical philosopher."
And yet proposals to remedy this state of things by means of legislation
were opposed in the name of Free Trade. No wonder that the policy has a
hard struggle to obtain a favourable consideration at the hands of working
men !
1 This state of the law was first modified in 1824, but workmen were not
finally put upon an equality with employers in this respect until 1876. The first
volume of the new series of "State Trials, "now in course of publication, throws
a most lurid light upon the oppressive character of this class of legislation.
Preparing the Arena. i^i
Pt. II., Ch. vii.,5 6.]
contract ; yet in reality they were an attempt to establish a real
state of freedom, in which the stronger party to the bargain
could not take advantage of the other's weakness. England
has, in consequence, had her reward in being the country of all
others which is most free from the fanatical spirit of revolu-
tionary anarchism.i But this remedial legislation is not ended
I Any one who examines English social legislation will see that it is very far
in advance of Australia in all respects except that of education. As illustrating
the immense distance which England has advanced beyond the United States
in her industrial legislation, it may be mentioned that of the sixteen demands
contained in the platform of the Socialist Labour Party, which is one of the
most radical organisations in the United States, no less than twelve (marked *
in the subjoined list) have been wholly or in part granted by the English Par-
liament. Some of these have been enjoyed by English workmen for many
years. The platform is published in full by Professor Ely, in his " Labour
Movement in America " (pp. 366-70), and is as follows :
* I. The United States shall take possession of the railroads, canals, tele-
graphs, telephones, and all other means of public transportation.
* 2. The municipalities to take possession of the local railroads, of ferries,
and of the supply of Hght to streets and public places.
3. Public lands to be declared inalienable. They shall be leased accord-
ing to fixed principles. Revocation of all grants of lands by the
United States to corporations or individuals the conditions of which
have not been complied with, or which are otherwise illegal,
* 4. The United States to have the exclusive right to issue money.
* 5. Congressional legislation, providing for the scientific management of
forests and waterways, and prohibiting the waste of the natural re-
sources of the country.
6. The United States to have the right of expropriation of running
patents ; new inventions to be free to all, but inventors to be re-
munerated by national rewards.
7. Legal provision that the rent of dwellings shall not exceed a per-
centage of the value of the building, as taxed by the municipality.
8. Inauguration of public works in times of economical depression.
* 9. Progressive income tax and lax on inheritances ; but smaller incomes
to be exempt.
* 10. Compulsory school education of all children under fourteen years of
age ; instruction in all educational institutions to be gratuitous, and
to be made accessible to all by public assistance (furnishing meals,
clothes, books, &c.). All instruction to be under the direction of
the United States, and to be organised on a uniform plan.
II. Repeal of all pauper, tramp, conspiracy, and temperance laws. Un-
abridged right of combination.
* 12 Oftlcial statistics concerning the condition of labour. Prohibition of
158 Industrial Freedom.
yet. So long as there are any who are forced by external cir-
cumstances, in whose ordering they have had no voice, to start
in the struggle for existence handicapped by want of education :
so long as there are others who are weakened in the power of
self-improvement by any alterable condition of society : so long
as the State or public opinion maintains any institution which
directly or indirectly causes to others physical misery or
mental darkness so long it will be the duty of Free Traders
and Protectionists alike to agitate for a policy of action
which may bring us nearer to the day when inaction can be
justified.
7. It would be easy to amplify these observations
on the policy of " Let alone " into a treatise of many
pages,^ but enough has been said to illustrate the ne-
cessity of using the maxim with extreme caution in in-
dustrial matters. For the purposes of the Free Trade
argument, it cannot be too often repeated, if we would
persuade the wage-receiver to support Free Trade, that the
most Socialistic sentiments in favour of an alteration in their
industrial condition are not at variance with the teachings
of P'ree Trade. The experience derived from the practice of
Free Trade is no justification for the denunciation of State
interference in other directions. The unrestricted competition
the employment of children in tlie school age, and the employment
of female labour in occupations detrimental to health or morality.
Prohibition of the convict labour contract system.
* 13. All wages to be paid in cash money. Equalisation by law of women's
wages with those of men where equal service is performed.
* 14. Laws for the protection of life and limbs of working people, and an
efficient employers' liability law.
* 15. Legal incorporation of trades unions.
* 16. Reduction of the hours of labour in proportion to the progress of pro-
duction ; establishment by Act of Congress of a legal work-day of
not more than eight hours for all industrial workers, and correspond-
ing provisions for all agricultural labourers.
1 Montagu's "Limits of Individual Liberty" and Sir James Stephen's
" Liberty, Equahty, and Fraternity," may be referred to in this connection.
Preparing the Arena. 159
Pt. II., Ch. vi!i.,? I.]
of private persons may be an expedient of great value in
furthering the production and exchange of goods, without
thereby becoming a general maxim of public policy. Free
Trade acts within its own province, and within that province,
but no further, it justifies an unrestricted competition. It may
be that Professor Sumner and Mr. Herbert Spencer are correct
in applying the principle to other departments of human
activity. On this question Free Trade offers no guidance in
the formation of a right judgment. Certainly, many Free
Traders, who to all appearance form a majority of the party,
vehemently repudiate the doctrines of Administrative Nihilism ;
while of those who are inclined to adopt it in a more or less
modified form, none need be induced by any Free Trade
leanings to deify the principle of competition and close their
eyes to every instance of its ravages. Nothing in the theory
or practice of Free Trade declares that competition ought to
be the governing influence of social life. A Free Trader would
rather be inclined to the opinion that competition is a force of
nature, like a flood or a gale, which, in Bacon's phrase, " man
must obey, so as to command." But the path of commercial
freedom lies altogether apart from these large questions.
CHAPTER Vni.
PROTECTION AND SOCIALISM.
I. In the discussion of all political arguments, one of two
theories of State action must be either expressed or assumed.
Beh'evers in Laisscz faire will adopt the view that the State is
a mere organisation for police purposes, with no constructive
powers or moral duties. Others, on the contrary among
whom all Protectionists ought to be numbered regard the
i6o Industrial Freedom.
State as an organised expression of the popular will, which is
capable of directing individual citizens to the achievement of
many high aims. They believe that the power of combination
can reach to many things which are not attainable by individual
effort, and that the State is the greatest of all combinations for
the realisation of a complete and harmonious development
both of the individual and the nation. This view of State
action, which admits of many varieties, is in its essence
Socialism.
As we proceed to examine the political arguments by
which Protection is supported, we shall tind that all of them
are really contained in the single contention that under Free
Trade the rich may grow richer, but the poor nmst grow
poorer ! To prevent this, the State must interfere by regu-
lating the nature and restricting the quantity of foreign
exchanges.
What ought to be the attitude of Free Traders towards this
line of argument ?
We have seen in the last chapter that the argument for
Free Trade is independent of either a belief or disbelief in
the general wisdom of a policy of Laissez-faire. The same
arguments can be used to prove its independence of a belief
or disbelief in Socialism. But is it the part of a prudent
controversialist to use them ?
2. If we want to strike at the opinions which really sway
the judgment of Protectionists, we must attack them with
considerations of unquestionable strength. Now, seeing that
no Protectionist can admit that the "police theory" of State
action has any validity, it will be necessary to conduct the
argument against him from another standpoint. Accordingly,
we must meet him once more upon his own ground, and, admit-
ting the correctness of his Socialistic theory, demonstrate by his
own tests that tariff taxes, although they are Socialistic in their
method, do not accomplish the results which Socialists desire.
Many Free Traders of whom the writer is one would
Preparing the Arena. i6i
Pt. II., Ch. viii., \ 2.]
readily and from conviction take this stand ; and, adopting
the view that the State must energetically use its power to
widen the sphere within which each man's will may work with
complete freedom, would be prepared to prove that the influ-
ence of Protection is no less pernicious in its moral than in its
material effects upon the development of a free people. Pro-
fessor Sumner, on the contrary, and a large class of Free Trade
writers, denounce Socialism in any form, and make the Social-
ism of Protection to be the head and front of its offending.
It is a curious instance of the hap-hazard inconsistencies of
most political opinions that many Protectionists indignantly
repudiate any connection between their views and those of the
Socialists. In fact, Socialism generally finds its strongest
enemies among Protected manufacturers. The men who
most detest and fear the spread of Socialist opinions are those
who owe their fortunes to Socialistic voters. Yet sincere
Protectionists who are also sincere opponents of Socialism
must either close their ears to all reasoning about principles or
have very uneasy consciences.
Professor Sumner has pointed out the connection between
these two policies with his usual terse lucidity :
"When I say that Protectionism is Socialism, I mean to classify it,
and bring it not only under the proper heading, but into relation
with its true affinities. Socialism is any device or doctritie i:<hose aim
is to save individuals from any of the difficulties or hardships of the
strugi:;le for existence and the competition of life by the intervention
of ' the State.'' Inasmuch as ' the State ' never is, or can be,
anything but some other people, Socialism is a device for making
some people fight the struggle for existence for others. The
devices always have a doctrine behind them which aims to prove
why this ought to be done.
" The Protected interests demand that they be saved from the
trouble and annoyance of business competition, and that they be
assured profits in their undertakings by ' the State ' : that is, at
the expense of their fellow-citizens. If this is not Socialism, then
there is no such thing. If employers may demand that ' the State '
shall guarantee them profits, why may not the employes deni.ind
that 'the State' shall guarantee them wages? If we are taxed to
L
1 62 Industrial Freedom.
provide profits, M'hy should we not be taxed for public workshops,
for insurance to labourers, or for any other devices which will give
wages, and save the labourer from the annoyances of life and the
risks and hardships of the struggle for existence? the ' we ' who
are to pay changes all the time, and the turn of the Protected
employer to pay will surely come before long. The plan of all
living on each other is capable of great expansion. It is, as yet, far
from being perfected, or carried out completely. The Protectionists
are only educating those who are as yet on the ' paying ' side of it,
but who will certainly use political power to put themselves also on
the ' receiving ' side of it. The argument that ' the State ' must do
something for me because my business does not pay is a very far-
reaching argument. If it is good for pig-iron and woollens, it is
good for all the things to which the Socialists apply it."
3. It would be interesting to hear a Protected manufac-
turer in answer to Professor Sumner's convincing words. His
reasoning, however, does not appeal with the same force to a
large class of Free Traders.
It would unnecessarily interrupt the present argument to
introduce a discussion on the attitude of Free Traders to the
large questions of policy involved in the theory of Socialism.
It will, however, not be out of place to remind those Protec-
tionists who are also Socialists that the Free Traders who re-
fuse to accept the maxim of ^'Laissezfaire'' as a scientific dogma
are pledged to no rejection of a measure because it happens
to be Socialistic. They are not to be scared by a nickname.
Recognising that the Factory Acts, the Poor Law, the
Irish Land Act, and many of the most beneficial measures of
this century, are Socialistic in their essence, they do not shrink
from other applications of the same principle. They do, how-
ever, require to be satisfied on three points before they will
support State action : viz., First that the State is the best
agency for the accomplishment of that which is desired ;
secondly That this object cannot be obtained by private
enterprise ; and thirdly that the result, when obtained, and
when all its effects are taken into account, is worth having on
a balance of advantages and disadvantages.
i
Preparing the Arena. 163
Pt. II., Ch. vlli., ? 3.]
They say, further, that no satisfactory assurance can be
given by Protectionists as to any of these three demands.
It is the subject of the following chapters to inquire whether
this be true.
Note to Chapter VIII.
THE LIMITS OF STATE INTERFERENCE.
This is not the place to elaborate a theory of State interference, but
since Free Traders are accused of being fanatical adherents of that theory,
which would confine the action of the State to keeping order and adminis-
tering affairs, it is well, before mentioning particular cases, to state
summarily, and without reference to other matters, the general principles
on which Free Traders might justify a more active interference by the
State.
The State exists in order to secure liberty : that is to say, to bring about
conditions under which every citizen can, by a conscious exercise of will, at
all times do that which is best. Having provided these conditions, the
function of the State is at an end. Other influences must determine what
is good or bad, and must supply the motive which would make men choose
the former. Philosophy and religion begin their operations upon the
ground which the State has cleared ; but the action of the State should not
interfere with the work of either. It consequently becomes one part of the
business of political science to define the limits within which the State can
act without trenching on the province of moral agencies. It is not
necessary now to show in detail where those limits reach. It is enough for
our present purpose to mark them in rough outline.
Laws exist to prevent men unduly interfering with the individual free-
dom of their fellow-citizens ; or, looked at in another way, a law defines a
sphere within which each man's will may work with complete freedom.
What, then, determines the exact amount of interference with individual
freedom which is necessary for the advantage of Society? To that we
answer "Experience," and a clear sense of what is needed by the
individual, in order that he may attain to a full and harmonious develop-
ment. Whether this clearer sense of what is needed is evolved by
inherited instinct, or whether it is due to the inspired direction of sacred
writers, matters not to the State. All that the State has to do is to see
that such social conditions exist, that Society may satisfy its wants so soon
as it becomes aware of them, and so soon as it is certain that their satis-
faction is necessary to human development. Tliis is the utmost which the
State can do. It must not attempt to decide for Society what moral
influence should guide its judgments ; still less must it interfere witli the
I. 2
164 Industrial Preedom.
free determination by every individual of the guiding principles of his own
life. Consequently, every act of the State is bad which weakens the
motives to self-improvement, either by unnecessarily taking away a duty
which is owed to others (as, for instance, the care of children), or by
preventing the full play of the human instinct towards self-development.
A law which forbids men to think as they like, and to express their
thoughts with a due regard to the public order, is bad, on the same ground
that a law would be bad which weakened individual self-reliance, or which
removed the motives towards thrift and industry.
It would seem, then, that the principles by which any act of State
interference should be tested may be summarised as follows :
1. The State ought in no case to weaken the motives for morality.
2. The State should not do that which might be done as well by private
persons.
3. The State should never act in such a way as to weaken individual
self-reliance.
But where the object to be gained is one of national importance, which
the efforts of individuals cannot accomplish, and when it can be gained
without discouraging any from making efforts on their own behalf, or from
entering into union for a common purpose, then all the conditions are
present which are required to justify State action.
^ai-t III.
THE ECONOMIC ARGUMENT.
CHAPTER I.
FREE TRADE IN ITS EFFECT UPON PRODUCTION.
I. In estimating the economic value of any fiscal policy,
the test to be applied is (as has already been mentioned^) the
effect of the policy in increasing the national productiveness.
The actual application of this test to the circumstances of a
particular country is, no doubt, extremely difficult ; but
its. theoretic value as a test of the economic efiicacy of
rival fiscal policies is, as we have seen, not on that account
impaired.
The material prosperity of a country must, in the long run,
depend upon the capacity of its citizens to produce wealth, so
that whatever enlarges that capacity must, per se, be an
advantage. Some men may take more interest in schemes for
distributing wealth than in schemes for facilitating its produc-
tion;, but no one can say that an increase in the national
productiveness can, of itself, and without the aid of any other
influence, cause any diminution in the material welfare of the
general body of citizens. The increase of wealth may be
accompanied by a displacement of labour and capital from one
industry to another, and such a displacement would probably
cause much undeserved suffering to individuals ; but if the
result of the displacement were that more wealth was produced
than had been produced before, no one could say that tlie
nition as a 7v/iole had become poorer. Possibly, iVc incrensc
' Sec p. 79.
1 66 Industrial Freedom.
of wealth might be accompanied by such grave evils of a
poUtical character that many men might reasonably wish to
keep their country poor. But this is a consideration of politics,
and not of economics, which will be dealt with in its proper
place.
When we come to deal with the political arguments upon
the tariff, arguments will be advanced to show that Free Trade
does not, and cannot, prejudicially affect the distribution of
national wealth ; but that, on the contrary, it assists the
labouring and poorer classes to obtain a fairer share of the
products of their toil by its efficacy in extending the area of
employment, in steadying wages, and in reducing the cost of
living.
At present, however, let us consider Free Trade solely as
an influence upon the production of wealth, and, waiving every
other consideration, follow the single inquiry, " How Free
Trade affects the aggregate of wealth within a country."
2. This is a matter which has already been so over-
laboured by writers on Free Trade, that it is not necessary
in this treatise to do more than indicate the heads of the
argument.
Regarded in its influence on production, Free Trade is
simply an expedient for carrying the piinciple of the division of
employment into international commerce. As it is found in
domestic industries that the largest quantity is produced when
each man confines himself to a particular department, so it can
be shown conclusively that wealth will accumulate most rapidly
in a country which produces those articles in the production of
which it has especial natural advantages, and exchanges these
for the other things it needs. Just as a baker would waste his
time by making his own clothes, so will a nation spend its
labour uselessly liy producing articles at greater cost than it can
buy them from another country. Nature gives gratuitously
to every country advantages peculiar to itself to one it is
The Economic Argument. 167
Pt. III., Ch. ii., \ I.]
coal, to another iron, to another wheat, to another wool ; but,
thanks to Free Exchange, men in every quarter of the globe
can serve themselves of these free gifts.
Free Trade, as has often been remarked, is only another
name for voluntary trade. If, therefore, every man follows
his own interest, he will prefer to trade in whatever calling
returns him the largest profits. Accordingly, if we find
the citizens of any country in which capital and labour are
abundant choosing certain occupations in preference to others,
the reason must be that the occupations which they adopt are
considered likely to return them a larger profit than those
which they avoid. Following out these ideas, we reach the
familiar Free Trade conception of industrial progress, which
is, that as capital accumulates and labourers increase, the
desire for gain is a sufficient motive to secure the devclopmen
of every suitable industry.
CHAPTER II.
PROTECTION AND PRODUCTION.
I. We have next to consider the operation of Protection
upon the production of wealth. If any quantity of labour is
attracted from old and more profitable to new and less profit-
able occupations, it is plain that, unless there should haj^pen to
be a compensating increase in the productiveness of the labourer
which is left in the old pursuits, tlicre must be a decrease in the
national productiveness.
Now, altliough an increase in the productiveness of an
industry may, through an improvement in the process of manu-
flicturc, or through some other agency, occur simultaneously
with the withdrawal of a portion of the labour and capital
previously employed in it, the increase is seldom, if ever.
1 68 Industrial Freedom.
occasioned by such a withdrawal. On the contrary, in most
industries the greater the expenditure of labour and cai)ital,
the greater the result.
The conclusion is thus reached that a withdrawal of capital
and labour from more to less profitable occupations must
occasion a loss of national wealth equivalent to the difference
between the profitableness of the natural and the artificial
industries. Suppose, for example, that the average rate of
profit under the natural conditions of a Free Trade country
where no special inducement is offered to follow one trade
rather than another, be ten per cent., and that an industry which
is not yet established in the country would only return three
per cent. : it is plain that unless these two rates of profit more
nearly approach each other, the industry which returns the
lower rate will be neglected ; and that to attract labour from
an industry which returns ten per cent, into one which only
returns three would be a net loss of seven per cent.
So far, the argument has proceeded upon the assumption
that the capital and labour which are required to establish a
Protected industry must be withdrawn from some other
employment. It remains to consider the supposition that
these may be imported from a foreign country. If this should
happen to any large extent, there will, undoubtedly, be an
increase to the national wealth. Consequently, if Protection is
to be carried out to the greatest advantage, each new industry
that is established must be created and sustained by imported
labour and imported capital. This has been the case in many
industries in the United States, where the huge burden of the
Protective tariff is only borne with such apparent ease on
account of the enormous influx of labour and capital from other
countries. In the cases of Canada and Victoria the influx has
not been so marked; while in all the Australian Colonies those
who most strongly advocate Protection most strongly oppose
assisted immigration. It may, therefore, be taken as a fact that
in most young countries, where tlie annual increase of population
The Economic Argument. 169
Pt. III., Ch. ii., \ I.
is not larger than can be employed in the natural develop-
ment of the country, and where able-bodied persons willing to
work are always in demand, the labour and capital required to
start new industries must be supplied within the community,
and must therefore be withdrawn from those industries which
have grown up naturally and without State aid.
The cases, therefore, in which Protection induces an im-
portation of labour and capital need not materially qualify the
conclusion previously arrived at, that a transference of capital
and labour from an industry which returns a satisfactory profit
to one which would return a less profit, if it were not for the
subsidy given indirectly by a Proteciive tax, must cause an
immediate loss of wealth to the community.
In the most favourable view of the transaction the tax can
only cause a transference of money from the pockets of one
set of citizens into those of another j while what happens in
actual practice is a transference of money from those who
were using it reproductively to those who must use it un-
productively unless they are assisted by a subsidy, together
with a loss of many of the coins during the process of transfer,
owing to the cost of maintaining Custom House officers to
effect the operation. During the process of transfer many of
the coins fall upon the ground, and become visible to every
bystander. In such a case, if the bystander is a Protectionist,
he at once exclaims that the wealth of his country is in-
creasing ; and the more often a display is made of the same
coins the louder become his exclamations !
The experience of Canada offers an instance, which is
cited by Sir T. Farrer, of the effect of a Protective tariff in
developing some industries at the expense of others. In
187S, under Free Trade, Canada exported of Iicr own manu-
factures to the value of ^825,000. In 1S84 she only exported
them to the value of ^700,000 : in spite of the fact that lier
population had increased and the development of her natural
resources had been improved during those six years.
1 7 Industrial Freedom.
2. But the diminution of the productive power of a
country which is occasioned by the transference of capital
and labour from a more to a less profitable occupation is not
the only prejudicial effect which Protection has upon the
aggregate of national wealth.
The essential object of Protection is to draw people into
industries which they have hitherto declined to enter. The
inducement offered is, of course, pecuniary. The patriotic
founder of a new industry is to be protected against the
competition of anyone who lives inside the borders of another
country ; and this protection is to be afforded by means of a
tax upon all imported articles of the same nature with those
which he produces.
The first question which presents itself under these circum-
stances is as to the amount of the duty which it will be
necessary to impose to effect this object. The duty must
clearly be sufficient to enable the manufacturer to sell his
goods at a remunerative price. Now, a remunerative price
must be a price which will give the manufacturer the same
return for his monej', skill, and time as he could obtain by a
similar expenditure in any other occupation which is carried
on within the country. In other words, he must obtain the
average rate of profit {whatever that may be) which rules in
the community, taking into account the usual considerations,
such as risk, agreeableness of occupation, &c., which deter-
mine the rate of profit with which a man will be satisfied.
Suppose, for instance, the ruling rate of profit be ten per cent.,
and that the manufacture of iron would only return one per
cent., no duty on iron would encourage the home manu-
facturers of that article unless it were sufficiently high to give
a reasonable expectation to the manufacturer that he would
obtain a return of ten per cent, upon his outlay.
There must, therefore, be such an expenditure of labour
^vithin the community as will prodixc a fund from which
those who enter the new industries ma)- be recompensed lor
TtiE Economic Argument. 171
Pt. III., Ch. ii., \ 3.]
the loss which they make in quitting the old. This labour is,
economically speaking, as much wasted as if it were employed
in digging holes in the sea-shore and filling them with sand.
Had Protective taxes not attracted capital and labour into
industries which did not pay without State aid, there would
have been no necessity for any expenditure for the purposes of
recompense. The operation of a Protective tax produces,
therefore, a double loss : It not only attracts men from the
industries in which they can produce more, to those in which
they produce less, but it compels those who continue in the
old industries to pay for the support of those who enter the new.
This, however, is not a full catalogue of the economic evils
of Protective taxes.
3. Such taxes cause yet a third loss to the productive
powers of a community, by reason of their effect in decreasing
the fund which is available for the employment of labour.
Any increase in the prices of articles of general consump-
tion soon tells its tale upon the purses of the bulk of a
community. Their power of purchasing becomes restricted,
and the employment which they can give to others is less than
it was. Nothing re-acts more quickly upon the labour market
than the impoverishment of the poorer classes, since this not
only directly reduces the demand for labour, but very speedily
increases the supply. When persons of small means find that
a sovereign only goes as far as fifteen shillings used to go,
they not only very sensibly contract their expenditure, but they
are forced to look about more actively for opportunities to
increase their income. The labourer is thus oppressed by
Protection on all sides. The cost of his living is increased,
and his opportunities of finding employment are diminished.
If he belongs to a Protected trade, he employs a portion of
his time in doing for himself what some one else in anotlier
co'jntry would do for him at a less price. If he is a member
of that larger class wlio cannot b; Protected, lie pays away a
172 Industrial Freedom.
portion of his earnings in support of his Protected brethren ;
while, whatever his position in the community, he has to pay
more for what he wants than if he bought it in the open
market, and has, therefore, less to live upon than he had
before, and less to spend in giving employment to his fellow-
workmen. Yet we are asked to believe that when the citizens
of a State are exposed to these necessitous conditions, and
when all these sources of loss are added together, the country
as a whole will increase in wealth ! Surely a more extravagant
proposition was never submitted for the acceptance of intelli-
gent men. Wealth is the product of labour, which may be
directed by a tax from one channel into another, but which no
tax, however cunningly devised, can call into existence.
If labour seeks one channel in preference to another, the
reason for its choice is, plainly, the desire for greater profit. If
the encouragement of a tariff is required to attract men from
one occupation into another, that is an admission that the
occupation into which it is desired to lead them is not, by
itself, so lucrative as those which are of natural growth. As
Mr. George has expressed it : " If the time has come for the
establishment of an mdustry for which proper natural con-
ditions exist, restrictions upon importations in order to promote
its establishment are needless. If the time has not come,
such restrictions can only divert labour and capital from in-
dustries in which the return is greater to others in which it must
be less, and thus reduce the aggregate production of wealth."
We have thus reached the first step in the economic
argument in favour of Free Trade, and shown that Protection
lessens a nation's power to produce wealth by attracting capital
and labour from the more profitable to the less profitable
occupations, and by taxing the majority of a community in
order to provide a fund for keeping profits and wages in ccriain
industries up to the average rate.
The precise extent of the loss which is thus inflicted will
be a subject for a separate chapter.
The Economic Argument. 173
Pt. III., Ch. iii., \ I.]
CHAPTER III.
FREE TRADE AND PRICES.
I. The hardiest advocate of a restricted commerce has
never had the courage to assert that Free Trade raised prices ;
the charge against a poUcy which permits free exchange has
always been the opposite. This abhorrence of cheapness
appears to be due, in a large degree, to the false idea that a
low level of prices must be associated with a low rate of
wages a misconception of facts, which is among the earliest,
as it is the longest-lived, of economic errors. The true
relation between prices and wages will be the subject of
inquiry when the effect of Free Trade upon the distribution
of wealth comes under review, but such an inquiry is foreign
to the scope of an argument directed only to the working of
a fiscal policy within the field of production.
The exact relation between prices and production is both
intricate and obscure. The economist says, and says un-
answerably, that there can be no such thing as excessive
cheapness, because the cheaper things become, the greater the
number of people who will buy them. The practical man of
business, on the other hand, asserts and brings forward facts
in support of his assertion that falling prices always check
production.
What is the explanation of this difference of opinion, and
what is the truth?
A low level of prices may be due to one or more of three
causes, viz. :
1. To a lessened cost of production.
2. To a decreased power of consumption.
3. To a scarcity of gold.
Each of these causes acting upon prices may affect the
production of wealth in a different way. Low prices, due to a
174 Industrial Freedom.
scarcity of gold, may at first limit trade, and then abnormally
extend it by encouraging inflated credit ; low prices, due to a
decreased power of consumption, give rise to that unhealthy
over-production from which the industrial body is only relieved
by the drastic remedy of a commercial crisis. Low prices,
however, which are due to the lessening of the cost of pro-
duction are a healthy stimulus to the productive power of
the human race.
These differences in the causes of low prices are generally
overlooked by those who raise an outcry against cheapness.
This has been notably the case during the extraordinary
industrial depression which prevailed over all parts of the
civilised world during the six years 1883 to 1888. This
depression was unparalleled in history, both in its extent and
its duration, and it was, moreover, accompanied by a large and
rapid fall in prices. The consequence has been a revival of
the old fallacy that "Low prices inake low wages," and an
onslaught on the Free Trade doctrine that a cheapening of
prices is for the general advantage. The circumstances, how-
ever, of this unprecedented and disastrous period afford no
test for the guidance of voters in choosing between fiscal
policies, and certainly throw no discredit on the teachings of
Free Trade. On the whole, Free Trade countries came best
out of the ordeal, but all suffered terribly.^ The causes were
complicated, and perhaps impossible to trace. One fact,
however, is certain : that all the three causes which have been
mentioned as affecting prices were at work sim.ultaneously,
with the result that in 1886 prices had fallen thirty-six per
cent, below the average rate of 1873,- and that this fall
continued until the middle of 1888, when it received a check.
1 See Reports of Evidence taken before Royal Commission on Depression
of Trade, 1883-6. According to the Washington Labour Bureau, one million
men were out of work in the United States in 1886.
- Sec Journal of Statistical Society, passim, especially the papers read
by Mr. Giffen and Mr. Sauerbeck.
The Economic Argument. 175
Pt. III., Ch. ili., \ 3.]
It would fall outside the scope of this argument to examine
in detail the many causes which have been believed to have
originated or prolonged this great depression. It may, how-
ever, be mentioned that the report of the Washington Labour
Bureau for 1886 classifies the causes assigned for industrial
depressions by witnesses before Congressional Committees of
Inquiry under 180 heads.^ Free Traders will learn with
pleasure that Free Trade was not considered to be the only
cause of industrial evils. Some witnesses attributed them also
to the use of tobacco, others to the neglect of female educa-
tion ; each of which explanations may serve to illustrate the
danger of indulging in generalisations upon the effect of low
prices !
Low prices may be both the cause and the effect of in-
creased production. When the low prices are caused by an
extension of the market, or by a cheapening of the cost of pro-
duction, they give an immediate stimulus to the productive
powers of a community ; but when they are caused by a falling-
off in the demand without a corresponding diminution in the
supply, then they may mark a period both of low wages and
small profits.
3. Free Trade, however, is, as has been pointed out, an
instrument of production, in that it cheapens and steadies the
supply of raw materials, and permits the application of the
principle of division of employment to the transactions of
international commerce. It is, in other words, in itself a form
of a cheapened process of production ; and as it is applicable
to every kind of article, it must, therefore, affect prices in that
particular way which stimulates production. If the distinctions
between the various causes of low prices have been correctly
followed, and if the fact is once admitted that all these causes
have been at work during the last six years, the futility ot
' .S'tv paper by Professor R. M, Smitli, Political Science Quarterly, I.,
p. 444.
176 Industrial Freedom.
the Protectionist alarm lest commodities should be too cheap
in consequence of Free Trade will be at once apparent.
Looking at cheapness simply as an influence upon production,
we can say with certainty that a cheapness of the sort induced
by Free Trade viz., a cheapness which arises from the use
of a wider area of production and a freer interchange of
goods can never be excessive. Whether it ever happens
that a cheapness arising from this cause can (as Protectionists
assert) so diminish employment that higher prices would be
an advantage to the labouring classes, because they would be
accompanied with more work, will be matter of inquiry when we
come to deal with the influence of Protection in reducing wages.
For the present, treating the question merely as one of
production, it must be apparent that a low level of prices,
arising from a cheapening of the processes of manufacture,
stimulates the productive power. The majority of mankind
is still so far beneath the level of its aspirations in its enjoy-
ment of material comforts, and the desires of all men are so
constantly enlarging, that no definable limit can be placed to
the extension of the present demand for the necessaries and
luxuries of life. All that can be said is, that in respect of any
particular article, the actual limit of demand is the price at
which it can be profitably produced ; and that, while every-
thing which tends to lower the price of remunerative pro-
duction increases demand, everything which increases demand
reacts in turn upon prices by causing production upon a
larger scale, and thus economising cost. Or, if tliis is thought
by those who believe in the theory of Protection to be too
abstract and vague, let them arrive at the same conclusion by
asking themselves two simple questions : " Would they think
it an advantage if other countries were to give us everything
we wanted, and took nothing in exchange?" If the reply is
in the affirmative, then let them ask "Whether, if a gift of
everything we want is advantageous, a gii"t of a part is not also
advantageous ?"
The Economic Argument. 177
Pt III., Ch. iii , ? 4]
The difference between a free gift and a reduced price is
only one of degree.
4. Free Trade, besides lowering prices through cheapening
the process of production, also steadies them, and in this
performs a most important function.
The complexity of our present industrial system, and the
universal practice of producing on a large scale for an unknown
market,^ has made it a matter of supreme importance to check
as far as possible wide or sudden fluctuations in prices.
Industrial depressions, whatever be the variety of their causes,
resemble each other in this respect : that during their con-
tinuance the supply of commodities is greater than the effective
demand for them. This may arise from over-production or
under-consumption : that is to say, the supply may be unduly
increased, or the demand may be unduly lessened. Possibly,
as was the case during the last depression, these two things
may happen at the same time. But, whatever the immediate
cause, the result is always the same that enterprise is stopped,
labour is unemployed, stocks accumulate, and goods cannot be
sold at a price which is remunerative. Production, however,
cannot at once cease ; mills cannot be closed, nor skilled
workmen suffered to disperse. The adjustment of the supply
of a commodity to the effective demand for it is always a slow
process. It is therefore a matter of supreme concern to every
producer that he should be able to anticipate with some
1 " How does it happen that when enough of a commodity is produced,
men should still go on producing? . . . The explanation is that in our
present industrial organisation we produce on a large scale for an unknown
market. In old times the shoemaker made a pair of shoes for the man who
ordered them ; now our manufacturers make thousands of dozens in advance
of the demand. If tliey can do this so as to undersell others, they have an
imlimited market ; but if another undersells them, they lose the entire market.
It is the same way in agriculture. The .American farmer ruined the English,
and now the Indian wli-at tlireatens to displace the .Vmerican in the Euro-
pean market." (Professor Richmond Smith, in Political Science Qtiartcrly,
Vol. I., p. 447.)
M
lyS Industrial Freedom.
degree of certainty the probable demand for his particular
class of goods. ^
Now, if prices fluctuate, the equation between supply and
demand becomes more difficult to calculate, because both the
supply of and demand for any commodity are greatly affected
by the steadiness of its price. Men are always more ready to
enter upon new undertakings or to increase their purchases
when they can calculate the cost beforehand with some degree
of confidence and exactitude. Whatever, therefore, steadies
prices must tend to avert commercial depressions, and to
lessen their severity, by enabling a more accurate adjustment
to be made between supply and demand.
Free Trade operates in steadying prices by widening both
the area of production and the area of consumption. It not
only gives a larger supply of raw materials, but a wider market
for the sale of the finished goods.-
1 Of late years the power of production has enormously increased through
the invention of new machinery ; at the same time, the power of consumption
has diminished in consequence of the displacement of labour caused by the
adoption of mechanical processes. Professor Richmond .Smith quotes from
the Report of the National Bureau of Labour for i836 (already referred to)
many striking instances of this.
2 In the days before Free Trade, the price of a quartern loaf in England
was seldom steady for a month together. Every frost and every fall of raiii
might be, and often was, the presage of starvation. The price of a quarter of
wheat often doubled within a year ; while since the adoption of Free Trade
tlie annual variation is between twelve and fifteen shillings. Or, to express the
same fact in another way, the price of the quartern loaf, which in one year
I cached eighteenpence and in another sold for fourpence, has, since Free
Trade, remained almost stationary between fourpence and sevenpence. And
this is not all. While, under Protection, high prices were the rule, under Free
Trade they are exxepiional ; so that in thirty years the average price of wheat
has been reduced twelve shi'lings the quarter. It is difficult for those who have
nt'ver lived in a country wheic pox'crty and want abound to realise the ines imable
boon of cheap food. Rut those who have read the literature of the Chartist
period--such tales, for instance, as Kings!ey's " Yeast" or Disraeli's "Sybil"
know well that in those days the var)ing price of corn continually drove the
working-classes to starvation. Periodic starvation was, in fact, the normal
condition of masses of working-men in England previous to the introduction of
Free Trade ; and if this statement seem exaggerated, the cruellest and most
The Economic Argument. 179
rt. iii.jCh. iii., ?4-]
A wide area of production must tend to steady, as well as
to reduce, the prices of raw material, because it not only-
increases the sources of their supply, but tends to make the
market independent of local disturbances. Suppose, for in-
stance, that New South Wales were dependent for her supply
of iron upon the furnaces of Lithgow : the price of iron might
be doubled in a single day by a strike, a breakage of ma-
chinery, disease among the workmen, or any other accident.
But when iron can be bought from England, Belgium, and
America, the failure of one market would only have a slight
effect upon prices in the others. The wider, therefore, the
area of production, the less the risk to a producer, and the
more constant his supply of raw materials.
Almost every article is, however, the raw material of another
in some stage of its production. Consequently, whatever
steadies the prices of raw materials affects production in all
its forms, by enabling producers to calculate beforehand all
the items of their outlay.
But in order that the supply of a commodity may not be
disproportionate to the demand for it, something more is
needed besides a regulation of the output. The probable
purchasing power of tlie customers must also be capable of
calculation. A producer must not only have an assurance that
there will be no sudden rise in the price of his raw materials,
but he must also be able to estimate the amount he is likely to
sell. In making this estimate, a producer is again assisted by
Free Trade. It is true that under Free Trade his market is
larger, and therefore his calculations will be more complicated ;
but the same security against the ill effects of local disturbances
whicli assisted him in his production will also assist him in his
sales. ^Vars, pestilences, bad harvests, and all the other
torments of producers, cannot have the same effect over a wide
rigid proof of its accuracy is given by the tables of mortality. The returns of
the l^;^ gistrAr-CJciieral sliow an increase in the number of dcalhi, with every
rise i!i the price of bread.
M 2
i8o Industrial Freedom.
area that they would have within the hmits of a single country.
But it has already been remarked, in considering the effect of
Free Trade upon production, that there is always a danger,
under a system of Protection, of over-supplying the local
market. This danger is to a great extent obviated by a policy
of Free Exchange ; because, whatever widens the area of
consumption gives a larger market for the sale of goods. This
consideration explains why Free Trade countries are generally
the last to feel, and the first to recover from, a trade depression.
Their foreign trade affords them a speedier outlet for surplus
stock, and helps the more rapid readjustment between supply
and demand.
But it is not only by widening the areas of production and
consumption that Free Trade is an agency in the prevention of
commercial crises. It also acts in this direction by giving
producers a more accurate knowledge of the wants and the
position of their customers. Trade depressions, as has been
said, are always marked by an accumulation of unsaleable
goods. Sometimes this is owing to a mistake on the part of
the producers, as was the case in 1825, when a cargo of skates
was shipped to the Brazils, and grand pianos and diamond
tiaras were consigned for sale to the South American Indians;^
and in such a case it cannot be denied that the crisis might
have been prevented, or at least alleviated, by greater know-
ledge. Even in cases where tlie error is not quite so gross,
there must always be room for more accurate information.
Can anyone doubt under which policy producers are less likely
to mistake their markets ? whether it will be under a policy
which encourages intercourse with foreigners, or under one
which insists on isolation? It must be iihiin tliat the risk of
producing goods wliicli are not wanted at tlie time is lessened
by everything which brings the inhabitants of distant countries
nearer to one anotlicr. Free Trade, like telegraphs and
1 5tv Martineau's " IIL-tory of t]u- Peace '" for an entertaining- account of
this commercial crisis.
The Economic Argument. i8i
Pt. III., Ch. iv., 5 I.]
railways, tends to keep both producers and consumers better
informed as to each others' needs.
5. But, although Free Trade tends to steady prices, and
therefore to prevent commercial crises, by equalising, dis-
closing, and enlarging markets, it cannot prevent these terrible
disturbances. Fluctuating trade, with all its misery of wasted
efforts, savings squandered, and homes destroyed, is an evil
which lies beyond the range of any tariff. The causes of
commercial crises cannot be removed either by Protection or
Free Trade. Wars, excessive speculation, dishonesty, gambling
in land values to mention only the chief of such causes are
manifestly outside the influence of Customs duties. All that can
be done by any fiscal policy is to lessen the frequency of trade
depressions, and strengthen a community to bear them better.
In this beneficial and remedial work, Free Trade has always
played a most important part.^
CHAPTER IV.
PROTECTION AND PRICES.
I. It was shown in the second chapter of this Part that Pro-
tection diminished the aggregate production of national wealth
in three ways :
I. By causing an artificial and compulsory transfer of
money and labour from profitable to unprofitable
industries.
1 The Report of the Royal Coniniission on tlie Depression of Trade contains
tlie followinsf paragraph : " There is no feature in the situation whicli %ve have
])eeii called upon to examine, so satisfactory as the immense improvement that
lias taken place in the condition of the working-classes during the last twenty-
si\- years. At the present moment (i886) there is a good deal of distress, owing
to till' want of regular work ; but there can be no question that the workman
in this country [(jreat Britain] is, when fully employed, in almost every respect
in a better condition than his competitor in foreign countries."
1 82 Industrial Fkeedo^t.
2. By causing a wasteful expenditure for the purpose of
giving to those who were induced by Protection to
change their employment a rate of profit in their new
occupations equal to that which they might be
making in the old.
3. By increasing the cost of living to consumers, and thus
lessening the amount which, but for Protection,
would have been available for the employment of
labour.
Underlying the argument by which these conclusions were
supported was the unexpressed assumption that Protection
raised prices an assumption which is so obviously contained
within the terms of the propositions submitted about Protection,
that it was not thought necessary to interrupt the argument by
inquiring into its correctness. Those, however, who have lived
in a country where Protectionists arc active, will know that no
proposition about commerce or finance is so plain that there
will not be some persons who dispute it ; and will not be sur-
prised to learn that it is even denied on public platforms and
in the columns of party newspapers that Protection has the
effect of raising prices. A few words, therefore, as to the effect
of Protection on prices will not be out of place in a work
which is intended to be of direct practical assistance to those
who are engaged in the fiscal controversy.
2. Very slight reflection will show that if Protection does
not raise prices it does not effect what is reciuired of it. That
much-regarded personage, the home producer, has complained
that he cannot sell an article of his own make at the low price
at which it can be imported, and the advocate of restricted
commerce has given him, in consequence, a Protective duty. If,
as some Protectionists assert, this duty will not increase
prices, why, we may ask, was it imposed ? If the only object
of the manufacturer who asked for the duty was that he might
sell his goods at a lower rate, Avhy did he not proceed to do
The Economic Argument. 183
Pt. III., Ch. iv., \ 3.]
this without waiting for the imposition of a duty? He might
have been sure that no one would have offered him a higher
price than he himself asked.
Or, to express the same idea in a more general way, the
competition against which Customs duties are designed to
assist the home producer is the competition of low-priced
articles. Now, there cannot for any length of time be two
prices ruling at the same time in the same market for the same
article. Therefore, if certain articles can be bought in the
open market at a price which will not repay the home producer,
no production of these is likely to take place within the country
until their price rises to a height which will repay him. If,
however, the importation of the low-priced articles is stopped,
or if something is added to their price before they are allowed
to be landed, their price may be sufficiently raised to make it
worth the while of somebody wiihin the country to attempt
their production.
But the hypothesis with which the Protectionists start is that
foreign competition keeps prices below the level which native
capitalists regard as satisfactory. If, then, native capitalists do
enter the lists of competition, and if they have been previously
prevented from doing so by the low price of imported goods,
they must sell the goods of their own make at a price which is
higher than the price of the same quality of goods in the open
market. In other words, since the Protectionist assumption is
that home production is checked by the low prices of imported
goods, native home production can only come into existence
(if this assumption be true) when prices rise. This conclusion
so nearly approaches to a truism tliat, did not experience teach
the contrary, one would have pronounced it impossible that
confusion should exist about it even in the minds of those wlio
wish to be confused.
3. In justice, however, to those persons who repeat in an
authoritative way the assurance of Protectionist orators tliat
184 Industrial Freedom.
Protection will not raise prices, two facts should be mentioned
which have given the statement a semblance of truth. These
are the universal fall in prices which has taken place during the
last thirty years, and the fall which often takes place in the
price of a particular article, in consequence of the competition
of Protected manufacturers one with the other.
The fall in prices, which is the marked commercial feature
of the last thirty years, has been due to many causes which it is
not necessary to enumerate here the chief of these being the
wonderful improvement in every process of manufacture and
in the means of transport. This fall, however, has occurred
contemporaneously with the introduction into many countries
of Protective duties, consequent chiefly upon the revival of
militarism as a result of the Franco-Prussian War, and has, of
course, affected most of the Protected articles. Uneducated or
unthinking persons, noticing an article has fallen in price since
Protection was imposed, adopt the familiar fallacy of attributing
this to the Protective duty, whereas in truth the price would
have fallen still lower if the Protective duty had not existed. It
is, for example, constantly asserted in New South Wales that a
duty of sixpence per gallon on kerosene, which was imposed
many years ago for revenue purposes, but which has now
become Protective, has had the result of lowering the price of
kerosene. The price of kerosene has no doubt fallen very
much since the duty was imposed ; but that has been owing to
the immense discoveries of natural oil-wells in America and
Southern Russia, and not in any way to the duty. This is
made apparent at once by the fact that the price of kerosene
at London, New York, or Batoum, after deducting freight and
charge, is less than its price in Sydney by just the amount of
the duty. It is, indeed, impossible that it should be otherwise.
