THE
THE LIBRARY
OF
THE UNIVERSITY
OF CALIFORNIA
RIVERSIDE
/y
STATE AID
STATE INTEKFEKENCE.
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STATE AID
STATE INTEKEEKENCE.
ILLUSTRATED BY RESULTS IN COMMERCE
'-4N-D INDUSTRY.]'/
BY
GEOKGE BADEN-POWELL, M.A., F.R.A.S., F.S.S.
LONDON :
CHAPMAN AND HALL, Limited,
HENRIETTA STREET, W.C.
1882.
All Bights Reserved.
HP/7/5
33'/
London :
R. Clay, Sons, and Taylor,
BREAD STREET HILL, E.C.
PREFACE.
There come upon nations epochs when, rising
superior to all experience, a blind dash is made in
some unlooked-for direction. This is an infatuation
of the national brain which destroys, in the brief
period of its rage, the hard-won results of centuries
of toil and progress.
A nation comes into being and grows with sur-
prising rapidity till it attains to great stature : it
puts on and uses the strength of a Samson. But,
in those days it not unfrequently happens that the
nation suddenly sets itself to sap all the foundations
of its greatness : to permit the cutting off of the
seven locks of its mightiness. And the Delilah
of its destruction is Government Interference.
Has England, in these latter days, fallen under the
glamour of such an influence ? Government Inter-
ference can only enter where pr ivate judgment has
vi Preface.
been beguiled to place itself in the embrace of
Authority. And in England, in recent years,
Authority in Matters of Politics has striven, and
striven with some effect, to supplant in the affections
of the people that far more wholesome and beneficial
faith which rested upon the teachings of Political
Economy because these were based upon the sure
and certain warranty of experience.
But if Rationalism in Politics is thus flat heresy
in the eyes of this Authority, is it so in the eyes
of the great intelligent portion of the nation ? The
answer is to be found in the fast-growing public
appreciation of statistical information, and the wide-
spread study of this science legislators are called
upon to ignore.
One of the most important of the problems dealt
with by Political Economy is the question of the
effect of State action. And it is by the analysis of
achieved results that we can best tell whether, as a
matter of fact, the State assists most or injures most ;
whether its action is best described by the term Aid
or the term Interference.
The State, by direct action, influences the working
of land and labour and education, and other matters
of the first moment to Ireland and to Scotland and
t< England, as well as to all the world. But in this
Preface. vii
volume I limit myself to results that have been
recorded of State action in regard to industries and
to commerce.
In the first chapter I summarise the general
conclusions to which the details of the succeeding
chapters lead.
Some of these detailed results I had already-
published in the Nineteenth Century for July, 1881,
and Fraser's Magazine for the same month ; and in
the Fortnightly Review and the Westminster Review.
The Editors of these various reviews have very
kindly granted me permission to republish these
articles in this book, and I take this opportunity of
recording my thanks for such permission.
G. B. P.
8, St. George's Place, London.
CONTENTS.
CHAPTEE I.
PAGE
State Aid and State Interference 1
1. Political Economy and Ignorance 1
2. The Duty of the State 6
3. The Results of Protection 9
4. Bounties 11
5. High Tariffs for Colonies 14
6. Free Trade within the British Empire 15
7. Freedom for British Agriculture 18
8. Freedom for British Manufactures 22
9. State Interference with other States 25
CHAPTER II.
The Failure of Protection in the United States . . 30
1. The case of the United States Important 30
2. The Causes of their Prosperity 32
3. American Manufactures 37
4. Revenue from Customs Duties 48
5. Protection in each Case Hostile to Advance. Its
Future 53
1)
Contents.
CHAPTER III.
PAGE
Bounties 64
1. Bounties not likely to Sncceed 64
2. The Shipping Industries of the United States . . 66
3. French Shipping Bounties 69
CHAPTER IV.
Sugar Bounties 73
1 . Cane-growing in the Colonies continually Advancing 73
2. Beet-growing not due to Bounties 88
3. Beet-growing and Refining do not flourish in
Bounty-giving Countries 94
4. How to do away with Bounties 102
5. British Sugar Industries more Prosperous than any
others 109
CHAPTER V.