The price of an article of universal consumption, such as
kerosene, is not likely to be determined for the whole world b)-
its price in New South Wales.
The fall of prices in consequence of internal competition is
The Economic Argument. 185
Pt. III., Ch. v., \ 3]
another cause which has tended to obscure the operation upon
prices of Protective duties. It cannot be denied that, although
the immediate effect of Protection must be an increase in
prices, it is possible that the competition of the home pro-
ducers, one with the other, may, after a time, become so fierce,
that prices will fall below their normal level. This, however,
although it is a probable consequence of Protection, is by no
means necessary ; since a ruinous internal competition is
generally checked by the facilities for combination which Protec-
tion offers. In the absence, however, of any combination among
the Protected manufacturers to keep up prices by restricting
their output, a Protective tax must, in the long run, cause
excessive production. The home market, even in a country of
the gigantic size of the United States, is necessarily more limited
than that which is open to a Free Trade country. Industries
which exist under Free Trade prove by the very fact of their
existence their ability to hold their own against the competition
of the world. Industries, on the other hand, which require for
their support the fostering aid of a Protective duty, signify by
this admission their inability to cope with foreign industries
even on their own soil. How, then, can they compete with
them in foreign countries ? If the home manufacturer re-
quires to be Protected against the foreigner when the
foreigner is handicapped by all the costs and charges of trans-
port, how can he hope to undersell the foreigner in a foreign
market when he has himself to bear the cost of freight and
other charges of exportation ? Nowhere is a manufacturer
situated so favourably as in his own market. If, then, under
the most favourable circumstances, he cannot hold his own
against the foreigner, he is not likely to be able to do so
in a foreign market, where the circumstances arc less favour-
able to him and more fiivourable to his rival. If a Protected
manufacturer can sell his goods at a profit in a foreign country,
it is proof jjositive that he wants no Protection in his own. If,
however, he does want Protection in his own market and it
i86 Industrial Freedom.
is on that assumption that the argument is being conducted
then he cannot sell his goods abroad except at a loss; and if he
does sell them abroad, he must make up for his loss by charging
more to the persons who have to pay for his Protection.
4. Seeing, then, that Protection renders no service to an
exporting country, and that no country which requires Pro-
tection can profitably export Protected articles, it follows that
when the home market of a Protected country has been
supplied there is no outlet for the surplus products. The
consequence must be an immediate fall in prices, which pro-
ducers will naturally endeavour to prevent. If no arrange-
ment can be come to for the creation of a pool or trust, a cut-
throat competition ensues. In either case the result is
disastrous. The pool, by annihilating competition within the
country, and being Protected against competition from out-
side, has both the labourer and the consumer at its mercy.
The only limit to its power of raising prices or reducing wages
is the untrustworthiness of its component parts. If high prices
tempt some members to secede from the pool, prices may again
fall; but so long as all the members hold together, a tyrannous
monopoly exists against which resistance is impotent. If no
pool is formed and a war of prices ensues, the workman is the
first to suffer. Since each ^^roducer must undersell his rival,
and since every one has a surplus of goods for sale, no
expedient is spared for cutting down the cost of production ;
and the first item of this cost which is sure to attract attention
is the wages of labour. If the native-born labourer will not
accept a reduction, his place will be supplied by imported
labourers from the most poverty-stricken countries in the Old
World.
This has been the invariable course of Protection in new
countries. At first prices rise, and all goes well in the Pro-
tected trade. The rise of prices soon attracts other capitalists
to take their share of the plunder which the law allows them.
The Economic Argument. 187
Pt. III., Ch. v., \ I.]
In time come over-production and a glutted market. There is
no outlet abroad, for Protection has destroyed the trade with
foreign countries ; yet the goods which are constantly increasin;^
have to be disposed of. Prices are then reduced and wages
are cut down ; strikes occur, and mills are closed ; distress
and famine at last cause outbursts of violence, which attract
public notice and compel the manufacturers to combine
together. A new period of combination is then entered upon,
the end of which no one can foresee; but which in its inception
has riveted the fetters of poverty upon the poor more firmly
than ever, and given to the possessor of wealth wider oppor-
tunities for the tyrannous exercise of power than were ever
dreamt of by despotic rulers.
CHAPTER V.
FREE TRADE AND WAGES.
I. A STATEMENT of the thcory of wages is beset with many
verbal difficulties, but these may be avoided without distorting
facts, if wages are defined as "The labourer's share of that
which is produced." They are that portion of the product
which remains after rent, profits, and taxes have been satisfied.
Consequently, if these factors are constant, the amount of each
man's wage will depend upon the proportion between the
quantity of this remainder and the number of workmen engaged
in the trade.
The theory may be expressed algebraically. Let R be rent,
p the average rate of profit, having regard to all the circum-
stances, such as security, agreeableness of occupation, &c.,
which lead to the choice of one occupation rather than another.
Let P also include cost of materials, interest or capital, wages
of superintendence, wear and tear everything, in fact, which is
i88 Industrial Freedom.
usually provided and allowed for by the capitalist employer.
Let T be taxes ; x the product. The amount divisible in
wages will then be expressed thus : x - (r + p + t). And if Q is
the number of labourers employed in the given occupation,
the share of each labourer will be
x-(r + p + t )
Q
Assuming, as before, that R, p, t remain constant and we
are entitled to make this assumption in an economic argument
the rate of wages depends upon the relative amounts of x
and Q. So that wages may be increased either by increasing
the total product or by diminishing the number of labourers.
Mr. Edward Atkinson, of Boston,^ who has made a special
study of the wages question, has demonstrated by an elaborate
l)rocess of induction from a great variety of authentic illustra-
tions, that the tendency under the existing industrial system is
to raise wages by both these methods: i.e., by increasing x
and lessening Q. This result is due to the marvellous im-
provements which have been effected during the last fifty
years in the means of transport and in mechanical invention.
Mr. David A. Wells, now happily again a senator of the United
States, has pursued this line of investigation to the same
conclusion in his lately published work on " Recent Economic
Changes." All inquiries into the earnings of the working-
class since the inauguration of the industrial era at the
beginning of the present century lead by a series of cumulative
proofs to the conclusion that the tendency of the competitive
system of industry is towards the production of a steadily
1 "The Distribution of Products." G. P. Putnam's Sons, New York,
1885. See also, by the same author, " The Industrial Progress of tlie Nation,"
Putnam's Sons, 1890. Further information on this deeply interesting economic
phenomenon which is the real cause of our recent trade depression and social
movements is to be found in Sir Lyon Playfair's recent volume of collected
addresses, and in Mr. Mongrrdien's pamphlet, "A Neglected Chapter in
Economics,"
The Economic Argument. 189
Pt. III., Ch. v., \ 2.]
increasing quantity of things by means of a steadily decreasing
number of labourers.
Accordingly, if we assume that there is no check to the in-
crease of population (and the possibility of raising wages by
this means need not be considered here), the conclusion is
inevitable that there can be no general rise in the rates of real
wages except by means of an increase in the quantity of things
produced, nor of money wages except by means of a similar
increase, coupled with the maintenance of the relative prices at
which such products can be sold. Does it equally follow that
an increase in the quantity of things produced is an essential
requisite to the opening of new channels of employment, so
that wages may be earned in fresh pursuits by those who have
been displaced from their former occupations ? Experience
and theory alike reply in the affirmative. The accumulation
of capital gives the best known stimulus to the establishment
of new industries ; while every increase in the efficiency of
labour by raising wages and lowering prices creates new ranges
of desire, which must be satisfied by the exertions of new
labourers. Poverty may, for a time, ensue as a consequence
of an invention ; but labour adjusts itself in time to new con-
ditions with a silence and rapidity which bear a striking
testimony to the apparently inexhaustible productivity of
human powers
^ 2. The action of Free Trade on wages becomes now easy
to trace. Free Trade is, as we have seen, a device for in-
creasing the number of things which can be made by a given
quantity of labour through access to the natural advantages of
distant countries. It is plain, therefore, if this be correct, that
l'"rce Trade cannol of itself cause any diminution in wages, and
that it \<, prima facie likely to raise them.
It does not follow, as we have repeatedly conceded, that
the labourer will always get a proper share of every increase in
national productiveness ; but it is impossible to argue from the
IQO INDUSTRIAL FREEDOM.
mere fact of an increase having taken place that wages are
likely to fall. If it should happen that some other factor of
the product gets an undue share of the increase at the expense
of labour, this must arise from causes which are independent
of the economic operation of Free Trade ; because (to put the
case in its simplest form) an increase in the sum to be divided
cannot, per se, lessen the quotient.
It thus becomes necessary to consider whether Free Trade
has any other effect which may influence wages besides that ot
causing an increase in the aggregate of material wealth. Does
it, for instance, unduly raise profits, or rent, or taxes ; or does
it by any means depress the labourer so that he cannot claim
a fair share of the increase ? This is really an inquiry into the
effect of Free Trade upon the distribution of wealth, which
raises political rather than economic considerations.^ There
are, however, two ways in which Free Trade is alleged by Pro-
tectionists to lower the rate of wages, which may properly be
considered in this connection.
It is said, in the first place, that the tendency of commerce
between two countries in which the rates of wages differ is to
depress the higher rate to the level of the lower ; and, secondly,
that wage-earners are less able under Free Trade than under
Protection to prevent the owners of natural monopolies, sucli
as land or mines, from appropriating an undue proportion of
any increase in productiveness.
These arguments are plainly expressions in another form of
arguments, which are well known on the political side of the
fiscal controversy under the titles of the " Pauper Labour " and
tlie " Diversification of Industry " arguments. At present,
however, we are not concerned with these arguments in their
practical applications, but need only consider whether ihcy
have any theoretic value.
1 " Prot'^ction now assumes a new form, and is advocated as a means of
securing to the labourers a larger share in the distribution of wealth." (Prof.
PiUtcn's '' Economic Basis o'" Protection," p. 20.)
The Economic Argument. 191
Pt. III., Ch. v., \ 3.]
3. The notion that the rates of wages in two competing
countries tend to an equality, so that a country of high wages
ought to be protected against the competition of a country of
low wages, depends upon the fallacy that the rate of wages is
the true measure of the cost of production. This confusion of
money wages with labour cost has always been a deeply seated
and frequent cause of error in the economics both of external
and internal trade. In former days it prompted the opposition
to the use of new machines, just as to-day it prompts the oppo-
sition to the labour-saving institution of foreign commerce.
The difference between the competition of machines and that
of cheap foreign labour is only one of degree. That which the
craftsman fears upon the introduction of new machinery is lest
his services should be more costly to his old employer than those
of the machine. That which the home producer fears at the
first rumour of foreign competition is lest his employer should be
able to import the foreign article at a less price than that at
which it can be made by home labour. In each case the fear is
lest the new competitor should be able to do more work at a less
price : in other words, lest it should prove more efficient than
the man who fears its competition. This fear is sometimes
well founded. The hand-loom weavers disappeared as a class
before the competition of the power-loom, and the Coventry
watchmakers have been sorely injured by the competition of
America and Switzerland. But when it is said that the foreign
competition of a cheap-labour country tends to reduce the
wages of a high-waged country, the statement is intended to
have a general application, and not to be limited to the
particular trade which is exposed to competition.
It is a truism of economic experience that no displacement
of labour can take place without causing much unmerited
suffering among labourers during the period that they are seek-
ing new employment ; and it is indisputable that during the
last twenty years whole classes of skilled artisans have sunk into
the reserve army of unskilled labour for no other reason than
192 Industrial pREEDO^r.
that the invention of a new machine has destroyed the market
value of their special skill. But it is equally incontestable that
the wages of workmen generally have risen during this period,
and that the rise has been greatest in those countries, such as
America and England, where the competition of machinery has
been the keenest. It is the same with the competition of cheap
foreign labour. If it is successful, and if it does, as in the
Coventry watch trade, supplant a home industry, the reason
must be that, either in consequence of the low wages of labour
or, more probably, in spite of it it can produce the article which
is the subject of competition at a less cost than this can be pro-
duced at home. To this extent, therefore, foreign competition
is a labour-saving device to all those in the country who may
desire to buy the finished article. The labourer which it
supplants must find another occupation, and is assisted in
doing so by the increased power of saving, which the reduction
in the price of the article in the production of which it was
formerly employed has given to his former customers. Thus,
when the watch trade left Coventry, the trade in bicycles grew
up ; and the rate of wages is higher, and the number of artisans
greater in that city than at any other period in her history. An
extreme instance will test the soundness of these views.
Chemists tell us that honey can be manufactured in a
laboratory which is indistinguishable from the work of bees.
Yet should we on that account, and in order to employ labour,
prohibit the keeping of apiaries in order to establish chemical
works and their attendant industries in every country ? The
suggestion, says a Protectionist, is absurd. Yet, how does he
act differently from this when he deals in the Legislature witli
another article of sweetness namel}', sugar ? Sugar can be
grown in New South Wales by white labour, and it is grown in
Fiji by Kanakas. The white man says and possibly he says
truly that labour enters so largely into the cost of producing
sugar that it is impossible for a New South Welshman to com-
pete against Fiji in its production without the aid of a Protective
The Economic Argument. 193
Pt. III., Ch. v., \ 4.]
tariff. Protectionists accordingly insist that no one in New
South Wales should be allowed to buy a ton of sugar from Fiji
without paying ^5 to the Government for every purchase.
How, then, does this differ from the suggested action against the
competition of the bees ? The result of the competition is in
each case the same namely, that the product is sold at a less
cost. What does it signify to the man who is competed with
whether his competitor be a bee or a black-fellow ?
4. The fallacy of the argument against the competition of
cheap labour lies in confusing the rate of wages with the labour
cost of production.
Now, the rate of wages can only be a measure of the true
cost of labour in those few industries in which the product is
the result of almost unassisted hand-work. In such cases, as
Mr. Atkinson points out, " both the materials worked upon, and
also the product, may bear a very high price, but the work upon
them not being aided by effective machinery, the quantity of
labour will be very large, and the result of the sale may there-
fore leave but a very small sum to be divided among very many
labourers, after the cost of materials has been set aside
For instance, after the pattern is drawn it takes merely manual
dexterity to make Brussels lace. The material which is used
in this branch of industry is fine and costly cotton-thread, which
is converted into lace by hand, without the aid of any machinery
whatever, but merely by the use of two or three simple tools.
The lace-makers of Brussels are among the poorest of the poorer
classes of European operatives. They work at the very lowest
rates of wages, which will barely keep them in existence, but
their product is of very high cost in money. The very best
Lyons silks and German velvets are other examples. They
are made upon hand-looms of the most primitive kind. Beet-
root sugar is another example. Beets require constant hand-
work in weeding. We cannot afford the time or labour for such
work so long as we can exchange wheat raided by michinery
N
194 Industrial Freedom.
for money, and with the money buy our sugar. In all handi-
crafts the quantity of labour is very great, but even at the high
prices which such products bring, the total sum of money re-
covered from the sale leaves but a very low rate of wages to be
divided among those who have performed the work."
Most industries, however, in a country of high industrial
development, are assisted either by natural advantages or
mechanical appliances. Accordingly, in all such cases high
money wages become a necessary consequence of the low
labour cost. In other words, since the labour of each wage-
earner is rendered more efficient, the proportion between the
value of the product and the number of workmen increases,
so that there is both a larger quantity to divide and fewer
labourers to receive. Reverting to the formula used on a
previous page, if the wage of each labourer in a given occupa-
tion be
X (r -f p -f t)
~~ "q
X is increased and q diminished. Low wages thus become
an indication of dear production ; while a high rate of money
wages is a necessary result of a low labour cost. " Low wages
and cheap labour are not synonymous terms ; but," as Mr.
Atkinson further says, at the conclusion of his investigations,
" that labour has, in fact^ proved to be cheapest by which the
largest product for each dollar expended was assured, and that
has been the highest paid labour." ("Distribution of Pro-
ducts," p. 66.)^ Low wages are rarely, if ever, the accompani-
ment of a degree of industrial efficiency.
1 Mr. Atkinbou's concluiions are as follows : First : The rate of wages con-
stitutes no standard even of the money cost of production : which cost must be
made up by adding together the sum of all wages and dividing by the product,
in order to establish a unit of cost in money by way of a unit of measure,
whether by the yard, barrel, or pound.
Second : Low rates of wages are not essential to a low cost of production,
but, on the contrary, usually indicate a high cost of production that is to fay,
a large measure of human labour and a large sum of wages at low rates. Con-
The Economic Argument. 195
Pt. III., Ch. v.,?4.]
It follows, then, from these considerations, that the pauper
labour argument needs to be re-stated. It is not the competi-
tion of a low-waged country that Protectionists need fear ; but
what may become dangerous to particular industries is the com-
petition of a country where production is carried on at high
wages, and consequently at a low labour cost. In the latter
case, individual industries may suffer, as individual industries
have suffered, by the introduction of machines, but the country,
as a whole, gains in wealth. The question thus becomes one
of politics : " Whether, in the interests of the State, this injury to
individuals ought to be prevented?" Later in these pages, when
the political aspect of this argument comes to be discussed, it will
be shown that the alarms at foreign competition are to a great
extent illusory. Individual industries do not, in fact, suffer
from the competition of other countries to such a considerable
extent as to justify a politician in imposing the burdens of
Protection upon other industries. Trade is mutually beneficial,
and nations are dependent one upon the other ; if in the rush
of competition one country should gain an unfair profit for a
versely, high rates of wages may, and commonly do, indicate a low cost of pro-
duction that is to say, a small proportion of human labour and a small
proportionate sum of wages at high rates in a given quantity of product.
Third : Cheap labour, in a true sense, and low rates of wages, are not
synonymous terms, but are usually quite the reverse.
Fourth : An employer is not under the necessity of securing labour at low
rates of wages in order to make cheap goods, but he may, and commonly does,
pay high rates of wages, for the very purpose of assuring the production of
goods at the lowest cost that is, in order to be able to sell them on the lowest
terms, or "cheap," in the popular sense.
The abuse of the word cheap leads to more mischievous fallacies than any
other abuse of language. The cheapest labour is the best-paid labour ; it
is the best-paid labour applied to ir.acliincry that assures the largest product in
ratio to the cajiital invested.
If these proportions can be sustained, it may be submitted that the more the
capitalist increases his wealth and applies it to reproduction, the more the wel-
fare of the labourer is assured. The competition of capital with capital tends
constantly to a decrease in the ratio of the profit of capital to the total produc-
tion, and of necessity tends also to a constant increase in the rate of wages of
tlic labourer, thereby more than coimteracting the tendency of the competition
of labourer with labourer to diminish wages.
196 Industrial Freedom.
time at the expense of another, the evils of attempting to adjust
the balance by the aid of a Protective tax are greater than the
temporary loss. Experience shows that foreign competition,
in the few cases where it is effective, is better met by studying
the laws of nature, and laying to heart the reasons why rivalry
has succeeded, than by looking to the laws of Parliament, and
praying for relief at the expense of others. If Protectionists
were right, and if the tendency of trade between two countries
of unequal rates of wages were to depress the higher rate to the
level of the lower, the rate of wages should vary in all
European countries according to the magnitude of each one's
dealings with the Asiatic or other uncivilised races. That is to
say : wages should be lowest in England of all European
nations, and in New South Wales of the Australian colonies.
The contrary is notoriously the case. So is it equally notorious
that the competition which the American or colonial Protec-
tionists most fear is not the competition of the dark-skinned
races, but the competition of the skilled and high-paid labour of
Great Britain. No instance can be cited by Protectionists of
any country whose rate of wages has been perceptibly affected
by a foreign commerce with a low-waged race. Again, as often
in this controversy, we must ask Protectionists to give us facts
as well as theory.
5. The second argument against Free Trade, as an
influence in raising wages that high wages depend upon a
diversity of industry, which Free Trade discourages will be
best understood by reference to the economic condition of
Ireland.
In th:\t country there were no important manufacturing
industries until very recent times each one, as it came into ex-
istence, having been ruthlessly destroyed by the Protectionist
measures of the British Parliament during the eighteenth century.
Ireland thus became a country of practically one industry. An
Irishman who would live in his own country must make his living
The Economic Argument. 197
Pt. Ill ,Ch. v., ?5.]
out of the land. The consequence has been that rents have
risen at the expense of wages. This process has been checked
of recent years, partly by legislation, and partly by trades unions
and emigration, but chiefly by the creation of new outlets for
industrial activity.
But even now a Protectionist might fairly argue that a
high rate of wages could be created and maintained in
Ireland by a tariff upon imports. The result of this, he would
say, being the creation of new industries, the labourer would
be able to exercise a choice in the selection of his mode of life,
so that the landowners would no longer be enabled to exact
monopoly terms for the use of land.
It is quite conceivable that under these circumstances the
decrease in rent and the increased demand for labour would
more than compensate the wage-receiver for an increased price
of manufactured articles, so that the burden of the tariff would
be entirely borne by the owners of natural monopolies. But
to concede this is not to concede the desirability of imposing
a Protective tariff. As we shall see, there are other ways
besides Protection of establishing a variety of industries. If
Government aid is required at all as would probably be the
case in Ireland in the establishment of a new industry, there
is no method by which it can be given more wastefully, and
with a less effective result, than by means of a tariff, and there
is none which carries greater evils in its train.
This argument, which has some applicability to a country
situated so unhappily as Ireland, requires to be used with great
caution. Some Protectionists, not perceiving its necessary
limitations, extend it to all countries without discrimination.
Their mode of reasoning is as follows :
" Free Trade," they say, " results in an interchange of
these commodities which are the products of relative natural
advantages, due to superiority of soil, climate, or location.
The })opulalion increases, the available quantity of these
198 Industrial Freedom.
diminishes, and the competition to obtain them raises the
profits of their owners. Thus, when population is small,
relatively to the available quantity of natural advantages, the
price of the products of these is low in comparison to the price
of manufactured commodities, as is evidenced by the fact that
in a newly settled country food and raw materials are generally
cheap, and other commodities are dear.
" With every increase in the population of a nation not
increasing [by means of Protection] the variety of its consump-
tion and the uses of its land, less fertile lands and poorer
national resources are brought into use, and the price of food
and raw material is raised. The increase of population, how-
ever, creates a keener competition among the producers of
commodities, and as a result they bear a lower price. Every
further increase in population adds to this contrast between the
value of food and material and that of finished commodities.
" As all natural resources are limited in quantity, the
surplus population cannot find employment upon them, but
must seek work in competition with their fellows who arc
engaged in the manufacture of finished commodities. For
these reasons a change in prices, due to increasing competition
in a Static society, is not nominal. Any decrease of price of
commodities does not result in an advantage to consumers
the advantage is secured by those who profit by the increased
price of food and material. Competition lowers wages and
interest, thus taking from those not exempt from its crushing
power, and at the same time increasing the advantage ot
monopolies to a corresponding degree." ^
These are the words of Professor Patten, the Wharton
Professor of Political Economy in the University of Pennsyl-
vania, and not of ^Mr. Henry George. Thus nearly do the
extremists on either side approach one another,
1 "The Economic Basis of Protection," by Professor Patten, Whartonian
Professor of Political Economy in tlie University of Pennsylvania. Philadol-
pliia : J. B. Lippincott & Co., 1890.
The Economic Argument. 199
Pt. III., Ch. v., \ 5.]
Yet the argument is undoubtedly a sound deduction from
economic postulates. Given a country of limited area and a
rapidly increasing population; given, too, that the population
has no means of escape by emigration, and that the means of
subsistence do not keep pace with the requirements of the
people ; given, too, that there is an effective competition
between all classes the result is an inevitable increase of rent,
at the expense of wages and profits. Since all must have food,
all must be at the mercy of the landowner. But where does
such a country exist ? The economic postulates cannot be
applied literally even to Ireland, where the pressure of popu-
lation upon the land has always been greatest.
The theoretical conclusion has, in fact, always been modified
by practical conditions ; and landowners have never been able
for any lengthened period to extort monopoly prices for the
use of land. Their theoretical power to do so has always been
directly, or indirectly, limited in fact. Sometimes rents have
been fixed by custom or by legislation ; sometimes they have been
forcibly lowered by a combination of tenants or by emigration ;
while the steady improvement in agricultural processes which
has characterised the last three centuries has so largely
increased the efficiency of agricultural labour, that the margin
of profitable cultivation is continuously expanding. These
considerations, however, jjlainly cannot affect the economic
soundness of the argument. All that we have to consider now
is its applicability to the fiscal controversy.
Is it the case that Free Trade assists the owners of natural
monopolies, and aggravates the tendency of rent to absorb
wages and profits ?
Professor Patten boldly answers in the affirmative, relying
on the reasoning already quoted. " A I'rotective policy," he
says, " results not in general high values, but in the high value
of commodities produced entirely by labour and capital, and a
low value of the products of natural monopolies. Free Trade
has the opposite effect. It tends to give a high value to the
20O Industrial Freedom.
products of natural monopolies,^ and increases the competition
of producers of commodities, so that what they produce has a
low value relative to the price of products of natural
monopolies " (p. 38).
But is this so ?
6. A landlord can, no doubt, exact higher rents in a
country of no manufacturing industries than he can where a
variety of occupations attracts his tenants from the land ; but,
on the other hand, he is still more strengthened in his monopoly
if his fellow-citizens are forbidden by law to purchase any of
their food from foreign countries.
Let us, however, assume that Protectionists who use Pro-
fessor Patten's argument are, like List and Hoyt, opposed to
Protective taxes upon food or raw materials. The argument
then depends on the assertion that Protection creates an indus-
trial variety, while Free Trade preserves industrial uniformity.
This is an assertion which will have to be tested both Ly
facts and theory when we come to consider its political
application under the title of the Diversification of Industry.
It is sufficient to point out at present that it rests upon two
unproved assumptions, namely :
I. That a sufficient variety of industry cannot si)ring up
without Protection ; and
1 It is not an unfair introduction of the personal element to ask Mr. Fatten
wliat was the efifect of Protection upon the natural monopoly of nickel, of uhicli
his pious founder, Mr. Wharton, was the owner in the United States. Was
the price of nickel reduced when a tax of fifteen per cent, was placed upon that
metal in 1864? or were not the American people, in fact, compelled, in conse-
tjuence of that duty, to purchase all their nickel from Mr. Wharton, who
owned the only nickel mine in the United States ?
Perhaps Mr. Patten cannot be exix;ctcd to answer these questions plainly,
because he holds liis chair upon the express condition, by the terms of Mr.
Wharton's grant, that he preaches the doctrine of Protection. A strange
notion this of U'niversity teaching that Professors shall not be allowed to
exercise an impartial judgment on the subject of their studies. .And what sort
of scientific investigation of facts or iirinciples can be expected from men wlio
are thus trammelled?
The Economic Argument. 201
Pt. III., Ch. v., \ 7.]
2. That Protection is the best method of creating the
desired variety.
Both of these assumptions will be shown to be unfounded
at a later period in this discussion. It is enough to concede
at present that in pure theory it is conceivable that Free
Trade might depress wages by increasing rent. In practice,
however, this seldom occurs although it has most nearly
happened in the case of Ireland ; and even if it did occur,
Protection is not the true remedy. Rents have a tendency to
increase either under Protection or Free Trade. If, under
peculiar circumstances, they increase more rapidly under Free
Trade than under Protection, the real remedy is not the
temporary check of a high tariff, but the permanent use of a tax
upon land values, which, by means of regular assessments ct
fixed periods, should give to the general body of citizens a
due portion of the State-earned increment.
7. The inquiry which has been conducted in the previous
pages leads to the conclusion that the effect of Free Trade
in raising the rate of wages by improving the efficiency of
labour is not lessened by any other economic operation of
the policy ; except in the rare case where Free Trade acts as
a discouragement of industrial variety, when it may possibly
depress labourers to the profit of landowners. It remains
to consider the effect on wages of a policy of Protection.
Before, however, entering upon this inquiry, some notice
should be taken of the influence of Free Trade in the direction
of steadying wages. Working-men make two demands in
respect of wages that they should be high, and that they
should be steady. It is hard to say which of these require-
ments is of more importance ; but it seems to be admitted that
regular employment at a steady rate tends to greater security
and independence than larger, but uncertain, gains.
Now, Free Trade, as we have seen, exercises a direct
influence in steadying prices ; this necessarily reacts on wages,
because, since real wages consist not so much in money as in
202 Industrial Freedom.
money's worth, whatever steadies the prices of articles in
common use makes it easier to estimate incomes and calculate
expenditure, and thus offers increased opportunities for saving.
Nor is the benefit of steady prices confined to working-
men. Employers also find it an advantage to know before-
hand all the items of their outlay. From being able to make
more certain estimates, they are encouraged to undertake more
business ; and they can undertake this at a lower cost, without
reducing wages, because the risk is lessened. This activity in
business soon reacts upon the wages of the labourer, until it is
shown by yet another instance that Free Trade means Great
Trade, and Great Trade means Prosperity. Moreover, through
this steadying effect on prices, Free Trade proves itself to be a
great security against commercial crises. Fluctuating trade,
with all its misery of wasted efforts, savings squandered, homes
destroyed, is an evil which lies far outside the range of any
fiscal policy. But, although the cause of fluctuating trade is
independent either of Protection or Free Trade, Free Trade
can at least mitigate its evil. Wars, excessive speculation, dis-
honesty, gambling in land these are among the causes of
commercial crises which cannot be affected by Free Trade,
and with regard to which Protection is most certainly as
impotent. But Free Trade does at least remove one source
of danger. It gives a larger area for the production of raw
materials, so that no industry is now dependent upon the
supply of a single country.
Closely connected with this virtue is the effect of Free
Trade in giving a more accurate knowledge of the state of
distant markets. A Free Trade country, which encourages
intercourse with foreigners, is less likely to mistake its markets
than one whose policy is isolation. The danger of producing
goods which are not wanted at the time is plainly lessened by
a closer intercourse with those who are your customers. Free
Trade, like telegraphs and railways, serves to keep producers
and consumers both informed as to each others' needs. Thus,
:V
The Economic Argument. 203
Pt. III., Ch. v.,?7.]
although commercial crises will continue to occur in Free
Trade countries, there is perhaps no risk of their resembling
some of those in earlier times, when, for instance, a cargo of
skates was shipped to the Brazils, and grand pianos lay upon
the beach at Valparaiso for the want of storage -room, and
diamond tiaras were consigned for sale among the savages of
South America ! Moreover, when the crisis comes, the work-
man will be more prepared to meet it in a Free Trade country.
In the first place, owing to the greater accumulation of capital,
employers will be able to keep business going for a longer
time. Secondly, the larger foreign trade will afford a quicker
outlet for the surplus stock, and bring the market sooner to its
normal state ; while, whether the spasm be prolonged or
momentary, the workman's greater power of saving and the
lower price of his domestic necessaries will both relieve the
pressure of the harder times.
This is no imaginary picture. Between 1877 and 18S0,
England suffered from a trade depression as profound as any
in her history. That time is near in all our recollections. It
was the time of reaction from the artificial stimulus which
followed the conclusion of the Franco-German War. It was
also a time of war in Europe, Africa, and Asia. There was
such a famine in Ireland as had not been known since 1846,
and for seven consecutive years the English harvest had
been bad. P^vents like these in former days produced the
Luddite and the Chartist riots. Yet during those three years
in England there was not one single outbreak. There were
splutterings of disorder in France, Germany, and Spain,
while in America the workers in the iron trade the most
Protected industry of that Protected country suffered such
extremities that they broke into actual riot, and occupied the
town of Pittsburg.
But that is not all. Not only was England quiet when
other countries were disordered, but, in spite of her difficulties,
and in spite of the slackness of work during those three years.
204 Industrial Fkeedom.
there was actually no perceptible increase in the number of
paupers. The working-class largely lived upon their savings.
It is hardly possible to offer a more pointed illustration of the
working of a Free Trade poUcy.
Yet all the recent facts of English industrial history point
to the same conclusion. Crime has diminished ; pauperism
has diminished ; the deposits in the savings banks have
increased ; the funds of the friendly societies have increased ;
the consumption of domestic articles in common use, per head
of the population, is nearly three times what it was in 1840;
the rate of mortality has declined, so that on an average a man
lives two years, and a woman three and a half years, longer
than they used.
Where, we may ask again, is it possible to get an accumu-
lation of facts like these to support the contrary conclusion of
Protectionists that Free Trade has injured the working-classes,
depressing wages ?
CHAPTER VI.
PROTECTION AND WAGES.
I. That Free Trade, unless some other and distinct influence
should supervene, cannot lower wages we have already proved.
That Protection must lower them, unless something supervene,
should now be made equally clear.
Protection, as we have seen, must raise prices for a
t'me, until the competition of the home producers has over-
supplied the local market, or else it will fail of its economic
purpose. At any rate, it must be admitted even by the most
i npatient partisan that Protection either will raise prices, or
else it will not. And on that admission we may fairly ask If
it will not raise them, to whom is the advantage? If it will
raise them, who will have to pay the piper ?
The Economic Argument. 205
Pt. III., Ch. vi., \ I.]
The Protectionists' desire to tax the "foreigner" is well
known, and is a laudable weakness that has seduced into the
Restrictionist ranks many of the less clear-headed voters. But
whatever confusion may exist in the minds of those who are
willing to be confused, as to the incidence of Customs duties,^
there can be no means even imagined of shifting on to strange
shoulders the sum which is added by Protective duties to the
price of home-made articles. Every penny of this must fall
upon the purchasers of those articles who are the citizens of
the "Protected country." But if Protection raises prices and
the increase has to be paid by the " Protected " purchasers,
where do these fortunate people get the money from to pay the
higher prices ?
This is the key of the economic attack upon Protection in
regard to its effect on wages.
Assuming, as we have already assumed for the purposes of
an economic argument, that rent, profits, and taxes remain
constant, and remembering that wages are the remainder of
the product after rent, profits, and taxes have been satisfied, so
that the rate of wages depends upon the proportion between
the quantity of the product and the number of labourers who
are employed in its production, the conclusion is irresistible
that if every one has to pay more for what he buys, and if the
num.ber of things produced is not increased, wliile the number
of labourers keeps the same, the rate of wages must fall.
Or the argument may be expressed in another way.
Protection diminishes the efificiency of labour by depriving
it of the assistance of the superior relative advantages which
It is rarely, if ever, the case that a Protective Customs duty can be borne
by the exporting country, because Protected countries are always pressed by an
anxiety to export. A good illustration of the fallacy of the vie a- that Customs
diUics arc paid by the foreign -r is givjn by the case of tlie salt duty in New
Sjath W.ilcj. This is at the rate of 90s. per ton. Now, the price of salt in
bond at Sydney is about 15s. a ton, and salt can be bought at the niine at from
about los. to i2s. a ton. Yet it is gravely asserted that the foreign merchant
who buys salt at los. a ton can afford to pay a duty on it of four times the
cost price !
2d6 Industrial Freedom.
exist in other countries. It compels a man to do for liiniself
what another person is willing to do for him at a cheaper rate,
and so it compels the ex^ion of a greater effort to produce a
given result. In other words, it lessens the quantity of things
produced in the Protected industry by any given number of
workmen working for a given time. The test is price. If ten
workmen, working eight hours under Free Trade, can produce
something which can be exchanged for a ton of foreign com-
modities, and if they cannot produce those commodities by
working for themselves with less than ten hours' labour, any
Protective tax which raised the price of the foreign commodities
so that the workmen can no longer purchase them by eight
hours' work must diminish the efficiency of labour by the
amount of extra exertion which is required to overcome the
new obstacle to the enjoyment of the foreign commodities
which is created by the enhancement of their price.
" But," argue Protectionists, " even if Protection does
weaken the efficiency of labour in one direction, it strengthens
it in many others. Natural advantages are not all-in-all. It is
true that Protection confines the labourer to using those natural
advantages which exist in his own country, and shuts him out
from those which exist elsewhere ; but, by way of compensa-
tion, it makes him a brisker and more capable workman." For
the sake of argument, grant the assertion. The only evidence
of its truth must be a fall in prices. If the home labour has
been made so efficient by means of Protection that it can
dispense with the assistance which Nature has afforded to the
producers of a similar article in other countries, all occasion
for Protection vanishes. The Protection of the article at home
is no longer prevented by the competition of the foreigner.
^ 2. The conclusion is thus reached, that so long as Pro-
tection is required and the evidence of this is the higher
price of the Protected article it cannot raise wages, but must
have a tendency to depress them. If, however, it be true that
The Economic Argument, 207
Pt. III., Ch. vn., \ I.]
Protection develops new industries and so creates an increased
demand for labour, or if it be true that Protection stimulates
new qualities in the labourer which greatly increase his effi-
ciency, then it may be that the effect of Protection upon wages
is not wholly bad. Nothing can be predicated of this with
certainty, because the probability is that if Protection gives
these compensating advantages to labour, there will be an
influx of immigrants to share them, and the rate of wages will
be again depressed by the competition of labourers with each
other. At present, however, we are treating these advantages
as non-existent. It will be our business later in these pages
to inquire into the claim of Protection to be justified upon the
score of encouraging new industries and diversifying the op-
portunities of employment.! At present we are only concerned
with the operation of Protection upon wages, in consequence
of its effect upon the aggregate of material wealth. And here
we are met by two phrases which require a full consideration.
The first of these is, "That high prices make high wages ; "
the second, that "More money makes more work." Both of
these contentions are plainly independent of the Nationalistic
argument in favour of production. They assume the economic
postulates, but deny that the conclusions are unfavourable to
a policy of restriction. They will be considered separately in
the next two chapters.
CHAPTER vn.
DO HIGH PRICKS MAKIi HIGH WAGES?
jj r. We are now outside the citadel of the Restrictionists, and
in the very centre of the battle. The true relation between
prices and wages is the determining issue of the fiscal contro-
versy. Low prices are, to the eye of the Protectionist, the true
1 See, for a further discussion of the effect of Protection upon wages,
Part IV., Chapter V. : " The Pauper Labour Argument."
2o8 Industrial Freedom.
cause of low wages. According to his theory, they prevent
the establishment of new industries, and restrict the develop-
ment of those which are already in existence by compelling
manufacturers to exercise such great economies in production
that the wages of the labourer are reduced to the lowest
possible rate. He proposes, therefore, to raise prices by the
operation of Customs duties. To the argument that this may
press hardly upon slender purses, he has the ready reply that
" it is much more important to the workman to have large wages
than cheap commodities ; that cheapness destroys employment,
because commodities cannot be cheapened without somebody
suffering ; that commodities may be too cheap when they are
below the price at which our people can make them profitably ;
that, in short, we must be careful lest, in our regard for the
interests of consumers, we sacrifice the interests of producers."
Such arguments really rest on the assumption that high prices
make high wages, and low prices make low wages. Is this
assumption true either in fact or theory ?
^ 2. It has been already pointed out that prices may be
raised in two ways : either by increasing the demand for goods
or by diminishing their supply ; and it has been shown that a
rise in prices which results from an increased demand is often
accompanied by an increase in wages.^
But this is not the way in which Protectionists propose to
raise prices. Their plan is to restrict supply. They want to
keep out the goods which are supplied from abroad in order to
compel their fellow-citizens to purchase those which are made
1 "What we want is abundance. We do not say that Free Trade necessarily
brings low prices. It is possible with increased quantities still to advance
prices ; for it is possible that the country may be so prosperous under Free
Trade that whilst you have a greater quantity of anything than you had before,
increased demand, in consequence of increased prosperity, may arise, so that
the demand will be more than the supply, and you may raise the prices on some
articles. In some articles it has been the case. It has been so on wool and on
meat ; and we may not know yet what effect it may have on wheat itself."
Cobden, House of Commons, December 13, 1852.
The Economic Argument, 209
Pt. III., Ch. vii., 5 4.1
at home. What is this but to substitute an artificial scarcity for
a natural abundance ? And what is the whole argument
against the low prices which are caused by the competition of
foreign countries but a repetition of the arguments of those who
fought against the introduction of machinery ?
Free Trade is merely a device for cheapening the process
of production. In its operation it may interfere with certain
kinds of labour, and may possibly destroy some industries ; but
has not the invention of every new machine the same effect in
a greater or less degree ? The power-loom threw thousands of
hand-loom weavers out of work by reducing the price of woven
goods ; but did the wages of weavers fall in consequence, or
did the Luddites gain advantage by breaking their plan of the
machinery ? Yet the Luddites were true Protectionists. They,
too, argued that employment was better than cheapness, and
that the producer ought not to be sacrificed to the consumer ;
and they, too, like their modern representatives, ignored the
interest of any section of the public but their own. Have
times changed in this respect, and can it be that scarcity is now
a greater benefit to labourers than abundance ? Can the limi-
tation of supply raise wages through the agency of prices ?
3. Certainly, the man who makes the assertion that this
can be, starts, as Sir T. Farrer points out, with a strong pre-
sumption against him. He cannot, by " any of the laws which
he proposes add one iota to the productive powers of the
world. He cannot add an idea to the brain of the thinker, a
muscle to the arm of the worker, a fertilising ingredient to the
soil. All his implements are fetters on free action or weapons
of destruction. To suppose that by preventing men from using
their natural powers and satisfying their natural desires you can
increase their capacity for production, and for earning wages by
production, is in the highest degree improbable."
4. Such an assumption is not only improbable it is
o
2IO Industrial Freedom.
contrary to fact. The theory that " high prices make high wages "
is in flat contradiction to all experience. Cobden showed it to
be palpably untrue by every modern instance that was open to
examination. The facts of to-day disprove it to any one who
chooses to investigate them ; and the records of six centuries
have recently borne witness to the same effect. Yet this vain
and baseless theory, evolved out of the selfish imaginings of
interested persons, still continues its delusive hold upon the
minds of many working-men.
Let us test it first by reference to facts. Professor Thorold
Rogers than whom no one can speak with greater authority
recently published an inquiry into the condition of the
English working-classes from the earliest times of which we
have authentic record, under the title of " Six Centuries of
Work and Wages." Nothing is recorded in this work which
has not been taken from contemporary documents, with the
result that all readers of the English language have before
them now a complete and exact account of the movements of
wages and prices during the last six hundred years. Surely, if
the Protectionist theory were true, such an examination as this
would furnish some facts in its support. It furnishes none.
Every piece of testimony is the other way. Wages have not
risen with prices, and they have not fallen when prices became
low, but quite the contrary. Mr. Rogers, summing up the re-
sults of his investigations into the fluctuations of prices and
wages during these six centuries, lays it down as an universal
law that "wages have always increased absolutely /.f.,in their
money amount -and relatively i.e., in their purchasing power
when prices were low."i
1 " Six Centuries of Work and Wages," p. 527. Compare also p. 428 and
the following passage from p. 429: "As, therefore, wages do not rise with
prices, no crime against labour is more injurious than any expedients adopted
on the part of Government which tend to raise prices. Unluckily for them,
many working people have been misled by interested sophistry into believing
that high prices for employers mean good wages for workmen. I do not deny
that if an artificial stimulus is given to some particular industry, the demand
The Economic Argument. 211
Pt. III., Ch. vi;.,?4]
Modern experience tells the same story. " Do you think,"
said Cobden in the House of Commons on February 24th,
1842, "that the fallacy of 1815, which I heard put forth so
boldly last week, that wages rose and fell with the price of
bread, can now prevail in the minds of working-men after the
experience of the last three years ? Has not the price of bread
been higher during that time than for any three consecutive
years for the last twenty years ? And yet trade has suffered a
greater decline in every branch of industry during this period
than in any preceding three years. Still there are hon.
gentlemen on the other side of the House, with the reports of
committees in existence and before them proving all this, pre-
pared to support a Bill which, in their ignorance for I cannot
call it anything else they believe will keep up the price of
labour." Later in the same speech, Mr. Cobden referred to
manufacturing wages : " Have low wages," he said, " ever
proved the prosperity of our manufactures ? In every period
when wages have dropped, it has been found that the manufac-
turing interest dropped also ; and I hope that the manufacturers
will have credit for taking a rather more enlightened view of
their own interests than to conclude that the impoverishment
of the multitude, who are the great consumers of all they pro-
duce, would even tend to promote the prosperity of our manu-
for the produce of which is limited, but continual, and the craftsmen in which
are also limited, such a calling may get enhanced wages for a short time. But
others soon crowd into the calling, and very speedily the thing is made dearer,
and the producer remains no better off, having lost in the interval the knowledge
which competition gives as to the best conditions under which industry can be
exercised. But it is idle to argue that such an artificial stinmlus can be given
to every kind of industry. Were it universal, the country would be debarred
from all intercourse with foreign commerce, and the legislature would raise a
blockade round the ports far more effective than anything which the most
successful belligerent could enforce. If it be partial, it will either affect all con-
sumers or some. If all, it induces a universal scarcity without benefiting any
one, for internal competition is sure to do its work on profits and wages ; if
son\e, it simply narrows the area of consumption, and with even more rapid re-
sults on profits and wages. These elementary principles, which one is almost
ashamed to alle^jc, could be illustrated by a thousand facts."