Protection in Young Communities 112
1. Parallel Cases of Victoria and New South Wales . 112
2. The Promotion of Manufactures 121
3. The Raising of Revenue 124
4. The Promotion of General Prosperity 127
5. Value of this Test Case 135
CHAPTER VI.
One-sided Free Trade 138
1. Supposed necessity for Customs Duties 138
2. Hong Kong advancing and prosperous with no
Customs Duties 139
3. People Increasingly Employed in Arts of Civiliza-
tion 141
4. Ample Revenue Raised 144
Contents. xi
CHAPTER VII.
PAGE
Low Tariffs fob the British Empire 147
1. Growth of our Trade with our Colonies 147
2. Need for England to recognise this 153
3. Most Nations maintain Free Trade within their own
Frontiers 156
4. All Colonies would Profit by Intra-National Free
Trade 160
5. Spontaneous Agreement of Colonies Necessary . . 168
6. Low Tariffs secure the Highest Prosperity of all . . 171
CHAPTER VIII.
Foreign Competition in Agriculture 177
1. The British Isles are becoming more Manufacturing,
more "Well-to-do, and less purely Agricultural . . 177
2. American Prairie Cropping must in a few years work
itself out 182
3. The Price of American "Wheat must Rise 186
4. America becomes rapidly Populated 194
5. Americans chiefly Compete with our other Foreign
Purveyors 198
6. Canadian "Wheat will not Permanently Lower Prices 203
7. English "Wheat Growing has many Intrinsic and
Local Advantages 205
8. Foreign Competition has roused English Agriculture
to Improve itself 207
CHAPTER IX.
Foreign Competition in Manufactures 213
1. What Foreigners are Doing and what they are
asserted to be Doing 213
2. Modern Tendencies of Foreign Tariffs 214
3. Modern Tendencies of Colonial Tariffs 221
4. Pauperising Effects of High Tariffs 224
5. Foreign Exporters of Manufactures 230
xii Contents.
CHAPTER X.
PAOK
Foreign Competition in Manufactures 236
1. What we are Doing in England : our Home Market
and Foreign Purveyors 236
2. Percentage of Manufactures to other Imports . . . 240
3. Particular Examples : Hardware, Silk, Woollens . 241
4. English Labour Cheaper and Better 250
5. Failure of Foreign Competition 255
CHAPTER XI.
Interference with other Nations 258
1. Four General Principles of Foreign Commercial
Policy 258
2. Lowering Tariffs 263
3. Fighting Bounties 267
4. Commercial Treaties 273
Index 279
STATE AID
AND
STATE INTEBFEBENCE.
CHAPTER I. '
STATE AID AND STATE INTERFERENCE.
SI. Political Economy and Ignorance. 2. The Duty of the
State. 3. Protection in the United States, 4. Bounties.
5. High Tariffs for Young Communities. 6. Free Trade
for the British Empire. 7. Freedom for British Agriculture.
8. Freedom for British Manufactures. 9. State Inter-
ference with the Commerce and Industries of other States.
1. In these latter days signs are not wanting
of the reappearance of an influence that has before
now destroyed civilizations. It may be that in
England the people are endowed with strength
sufficient to combat and throw off this influence ;
but the struggle bids fair to be severe, even if
there be no doubt as to the final result.
B
2 State Aid and State Interference.
Authority, in these latter days, is attempting, with
daily increase of force, to usurp the sovereignty of
liberty. And in England the evidence of this is
seen in the growing tendency to set up individual
men or individual ideas in the seats of power
that should be occupied by the cultivated national
opinion, or by personal knowledge of facts. In
England at the present moment the principles
and creeds of sections of the community, that claim
to be not .the least advanced, degenerate in reality
on the one hand into an unquestioning acceptance
and worship of mere words, and on the other into
an equally unquestioning and unthinking servitude to
men who are blindly supposed to embody some idea.
There is evidence that an appreciable portion of
the educated intellect of the nation may fall into
this bondage of hero worship. If the result be
of sufficient power to enable a Government to ride
roughshod over all principles and experiences that
would otherwise check some particular political move,
there is at once risk of an undoing of all that has
been done; of a loosening of the whole national
fabric. The turning into the road to ruin is made
immediately Government undertakes to do what
is, and has been, best left to private initiative.
Popery in politics is the resource of nations or
State Aid and State Interference. 3
of individuals, of low intellectual calibre. Un-
questioning surrender of the political conscience to
some human high priest, is the refuge of the
incapable and the ignorant. Authority, in the matter
of politics, only becomes personal with those who
lack power or energy to think for themselves.
Authority may be well defined as "the allowing
some one else to think for you." And in this sense
it would appear, in these latter days, Division of
Labour has been carried to a pernicious extreme.
For instance, if Political Economy is banished by
Authority to Saturn, many there are, and these
passing for intellectual men, who have been found
to bring their lips to say, " So much the worse for
political economy."
There is but one silver lining to this cloud of
dependence on others. The cloud itself is some
check on that yet more baneful tendency of the
times the tendency of educated ignorance to
assert itself. Argument, snatched hurriedly from
the skurry of modern life, is mistaken for fact ;
second-hand and often interested explanations are
mistaken for the occurrences they would explain ;
and this half-knowledge, which is altogether worse
than no knowledge, is only too ready to pose before
the world as knowledge, and to usurp the place of
B 2
4 State Aid and State Interference.
teacher that of right belongs to experience. In
reality, all this misleading mass of assumptions
and vain theorisings is after all only formulated
ignorance. It is thus possible even to welcome
Authority in politics if only it prove to be some
antidote to this other great political evil. But this
welcome is altogether soured when we find the
High Priest of this Authority himself suddenly
discarding knowledge and experience, ridiculing the
teachings of history, and telling us that the science
which collects and explains all that is known of
the results of human action, is no longer of any
service in mundane affairs. Such ideas can only
flourish where there prevails actual ignorance of
the true nature of the science of political economy.
The abstract principles of Political Economy are
nothing more nor less than logical explanations of
successful human work. The science is thus an
exact science in so far as it collates the recorded
results of such work. It can describe by analysis
and abstraction each of the conditions which when
co-existent make up necessarily a certain effect.
It can tell us, with all the certainty of mathematics,
that certain defined conditions existing together
are a certain total or effect, for this effect is merely
a bundle of conditions.
State Aid and State Interference. 5
Ask Political Economy, " what is the cause of
manufacturing prosperity ? " It will reply : Take any
case of manufacturing prosperity and you will find
you have a community enjoying, as much as, or
more than, its possible rivals, a favourable climate,
skill in the people, energy in the people, an adequate
command of capital, an adequate command of raw
material, and liberty to utilise all these conditions.
Free Trade does not cause it : Protection does not
cause it : for it is nothing more nor less than the
realised co-existence of several conditions, each one
of which can be seen by analysis to exist in all cases
of manufacturing prosperity.
Political Economy unties for inspection the bundle
of conditions that, in its entirety, is some definite
effect or fact. It describes each of these conditions,
and it explains once and for all that if you take
these several conditions and make them up together
into a bundle you will have such and such a par-
ticular effect. It is a necessary truth. It is this
analysis of results which is the main function of
the Political Economist. His chief duty is to
explain economic experience. His " principles " are
the constants he finds in circumstances ; the sub
stantial conditions which underlie circumstantial
varieties. He does not explain on hypothesis ; he
6 State Aid and State Interference.
simply draws up a list of the actual, conditions which
must *be present together if Ave are to have any
given effect.
2. So far as private acts go Political Economy
has less to say than in the case of public acts ; and
there is no more important problem to be explained
by Political Economy than the question how far the
common body politic the State is to do the
thinking for the community, and interpose in the
regulation of private acts.