O 2
212 Industrial Freedom,
facturers. I will tell the House that by deteriorating that
population, of which they ought to be so proud, they will run
the risk of spoiling not merely the animal, but the intellectual
creature ; and that it is not a potato-fed race that will ever lead
the way in arts, arms, or commerce. To have a useful and a
prosperous people, we must take care that they are well fed."
The figures of English agriculture tell the same story.
During the present century the price of corn has fallen from
9SS. to 30s. a quarter, yet the wages of the agricultural labourer,
reckoned in money, are almost a third more than they were ninety
years ago ; while his real wages have increased even more,
owing to the greater cheapness of everything he buys. It
would be wearisome to cite many other instances in contradic-
tion to the unproved assertion of Protectionists that wages
and prices rise and fall together.^ It is for them to bring
forward proofs and illustrations in support of so incredible a
proposition. One further example may, however, be pardoned
on account of its instructive character. The economic condi-
tions of Victoria and New South Wales are as nearly similar as
those of any two countries can be, except that Victoria is a
strictly Protected country, while New South Wales has almost
a Free Trade tariff. Prices of " Protected" articles are higher
in Victoria than those of the same articles in New South Wales.
According to the Protectionist theory, wages in Victoria should
be higher also. Yet, so far as there is a difference in the rates
1 During the first twenty years of the century wheat was, on an average, 98s.
a quarter. The average weekly wages of the agricultural labourer were los.
from 1799 to 1803 ; I2S. from 1804-10 ; 12s. gd. from 1811-14. They then
sank about 17 per cent, from 1814-18, and about 20 per cent, more in 1819-20 ;
bringing them down in the last year of the decade to about 8s., for which year
the mean price of wheat is given by Mr. Tooke at 76s. Sir J. Caird, in his
book on the " Landed Interest,'' states that in 1878, when wheat was 46s., the
agricultural labourer's wages were 15s. a week. In 1886, wheat fell to 30s. a
quarter, but the nominal wages of the labourer were only less by 10 per cent. ,
while, owing tc the fall in prices, his real wages did not alter. The agricultural
labourer was better off during the recent period of low prices of agricultural
products than at any other time in the century. [Summarised from Sir T.
Farrer's address to the Cobden Club, July 30, 1887.]
The Economic Argument. 213
Pt. III., Ch. vii., \ 5.]
of wages in the two colonies, it is in favour of New South
Wales. 1 In short, the Protectionist assertion that wages and
prices rise and fall together cannot bear the test of argument.
It is, indeed, disproved by so many facts, that were it not for
the extraordinary influence of this delusion, we might fairly
decline to discuss it until some instance was brought forward
in its favour. Unfortunately, such is the nature of the contro-
versy between Protection and Free Trade that facts are seldom
accorded their due weight on either side ; but it may be doubted
whether there is any feature in the Protectionist revival more
surprising than that any number of persons at the present day
should believe that wages vary with prices when that cannot be
shown to have happened in any single instance, and when the
records of industrial history point unanimously to the opposite
conclusion. It must remain one of the marvels of human
credulity that persons not deficient in intelligence should give
credence to the bare assertion of interested parties, that " high
prices make high wages," when an unbroken record of experi-
ence proves the contrary.
5. We have hitherto been using the term wages with
reference to the whole community, and not to any particular
trade. This is the sense in which the term is used when
1 I am aware of the controversy which rages on this point between the sup-
porters of the two policies. Comparisons between rates of wages are notoriously-
difficult. It is, liowever, generally admitted that the nominal rates of wages
e.^., those fixed by trades unions are higlier in New South Wales. Victorian"",
however, assert that in their colony work is more regular, and rents are low er.
The latter part of the assertion is undoubtedly true as regards Melbourne,
where the natural features of the country make building easy and cheap, while
in Sydney similar work is necessarily very costly. Moreover, in the older
colony more of the land round the large towns is in the hands of large proprie-
tors, having been acquired by them in early days. Xevertheless, the balance
is in favour of New South Wales, so far as there is any difference between
the two colonies. I have satisfied myself by personal investigation that from
1886 to 1888 the wages paid to bricklayers, miners, and railv\ay servants were
from sixpence to one shilling a day higher in New South Wales than in
Victoiia. (See .Appendix III,)
214 Industrial Freedom,
appeals arc made to the patriotism of consumers to submit to
a rise in prices for the purpose of raising wages. Certainly,
such an appeal is never intended to be understood with refer-
ence only to wages in Protected trades. Even a Protectionist
might shrink from asking a community to tax itself for the
benefit of the workmen in a few industries. Yet it cannot be
denied that a rise in prices, such as Protection must cause, may
for a time raise wages in the particular trade which is Protected.
It does not follow that this will be the necessary result of the
Protective duty ; but if the result of the duty is to shut out
foreign competition, and if the home producers are unable to
meet the demands of the local market, and if the supply of the
particular kind of labour which is required cannot be imme-
diately satisfied, the artificial scarcity which is created by Pro-
tection may cause a temporary rise of wages in one or more of
the Protected trades. This would unquestionably be an
advantage to some classes of wage-earners, but from the very
nature of its origin it cannot be permanent.
The transference of labour from one industry to another is
much more rapid than it used to be ; and there are now few
manufacturing processes which cannot in their simpler stages
be conducted by any person of ordinary intelligence. This
important difference between manufacturing and other pursuits
is often overlooked by the zealous advocates of manufacturers.
An agricultural labourer, a seaman, a clerk, an artisan in any
of the building trades, or a handicraftsman of whatever nature,
has to learn his business by a long apprenticeship. The man
who attends to a machine can almost learn his business in a
week. It is true that the higher processes of manufacture re-
quire both skill and taste, but they only give employment to a
small number compared with the large number of unskilled
"hands " who perform the chief of the work. It follows from
these considerations that any sudden rise of wages in one trade
is likely to attract labourers very rapidly from others ; and that
this attraction will be strongest towards those branches of
The Economic Argument, 215
Pt. III., Ch. vii., \ s.]
employment which require the least skill. The consequence of
men thus crowding from other occupations into the Protected
trades would be that the wages of the less skilled labourers
would soon fall to their former level. Nor are the more skilled
members of the trade likely to enjoy the benefits of their posi-
tion for any great length of time. The smallness of the com-
munities in which Protection is now being tried makes the
competition among skilled labourers even more severe than it
is among the unskilled. Unskilled workmen in young colonies
can always command good wages in any occupation requiring
physical strength. Skilled workmen, on the other hand,
whether under Protection or Free Trade, are seldom so well
off as they are in England. The smallness of the scale upon
which business must be carried on in a small community pre-
vents that sub-division of employment under which a man's
peculiar talents acquire a special value. Wages of 20s., 28s.,
and 4CS. a day, such as Sir Lowthian Bell mentions as the rate
for certain classes of workmen in the ship-building and iron
trades in the north of England, are unknown in Australia ; and
it is no uncommon thing to find among the passengers of the
homeward-bound steamers skilled English artisans, who are re-
turning to England because they cannot make the high wages
that they used to earn, in any part of Australia not even in
Protectionist Victoria. ^
In these colonies manufacturers can only give a limited
employment to any class of labourers, and of those whom they
do employ, only a small number require any special skill or
training. Now, the skilled artisan is just the person who
1 In a paper read before the Industrial Remuneration Conference in 1885
{sec Report, p. 140), Sir Lowtliian Bell, the President of the Iron and Steel
Association, mentions a ship-builder who in one year paid from 8s. gd. to
I2S. io.\d. a day to all his skilled hands. Among tliese were ten who made 25s.
a (lay, and thirty who were paid 20s. a day. They were at work for 313 days
in the year. At the rolling-mills, furnace-men were paid 12s. 8d., and the head
sliearcrs 28s. 3kl. per day. The least experienced of the chief rollers received
17s. 5d., and the best 40s. iid. per day. The average daily receipts of fourteen
men employed at the rolls were 27s. 8d.
2i6 Industrial Freedom.
emigrates most readily, as he has both the means to take this
step and the intelhgence to appreciate its advantage. Conse-
quently, most young countries have a superfluity of skilled
manufacturing labour ; while if there should not be any trade
for which skilled labour was not available at a low price, nothing
would be easier than for the "Protected" manufacturer to im-
port as much as he required. Accordingly, whatever may be
the effect of Protection in raising prices in a particular trade,
the wages in that trade are not likely to rise for any appreciable
length of time. They will be kept down both by the competi-
tion of the home labour market and the facility with which the
manufacturers will be able to import labour from other
countries.
6. There is, however, another consideration which should
not be overlooked in considering the effect of prices upon
wages viz., the difference between "nominal" and "real"
wages. Very slight reflection will show that a rise in the
money value of wages is of small advantage if the purchas-
ing power of money is diminished. If a sovereign under
Protection only goes as far as 15s. under Free Trade, the
workman whose wages are raised from 15s. to i8s. is worse off
by 2S. a week than he used to be. This diminution in real
wages must not be forgotten by those who are attracted
by the prospect of an immediate increase in their money
wages. Prices will not be allowed to rise in one industry
only.i
7. Protection will never be submitted to unless its
anticipated benefits are believed to be shared by all citizens
iThe experience of Protected countries shows that this conclusion of
abstract PoUiical Economy accords with facts. Wages are not higher, either in
the United States or in Victoria, in the protected than in the unprotected
trades. Indeed, in many of the " Protected " trades in the United States
wages have fallen so low that the native Americans have been displaced by
labourers of a lower standard of living.
The Economic Argument, 217
Pt. III., Ch. vii., 5 7.]
alike. Consequently the scheme of the Protectionist is to
protect everything !
Buoyed up by their belief in the ability of Governments
to regulate the price of goods and labour, Protectionists
are ready to apply their nostrum to every form of industry,
and indignantly repudiate the charge of wishing to confer a
favour upon special trades. Have they protected the native
industry of iron-producing? They will admit that by doing
so they have inflicted hardship upon every one who has to
purchase iron, such as machinists, boiler-makers, engineers,
shipbuilders, <Scc., &c. Seeing, then, that they have made iron
scarce and dear, they are willing to go further, and lay a duty
on the importation of every substance made of iron. By this
means, they say, the makers of iron-ware of every sort will be
able to recoup themselves for the higher price of their raw
material by charging higher prices to their ov/n customers.
But here a new injustice would arise if our Protectionists
were not so careful and far-sighted ! The consumers of iron
goods of all sorts the manufacturers and householders who
need boilers, fenders, pots, pans, and iron-ware of every kind
are they to go without Protection ? They are hindered in
their laudable desire to foster native industry by the high
prices they have to pay for their requisites of production.
Let them, says the Protectionist, accordingly obtain a tax to
raise the price of all the articles which they produce ; and if,
directly this complicated business is concluded, there should
crop u[) another lot of patriotic natives eager to have their
industry fostered, let them, too, obtain a tax even as the iron-
ware makers ! So the process continues. Every man who can
produce, or thinks he can produce, an article which is im-
ported, is, under the Protectionist creed, entitled to a duty.
No wonder that the politician who may liave started on his
career with the intention of protecting iron and nothing else,
soon, in a despair of puzzle-headedncss, cries out with iron
producers, iron labourers, iron consumers, and all the deluding
2i8 Industrial Freedom.
and deluded crowd, "Protect not only iron, but coal, cotton,
bread, meat, tobacco, clothing, china ! Protect everybody and
e/erything!" that every one may have the pleasure of robbing
his neighbour to distribute to the poor, that the laying goose
may be destroyed and one golden egg divided !
" If you tax corn," says Sir T. Farrer, " you must tax flour
and everything made of corn ; if you tax sugar, you must tax
biscuits and jams ; if you tax salt, you must tax chemicals ; if
you tax chemicals, you must tax dyed goods ; if you tax
leather, you must tax boots, shoes, gloves, harness, and
gearing; if you tax wool, you must tax yarns and woollen
goods ; if you tax yarns, you must tax cloth and silk ; if you
tax iron or steel, you must tax everything made of iron and
steel -from a ship to an umbrella." Generous indeed as is
the impulse which leads the advocate of a restricted com-
merce in a young country to demand that Protection should
be given equally to every one, it is to be feared that this all-
round system differs only from that which they so boastfully
despise in being more unjust and more impolitic. Could
such a system be carried out in its entirety, it would result in a
rise of nominal prices, which would leave the real rewards of
labour exactly as they were.
8. But the fundamental objection to a system of
all-round Protection is its complete impracticability. The
large majority of persons in any community can never be
Protected, because, as consumers, they outnumber the
producers ; so that Protection weighs upon them with all
its disadvantages, without being able to confer even an
imaginary benefit. All those who are engaged in rendering
services to make life and property secure such as judges,
soldiers, police, and civil servants in all their infinite variety
cannot fail to suffer unless with every rise in prices their
fixed salaries are also raised. Another class which can
receive no benefit is that which is engaged in what Mill calls,
The Economic Argument. 219
Pt. III., Ch. vii., \ 8.]
in the widest sense of the term, "unproductive" labour,
whose duties might be better defined by borrowing from
Bastiat ^^ services itnmatene/s." This class comprises domestic
servants, lawyers, clergy, schoolmasters, authors, artists, and
all kinds of "professional men." Neither does the class of
retail dealers receive from the system anything but injury. If
we use " retail dealers" in its widest sense, to mean all who
are concerned merely with the distribution of wealth, this
class will comprise bankers, brokers, merchants (both whole-
sale and retail), railway servants, seamen, wharf labourers,
carriers, and many others. There is yet a fourth class to
whom Protection brings more hardship than aid, composed of
all whose products are immediately consumed upon the spot,
such as caterers, masons, carpenters, blacksmiths, gardeners,
bakers, butchers, &:c. In short, one may say that all those
whose services or trades are such that they can never fear the
competition of the foreigner are directly injured by a system
of Protection.
Such persons form by far the larger number in every
community. Probably not more than one person out of ten
is engaged in an industry which it is possible to protect.
Thus even all-round Protection turns out to be a favouring of
special trades, although every fresh application of the principle
may make it more difficult to trace its working.
The comparatively narrow sphere within which any Pro-
tective duties can operate leads to an important economic
consequence, by increasing the rapidity with which Protection
affects the labouring classes. Every loss which is inflicted on
the non-Protected portion of a community by a rise in prices
soon recoils upon producers. Increased prices result either
in a less consumption or a diminished power of saving ; and
as a great part of the industrial enterprises of a country are
canied on by the use of small savings, the result follows that
as producers lose the assistance of that capital industry begins
to bnszuish.
220 Industrial Freedom.
9. It is worthy of notice, in conclusion, that the argu-
ment that Protection ought to be supported because by raising
prices it will raise wages is entirely inconsistent with the
argument that Protection ought to be supported because it
will in the long run bring prijces down. No one who has been
actively engaged in a campaign against Protection would feel
surprise at noticing that any two Protectionist arguments were
mutually destructive; but for the benefit of those whose
happier fortune has led them into other paths, it may be
mentioned that the two arguments are never intended to be
addressed to the same audience. The argument that Pro-
tection will raise wa!ges by raising prices is for the exclusive
use of the working-classes ; while the argument that Pro-
tection will lower prices is reserved with equal carefulness for
the voter with a fixed income ! As, however, the working-
classes are the power behind all policies, it is with the
arguments intended for their ears that Free Traders have the
most to do.
In spite, therefore, of the fact that there never has
been, nor can be, a general rise in wages in consequence of
a rise in prices resulting from a diminution of supply, the
idea that the contrary is possible is so deeply rooted in the
minds of many working-men that no excuse is needed for
devoting further time to its consideration. Let us assume,
then, for the sake of argument, that the high prices caused
by Protection can cause an increase of wages : where does the
money come from to pay the increase ? If everybody has to
give more for what he buys, how comes there to be a larger
sum available for wages ? By whose labour is it created ?
These are questions which go to the root of the Protectionist
argument. How far Protectionists succeed in answering them
will be the next inrjuiry.
The Economic Argument. 22 1
Pt. III., Ch. viii., \ I.]
CHAPTER VIII.
DOES MORE WORK MEAN MORE MONEY?
I. If the argument of the last two chapters has been
followed, it will be remembered that the inquiry at present is
into the truth of the assertion that the higher prices caused by
Protection may be beneficial to the working-classes.
At first sight, a man would not appear to be better off for
having to pay a higher price for everything he wished to
purchase ; but the Protectionist explains that the benefit which
is thus conferred is of a twofold nature.
First he says, " High prices mean high wages." With
that theory we have already dealt.
Next he says, " More work means more money." It is
with this portion of the explanation that the argument is now
concerned.
Developed at more length, the Protectionist reply to the
question by which Free Traders hoped to have posed their
adversary namely, " Where does the money come from to
pay the higher prices ? " is of this nature :
" True," it is said, " that Protection raises prices for a time ;
true that it draws labour and capital into industries which they
would not enter if they were left to themselves ; true that high
prices cannot cause an all-round rise in real wages. Never-
theless, the encouragement which a judicious tariff will give to
the starting of new industries, or the development of those which
are already established, must so greatly increase the demand
for labour, that the wage-earning class under Protection, even
in the unprotected industries, will be better able to pay high
l)rices than the same class under Free Trade was able to pay
low prices."
The first remark whicli suggests itself as a criticism upon
this presentation of the Protectionist case is that it is rather an
222 Industrial Freedom.
assertion of fact than an argument. It is merely an expansion
of the stock controversial phrase that " employment is better
than cheapness," of which the underlying assumption is that
Protection gives a wider and more regular employment than is
given by Free Trade.
The first question, therefore, which arises is in reference to
the truth of this assumption: " Is it a fact that a comparison
between countries whose industrial conditions in other
respects are in the main similar, shows that the employment of
the working-classes is more constant in those which have
adopted Protection than in those which have adopted Free
Trade?" This is, plainly, a question of evidence. Yet, how.
many writers or speakers think it necessary to obtain or weigh
the evidence on either side before they hazard an assertion,
one way or the other ?
It is one of the many indications of the empirical character
of most economic opinions that persons of eminence in other
branches of science do not hesitate to generalise upon com-
mercial or industrial phenomena, without even an elementary
knowledge of the facts on which their reasonings rest. A man
who would talk on law or physics with the assurance with
which some lawyers and scientists talk of commercial phe-
nomena, would be at once asked to produce some proof of his
acquaintance with the facts of the subject upon which he was
speaking. Yet men of education and intelligence, who are
accustomed to weigh their words about other matters, will
readily adopt a fixed opinion for or against Free Trade, without
any apparent consciousness that opinions upon such a matter
ought to rest upon accurate acquaintance with the industrial
conditions of the particular country to which they relate, and
require, before they can possess any value, at least a superficial
acquaintance with the course and extent of its foreign
commerce.
Although industrial and commercial phenomena are gener-
ally complex, on account of the variety and changeable
The Economic Argument. 223
Pt. III., Ch. vlii., \ I.]
character of the forces by which they are occasioned, and
although any fiscal policy must be judged by its effect on
industry and commerce, the number of persons who study the
development of industry or the course of commerce, even as
regards one country or during any period of years, is small
indeed, as compared with the number of those who are
prepared to pronounce authoritatively in favour of Protection
or Free Trade.
It is surprising, for instance, how readily people will repeat
the old fallacy that " Employment is better than cheapness,"
without inquiring whether the countries in which a low level
of prices prevails are not precisely those in which after
making allowance for other diversities of industrial conditions,
such as would arise from differences in the amount and
distribution of capital, labour, and available land the employ-
ment of the working-classes is the most regular and the most
profitable. Such neglect in the observation of industrial
facts certainly cannot be due to the difficulty of obtaining
information.
The Reports of the Commission of Enquiry into the State
of Trade in the United States, which was appointed in 1885
by Mr. Secretary McCulloch, collected a mass of authentic
information as to employment and wages in other countries
besides America ; while the late Royal Commission on the
Depression of Trade, of which Lord Iddesleigh was the
Chairman, has compiled an almost complete body of testimony
upon the industrial condition of every part of the civilised
world between the years 1883-6. . The results of these
investigations are supplemented from time to time by Official
Reports published by the Board of Trade in England and by
the Labour Bureau at Washington.
Surely, if there existed anywhere any proof that the best
way to give employment to the working-classes was to cause
an artificial scarcity of the articles they wished to buy, tlicse
officials and commissioners would have discovered it. Yet
224 Industrial Ph^edoM,
nothing is more remarkable than the omission on the part of
Protectionists to adduce even a soUtary instance in support of
their theory that employment is made more regular by the
adoption of Protective duties.
It would be out of place, in a work which is intended chiefly
as a guide to the understanding of principles and their applica-
tion, rather than as a handbook of polemical illustrations, to enter
upon any lengthy statistical investigations in order to compare the
progress or condition of one country with another. The figures
upon which such a comparison must rest change from year to
year, so that it would be impossible to give any demonstration
of the superior condition of the working-classes in a Free
Trade country which would carry conviction to a reader two
or three years hence. All that can be done is to indicate, so
far as an extended range of reading will permit, that from time
to time this demonstration has been made by Free Trade
writers for the dates at which they wrote ; but that, unless the
newspapers and controversialists of his own side have been
singularly oblivious of his work, no Protectionist writer has
even attempted to prove the opposite.
The characteristic, indeed, of Protectionist utterances in
Australia where the controversy rages keenly is a resolute
ignoring of official records as to the condition of Protected
countries. Free Traders are not so unwilling to look at facts.
Their inclination to go for their arguments to men and
markets is as marked as is that of their opponents to lean upon
books and maxims. Dull as statistics must always be, they
are the only evidence by which a fiscal theory can be put to
the test of practice. Who will say that Protectionist orators
and writers are willing students of the figures of trade, wages,
and prices ?
It may be that some believer in Protection is prepared to
bring forward definite evidence in support of his theory that
the best way of giving employment is to cause a scarcity of
commodities. All that Free Traders say, at present, is that
The Economic Argument. 225
Pt. III., Ch. viil., 5 2,]
such evidence is wanting. When it is produced they will be
prepared to consider it. Until it comes it is only by the
courtesy of controversy that they give consideration to the
strjnge theory. They are justified, however, in pointing out,
before they discuss the theory as a theory, and without entering
into details, that the body of testimony is against it. All the
reports which have been already mentioned, together with the
investigations of Mr. Giffen in England and Mr. Atkinson in
the United States, and the evidence which is afforded by other
official documents, show that, other things being equal, there
is, in fact, at least as steady and as large a field of employment
under Free Trade as under Protection. Commercial crises
and interruptions of employment occur at least as frequently
under Protection as they do under Free Trade.
2. Let us, however, for the sake of argument, waive all
objections founded upon want of evidence, and discuss the
theory of the Protectionists that "More work means more
money," upon a priori grounds. The allegation is that "Pro-
tection will give more employment."
Now, that the removal of a Protective duty might, at any
rate for a time, deprive some persons of employment, cannot
seriously be denied ; and by a parity of reasoning it may be
admitted that the imposition of Protective duties may cause
some persons to be employed who were previously idle. But
when Protectionists talk about giving employment, they have
in their mind the general body of workmen. It is not employ-
ment in a particular trade which they profess to consider,
but an increase in the total number of workers, and a more
constant demand for labour in all its branches. The question
accordingly to be considered is, " Whether Protection gives
more regular employment to the body of wage-earners than is
given by Free Trade?"
Let us recall for a moment what has been already sliown
to be the operation of Protection. The admitted object of
p
2 26 Industrial Freedom.
Protectionists, and the admitted effect of Protective duties, is to
cause something to be made in one country which, in a state of
freedom, would be made in anodier. The proposal is, by
means of a duty, to bribe men into making for themselves at a
greater cost, or what is the same thing by a greater expendi-
ture of labour, the things which they had been in the habit
of obtaining at a less cost by a process of exchange. In so far,
then, as Protection increases the price of any article, it is a
device for causing unnecessary labour ; because the price of
most articles of common use which are the articles usually
affected by Protective duties is, under ordinary circumstances,
a measure of their cost of production.
Now, it has been shown in previous chapters of this work
that Protection causes a rise in prices at all events for a time
and that an increase of prices from this cause is not accom-
panied by any general rise in the rate of wages. The effect,
therefore, of Protective duties upon employment is that men
have to work for a longer time before they can earn enough
money to buy what they want. If Protective duties raise the
price of boots by two shillings a pair, every one who wants a
pair of boots must earn two shillings more before he can buy
them. Now, as has been proved in the last chapter, the wages
of workmen in other trades are not raised by a duty upon boots.
He therefore will have to earn the additional two shillings which
the boots will cost him by doing more work than he used to
do previously. In this sense, and in this sense only, does Pro-
tection give more employment to the working-classes they
have to work a longer time before they can earn enough to
purchase what they want. It has remained for Protectionists
to assert that the short cut to general prosperity consists in
compelling men to do for themselves what Nature has done for
them gratuitously in other countries.
The idea that tlie employment which is given by the neces-
sity of supplying the scarcity which is artificially created by
Protective duties is advantageous and profitable to a com-
The Economic Argument. 227
Pt. in., ch. viii., 5 3.]
munity is in the same category with the idea that any one
causing two labourers to be paid instead of one thereby
doubles the amount of remuneration received in wages. The
Protectionist ironmaster, who insists that it will give employ-
ment to the people if he is allowed to make iron at six pounds
a ton, which persons can at present buy for three pounds, is
(without always knowing it himself) in the same position as the
temperance lecturer in the story, who happening himself to be
a manufacturer of bottles always urged his audience to smash
the bottles after they had drunk their ginger-beer !
3. The plain truth is, that the matter of importance to a
community is not the mere giving of employment, but that the
employment which is given shall be profitable. Any number
of men might be employed in digging holes in the seashore
and filling them again with sand, but even a Protectionist
might hesitate to say that this was a mode of employment
that was advantageous to the nation even though all the
money spent in wages should be "kept in the country."
Yet simple and plain as these considerations are so that it
almost seems an insult to good sense to state them they are
not so simple and plain as not to be ignored by those who
carry into practice the doctrines of Protection. Perhaps no
better instance of the fatuity of those who think to benefit
a country by putting unnecessary labour upon its inhabitants
has ever been afforded than that which is offered by the
kerosene industry of New South Wales.
Many years ago a duty of sixpence a gallon was imposed
for revenue purposes on kerosene oil. At that time no
kerosene was produced in New South Wales, but large deposits
of shale have subsequently been discovered. A process was
soon adopted of extracting oil from the shale, and the six-
penny duty has been for some time highly Protective. The
abolition of the duty is, consequently, pressed for by Free
Traders, but strenuously resisted by Protectionists upon the
p 2
228 Industrial Freedom.
ground that its retention affords employment. No Free Trader
can deny that this is the case. The question is, " Whether the
employment is profitable ? " The case stands thus: Since the
duty was imposed, great natural wells of kerosene have been
discovered in America and Southern Russia, and the process of
extracting oil from shale is almost entirely superseded by the
gratuitous operations of Nature. When oil bubbles from the
ground almost as if it were spring-water, one would hardly
think, unless one were acquainted with Protectionists, that
people would be found to urge that it was better to refuse the
gift of Nature and make oil by the old process. Yet so it is in
New South Whales. The oil is flowing from wells in Russia
and America, so that if a man wants oil he has little more to
do than dip a pannikin into the flowing stream. " But," argue
the Protectionists, " what ' employment ' is there in dipping a
pannikin into a stream ? Can we not in New South Whales get
the same oil by the laborious process of squeezing it out of our
own clay ? And shall we not by these means be developing
our natural resources and giving employment to our own
people? Let us then shut out the oil which flows in natural
streams, because Nature gives us that for next to nothing, and
set our men to work at squeezing the oil which we require out
of our own clay." Who can deny that such a policy, which is
literally carried out in New South Wales, will give employment,
and that, if the duty is removed, the employment may cease ?
Let us, however, carry the investigation a little further, and
inquire into the cost to the nation of providing this employ-
ment. The amount of kerosene imported in 1888 realised,
in round numbers, about ^25,000 in duty, and was a little
more than half the amount consumed. The full cost of the
tax, however, can only be calculated by adding to the amount
collected at the Customs House another ^25,000, being six-
])ence a gallon on the total quantity of home-made oil consumed
in the colony. Fifty thousand pounds ! That Avas the amount
which it cost the inhabitants of New South Wales to give
The Economic Argument. 229
Pt. III., Ch. viii.,? 3.]
employment to the persons who were engaged in the year
1888 in extracting kerosene from deposits of shale.
It will hardly be credited by any one who has not had
practical experience of the characteristics of a Protective
system that the number of hands who were so employed in
that year was only 299 ! Fifty thousand pounds to give
employment to 299 persons ! It would manifestly pay the
Government, if the duty were removed from kerosene, to give
_;;^i 0,000 to some speculative individual to build an asylum, in
which every one of these 299 persons might be supplied
gratuitously with food, clothing, and lodging for the rest
of their natural lives. Or if it is essential to the well-
being of the State that these men should be employed,
why not put a sum in the estimates which would give each
of them eight shillings a day to sit still with folded arms, and
do nothing if only by that means they would consent
to the free admission of kerosene oil ? To refuse to accept oil
which is manufactured by Nature in the bowels of the earth,
because to do so would throw out of employment some
three hundred persons who are engaged in manufacturing it by
machinery, is no whit more absurd than it would be for a
settler to refuse to draw his water from a running creek in
order that he might have the employment of digging a well on
its bank.
Yet this kerosene example is by no means an exceptional
instance of the extravagant absurdity of a Protectionist tariff.
The Victorian and American tariffs offer many similar cases, in
which the amount raised by the tariff is altogether dispro-
portionate to the employment which is given ; and in which
a far larger sum is collected by the tax at the Customs House
without taking into account the amount collected from the
consumers by the local manufacturers in the shape of
increased prices than would be required to give the current
wage to each of the workmen whom the tax allows to be
employed, and leave a handsome surplus over.
230 Industrial Freedom.
4. It must be remembered that we are not dealing now with
the argument that Protection is desirable in order to cause a
variety of industries or in order to collect revenue both these
arguments will be dealt with later but only with the argument
that Protection is econojnically sound because it gives employment.
The root fallacy of this argument lies in the assumption
that the persons who are employed in the industries which
the tariff calls into existence would be idle if the tariff were
removed,
A moment's consideration will show that this assumption is
baseless.
The labour which is caused by Protection is unnecessary
labour, because (since the assumption is that, without Protec-
tion, the particular class of work in question would not be done)
the only reason for that labour is that it may produce something
which might be produced by far less labour in another country.
To ask a nation to give more labour to produce for itself what
it might obtain with less labour by a process of exchange is
manifestly to cause an unnecessary expenditure of effort. It is
no doubt true that this must in some industries cause an in-
crease of employment, but the question to be determined is,
Whether this indicates any economic advantages to the com-
munity? It would hardly be contended (to recur to our
former illustration), except by a thoroughly logical Pro-
tectionist, that any one who by bungling workmanship or
by extravagance caused two labourers to be paid instead
of one, thereby doubled the amount of money which he
expended in, directly or indirectly, remunerating labour. It is
undoubtedly true that the necessity of employing two men to
do the work of one does, for the moment, cause an increase in
the amount paid to the labourers in one class of occupation ;
but inasmuch as, by the hypothesis, one-half of this expendi-
ture is wasteful, it lessens, by the extent of its cost, the amount
which the engager of the labour is able to direct to productive
employment.
The Economic Argument. 231,
Pt. Ill ,Ch. viii., 5 4.]
No one, for example, could imagine that it would conduce
to the general prosperity gradually to poison all the wells and
streams in England. Yet such an act might be defended by
every argument advanced in favour of Protection. As thirst
must still be quenched, another means must be adopted of
procuring drink. A new industry that which Protectionists
so much desire will accordingly spring up. Capital will
be directed to the distilling of salt water a great natural re-
source which will now be utilised. All fear of uniformity of oc-
cupation will then have vanished before the constant demand
for builders of all kinds, carters, horse-dealers, railways, tank-
makers, coopers, and fishermen, not to mention the number of
retail water-sellers whose services will also be required. And
in this case the industry will never perish. With every increase
of population more fresh water will be needed, and so a
profitable and permanent employment will have been provided
for the poor !
An extreme instance like this reveals at once the under-
l)ing fallacy of the Protectionist assumptions. Those who
claim that Protection gives more employment than Free Trade
ignore the fact that this employment must be paid for. "You
cannot," said Cobden, "go on for ever feeding a dog with his
own tail."' There must in time come a limit to the power of
one class in a community to live upon another. Since a tax
upon imported commodities cannot of itself create wealth, the
higlier prices which the tax allows must be paid for out of
wealth already in existence. But if everybody has to pay
more for the things he wants, the power of a community to
save is necessarily lessened. Now, money is not, as a rule,
hoarded. Men invest their savings either directly in pro-
ductive enterprises or by depositing them in banks and
kindred institutions. Every penny which is invested employs
labour. Accordingly, whatever diminishes savings must di-
minish ihc power of employing labour. This is precisely the
(jpcralion of Protection. IJy taking more from people in th.e
232 Industrial Freedom.
form of increased prices, it leaves them less to spend in the
form of invested savings. Protectionists see the labour which
the tariff employs, but they omit to notice the labour which
the tariff causes to be idle.
The decline in the export of Canadian manufactured pro-
duce, from ^825,000 in 1878, which was the last year of Free
Trade, to ^^7 00, 000 in 1884, which has already been referred
to, offers a good illustration of the double influence of a Pro-
tective tariff. The Canadian Protectionists who exult over
the increase in the number of hands employed in a few
weakly manufactures never speak of those who used to be
employed in the produce of articles of export, and wlio
lost their occupation on the introduction of Protection. It
may be a good thing to be occupied in working for the home
market, but it does not follow, without any evidence,
that the home market will give more employment than
the export trade. Any increase in the total of employment
can only arise from an increase in the total of productiveness,
which Protectionists have yet to prove can ever be the conse-
quence of a restricted trade.
The argument thus comes round to the point from which
it started. Other things being equal, employment will be
greatest and most constant in the country where there is the
most wealth. To cause a waste of wealth and an unnecessary
expenditure of labour in particular directions cannot increase
the aggregate number of men who arc employed unless it at
the same time reduces their wages. Once let it be recognised
that Protection causes waste, and the al)surdity of thinking
that the working-classes are better off because wealth is wasted
and labour is employed uselessly will be at once perceived.
Protection can divert industry from one channel into another,
but it can do no more. Py tlic whole amount of labour which
it causes to be employed needlessly does it lessen the pro-
ductive employment of the rest of the working-classes.
The same argument mav be staled in another wav. Since
The Economic Argument, 233
Pt. III., Ch. viii.,?5.]
the aggregate wealth of a community is not increased because
a change in the character of goods demanded alters the
direction of capital, any apparent gain to one class of labourer
must be a loss to others. The whole amount payable in wages
can only be increased when the increased demand for those
articles which are afifected by the tariff is greater than the
diminished demand for others. But to assent to this proposi-
tion is equivalent to an admission that employment can only
be increased by an increase in the aggregate of wealth and
that, as has been proved, is not a result of Protection.
5. It must, of course, be borne in mind that the argu-
ment of the preceding pages has been entirely economic : that
is to say, it has proceeded on the assumption of a free move-
ment of capital and labour, which is the postulate of all
economic reasoning. There may, however, be circumstances
in which this postulate cannot be conceded, and in such a case
the conclusions must be qualified. What the full extent of the
qualification must be, and what are the circumstances under
which it must be made, are the proper subjects of the concluding
portion of this work. All that is relevant to the present
inquiry is a reminder that every abstract argument in the field
of politics must be subject to practical limitations. No
attempt has been made, up to the present point in the argu-
ment, to indicate the nature of the special limitations which,
either rightly or wrongly, are sometimes thought to be required
upon the economic argument against Protection ; but an en-
deavour has been made by a variety of methods to enforce
the homely truth tliat waste cannot make wealth, and the
diflicully of the argument has been entirely caused by the
simplicity of the conclusion. Even, however, if we assume
that tliere may be (-ircumstances under which, in a country of
large but undeveloped natural resources which has at the same
time a considerable quantity both of its labour and its capital
unemployed, even a I'roteclive ta.\ may be one means of
2 34 Industrial Freedom.
directing industry to a permanent and profitable channel, still
the inquiry must be made whether such a tax would be the best
means of effecting this result, or whether the temporary
difificulty might not be more effectively dealt with by other
means, such as the gift of a bonus or the placing of Govern-
ment contracts with local producers at non-competitive prices.
It is plain, also, that such a qualification of the conclusions of
abstract reasoning, even were it practically justified, would in
no way affect the validity of the previous reasoning which has
been directed against those who maintain two consecutive
propositions ist. That without Protection prices must be
unremunerative to the producer ; 2nd. That with Protection
the consumer will be better off, in spite of high prices,
because he will obtain more constant and profitable em-
ployment. In order to probe these assertions, the questions
have been put in a variety of forms. At what will the
employment be, and who will pay for it?" And the old
conclusion has been reached : that men cannot be employed
except by the proceeds of labour. From which it follows
that whatever diminishes the proceeds of labour either
by lessening its efficiency or imposing new and artificial
obstacles in its way must diminish employment. That this
is the result of Protection cannot be denied by any one who
believes that where labour is free and capital abundant, men
will naturally follow the most profitable occupations. If Pro-
tective taxes are required to establish industries which cannot
grow up naturally, that fact is conclusive evidence that the
return of the Protected industries is less than that of those
which are already in existence. Protection, by holding out the
bribe of high prices, may draw labour from one channel into
another ; but by every penny which it takes from the consumer
in the form of higher prices, by so much does it lessen the
employment of those workmen who are not protected.
^Vhethcr or not it is a good thing that one class of
woikrr.cn sho i!d live upon tlie con'ributions of another may
The Economic Argument. 235
Pt. III., Ch. viii., \ 5.]
be a fair subject for argument. All that Free Traders ask is
that the recipients of public charity should acknowledge their
obligation. Let it be fairly understood that when a Pro-
tectionist manufacturer asks for taxes in order to give employ-
ment, he is really asking the rest of the community to pay for
the support of himself and his workmen ; and we may be sure
that it will become a matter for most critical consideration as
to whether or not the case is a deserving one for public charity.
Our present cause of complaint is that Protectionists have not
the courage to plunder us openly. They take sixpence here
and a penny there from every citizen who buys their goods,
but instead of collecting it from him in a fair and open
manner every time he makes a purchase, they disguise their
operations by increasing prices. No one will deny that in
taking this course the restrictionists are wise in their genera-
tion. For what length of time would a law remain upon the
statute-book of a democratic country which should empower a
constable to detain every man or woman as one left a shop,
and then and there, for every pound's worth of goods which
he or she had bought, to claim five shillings for the support of
certain manufacturers? Yet a 25 per cent, duty takes more
than 5s. in the ^ from every purchaser of the Protected
article for all the time that a duty of that amount is required
in order to equalise the prices of home-made and imported
goods. The only difference between taking the five shillings
by means of a policeman as one leaves the shop and taking
it over the counter in the form of an increased price, is that
the former method is honest and open, while the latter is
fraudulent and secret.
Track the Protectionist argument from point to point, and
it must end in the admission that under Protection one class
will live upon another. Let it assume what disguise it ma\-,
I'rotection, if it is effective, can never be anything more than
spoliation under the forms of law. Every Protective tax, by
whatever extent it operates to the exclusion of imported goods.
236 Industrial Freedom,
is a licence to one class of the community to plunder another
under the pretence of charity. Hard as these words are, there
are times when the use of plain words is necessary.
Such a time has always arrived when benevolent but
heedless men are moved by the sight of sufferings to coun-
tenance quack remedies. Such is the present situation of
the fiscal controversy. The ravages of competition have been
great, and the intelligence to hear the cry of distress is
growing keener. What more easy and more satisfying to lazy
emotionability than to denounce competition in all its forms,
and to urge that a beginning should be made with the com-
petition of foreign nations ? If only the cure were so easy !
Knowledge, however, and experience teach the contrary ; and
in the meantime, to those who despise knowledge in political
affairs, and who have not the strength of character to possess
their souls in patience, we may fairly say, as plainly as we can,
" Not only will your policy of commercial restriction fail to
remedy the evils of which you complain, but it is in every
aspect a disgraceful policy, because it turns your workmen
into beggars for public charity, and your manufacturers into
thieves." Great indeed should be the advantages which are
to compensate for evils such as these !
fart X.
THE POLITICAL ARGUMENT.
CHAPTER I.
THE ARGUMENTS CLASSIFIED.
I. All that can be said in favour of Protection on
political grounds may be reduced, on analysis, under one of
four heads, which may be conveniently designated by the
names which the arguments bear in popular controversy.
These are :
1. The Infant Industry Argument.
2. The Variety of Industry Argument.
3. The Home Market Argument.
4. The Pauper Labour Argument.
2. It is well pointed out by Professor Taussig, in his
"Tariff History of the United States," that these arguments
have a certain historical connection. The whole passage
referred to is so instructive, and the work from which it is
taken so little known to Australian and English readers, that
no further excuse is needed for quoting it at length :
" Tlie system of Protective legislation began in 1816,
and was maintained till towards the end of the decade 1830-40.
Tlie Compromise Act of 1S33 gradually undermined it. By
1S42 duties reached a lower point than that from which they
had started in 18 16. During this whole period the argument
for Protection to young industries had been essentially the
mainstay of the advocates of Protection, and the eventual
cheapness of the goods was the chief advantage which they
proposed to obtain. It goes without saying that this was
238 Industrial Freedom.
not the only argument used, and that it was often expressed
loosely in connection with other arguments. One does not
find in the popular discussions of fifty years ago, more than in
those of the present, precision of thought or expression. The
'home market' argument, which, though essentially distinct
from that of young industries, naturally suggests itself in con-
nection with the latter, was much urged during the period we
are considering. The events of the war of 1812 had vividly
impressed on the minds of the people the possible incon-
venience, in case of war, of depending on foreign trade for the
supply of articles of common use ; this point also was much
urged by the Protectionists. Similarly the want of reciprocity,
and the possibility of securing, by retaliation, a relaxation of
the restrictive legislation of foreign countries, were often men-
tioned. But any one who is familiar with the Protective
literature of that day as illustrated, for instance, in the
columns of Ni/es's Register cannot fail to note the
prominent place held by the young-industries argument. The
form in which it most commonly appears is in the assertion
that Protection normally causes the prices of the Protected
articles to fall,i an assertion which was supposed, then as now,
to be sufificiently supported by the general tendency towards a
fall in the price of manufactured articles, consequent on the
great improvement in the methods of producing such articles.
" Shortly after 1832, the movement in favour of Protection,
which had had full sway in the Northern States since 1820,
began to lose strength. The young-industries argument at the
same time began to be less steadily pressed. About 1840 the
Protective controversy took a new turn. It seems to have
been felt by this time that manufactures had ceased to be
1 See, for instance, the temperate report of J. Q. Adams, in 1832, in which
this is discussed as tlie chief argument of the Protectionists. Adams, though
himself a Protectionist, refutes it, and bases his faith in Protection chiefly on
the loss and inconvenience suffered through the interruption of foreign trade
in time of war. The report is in " Reports of Committees, 22nd Congress,
1st Session, vol. v., No, 481,"
The Political Argument. ^39
Pt. IV., Ch. i., \ r.]
young industries, and that the argument for their Protection as
such was no longer conclusive. Another position was taken.
The argument was advanced that American labour should be pro-
tected from the competition of less highly paid foreign labour.
The labour argument had hardly been heard in the period
which has been treated in the preceding pages. Indeed, the
difference between the rate of wages in the United States and
in Europe, had furnished, during the early period, an argument
for the Free Traders, and not for the Protectionists. The Free
Traders were then accustomed to point to the higher wages of
labour in the United States as an insuperable obstacle to the
successful establishment of manufactures. They used the
wages argument as a foil to the young-industries argument,
asserting that as long as wages were so much lower in Europe,
manufacturers would not be able to maintain themselves
without aid from the Government. The Protectionists, on the
other hand, felt called on to explain away the difference of
wages ; they endeavoured to show that this difference was not
so great as was commonly supposed, and that, so far as it
existed, it afforded no good reason against adopting Protection. 1
About 1840, the positions of the contending parties began to
change.- The Protectionists began to take the offensive on
the labour question ; the Free Traders were forced to the
1 Some signs of the appeal for the benefit of labour appear as early as
1831 in a passage in Gallatin's " Memorial," p. 31, and again in a speech of
Webster's in 1833, "Works," I., 283. In the campaign of 1840, little was
heard of it, doubtless because other issues than Protection were in the fore-
ground. Yet Calhoun was led to make a keen answer to it in a speech of
1840, " Works," III., 434. In the debates on the Tariff Act of 1842, we hear
more of it ; see the speeches of Choate and Buchanan, Congr. Globe, 1841-42,
pp. 950, 953, and Calhoun's allusion to Choate, in Calhoun's "Works," IV.,
207. In 1846 the argument appeared full-fledged, in the speeches of Winthrop,
Davis, and others, Congr. Globe, 1846, Appendi.x, pp. 967, 973, 11 14.