If we look to history we find that all prosperity
is generated in freedom. Anything and everything
that interferes with freedom generates a negation of
prosperit} 7 . And the State, the expression of the
unity of any community of men, has the one
whole duty of securing the freedom of the indivi-
duals who make up the community. But it is a
community ; and the true freedom of the individual
is liberty for the full play of his own energies
limited by the precisely similar liberty for every one
of his fellow-citizens. The guardianship of these
liberties is the prime function of Government the
one great final cause of its existence. The State
has to hold the true and just balance between
the individual and collective liberties; and in the
economic quite as much as in the moral or religious
State Aid and State Interference. 7
affairs of mankind, the State can do harm by
letting alone, but it also can do harm by not letting
alone. In other words, there can be State Aid as
well as State Interference.
It might be said that it is the duty of Govern-
ment to bring all previous experience of the human
race to bear directly upon the particular con-
ditions in which a nation may find itself, and so
forestall much lengthy trial and consequent waste of
energy. But it is often the case that Government
itself is in error, and is more liable to act on wrong
judgment than the private individual. And this is
specially the case in industry and commerce, because
these thrive best under the impulses, sacrifices, and
knowledge of the individual. Before now, States,
in their endeavour to promote some industry, have
choked out of it all its life ; States have succeeded in
setting up unprofitable industries ; States, in their
endeavour to hasten industrial development, have
been known to foster industries by no means profit-
able to the community at the sacrifice of those that
were in reality the most profitable. All this is
never possible if such development be left to in-
dividual initiative. The individual best discovers
what is profitable and what not : the individual
best bears the losses incident to failure. It is of
8 State Aid and State Interference.
the first importance that every individual be left
free, and neither encouraged to take up unprofitable
nor hampered in the prosecution of profitable
industries. It is folly to encourage a man to make
hats when he might be more profitably employed
growing wheat. It is folly to check his making
hats when it no longer pays him to grow wheat.
It is held to be an open question whether in
actual life a man's ' acts are governed by reason
as often as they are directed by unreason. This
latter this unreason is the arch enemy of pro-
gress the subtle destroyer of systems of civilization.
And as reason is founded on experience, so is un-
reason founded on ignoring experience. And this
experience is a knowledge of the several conditions
that make up the bundle that is known as the
effect. Unreason is the negation of experience, and
thrives only under the supremacy of ignorance.
Luckily at the present day ignorance has acquired
the habit of formulating itself with as much exact-
ness as knowledge ; and we can cull from the
popular arguments of the day the definite conten-
tions advanced by this formulated ignorance, and
compare them with actual fact.
In analysing results it is right to go into detail ;
to separate the sticks of each bundle ; to enter at
State Aid and State Interference. 9
length into the description of the many conditions
we find combined into each result. And I sum-
marise in this chapter the analysis of the bundles
or effects which are analysed in detail in the
succeeding chapters.
In Industry and Commerce there is one great
lever to State Interference, known to the world as
" Protection." It is the interference by Govern-
ment with what is imported into a country for the
avowed purpose of securing certain ends for the
home industries and commerce. It is thus that in-
vestigations naturally group themselves round the
problem Is Protection, in the popular sense of the
term, State Interference or State Aid ? Does it
assist or impede wholesome natural development ?
3. Among the formulas that have become the
stock-in-trade of this Ignorance none is more fre-
quently met with than the pointing to the United
Slates as an example contradictory of all that is
credited to Free Trade. We are told, How is it, if
all this be true about Free Trade, that the United
States, with their stringent Protection, develop so
fast, manufacture so much, and are generally so
prosperous 1 ? The sum total of the answer is that
in every point in which the United States do
flourish and prosper it is in spite of, and not
10 State Aid and State Interference.
because of Protection. The chief sources of wealth
over the vast interior the foods and the raw
materials are being worked under the stimulating
aegis of absolute Free Trade. By the constitution
of the United States it is strictly forbidden for any
one of the States to levy customs duties on goods
entering from any other State.