See also a characteristic letter in A'iles, Vol. 62, p. 262. Webster's speech in
1846, " Works," v., 231, had much about Protection and labour, but in a
form somewhat different from that of the argument we are nowadays familiar
with.
- See, among others, Clay's Tariff speech in 1824, "Works," I., 465, 466.
240 Industrial Freedom.
defensive on this point. The Protectionists asserted that high
duties were necessary to shut out the competition of the ill-paid
labourers of Europe, and to maintain the high wages of thelabourers
of the United States. Their opponents had to explain and
defend on the wages question. Obviously this change in the
line of argument indicates a change in the industrial situation.
Such an argument in favour of Protection could not have arisen
at a time when Protective duties existed but in small degree,
and when wages nevertheless were high. Its use implies the
existence of industries which are supposed to be dependent on
l.ij^h duties. When the Protective system had been in force
for some time, and a body of industries had sprung up which
were thought to be able to pay current wages only if aided by
high duties, the wages argument naturally suggested itself
The fact that the iron manufacture, which had hitherto played
no great part in the Protective controversy, became, after
1S40, the most prominent applicant for aid, accounts in large
part for the new aspect of the controversy. The use of the
wages argument, and the rise of the economic school of Henry
C. Carey, show that the argument for young industries was felt
to be no longer sufficient to be the mainstay of the Protective
system. The economic situation had changed, and the dis-
cission of the tariff underwent a corresponding change."
h 3. This brilliant survey of the history of the Protective
movement in America might easily be illustrated from
Australian experience. In that country, also, the pauper-
1 ibour argument has been the last to come into prominence.
The argument which was most frequently used in the early
days of the Protectionist agitation in Victoria was drawn from
the supposed necessity of providing new avenues of employ-
ment for the mining population as the yield of gold
decreased.^
The same cry was raised in New South "Wales when,
1 Victoria adopted a Protectionist taiiff in 1S66.
The Political Argument. 241
Pt. IV., Ch. ii., 5 I.]
owing to a reaction from a period of excessive expenditure on
public works, and to the effect of a Land Act in stopping im-
provements on Crown lands, a number of " Unemployed"
made their appearance in the streets of Sydney. Gradually,
however, as the agitation in each colony settled down, and as
industries began to be established in Victoria under Protection,
in New South Wales under Free Trade, the necessity was
felt for appealing to cupidity and self-interest by some other
means. The pauper-labour argument was admirably adapted
for such a jDurpose. Indeed, there is no other argument in
the Protectionist quiver which offers a politician such a rare
opportunity of doubling the parts of prophet and philan-
thropist. Cassandra-like predictions of desolation and ruin
are exceedingly efif'ective anodynes to the present incon-
veniences of higher prices. In Australia, however, as in
America, no one argument has ever been used to the exclusion
of others. The utmost that can be said is that in each
country the influence of the various arguments has varied at
different periods.
It will be necessary now to consider each by itself.
CHAPTER II.
THK INFANT-INDUSTRV ARGUMENT.
I. Thf: political argument which came first into use in
support of Protective tariffs is that which is generally known
as the " Infant Industry Argument," and which may be stated
in these terms : " Protection is desirable for a i^"^ years in
order to establish the industries which are naturally suited to
a young country."
It is apparent from its terms that this argument is not
intended to be a defence of Protection as a periuanent
Q
242 Industrial Freedom.
policy, but that it is addressed to those who may be frightened
at the cost of a Protective tariff, or have other objections to
it, in order to induce them to submit to a temporary sacrifice
for the sake of a future permanent gain. The argument thus
becomes in part an admission that Protection is an evil, and
in part a prophecy that the evil will be temporary.
The admission is correct ; the prophecy is not.
Before examining this, the first political argument sub-
mitted for consideration, a warning must again be given of the
limited scope of our immediate investigation. We have to isolate
each political argument, and consider it apart from others, if
we would estimate its true value. In practice, of course, this
is seldom done. Men pass almost imperceptibly from one
argum.ent to another, and are apt to be angry if they are
pinned, even for a time, to the separate consideration of any.
If, then, any Protectionist who may read these pages should
be inclined at any point of the argument to charge the writer
with unfairness, he should reserve his final judgment until he
has perused the whole of the political discussion ; and even
then he should ask himself whether his own arguments and
phrases are, upon analysis, anything more than a compound of
two or more of those political fallacies whose nakedness he
is ready to admit when each is separately exposed. Further,
let it be remembered that a greater freedom of criticism is
permissible in dealing with political than with scientific
arguments, and that ad captandum statements may be fairly
answered in the same measure.
With these few words of warning and deprecation, let us
proceed to the consideration of the argument which owes its
name to the advocacy of Infant Industries.
The notion is, as has been said, that certain industries
cannot be established, under the circumstances ordinarily
existent in a young countr}', if they are exposed at the outset
to the competition of the older and stronger industries of
other lands. It is then answered that if the critical stages of
The Political Argument. 243
Pt. IV., Ch. ii., ? 2.]
struggle and difficulty can be successfully passed, the industries
in question will be able to sustain themselves without assist-
ance against all competitors. And, finally it being repre-
sented as a desirable thing that these industries should be
established the people \s\\q will have to pay for their estab-
lishment are exhorted to bear the burden for a short time, in
the assurance that they will reap benefits a hundredfold when
the period of pupilage is at an end.
2. It is obvious that this argument assumes that after a
reasonable time the Protected industries will be able to stand
alone. Accordingly, the first question which a voter ought to
ask when this argument is addressed to him is as to the length
of time for which the assistance of Protection will be needed;
because, as it must again be mentioned, this argument is
not addressed to those who advocate Protection as a permanent
policy, but to those who, regarding it as undesirable in itself,
are nevertheless prepared to submit to its inconvenience in
order to gain the advantages of new industries. It becomes,
therefore, a matter of chief importance to test the assumptions
of the argument by concrete instances, in order to form some
idea of the amount of sacrifice which is demanded to obtain
the promised benefits.
On this point let us first listen to Professor Sumner :
" I know of no case," says he, " where the hope that infant
industries can be nourished up to independence, and that they
tlien become productive, has been realised, although we have
been trying the experiment for nearly a century. I'he weakest
infants of to-day are those whom Alexander Hamilton set out
to jirotcct in 1791. As soon as the infants begin to get any
strength (if ever they do get any) the Protective system forces
them to bear the burden of other infants, and so on for ever,
The system superinduces hydrocephalus on the infimts, and
instead of ever growing to maturity, the longer they live the
bigger babies they are."'
I ) 2
244 Industrial Freedom.
The " infant-industry " argument has never been disposed
of in fewer words, nor more completely ; and the treatment is
according to its deserts. Some persons, however, may require
to know the evidence by which the statement is supported.
This is given by the instances of the United States, A-'ictoria,
Germany, and every other country which has adopted the
Protective system.
Let us begin with the United States.
3. The history of the "infant-industry" argument in the
country of its birth is a singular record of human blindness
and popular forgetfulness. As might be expected, it first saw
light in the discussions which preceded the Tariff Act of 1789,
and had at once a complete success. Among the many and
various motives which induced the framers of the American
Constitution to submit to a federal tariff, not the least strong
was the belief that by taking this step they would raise up new
industries within their borders, and preserve them from the
crushing competition of Great Britain. Thus the Tariff Act
of 1789 contained a statement in its preamble that it was
passed for "the encouragement and protection of manu-
factures." Nor was the preamble the only portion of the Act
in which its framers displayed the honesty of their convictions.
A subsequent clause provided that the Act should expire in
1796, and that the duties, which were fixed at eight-and-a-half
per cent, ad valorem, should not be collected after that date
so confident were these clear-sighted men that at the expira-
tion of seven years Protection would no more be needed !
The infant industries were to attain their majority in
seven years! This was tlie belief in 17 89. Never was the
vanity of Protectionist good-wishes more strikingly ex-
emplified I
The very year in which tlie Act was passed tlie "infants"
required a further assistance of two-and a half percent., and
two years later, in 1792, their Protection was raised to thirteen-
The Political Argument. 245
Pt. IV. Ch. ii., \ 3.]
aiid-a-half per cent. The year 1796 arrived, but the coming
of age was indefinitely postponed !
Between 1789 and 1S16 a period of twenty-six years
seventeen Acts were passed affecting duties, which generally
and steadily raised them.^
Some Protectionists have said that these successive in-
creases in the rate of duty afford a proof of the beneficial
operation of Protection ; but those who assert this in Australia
need to be reminded that the present argument is not whether
Protection is permanently beneficial, but whether any period
can be ascertained at which Protection can be done without.
The second great fight upon the tariff" in the United States
occurred in 1816. After the experience of previous years, it
might have been thought that there would have been a certain
disinclination on the part of Protectionists to fix beforehand
any limits, either of time or amount, to the desire of manu-
facturers to get the most they could from a State that was
willing to give. Still, in those days of inexperience in Pro-
tective legislation, it was felt that the claim to special privileges
would have to be justified by some more plausible argument
than the bare assertion of an abstract right to plunder the
general body of citizens to the end of time. Consequently,
the old appeals to sympathy were renewed; and the old
I)romises were repeated, with even greater fervour, that the aid
would only be required for a few years.
Two great industries were particularly insistent in their
demands : viz., the cotton and the iron. Both of these had
established themselves under Free Trade with a fair measure
of success the iron industry, even in the old colonial days,
having been so profitable that its progress threatened the
superiority of the ICnglisli iron-masters, and led to the passing
' It \\\\\ be obvious to all who nre acciiiainted with the subject that I am
much inckbted for this record of tlie ]5ractical application of the infant
arf;uMient in America to Professor .'^unmer's Lectures on the History of
Protection.
246 Industrial Freedom.
of Acts of Parliament designed for its suppression. Changes,
however, in the mode of manufacture, and the disorganisation
consequent on the return of peace in 181 5, had thrown these
industries and several others into a condition of distress.
This state of things led to the tariff of 1816, and furnished
another example of the ease with which voters are misled by
promises which from their nature are incapable of fulfilment.
Our illustrations may be confined to the two leading
industries of cotton and iron.
The duty on cotton was fixed by the Act of 18 16 at
twenty-five per cent., but in order to conciliate purchasers it
was enacted that this Protective duty should only be levied for
three years.^
The end of the three years came, but the duties remained.
So far from being removed, they were increased in
1824. They were again increased in 1828, again in 1832 ;
and from that date to this the manufocture of cotton in the
United States, where the raw material for the world is grown,
has been continuously protected by a tariff which is in some
lines almost prohibitory. Yet so little vigour has this "inf^mt"
been able to obtain in seventy-three years, that the imports of
cotton goods into the United States from Great Britain
amounted in the year 1888 to ^^5, 750,000 in value or nearly
twice as much as the total exports of cottons from America
to all the world ; in addition to which. Great Britain almost
monopolised the open markets of the world.- Surely, if
Protection was ever desirable, it would be in the case of the
cotton industry of the United States ? Yet if, after seventy-
three years of Protection, that industry is still an " infiint,'" and
so weakly, even for an infant of those tender years, that.
1 Taussig; "Tariff History of the United Status," p. 30 ((]. P. Putnam,
New York, 1888).
2 Taussig: " Tariff History of the United States," p. 40 : Tlie exiiorts
of cotton goods from Great Britain in 1888 were _^6o, 329, 000 ; the exports of
cotton goods from llie United States in 1888 were ^'2, 750, 000.
The Political Argument. 247
Pt. IV., Ch. ii., \ 3 ]
although it has its raw material on the spot, it cannot compete
with a little country like England, which has to convey the
raw material three thousand miles and send the manufactured
goods the same distance before they get into the market, it
is difficult to see what the industry can be which requires to
be nurtured into manhood by Protection.
But the loudest and most persistent beggar for Protective
duties has always been the iron industry. Despite the fact
that the manufacture of pig-iron was started in America in
the seventeenth century, and that it was a firmly established,
prosperous, and increasing industry before the first tariff, this
hoary infant of 250 years still demands and receives a Pro-
tective duty amounting to sixty per cent, ad valorem} The
increment in the tax has been gradual. Up to 1816 there
was no Protection on pig-iron, and the furnaces were numerous
and increasing;- but the revision of the tariff in that year
rendered the imposition of a duty inevitable. A duty on iron
is necessarily the keystone of a Protective system, partly
because of the close connection of that commodity with every
form of manufacturing process, and partly because its in-
dustrial importance easily attracts attention. For many years
the whole Protective system of the United States depended
upon the retention of the duties upon iron.
In the fervent words of Mr. E. J. Donnell, "the tariff
monopoly in iron is the tap-root of the upas-tree that has
poisoned both our industry and our politics. With free iron
the monopolies in otlier raw materials could not stand a day,
and the tariff on manufactures would soon cease to have a
single advocate, even among the manufacturers. In point
of fact, the tariffs on coal, copper, lead, wool, timber, and
many other articles whicli constitute the basis of various
branches of our industry, had their origin in what is called
1 Sic Taussig's " History of Protection."
- The iron products of the United States were valued at /i4,gco,ccq in
iSio.
248 Industrial Freedom.
log-rolling they were supported by the iron monopoly as a
buttress to the iron tariff. . . . Iron is the key to the arch of
monopoly. Almost every branch of American industry can be
liberated by emancipating the one article, iron." 1
The iron industry in 18 16 was quite as moderate in its
demands as the cotton. Duties were fixed at twenty-five per
cent. ; but in 18 19 these were to be reduced to twenty per
cent.
When 1 81 9 arrived, the reduction was postponed, and
it is almost unnecessary to add that since that date the
duties have been increased and not diminished, until they
stand at the present, in some lines, as high as 100 and 250
per cent , - to the no small advantage of Mr. Carnegie and
other enthusiastic champions of Protective legislation.
In 1832 the tariff was again revised in the Protectionist
interest. At this date Protection had existed, in a greater or
less degree, for forty-three years, and still the "infant" argu-
ment was not abandoned ! It was only modified. That it
should have been used in any form and still more, that it
should be used in any country in the year 1890 is a striking
illustration of the great difficulty in the way of tariff reform
which arises from the indifference of the popular memory to
the details of so unattractive a subject. When, added to
this indifference, we have on the part of some a willingness
to be deceived by phrases, and on the part of others an
intense wish to gain advantage by deceiving the progress
of Free Trade in the United States and other countries,
slight as it is, becomes a matter of considerable surprise.
In 1832 the weakness of the '"infont" argument was
beginning to be felt, and Henry Clay, the Protectionist
champion, abandoned the seven years' minority, and named
twenty-five years as the period during which assistance might
1 Since the passing of the McKinley Tariff, wool has taken the place of iron
in this respect. (5^^ article by Prof. Taussig in Vol, I. of the Economic Journal.)
- e.g., nails.
The Political Argument. 249
Pt. IV^, Ch. ii., \ 3.]
be legitimately demanded by a " Protected " industry. The
admirers of Henry Clay will not consider it an injustice to his
intellectual powers to believe that he was sincere in making
this prognostication. On the contrary, Mr. Horace Greeley,
the modern defender of Clay's principles, expressly declares
that Clay and all the earlier champions of Protection includ-
ing Hamilton, Carey, Niles, and the earlier presidents
"champion not the maintenance, but the creation of home
manufactures."^
Possibly the modern champions of Protection would insist
on placing themselves in the same category. After all, there is
but a difference of degree between " the creation " of an
industry and its " maintenance " ; and who is more competent
to decide whether an industry has passed from the growing to
the mature stage than the manufacturer, who is to be paid for
attending to the growth ? This, at all events, seems to be the
view of the most modern teaching on this Protectionist argument.
In the last edition of his "Political Economy" (p. 233),
Professor Thompson, of the Pennsylvania University, tells us
that " it will ordinarily take the lifetime of two generations to
acclimatise thoroughly a new manufacture, and to bring the
native production up to the native demand."
From seven years to two generations is a long step ! Yet,
if this is the latest exposition of the gospel, Free Traders only
ask that it may be spread abroad. For, as Mr. George
suggests, it would hardly be a popular argument to address to
the present generation: that it should tax itself and its successor
for the benefit of a third. To such a demand we might well
ask, " What has posterity ever done for us ? " ~
'Horace Greeley: " PoliUcal Sermons," p. 34; cited by Mr. George:
" rroteclion or Free Trade?" p. 103.
- TIk' latest writer on Protection, Professor Patten (1890), boldly aban-
dons the Infant argnnient, and takes his stand on the position that
Protection onyht to be a permanent policy. Free Traders, therefore, may
surely use language of derii>ion about this once famous argument without
incurring odium.
250 Industrial Freedom.
4. Were it not for the numerous instances which history
offers of the truth of Dean Mihnan's theory of the immortahty
of humbug, it might have been thought impossible, after the
experience of the United States, that this tattered and fact-
riddled theory about infant industries should ever be dressed
up again for use in other countries. But it appeared in
Victoria in 1865 in all its old effrontery; and is still the
favourite catchword of Protectionist audiences in New South
Wales. Yet the history of Victoria has been in no whit
different from that of the United States as regards the falsifi-
cation of all prophecies that a time would come when a
Protected industry could stand alone.
Although the framers of the first Victorian tariff were wise
enough to fix no date for its repeal, they won for it no small
measure of support by the assurance that it would not be
needed for any length of time. Then, as in America in 1789
men believed or affected to believe that Protection might
be adopted as a temporary expedient, in order to give a start
to a few suitable industries. Then, as now, in New South
Wales, most Protectionists professed themselves to be " mo-
derate," or " discriminating." They would neither have high
duties nor maintain any duties permanently.
The result of these expectations ought to be a significant
warning to simple-minded people in other countries who allow
themselves to be persuaded into similar beliefs. The " tem-
porary " duties are in force to-day. The " moderate " duties
have been three times revised, and have been raised on each
revision. Protection has now been the law of Victoria for
twenty-three years, and during all that time the reductions of
duties have been almost imperceptible, while the increases of
duties have been steady and enormous. It is not too much to
say, if we accept the sincerity of the public professions of the
" moderate " men, that the tariff of 1865 would never have
become law if the same rate of duties had been asked for then
which was readily conceded in 1S89. Take the hat-making
The Political Argument. 251
Pt. IV., Ch. ii., 5 4.]
trade for an illustration. How many electors in 1865 would
have voted for a duty of 5s. apiece on hats ? And how many
candidates would have ventured to support it? Yet in 1889
the hat-makers obtained a duty of 60s. a dozen on hats, and
are grumbling still because they did not obtain one of 72s.
What the tax may be on hats in 1900 it is dangerous to con-
jecture. Similar instances of the unappeasable appetite of the
principal Victorian " infants " may be collected from every side.
The greatest cormorant is the woollen trade, which, in spite
of its contiguity to the source of its raw material, is in chronic
difficulties. In 1868 the duty on clothing imported into
Victoria was 10 per cent. After three years the duty was
raised to 12J per cent In 1872 it was raised again to 20 per
cent., at which figure it remained for eight years. But 20 per
cent, was not enough for this struggling industry, nor twelve
years sufficient to draw it from a state of pupilage. In 1880
the duty was again raised to 25 percent. In 1886 it was raised
again to 30 percent. ; and in 1889, after twenty years of a Pro-
tective tariff, the manufacturers of clothing, asking for a duty of
40 per cent., got one of 35 per cent. The duty on furniture,
again, has increased from 10 per cent, in 1866 to 25 per cent,
in 1888 ; and the duty on woollens has increased from 7.^ per
cent, in 187 1 to 35 pef cent, in 1889.
The subjoined table shows the changes in the Victorian
tariff from 1S66 to 1889 ui)on a few of the commoner necessi-
ties of life :
Article.
1806.
1 863.
P.O.
10
10
10
1872. 1S80.
p. C. p. c.
20 25
20 25
20 25
1SS6.
p. c.
25
25
1S88.
.S89.
Apparel and Slops
]''urnitiire
Hats and Caps and
ISonnets .
4s. per cub. foot
10 per cent.
4s. per cul). foot
p.c.
35
25
25
p.c.
25
35
var.
Is there any reason to believe that we in New South
Wales would have a different experience from that of America
252 Industrial Freedom. '
and Victoria ? Would not any Protective duties, however low
they might be at first, inevitably increase in this country, as
they have done in others? Those who really are " moderate "
Protectionists should learn a lesson from experience, and vote
for P>ee Trade.
5. The illustrations which have already been offered from
the history of Protection in countries so different in their
conditions as the United States and Victoria, indicate
sufficiently the nature of the answer to the argument in
favour of Protection "that it may be temporarily useful in
assisting infant industries." The fatal objection to this
argument is its inapplicability to political facts. It takes no
account of the imperfection of human nature. It assumes that
every Government is incorruptible, and every manufacturer
disinterested. Whereas the truth is. that Governments are
squeezable, and manufacturers are very active in their own
interests.
There is one great, plain, i)ractical fact in respect to
Protection to "Infant industries " which is itself a sufficient
answer to all the arguments which may be advanced in its
favour. "Temporary" Protection, or "moderate" Protection,
or " diminishing " Protection never hasexisted, and never can
exist while human nature continues as it is. There cannot be
one single instance referred to in the history of any State,
nation, or people in which the Protected classes have volun-
tarily abandoned the assistance of Protection when the purpose
for which it was imposed has been achieved. This is owing
partly to the unchangeable characteristics of human nature,
partly to the economic consequences of all Protective legis-
lation.
No matter with what honesty of purpose Protection may
be first established, its continuance will always be secured by
the selfishness of vested interests. The men who deri\e
advantage from the right to tax their fellow-cilizens, being few
The Political Argument. 253
Pt. IV., Ch. ii.. \ 5.]
and powerful, will combine to support their privilege ; while
the majority of the people, being affected by the tariff in
different ways, and often unable to perceive its operation,
have no motive of equal strength to stir them into opposition. 1
The vested interests have also the further advantage, in any
contest, of being able to appeal to public sympathy with a fc rce
which is directly proportionate to their own weakness. When
once Protection has been established, its continuance can be
secured, not only by the illegitimate use of organised wealth
and power, but by drawing harrowing pictures of the loss and
hardship to innocent persons which would be inflicted by its
abolition. This consideration is naturally strongest in a small
community, \^here members of all classes are more or less
acquainted with each other. Kind-hearted and impetuous
persons, who would never have voted for the establishment of
Protection, are easily moved to support its continuance by
pictures of the miseries which would follow an " extermination "
of the Protected trader the ruined capitalists with useless
plants, the thousands of labourers " robbed of their livelihood."
Unfortunately, these good people do not stop to inquire
whether the return to Free Trade will really cause the industry
to stop, or whether the statement is not merely the unproved
assertion of an interested party.
It has been asserted by the Hon. David A. Wells and
the statement has never been disproved that from eighty to
ninety per cent, of American manufacturers are able, from their
' The notorious corruptness of the Presidential election of 1888 illustrates
the text. The investigations conducted by the New York H 'wA/ in January
and I'cbruary, 1889, revealed a complete organisation on the part of the Pro-
tected manufacturers for purposes of corruption. As one of the Republican
organisers stated, "the fat was to be fried" from tlie manufacturers. The
Democratic parly were, no doubt, also corrupt ; but not l)eingaljle to stimulate
their supporters by ll;e same inducement, they could not collect the s.ime
amount of money, and so lost the election. The purchase of New York State
by tlie corrupt agreement of the Democratic leaders for the sale of the Irish
\ote for the Prcoidency in consideration that a Republican vote sliould he caft
for the Democrats in the State election, gave Presiient Harr'son the victory
254 Industrial Freedom.
natural advantages, to under-sell foreign competitors without
assistance from the tariff; and that only ten to twenty per cent,
of them are in any degree subject to foreign competition.'^
Nevertheless, the question must arise in any country where
Protection has been long established, whether a return to Free
Trade would not destroy some of the existing industries ; and
Free Traders must admit that such might be the case. Indus-
tries which are unsuited to the country, either owing to the
conditions of its civilisation such as handicrafts in a country
of highly developed mechanical appliances or to the natural
disadvantages of its climate such as tea-growing in the United
States must suffer by a change from Protection to Free
Trade if they cannot soon adapt themselves to the new
conditions.
A Free Trader has two replies to those who urge the
continuance of Protection upon this account :
First, he says, " Industries such as these are not worth
preserving our country cannot afford to keep them. They
belong to a lower grade of civilisation, in which our citizens
ought not to be compelled to live."
Secondly, he would say, " Even under Protection indus-
tries such as these are never prosperous. From the conditions of
their existence they can never export their articles of manu-
facture, and are therefore confined to a small and non-expansive
market. Of such industries distress and suffering is a chronic
complaint, and the continuance of the Protective system will,
in most cases, only make the misery of those who work in them
greater and more extended. The blame for this belongs
properly to the policy which made this ruin inevitable, and not
to that which sought to limit its effect?. If a choice has to be
made between the total abolition of Protective duties, after a
reasonable notice, and their gradual reduction, the truer
kindness, probably in every case, is to prefer the speedier
1 6'('(,' " Practical Economics " ([1. 142). Putnam, New York, 1888.
The Political Argument. 255
Pt. IV,, Ch. ii., ? 7.]
process. Trade suffers less from a sharp shock than from a
protracted agony."
6. There is another reason for the want of finahty in all
Protective legislation, which has already been referred to
incidentally in the discussion of the economic argument :
namely, the close and often unforeseen dependence of one trade
upon another.
It is obvious that Protective duties upon iron, steel, cotton,
or any other raw material, necessitate compensating duties
upon the finished products of any of these articles ; but it is
not always easy to trace either the amount of compensation
which is requisite or the products which require it. The
processes of manufacture are so complicated, and the inter-
dependence of several trades upon each other is so intricate
and variable, that even experts find it difficult to say beforehand
on what lines, or to what amounts, compensating duties ought
to be imposed. The compensating duties placed on woollen
goods in the United States offer an illustration of this difficulty.
These are so numerous, and so delicately graduated, that no
person who is not in the trade can possibly understand either
their amount or their incidence, and even manufacturers
themselves have been disputing about them since 1869. The
whole matter is fully discussed by Professor Taussig in his
" Tariff History of the United States," in a chapter which will
well repay perusal.
^ 7. But not only is there a legitimate connection between
duties upon raw materials and duties upon finished products,
but there is an illegitimate connection between all Protecti\-e
duties. It is not in human nature to stand by while another
person's industry receives Protection without demanding the
same privilege for oneself Such a demand is certain to receive
considerable attention. In tlie first place, it appeals to the
universal sense of fair play by asking that every class of
256 Industrial Freedom.
industry should be treated alike ; and secondly, it gives new
allies to those who are already Protected. Thus is initiated
the system known as "log-rolling," by which one set of
manufacturers will help another set to get what duties
they want on condition of receiving similar assistance for
themselves.
Nor is this practice, although most destructive of political
purity, altogether without justification. It is not the men
who are to blame, but the system. For, as Professor Sumner
has pointed out, " if one industry should be set out in free
competition, while the rest were Protected, it would be found
. , . . that machinery, raw materials, and labour supplies
would be so dear that the exposed industry would have no fair
chance in competition with foreigners. Hence one long-
Protected industry, if it became independent by natural causes,
could not be left free unless the whole system were abandoned.
But then the cry goes up from those nurslings of recent begin-
ning that they are not yet ready. If you defer the introduction
of freedom for ten years longer on their account, a new
company of infants is meantime brought into being, and the
plea for further delay comes from them. Thus you go on for
ever, and the theory is reduced to an absurdity.'' (" History of
Protection," p. 44.)
A Senator of the United States the Hon. Samuel S. Cox
has described the practices which result from the interde-
pendence of Protected trades as " mutual brigandage and re-
ciprocity of robbery." After making all due allowances
for the warmth of the expression, we may still derive some
profit from the graphic illustrations by which the senator sup-
ports it :
"Kentucky," he says, "wants clieap copper stills for her
whisky. She gets even with the Miclii,c;an roljber by demanding a
tariff on hemp. . . . ?ilaine .steals on lumber to make up (or
the Massachusetts roguery on fabrics. Massachusetts hauls for cheap
coal ; Pennsylvania says no ; and so Massachusetts goes out with a
'Home Market Club' [referring to a political association of that
The Political Argument. 257
Pt. IV., Ch. ii., 5 8.]
name], and knocks down the West and South to rifle them of half
tlieir gains on raw cotton. Tennessee, Virginia, and North
Carolina, being fleeced all round in clothing, sugar, and what not,
go for goobers at a cent a pound. California demands a large
reprisal for her lumber, because she is fleeced on salt by IS'cw
York. . . , Pennsylvania, the Robert Macaire of the lot, steals
boldly on all articles, from a plate-glass to a locomotive ; and to
make up for the general loss, the North-West masks herself behind
her forests and demands timber reprisals ; and so on. Nothuig is
sacred. . . . Oh, the beauty of reciprocal rascality ! "
The same conflict of interests, pacified, if possible, by the
same methods, is seen wherever Protection exists. The result
is an impossible effort to satisfy a thousand Pauls by robbing
a thousand Peters. In attempting this, Protection is per-
petuated.
8. The conclusion is inevitable. Whether the infant-in-
dustry argument be tested by experience or by a pi'iori
reasoning, its emptiness and the unreality of its assumptions
are equally apparent. It is difficult, indeed, to understand how
any man who is acquainted with the history of tariff legislation,
or accustomed to reflect upon the springs of political action,
can with any honesty of conviction continue to maintain or lend
attention to the vain assertion that " Protection can be tried
for a short time, and laid aside after trial if it either performs
its object or proves unsatisfactory."
If Protection be once established, it will spread itself with
a silent and irresistible growth, which nothing short of a con-
vulsion of the State will be able to uproot. Each Protective
duty is the seed-nut of a hundred others, some of which propa-
gate themselves, while others are planted by industrious sowers.
Nor is resistance to this pernicious growth of much avail. Self-
interest, especially when it masquerades as patriotism and
phihmthropy, is ahnost irresistible in a conflict with disorganised
justice. The nation, therefore, which adopts Protection stands
on an inclined plane. Once let it be started on the downward
patli, it will slide inevitably to the bottom ; but where that
R
258 Industrial Freedom.
bottom is no one yet knows, because no one has yet fathomed
the depths of human creduUty and greed.
It is true that the foregoing considerations can have no
weiglit with those who regard Protection as a scientific
doctrine. To such persons the permanency of Protection is
a thing to be desired for its own sake.
But it is the characteristic of a poHtical argument, such as
that at present under review, that it appeals differently to
different people. Thus, the "infant-industry" argument is
not directed to the true believers, but only to the doubters.
That it has effect on these is plain to any one who has lived in
the atmosphere of tariff controversies. Two-thirds of the Pro-
tectionist members of the present New South Wales Assembly
have described themselves in their addresses as " moderate
Protectionists," or have supported their views by making use of
the " infant " argument. To such men and to their hearers the
considerations which have been urged above ought to appeal
with force.
The argument has also a certain weight with scientific
writers on the tariff question a fact which probably accounts
for its political vitality. John Stuart Mill has notably given it
an undue prominence in his consideration of the case of
Protection in a young community. But it will be found upon
examination that the cases which Mill imagines, although they
are theoretically conceivable, are not such as have ever
occurred in New South Wales ; and that in any country his
argument assumes the existence of that which has never yet
been discovered : viz., a Government honest enough and
powerful enough to resist all claims to illegitimate Protection,
and to remove Protective duties directly they have done their
work.i
' Sec .Appendix II. for a full examination of J. S. Mill's view of the
possible economic justification of Protection in a young country.
The Political Argument. 259
Pt. IV., Ch. iii., \ I.]
CHAPTER III.
THE " DIVERSIFICATION OF INDUSTRY " ARGUMENT.
I. It is probable that Protection gains the majority of its
supporters by appealing, in a more or less direct manner,
to the sentiment of national sufficiency. There is a general
desire ^which is especially strong in a young community
whose place among nations has not yet been recognised
to become independent of other countries by supplying all
its wants through the labour of its own citizens.
The industrial characteristics of a new country are very
visibly determined by its natural features. The attraction to
settlers is, in almost every instance, the possession in an
exceptional degree of some great natural advantage. The
consequence is that in the early days of the community the
population is fully employed in the production of raw material ;
and the high profit which this occupation returns enables
it to satisfy its wants very easily by trading with foreign
countries.
After a time, however, the extractive industries, as they are
called, become less profitable. The virgin soil gives out, the
surface ores are exhausted, the nearer forests are thinned, and
the special natural advantages which were possessed by the
young country grow gradually less. In the meantime, the
influx of population which is generally mucli behind the
demand for labour keeps up at the old rate, or probably in-
creases. Two currents of opinion are thus set in motion, the
one coming from the more far-seeing of the former inhabitants,
who observe the increasing difficulty in carrying on the old
pursuits ; the other from newly arrived immigrants, whose
expectations of an El Dorado are not realised. Each class
wants to find new avenues of employment. The older settlers
need openings for their children. The new-comers want
work at the trades to which they have been accustomed.
R 2
26o Industrial Freewm.
Under such circumstances, it only needs the occurrence of a
commercial crisis, or a disorganisation of industry from one of
the causes to which young communities are especially exposed
namely, drought, over-speculation, or excessive borrowing
and the Protectionist manufacturer has ready to his
hand the very best of opportunities. He can point out
to the discontented the indisputable fact that a change
is coming, and that industry cannot continue in the old paths.
He will say that " it is the duty of the State to preserve the
industrial organisation, and to see that the capital which has
already been spent in the country be not wasted, or the
labourers forced to go away to other lands." He will, there-
fore, urge the necessity of opening up new channels for
employment and preventing the nation sinking into a state
of stagnation. He will maintain that, although it may be
cheaper to buy manufactures from abroad in exchange for raw
produce, yet the gain thus secured would be dearly bought by
the limits which this practice would impose upon the growth
of population, and by the injurious influence upon national
character which arises from a lack of variety in the occupations
of a people. He would say that the " extractive industries"
do not call forth the highest mental qualities ; and that in
any case they can only be followed by men who are suited to
outdoor work. Accordingly, to confine the labour of the
country to these pursuits would deprive many men who might
excel in handicrafts of the opportunity to iind employment,
and thus to cause a waste of industrial power. Nor would he
omit to mention that the establishment of manufactories
means the growth of towns, and that the social development
and progress of a country cannot be so rapid if the greater part of
the population be employed in field work and live in scattered
settlements. " Therefore," he would say, " seek a stimulus for
new industries in a Protective tariff, in the hope that the home
demand for manufactured goods may force home labour and
capital into a variety of new channels, until every natural
The Political Argument. 261
Pt. IV., Ch. ili., \ 2.]
resource is developed to its full extent and no native talent is
without a scope. The piteous cry of the farmer and miner,
* What shall we do with our boys ? ' will no longer be heard in
the land ; ^ but every lad, when he comes of age, will find
a calling suited to his powers, and every immigrant, on landing
at the wharf, can take a place in his own trade. By this
means, though the individual may suffer temporary loss, the
latent capacities of the nation as a whole will be developed,
and its attractiveness to immigrants will be increased."
This is undoubtedly a clever picture, which lacks no feature
of attraction for the public eye. Nor is the picture an in-
correct representation of what might be. It is part of the
truth, but not the whole.
2. It is evident that the reasoning which supports Pro-
tection because it gives a variety of industries, rests upon three
important but unexpressed, assumptions : viz. i. That there
is, in fact, no sufficient diversity of industry in any young
community which adheres to Free Trade. 2. That, without
Protection, no sufficient diversity of industry can either be
secured or maintained. 3. That, when a sufficient diversity of
industry is secured and maintained by means of Protection,
the country, as a whole, will be better off.
The burden of proving these assumptions to be sound
clearly rests on the Protectionist, because it is he, and not the
Free Trader, who proposes to interfere with the natural course
of trade. Consequently, until he discharges this burden the
diversity of industry argument counts for nothing. A pleasant
escape, indeed, from a long discussion !
It is to be feared, howtver, that logic has Aery little
' This ridiculous question is really p/Ut to Protectionist audience?, nnl
sadly passed by, as admitting of no satisf.ictory answer while Free Trade con-
tinurs. An irreverent believer in freedom once suggested, \slien llie (|iie>tion
was being put in n)oie than usually lugubrious tones, " Marry llicin to our
girls"; but the advice, though it has become historic, has never been well
received by the prophets of evil.
262 Industrial Freedom.
influence in a tariff controversy. Certain it is that the diversity
argument loses none of its force by having its assumptions
taken for granted instead of proved. What Protectionist
orator or writer would stop, in his glowing catalogue of benefits
to be derived from a variety of industries, for any dull inquiry
whether this much-desired variety does not already exist to a
sufficient degree; or whether, if some industries are still wanting,
Free Trade is an absolute bar to their establishment ? Yet
these are, essentially, inquiries into facts, which cannot be
ignored by any man who wants to form a reasonable judgment
upon the value of this famous argument.
If, however, Free Traders ignore the diversity argument
until its assumptions are proved, they will never convince
voters. Let them, therefore, begin the attack. But first let
them survey the position.
3. The aim desired is a variety of occupations. Are Free
Traders to admit this aim to be desirable or not ? Professor
Sumner answers sturdily in the negative. " It is not," he says,
" an object to diversify industry, but to multiply and diversify
our satisfactions, comforts, enjoyments. If we can do this by
unifying our industry in greater measure than by diversifying
it, then we should do, and we will do, the former." (" Protec-
tionism," p. 116.) It would be difficult to find a more striking
instance of the divergent scopes of an economic and a political
argument. To Professor Sumner, "satisfactions, comforts, and
enjoyments" arc words of "economic" import. They are
products or sensations which are obtainable in exchange for
wealth. To the politician, and especially to the Protectionist,
they convey a different meaning. The " satisfactions " are
satisfactions of sentiment as well as of wants and no serious
politician will ignore the demands of national sentiment
while the "comforts and enjoyments" are not only of material
things, but of everything which occupies pleasantly the life of a
citizen, or relieves him from alarm. \'ague, illusory, and
The Political Argument. 263
Pt. IV., Ch. iii.,?4]
unobtainable these " satisfactions, comforts, and enjoyments "
may be in most instances, but they are sufificiently definite to
be the subject of argument, when they are of the kind which are
promised to the labouring classes through the establishment of a
variety of industries. The ambition to rise, the love of change,
the very difference of physical and mental qualities all conduce
to make men who have to live by wages look forward with
pleasure to the possibility of obtaining different kinds of work
for themselves and their children ; while the politician may
share with peasant and artisan the fear lest the temper of the
nation may be lowered and its talents wasted by a dull,
sluggish uniformity of occupation.
Accordingly, if we are to answer their political argument
with a political answer, we must, at the outset, frankly recognise
that the aim of the Protectionists in this instance is good ; and
that a variety of industrial occupation is, for many reasons,
advantageous to a community.
We may even, indeed, go further on the path of conciUation,
and also admit that, in some stages of national development.
Protection is very likely to create industries which either would
not otherwise come into existence, or would be delayed
in their birth for many years.
We start, therefore, by admitting that Protection in this
instance aims at effecting a good result, and partly succeeds in
its aim. But we are still far from a final agreement. Protection
may be one means to secure diversity of occupation, but Free
Trade may be a better.
>; 4. As in every political question, the point to be con-
sidered in judging of the expediency of adopting Protection,
in order to secure an early diversification of industry, is
" ^^'hcther, on a balance, the advantages exceed the dis-
advantages."
In order to ascertain tiiis, tlie present condition of the
country must first be examined. Thus, if the argument is
264 Industrial Freedom.
being used to justify the abandonment of Free Trade, the
question will be, " Whether, as a fact, the industrial occupations
of the country have not already been so much diversified,
under a policy of freedom, as to give a reasonable ground
for the belief that no legislative interference is required to
prevent stagnation ?" If, again, it is used in a Protected
country to resist a return to freedom, the question at ihe
outset is equally one of fact; namely, "Whether Free Trade,
although it might alter the kinds of industries, would really
lessen their number ? "
These facts having been ascertained to form the basis of dis-
cussion, the question then assumes a wider scope, and invokes
a general consideration of the working of Protective policies.
Every circumstance which attends the operation of Protection
must be taken into account its effect upon existing industries,
as well as upon those which it seeks to create ; its effect upon
the relation between capital and labour generally in the
community ; its effect upon the industrial temper of the
people, their energy, honesty, and self-reliance ; its effect
upon the purity of political life ; its social effect in creating
"vested interests" and privileged classes- in a word, its
bearing generally on all the intricate relations of the industrial,
political, and social life of the community in which the experi-
ment is to be justified.
By thus considering, first, the actual industrial position
of the country, and next, the actual or probable effect of
Protection in all its bearings, some estimate can be formed of
its wisdom or unwisdom as a means for encouraging a variety
of industr}'.
It is the fate of every political measure to produce un-
expected consecjuences of evil. Protection, as a political
measure, cannot hope for better fortune; so that we may fairly
assume that the results of a Protectix'C measure in any country
will not be wholly good. Therefore, when we are asked to
support Protection because it causes a diversity of industry,
The Political Argument. 265
Pt. IV , Ch. iii., \ 5.]
we cannot fix our attention on the one good result of the
poUcy and ignore all those that are bad. Admitting a diversity
of industries to be a good thing, and admitting it to be
attainable by Protection, still we must inquire, " Whether there
is not any other means which would give the same, or almost
the same, good, with less of the evil ? "
Applying these considerations to the particular argument
now under discussion, it follows that, although it may be true,
under ordinary circumstances, that Protection will cause an
earlier diversification of industry than would be established
naturally, that is not conclusive in its favour, even if it be
further admitted that an early diversification is desirable. The
Protectionist will also have to show that industry will not
diversify under Free Trade if not, perhaps, quite as rapidly,
yet with sufficient speed, and with more advantage on the
whole to the welfare of a young community.
The discussion of the validity of the diversity argument
will then take the following order :
First Whether, in fact, any Free Trade country has
suffered, or is likely to suffer^ from an insufficient variety of
industrial occupation ?
Secondly Whether, if a country is so suffering. Protection
is the only remedy ?
And thirdly If Protection be the only remedy, whether,
in any case. Protection is not too high a price to pay for the
advantage of diversity ?
A discussion of these questions will' occupy the remainder
of this chapter,
i; 5. 'J'hc first duty of a tarift" disputant is to verify his focts.
Vet, probably, in no other controversy professing to deal with
facts is tliere such an outspoken contempt for accin-atc inquiry,
or such a readiness to build large conclusions upon so slight
a basis of verified evidence. No doubt each })arty to the
266 Industrial Freedom,
controversy brings this charge against the other, but we may
prove it against Protectionists in at least one instance.
The " diversity of industry " argument is intended to be used
as a general defence of a Protective system. The assumptions
upon which it rests are partly of existing facts and partly of
theories. The assumption, for instance, that a country either
is suffering, or is in imminent danger of suffering, from a lack
of variety in its industrial occupations, is purely an assumption of
present fact \ while the assumption that Free Trade destroys or
prevents diversity of occupation is a theory. No doubt, if the
theory is true, it will be an inference from facts ; but it does
not give rise to an inquiry into evidence of the same direct
and simple character as the assumption which was first
mentioned.
Now, it is plain that the use of the diversity argument in a
Free Trade country implies a belief, either proved or taken for
granted, that the variety of industries existing at the time is
insufficient to the wants of the community. It must also be
admitted that, if it can be shown that there never has in fact
been any country in which a sufficient variety of industries did
not grow up naturally without Protection, such a proof should
materially lessen the alarm of those who believe that a return
from Protection to Free Trade will cause employment to be
narrowed to a few extractive industries.
Let us, then, keep the argument to one point, and setting
aside for a moment the question whether it is conceivable that
Free Trade could preyent the growth of industrial variety let
us examine the actual condition of the United States of
America, Victoria, and New South "Wales at the time when the
argument was used in each of those three countries to justify
the abandonment of industrial freedom. Is it, or is it not,
the case that either of tliose countries ever suffered, or was
likely to suffer, because the efforts of its population were
limited to a few occupations? This is a simple matter of
evidence.
The Political Argument. 267
Pt. IV., Ch. iii., 5 6.]
6. Look, first, at the industrial condition of the United
States in 1789. During the existence of the British dependency
all American industries were exposed to the crippling influence
of the colonial system, under which the whole trade of the
colonies was at the mercy of the English Parliament. This
terrible power was used by the English Protectionists entirely
in the interests of English manufacturers. Thus, not only
were Americans forbidden to trade with any country except
England, but the moment an American manufacturing in-
dustry showed signs of growth, it was suppressed by Act of
Parliament.
Protectionists often ask what country ever reached the
manufacturing stage without Protection ? Seeing that the
principles of Free Trade may be said to have been unknown
until the close of last century, it would be just as reasonable to
inquire for the name of any country which attained to manu-
facturing eminence without a system of communication by
means of post-horses and hand-signals. Free Trade, like
telegraphs and railways, is a modern device, and is directed
to the object of all modern human invention : viz., the over-
coming of natural obstacles. Still, if this silly question is to
be pressed, an answer is easily found the United States of
America.