And the United States are as large as Europe
and as rich in all natural wealth. The high tariff
can affect this community in two ways. In the first
place it affects alone by imports ; and the popula-
tion of the United States imports but 21. per head
as compared with the 101. per head imported in
the United Kingdom. In the second place, the
high tariff is supposed to yield revenue, and so
relieve the nation of other taxes. But if we look
to records, we see that within the last ten years
the customs revenue, from yielding 19s. per head
of population, has fallen to yield only lis. and that
the actual bulk of the annual yield has decreased
25 per cent. Thus the high tariff fails to relievo
the country of other taxation ; and at the same
time it presses comparatively lightly on a population
that buys so little abroad.
The question remains, What of the positive
effects? Protection was instituted to develop
State Aid and State Interference. 11
manufactures, and yet the percentage of manu-
factures to the rest of the commodities exported is
not only insignificant in amount, but dwindling
year by year. Imported manufactures still hold
their own in the American market ; and all that
can be said in the summing up is that Protection
has fostered the growth in America of manufactures
that are a dead loss to the community at large,
and has stifled some industries that would have
been of the highest national advantage.
4. Formulated ignorance sometimes shifts its
ground. " It may be true, all this about Free
Trade and Protection ; but Bounties, at all events,
must be fought by direct action." To understand
this problem aright it is well to have before us
the whole details of some typical case ; and there
is no case more distinct, more recent, and more
fully recorded than that of the Sugar Bounties.
If we look into such details we at once find that
Bounties in the result do more actual harm to
the nations that give them than to the rivals they
attempt to overthrow. A Bounty is a portion of
the national wealth handed over by the State to
an individual. It is a tax on the nation in favour
of some individual. It is presented to the indi-
vidual for carrying through some industry. If that
12 State Aid and State Interference.
industry be profitable in itself the Bounty is an
entirely gratuitous gift. If that industry be unpro-
fitable in itself the Bounty is merely a bonus on
pursuing an industry which decreases the national
wealth. A Bounty is thus a tax on the people,
which is at best an altogether unnecessary drain
on their resources, and which may be, and in many
cases is, a direct encouragement of a waste of the
nation's resources. A Bounty is indeed a political
sop that many a dishonest Government has thrown
with great " politician " effect. But in the end it
brings ruin and loss. It either encourages an in-
dustry that needs no encouraging, or it encourages
an industry that should never be encouraged.
In regard to Sugar Bounties we find that those
countries which give no Bounties possess the
most flourishing sugar industries. It is usually
found that where one industry or country receives a
Bounty other industries and other countries clamour
for them. The movement, like other Protective
measures, tends more and more towards a drain on
the popular wealth for the sake of a few individuals.
It is distinctly against the general prosperity, and
subversive of the conditions best for the particular
industry itself. If the Shipping Bounty in France, for
instance, proves a "success," it will be a new burden
State Aid and State Interference. 13
of taxation on the French people equivalent to an
additional 4<d. in an Income Tax. So long as the
French are willing to support this burden, so long
do they handicap themselves in every industry to
this extent against English competition. The same
is the case with Sugar Bounties. We are told an
Import duty of 2s. a cwt. on all sugar we import
that has received any Bounty would countervail the
effect of the Bounty. In other words, if the English
taxpayer will kindly contribute a sum of 600,000/.
the effect of the Bounties will be effectually
neutralised. Because other nations handicap them-
selves in their sugar industries we are asked to do
so likewise. By their Bounties some nations send
us refined sugar at a price lower than they could
otherwise afford to sell at ; and other nations send
us raw sugar at a similarly reduced price. Con-
tinental taxpayers, in short, pay to the continental
refiners and growers part of the price the English
ought to pay for their sugar. This is the sum and
effect of their Bounty giving. And we find on the
continent a widespread and general outcry against
these Bounties, chiefly based on the fact that Eng-
land, the only country that has cut herself aloof from
all such restrictions on industry, is the only country
in which the sugar industries flourish and increase.
14 State Aid and State Interference.
5. Formulated ignorance is fond of asserting
that Protection, though altogether wrong for fully-
grown communities, mag yet be beneficial for young
communities. Luckily recent history has provided
us with a test case. Two of our own colonies, of
sufficiently similar size and environments, have been
racing together for ten years, on the rival systems of
Free Trade and Protection. The value of this test
case has been fully acknowledged. Indeed the
comparison of Victoria and New South Wales
has recently become a commonplace with poli-
tical economists. At the meeting of the British
Association, in 1880, I first put forward some
statistics of the ten years' progress of these two
colonies. These figures I have since elaborated,
and they have been extensively quoted. I set them
out afresh in this book, as they prove conclusively
that in all desirable growths, in the details of revenue
raising and the promotion of manufactures, as well
as in the general advance in prosperity, a low tariff
does far more for a young community than a high
tariff.
Formulated ignorance is also fond of asserting that
a country that keeps its own tariff low while other
nations retain high tariffs is adopting a policy of
onesided Free Trade that must in brief space prove
State Aid and State Interference. 15
its ruin. In answer to this popular fallacy it is well
to remember there are in this world Free-ports
communities that actually levy no customs duties
whatever. If we look to Hong Kong, for instance,
we find an island in close contiguity to a highly
" Protected " populous and industrious continent.
In Hong Kong there are no import duties whatever ;
and yet here we have a, community advancing fast
in prosperity ; raising an abundant revenue ; and
attracting a fast-growing population increasingly em-
ployed in the arts of civilization. Those who object
to a low tariff on the incomprehensible plea of
" one-sided Free Trade " will do well to ponder over
this instance of a country flourishing with no tariff
at all.
6. Formulated ignorance has, in these latter
years, become much enamoured of the idea of a Zoll-
verein for the British Empire. Free Trade within
the Empire to be extended to all foreign countries
willing to afford reciprocal advantage, but with a
rampart of protective duties against all others this
is the policy suggested. It is admitted that Free
Trade is best ; and next, the definition of Free Trade
is abandoned, and restrictions on commerce ad-
vocated. Free Trade is the doing away with all that
practically interferes with the fire course of industry
16 State Aid and State Interference.
and commerce. .We are told this is impossible over
the whole world at the present but it is possible
over the wide British Empire. Next, the assumption
is made that all the Colonies are willing, provided only
we hedge the Empire round about with a wall of
protection. And we are told the whole of this grand
effect is to be produced by the imposition of customs
duties on certain commodities so long as they come
from foreign countries unwilling to concede reciprocal
trade advantages.
That Free Trade is possible over the wide British
Empire is perfectly true. Indeed, over the whole
Empire there are only two fiscal authorities out of
forty that are not at this moment pursuing the wise
policy of Free Trade. The advocates of a Fair Trade
Empire will find themselves grievously mistaken if
they rely on the illusion that the Colonies are
willing to join a Free Trade Bond, provided only it
be surrounded with a wall of higher duties to out-
siders. The Colonies understand their position too
well. They trade largely' with every nation under
the sun. It is true they buy most of their manu-
factures in England, but they send great proportions
of their own produce to foreign nations, and by
selling abroad they arc enabled to buy in the
mother country. All the Colonies wish for tariffs
State Aid and State Interference. 17
everywhere as low as possible. With true practical
insight they will be found very averse to the
provoking a general raising of tariffs. It must also be
remembered that the imposition of customs duties in
England on certain goods, if of foreign and not
colonial origin, would be of no real effect. If such
a measure were to have its apparent effect, it would
enable the Colonies to send to England, for instance,
all their wheat, and with the profits they would
purchase the wheat they required for their own
consumption from foreign nations. The same
amount of -wheat would be grown in the same
places, but this interference with the free course of
commerce would force it into different markets.
The true foundation for a Free Trade Empire is
the national conviction that low tariffs are most
conducive to prosperity. This conviction is already
widely held by the free congenital communities of the
British Empire. The cases of Hong Kong and of
Victoria and New South Wales are evidences that
this conviction is sound and good. That the con-
viction should increase in strength, and spread till it
inspires the whole nation is dependent on the prob-
lem whether Englishmen all the world over will
shape their policies by the light of experience, or
grope, as other nations have done to their ruin, in
c
18 State Aid and State Interference.
the darkness of fictions and fancies that are
pleasurable at the instant, but have no foundation
in fact.