In the early colonial days, in spite of hostile legislation,
many manufacturing industries had so firmly established them-
selves that their products were able to undersell the English
manufacturer in his own market. The consequence in every
instance was the same : viz., that the English manufacturer
obtained an Act of Parliament prohibiting the export of the
American article. A list of the Acts referred to can be found
in Mr. Bancroft's " History of the United States," or in Mr.
Lecky's " History of England."
Yet, so irresistible is the tendency in a growing community
to diversify its occupations, that, in spite of this crushing
system of legislative interference, Hamilton, the father of
268 Industrial Freedom.
American Protection, was able to enumerate, in his report on
manufactures, no less than seventeen industries as being "firmly
established" in the year 1792. The list of these speaks for
itself. It is sufificient to note that the iron industry was one of
those which had so become "established" without Protection.
, 7. The recent history of the United States furnishes
another instance of the spontaneous development of manu-
factures in a growing community, in despite of the competition
of older and powerful rivals. The Western States of America,
in their early days, stood towards the Eastern in precisely that
industrial relation Avhich, according to Protectionists, makes
diversity of industry impossible without Protection. In the
West the extractive industries were exceptionally profitable.
In the East there were old-established and important manu-
factures. In the West the average rate of wages was, and still
is in some States, about twice as high as that prevailing in the
East. The rate of interest in the East was, and is, from six to
two per cent, lower than in the West. The Eastern manu-
facturer thus has all the advantages which, according to
Protectionists, are essential to the successful establishment of
manufactures : viz., low wages, cheap capital, acquired skill,
established business connections, traditions of manufacturing
industry, a wealthy and settled population everything, in
short, which makes the competition of an older rival irre-
sistible. If the Protectionist theories are true, the Western
States would still be communities of miners, pastoral isls, or
farmers. They would never have enjoyed the blessings of a
varied industrial life unless they had been able to Protect
themselves by tariffs against the "inundation" of Eastern
goods. That bracing and delicious life within factory walls,
which (in Protectionist speeches) the fiirmer and the miner
are always supposed to be desiderating, could never have been
opened to the man of the ^^'est unless he had consented to
reduce his wages or to take a lower return for his capital 1
The Political Argument, 269
Pt. IV., Ch. ili., 5 7.]
Yet, what are the facts ?
There has always been absolute Free Trade between all
the States of the Union. Goods pass as freely from Penn-
sylvania to California as they would pass from Pennsylvania to
Toronto if the obstacles of legislation were removed. The
Western manufacturer has always been "at the mercy of" his
Eastern rival. In the meantime, the industry of the Western
States has been steadily diversified. Towns have grown up, at
first as reservoirs for agricultural produce or as mining centres;
and as population has come together, manufactures have been
established. At the present time a large number of manu-
facturing industries are carried on in California, giving employ-
ment to about twenty thousand persons. A similar development
is taking place in all the Western States. Their manufactures
of woollens, certain grades of leather and iron goods, are not
only able to supply the local demand, but to hold their own in
competition with the produce of Eastern factories in every part
of the Union.
This instance of industrial progress in the Western States
of America has a particular significance to Australians.
The only serious rival to Australian manufacturers is Great
Britain the imports from other countries being insignificant
compared with those from the motherland. Now, the diftcrencc
between the industrial conditions of Australia and Great Britain
is no greater than that between the conditions of California
and New York.
There is, no doubt, a greater difference between Australia
and England in the rates paid to the lowest grade of unskilled
labour than there is, in respect to the same class of labour,
Ijjtween any two States of the Union; but the difference
between wages in manufacturing industries in England and
Australia is not so great as the difference between the same
class of wages in Pennsylvania and California ; while in other
respects, the comparison between Australia and England is
strikingly similar to that between theEastern and^\'estern States.
270 Industrial Freedom.
What reason, then, can be suggested why England and
Australia should not trade together, which would not equally
apply to trade across the American continent ? If in the face
of Eastern competition the Western States develop a variety of
industries, is not the alarm of Australian Protectionists lest
manufactures can never be established here in the face of
English competition, exaggerated and unfounded ? Can any
reason be suggested why the industrial progress of Australia
should be different from that of the Western States ?
If it be said that California and Pennsylvania are parts of a
*' political entity," to which the economic entity should be
compelled to correspond, the reply is obvious. England and
Australia are equally parts of a political entity ! And if it be
urged that the political connection between England and
Australia is not likely to continue, the value of the reply is not
lessened. The basis of any sound " political entity " must be
a living sentiment of national unity ; and, whatever may be the
future of Australia, no one can pretend at present that she is
not connected with England by ties of race, speech, and
nationality, which are stronger than any political forms. The
differences between the inhabitants of the Southern, Eastern,
and Western States of America in race, manners, religion, even
language itself, are far greater than the differences between
Englishmen and Australians; yet a "Nationalist" economist
allows Spanish Florida, French Louisiana, and Mexican Texas
to trade with one another and with Puritan New England, but
proi)hesies every sort of disaster if Australia continues to trade
with England.
8. Let us now turn from America to Australasia, and
examine the actual conditions of the latter country, in order
to ascertain whether they give any colour to the assertion
that a young country cannot diversify its industries without
Protection.
Australia furnishes a striking instance of two colonies, of
The Political Argument. 271
Pt. IV., Ch. iii., \ 8.]
similar industrial conditions, of no great inequality in natural
advantages since the physical advantages of New South
Wales are more than equalled by the advantages of early
development which Victoria owes to her concentrated and
well-watered territory living under similar forms of govern-
ment, and resembling each other in all respects save that one
has adopted Protection and the other has adhered to industrial
freedom. No other countries, past or present, offer so ex-
cellent an occasion for studying the effects of different fiscal
policies. At present we are only dealing with the supposed
effect of Protection in securing and maintaining a diversity of
industries. It is a striking illustration of the impotence of
legislation to control in any material degree the operation of
economic forces, that after twenty-five years of Protection in
Victoria and Free Trade in New South Wales, there is no
great difference between the two colonies in the diversification
of their industries. If any difference exists, it is in favour of
New South Wales. There is a greater variety of industry in
the Free Trade colony than in the Protected. This is, no
doubt, owing to the operation of other causes than the absence
of Protection, but it is a very strong piece of evidence against
the theory that industrial variety cannot exist in a young
community without Protection.
Even in Victoria, Protectionists will find it hard to prove
that the industrial diversification which now exists would not
have been without the tariff In 1866, the last year of Free
Trade, there were no less than 735 manufacturing establish-
ments within the colony, giving employment to 12,127 persons
out of a population of 651,899.
Who can say, with the experience of the Western States of
America before him, that the industries which have sprung up
during the last twenty-three years are wholly owing to the
tariff? And still more, who can count or estimate the in-
dustries which the tariff has destroyed or stifled in their l^irtli ?
A comparison of the industries in existence in 1866 with those
272 Industrial Freedom.
of 1889 shows that, whatever Protection may have done in the
way of creating new industries, it has materially discouraged
some of the old industries notably the industries of ship-
building and meat-preserving.
But if there is little or nothing in the history of Victoria
to justify the belief that without Protection there must be
industrial uniformity, there is still less in the history of New
South Wales.
The " industrial uniformity " of Free Trade New South
^Vales in 1889 consisted of 109 distinct varieties of manu-
facturing industries. The number of establishments was
3,106, and the number of hands employed was 45,564, while
the value of the plant was ^5,743,025, and the horse-power of
the machinery was 24,990. The list of manufactures in the
official returns made by the manufacturers, whose interest it is
to minimise their success, shows that, so far from New South
Wales being in any immediate risk of becoming a purely
pastoral community, the progress of manufactures has been
such that most articles of common use can now be made in
the country, from a pearl button to a steam-engine.
Still, it may be said, great as is the manufacturing progress
of New South Wales, it might have been even greater under a
ss'stem of Protection. Conceivably it might. But that is not
t'.ie question immediately at issue. Time enough later to
consider whether greater progress in that direction would have
been possible or healthy. The pressing question is, "Are
Protectionists right when they urge New South Wales to
abandon Free Trade in order to secure diversity of industry?"
A\'here, we ask, is the evidence that variety is lacking ? Where
i; the proof that your alarms are well founded? The i)ro-
l)ortion of our manufacturing to our agricultural and pastoral
l)opulation is well up to the average. The number of our
industries is large and increasing. Where, then, are the signs
that the cause of our inconveniences is an excessive concentra-
tion upon pastoral pursuits? Can they point to any country of
The Political Argument. 273
t. IV., Ch. iii.,59.]
modern times which was prevented from diversifying its in-
dustries for want of Protection? If they cannot, the first and
principal assumption of the diversity argument, when it is used
in a Free Trade country, is unsupportable by facts. There is
not, in fact, any lack of variety in the industrial occupations of
a Free Trade people who inhabit a young community whose
resources are great and expanding.
Let us now test the argument by theory, in order to dis-
cover, if possible, to what extent it is probable that Protection
can ever be a necessary condition of industrial variety.
^ 9. The first assumption of the diversity argument viz.,
that without Protection there can be no sufficient industrial
variety in a young country has now been tested by reference
to facts, and it has been shown that the assumption is, at least,
not supported by evidence. All young countries with which
we are acquainted have developed many natural resources
without Protection, while there is no evidence that any of
them has been prevented from doing so by the existence of
Free Trade. It remains to test the assumption by reference
to theory. Protectionists cannot complain of this test, for
until they advance facts in support of their assertion it can
only be tested by the probabilities which are derived from a
consideration of general principles.
It has already been pointed out that when a State is first
settled the energies of its people are so largely directed to the
extractive industries that there is no supply of spare labour
available for manufactures on a large scale.
It docs not, however, follow that there will be no other
avenues of employment. Even a pastoral community and
pastoralism is tlie simplest of the extractive industries requires
houses, clothes, tools, and conveyances ; while, as Professor
Fawcett, among others, has pointed out, " However purely
agricultural the industry of a country may be, there must
always bo a great deal of work to be done which will provide
s
274 Industrial Freedom.
many different kinds of employment besides the mere tilling of
the land. Houses and other buildings have to be erected,
roads have to be made, agricultural implements and machinery
have to be repaired, and the cost of carriage will make many
articles, especially those of a bulky kind, so expensive to
import that, although labour maybe dearer in a new country, it
will be found cheaper to make the articles at home. The
various trades and handicrafts which are thus called into
existence will create an increasing demand for skilled labour,
and in this way that industrial uniformity about which the
Protectionists express so much alarm will be avoided."
(" Free Trade and Protection," p. 77.)
But none of the young communities of modern times is
devoted exclusively either to pastoral or agricultural pursuits.
They follow all the extractive industries simultaneously. Now,
nothing more conduces to the concentration of the population
and the growth of towns than mining. Consequently, in any
country where minerals abound the domestic industries, which
are inevitably created by the growth of towns, are sure to gain
a firm footing.
It would therefore appear that under any conceivable
circumstances the cry about a country suffering " from the
stagnation of a single industry" is both exaggerated ar.d
ridiculous. No community can exist without a great variety
of industries which no foreign competition can destroy. The
true question, when the diversity argument is stripped of its
exaggerations, is, " Whether a State can pass from the agricul-
tural to the manufacturing stage without the assistance of a
Protective tariff."
|< lo. Now, the successful jjrosecuticn of manufactures on
a large scale dci)ends u[)on tlie concurrence of two conditions,
namely :
1. A large and concentrated population.
2. A supply of available capital.
The Political Argument, 275
Pt. IV., Ch. iii., ? 10.]
It is sometimes asserted that Protection encourages
immigration, and thus stimulates the increase of population.
This assertion, although it is not demonstrably incorrect, is not
supported by proof. Such evidence as can be obtained points
rathcn the other way. Since the adoption of Protection by
Victoria there has been a steady stream of emigration from
that colony to Free Trade New South Wales, as was disclosed
by the often-quoted report of Mr. Hayter on the census of
1 881.1 ^^he emigration of young men from the colony of
Victoria is particularly noticeable, in view of the Protectionist
assertion that Protection provides employment.
It will be imitating a Protectionist method of argument to
assert that New South Wales gained the whole of this
l^opulation from her southern neighbour on account of the
superior attractions of her Free Trade policy. But the fact of
the decrease in Victoria during ten years of Protection
certainly does not predispose the mind to a ready belief in the
unsupported prophecy of Protectionists, that their policy will
increase population.
Nor does American experience justify Protectionists in this
assertion. The figures of immigration into the United States
have been analysed by Professor Sumner (" Protectionism,'
p. 122), with the result that nine-tenths of the immigrants are
shown to be labourers, domestic servants, farmers, and others
who belong to trades which are not Protected, and whose
arrival cannot therefore be attributed to the operation of a
Protective duty.
Suppose, however, for a moment that Protection does
ericourage immigration. This is a curious rtsult to be brought
about by those who invariably declare themselves the
enemies of immigration. A tax to increase the supply of
labour very soon becomes a tax to lower wages; so that there
seems some inconsistency between the argument that Protection
' 5tv below, .Appendix III.
276 Industrial Freedom.
raises wages and the argument that it increases the number of
the wage-receivers.
Moreover, it is worth considering whether any rapid
increase of population even although it causes the establish-
ment of manufactures as one result is altogether desirable to
a young community. The absence of poverty, the easier
conditions of life, the higher standard of comfort, which are
characteristics of a young country, are owing in no small
degree to the strong position which the labourer occupies in
making his bargain with employers, in consequence of the
limited number of his competitors. The man who desires to
introduce the pressure of population into a young country
must also be prepared to face the evils of an old.
But if it is conceivable (although unproved) that Protection
may assist the encouragement of manufactures by stimulating
immigration, there is certainly no ground for any fear that
Free Trade will operate as a hindrance to new settlers. That
which attracts population to a young community is precisely
that which is an obstacle to the establishment of manufactures :
namely, the profitableness of the extractive industries. So
long as the natural fertility of the soil enables much to be
produced with little effort, so long will immigrants pour into a
country of high wages and large profits. It was the discovery
of gold, and not the Protective tariff, that caused the rush of
])opulation to A^ictoria ; and it is the vast expanse of fertile land
that draws the annual stream of immigrants to the United Slates.
The second requisite to manufacturing development is an
abundance of capital. Now, the profits of capital in a young
country are usually large, because the demand of the old world
for raw produce is very great, and, owing to the assistance of
nature, is easily supplied. But, as cajjital accumulates, and
the natural advantages of the country become exhausted, new
openings for investment will naturally be sought. \\\\\ these
be sought in the country or outside ? Can the answer be in
doubt? At any rate, no one whose professed faith is belief
The Political Argument. 277
Pt. IV., Ch. iii., \ 10.]
in the nation as the industrial unit ought to hesitate a moment
in his reply !
Let it, then, be granted that a time will come when the
spare capital of the country can no longer find a satisfectory
investment in the extractive industries what is more likely to
attract attention than a further development of natural
resources, in order to supply the young community with
articles that it has hitherto imported ?
But tlie more vigorous the foreign trade, the larger is the
home production ; and the larger the home production, the
greater the opportunities for saving money. Accordingly, a
large import trade is the surest sign that foreign industries will
soon be naturalised ; and the fear of industrial uniformity is
groundless so long as the capital of the community continues
reproductive, and natural resources remain to be developed.
'^I'he conclusion is thus reached that, just as there is no
known instance of industrial variety being prevented by Free
'i'radc, so is there no a priori reason that such should be the
case. Once grant that individuals seek their own gain, and
are alive to their own interests, and that the conditions of a
country are such as to encourage a rapid growth of population
and a large accumulation of capital and the tendency to
develop new industries continues with gathering strengtli until
every natural resource has been exhausted.
Manufactures will spring up in every State as need arise?',
for then the demand for their products will be sufficient to
ensure a profit. Protection, by creating an artificial demand,
may hurry their growth by a few years ; but Free Trade is not
an obstacle to manufactures, but rather an assurance that they
will be jjlanled in a health)- soil, and grow to maturity. "The
develoi)ment of society is as regular and as natural as that of a
plant, and there is no more need of human interference than
there is to make a bud l)urst into blossom at the proper time.
It is a develoi)ment, moreover, which cannot be hastened
without injury. A new country cannot have the higher social
278 Industrial Freedom.
development until its population begins to grow dense. It is
so in America yet. We have not the literature, or the science,
or the fine arts of the old countries ; but we have not their
poverty and misery. We must take our advantages and dis-
advantages together." (Sumner's "History of Protection, "p. 26.)
This is the answer to Protectionists in a young community
who complain of its industrial uniformity. Free Trade is no
obstacle to a natural diversity of occupation which is sufficient
for the present needs of any growing country, and is free from
the risks and disorders of that rickety diversity which is the
untimely fruit of legislative labour.
II. We have already considered the argument that
Protection causes a diversity of industry by the tests of fact
and theory, and endeavoured to show that young countries do
not, in fact, suffer from industrial uniformity, and that, if they
did, there is no reason why they should not find a remedy
under a policy of unrestricted trade.
It remains to point out that, even if all the force is given
to the argument which Protectionists demand for it, there are
certain natural limits to diversity which no legislation can ever
pass. It must never be forgotten, when Protection is extolled
because it causes a diversity of industry, that there is an
impassable limit to diversification set by Nature herself.
It has been well said that " there is a natural law in opera-
tion which as surely determines the number required for each
great class of employment as do the natural laws which locally
determine the times and relative heights of the tide. No
social advancement . . . can ever alter the relative
numbers of the various branches of human service." ^ That
1 Extract from paper read by R. M. Johnston, Government Statistician
of Tasmania, before the Australasian Association for the Advancement of
Science, at Melbourne, 1890 (p. 9). Mr. Johnston gives (p. 11) a valuable
table showing the proportional classification of tiie occupation of all persons
engaged in the supply of home wants. The higlicst proportion employed
in industrial occupations is in Engl ind : viz., 24 "5, as against 7"6 in the United
States.
The Political Argument. 279
Pt. IV., Ch. iii., \ II.]
which determines the numbers required for each class in any
country is the condition of its leading industries.
In a country where dominating industries are pastoral or
agricultural, the proportion of industrial employees must be com-
paratively small ; while in a country like Great Britain, which
is pre-eminently a manufacturing country, the number will be
large. Until a country has exhausted the profitable occupation
of its soil, whether in the cultivation of iron or search for
minerals, no amount of Protection can draw labour and capital
to other industries without inflicting a dangerous check to
national development.
Even in the United States, where Protection has run
mad, the proportion of industrial bread-winners is, according to
Mr. Johnston's figures, only 7-6 of the entire population ; while
in England it is 24-5.1 While, if " industrial " occupations are
still further sub-divided so as to place manufactures in a
separate class, it is usually estimated that not more than one
person in ten can, under any circumstances, find employment
in that channel. Nor can this number be safely anticipated
in a country which, like the United States or Australia, is still
in the agricultural stage. But, whatever may be the precise
proportion which manufactures ought to bear to agriculture or
to mining, the point to remember is that it cannot be safely
exceeded. A country like England, which exports its manu-
factured goods to every corner of the world, can enlarge the
proportion which its manufacturing employees bear to its own
population, because they are engaged in supplying the wants
of other countries. But a country which cannot export its
manufactures can only safely permit the existence of a sufficient
number of employees to supply its own wants.
The practical rule to be deduced from these obvious
renections is that manufactures should be allowed to find their
own level. If an attempt is made to forcibly divert labour
from agricultural to manufacturing pursuits, there is an almost
1 In I'"rce Trad'.- Xcw South Wales in 1880 it was 6'^.
28o Industrial Freedom.
certain danger of over-production ; wliile if manufactures are
allowed to grow up as they are required, they will be able,
having originated under open competition, to extend their
market as they increase their production. Nothing is moie
striking in commercial history than the inability of American
manufacturers to compete with England in a neutral market.
While England every year sends from twenty to thirty million
pounds' worth of manufactured goods into the United States,
in despite of the heavy tariff, the whole export of American
manufactures to all parts of the world seldom exceeds a value
of ten millions.
It is as certain as any forecast of the future can be, that so
long as America adheres to Protection Great Britain need have
no fear of her commercial rivalry ; but when America adopts
Free Trade the tables will be turned, and England, in all
probability, will be beaten out of many neutral markets.
The impossibility, then, of increasing manufacturing
industries beyond a certain point, unless the industries are such
that they can face the competition of the world, is a considera-
tion w'hich should make Protectionists pause before proposing
to hurry the establishment of many industries. The results of
interference with commerce are hardly ever calculable, and no
one can foresee in any country all the consequences of
Protection. We cannot accurately estimate either the demand
for manufactured goods or the supply of available labour ; we
cannot tell beforehand what would be the result of higher
prices for manufactures upon the dominating pursuits of the
country, and we hardly even know accurately the number or
strength of our existing industries. Under such circumstances,
the man takes upon himself a heavy responsibility who
proposes to interfere by Act of Parliament with the distribution
of employment. It may be true that the future is obscure, so
that even the clearest-sighted despair at times ; but steady faith
in man and nature is better than rash play with unknown
forces. Things may be bad, and the remedy may not be
The Political Argument. 281
Pf. IV., ch. Hi., \ 12.]
visible ; but it would be the very blindness of unwisdom to
attempt to solve the problem without knowing the factors or
possessing any test of the result.
12. Nor must it be forgotten that, even if diversity be
gained, there is another aspect to the question besides that
which is presented by the manufacturers. It is possible to pay
too high a price even for the advantage of industrial diversity.
"Development of natural resources," "variety of occu-
pation," and such large phrases, bear a different significance to
the man who pays for the development and the variety and to
the man who receives the money. The natural-resource
theory is admirably comforting to the man who owns the
resource ; but the man who does not own it sees the theory in
another light.
Professor Sumner has thrown the question into an amusing
dialogue, which contains none the less of sound sense and
good economics than if it were expressed in a more professorial
style.
"A man," says Professor Sumner, " discovered iron when
there was no duty on imported iron. On the Protectionist
doctrine, he wonl collect tools and go to work. He goes to
Washington, he visits the statesman, and a dialogue takes
place :
" Ironman : Mr. Statesman, I have found an iron deposit
on my farm.
" Statesman : Have you, indeed ? Tliat is good news.
Our country is riclicr by one new natural resource than we had
supposed.
" Ironman : Yes ; and I now want to begin mining iron.
" Statesman : Very well ; go on. A\'e shall be glad to hear
that you are [)rospering and growing rich.
" Ironman : Ves, of course ; but I am now earning my
living by tilling the surface of the ground, and I am afraid that
I cannot make as much at mininc: as at farmin";.
282 Industrial Freedom.
" Statesman : That is indeed another matter. Look into
that carefully, and do not leave a better industry for a worse.
" Ironman : But I want to mine that iron. It does not
seem right to leave it in the ground when we are importing
iron all the time ; but I cannot see a profit in it at the present
prices for imported iron. I thought perhaps that you would
put a tax on imported iron, so that I could sell mine at a
profit. Then I could see my way to give up farming, and go
in for mining.
" Statesman : You do not think what you ask. That
would be to throw on your neighbour the risk of working the
mine which you are afraid to take yourself.
" Ironman (aside) : I have not talked the right dialect to
this man. I must begin all over again. (y\loud.) Mr.
Statesman, the natural resources of this continent ought to be
developed. American industry must be protected. The
American miner must not be forced to compete with the
pauper labour of Europe.
" Statesman : Now I understand you. Now you talk
business. Why did you not say so before ? How much tax
do you want ?
" The next time that a buyer of pig iron goes to market to
get some, he finds that it costs thirty bushels of wheat per ton
instead of twenty. ' What has happened to pig iron ? ' says he.
'Oh! haven't you heard?' is tlie reply. 'Anew mine has
been found down in Pennsylvania. We have got a new
' natural resource." '
" ' I haven't got a new natural resource,' says he. ' It is as bad
for me as if the grasshoppers had eaten up one-third of my crop.' "
It would be a good day for the public if the discussion of
politics could always be conducted in this simple language.
At present, politicians are the only persons, except preachers
and art critics, who are thought the more of for talking
nonsense ! For the picture drawn by Professor Sumner is not
in the least exaggerated. The third chapter of Mr. Taussig's
The Political Argument. 283
Pt. IV., Ch. iii., \ 12.]
most useful work contains numerous illustrations from American
experience which are equally grotesque. The most instructive
are the duties upon emery, nickel, and copper.
Up to 1864, nickel had been admitted into the States
duty-free ; but shortly before this date a nickel mine was dis-
covered in Pennsylvania. The opportunity for developing a
natural resource was too great, especially as the mine was
owned by an influential politician. In 1864 a duty of 15 per
cent, was imposed on nickel, and in 1870 the duty was raised
to 30 cents per pound, or about 40 per cent, on the value. No
other nickel mine has been discovered, and the fortunate pro-
prietor, Mr. Joseph Wharton, is now a millionaire, and joins
with Mr. Carnegie in his praises of democracy. It is, perhaps,
needless to add that Mr. Wharton is a determined opponent of
any reduction of the duty upon nickel. Mr. Wharton is also
the founder of the " Wharton School of Finance and Economy "
in Philadelphia, and, in the opinion apparently that restrictions,
which are so desirable upon the sale of nickel, would be equally
applicable to the study of economics, he has expressly enjoined
that the professor shall teach Protection ; or, in the words of the
deed of gift, " how, by suitable tariff legislation, a nation may
keep its productive industry alive, cheapen the cost of com-
modities, and oblige foreigners to sell to it at low prices, while
contributing largely towards defraying the expense of its
government." It is not mentioned in the deed of gift whetlicr
tlie Wliartonian professor is allowed to teach the best means of
" cheapening the cost of the commodity," nickel. The present
holder of the Chair is the Mr. Patten whose work in defence of
Protection has already been referred to.
Copper has fared the same as nickel. Previously to 1869
copper ore was imported from Cliili, and was smelted and re-
fined in Boston and Paltimore. But during the years imme-
diately preceding 1869, the great copper mines of Pake
Superior had begun to be worked on a considerable scale.
284 Industrial Freedom.
These mines, under ordinary conditions, could have supplied
the whole of the United States more cheaply and abundantly
than any other country; yet, as Professor Taussig points out,
" through the tariff policy these very mines have caused
Americans for many years to pay more for their copper than is
paid in any other country." The table compiled by Professor
Taussig (p. 263), from "The Mineral Resources of the United
States," of the prices of copper in London and New York from
1875 to 1886, is conclusive on this point. The process was
simple. The duty having shut out foreign copper, a copper
trust was formed, which has embraced the new mines one by
one as they were opened, and the output of copper was limited
o as to keep the price just below that at which copper would
have been imported. Needless to add that all the "copper
kings " are staunch Protectionists.^
Put it is unnecessary to multiply examples. American
experience is open to all to see. Can Australians hope to
escape these evils? No wonder that, with the results before
his eyes of the discovery in America of nickel and copper,
1 The Hon. David A. Wells, on page 23 of his " Practical Economics," has
collected some of the more striking examples of American efforts to secure
industrial variety. '' .\bout 1826 to 1828." he says, "the discovery of the lead
mines at Galena, 111., became generally known, and as the first reports were
to the effect that the deposits were of such unparalleled richness, purity,
magnitude, and easy accessibility, as to make it only a matter of time when the
whole world, from sheer inability to compete, would become wholly dependent
for its supplies of lead on this one locality, it was at once considered desirable
Ijy many people to establish it, so far as fiscal legislation could do it, on a most
extraordinary economic jirinciple, and one whicli from that day to this has
proved popular in all tariff enactments in the United States : and this was to
make tlie (li--co\ery or recognition of the existence of any great natural advan-
tages citluT in the way of mines, soils, climatic advantages, forests, means of
interconnnunication, or national characteristics the immediate occasion for
cursing tlie cuuntiy by the creation or imposition of some new tax, thereby
making dear what was before clieap ; endeavouring to work up to a state of
abundance through conditions of scarcity artificially created and unnecessarily
perpetuated. In this particular instance the principle was exemplified by
raising tb.e duty on lead imported in pigs and bars from one cent a j50und to
three cents."
The Political Argument. 285
Pt. IV., Ch. iii., \ 13.]
Professor Sumner firmly hopes that tin may not be found.
" At the present time," he says, " we have all the tin that we
want above ground, because beneficent Nature has refrained
from putting any underground in our territory." In the metal
schedule, tin is alone free. Should a tin-mine be discovered,
the next thing will be a tax on tin of 40 per cent. "The
mine-owners say they want to exploit the mine. They do not.
They want to make the mine an excuse to exploit the tax-
payers." (" Protectionism," p. 53.) Since these words were
written, tin has been discovered in the States, and duties on tin-
plate have been a prominent feature in the M'Kinley tariff, as
many Western canners have already discovered, to their loss.
13. Finally, let the diversity argument have all the strength
Protectionists attribute to it : it can never be used as a general
defence of a restrictive policy. It rests, as we have seen, on
the three assumptions that industry has not, in fact, diversified
under Free Trade ; that it cannot do so ; and that Protection
is the best means of causing a diversification.
Now, it is plain that the first two of these assumptions may
be true of one industry and not of another ; accordingly, when-
ever the argument is used, it will be necessary to ask for more
precision. " What are the new industries which it is desired to
establish? and what is to be the rate of duty?" It is most
noticeable that Protectionists are always silent upon these
(questions when they are before constituencies. "The art of
taxation,"' Colbert is reported to have said, "is the art of
plucking the goose so as to get the largest possible amount
of feathers with the least possible squealing." It would never
do, tliereforc, to let the people know beforehand the nature of
the coming taxes. Mucli better to let everybody think that
the tax will fall on his neighbour's back. When gifted legisla-
tors meet in cau( us, matters t^n be arranged so much more
satisfactorily to the manufacturers certainly, and possibly to
the legislators ! Thus the policy of the Protectionist party on
the 1 ustings must always be a policy of silence and conceal
286 Industrial Freedom.
ment. The strongest argument Free Traders can desire is that
no Protectionist leader ever dares to say beforehand either
what taxes he requires, or what is to be their amount, or for
how long they are to be imposed.
CHAPTER IV.
THE HOME-MARKET ARGUMENT.
I. The home-market argument is best known in the story of the
Irishman who complained that a dollar in New York went no
further than a shilling in Dublin. '' Then, why did you not stop
in Dublin ?" was the question of a bystander. " Because there
I couldn't get the shilling ! " was Pat's reply. This is the plat-
form presentation of the argument. In treatises which pretend
to be serious it has three distinct forms or varieties. Some-
times it is used in defence of Protection as a means of render-
ing a community less dependent upon foreigners in the event
of war ; at others, as a means of extending or strengthening the
market of the local agriculturist in time of peace ; while in its
more recent developments the necessity of enlarging the home
market is insisted upon as the only means of disposing of the
surplus from extractive industries.
The economic basis of the argument in all its varieties is
that misapprehension of the comparative importance of the
home and foreign trade of a community which confused even
Adam Smith. The passage is well known. " Capital," he
says, "employed in purchasing in one part of the country in
order to sell in another part the produce of the industries of
that country, generally replaces by such operation two distinct
capitals that had both been employed in its agriculture or
manufactures, and thus enables them to continue that employ-
ment The capital employed in purchasing foreign
The Political Argument. 287
Pt. IV., Ch. Iv., \ I.]
goods for home consumption, when the purchase is made by
the produce of domestic industry, replaces, too, Ijy every such
operation, two distinct capitals ; but one of them only is em-
ployed in supporting domestic industry. . . . The other sup-
ports foreign industry, and, therefore, foreign trade will give but
one-half the encouragement to the industry or productive
labour of a country that domestic or internal trade does."
The fallacy of this proposition is in the assumption that the
capital which is left unused in consequence of the diversion
of the capital, which set it in motion, from the home to the
foreign trade will continue to be unused after the diversion has
been effected. It is true that trade between England and
Scotland will replace both an English and a Scotch capital ;
and that if the trade be diverted from Scotland to Portugal, it
will replace an English and a Portuguese capital. But the
Scotch capital is not thereby destroyed, but remains available
for new undertakings.
Mr. Henry George ("Protection or Free Trade," p. 117)
exposes the fallacy with an admirable lucidity. " If,'' he says,
" we substitute for the terms used by Adam Smith other terms
of the same relation, we may obtain, with equal validity, such
propositions as this : If Episcopalians trade with Presbyterians,
two profits arc made by Protestants ; whereas, when Presby-
terians trade with Catholics, only one profit goes to Protestants.
Therefore, trade between Protestants is twice as profitable as
trade between Protestants and Catholics.
" In Adam Smith's illustration there are two quantities of
I'.ritish goods -one in Edinburgh and one in London. In the
domestic trade which he supposes, these two <|uantities of
British goods are exchanged ; but if the Scotch goods be sent
to Portugal instead of to I'^ngland, and Portuguese goods
brought back, only one ([uantity of British goods is exchanged.
There will be only one-half the replacement in Great Britain,
but there has been only one-half the dis[)lacement. The Edin-
burgh goods which have been sent away have been replaced
2 88 Industrial Freedom.
with Portuguese goods ; but the London goods have not been
replaced with anything, because they are still there. In the
one case twice the amount of British capital is employed as in
the other, and consequently, double returns show equal
profitableness."
It is astonishing that such a patent fallacy should have
misled any one ; but Mr. Hoyt, in his eighth chapter, accepts
the argument with guileless confidence as a basis of his own
view of the theory that the " home market ought to be pre-
served for home producers : " a maxim which, as Mr. George
observes, is in the same category with " Keep our own
appetites for our own cookery^'' or " Keep our oivn transportation
for our oivn legs I '"'
2. Passing now from the supposed economic basis of the
home-market argument to its various political props, we
shall find that the earliest of these is the dread of an inter-
ception of foreign commerce in time of war. This alarm
underlies the older mercantile theory of commerce, and
pervades the writings of List, Carey, and the earlier Pro-
tectionists.
It is, indeed, as Professor P'awcett has observed (" Free
Trade and Protection," p. 82), "the only logical basis on which
a Protective system can be supported ; for if it could be
assumed that the normal condition of a country was to be
perpetually at war with its neighbours, it would become of the
first importance to make it, as far as possible, industrially
independent of them. Lnder such circumstances it might
be expedient, at whatever cost, to impose Protective duties
with the view of establishing and maintaining various branches
of home industiy." But can any such assumption be made?
Can any conjuncture of circumstances be imagined under
which a country with the extensive seaboard of Australia or
America, and with their means of commanding supplies from
all quarters of the globe, should be unable to import ? As
The Political Argument. 289
Pt. IV., Ch. iv., \ 2.]
Professor Fawcett points out, even when the faciUties of trans-
portation were far inferior to what they are at present namely,
during the wars of the first Napoleon " there was never a
moment even in his unparalleled career of military aggression
when all the coasts and all the frontiers of France were so
completely blockaded that no foreign product could find its
way to her markets."
Assuming, however, that the danger lest any "country, in
these days of steam and electricity, could be so completely
surrounded both by sea and land with foreign foes that it was
unable to import any foreign supplies is not wholly imaginary,
the question still remains whether the premium for insurance
against it is not excessive. The argument then descends into
the region of finance, and turns upon the cheapest means of
guaranteeing to a particular country the continuous supply cf
a certain quantity of goods.
Now, it is apparent that since this argument rests on the
assumption that the goods in question cannot be produced
against foreign competition, the profitable selling price of the
home-made article must be higher than that of the imported.
In other word:, Protection, in this case at any rate, will raise
prices.
It becomes, therefore, a simple matter of calculation
whether the cost to the community of this increase in prices
is not out of proportion to the risk which the expenditure is
thought to insure. The salt tax in France, which Professor
Fawcett mentions as an illustration of the argument, because
it is supported on the ground that without Protection
the French might be deprived of this necessity in time
of war, has raised the price of salt by a halfpenny a pound.
This means a burden of ^7; 20, 000 a year upon the iM-cnch
consumer.
Seeing that a war such as the alarmist contemplates
is not likely to happen more than once in one hundred years, it
would be manifestly cheaper to remit the tax and sp:-nd
T
290 Industrial Freedom.
;i^ioo,ooo a year in the purchase of salt, and distribute this
from the Government stores when the necessity arose.
It is difficult to deal with such considerations seriously.
3. The second form in which the home-market argu-
ment appeared has almost lost its force with the cheapening of
transport and the improvement in the means of locomotion.
It has, however, played a prominent part in the controversies,
and still retains a lingering vitality, so that some examination
of it is required.
It is thus stated by List, as usual, in many words (p. 262,
Eng. Trans.):
"The foreign commerce," he says, "of agricultural nations of
the temperate zone, so long as it is limited to provisions and raw
materials, cannot attain to importance.
"Firstly, because the exports of the agricultural nation are
directed to a few manufacturing nations, which themselves carry on
agriculture, and which, indeed, because of their manufactures and
their extended commerce, carry it on on a much more perfect
system than the mere agricultural nation. This export trade is there-
fore neither certain nor uniform. The trade in mere products is
always a matter of extraordinary speculation, whose benefits fall
most to the speculative merchants, but not to the agriculturists or
the productive power of the agricultural nation.
" Secondly, because the exchange of agricultural products for
foreign manufactured goods is liable to be greatly interrupted by the
commercial restrictions of foreign States and by wars.
"Thirdly, because the exports of mere products chiefly benefit
countries which are situated near sea-coasts and the banks of
navigable rivers, and does not benefit the inland territory, which
constitutes the greater part of the territory of the agricultural
nation.
"Fourth, and finally, because the foreign manufacturing nation
may find it to its interest to procure its means of subsistence and
raw materials from other countries and newly formed colonies."
The bare statement of these views is their best refutation.
In truth, commerce follows its natural channels. Tlic
foreign trade of a young country is in tlie surplus of its
extractive industries, and that trade is neitlier more nor less
The Political Argument. 291
Pt, IV., Ch. iv., ? 3.]
uncertain or varied than trade in manufactured products.
The probabihty, indeed, is that a trade in the necessaries of
Hfe is likely to be larger and more steady than one in manu-
factured articles, which depends to some extent on fashion or
caprice, and is liable at any time to be disturbed by changes
in the processes of production, or in the pressure of new
competitors.
Secondly, a foreign trade in the export of raw materials is
far less likely to be interrupted by war than a trade in manu-
factures, on account of the greater value of such articles to
foreign countries. England, for example, would make more
strenuous efforts to maintain a continuous supply of raw
cotton than of Yankee notions yet, according to List, trade
in the former is more likely " to be interrupted by the com-
mercial restrictions of foreign States and by war."
List's third reason for preferring a home market -" that
exports of mere products chiefly benefit countries which are
situated near the sea-coasts" has entirely lost any value which
it might have once possessed, in consequence of the improve-
ment in the means of locomotion. The existence and pro-
sperity of the Western States of America and Canada is quite
a sufficient answer to the theory that a foreign trade in natural
products only benefits a coastal State.
As to List's fourth reason " that a foreign manufacturing
State may stop buying its food or raw materials from abroad"
can any one name any reason why there is not precisely the
same danger of an interruption to commerce when the articles
exchanged are manufactured goods ? Why should a country
be less likely to give up the importation of manufactured
goods than to give up tlie importation of food? Surely
these professors of Restriction have but little faith in their own
theories !
If all countries became their discii)les, each would
manufacture for itself, and the country which would suffer
most from such a chanire would be that which had been the
292 Industrial Freedom.
first to act upon their maxims, and replace the export of food
by the export of manufactures.
Again, the appeal must be made to common sense.
People abroad buy food and raw materials because they
require these things. The country which sells them does so
because the sale is profitable. The same rules affect a trade
in manufactured goods. Neither is, by its nature, more
profitable, more certain, or more steady than the other ; that
one is likely to possess these attributes in the highest degree
which arises out of natural conditions, and is pursued spon-
taneously by individuals seeking their own advantage.
4. But what shall be said of Mr. Patten the Whartonian
professor ? If List preferred a home market because a foreign
trade was precarious, the latest oracle warned, no doubt, by
the periodic recurrence of commercial crises, even within the
limits of Protected countries has abandoned this reason, and
justifies his preference on the ground that a home market
causes the land of a community to be put to new uses. These
are the steps of his reasoning : " There is a foreign demand
for one class of crops and not for another ; the foreigner takes
wheat, and whilst that demand lasts American land is put
under wheat, and will always remain under wheat until a home
market arises ; because until that event happens no one will
require any other product of the land. An extension of the
home market is required to find new uses for the land." And
the proof is that, since Protection corn has been grown in the
Western States, " the heavier lands were brought into cultiva-
tion, as the home market created a demand for corn instead of
wheat" !i
1 The full text of the argument is subjoined : " The first settlers, instead of
coming upon the best lands, are actually forced to cultivate many of the
poorer soils which are easily brought into cultivation, or which are peculiarly
adapted to the cultivation of those crops for which there is a foreign demand.
For this reason some change in the demand of food must precede the best use
of the land of a countrv. Some Vl&w market must be opened up which will
The Political Argument. 293
Pt. IV., Ch. iv., \ 5.]
What a blessed consummation of the Whartonian pohcy,
that the Western farmer should change his crop from wheat to
maize ! But does it really matter to the Western farmer what
he grows, provided he gets his price for it? And is the
American the only man on earth to whom he could have sold
his maize ? What, too, of the wheat-growers ? What consola-
tion is it to them for the fall in value of the lighter lands which
were first used for wheat that the heavier corn lands now
command a higher price ?
Surely the argument needs no serious answer ; and perhaps
Mr. Patten the professor who, by the terms of his appoint-
ment, is not allowed to be impartial ^ is more to be pitied
than blamed for having used it.
5. But it is not with arguments like those of Pro-
fessors List and Patten that the agricultural voter is beguiled,
but with others which are more enticing. Put in its most
afford a place where the new crops can be sold, thus enabling the producers to
use their land in a better manner ; with which extension of the home market
new uses for the land are found, and at the same time many classes of soil,
which were worthless while the few crops demanded by foreigners were pro-
duced, now become the more productive part of the land. This fact is clearly
illustrated in the changes of value in Western lands which have followed the
creation of home markets. The lighter soils were first occupied because better
adapted to the cultivation of wheat. These soils commanded a higher price
than the heavier lands so long as the main market for the West was in Europe.
But when the growth of home markets created a demand for corn instead of
wheat, the heavier lands were brought into use, and soon became to be
regarded as the better land ; and at the present time they command a much
higher price than do the lighter lands which were first used for wheat."
1 It will be remembered that Mr. Wharton, the founder of Mr. Patten's
Chair, was the fortunate owner of the only nickel deposit in the United States,
and in that capacity developed by means of a tax the natural resource of
nickel-mining " put the land, in fact, to a new use," as Mr. Patten would say
with the result that he became a millionaire, and founded a Chair to teach
"how by suitable tariff legislation a nation may keep its productive in-
diisti y alive, cheapen the cost of commodities, and oblige foreigners to sell to
it at low prices." What do foreigners sell to the Western farmer ? and how
has Protection lowered the price of nickel? These are practical questions for
Mr. Patten to answer.
294 Industrial Freedom.
effective form, the home-market argument, as used at election-
time in country districts, is something like this :
" You are, at present, many miles away from the nearest city,
which is your only market. You cannot sell to your neighbours, who
are all farmers, but must carry all your produce to the city. The cost
of transportation will consume the bulk of your profit; and when
you get the goods to market you will find yourself undersold by the
man who lives a few miles outside the town. What is the remedy ?
Why, this : To make your market at your own doors, and keep it
when it's made. Agree to pay more than we pay now for woollens,
and so make it an object for some one to come here and start a
manufactory. Make the same agreement in respect of agricultural
machinery, furniture, and all farming and domestic implements, so
that you will have a town grow up in your midst, and a market at
your very doors. You needn't then depend on wheat, but can grow
vegetables and other perishable produce, while your wife will sell
eggs, and your children find employment in the factory."'
It is done. The mill is built : the town grows up. The
New England States become the home of manufacturers.
And the farmer what of him ? Strange to say, he sells his
homestead for less than cost, and flees to the wilds of Dakota.
Where is the mistake ? The theory is excellent ; why will it
not work ? It is the agreeing to pay ''just a little more " that
has done all the mischief If the farmers of this locality want
a woollen mill, those in that locality want a cotton mill, and
those in the next county an iron furnace, and so on. The
result is that the fanners everywhere pay ''a little more'''' for
everything they buy, until the cost of their living is increased
beyond any possible profit from an extended market.
The success of this argument is a remarkable instance of
what can be effected by using big words about simple matters.
Suppose that a Protectionist, instead of indulging in large
expressions about phrases such as a home market, the
development of industry, a concentrated population, and
I The writer is indebted for the form of this argument to a pamphlet by
Mr. Graham M'Adani on "The Protective System: what it costs the American
Farmer." (New York Free Trade Club, 1880.)
The Political Argument. 295
Pt. IV., Ch. iv 5 s.]
such-like, were to address a country audience in terms like
these :
" My friends, I am a poor man, but I am anxious to see you sell
all your products at a profit. I want nothing to be wasted because
of the cost of taking it to market. I propose to bring a market to
you by buying your stuff myself."