7. Formulated ignorance is particularly strong
in its assertion that the policy of one-sided Free
Trade has at all events ruined the Industry of Agri-
culture in England. We are told that now when
lean years come the farmer gains no compensation in
rise in price for shortness in quantity. It may be true
that if we still levied a duty on foreign wheat, in
lean years prices would rise somewhat more than
they do in the absence of any duty.
But the extent of their rising would be small. Our
present surroundings force us and enable us to
import more than half of the wheat we consume ;
and the cost of production of these importations
would have a corresponding effect on prices in
England, duty or no duty. The enormous advance
in facilities of transport has had far more effect on
the wheat supply than any mere alteration of import
duties in any one country. If duties kept prices of
wheat high, it is perfectly obvious no duty-imposing
country would care to sell its wheat in the low-
priced English market. Supposing, however, a duty
is placed on imported wheat, the question remains,
would the farmer be better off? Beyond all doubt
State Aid and State Interference. 19
he now-a-days obtains the " raw materials " of his in-
dustry at far less cost. Oil-cake of every kind,
Indian corn, and other foods ; manures ; implements,
both as to variety and quality ; all these he obtains
better and cheaper, because the supply is free from
all State Interference. Of his land it cannot as yet
be said that it is free from State Interference ; but
even in this respect the Free Trade of his country
has enabled him to acquire sufficient use of the soil
at very low cost. Wealth, acquired in so many other
ways than agriculture, seeks satisfaction in an owner-
ship of the soil, which has no ulterior object in making
use of the soil. Consequently it becomes true that
if we look to all the agricultural requirements to
proximity to good markets, to fertility of soil, to
climate, to supply of labour, and so forth, we find that
it is in England the farmer pays least for the use of
good agricultural soil. This is due to the general
prosperity. And the farmer feels the effect not only in
regard to land, but also in regard to labour. A very
fragmentary rise in the prices of food and lodging and
clothing would tell disastrously for the farmer in the
price of labour. So far, then, as the "raw materials"
of his industry are concerned, the absence of State
Interference is an unmitigated blessing for the
farmer.
c 2
20 State Aid and State Interference.
There is the further important element of the
prices he can obtain for what he produces. We
hear frequently of the very low price of wheat. It
has been low lately, but it has been lower in previous
years, and there is compensation in the fact that
barley and oats are higher. The average prices per
quarter of wheat, barley, and oats for five year periods
during the last forty years have been as follows :
1841-45.
1846-50.
1851-55.
1856-60.
1861-60.
1866-70.
1S71-75.
1876-f-O.
Wheat ...
Harley ...
Oats ...
s.
54-9
310
207
s.
51-11
3111
214
*.
56 4
31-2
2210
*.
53-4
38-9
24-5
s.
476
32-11
21-10
s.
547
3811
24-6
s.
54-7
3810
263
t.
47 6
365
21-3
Average \
for all 1
grain j
crops )
35-5
35-1
36 9
38-10
34-1
39-4
3911
361
,
,
Wheat follows the general modern tendency
towards lower prices in all things, but its price also
exhibits a tendency to greater steadiness, the more
its exchange is free. During the past forty years,
for the four decades, the range of wheat prices was
for the first decade, 25s. 6d. ; for the second, 36s. 2d. ;
for the third, 24s. 3(/. ; and for the last only 14s. lOd.
Moreover, there is little doubt but that the very low
cost of prairie grown wheat will soon be a thing of
the past. Rapid increase of population on the prairie
itself has run up the value of the land. This at
State Aid and State Interference. 21
once makes it necessary to farm, and not merely to
crop. Moreover, fifty millions of people will soon
come to live on these prairies, and they will con-
sume a large proportion of the wheat there produced.
With the exception of this prairie cropping, wheat
is produced in England as cheaply as anywhere ;
and, with the prairie cropping at an end, there will
be no further fall in prices, but every certainty of
a moderate rise over the whole world.