These sentiments should be received with cheers ; but let
the orator proceed :
" I propose to build myself a fine mansion on the most eligible
site in the country. This will give employment to stonecutters,
bricklayers, masons, carpenters, joiners, carters, upholsterers, and
many other kinds of tradesmen. I intend that all these men shall
do their work within the district. I mean that they shall all live
about here whilst they are engaged on my job ; and, as I intend
my mansion to be very large, I calculate that I shall have five
hundred men living here for the next ten years building it and putting
the grounds in order ; and when it is complete in all its adjuncts, I
expect to keep a staff of several hundred servants in the house and
about the grounds. Think what this means to you. All these men
and their families will want food, which you will supply. No more
fruit rotting on your trees, no more vegetables going to seed
because you can't afford to carry them to market ; you and your
wives and children will be busy for the rest of your lives in feeding
your own neighbours."
Again applause. The orator proceeds :
" But, as I said, I am a poor man. I cannot realise my patriotic
dreams without your aid. I am short in my necessary capital by
the sum of ten thousand pounds. You can have the privilege of
aiding in our national development by giving me this amount. I
do not ask for it all at once, but in trifling sums. Let each of you
give me a shilling a week for tlie rest of your lives, and I will get
to work at once at building my house and laying out its grounds.
None of you will feel the expense, and all of you will share in the
advantages."
If Protectionist speeches were made in these plain terms,
could any protestations of philanthropy disguise their naked
selfishness? And yet, instead of " mansion " read "factory,''
and by the change of this one word we have a regular Protec-
tionist oration in favour of the home market.
296 Industrial Freedom.
The argument, however it may be disguised, must ahvays
resolve itself into an appeal to the farmers to subsidise a
number of artisans to settle at the farm gate. " Pay them,"
says the Protectionist, " for making goods at a loss, and out of
their profits they will purchase your abundance." A manu-
facturer who really believed in this argument would pension an
army of tramps to live beside his factory upon condition that
they spent their money in the purchase of his goods. The three
students of fable who hoped to earn a living by taking in each
other's washing were the earliest examples of a delusive faith
in a home market. The idea that a farmer, if he pays taxes to
bring into existence a factory which would not otherwise exist,
will win more than the taxes by selling farm produce to the
artisans, is, as Professor Sumner has tersely said, " an
arithmetical fallacy. It proposes to get three pints out of
a quart. The farmer is out for the tax and the farm produce,
and he cannot get back more than the tax, because, if the
factory owes its existence to the Protective taxes, it cannot
make any profit outside of the taxes. The proposition to the
farmer that he shall pay taxes to another man, who will bring
part of the tax back to buy produce with it : this is to
make the farmer rich. The man who owned slock in a
railroad, and who rode on it, paying his own fare, in the
hope of swelling his own dividends, was wise compared with
the farmer who believes that Protection can be a source of
gain to him." (" Protectionism," pp. 125-6.)
6. The latest form of this almost discredited home-market
argument is one which had a great vogue during the Presi-
dential campaign of 188S. Its author appears to be Mr.
Hoyt, who develops it from an American standpoint with great
assiduity.^ The argument is briefly this :
"Foreigners can only lake a certain amount of American pro-
ducts : /. ., food and raw materials. In return forthe^c, Americans
1 See pp. 193 and 199, an 1 Chapter XI.
The Political Argument. 297
Pt. IV., Ch. iv., \ 6.]
receive a certain quantity of foreign manufactures. But the American
demand for manufactured goods is far larger than the quantity
which is received from aljroad in return for American products.
Accordingly, unless the export of American products can be in-
creased, which ex-hypolhesi is impossible to any appreciable extent,
Americans must either go without a certain quantity of manufac-
tured goods or manufacture for themselves. Conclusion Encourage-
ment of manufactures by Protection is necessary."
The fallacy of this argunient which has been freely used
by Mr. Reed and Mr. Blaine lies in the assumption, first,
that the export of American products cannot be appreciably
increased ; and secondly, that if it cannot, manufactures will
not spring up without Protection. The first assumption is
probably true, if it is limited to the proposition that foreign
trade could not supply all the wants of a country like the
United States ; but the second has no foundation in fact.
Suppose it to l)e the case that the American demand for
manufactured goods is so vast that it cannot be satisfied by ex-
change, that fact is itself the strongest guarantee that home manu-
facturing will be profitable; because the greater the necessity
for manufactured goods, and the less the opportunity of getting
them, the better is the prospect for the manufacturer. Con.se-
quently, the very fact on which Protectionists rely to frighten
the farmers into accepting Protection namely, the fear that
w ithout Protection they will not be able to satisfy their require-
ments for manufactured articles is itself the best assurance
that Protection is unnecessary.
The argument, moreover, ignores another aspect of Protec-
tion which is being forcibly ol)truded upon the notice of
American manufacturers namely, the tendency of Protection
to destroy the foreign market by too much cultivation of
the home market. At tlie present time, the most serious
l)roblem before tlic manufacturers of the United States is how
to dispose of their manufactured goods. The home market
has been over-supplied for some years past, and yet, owing to
Protection, there is no outlet for their goods abroad. The last
298 Industrial Freedom.
work of Mr. Wells " Practical Economics" the Congressional
speeches on the Mills tariff, and the collection of facts which
was published at the Conference of Free Traders held at
Chicago in 1888, contain abundant evidence of the truth of
this assertion, which is, indeed, not disputed by Protectionists.
It would lie beyond the scope of this work to multiply
instances. It is sufficient to refer to the words of Mr. Wells
upon this subject, which no one who has any knowledge
of current American literature is likely to dispute.
"No one," says Mr. Wells ("Practical Economics "p. 103),
" who has given the subject any attention, has any doubt that the
United States has, at present, more active capital, machinery, and
labour engaged in the so-called work of manufacturing, than is
necessary to supplyany present or immediate prospective demand for
increased consumption. And as general evidence confirmatory of
this position, citation may be made, first, of the general and in-
creasing complaint on the part of American manufacturers of over-
production. . . . Second, the interruption of great branches of
domestic industry, of which examples are to be found in the recent
suspension [written in 1883] of the entire business of cotton manufac-
ture in Philadelphia and vicinity ; of the discontinuance in all, or great
part, of the India-rubber and gunny-bagging manufacture ; of the
reduction of the sugar-refining industry to about 60 per cent, of its
existing capacity ; and the suspension or failure of some of the most
important iron-furnaces and rolling-mills of the country. And,
third, the actual or attempted reduction of wages in almost every
department of domestic manufacturing industry . the recent united
effort for this end of the representatives of all the i-on-works west
of the Alleghanies being especially noteworthy."
Mr. Wells might have added that the rapid growth of
trusts and combinations is further evidence in the same
direction.
In the meantime, while the enormous output of home
products is steadily increasing, there is an actual decline
even in the small proportion of home-made goods which the
tariff allows the Americans to send abroad.
The figures for the year ending June 30th, 1890, show that of
the total exports, valued at 845,293,000, only $151,293,000
Th. Political Argument. 299
Pt. IV., Ch. iv., \ 7.]
worth, or 17 "88 per cent., were of manufactured goods; while
the export of American manufactures in 1889 represented
18-99 psr cent, of the whole. Purely agricultural productions
gave but 72-87 per cent, of the export values in 1889 ; whereas
they gave 74-51 per cent, of the whole in 1890, and the ratio
of all natural productions increased from 81-01 to 82-12 per
cent.^
7. The home-market argument fails at every turn. It
rests on a fallacious economic basis, and its political supports
are rotten. The foreign trade is not, from its nature, more
precarious than the home trade. The home demand does not
necessarily cause the land of a community to be put to more
profitable uses than a foreign demand would do. A home
market caused by Protection makes farmers pay more than
they receive ; while every variety of the argument ignores the
danger to manufactures of that glut in the home market which
is an inevitable consequence of a Protective tariff.
The theory, moreover, is in no instance borne out by facts.
Farmers do not, in fact, remain in the Eastern States, where,
according to the theory, they should find their market, but
emigrate to the West, and sell their products in Europe.
The theory is that the farmer will get a higher price by
selling his corn to the hands at a neighbouring factory. The
fact is that the farmer sells his produce at the price which
rules in Mark Lane ; and the neighbouring artisans will not
give him a penny more than the market rate for the sake of
neighbourliness.
The theory is that the demand of the home market keeps
up the prices of agricultural produce. The fact is that men
must eat, wherever they live ; and that it does not matter to
the farmer, who sells food, whether his customers live in
America or Europe.
' In these calculations leather and lumber are included among manu-
factured products.
300 Industrial Freedom.
The theory is that the farmer will gain an advantage by
being brought into direct relations with consumers, and so
save the cost of transportation. The fact is that farmers sell
their wheat to millers or produce merchants, and not direct to
artisans, whether the latter are neighbours or not.
The theory is that the farmer must be better off if there is
a home demand. The fact is, the farmer is best off when he
can sell his produce at the highest price, and buy what he
wants at the lowest.
The theory is that the American and Victorian farmer
ought to be exceptionally prosperous. The truth is that the
former is overwhelmed with debt, and the latter is emigrating
into New South Wales.^
Whatever force the home -market argument has is owing to
union with other Protectionist arguments. Even when it is
stated by itself, it generally resolves itself, upon analysis, into
the statements that Protection causes a diversity of occupation,
and attracts population. In this meaning it may appeal to
farmers with a certain degree of force because every increase
of population, in whatever part of the world it occurs, may
become an a^/i.ntage to the producers of food. But, although
it may be admitted that Australian and American farmers are
likely to be benefited by the growth of towns, the questions
are still unanswered " Whether the towns would not grow up
as fast without Protection ?" and "Whether under Protection
the farmers, as a class, will not have to pay more in the form
of taxes than they receive back in the form of prices ? "
While the price of food all the world over is determined
by the ruling price in Mark Lane, the increased demand for
food of a few hundred thousand townsmen in Australia or
America will not make any appreciable difference in the price
1 An article in In-l/orJ's ALtgctzine, March, i83g, upon the state and
prospects of the American fanner, contains a mass of nsefiil information on
this subject. Current American Hterature is full of the grievances and distress
of- the farming population, who have to sell at London prices, and buy at
American.
The Political Argument. 301
Pt. IV.,Ch. iv., ?7.]
of farm produce, unless either of these countries should sud-
denly cease to export agricultural products.^ In such a case
if Americans and Australians could only procure their food
over a tariff fence the farmer might, no doubt, raise his
prices, as English landlords raised rents in the days of the
Corn Laws ; but until the artisan and townsman consent to a
tax on food, farmers in a Protected country which exports
food can expect nothing else but low prices for the articles
they sell, and high prices for those they buy, No one will
find out sooner than the Protected farmer that the old English
proverb, "That the farmer pays for all," has a special signifi-
cance in a Protected country.
The writer of the paper on the " Decline of the Farmer,"
which has been already referred to, shows the fate of the
farmer in every Protected country - when he thus summarises
the steps of the American farmer's decline :
" Captivated," he says, " by the promise of a home market
as the result of manufacturing development, which he was led
to believe would buy his products at highest price, and sell to
him in return at lowest, the American farmer departed from
the only true republican principle of strict equality in public
privileges and burdens. He consented to be taxed to a limited
extent for the encouragement of manufactures but only upon
the understanding that the arrangement was to be temporary :
only while the infant industries were struggling for a foothold.
The interest thus aided was then so weak and insignificant that
' Victoria has been a grain-exporting country for many years ; while New
South Wales, owing to climatic disadvantages in the coastal districts, and the
remoteness of other wheat-growing lands, has to import about one-third of ht r
wheat supplies. The price of wheat in Melbourne is, on an average of many
years, sixpence a bushel less than the price in Sx-dney. Protectionists, observ-
ing this, tell a Sydney audience lh,!t Protection mcms cheap bread ; going
into the country, they tcU the farmers that Protection means dear wheat.
But how- cheap bread and dear wheat are to go together they have never
e.xp'.ained,
- See tb.e English Consular Reports on F<>rming in France and Italy for
any year from i83_;-;i.
302 Industrial Freedom.
he never dreamt the day might come when it would dispute
his supremacy, and, taking him by the throat, demand as a
right what he had granted as a favour."
CHAPTER V.
THE PAUPER - LABOUR ARGUMENT.
I. The pauper-labour argument is the final refuge of all
Protectionist disputants, and tends to become relied upon
more and more as a justification of the permanent retention of
a Protective policy. Although it assumes a variety of forms,
its essence is always an assertion that the high rate of wages
which is characteristic of young countries cannot be main-
tained unless both labourers and capitalists are protected
against the competition of pauper labour and cheap capital.
" The claim is set up in warrant and justification of a
continued high-tariff policy, that the difference of wages in
favour of competitive foreign productions constitutes a good
and sufficient reason why compensating Protective duties
should be levied on their resulting products when imported
into this country ; and the assertion is further constantly and
conjointly made that unless such duties continue to be levied,
the American manufacturer will be unable to withstand foreign
competition : that our workshops and factories will be closed,
and our workmen and their families made dependent on public
charities."!
Such an argument as this is really the basis of every so-
called scientific treatise, such as Professor Patten's, of the
Wharton Scliool of Pxonoyiics, in favour of Protective tarifls ;
and, from its place in the historic system of Protectionist
arguments, may be taken as the last word which the advocates
1 lion. Davil A. Wells, "Practical Economics" (p. 132).
The Political Argument. 303
Pt. IV., Ch. v.. I I.]
of a restricted commerce are able to advance. It becomes
therefore, of the utmost importance to examine this argument
fully, both by reference to facts and theory.
First, however, as usual, careful disputants must verify
their facts. They must ascertain three things :
1. What difference in fact exists between the rates of wages
paid in the trade, which it is proposed to Protect, by
the native and the foreign producers ?
2. To what extent does this difference in the wage-rate
affect the relative costs of production ?
3. What evidence is there that the imposition of a Pro-
tective duty will prevent the rates of wages in the two
countries in question from assimilating ?
These facts, once ascertained and until they are ascer-
tained no argument is possible the last question, which has
always to be answered in the fiscal controversy, still remains
for consideration : viz.. Whether Protection may not be too
high a price to pay for the preservation of the industries in
question? This, however, can only be answered by a con-
sideration of matters which properly belong to a later chapter.
It would be beyond the scope of this work to examine the
fiicts of any country, or any particular trade, in order to see
whether the pauper-labour argument can justly be applied to
its conditions. All that can be done here is to indicate the
line of investigation, and to suggest certain general considera-
tions whicli must be taken into account. It will not, however,
be out of place to refer, in a general way, to the answers which
other inquiries in this field have obtained to the questions
which have already been suggested, and to mention those
which a student of economics would expect to obtain if the
working of economic principles were not disturbed 1)y local
causes. Let us first, then, examine into the nature of this
in(iuiry as to what difference does in fact exist between the
rates of wages paid in a young and an old community.
304 Industrial Freedom.
2. No statistical information is more difficult to obtain
than accurate statements of the rates of wages, and no statis-
tics are more misleading or useless than so-called averages of
wage-rates.
Even when' the sources of information about wages are
above suspicion, wage-rates admit of so many qualifications
that it is difficult to use them for purposes of comparison. Ten
shillings in one country may not go so far as eight shillings in
another ; while in some mills workmen have advantages in
house-rent or allowances which are denied to others.
Any money-rate of daily or weekly wages must therefore of
necessity be misleading, unless we know : (i) the number of
days worked, (2) the cost of living in the district, (3) whether
the \> or!- nen have any special allowances in lieu of wages.
And finally, even when all this is known, it is quite useless
for controversial purposes to attempt to arrive at any average
rate of wages for a given country.
Even in a small country like England, wages in the same
industry differ by as much as thirty per cent, in different
localities. This is especially the case with agricultural labour ;
but the same holds true, in a less degree, of the wages in other
industries. In the United States the rates vary more or less
in every State ; and the wages in the West are sometimes
double those paid to the same class of workmen in the Eastern
States. For these reasons, as Mr. Wright, the chief of the
Labour Bureau, has often pointed out, it is idle to speak of an
"American rate of wages." There is one rate for New York,
and one for Pennsylvania, and a third for California ; but to
strike an average between all the States would give a rate
which no class of workmen ever receive, and which would 1)C
useless for any purposes of comparison.
Another reason why averages must be misleading is that
in all old countries the " residuum,"' as Mr. Bright called
them the class, that is, of hereditary paupers and hopeless
ne"er-do weels is much larger than in a young communit}-.
Tjie Political Argument. 305
Pt. IV., Ch. v., \ 2.]
But any average of national wages would have to take into
account the starvation rates paid to people of this class, with
the result of unfairly lowering the rewards of manufacturing
labour.
When, therefore, artisans and manufacturers in a young
country ask to be "protected" against the pauper labour of
more settled communities, they must, if their request is to
receive attention, ignore averages, and confine their compari-
son to specified industries. This warning will seem super-
fluous to those who have not lived in the midst of Protectionist
controversies nor read Protectionist speeches ; but hardly a
week passes in Australia or America where the wages of
London dockers are not the theme of some Protectionist
oration. It ought, however, to be self-evident that a com-
parison between the wages paid to the lowest class of unskilled
labour in London and those paid to skilled Australian artisans
is a comparison between two subjects of a diff'erent class.
Take, for instance, the iron trade. New South Wales Pro-
tectionists constantly aftirm that the difficulty in the iron trade
in that colony is owing to the high rate of wages. This
assertion may or may not be true ; but it is idle to use as
evidence in its support comparisons between the pay of
Sydney artisans and London dockers.
Nor is it a sufficient answer to these considerations to
reply that the existence of a residuum of low-paid wage-
earners reduces the wage of skilled artisans. Within certain
limits this statement is true. The reserve army of labour
may destroy the success of a strike for higher wages, as was
recently the case in Australia ; but as a rule, the underpaid
starveling has neither the physique nor the intelligence to come
into competition with workmen of higher grades. It is thus
unfair to argue that the lowest rate of wage in a country is
tlie determinant of its ability to compete with a country of
a higlicr rate. The comparison should be made in every
case between the wages paid in the two countries to the
u
3o6 Industrial Freedom.
workmen of the particular trade for which Protective duties are
demanded.
Mr. Edwin Chadwick, in a passage quoted by Mr. Wells
in the work already referred to (p. 138), illustrates this view
by the following interesting example from his own ex-
perience :
" In Nottingham," he says, " the introduction of more
costly and complex machines for the manufacture of lace has,
while economising labour, augmented wages to the extent of
100 per cent. I asked a manufacturer of lace whether this
large machine could not be worked at the common lower
wages by any of the workers of the old machine ? ' Yes, it
might,' was the answer; 'but the capital invested on the new
machinery is very large, and if from drunkenness or misconduct
anything happened to the machine, the consequence would be
very serious.' Instead of taking any man out of the street, as
might be done with the low-priced machine, he (the em-
ployer) found it necessary to go abroad and look for one
of better condition, and for such a one higher wages must be
given."
When industrial activity is highly developed, employers
cannot afford to pay low wages.
3. It will be plain, from the foregoing observations,
that any statements of comparative wages ought to be received
with caution ; so that the first duty of a person dealing with
an argument which rests upon a difference in the rate of wages
in two countries is to verify the facts, and then confine the
comparison to the specific trades which are supposed to com-
pete with each other. This method, however, is impossible
in the present treatise ; and therefore, in order to carry the
argument further, we must make the admission that, although
the difference between Australian or American wages and
those of Great Britain is probably greatly exaggerated by
Protectionists, the wages of unskilled labour in a young
The Political Argument. ^oy
Pt. IV., Ch. v., ? 3.]
country are higher than the wages paid to the same class in
England.
We may admit, further, that the investigations of Mr.
Wright, chief of the Washington Labour Bureau, show almost
conclusively that both the nominal and the real rates of
wages in the chief manufacturing industries of Massachusetts
are higher than those of the same industries in Great Britain.
On the other hand, the wages of miners in Pennsylvania
are probably not as high as those of miners in Durham or
Northumberland, and are much lower than those paid in New
South Wales.
Still, however, it may fairly be assumed, as a basis for
discussion of the pauper-labour argument, that wages are
higher in a young country than they are in Europe. The
difference is greatest on the lowest grade of manual labour,
and lessens as the labour rises in the scale. As to skilled
labour, personal inquiries from both masters and men have
satisfied the writer that the highest grades of this class are less
well paid, even in money wages, in Australia than they are in
England.
The same is probably true of America,^ if we may draw
an inference from the statistics of immigration, which show
that the number of " skilled labourers" who come as immi-
grants is comparatively small. But the bulk of the labour
employed in manufactures is unskilled. The question, there-
fore, is Does the higher reward of this class prevent the
establishment of manufactures in a young community ? The
answer to this question will depend- upon the number of
manufactures which are exposed to foreign competition, and
the proportion borne in these by the cost of labour to the
price of goods.
' Mr. Wells, writing in 1888, mentions that artisans imported into America
from foreign countries to work in certain employments (^..i'. , glass-making)
wore returning to I'.uropc with a view of bettering their co;ul'tion, (" Practical
Economics," p. 140.) Sec also above, p, 215.
3o8 Industrial Freedom.
4. It has been estimated by Mr. Wells that of all the
manufactures in America not more than twenty per cent., and,
perhaps, not more than ten per cent., can ever be exposed to
foreign competition. Probably the number of Victorian in-
dustries which are able to stand alone bears a less proportion
to the whole ; but in every country there will be a certain
number of industries which, from advantages of climate, means
of communication, or acquired industrial skill, are in no
danger from foreign competition. These industries can, there-
fore, be left out of account in the discussion. The real matter
of importance is as to the industries which would not be able
to withstand foreign competition except by reducing wages.
Let us proceed to inquire what kind of industries these are
likely to be.
5. The fundamental assumption of those who use the
pauper-labour argument is that the price of goods depends
upon the rate of wages. It is not too much to say that this
theory is wholly incorrect. The price of goods depends not
upon the rate of wages, but upon the " cost of labour," which
is a very different thing.
Thus, Mr. Donnell, in his pamphlet, contributed to the
"Questions of the Day" series (Putnam, 1884), p. 54, says :
" It is a great mistake, though a common one, to suppose
that the highest-priced labourer is the dearest. High-priced
wages are the cheapest. ... I am satisfied by personal
observation and diligent inquiry that American labour esti-
mated in productiveness that is, the work accomplished in
proportion to wages paid is the cheapest in the world."
Mr. Edward Atkinson, of Boston, in his work, " The
Distribution of Products," after a careful investigation of the
cost of production in many industries, has laid it down as a
law " that a high rate of wages means a low cost of product,
and a low rate of wages means a high cost of product." Mr.
Prasscy, the famous contractor, said the same thing in another
The Political Argument. 309
Pt. IV., Ch. v., ? s.]
form when he stated that he found it cheaper to employ the
high-waged Enghsh navvy in preference to any number of low-
waged Germans and Asiatics.
The important matter, therefore, in considering whether
a particular industry requires Protection on account of the
higher rate of local wages, is not so much a knowledge of the
difference in money, or even in real wages, between the two
countries in question, but to ascertain the difference in labour-
cost. And the probability, which is almost a certainty, is that
high wages, instead of being evidence of a high cost of pro-
duction, are, on the contrary, direct evidence of a low cost of
production, and therefore, as Mr. Wells says, "in place of
being an argument in favour of the necessity of Protection,
they are a demonstration that none is needed." It would
unduly extend this work even to summarise the evidence on
which these statements rest. For further information the
reader is referred to Mr. Edward Atkinson's two works,
"The Distribution of Products," and "The Industrial Pro-
gress of the Nation" (New York and London, 1890).!^
The question is thus narrowed to a comparison not of the
rates of wages in the competing countries, but of the pro-
portion which these bear in each case to the respective costs
of production. In otlier words, we have to deal not with
rates of wages, but with labour-cost. We are thus led to two
practical conclusions :
' Mr. riirsch, in his pamphlet entitled " Protection in Victoria," which is
more fully referred to in tlie Appendix, makes the following sound observations
on this part of the question : "A comparatively high rate of wages is one of
the most important, if not the most important factor in reducing cost of pro-
duction, not only by forcing into use labour-saving machinery, which at a
lower r.ite of wages could not | ermit of a saving in wages, but also by tlic
greater intelligiMice and vigour of the woikmen, which high wages produce.
C'onscfiuenily, we find a nation's jxjwer in the markets of the world to be some-
what in accordance with the rate of wages to which its workers are accustomed.
Cluna, India, Mexico, export no manufactures, Russia least of all ICuropean
rations, Italv and Spain rank next, Austria stands by itself, (Germany and
France follow, and Great Britain stands at the apex ofinduUii.il power" (ji. 9).
3 TO Industrial Freedom.
T. That Protectionists cannot establish even the appearance
of a rightful claim to any duty until they have proved that
the labour-cost of producing the article which it is proposed
to Protect is so much greater in the young community than it
is in other countries that its manufacture in the community
cannot be profitably carried on.
2. That when it can be proved that the production of
any article is prevented by differences between its labour-
cost in a young community and its labour-cost in Europe, then
a duty equivalent to the labour-cost, less the cost of importing
the article from Europe, might cause the establishment of a
manufactory of that article in the young community.
3. Consequently, if the labour-cost of producing any
article is lower in Europe than it is in America or Australia,
it must be for one of two reasons: Either (i) the European
labourer is more efficient on account of his greater intelligence
or on account of the greater assistance he derives from Nature
or machinery ; or (2) the article is one which is made entirely
by either unskilled manual labour, or by manual labour
assisted by only cheap and simple mechanical appliances. In
either case the difference in labour-cost affords no argument
for Protection.
6. The labour-cost of a finished article by which is
meant the proportion which the cost of labour bears to the
cost of the whole depends on two things : namely, (i) the
intelligence and ability of the human labourer; (2) the
amount of assistance he receives from Nature or machinery.
Pjut the average of education and intelligence is un-
doubtedly higher both in America and Australia than it is
in Great Britain or Europe. In this respect, therefore, the
advantage is on the side of the young community. Of the
amount of assistance received by cither country from natural
causes, or from the use of machinery, nothing can be pre-
dicate ^ There is, however, no a priori reason why this
The Political Argument. 311
Pt. IV., Ch. v., ? 6.]
assistance should be less in a young community than it is in
England.
In the first case, as we have seen, the European superiority
is very unlikely to be due to the superior intelligence of
the workmen or their better tools ; and must, therefore, be
attributed to the superior natural advantages of climate, soil,
or situation by which his labour is assisted. But if Protection
is demanded as a compensation for the want of natural
advantages, this is a clear admission that Protection is in-
tended to cause a waste of labour by making men in one
country do for themselves what Nature has done for them
elsewhere.
The competitor whose ravages the tariff is designed to
check is not, strictly speaking, " foreign labour," but the
natural advantages which foreign labour enjoys, and which,
under Free Trade, it would share with the world. Hence
follow all those extravagances which Bastiat was fond of
turning into ridicule, and which Protectionists always declare to
be irrelevant, by the contention that they only desire to Protect
industries which can be naturalised in the Protected country.
But it must be remembered that the argument now
under consideration is an argument in favour of Protection as
a permanent, and not as a temporary policy. If, therefore, any
industry demands Protection because its article is produced
abroad at a less labour-cost than that at which it would be pos-
sible to produce it at home ; and if it appear that the difference
in labour-cost is due to the possession by foreign labour of
superior natural advantages, the case becomes one in which
Protection can only be justified by the same arguments which
justified Bastiat's petition of the candle-makers against the
competition of the sun. If the difference in labour-cost is
due to the superiority of the foreign mechanical appliances,
the case is obviously equally unfit for permanent Protection,
because the same result could be obtained by the adoption in
the home ccruntry of the same appliances.
312 Industrial Freedom.
There remains the case in which the difference in labour-
cost is due to the nature of the product being such that it is
the result of unaided manual labour, or of manual labour only
slightly aided by mechanical appliances. In such a case it is
plain that the labour-cost and the amount of money spent in
wages will very closely correspond. Accordingly, if the in-
dustry is one which does not admit of a high degree of skill, so
that one skilled workman at a high wage could not do the work
of several unskilled workmen at a low wage, the rate of wages
will be a fair test of the labour-cost of production ; and a
country of high wages will not be able to compete in this
particular line with a country of low wages. To this extent,
then, the Pauper-Labour argument may justify Protection in a
theoretical discussion.
The next question is, whether the common facts of in-
dustrial life give any ground for the belief that this theoretical
justification of Protection can have any but the narrowest
application ? To decide this, we must inquire what the in-
dustries are which owe their lower labour-cost to a lower rate
of wages. Manifestly, as we have seen, they are handicrafts,
such as the making of common pottery, where, as Mr. Wells
remarks, "the labourer works almost exactly as did his pre-
decessor 4,000 years ago." In such industries the moral and
physical standard of the labourer is necessarily at its lowest.
The trades are such as can be learnt by any one ; they require
neither skill, training, nor continuous effort, and they are
carried on for the most part under unhealthy conditions. Is
there really any need to establish industries such as these in a
young country? The question is purely political. Ought a
politician to encourage trades which will inevitably collect the
driftwood of society, and render possible in a new country the
worst abuses in the industrial history of the old world ? Should
it not rather be the aim to direct the labour of a young
community into channels where intelligence, skill, training, and
patience may enable every individual to satisfy the better
The Political Argument. 313
Pt. IV., Ch. v., \ 6.]
instincts of his nature ? Is it wise to offer to the lazy and
unthrifty the chance of making a bare Hving in a degrading
form of occupation ? Will not the existence of such a class of
workmen tend in time to drag the labourers of other classes
down to its own level ?
Suppose, however, that the Protectionist politician is ob-
durate, and passes by these questions without reply, still there
remains the consideration : What shall be done with these
workmen when they have supplied the home market ? Mani-
festly, their products cannot be exported, because, ex hypotkesi,
they cannot be produced at the same cost in the Protected
country as is possible abroad, unless the wages of the former
are reduced, which, according to Protectionists, Protection will
prevent. The consequence will be that a yearly increasing
number of unskilled labourers will join the army of the tramps
and unemployed. No other alternative will open to these
unfortunate persons, because the very nature of their former
employment will have destroyed their industrial aptitude.
Well may David Wells ask, " Why, in the name of common
sense, America, as a nation, should enter into competition
with these low-waged countries ?" " What possible reason," he
asks, " or inducement is there for wanting to introduce these
handicraft industries into this country, and of attempting to
keep men alive by means of enormous taxes levied under the
tariff upon the whole people, when we can buy all we want of
these products with a very small part of the excess of our
cotton and grain ?"
Finally, it must be remembered that the number of these
handicrafts is decreasing every year, as science, the great
leveller, elevates wages by increasing the efficiency of the
labourer. It follows that the force of the pauper-labour
argument, even in tlie one case where it. has a theoretic
validity, is constantly diminishing before tlic ap|)!ication to
industry of new mechanical appliances; and it is not a long
I)eriod to anticipate when the lowest and commonest forms of
314 Industrial Freedom.
manual toil will have been rendered entirely unnecessary, and
men in all countries and of all classes will have the leisure and
the opportunity to train their intelligence and satisfy their
instincts in higher forms of industrial activity.
Summing up, then, the results of this discussion, we may
say First, That the pauper-labour argument, although it has a
certain theoretic validity, can seldom be applied in practice,
because the circumstances on which its assumptions rest
seldom co-exist ; Secondly, That even in the few cases in
which its application might be justified, the result of applying
it is both politically and economically harmful to the interests
of a young country ; Thirdly, That the argument must gradu-
ally lose what little force it ever possessed, as science lessens
the number of unskilled handicrafts.
7. But we have not yet done with the practical objections
to this argument. Any attempt to apply it not only reveals a
fatal inconsistency between its assumptions and its promises, but
carries the politician along a path of inextricable entanglement.
The theory of the argument, as we recall it, is that
manufacturers in a young community are prevented from
competing with their European rivals, on account of the high
local rates of wages.
Now, if high local wages are really an obstacle to manu-
factures, that can only be because they cause the prices of the
manufactured articles to be too high to find a market in the
face of open competition. In other words, the argument is
that high wages cause high prices.
But the constant assertion of Protectionists is that Pro-
tection will cause lower prices. How, if that be true, can
Protection secure higher wages? If wages and prices depend
on one another, as Protectionists assert, the same policy
cannot at one and the same time make wages high and prices
low. So nuicli for an inconsistency in theory ; now for a
difliculty in practice !
The Political Argument. 315
Pt. IV., Ch. v., ? 9 ]
8. If it be true that the ability of manufacturers to
compete with one another depends upon the rates of wages
which they respectively pay to their\vorkmen^ then it is evident
that any duties which are levied for the purpose of equalising
wages must vary according to the variations in the wages rates
of different countries.
If, for example, wages in any industry are 10 per cent.
higher in Australia than in England, a duty of 10 per cent,
will be more than sufficient to equalise the terms of competi-
tion ; but if wages in the same industry are 10 per cent, lower
in Germany than they are in England, the Protectionists ought
to impose two equalising duties namely, one of 10 per cent,
on English goods, and one of 20 per cent, on those which
come from Germany. And as the wages of any specified
industry differ in nearly all countries, the same article ought to
be exposed to many duties. Nor is this all. The duties
ought to be constantly revised, so as to adapt them to any
changes in the rates of wages which may occur in the foreign
competing countries.
It is difficult to see how any person who sincerely believes
and many profess to believe it that Protective duties are only
required to compensate the manufacturer for higher local
wages, can deny the force of the above reasoning. Such persons
indignantly repudiate any desire to give a manufacturer special
favours ; but it is obvious that a fixed duty, which is estimated
on the wages paid in a particular industry, say in India, will be
considerably more than is required to compensate him for the
difference between the local rate which he pays and the English
rate. He will therefore have the sole benefit of the duty on
all English goods up to the amount of the difference between
English and Indian wages, and Protection will be a clear
privilege to him by that amount.
But this is not the end of the entanglement.
9. The countries whose competition is most dangerous to
3i6 Industrial Freedom.
a young community are precisely the countries of high wages.
Of the total imports into New South Wales from countries
beyond the sea for the year 1889, four-fifths were the products
of Great Britain and America. It is the same with the United
States. Her great commercial rival is not Germany or India,
but again Great Britain.
Now, whatever ill-will Protectionists may bear Great Britain
and Protection is openly recommended to the Irish voters
in America as a means of damaging British trade no one is
likely to dispute that manufacturing wages are higher in
that country than in any other part of Europe. The low-
waged countries, which Protectionists term the countries
of pauper labour, are not England, Switzerland, Holland, or
Norway these are the countries of industrial freedom, as
they are the countries of political and religious freedom but
soldier-ridden and Protected Germany, and harassed and
Protected France. How is it possible to admit this fact, and
yet maintain that high local wages are an impediment to local
manufactures unless foreign competition is forbidden ?
But the most disingenuous use of the pauper-labour argu-
ment is in New South Wales. In that colony the voters of the
cities and centres of population are Free Traders by a large
majority. The bulk of the farmers, on the other hand, are
Protectionists. The immediate causes of this are agricultural
distress and a bitter feeling of resentment against the border
duties levied by Victoria. The remoter ' cause is not im-
probably the premature settling of the lands by a too-scattered
population. But, whatever the cause of this Protectionist
feeling among the farmers, they, of all people, could not justify
it by the fear that their industry should be exposed to the
competition of jjaupers.
The only competitors of the New South ^Vales farmers are
tlie farmers of Victoria, South Australia, and New Zealand. For
a Protectionist orator to use the pauper -labour argument in such
a case, to justify the farmers in their present mistaken view of
The Political ArguaMent. 317
Pt. IV., Ch. v., 5 lo.]
their own interests, is either a wilful attempt at deceit, or an
assertion ihat the farmers in the Protected colonies are paupers,
whose chief products ought not to be admitted into New
South Wales, because wages in those Protected lands are at
"starvation rates." Protectionists must take their choice of
the alternative.
10. We are now in a position to finish off the pauper-
labour argument by considering the true causes of those high
wages which are declared to be the obstacle to manufacturing
growth in a young country. Wages being in their ultimate
analysis the labourer's share of the article produced, it is plain
that every increase in the efficiency of the labourer tends to
increase the quantity of that from which he must receive his
share. To ensure that the labourer's share shall be that to
which he is fairly entitled is one of the functions of trade-
unions ; but it is plain that his share cannot be lessened
by an increase in the quantity to be divided if everything else
remains the same.
Now, the efficiency of labour depends, as we have seen,
not only upon human ability to produce, but also upon the
amount of assistance received from Nature. Natural advan-
tages of climate, fertility, situation, and such-like, are free gifts
to man. The more of these a workman can gain, the less
expenditure of effort he requires to i)roduce a given result.
Nature does for him what men in less favoured situations have
to do for themselves.
But the characteristic of young countries is the possession
in exceptional abundance of one or more great natural advan-
tages. Labour is therefore exceedingly productive when it is
employed on any of these natural industries. Ten men, for
example, can raise more wool in Australia than could be raised
by twice that number in Great Britain. Thus, although the
wages of station hands are three and four times the wages
paid by luiglisli shccp-owncrs to their labourers, Australian
3i8 Industrial Freedom.
wool competes successfully with that of England. Here is a
plain case in which higher wages are no bar to successful
competition. It is the same in all extractive industries which
are followed in a young country. The labourer is able to
appropriate a natural instrument of production for his own
advantage.
The question is, "How long will this advantage continue?"
To this the reply must be, " So long as Nature continues to be
bountiful, or so long as man continues by the ingenuity of his
hand and brain to make up for deficiency in Nature's gifts."
When work becomes less efficient, wages may fall ; but while
young countries enjoy their peculiar superiority in certain
dominating industries, the prevailing rates of wages will con-
tinue high. Or, to express the same thing in the words of the
market-place : " Men won't take less as artisans than they can
get as labourers."
Webster, in a stirring passage, has expressed the same idea.
" The chairman," he says, " says it would cost the nation
nothing as a nation to make our ore into iron. Now, I think it
would cost us precisely that which we can worst afford : that is,
great labour. . . . We have been asked ... in a tone
of some pathos, whether we will allow to the serfs of Russia
and Sweden the benefit of making our iron for us. Let me
inform the gentlemen that those same serfs do not earn more
than seven cents a day. . . . And let me ask the gentle-
man further, whether we have any labour in this country that
cannot be better employed than in a business which does not
yield the labourer more than seven cents a day ? . . . The
true reason why it is not our policy to compel our citizens
to manufacture our own iron is that they are far better em-
ployed. It is an unproductive business, and they are not poor
enough to be compelled to follow it. If we had more of
poverty, more of misery, and something of servitude ; if we
had an ignorant, idle, starving population, we might set up for
iron-makers against the world. . . . Multitudes of persons
The Political Argument. 319
Pt. IV., Ch. v., ? II.]
are willing to labour in the production of this article for us at
the rate of seven cents a day, while we have no labour which
will not command, upon the average, at least five or six times
that amount. The question is, then, shall we buy this article of
these manufacturers and suffer our own labour to earn its greater
reward ; or, shall we employ our own labour in a similar
manufacture, and make up to it, by a tax on consumers, the
loss which it must necessarily sustain ? "
11. If the preceding extracts and observations contain a
true view of the theory of wages, it is evident that wages will
continue to be high in a young country so long as the natural
extractive industries continue their exceptional productiveness.
Now, the productiveness of an industry or, what is the
same thing, the efficiency of the labour employed in it
depends to a considerable extent upon the obstacles which
labour has to overcome. The fewer these are, the more will
be produced by an equal effort.
But the object and effect of Protective duties is to create
obstacles where none existed. They are expressly designed
to prevent men making use of the free gifts which Nature has
bestowed on foreign countries. They thus constitute new and
artificial obstacles which labour has to overcome. If these
duties affect any of the instruments used in the extractive in-
dustries and it is hard to conceive of any Protective duties
which will not affect the farmer and the miner in his tools
or wants they are, clearly, an encumbrance on their natural
productiveness, and by that amount they lessen the efficiency
of labour.
But by lessening the efficiency of the labour employed in
the extractive industries, Protective duties lower the standard
of wages for the whole country. The standard of wages is
fixed by the profitableness of the dominating industries. These
require little skill, and are open to every one of a strong body.
Naturally, therefore, a man who has the chance of commanding
320' Industrial Freedom,
a certain rate in an industry of this kind will not accept much
below it in any other.
It is not meant that every carpenter or joiner, if he cannot
get the current wages, will at once turn farmer. That would
be a grotesque misrepresentation of the argument. What is
contended for is the obvious truism that when, owing to the
natural superiority of a country in climate, soil, or mineral
wealth, unskilled labour can obtain a high reward, the
probability (which over a large number of men becomes a
certainty) is that the ruling rate for other kinds of labour will
be at least equal to that which prevails in the extractive
industries. If this be correct and it can hardly be denied the
extractive industries set a certain standard of wages, which will
not be reduced until these industries become less profitable.
12. The chief charge, therefore, against Protection, from
the view of tlie wage-earner, is that by making the extractive
industries less profitable it hastens a decline in wages
generally.
Nor is this the only way in which Protection operates in-
juriously on wages.
High wages depend not only on the cfiiciency of labour,
but on the number of labourers. " When two masters are
running after one man, wages rise ; when two men are running
after one master, wages fall," is a saying attributed to George
Ste))henson. But, whoever may be the author, the saying
expresses a portion of the truth which must not be over-
looked.
In most young countries the development of the natural
resources is still incomplete, so that every labourer who can
turn his hand to one of the extractive industries causes an
increase in the national productiveness. He does not displace
another workman, but himself adds by his labours to the store
from which all workmen are emjiloyed. Consecpently, there is
no fear at present of Australian or American wages being
The Political ArgumMnT\ 321
tt. IV., Ch. v., 5 12.]
forced down by the competition of immigrants belonging to
the classes who will find employment on the soil or in other of
the extractive industries. Australia, indeed, is suffering from
an insufficiency in the supply of labour for these pursuits. She
could employ double the number of men in the extractive
industries ; and since every man would produce a far greater
value than he could consume, the rate of wages would not fall.^
Competition, where labour is properly organised, only reduces
wages when the industry, for employment in which the labourers
are competing, has reached the limits of its productiveness. That
point is yet far distant in Australia and America. As was ob-
served in the course of the debate on the Mills' tariff proposals
in the American Piouse of Representatives in 188S: "Not until
the sixty millions of Americans become six hundred millions
will men crowd each other in the United States in the fierce
struggle for existence and wealth, as they do in Great Britain
to-day." When that time comes unless, as indeed will
probably be the case, if we may judge from past experience,
the instruments of production should enormously improve in
power wages will have fallen to the European rate. But
we may leave the incidents of that far-off time to speculative
dreamers.
But although the increase in the number of extractive
labourers in a young country is not likely to lower wages,
the effect of an increase of manufacturing labourers is entirely
different.
The market for manufactured goods in any young com-
munity must be smaller than the market for its raw produce.
The former is limited by the confines of the colony the
other is the world. Consec^uently, over-production of manu-
factured goods will be an early result of a Protective tariff.
' This is, of course, on the assuinplion, which ouglit always to be made in
dealing with questions of wages, that trades unions exist in tlie country. If
there were no unions, advantage might be taken of local congestions of labour,
or of the ignorance of new-comers, to lower the rati.'s.
322 Industrial Freedom.
Twenty years have been sufficient to supply the market of
Victoria, even althougli for the greater part of that time the
markets of the other colonies have been open to Victorian
produce. If New South Wales, where Victorians now find a
market for their surplus, were to adopt a Protective tariff and
should she take this fatal step, it will in no small degree be
owing to a just resentment against the provincial spirit of her
Southern neighbour many Victorian manufactories would run
half-time.
The effect of over-production of manufactures upon the
general rate of wages is easily understood.
The artisans, unable to find employment in their own
trades, flock to the extractive industries. These, being already
burdened with the Protective duties, do not respond with
elasticity to the new demand. Nor do the labourers them-
selves generally possess the training or physique which fit them
for these pursuits. They do, however^ form a large and
gradually increasing body of floating unorganised labour,
which always presses on the outskirts of trades unionism, and
offers to employers an encouragement to resist its just
demands.
Nor is this danger to the interests of organised labour
always left to its natural growth. The contrary is indeed the
case. The experience of America and Victoria shows that
Protected manufacturers most frequently import their labour.
The wage-earner is thus oppressed by Protection on every
side. The aid of Nature to his efforts has been lessened : the
purchasing power of his wages has been diminished : and the
number of his competitors has been increased. His old
prosperity is destroyed by the very means which he adopted
to peri)etuate it, until he learns by a bitter experience that
Nature is, after all, the best restorer of labour troubles, as of
other ills.
The Political Argument. 323
Pt. IV., Ch. vi.. \ I.]
CHAPTER VI.
THE COST OF PROTECTION.
I. The fiscal controversy has now been tracked through all
its windings. Starting on the broad and well-worn road of
economic demonstration, the argument has wandered into
every by-path of expediency and prejudice. None of the
appeals to interest, sentiment, or pride, by which Protectionists
have tried to cover their defeat in economic argument, has
been allowed to pass unnoticed, but each has been considered
separately, and has been tested both by experience and by
theory. The result is unaltered. The economic demonstra-
tion needs no qualification. Both political and economic
arguments lead to the same conclusion : namely, that Free
Trade which is voluntary trade means great trade, and
great trade means prosperity.
Nevertheless, where so much is at stake there will never be
finality. The theory and experience which seem conclusive
to-day will be distinguished tomorrow, if there is only a
difference in names to furnish an excuse. Self-interest will
never lack a means of working on fanaticism. Protection is
hydra-headed, as every Free Trade controversialist must know.
It seems useless to expose one fallacy, because the disputant
at once ignores what he has said before, and takes his stand
upon a frcsli position. Prove to a man that Free Trade
cannot lower wages, and lie will talk aljout diversity of
cccu[)ation ; quit the argument about wages to discuss di-
versity, and he is asking for a home market. (Juote statistics,
the authority is denied. Ask for facts, )ou ar*^ given phrases.
Reason logically about tlie very phrases that are given- all
reasoning is denounced as ' theory."
Fortunately, one resource remains to disregard the rents
and gaps in Protectionist arguments^ and treat the (question
\' 2
324 Industrial Free do At.
simply as one of expediency. Assume that Protection will do
all that its advocates promise, is not the price too dear ? May
we not buy diversity of occupation at too high a rate, even if
we get infant industries and a home market thrown into the
bargain ? In short, let it be granted that Free Trade is bad,
and that Protection remedies its worst defects, and still the
question will remain is the game worth the candle? If it is
not, and if Protection prove too high a price to pay for all the
promised benefits, a permanent and comprehensive answer is
afforded to every form of Protectionist allurement.
Nor can Protectionists complain of this method of con-
troversy, since they themselves impliedly, if not expressly,
admit that Protection may be bouglit too dearly when they
protest against being supposed to advocate "extreme" Pro-
tection. Bastiat's famous petition of the candle-makers against
the competition of the sun, which seems to Free Traders such
an unanswerable redudio ad absnrdiiiii of Protectionist argu-
ment; can only be avoided by fixing some limit to the
operation of Protective doctrines. Unfortunately, no one
knows what that limit is. It can only be guessed at by a series
of rough inductions from Protectionist protests.
We know, for instance (to recur to the former illustration),
that Protectionists in France and Anierica would not advocate
the enclosure of a city in a dome of glass in order to give
employment to the makers of glass and the manufacturers of
artificial liglit. However much the light of the sun may
prejudice the sale of oils, candles, lamps, and resin, and an
infinity of kindred articles, Protectionists will not shut out the
competition of that foreign rival. And they will not be moved
to alter their decision even by the consideration that if access
to natural light were closed in a few of the principal cities,
there would be an increase of cattle and sheep to supply
tallow, that groves would be planted with resinous trees, that
there would be an extended cultivation of vegetable oils,
and that the demand for artificial lishtinsi; would encourage
The Political Argument. 325
Pt. IV., Ch. vi., 5 I.]
agriculture in many ways, and at the same time give a home
market to the farmer.
We know that Protectionists will not shut out sunlight,
because many of them have declared the proposal to be
absurd, and have given as their reason that sunlight is a free
gift of Nature. The reason is excellent, but it equally applies
to iron, coal, and every other natural product which, by reason
of the greater liberality of Nature, is cheaper in one place than
another.
But the same Protectionists who refuse to exclude cheap
light do exclude cheap firing and cheap iron, from which we
can only conclude that there are certain limits to the extent to
which Protectionists are ready to refuse the gifts of Nature.
Sunlight they will accept, because the price of that is always
zero ; but iron, coal, and corn will be refused, because the price
of these articles only ai)proximates to zero. If Nature does
the whole work, her gifts will be received ; if she does only a
part, they will be rejected : or, what comes to the same thing, a
tax, equal in amount to the equivalent of Nature's cftbrt, will
be imposed upon the import of the completed article.
But even this distinction is not quite exact. Protectionists
will accept some gifts of a part from Nature, but not others.
For instance, American Protectionists will accept the assistance
of Nature in the production of tea, but not of iron. They
are ready to recognise that tlie natural conditions for the
production of tea are better in China than in America, but
they refuse to recognise the superiority of Australia in pro-
ducing wool. ]jut the proof of the existence of superior
natural conditions for tlie production of any article must
always be the same, vi/., a lower price. Altliough American
Protectionists will not encourage the tea industry, it is only a
matter of money to grow enough tea under glass in the
Southern States to supply the wliole Unir)n. Nor would it
matter what the tea cost, because even if it cost twenty
dollars a pound, the money (according to the Protectionist
326 Industrial Freedom.
theory) would not go out of the country ; so that instead of
America having the tea and China the money, as at present,
America would have both the money and the tea ! While
if there were any surplus production, bounties might be given
on its export to China, so as to destroy the foreigner in his
own market !
Other instances of a similar character miglit be quoted
to show that Protectionists are not always ready to follow
arguments to their logical conclusion. There appears to be
some vague and variable limit be) ond which Protectionists
will not go, for the reason that, if they di<l, Protection would
cost too much.
2, Assuming, then, that Protectionists cannot fairly object
to an inquiry into the cost of Protective tariffs, we will
proceed in the next and concluding pages to enumerate in
order the objections, both economic and political, to this
most baneful form of interference with the course of trade.
Protection is indefensible on economic grounds, for the
reason that under whatever disguise it may be recommended
it is always a device for making work. If the device
succeeds, somebody must pay for it. To ignore this truism
is to commit the blunder of the alchemists who spent their
lives in endeavouring to find a way of making something out
of nothing.
But it is said with pride : " See what industries Protection
has created ! " Granted that they are splendid, whose is the
luu-den of their cost ?
If an industry can sell its ])roducts at the price of the
open market, it needs no Protection. If it caimot sell at
market prices, and has to get an Act (jf Parliament to allow
it to charge more, it becomes a parasite u[)on existing in-
dustries, and nuist be su[)i)orted out of their profits. The
difference between the prices charged by these Protectetl
industries and the price in the open market is a measure of
The Political Argument. 327
Pt. IV., Ch. vi., \ 2.]
their economic cost to the whole community. The industries
themselves may be very fine and large, and a credit to their
superintendents, but if they cannot stand alone they owe
their support to taxes, and ought to be reckoned in the same
category with hospitals, gaols, almshouses, and other kindred
institutions.
It must always be difficult to estimate the exact amount of
the burden which these parasitic industries cast u})on a people.
Sometimes, but in rare cases, internal competition so reduces
prices that the loss is nil ; but in such a case the industry can
exist without Protection, and the duty ought to be, but never
is, removed. More often the difference between the price
charged by the Protected industry and that of the open
market is something a little less than the amount of the duty.
At times it is equal to the whole of the duty. Put whatever
the difference between the two prices may be, if the industry
requires Protection and that is the basis of the argument on
both sides it is borne by the community. No consequences of
this seem to be too grotesque for a true Protectionist. It has
been shown by undeniable figures times out of number that the
tariff in many instances takes more from the pockets cf the people
than would be enough to pension every workman in the Protected
industry, and buy up all the capital employed. The kerosene
industry in New Soutli Wales has been mentioned as one
instance. The tables of Mr. Hayter, the statistician of Victoria,
contain many others. Yet no such demonstrations can weaken
the enthusiasm of the true believer.
Nor do the figures of the Custom House reveal the whole
of the loss. The increased price of the home-made article
by reason of the duty must also be added to the account.
There is also a further item of loss, which it is almost
impossible to estimate, in the value of the industries which the
tariff has destroyed or crippled. These are never mentioned
in the boastful calculations of Protectionists; yet it is cer-
tain that no tariff was ever passed which did not interfere
328 Industrial Freedom.
prejudicially with some industries already in existence, and pre-
vent others from growing up. Why, then, should Protectionists
keep silent about this source of destruction and loss except
that it is in the nature of all men to " mark when they hit, but
not when they miss?"i
3. But the cost of a Protective tariff is beyond what can be
measured in mere money, because it weakens the fibre of
national life, by giving rise to political and social evils, which
must be counted as of graver consequence than any economic
loss.
From the standpoint of a politician it produces many evils,
which differ from each other only in degrees of harmfulness.
In the first place, it is a policy of inequality ; because it
confers special advantages upon certain classes without regard
to the value of the services which they render in return.
Under Protection every person, who is able to interest a
majority of legislators in his favour, can shield his industry
from foreign competition, and is allowed, with others in his
own trade, to sell certain goods at an artificially high price.
In other words, the tariff allows him and his fellows to
compel the rest of the community, who are in a large
majority, to deal exclusively with them, under penalty
of a fine in the shape of a customs duty should they
choose to purchase the goods which they desire from
some one else. Protectionists sometimes resent this
> I'reviou.^ly to the American tariff of 1862, there was a considerable
smelting industry carried on in the seaboard States. The duty on pig-iron
destroyed it. 'J lie decline of the American shipping trade is another familiar
instance. The tarilT has made iron and steel so deai', and so eahanced the
price of other raw materials, that shipbuilding has ceased to be jirofitable, and
the American marine, which once ranked next to that of England, has almost
disappeared.
The tariff has produced a similar result in Victoria. The shipbuilders
have openly asseited, and proved their assertion to the Ciavernment, that
they can no longer build ships to compete with those of New .Soutli Wales,
because of the high price of the raw material Q;:casioiied by the Protective
tariff.
The Political Arcvmekt. 329
Pt. IV., Ch. vi.,5 3.]
manner of stating the case, upon the ground (as they say)
that the internal competition of producers will reduce the
prices of Protected articles below those at which they could
be imported. Of course, if this were true, there would be no
need of Protection ; and the best proof of sincerity which
those who make the assertion could give, would be to become
Free Traders. But in fact, as so often happens with Protec-
tionist arguments, they are theoretically true under certain
assumed conditions, but in practice they have no bearing on
the controversy, because the conditions are absent. The
internal competition of which we hear so much seldom takes
place with sufficient activity to reduce prices. Rings, trusts,
combines, pools and every other device of a closed commerce
to secure for itself a profitable field of plunder, are resorted to
by the Protected manufacturers to prevent a decline in prices
through the competition of their own number. A Protected
country furnishes new illustrations every year of the old adage
that " where combination is possible competition is impossible."
It may, indeed, be put as the head and front of Protectionist
offending, that it destroys healthy competition in order to
create an unhealthy combination. The manufacturing
magnates of a Protected country arc as truly the privileged
class of to-day, as were their prototypes in the Rhine castles,
who exacted tolls from every passing trader.
Not only is Protection a policy of ine(|uality, but it is a
policy of ine([uality without system. It is a haphazard policy,
which confers its fiivours and strikes its blows equally at
random. This is inevitable from the nature of the object
which it sets before itself The selcriion of tliis or that
industry for special legislative favour places a i)Ower in the
hands of Parliament, which, even if it is not exercised cor-
ru])tly, must he exercised more or less blindl}-. The woollen
duties of the United States are the typical illustration of this
feature of Protection. They are so intricate and delicately
graduated tliat even experts in the trade are said to be unable
330 INDUSTRIAL Freedom.
to estimate exactly either their amount or their incidence.*
What, then, must be the position of the legislator who imposed
the duties ? No man can be master of the technicalities of
every trade ; and the most honest legislator cannot fail to be
misled by the interested statements of commercial experts.
The settlement of a tariff has been described by an American
eye-witness as "a game of grab," in which each interest takes
what it can, and by combination with others secures the
utmost. The iron men support the farmers, if the farmers vote
for a duty on steel rails ; and the woollen manufacturers form
a close alliance with the copper trust in order to prevent the
pastoralists from getting too much for wool. How infinitely
hard, in such a chaos of no principles, to detect corruption or
insure wise judgment ! Ignorance attempting to legislate
according to the dictates of self-interest ! Grant that ignorance
acts honestly, yet into what an unseemly scramble for money-
aids is politics degraded !
Unfortunately, however, ignorance is not always honest.
It would be assuming too much of human nature to look for
the continuance of a high standard of public integrity in any
Protected country. With whatever high motives men may at
first delude themselves into the support of a Protective tariff,
they run a constantly increasing risk of being conquered by
the temptations with which the policy surrounds them. The
virtue of a legislator must indeed be adamant, if, when he sees
others plundering all about him, he keeps his own hands pure
from bribes. Let the recent experience of Canada, or the
revelations of the methods of the contest for the United
States Presidency in 1888, be a sufficient warning!
Politically, then. Protection ought to be condemned,
because it creates vested interests, the existence of which is
dependent upon Acts of Parliament, and which tend mevitably
to become monopolies ; because it creates these interests without
' See on this subject the chapter on the Woollen Duties in Professor
Taussig's " History of Protection."
The Political Argument. 331
Pt. IV., Ch. vi., \ 4.]
due regard to the evil which it inflicts on others, and because
it entrusts the power of enriching individuals to legislators,
who are all the more exposed to the influence of improper
motives, because their want of knowledge must prevent them
from acting with complete fairness, even if they had the best
intentions.
4. But it is as a social rather than a political evil, that the
baleful influence of Protection is the most apparent, h.% an
abuse of the law-making power, it injures respect for law by-
creating artificial offences against which both self interest and
the sense of justice equally rebel. There is no surer means
of accustoming citizens to view with complacency disobedience
to the laws, than by awarding heavy punishments for acts (such
as smuggling) which are not morally wrong. No one can
trace in detail or estimate in bulk how much is lost to a com-
munity, if the public once lose faith in its law-makers and respect
for its laws ; but that the loss is considerable few would attempt
to deny. Nor does the evil of Protection rest here. Men are
influenced by it also in the more self-regarding relations of
their lives ; because it tends to weaken tlie motives of self-
reliance and enterprise. x\fter a long course of Protection
manufacturers seem to lose the power of facing difficulties like
practical and courageous men. In the face of competition
they become like silly cliildren, and are scared by it as by a
ghost. Instead of calling their men together to devise new pro-
cesses, or calculating how to cheapen or improve their present
ones, they run whining to Parliament for help at the first sign
of successful rivalry. Instead of trusting to the old-foshioned
virtues of enterprise and self-reliance, they lean entirely on
Protective dulies. A system is thus initiated which, if it were
continued long enough upon a people whose numbers wore
not constantly recruited by energetic immigrants, could only
end in the destruction of national life. The vigour of a
pcojile wliich becomes accustomed t(j ai)ijly to (;(j\ernment
332 IXDVSTKJAL FREEDOM.
in every difficulty, must be gradually sapped. Private energy
will put forth no power, when it is without assurance that it
will be allowed to reap success, and when a vote of the
Assembly may at any moment bring its enterprise to an un-
timely end. Thus Protection defeats the object of its advo-
cates ; and the very policy which is designed to stimulate new
qualities and develop the natural powers both of a country
and its citizens, becomes a subtle instrument for the destruction
of originality, ambition, and enterprise. For Protection is
essentially antagonistic to progress.
It runs counter to one of the most elementary and per-
manent of human instincts, viz., the desire to satisfy wants
at the least cost. We spend millions in dredging harbours, in
removing sand-bars, and by every means improving the
facilities for commercial intercourse. Yet, so soon as we
experience the effects of this work in a reduced cost of
foreign goods, the Protectionist would have us lay a new tax,
like restoring the sand-bars, in order to bring up prices. Well
may Professor Sumner saj', "To build sand-bars across our
harbours would be a far cheaper means of reaching the same
end." If the Protectionist theory be correct, all the thought,
energy, time and money devoted to imjiroving the means of
communication between foreign nations is wasteful and in-
jurious. A great steamship or an international railway only
exists to cheapen the cost of transportation ; improvements in
processes of manufacture are only designed to cheapen the
cost of production ; improved markets, co-operation, and
similar devices, are only resorted to in order to cheapen the
cost of distribution. The net result of this manifold exertion
of human power is a reduction in jjrices. ^'et, let prices fall
in any country save their own, Protectionists at once
declare that the result is ruin, not advantage, to their
fellow-citizens. The Cliinese are the true I'rotectionists,
for they build a wall around their territory and exclude
foreieners.
The Political Argument. 333
Pt. IV., Ch. V,, \ 5.]
5. Finally, Protection deserves to be condemned as a
moral abuse.
It is no doubt unfashionable, at present, to judge political
measures by ethical standards ; partly because the dominance
of reactionary ideas and the rule of force, of which Protection
is only one expression, are unfavourable to moral criticism,
and partly owing to a just resentment against the egotism, cant
and malice with which some prominent political moralists apply
the ethical test. Nevertheless, those who believe that the
foundations of a national policy must rest upon sound morality
will be compelled to give consideration to the ethical basis of
a Protective system. Yet it would seem as if Protectionists
always shrank from this duty. Their policy has no ethical
maxim connected with it. It is, on the contrary, an open
outrage on the moral sense of a community, and a defiance of
all moral maxims. It rests avowedly on seltishness " Germany
hav, nothing to do with Russia, nor Russia with Germany,"
says List, its champion I^and it justifies its action by appeals
to national prejudice and class interests. Where Free Trade
preaches the brotherhood of man, and urges that, in foreign as
in private commerce, a nation should "Do unto others as it
wishes to be done by," Protection advocates national isolation,
and inculcates the doctrine of doing to others in commercial
matters as they do unto us. " Peace on earth, good-will
towards men,"' which is the motto of the Cobden Club, can
have no meaning to the ears of men who wage an internecine
warfare with every nation by the means of hostile tariffs, which
are not the less deadly than murderous weapons because they
do not leave their victims mangled on the ground. The
"nationalist" who rejoices over the distress which the
McKinley tariff has caused in Germany or Wales, and
claims every dislocation of foreign commerce and every
injury to foreign traders as a sign of a worthy triumph,
evidently stands upon a different moral plane from those
who hold tb.at each nation finds its own true slremzih
334 IXDUSTRIAL I'REEDOM.
in a joint and peaceful progress with neighbouring
countries.
It is characteristic of those who view Avith satisfaction the
injurious effects of their pohcy on other countries, that they
should be indifferent to the liberties of their own people. Yet
the moral aspect of Protection is no brighter, if the policy is
contemplated only in its home results. Protection is an
interference with human liberty, of the same nature, and
differing from it only in degree, as human slavery. " If it is
criminal," said Cobden, with his usual insight, " to steal a man
and make him work for nothing, it is equally criminal to steal
from a free man the fair reward of his labour." Every increase
of price in a Protected article means an addition to the forced
labour of those who desire to buy it. Such an invasion of
human freedom may be justified (as negro slavery was
justified) by more or less sincere assertions that the interest
of the poor requires it ; but in its essence it is always, as in
practice the facts prove, a device to secure advantages for rich
men in which the poor do not share.
It is this consciousness of the deep-lying immorality of a
Protective policy that justifies the confident belief among Free
Traders in its ultimate destruction. Those who believe that
" morality is the nature of things " arc not likely to be much
disheartened by the passing victories of restrictive ])olicies.
Periods of reaction are inevitable ; and when the reaction
takes the form of military despotism and belief in force, tariffs,
which are the accompaniment of niilitarism and the denial of
justice, are necessary incidents of tlie reaction. Even already,
however, there are signs that the nightmare of Protection is
lifting ; while the causes of discouragement to Free Traders
have never been so great as tliose which darkened the days
of the Abolitionists only twenty years before the Civil
War.
6. It is no wonder, then, that, in every civilised country,
The Political Argument. 335
Pt. IV., Ch. vi., \ 6.]
those who try to find the best expression of a nation's moral life in
its political system, and who recognise that sense of duty is the
safeguard of society, and not self-interest all, in fact, who are
men of ideas, with hardly one exception are waging an
undying battle with the creature Protection, It is no wonder,
also, if at times the language of the disputants grows heated,
" Protectionism," says Professor Sumner and his words will
find an echo in the heart of every one who has lived in a Pro-
tected country, and has seen the desperate shifts to which
Protectionists resort, or read the nonsense and the falsehoods
of their journalistic champions " is such an arrant piece of
economic quackery, and it masquerades under such an
affectation of learning and philosophy^ that it ought to be
treated as other quackeries are treated with scorn, contempt,
satire, and ridicule." If this method has not been adopted in
the present work, it has been out of deference to the feelings
of others, and from a real desire to see the matter as they see
it, and not from any belief that Protectionist arguments can
bear even the sound of plausibility to men who study the
course of trade and the growth of industrial life. Students of
economics are virtually unanimous in condemning the policy.
But voters are not students, and often lack the means of
information. Such persons, if they will reflect upon the matter,
need no study to become Free Traders. Protectionism is an
outrage on the moral sense. " It is a subtle, cruel, and
unjust invasion of one man's rights by another. It is done by
force of law. It is at the same time a social abuse, an economic
blunder, and a political evil." The system saps self-reliance,
because it leads men to deiJond upon the laws of Parliament
when they should be studying the laws of nature ; it is repug-
nant to justice, because it introduces artificial inequalities ; it
is destructive of political purity, because it turns the power of
law-making into an engine for enriching individuals. It is at
once the offspring and the parent of corruption. It lowers the
standard of wages and creates monopolies. It widens the
^^6 Industrial Freedom.
breach between classes by introducing systematic spoliation
under the forms of law. No possible advantage which Protec-
tion can give can compensate for these tremendous evils. The
true policy, therefore, is to trust in freedom, even when the
path seems lost, remembering that the confusion and obscurities
of industrial life cannot be relieved by efforts to turn back the
hands upon the clock of time.
The Free Trade controversy presents anew all the features
of the old controversy against ingrained abuses. The struggle,
which, in one form or another and under varied names, has
divided men into opposing camps, since the first existence of
political societies, is now waging round the issue of Free
Trade. Religious, political, and industrial freedom are the
constituent elements of a stable and prosperous State. Two
of these religious and political freedom have already been
achieved ; but the struggle is yet being waged around the third.
Yet, of the three, industrial freedom is of most importance to a
democratic State ; because under the modern conditions of civil
life, neither religious nor political freedom is likely to be long
enjoyed, if the fabric of liberty is once impaired upon the side
of industry. The matter of primary importance in any
industrial society is the preservation, against all attacks, of its
individual freedom. Those who, in their zeal for socialism,
temperance, or other objects^ refuse to take their part
in the fiscal battle, need to be reminded of Mr. John
Morley's advice to another class of earnest reformers, that
" They should not let the eternities bulk so big as to shut out
this perishable speck, the human race," and to be guided
in their practice by Cobden's sage direction that 'Mn politics we
must only do one thing at a time." The first thing to be done
now throughout the greater part of the English-speaking world
is, to destroy Protection. That once accomplished, the path
is clear, and other reforms will follow.
APPENDIX I.
Tables of Wages in the English Cotton, Woollen,
Worsted, and Iron Trades.
In order to illustrate the statements in Chapter IV., Part I., relating
to the diffusion of wealth in Great Britain, some tables are sub-
joined, exhibiting the fluctuations in the wages of the four principal
English Industries the Cotton, Woollen, Worsted, and Iron
manufactures since 1830. The figures are extracted from the
Reports issued by the Board of Trade, under the title " Miscel-
laneous Statistics of the United Kingdom." Unfortunately, these
reports contain very little evidence upon which positive conclusions
can be based. They contain, it is true, a good deal of miscellaneous
information about wages ; but they appear at irregular intervals,
and their information is exhibited on miscellaneous principles of
inconvenience and confusion. In one report an industry is
scheduled by itself, which in the next is lost among a mass of
details of the state of trade in certain districts. Sometimes wages
are estimated by the hour, sometimes by the week, and sometimes
by the piece. Upon occasions the employments of workmen are
distributed ; while upon others an industry is treated as a whole,
and its rate of wages is expressed in averages ; and, not unfre-
qucntly, an ijiiportant trade, the condition of which has been
described for several years with a most useful fulness, drops out
entirely from the record, never to appear again.'
But, in spite of the impaired value of such ill-arranged statistics,
the figures are useful up to a certain point for purposes of com-
parison ; and, in respect of the four great industries already named,
they have been presented with some approach to an uniform
method. These trades together give employment to about one-
half of the working-class, so that the \-ai-\ ing rate of wages paid
in them during the last thirty years will indicate an approximate
an^iuer to the question '' Whctlicr wages in Knglantl have on the
wh'ilc risen or decreased ?''
A. v"Ar;i:s IX Tin: co'I'I'on ixr>usTRV.
The wa;-;es paid in llie Cotton industry are particularly valuable
indications of the ratc,^ in other trades, lioth l)ecause for the last
' Thcso (l.'fu'ioiicit'S !iav" l)cen remedied of Lite years; Imt the I'eniavk.s
a]";'ly t'l t!ie veai's f)\c;" wlach tl;ese jirrnres !ia\'e li-en taken.
W
338
Industrial Freedom.
forty years that industry has maintained the same position of
importance, and because it has also, during that time, been singu-
larly free from any disturbing fluctuation in the number of hands
employed.^ This is mainly owing to the gradual introduction of
machinery', by which, in spite of the great increase in the production
of cotton goods, the necessity for employing more labour has been
avoided.
In examining the fluctuations, it is convenient to adopt a rough
division of the Cotton operatives into four classes, according to
the degree of skill required in their several occupations.
In the first class would come the overlookers and superior
artisans in each department, together with those spinners who,
according to the number of spindles each man can manage, would
be classed above No. loo in the technical language of the factory.
The bulk of the adult males would fall into the second class, as
being spinners and weavers of average skill. Women should be
ranked alone as a third class ; and, for greater clearness, the
wages of children under sixteen should also be considered separately.
The subjoined Tables are an attempt to carry out this principle
of division.
Table showing the Fluctuations in the Average Rate of
Weekly Wages paid to persons employed in the Cotton
Trade during the years 1839-77 in Manchester and the
Xeighbourhood :
Occupation. \
1839.
"V
1849.
1859. 1874. 1
1S77.
1ST Class. j
1
Superior Operatives. i-.
d. s.
d.s.
d. s.
d. s. s. s. d, s. s.
d. s.
d.
(i.) Overlookers .. ..'24
to 25
028
28 '30 to 45 30
to 45
(ii.) Skilled spinners, above
No. 103 . . . . 40
to 45
036
to 40
40 to 45 45 to 50
45
to 55
(iii.) Engine-irs .. 24
28
,30 ,43
58
3
2NT) Class.
Unskilled Operatives.
(i.) Spinners below No. 10023
to 25
21
23 to 25 42
40
(ii.) lileachers . . . . 21
18
18 ^24 :28
(iii.) Strippers and grinders 11
to 13
12
to 13
12 to 13 22 to 2321
(iv.) Labourers .. 15
15
15 I y 5 I S
9
SRD Class.
1
Women.
(i.) Carding Department . . 6
6 to 7
t 6
6 10 S
6 7 to 9 II to 16 10
6 to 18
7
(ii.) Doublers . . 7
7
6
9 10 to 13 12
(iii.) Weaving
9
to 17
63
9
to 16
60
10 to 20
12
to 24
Weekly hours of labour
60 59 1
56^
' The number of hands employed in all branches of the Cotton trade is
given at 420,000 for 1S74, and in 1840 it was estimated at 400,000.
Appendix I. 339
It appears from these Tables that in the year 1839 the wages
of the highest paid overlooker, in any department, was 25s. for a week
of sixty-nine hours, which is twelve hours a day, with nine hours on
Saturday for a half-holiday. Ten years later after Free Trade
his wages had risen to 28s., and his hours of work had been re-
duced to sixty in the week. Since that date there has been a steady
improvement in wages, together with a further reduction in the
hours of work. The lowest paid overlooker now gets more for fifty-
six and a half hours' work than the best paid overlooker received in
1849 for sixty hours ; while the remuneration of the more skilled over-
lookers has increased more than fifty per cent, in the same period.
The increase in the wages of the engineers is even more remark-
able. They have more than doubled in the last thirty years.
The skilled spinners after a temporary fall, through the introduc-
tion of machinery are also better off than they were. Those who
are the least skilled among them are paid higher for less work, and
the rewards open to them for a higher exercise of skill are con-
siderably increased. Even the class of unskilled labourers,
whose progress, as already noted in the text,^ is generally slower,
have, in some cases, doubled their wages in the same thirty years ;
although, with reference to this class, it should not be forgotten
that many of its members are constantly pushing forward into
better paid employments, and that it is also being constantly re-
cruited from below by those who, in former days, would have lived
as paupers or vagabonds.
The figures which show the wages paid to women need no
further explanation. They will show, with sufficient clearness,
how low is the market \alue of woman's labour, and how little
has been done to raise that value by intelligent and power-
ful combination. Unlike men, women are not yet paid l)y
reference to any standard of class comfort, but arc content
with any pittance which may increase the family resources,
however insufficient that may be, by itself, to keep one ])erson
in a position of health and decency. By such ill-judged
economy, they only depress the general labour market, without
obtaining for thcmseh-es independence or security ; so that they
tempt men, wlio are heedless of tl;e impossibilit\- of bringing
women back to a state of subjection, to clamour fn- tlicir cx-
rlusion from male employments.
' Src page 305.
34
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APPENDIX II.
J. S. MILL AND PROTECTION.
The idea that the abnormal economic circumstances of a young
country justify the imposition of Protective duties is sometimes
supposed by Protectionists to have approved itself to no less
eminent a thinker than John Stuart Mill. Indeed, much of the
Protectionist argument from natural difficulties is professedly
adopted from one passage in the writings of this economist. As
this passage has been so much misunderstood, it will be well to
quote it in full before entering upon any criticism of Mr. Mill's
views.
" The only case," says he, " in which, on mere principles of
political economy, protecting duties can be defensible, is when they
are imposed temporarily (especially in a young and rising nation)
in hopes of naturalising a foreign industry in itself perfectly
suitable to the circumstances of the country. The superiority of
one country over another in a branch of production often arises
only from having begun it sooner. There may be no inherent
advantage on one part or disadvantage on the other, but only a
present superiority of acquired skill and experience. A country
which has this skill and experience yet to acquire may, in other
respects, be better adapted to the production than those which
were earlier in the field ; and, besides, it is a just remark that
nothing has a greater tendency to promote improvements in any
branch of production than its trial under a new set of conditions.
But it cannot be expected that individuals, at their own expense,
or, rather, at their certain loss, would introduce a new manufacture,
and bear the burden of carrying it on until the producers have been
educated up to the level of those with whom the processes are
traditional. A protecting duty continued for a reasonable time
will sometimes be the least inconvenient mode in which the nation
can tax itself for the support of such an experiment. But the Pro-
tection should be confined to cases in which there is good ground
of assurance that the industry which it fosters will, after a time, be
able to dispense with it ; nor should the domestic producers ever
be allowed to expect that it will be continued to them beyond the
344 Jadvsthjal Freedom.
time necessary for a fair trial of what they are capable of
accomplishing."
As this passage has been so often misinterpreted to convey an
approval of the Protective policy in America and Australia, it may
be well to set out clearly at starting what are the conditions under
which Mill thinks Protection might be justifiable. They are four
in number :
(i) Where the tariff is imposed to start a new industry.
(2) Where such industry is plainly suitable to the
country.
(3) Where it is only the want of experience on the part of
either labourer or capitalist which deters individuals from
running the risk of establishing the industry.
(4) Where there is good reason to believe that the fostered
industry will soon be able to stand alone.
It is not an excessive admission that in such a case " Protection
might be one mode " in which a nation could tax itself in support
of an industrial experiment. Mill's error lay in thinking that it
could ever be " the least inconvenient mode " of raising such a tax.
The error of those that quote Mill lies in not perceiving that his
observations only apply to the cases in which the conditions which
he requires are present, and that in these cases he only contem-
plates giving Protection during that short interval in the history of
an industry between the first production of an article and the time
when the home manufacturer is able to compete with his foreign
rival both in quality and quantity. In the whole history of the
Protective movement in America and Australia it is, I believe,
impossible to cite a single industry, the circumstance of which
would have justified Protection according to the canons laid down
by Mr. Mill.
Even, however, if it be granted that the condition of things
concei\ed by Mr. Mill is theoictically possible, it cannot be too
strongly insisted upon that Protection is the most wasteful, unjust,
and inconvenient method of Government assistance.
In the first place, whatever aid it gives comes too late ; Ijecause
it cannot be of service in starting an industry, whatever advantages
it may give after the industry is set going. Take, for instance.
Mill's imaginary case of an industry which is delayed by want of
skilled labour. This labour must either be imported from abroad
or created at home by instruction ; and in neither case is the
Append I. "^ 11. 345
object sought for immediately furthered by Protective duties. It
would be better for the Government either to pay the passages of
the imported labourers, if immigration were necessary, or to bear
the cost of giving the required instruction to a sufficient number
of home labourers. Either of these methods of aid would be
.directed immediately to the object aimed at, and would be free
from the grave objection to which Protection is open, of placing
difficulties in the way of every industry which requires to make use
of the Protected article. In fact, it must be plain that Protective
duties can be of no advantage until the producers have begun to
make the article ; but none the less they lay a heavy burden on the
community from the first day on which they are collected ; while
the benefits which they confer at a later stage in the history of an
industry after it has been started, but before it is able to hold its
own are open to the further objections that they come too late and
are scattered indiscriminately upon those who may deserve them
and those who certainly do not.
The founder of a new industry in a young country does un-
doubtedly confer a benefit upon the whole community at his own
personal expense and risk ; so that it may be sometimes desirable,
in the cases which Mr. Mill has put, that Government should
encourage men to make experiments in new industrial ventures.
But of all modes of giving this encouragement, Protection is the
most ill-advised, being at once unjust and unsuccessful. The help
which it gives comes after the time of difficulty has gone by, and
is given with equal readiness both to the enterprising originator of
the industry and every one who rushes into the business upon the
strength of his experience. By this competition prices are certain
to be reduced, until the originator of the industry may lose the
advantages of the monopoly, which was created as his reward
If Government aid is really required, either as a stimulus to new
experiments or a reward for successful ones, it ought to take a
form which will give the benefit with as much discrimination as
possible to those who deserve it, and witli as little hardship as
possible to the mass of the consumers. Either the ]iaymcnt of a
money sum by way of bonus for the first production of the required
article at home, or the granting of an allowance to the originator
of an industry to enable him to sell his goods at market rates
during his temporary inability to compete with the foreigner, or
the letting of a Government contract at a non-competitive rate
would serve the doulile purpose of reward and encouragement
346 Industrial Freedom.
without much inconvenience to the mass of consumers. Any of
these methods of aid, moreover, has the advantage that it can be
easily withdrawn ; while a Protective tariff, once imposed, remains
an incubus which can only be removed by serious civil strife. The
essential ingredients in any form of Government assistance
should be that it was terminable at a fixed period, and that both
the persons who receive it and the amount which each receives
should be easily ascertainable. Protection does not satisfy either
of these requirements.
No form of Government aid, however, is free from objection.
Bonuses, bounties, special contracts, or any other form of subsidy,
are in the long run demoralising both to the recipients and to the
public life of the country, both as being premiums on laziness and
occasions for fraud. It is so easy for all concerned to receive and
pay money according to the terms of some agreement, that neither
can a manufacturer be expected to shorten this period of gratuitous
assistance nor a civil servant to watch very closely all the details
of a manufacturing process or check the figures of a ledger. In
any bargain of this kind with the State the manufacturer is sure to
get the best of it.
Fortunately, experience proves that Government assistance is
not required to start new industries in a young country. If there
is a risk of failure in a young country owing to the inexperience of
all concerned, the conditions of the country soften the failure very
much. In a small country new industries must be on a small
scale ; and no large expenditure, whether Government assistance
be extended or withheld, would be required to embark upon the
experimental stages of a new industry. Consequently, we may
watch every demand for State aid with more than ordinary suspicion,
without being haunted by any sentimental fear lest in protecting
the State purse against the raids of interested persons we are
delaying the development of our country. Healthy enterprises
and profitable trades are sure to be developed without assistance ;
while if there be any natural industry which ought to start at once,
and is prevented by the want of Government assistance, the
question must be still answered whether it is not better to lose
the industry than to enter on the perilous path of State aid.
APPENDIX III.
Comparison between the Respective Rates of Progress
OF New South Wales and Victoria since 1866.
I. The risk of pressing too far any argument, which rests upon a
comparison between the condition of different countries, has been
already alluded to in these pages, and attention has been called to
the passage in which Mr. Giffen points out, with admirable lucidity,
the requisites under which alone any such comparison is admis-
sible. These requisites exist more nearly as between New South
Wales and Victoria than between any other countries, so that, if
the argument from comparison is ever admissible, it will be in
their case. Both of them are young countries, and are inhabited
by men of the same race, speech, and training : capital and labour
oscillate freely between them : both use substantially the same
methods and forms of government : while, against the larger terri-
tory of New South Wales may be set the superior climate and
easier development of its southern neighbour. Whatever may be
the balance of the natural advantages, whether of climate or popu-
lation, is on the side of Victoria, whose compact, fertile, and well-
watered territory gained for it, on its first discovery, the well-
deserved title of Australia Felix. The striking and ultimate point
of difference between the two countries is their fiscal policy. Since
1866 Victoria has lived under a system of gradually increasing
Protection, while the policy of New South Wales has been, in the
main, one of Free Trade. According to all Protectionist theory
Victoria should be prosperous and New South Wales distressed ;
there should be variety and growth in the one country, stagnation
in the other. At least the progress of Victoria ought to have been
more rapid than that of New South Wales, because she has added
to the natural advantages which she already enjoyed, the artificial
benefits which are claimed for a Protective tariff.
If, in fact, neither of these conclusions is correct, and, while
both countries have been phenomenally prosperous, New South
Wales has prospered the most, one of two conclusions is inevit-
able namely, either that certain special influences have caused
the more rapid progress of New South Wales which were not felt
34^ Industrial Freedom.
in Victoria, or that Protection has retarded instead of assisted the
development of Victoria's natural superiority.
2. Writers of all schools admit that activity in certain depart-
ments of national life is a fair indication of prosperity and progress.
It is, for instance, generally allowed that an increase in popula-
tion, a development of agricultural and manufacturing industry, a
growth of foreign commerce, an increase in shipping, or an
improvement in the public revenue, are all signs of health
and well-being ; and that a concurrence of such symptoms
over a lengthened period indicates an increase in material
wealth.
Accepting these tests of progress, our comparison proceeds
thus : first, we examine the position of the two Colonies as regards
population, foreign commerce, shipping, agriculture, manufac-
tures, and revenue, at the time when both of them adhered to
Free Trade ; from which we find that, according to all these indi-
cations of prosperity, Victoria was then very much the better off :
In 1866 she outnumbered New South Wales in population by
200,000 souls : her foreign commerce was larger by /^8,3oo.ooo : she
had a greater area of land under cultivation : her manufactures were
well established, while those of New South Wales were few and
insignificant : she was ahead in shipping, and her revenue was
greater by one-third.
Passing next to the years which follow 1866, we observe that
New South Wales gradually bettered her position in every
province of national activity, and that, as the fetters of Protection
became tighter, V'ictoria receded in the race. She gave way first
in the department of foreign commerce, next in population,
shipping, and revenue, until, in 1887, she maintained her old
superiority in agriculture alone.
From this accumulation of facts and not from any one of
them we infer that the rate of progress in New South Wales
under Free Trade has been greater than that of \'ictoria under
Protection ; and we use this fact (without at present claiming the
credit of it for Free Trade, or seeking for its explanation) as one,
which, whatever its explanation may be, is proof by itself that the
Protectionist dogma as to the inability of a young country under
any circumstances to make rapid progress without Protection
is contrary to experience. " Either prosperity in a Free
Trade country, or distress in a Protectionist country, is," as
Appendix III. 349
Professor Summer has said, " fatal to the Protectionist
theory."
3. Having established our facts, we next seek to explain
them ; and in doing so have first to consider the various explana-
tions offered by Protectionists. These are three in number.
P^irst, they say that the comparison between New South Wales
and Victoria ought not to be made, because the conditions of the
two countries are not similar; and they specially insist upon the
earlier foundation and the larger territory of the Free Trade
Colony. This argument we meet by a plea in confession and
avoidance, to drop for a moment into the apt language of the
lawyer's art ; the facts may be admitted, but the use which is made
of them must be contested. We shall have to show that whatever
advantages the circumstances referred to may give to New South
Wales are more than compensated for by other advantages
peculiar to Victoria.
The second argument by which Protectionists attempt to
depreciate the signiticance of the New South Wales superiority is
by insisting that her growth is due to certain special causes such
as the expenditure of borrowed money, and the sale of public
lands which have no connection with the fiscal dispute. Here,
again, the facts will be admitted, and it will be conceded that both
these and other causes have contributed most materially to the
rapid progress of New South Wales. But it will also be shown
that whatever influences besides Free Trade have aided New
South Wales, have also aided \^ictoria with even greater intensity.
Thus, the very facts which are advanced as a disparagement will
be used as further evidence of the efilcacy of a Free Trade
policy.
Having thus sketched the outline of the argument which
follows, we arc in a position to enter upon the details with less
risk of confusion.
POI'ULATIOX.
The first element of greatness to a young country is populalion.
.'\ new- land needs to Ijc (lc\clopcd b}' strou;;' arms, and e\ t!'\-\\ lu-re
ciics aloud foi" men. It is true that congestions iii the labour iiiarkcL
or; iir at limes in Australia as elsewhere, but tliey must not be taken
as an nidieation of o\'er-iioj)ula'ion. F\er\' new coimtr\- ' dutains
a resiiluun\ of ciinainals antl ne'cr-do-wcels who, from oni- cause or
atio'.her, arc unfit for work ; wliik; Austral;, i po::se~ ics. in a'lcliiion.a
35 Industrial Freedom.
class of genuine lazzaroni, whose dislike of any steady occupa-
tion is encouraged by a genial climate and a reckless system oi
public and private almsgiving. During the greater part of the
year the shelter of a roof at night is neither requisite nor comfort-
able ; while for the inclement season, food and lodging can be had
in every capital either gratuitously or for a minimum of work.
Besides this voluntary pauperism, there is in every Colony a certain
element of casually employed persons, consisting of artisans and
clerks, who experience real suffering in times of depression, from
inability or unwillingness to leave the cities and seek new kinds of
occupation in the country. Still, after making every allowance for
temporary dislocations of industry, it is safe to say that the danger
of over-population is not within the limits of practical Australian
politics ; and that, even in times of greatest depression, thousands
of able-bodied men could always obtain work in any Colony at
good, and even high, wages. The growth of population is thus a
crucial test of Australian prosperity, which can be applied without
qualification to all the Colonies, because none has any pre-eminence
in "unemployed." The class of the "unemployed" contains the
same elements in all, and passes freely from one to the other,
as political agitation or other causes makes its existence no-
torious.^
In 1866, the year in which Protection was introduced, the
1 An illustration of this occurred in Sydney towards the close of 1886, when
a Protectionist Government gave indiscriminate relief, without any labour test,
shortly before a general election. The natural consequence was that the float-
ing population of all the Colonies drifted to Sydney, where 6,000 men were at
one time being lodged and fed by the Government. After the elections, during
which this body of "unemployed" was freely used as an argument against
Free Trade, Sir Henry Parkes, who had succeeded to power, found himself
unable to disband so large an army in the streets of Sydney, and adopted the
plan of creating employment on Crown lands for all who wished it, while at the
same time he stopped the indiscriminate relief in Sydney. It was more than a
year before the labour market which had become quite disorganised by the
inducements offered to country labourers to throw up their work, either to
enjoy a visit to Sydney, or to earn (as good workmen could) more than their
usual wage by piece-work on the Crown lands resumed its normal condi-
tion. An incident occurred during this period which illustrates in an amusing
fashion the popular view of the " right to employment " as it finds expression in
Australia. In June, 1887, the "unemployed," who were then working at the
Field of Mars for 5s. a day, petitioned the Cabinet to be allowed "a day's
holiday to celebrate the Jubilee," so completely had they come to regard
themselves as a State institution.
Appendix III. 351
population of Victoria amounted to 636,982 human beings, as against
431,412 in New South Wales. In 1881, the relative numbers were
862,346 and 751,468. In 1886 the numbers were estimated in both
Colonies at a million. Victoria then gained a little during the
Exhibition year in 1888, but in 1889 New South Wales again took
the lead with 1,122,200, as against 1,118,077, and has maintained it
to the present time. During the period from 1866-89, the increase
was only 75 per cent, for the Protected Colony, while it was 140
per cent, for the Free Trade Colony. The increase from 1871 to
1 88 1 was 30'9i per cent, in New South Wales, and only 18 per
cent, in Victoria ; and from 1881 to 1888 it was 44*43 per cent, in
the former, and only 26*50 per cent, in the latter Colony. While
in the former decade the difference in the rate of increase was
1 2*91 per cent., it was i8'43 per cent, during the latter period,
thus proving that the increase of Protective duties is not
necessarily accompanied pari passu by an increase in popu-
lation.^
Popular prejudice, anxious to minimise as much as possible
this rapid growth in the numbers of a Free Trade Colony, where,
according to all theory, no man ought to be able to get a living,
has attributed it to State-assisted immigration. There were, how-
ever, during the period from 1881-87, when the increase in popula-
tion was most rapid, only 32,744 assisted immigrants ; while the
whole number of State-assisted immigrants between 1866 and 1889
only amounted to 59,000, as against a total increase of 690,788
souls. Assisted immigration can accordingly account for only 8'5
per cent, of the whole increase.
The real reasons must be sought elsewhere, and will be found in
the greater attractiveness of New South Wales as a place of resi-
dence, in its higher marriage rate, and its higher birth rate
three causes which, either separately or together, indicate a higher
range of material prosperity. We will treat of each sepa-
rately.
The most noticeable fact which is disclosed by the Victorian
Census of 1 87 1 and i88r, is that, next to the little island of Tasmania,
A'ictoria has the greatest proportion of females to males of any
Australian Colony, which is the more remarkable when we recall
' I am iiidehted for tliese calculations, which are taken from the ofticial
records, to a pamphlet by W. Max Hirsch, entitled, " Protection in Victoria"
(Melljourne : Echo Publishing Company, 1891) sec p. 10.
352 Industrial Freedom.
the circumstances of her origin in the gold fever of the early fifties.
Victoria in those days had an enormous excess of males. Further,
we find that this unhappy disproportion between the sexes is grow-
ing rather than diminishing in the Protected Colony. The follow-
ing table shows the figures as compared with those of New South
Wales ;
Percentage of
Fem.vles in the Total Population.
Year.
New South Wales. Victoria.
l88r
1888
1891
45 '8 47 '5
44 "3 466
46-5 47-8
Pursue the investigation a little further.
The census returns for 1881 showed that Victoria like the
exhausted countries of Europe was actually not sustaining her
own population ! During the ten years, 1871 to 1881, the returns
show that 53,000 persons emigrated to Victoria, but that 68,000
persons left. In other words, during these ten years of active Pro-
tection, adopted professedly in order to "give employment,"
Victoria not only lost all her immigration, but also 15,000 of her
natural increase 1 The figures of the last census in 1891 will be
awaited with much interest.
r\Iorc significant still is the change in the quality of the A^ctorian
population. The class of citizen which every country wishes most
to keep is that of the "soldier's age,'' from 20 to 40. Yet in 1881,
in spite of her much larger population, Victoria was found to
possess about 18,000 fewer men at this desirable range of age than
New South Wales. On this point, Mr. Hayter, who certainly
cannot be accused of giving undue prominence to any fact which
tells against Victoria, makes the following remarks in his "General
Report" on the Census: "It will be noticed that the contingent
available from A'ictoria is smaller by 18,000 than that from New
.SdUth Wales, and a simple calculation will show that rclalivcl)- to
the total population, males at the soklier's age arc fewer in \'it:toria
than in any of the other Australasian Colonies. In fact, it may be
stated thai the deficiency of males, at this important period of life,
is the weakest |)(iint in the A'ictorian population."' U|)on this
passage Mr. h'dward I'ni>roi-d, who was the fii-.-^l to in\-e>tigate the
bearing of tlic Victorian ])opulaiion returns upon the fi.-^cal con-
1rovcr"v. remarks as follows- "Tlic rream (^{ the ' effecii\e '
Appendix III. 353
population of a country may be said to be the males between 25 and
45. The changes in this portion of the people in the two Colonies
during the decade were simply extraordinary. New South Wales
showed a gain of 32,716, whilst Victoria showed a positive loss of
35,916. In 1871, Victoria was 52,138 ahead; in 1881, she was
16,494 behind a change against Victoria in the relative position of
no less than 68,632."
The following two tables will bring out more clearly still the
greater attraction which New South Wales exercises on men in the
prime of life, and the loss which Victoria sustains through the
emigration of this economically most valuable section of its
population :
Males in 1881.
^'icloria. New South Wales.
Up to 25 years old 257,069 = 56 '86 per cent. ... 229,342 ^ 5578 per cent..
From 25 to 45 years
old 99,497=^22 ,, ,, ... 115.991 = 28"22 ,, ,,
45 years old and over 95,579 = 21 '14 ,, ,, ... 65,816 = 16 ,, ,,
452,143 ... 411,149
Males between the Ages of 25 .\.\d 45 years.
\'ictoria. New South Wales.
1871 . . 135,413 = i8"i per cent. ... 83,275 = 107 per cent..
1881 . . 99,497 = 11-5,, ,, ... 115,991 = 154,,
Loss . 35,916 ... Gain . 32,716
Mr. Hirsch makes the following remarks upon these figures :
" In the first of these tables the percentages are those of the male
population ; in the latter, the percentage of the males in their prime
to the total population is given. The first table shows the result^
viz., the greater percentage of men in the prime of life in New
South Wales ; the latter table shows that the shifting took place
in the years during which ^'ictoria enjoyed Protection ; that on
account or in spite of Protection young men are avoiding and
leaving the Protected Colony in which, if Protectionists are right,
they ought to find it easiest to make a living- are flocking into the
Colony in which they ought to find it most difficult to make a
living. In estimating the significance of these figures, it must not
be forgotten that, according to the general increase of population,
we ought to have had [in \'ictoria] in 1881 20,987 more males of
from twent\--five tt^ forty-five years than in 1S71, making our total
354 Industrial Freedom.
loss of men in the prime of life 56,903 surely a most disastrous
retrogression in one decade. There is, however, nothing new in
these tables ; they are merely a confirmation of what has long been
generally known. Every traveller remarks upon the number of
Victorians engaged in trade and agriculture in New South Wales
and other Colonies, and the paucity of natives or former inhabitants
of New South Wales similarly engaged in Victoria. A more
significant fact by which to measure the result of Protection can
scarcely be asked for, for if the Protective policy had added to the
natural advantages of Victoria, then surely Victoria would have
powerfully attracted the workers in the prime of life from every
Colony, and even from over-sea. But the opposite is the case ; the
strong, the hopeful, the energetic, leave the Protected Colony, and
flock into the Free Trade Colony instead, proving conclusively that
there it is easiest for them to gain a comfortable livelihood."
But gain by immigration is not the only cause of the more rapid
increase of population in New South Wales, which is due also to a
higher marriage rate and a higher birth rate.
Now, as Mr. Hirsch points out, "it is one of the most firmly
established facts in the science of statistics that under present
social and economic conditions the numbers of marriages and
births rise and fall with any fall in the nation's prosperity ; that
steady employment at decent wages especially has the invariable
result of increasing the number of marriages and births. And it
must be held as similarly true that in two nations of similar origin,
the members of which are constantly intermingling, the social and
political institutions of which are the same, the more prosperous
nation, the one in which employment is more constant and eft'ec-
tive, wages higher, will show the greater number of marriages and
births." Tried by this unerring test, New South Wales again holds
her superiority over her Protected neighbour.
The mean annual marriage rate per 1,000 during the years
1866-1889 was, for Victoria, 690; for New South Wales, o-oo.
While the annual birlh rate for the same period was, for A'ictoria.
34-54, and for New South Wales 38-90.
The excess of births over deaths tolls the same taie : its mean
per 1. 000 of the population for the ten years from 1878-87 being
112 for A'ictoria, and 14S for New South Wales.
Indeed, from whate\er standpoint the movements of population
and the vital statistics of the two Colonies are considered, it is clear
tliat under Free Trade New South Wales has yaineJ upon
Appendix III, 355
Victoria, not only by immigration, but by a more rapid increase in
the number of her native-born a significant commentary indeed
upon the theory that " Protection gives employment.'' Why did
it not give employment to those thousands of young men, within
the soldier's age, who emigrated from her borders into New South
Wales ? Is it that New South Wales is the more attractive
because she has a larger territory ? But had she not just the
same extent of territory in 1866, when Victoria, under Free Trade,
was able to feed her own sons ? Or is Victoria, with its 87,884
square miles of territory, not able to find employment for more than
a million people? When Victoria is over-populated it will be time
enough to raise the cry that New South Wales is drawing young
Victorians to her territory because their own land does not give
them so good an opportunity of earning a livelihood. It is " Pro-
tection" that was to have given the employment ! It has done so !
It has made every one who stayed in Victoria work longer for
what he wants, and has driven the cream of Victorian youth out of
the Colony to earn honest livings in a Free Trade country ! But
was that the kind of employment which was so fraudulently
promised ?
The truth is manifest to all who will not refuse to see it that
the labour-market has been better in New South Wales than in
Victoria, and that the Free Trade Colony has offered the most
employment. One would as soon expect water to run uphill as
labour to leave a country of good wages and steady work for one
of inferior attractiveness from either point of view. Accordingly,
if New South Wales has gained upon Victoria in population, both
by voluntary immigration and by natural increase, since the latter
adopted Protection, the reason must be that the Free Trade Colony
has been more prosperous, and better able to ofter work at good
wages ; and further evidence in support of the fact should be
superfluous. It may, however, be useful to pile up testimony upon
this crucial point, and to show by other tests that Victorians have
gone to New South Wales for one very good reason that
they were better off there than they would have been at
home.
First, as to the respective rates of wages in the two countries.
So far as any comparison can be made between these and the
difficulty of such a comparison has Ijcen already pointed out^ it is
356 Industrial Freedom.
in favour of New South Wales. Mr. Hirsch has compiled a table
from the Victorian Year-Book, showing the fluctuations in the
nominal wages of 121 trades, as returned by the Government statist.
This table shows that between 1878 and 1888, during which period
new duties were imposed to the annual amount of ;^ 1 80,000, no
change in wages had taken place in 58 of these 121 industries.
The alteration in the rates of wages for the remaining 63 employ-
ments classify themselves as follows :
Jicrea.se.
Decrease.
13
26
16
9
Protected trades
Unprotected trades .
showing that, while there has been, on the whole, a decline rather
than a rise in wages during the decade, the fall has taken place
more in the protected than in the unprotected trades. The rise in
wages has occurred chiefly in the farm pursuits, owing to the
scarcity of this kind of labour. It should also be remembered that
the official wage rates make no disclosure of the condition of the
large number of home-workers, who, as recent revelations have
shown, are working in Melbourne dens for is. 6d. and 2s. a day
under conditions which the Age., the leading Protectionist journal,
has described as being " as bad as anything to be found in
London."
It is true that wages have also fallen in New South Wales from
the highest point which they reached since 1866 ; but the Free
Traders have never claimed to be possessors of a patent system for
keeping wages high. Besides, so far as comparisons are possible,
they are higher in New South Wales than in Victoria. There is a
special difficulty in the way of making any such comparison in this
case, owing to the different methods of collecting the returns in the
two Colonies, and the different designations of many trades. Still,
Mr. Hirsch has collected twenty-nine trades all which it was
possible to collect and found that in 1888 wages in four of these
were equal in the two Colonies, were higher in \'ictoria in ten, and
lower in \'ictoria in fifteen instances. As he properly remarks,
" If the assertion that Protection increases wages were well
founded, no such result of even a partial comparison would be
possible.'' But perhaps the best guide to the average wage rate of
the two Colonies is furnished by the wages paid by the Governments
of each. In each Colony the Government owns the railways, post-
office, telegraphs, roads, forests, and carries on a great quantity of
Appendix III.
357
public works. In all the Government departments the wages are
from sixpence to a shilling a day higher in New South Wales than
in Victoria. It is impossible to believe that the highly organised
trades in Victoria would allow railway servants, for example, to
receive a shilling a day less than the same class of labour was
receiving in New South Wales, unless they were conscious that the
lower rate fairly represented the average wage rate of the Colony.
In addition to these sources of information must be added private
experience. It is matter of common observation that the wages
paid to miners are higher in New South Wales than in Victoria,
and the writer verified the same fact by personal inquiry in regard
to the building trades for the year 1889-90.
All other possible sources of information point to the same
conclusion.
The consumption of working-class luxuries, such as tea, coffee,
sugar, currants, raisins, beer, spirits, and tobacco, is larger per
head in the Free Trade country, showing the obvious truth that
men who receive more have more to spend.
The following are the figures for the year 1884-5, ^vhich is taken
as a normal year, being before the boom in Victoria and after that
in New South Wales:
Consumption of Luxuries in 16
New South Wales.
Tea .
Coffee
Sugar .
Currants, raisins, etc.
.Spirits
Beer ...
Tobacco
127 ozs.
II M
102 lbs.
Ill ozs.
20-4 gills.
16.2 gals.
46 ozs.
-5 PER HEAD.
Victoria.
no ozs.
16 ,,
92I lbs.
982 ozs.
18.L gills.
J 6 gals.
354 ozs.
Pointing, again, in the same direction are the figures which
show the quantity of postal and telegraphic communication in the
two Colonies.
In 1866 Victoria received and despatched nearly two million
more letters than New South Wales, the figures being 8,631,133 as
against 6,678,371. In 1885 the positions were reversed, and New
.South Wales received and despatched three million more letters than
Victoria, the figures being : New South Wales, 39,35 1,200, or 40 per
head of the population ; and 36,061,880, or 36 per head, for Victoria.
The number of telegrams sent in Victoria in 1S66 was 277,788,
as against 143,523 in New South Wales. In 18S5, New South
Wales sent 2,625,992, against 1,634,666.
35^ Industrial Freedom.
In fact, to whatever test of progress we look, we arrive at the
same conclusion namely, that since Victoria adopted Protection,
New South Wales has been steadily gaining upon her. But some
of the tests are of sufficient importance to demand a detailed con-
sideration. Chief among them is the progress in either Colony of
the manufacturing industry.
MANUFACTURES.
No young country can pass from the agricultural or pastoral to
the manufacturing stage of its existence until it has obtained a
sufficient density of population to enable production to be carried
on with that effective cheapness which comes from the subdivision
of employments and the establishment of subsidiary industries for
using up bye-products. In 1866 the population of Victoria was
already concentrated in the mining centres ; while that of New
South Wales was scattered over a wide area, through which the
means of communication were few and primitive. As a natural
consequence A'ictoria became a manufacturing Colony earlier than
New South Wales. It is true that New South Wales has better
facilities for manufactures in her rich deposits of coal and iron ;
but the advantage of these may be easily overestimated, unless it
is remembered that the coal goes to both capitals by sea, and that
the cost of 500 miles longer sea carriage is not a serious item in
these days of fuel economy. It is accordingly not surprising to
find that, while there were 869 manufactories and works in Victoria
in 1866, exclusive of 1 14 flour mills, the manufactories and works
of New South Wales were at that date too insignificant to be
counted.
Since 1866 the whole energy of \'ictorian legislation has been
directed to the development of manufactures ; while, except as to a
few industries, such as the kerosene and candle, which have
benefited by duties originally imposed for revenue purposes, the
development of manufactures in New South Wales has taken a
natural growth. The figures speak for themselves.
In twenty-five years of Free Trade the pastoral Colony of New
South Wales had made so good an entrance into the manufacturing
stage of its existence that in 1890 it employed 46,135 hands, or
more than one-tenth of its adult population, in one or other of the
120 distinct varieties of manufacturing industries, in which the
plant and machinery was valued at ^4,526,821, and worked
Appendix III.
359
to a horse-power of 24,662. Surely this would not be a
bad record, either of growth or diversity, even for a Protected
country !
The record of V'ictoria is also good, but certainly not better
than, if, indeed, it is equal to, that of New South Wales.. It is
difficult, however, to decide this cjuestion, because the method of
classification, and the dates of making the returns of manufacturing
statistics, do not correspond in the two Colonies. The subjoined
table, however, will show the respective rates of progress of each.
YEAR.
1880.
1885.
Mctori.i.Iy. S. W.
1S89
1890.
\'ictoria.
N. S. W.
\-ictoria. '.\. S. W.
Victoria .V. S.W.
Number of hands
employed ...
Value of machinery,
plant, and land ...
(Thousands omitted)
Number of establish-
ments"!
Horse power
33,247
6,711
2,239
28,259
j
49,066 , 41,669
j
10,166
I
2,841 --
39,169+
15,612
3-137
46,135
11,603
2,926
58,175 +
46,525+
.,_t83
* Where blank spaces are left the figures are either untrustwortliy or at present un-
attainable. I'he method of collecting New South Wales figures was radically altered
after i836, when the present statistician, Mr. Coghlan, was first appointed.
t These figures are from an estimate made by Mr. Hayter, the statistician of the
Victorian Government, as published in the Arg7/so( December 30th, 1891.
*\ Many of these employ very few hands. Thus over three hundred of the works
included in the Victorian returns emploj' less than six hands, and more than one thousand
employ less than ten.
The above table puts the case of the \'ictorian manufactories in
the most favourable light. Not only arc some 2,300 hands in-
cluded in the \'ictorian returns which are e.xcludcd from those of
New South Wales,' but these also include between four and five
thousand more females, whom the harder conditions of life in the
Protected Colony have dri\en from the home to the factory."
P\irther, the later Victorian figures are for a time of high pro-
sperity consequent upon the lavish expenditure of imported and
borrowed capital, while duiing the same period New .South Wales
was exi)ericncing the pangs of a period of economy, and was also
1 Xaniely, employees in cliaffcutting and corn-crushing establishments, in
flour mills, in cheese factories, and the Roval Mint.
- Tliere were <j02 females included in. tb.e Xew Stv.-.th Wale's returns f ^ r
l8r,o.
6o Industrial Freedom.
recovering from the most severe drought known in her history'.
The figures for 1891 would show an increase for New South Wales
and a decrease for Victoria. Let us, however, pass by all these
considerations, and grant a superiority (and, if it be desired, even a
substantial superiority) to Victoria in manufactures : two questions
will still remain to be answered first, Whether this superiority is
as great now as it was in 1866, having regard to the increase of
population .' and, secondly. Whether, if it be so, such a superiority
has been worth the expenditure required to obtain it ? Let no
deductions be made on any score, and even count it a good thing
that women should be forced to leave their homes to seek employ-
ment in a factory ; let us,in short, admit that Victoria has an excess
over New South Wales of fully 12,000 manufacturing hands ; yet at
what cost has this excess been gained '^. The Customs duties levied
on Protected articles have by themselves amounted during the last
twenty-five years to twenty millions of pounds, without taking into
account the increase in the price of the home-made article, which
is consequent upon the tariff. May not Free Traders fairly ask
whether, if it was really necessary to Victorian prosperity that she
should confine 12,000 of her population (of whom one-third are
females) within the four walls of factories in order to be by that
number superior to New South Wales in the tale of manufacturing
employees, twenty millions of pounds sterling is not a high price to
have paid for this questionable advantage ? Twenty millions of
pounds would have pensioned those 12,000 working hands, men,
women, and children (and children, too, are being driven with their
mothers to enter the Protected factories, so hard is the stress of life
becoming in this Victorian paradise !), many times over, at more
than the rate which they are now receiving in wages from the
afflicted consumer ! If only the recipients of Protective charity
could be compelled to receive their alms, as honest beggars, in a
public manner !
Nor is an inside view of the condition of ^"ictorian manufactures
any more encouraging. On the contrary, while the number of
employees is declining, and women and boys are taking the place
(if men, the exports of manufactured produce show a steady annual
decline, and the imports of foreign goods a steady increase. The
limit of consumption within the Colony has long ago been reached,
and although an outlet was afforded for several years into the
neighbouring Colonies by means of an elaljoratc system of fraud,
under which the drawbacks were manipulated in such a way as to
Appendix III.
361
become a bonus upon exports,^ the productiveness of the Protected
industries is steadily decreasing. Year by year, Mr. Hayter, who
certainly cannot be accused of giving undue prominence to facts
which tell against Victoria, has pointed out the ominous decrease
in the value of Victorian exports, and the equally ominous increase
in Victorian indebtedness. The figures from 1880 are subjoined.
Exports of Articles Manufactured or
FROM 1880-90.
Produced in \'ictoria
Year.
Total Value, omitting
Value per
Hea
d of the
Thousands.
Population.
s.
d.
1880
11,220,000
13
3
II
1881
12,480,000
14
7
3
1882
i2,57cf|ooo
14
2
5
1883
13,292,000
14
II
9
1884
13.t55.000
14
I
8
i88t
12,452,000
12
19
10
1886
9,054,000
9
3
6
1887
8,502,000
8
6
9
18S8
10,356,000
9
15
1889
9,776,000
8
17
I
1890
1891
In this table the exports of manufactured articles and of home
produce are lumped together. If the former were dealt with
separately, the decline would be still more apparent. On p. 131 of
vol. ii. of the "Victorian Year-Book" for 1889-90, Mr. Hayter gives
a list of thirty-five lines of Victorian articles of export. The
majority of these are raw materials, which are not afilected by
duties. More than half of the value in the list is provided by the
two articles of wool and gold, although more than one-half of the
wool exported as Victorian produce is grown in New South Wales
and shipjicd from Melbourne either because of its proximity,
or because ''Port Phillip" wool commands a traditionally high
price. Taking out from this list all articles which may, with a
1 Public attention was first called to this system of fraud in 1886 by Mr.
Edward Pulsford, Secretary of tlie Free Tratle Association of New .South
Wales, and Honorary Member of the Cobden Club. His assertions wore at
first denied and ridiculed ; but ultimately, after an official investigation, his
charges were verified. Many of tlie first firms in Melbourne were fotmd to be
implicated, but no prosecutions followed. Tliere could hardly be a better
llustration of the demoralisation which a tariff causes.
;62
Industrial Freedom.
stretch of the term, be classified as manufactured products, we get
at the following result :
Exports
OF Articles the Maxc!
ACTUKE OK Victoria
SINCE 1883.
Increase
Articles.
1883.
1884.
18S5. \
1 386.
1887.
iS88.
1889.
+ ; De-
crease
.
Stationerj'
23,300
22,100
1 7, 900
14,300
13,200
15,400
1 6, coo
- 7,300
Agricultural Im-
plements
14,100
10,300
11,000
11,700
15,600
15,600
22,000
+ 7,9=0
Machinery
138,000
98,000
73,000
48,000
90,000
56,000
62,000
76,000
Saddlery, Har-
ness
22,OC0
14,000
13,000
9,800
7,100
IO,OCO
6,Soo '
15,200
Furniture and
Upholstery ...
46,800
43,700
39,000
24,000
20,000
22,000
17,600
29,300
Drugs, Chemi-
cals
15,000
12,000
17,000
13,000
10,600
7,003
4,700
10,300
Woollen Piece
Goods
12,000
10,600
4,100
2,700
1,800
9,003
2,600
9,400
Apparel & Slops
246,000
257,000
242,000
155,000
117,000
121,800
9S,ooo
- 148,000
Boots and Shoes
40,000
37,000
25,000
21,000
23,000
21,000
16, OCO
24,000
Cordage
27,600
29, OCO
20,600
9,000
5,000
4,000
4,600
23 030
Preserved Meats
76,000
116,000
99,800
88,000
41,000
16,000
16,030
5o,ooo
Confectionery...
15,700
13,000
11,000
6,700
3,700
2,800
2,7CO
13 000
Biscuits
27,600
40,000
45,coo ,
37,600
26,800
20, 900
20,600
7,000
Bone dust
8,900
n,300
14,400
9,600
5,200
11,300
11,000
+ 1,100
Candles
300
3,6oD
7,000
5,000
1,600
500
300
Glue Pieces
600
1,000
I, coo
1,700
1,700
1,500
900
-r 300
Leather
359,000
338,000
342,000
254,000
207,000
181,000
I9o,coo
-289,000
Soap
12,700
15,500
18,000
13,003
10,000
10,000
9, OCO
- 3,700
Stearine
13,000
6,000
5
96
503
85
- 12,900
Tallow
232,000
256,000
155,000
121,000
85,000
157,000
49, coo
Oil
8,000
9,000
7,6co
7,000
3,600
2, coo
1,803
6,2CO
Hardware
28,030
24,000
i9,cc'_
20, Boo
16, coo
15,800
15,000
13,000
Oilmen's Stores
13, coo
I=,OOD
i4,o;o
11,800
13,600
11,000
9,000
- 4,000
All other Articles
410,700
439,000
1,570.?.:.:. I
324,000
265,000
222,000
234,003
- 1 70,000
Total
1,793,300
1,82 4,103
2.^.0,705
933,596
934,ico
819, ';85
- 1,1 io,3CO
-i- 9,300
The same conclusion as to the decline of Victorian manufac-
tures is given by another table in Mr. Hayter's book (p. 133)) '^i
which the total increase or decrease of exports of all articles of
home produce, as between 18S9 and 1888, is given in detail, with
the result of showing a nctt decrease on the year of ^579,963. It
is noticeable, however, that this nett decrease is kept down to this
comparatively low figure by reason of an increase of ^1,438,593 in
the value of wool exported, and of ;/^i 29,498 in the value of the
export of gold bullion. Deducting these two items, the nett
decrease in the year would be 7^2, 148,054 ; while if the nett
decrease on manufactured products only were considered, it would
amount to the large sum of /!2, 256,395.
These figures have a double significance. First they show that
the export of \'ictorian manufactures has not been anything to
Appexdix III. 363
boast of during the last eight years, and that, in spite of every effort
to force manufactures, eleven-twelfths of the exports from Victoria
consist of food-stuffs and raw materials. They also show, in the
plainest manner, the withering influence of Protection upon the
aggregate of national industry. The export trade of a country is a
generally accepted test of the vigour of its national productiveness.
Consequently, a fall in eight years from ^14 us. gd. per head to
Z 17s. id. in the total export trade which is equivalent to a fall
of 39'303 per cent. and a fall of 32'925 per cent, during the same
period in the exports of manufactured produce, ought to shake
the confidence of the most infatuated believer in the infallibility of
the Protectionist dogma ! Further, when this decline in exports
which are the only means by which a borrowing country is able
to discharge its indebtedness and pay its interest on loans^is
accompanied by a rapidly increasing excess of imports, no one
who remembers that the excess of imports over exports represents
in a young country which does not receive much from foreign
investments, or for shipping, or other services rendered by its
citizens in other countries, or by immigration the amount of new
capital which it has borrowed can view the present condition of
Victorian commerce without alarm. Unless the tarift" is altered in
such a way as to give the natural industries of \'ictoria a better
opportunity of growth, or unless the irrigation experiments, which
are being pushed with so much vigour, falsify the predictions of
many experts and provide new articles of exports in the shape of
fruit and wine, it is certain that the task of dealing with the finances
of Victoria will tax the capacity and ingenuity of her rulers for
many years to come.^ The combination of Protection and borrow-
ing must result in a serious crisis.
' The following figures show the excess of imports over exports since 1881,
omitting figures below five hundred :
^.
81 ... ... ... 466,000
882 ... ... ... 2,554,000
803 ... ... ... 1,34^,900 Of thi.s .sum, ;^ii,2i9,coo re-
884 ... ... ... 3,151,000 presented an increase in
885 2,4j2,8oo the public indebtednes.s, not
886 ... ... ... 6,735,000 taking into account redemp-
8S7 ... ... ... 7,67i,o.:o tion loan.s, amounting to
883 ... ... ... io,iiS,oo3 ^5,800,000.
8S9 ii,668Joco
Total ... ... 46,200.700
Since 1873 the exports have only once exceeded tlie imports namely, in
1880. liearing in mind that between three and four million pounds' worth of
wool which is tlic product of Xew South Wales is shipped annually fron>
364 Industrial Freedom.
agriculture.
The boast of Victorians is, rightly enough, in their agriculture ;
and in this great department of national activity their country has
maintained her lead over New South Wales, although she has not
succeeded in increasing it. Even this partial success cannot be
attributed to Protection, because Victoria was an exporter of food-
stuffs even in her Free Trade days, but is owing partly to the fact
that in the variable climate of New South Wales the land that is
good for crops is not near the markets, and the land that is near the
markets is not good for crops, and partly to the early alienation of
the best agricultural lands to large proprietors, who have not yet
shown themselves inclined to use it for any but pastoral purposes.
Even in this direction, however, there are already signs of decline,^
and while the area of cultivation is increasing in New South Wales
it is declining in Victoria. Fortunately, the farmers have at last
realised their position, and during the years 1890-91 every
" Farmers' Protection Association " has omitted the word Protection
Port Phillip, and therefore included among the exports of Victorian produce, it
will be seen that the nett annual value of Victorian exports is between eight and
nine millions, as against an importation of nearly twenty-four millions for the
year 1889. Of the imports a certain sum which cannot, on the most liberal
estimate, exceed ^^500,000 must be allowed for freight due to Victorian ship-
owners ; an allowance must also be made for interest on Victorian capital
invested abroad. It is difificult to ascertain how much this should be ; it is, how-
ever, a rough but perhaps a fair estimate to take the value of New South Wales
wool shipped from Melbourne as equivalent to the value of the returns to
Victorian capital invested abroad. Most of the wool which comes to Mel-
bourne from the other Colonies is sent there because the stations are owned by
Victorians. The wool which is sent to Melbourne by New South Wales
station owners, may be set off against the proceeds of Victorian investments in
Queensland properties. But, after all these allowances are made, the fact
remains that durmg recent years the indebtedness of \'ictoria has increased
more rapidly than its exports. This increase has continued through 1890 and
1891, although the official returns are not available at the time of writing.- It
is this enormous expenditure of borrowed money, both by the Government
and by private persons, which has maintained the rate of wages in Victoria, and
successfully disguised from the multitude the evil influences of Protection.
1 Thf official figures for 1890-91 are not yet published, but unofficial
returns show a decline of more tlian 50,000 acres in the area of cultivation
during the last two years.
Exports. Imports. The incre.ise in exports in i8go .ind iSgi
will probably lie found clue to an in-
" 1890 ... 13,256,000 22,o5j,ooo cre.ise in the shipments from Melbourne
1S91 ... 15,679,000 2i,62?,030 of Xtw South Wales wool.
Appendix III.
365
from its title, and declared in favour of Free Trade. It is one of
the most amazing instances of the power of words over unthink-
ing men that the farmers in any country should ever advocate Pro-
tection. The maxim that " the farmer pays for all " can never be
more plainly illustrated than by farmers who hope to get rich by
paying customers to buy their crops. If a young country exports
food, Protection can be of no use to the farmers, who have to buy
everything they want at Protective prices, and sell everything they
produce at Free Trade prices. If, on the other hand, a young
country requires to import food, the farmers have already the best
market they can desire, viz., one which is short supplied. For ex-
ample, the average price of wheat in Sydney has been for many
years 6d. a bushel more than in Melbourne. The following are
the figures relating to agriculture :
Area of Land in Cultivatio.n in Acres.
1866.
188S.
2,627,262
Victoria - . ' 592,915 ' 909,015 ' 1,997,943 1 2,405,157 ' 2,564,742
NewSouth; ' '
Wales ... '. 451,223 426,976 710,337 868,093 999,298 I, 64,475 1.241,419
COMMERCE.
The figures which follow as to commerce, revenue, and
shipping, require no comment. They all point the same moral
that Victoria has not only failed to hold her superiority over New
South Wales, but has fallen far behind :
Imports and Exports of New South Wales and Victoria.
1
Import
s.
Export
Colony. ! Year.
1
1
Total Value.
Value per
Head.
s. d.
Total Value.
Value per
Head.
S.
(/.
1866
14,771,000
23
9
7
12,889,000 1
20
9
9
. 1880
14,556,000
17
2
4
15.954.000 ,
18
15
^
ca
1885
18,044,000
18
16
b
15,551,000 j
16
4
6
/
1888
23,972,000
22
n
5
13,853,000 !
i.S
II
'1
1889
24,402,000
22
2
12,734,000 ;
1 1
10
8
> 1890
22,953,000
13,256,000 i
1891
21,622,000
(estimated)
15,679,000
(estimated)
f! 1866
9,403,000
9,913,000
~ \ 1880
13,950,000
19
4
b
15,525,000
21
7
II
g yj , 1885
23,365,000
2.S
2
16,541 ,00 J
17
15
4
'-r-~ ... { 1888
20,885,000
19
12
6
20,859,000
19
12
S >
1889
22,863,000
20
14
2
23,294,000 .
21
2
2;
1890
1891
366
Ind us TR /. J L Fr e edom.
Shipping.
j
Inwards.
Outwards.
Colony. Year.
No. of
Vessels.
Tonnage.
No. of
Vessels.
Tonnage.
New South Wales... 1866
Victoria 1866
2,099
2,078
730,354
649,979
2,259
2,203
784,381
675-741
New South Wales... 1889*
Victoria 1889
3,254
2,855
2,632,081
2,270,827
3,229
2,886
2,689,098
2,328,351
* The year i88g was one of great depression in New South Wales. Later years
would show a wider difference between the two Colonies.
REVENL'E.^
Colony.
1S66.
2,012,079
3,079,160
1889.
1891.
New South Whales
Victoria
9-063,397
8,675,990
10,079,000
(estimated)
* The excess of revenue in New South Wales is due to the elasticity of her returns
and not to the weight of ta.xation. The charge of taxation per head in 1889 in the two
Colonies was as follows : Victoria, ^3 9s. id.; New South Wales, ,1 8s. fd. Thu~,
although every citizen of Victoria pays ^i os. 7d. more in taxes than his Free Trade
neighbour, the revenue of Victoria is about two millions less than that of New South
Wales.
The figures which have been set out in the preceding pages
have been treated by Protectionists in various ways at different
times. For a long period they were ignored ; then, after Mr.
Edward Pulsford, of Sydney, brought them into pubhc notice,
their accuracy was denied, and the Statistical Office of New South
Wales was assailed with scurrilous abuse. Finally, after Mr.
Hayter, the A'ictorian official statist, had verified their substantial
correctness, every effort was made to depreciate their significance.
It was alleged that the greater success of N^w South Wales was
owing to special causes such as her larger territory, her greater
expenditure of borrowed monc\", and her larger land revenue
which had not operated in A'ictoria to the same e.xtcnt. Here,
again, however, the Protectionists were foiled. Mr. Pulsford and
this is not among the least of the services which he has rendered
to the cause of P'ree Trade undertook an elaborate series of in-
vestigations into the statistical returns of the two colonies, and
Appendix III. 367
demonstrated even to the satisfaction of Protectionists that the
" special causes" of prosperity, so far from being peculiar to New
South Wales, had operated with even greater intensity in Victoria
during the period under review. It is chiefly due to Mr. Pulsford's
untiring industry and clearness of exposition that the example of
Victoria is never cited now in the neighbouring colonies as an in-
stance of the benefits of a Protective policy. As, however, the
energy of Victorian rcclanie has not exhausted itself in other
fields, it may be well to indicate very briefly the heads of the
answer to Protectionist disparagements of the progress of New
South Wales.
First, it is said that New South Wales owes her success to her
earlier foundation. It is a sufficient reply to this that, in spite of
her earlier foundation, she was far behind Victoria in 1866, when
both colonies were Free Trade. The development of the Colony
was so slow in the transportation days, which ended in 1856, that
Victoria, in 1866, had gained from her active population of gold
diggers more of the advantages of roads, bridges, and other inci-
dents of civilisation, in ten years than New South Wales had by
two generations of convict labour.
Next it is said that New South Wales owes her more rapid
progress to her larger territory. To a certain extent this is true ;
but it is the merit and object of Free Trade to make use of natural
advantages. A large territory, however, is not altogether an ad-
vantage to a young country. There is a power in concentration,
and a weakness in scattered forces. "Wealth,"' as Mr. Pulsford
has well remarked, "grows richer by population than by square
mile, and, as a rule, it will be found that the most important and
wealthy countries are of limited area. A larg-er area is often a
great weakness." Certainly this has proved to be the case in New
South Wales, whose rural population is badly served in all local
requirement?, and grievously handicapped by the difficulty of pro-
vidingfor the wants of so vast a territory. The greater advantages
wiiich a settler enjoys in the compact territory of \^ictoria become
inimccliatcly apparent to any one who looks upon a railway map of
the two Colonies. In New South Wales the railways stretch in
three long lines, each to a distance of about 500 miles irom the
city to the sea-board. In \'ictoria the railways divide the country
in:o small rectangles and unite every little township with the
capita! : and where railways fail the Southern settler, ri\ers play
their part and gi\c him that assurance of a return to his annual
368 Industrial Freedom.
labour which the resident in the more variable climate of New
South Wales is never able to anticipate.
Indeed, in physical and climatic advantages, Victoria is vastly
the superior of New South Wales. Not only does its compactness
make the former cheap to govern and easy to develop, but its
fertile and well-watered lands lie close to the markets. In New
South Wales, on the contrary, except a narrow strip upon the coast
of Ilavvarra, the good land lies beyond the coastal rang-es at a
distance of at least 200 miles from Sydney and the sea-board.
There are, moreover, in New South Wales no large mining town-
ships (except that of Broken Hill, which is, for practical purposes,
part of South Australia) where the farmers are able to find a
market. Moreover, even the best lands in New South Wales are
subject alternately to droughts and floods. Further, while the
lands of New South Wales are heavily timbered, so that the ex-
pense of preparing them for the plough is very great, most of the
arable land in Victoria was naturally clear. In fact, it is difficult
to exaggerate the natural advantages which are enjoyed by the
fertile, extensive, open, well-watered lands of Victoria, over those
of its larger, but more variable, neighbour. Nor does this com-
plete the catalogue of the natural superiorities of the favoured
province. Victoria has a distinct advantage in the character of its
early settlers. The renown of her gold-fields attracted the very
pick of the world, for energy, enterprise, and power. Through
their aid she gained a start in wealth and population, which, but
for the folly of her rulers, she would not have lost for many
generations. The richness of her alluvial gold-fields, and the
character of her early population, caused the easy establishment
and rapid growth of great cities, whose position rendered her
singularly fitted to be the seat of manufactures ; while the extent
of fertile land, which was immediately available, made her from
the outset rich in the more durable elements of natural pro-
sperity.
What wonder that in such a country progress has been rapid ?
The matter rather for remark is, that it has so soon ended. Of all
the lessons which Australia has given to the world in politics,
not the least instructive is to be drawn from the rise and
decline of the Colony of Victoria I The "might-have-beens"
of history are notoriously unjjrofitable matters of specula-
tion ; but no one can read the history of ^'ictoria, with
impartial mind, without being moved to wonder what her fate
Appendix III. 369
might have been, if she had been left to expand to her
natural growth unhindered by the cruel restrictions of a cramp-
ing tariff.
Another strangely perverted argument is that New South Wales
owes her more rapid progress to her greater production of coal and
wool, which, it is said, are two raw materials, the production of
which could not be affected by any fiscal policy. Supposing this
were so, it is in the eyes of a Free Trader precisely a reason why
the Colony of New South Wales should make as much profit as it
can out of its natural industries instead of diverting its capital and
labour into less productive channels. As the facts stand, how-
ever, Victoria has produced a larger quantity of raw materials than
New South Wales during the period under review. The aggregate
production of wool and gold in Victoria from 1866 to 1885 ^ was
^27,410,950 more than in New South Wales. The following are
the figures:
Gold and Wool. Total Production 1866-1885.
Victoria. New South Wales.
Gold raised ... ... 85,819,216 ... i5>763.365
Wool produced * ... 67,891,880 ... 110,536,781
Total ... ... 153,711,096 ... 126,300,146
* The figures representing wool are the aggregate of the exports after deducting the
imports.
The total value of the coal raised in New South Wales
from the foundation of the colony does not equal the excess
of Victoria in her production of the two articles of wool and
coal during the twenty years, 1866-1885, being only ;/^23,89 1,629.
The production of coal during that period amounted to
^11,282,325.
The Protectionist theorist, driven to explain the, to him,
astounding fact that New South Wales has prospered more under
Free Trade than Victoria under Protection, finds his last refuge
in the assertion that New South Wales owes her more rapid
1 The year 1885 is taken to avoid errors on cither side on account of the
disturbing influence either of the New South Wales good seasons or the
Melbourne "boom."
\
37 Industrial Freedom.
progress to a more lavish expenditure of borrowed money. "A
spurious prosperity," says the Age, in 1886, "or the appearance of
prosperity, has been kept up for some eight or ten years past by
a monstrously lavish expenditure of public money, which has
either been borrowed or obtained from the sale of land." Upon
this passage Mr. Pulsford ("Freedom in New South Wales v.
Oppression in Victoria," p. 49) makes the following observa-
tions :
" Believing that, perhaps, after all. New South Wales might not
be so black as she is painted, I have carefully investigated the
subject of the money obtained by sales of land, and by public
borrowing in the two colonies. The result of my investigations
will, I venture to say, be a surprise to all. I find that, for many
years, Victoria led the way in both sales of land and public borrow-
ings. That, in point of fact, Victoria for many years borrowed
more rapidly than New South Wales, and also sold land much
more rapidly. I confess I was very much surprised myself to find
that, up to the year 1883, the aggregate of the moneys obtained by
loans and land sales in New South Wales had always been ex-
ceeded in Victoria. It is perfectly obvious that the colony that
obtained the lead in the construction of useful public works had a
great advantage. I find that in the year when Victoria entered
upon her policy of Protection, she had received twenty-one mil-
lion pounds from the sources named, against only eleven millions
in New South Wales. The early expenditure of so much money
in Victoria represented a great advantage over this colony. It was
not till 1875 that is, nine years later that New South Wales
reached this sum of twenty-one millions, and then the Victorian
total had risen to thirty-one millions, or still the ten millions
ahead. In 1880 \'ictoria was six millions ahead. In 1885 the
tables were turned, so that New South Wales was eight millions in
advance of Victoria.
" When I come to take the totals of these twenty years
1 866-1 885 I find that Victoria has had the use of capital
equivalent to thirty-four millions for the whole period, against
only tiuenty-eight millions on the part of New South Wales.
I claim, therefore, that Victoria, and not New South Wales,
is the colony that has received the greatest impetus to-
wards prosperity from the expenditure of moneys obtained by
loans and land sales." A full table of these moneys is sub-
joined.
Appendix HI.
371
New South Wales.
Year,
Loans.
Land Sales.
Total.
L
L
i860 to 1865
Average
1 5.212,771
.. 4,061,732
9.274.503
1866
... 6,418,030
.. 4,781,653 .
.. 11,199,683
1867
... 6,917,630
.. 5,046,313 .
.. 11,963.943
1868
... 8,564,830
5.311.563
.. 13.876,393
1869
... 9,546,030 .
.. S.631,176
15,177,206
1870
... 9,681,130
5,882,019
15.563.149
1871
... 10,614,330
6,143,420
16.757.750
1872
10,773,230 .
6,575,793 .
17.349.023
1873
... 10,842,415
7,421,203
.. 18,263,618
1874
... 10,516,371
8,532,244 .
.. 19,048,615
1875
... 11,470,637 .
.. 10,292,814
21,763,451
1876
II. 759.519
.. 12,806,218
24,565,737
1877
... 11,724,419
15.774.075
27,498,494
1878
.. 11,688,119
.. 17,850,086
.. 29,538,205
1879
14.937.419
19.236,773
.. 34,174,192
1880
... 14,903,919
,. 20,618,799
.. 35,522,718
1881
... 16,924,019
.. 23,102,137
.. 40,026,156
1882
... 16,721,219
25,557,178
.. 42,278,397
1883
21,632,459
., 26,826,657
.. 48,459,116
1884
... 24,601,959
28,190,150
.. 52,792,109
1885
... 30,064,259
29,414,372
59.478,631
Average 1866
to 1886
} ^3.515.^97
- 14.249.732
.. 27,764,829
We are now in a position to appreciate the whole significance
of the tale which the preceding figures have disclosed.
Every Protectionist argument, either expressedly or impliedly,
assumes that no country can develop under natural conditions,
but that a home market, a diversity of industries, a high rate of
wages, and all other ingredients of prosperity, can only be secured
by means of a Protective tariff. It is not that Protectionists claim
a mere superiority for their policy over the policy of Free Trade as
an instrument of national development, but they insist that Free
Trade is a positive evil that prevents development. Consequently
when we find that a country, which is also one of those young coun-
tries in whose case Protection is declared to be most plainly
demanded, has, while faithfully adhering to Free Trade, developed
its resources, diversified its industries, maintained a high rate of
wages, given its farmers a profitable market for their produce, and
steadily advanced in prosperity in every path of progress, we are
entitled to question the truth of the assumptions which Protectionists
invariably take for granted. If wc can go further, and show that
another country which has enjoyed greater natural advantages, and
where the other influences which make for national welfare have
372 Industrial Freedom.
operated with greater intensity, has advanced much more slowly
under Protection than our first example has under Free Trade, the
conclusion is irresistible that Protection, not Free Trade, is the
clog upon national progress. At the same time, no sensible Free
Trader would rest his case upon the records of any country during
the short period of twenty-five years. The example of New South
Wales is of importance in a Free Trade argument, not so much on
account of the support which it gives to P'ree Trade, as because it
pushes the rude thrust of fact into the cobweb of a Protectionist
theory. It has also this more limited value that it makes it im-
possible for restrictionists to make use of the undoubted progress of
Victoria since 1866 as an illustration in their favour, without also
attributing the still greater progress of New South Wales to the
opposite policy of Free Trade.
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A
Library Burnai
Cat. No. 1137
.''SRARy FACILITY
465