And all this while, with continued fall in the prices
of his own " raw materials," the farmer has seen a
continued rise in the price of meat. This will not be
checked ; for in all new lands meat will never be
lower in price than it now is.
So far as the great industry of Agriculture in
England is concerned, its permanent success has
proved that it flourishes, because instead of State
Interference, it commands that State Aid which sets
about abolishing any impediments to the free course
of the industry. Here, indeed, there is grand scope
for reform in England. Several recent laws have
incidentally become unfair burdens on Agriculture ;
many old laws have survived the time of their useful
existence, and also grown to be burdens on Agricul-
ture. In both cases reform is urgently necessary ;
and in both cases Agriculture may look for very con-
22 State Aid and State Interference.
siderable relief and assistance if the State will only
aid to abolish both new and old State Interference.
And the country will have to look for such reform to
some new party, for the agricultural legislation
recently initiated by one great party in the State is
marked not only by the banishing to Saturn of the
teachings of experience, but also by fundamental
ignorance of actual agricultural life. And as a
consequence, however good in intention, it fails to
achieve any practical end that is good.
8. We are told Agriculture is the greatest of
English industries, and we have seen that State
Interference is its bane. We are told we are a
nation of shopkeepers, and no one doubts but
that a policy of Free Trade promotes commerce
and exchange. We are told we are the work-
shop of the world. But here formulated igno-
rance steps in and tells us that the absence of State
Aid for our manufactures is rapidly ruining the
country in its capacity for manufacturing. We meet
with a variety of formulas. We are told "foreign
cowitrics shut us out with increasingly hostile tariffs''
We are told our Colonies do the same. And yet if
we look round we find that, as a matter of fact, on
the continent of Europe there has been for many
years a growing tendency to lower tariffs, to reduce
State Aid and State Interference. 23
the number of items in tariffs, and to grant to us
most favoured nation treatment. If we compare
continental tariffs of 1880 with those of 1860 we
find that in fourteen out of the sixteen countries
they have been lowered. In 1860 the average
number of items on these tariffs was 140 ; in 1880
it had fallen to 112. In 1860 seven out of the six-
teen countries granted us most favoured nation
treatment ; in 1880 fourteen granted us the favour,
and the remaining two had expressed their willing-
ness so to do.
And when we turn to our Colonies we find that
only two out of forty maintain tariffs that can
in any way be described as high or hostile. One of
these instances is that of Canada, and here the high
tariff was made to include English goods, not out of
hostility to English manufactures, but because the
Supreme Government of the Empire maintains the
theory that no duties within the Empire are to be
differential. Moreover, as a matter of fact, both
these high tariff Colonies continue to import more
and more of our manufactures. For instance, even
in effect, there is no hostility to British manu-
factures in the records of Canadian trade : English
imports are increasing and United States imports
decreasing steadily.
24 State Aid and State Interference.
We are also told foreign countries are flooding us
with their manufactures. But foreign countries are
not increasing their export of manufactures so fast as
England increases hers. If foreign countries are
flooding England, England is flooding them in far
greater proportion. It is also remarkable to notice
that foreign countries increase their exports both in
quantity and kind in proportion as their tariffs are
low in the particular items exported. Nor is this
contrary to reason. A protective or high tariff is
only effective against goods that can be produced
cheaper elsewhere. Consequently these goods will
drive from all other markets similar goods made in
the protected country.
If foreigners were supplanting us as manufacturers,
not only in our own markets but in foreign markets'
we should at once see the effect in our imports and
our exports. Now, as a matter of fact, the per-
centage of manufactured articles to the rest of our
imports is insignificant only eight per cent., and it
does 'not increase. And, on the other hand, as a
matter of fact the percentage of our manufactures to
the rest of our exports is very great ninety-four per
cent., and does not decrease.
Other countries range through the whole gamut of
State Aid from the negative pole of Free Trade to
State Aid and State Interference. 25
the most positive pole of Protection. But England
continues steadily at the head of the list of manu-
facturing peoples. Her supremacy seems to be
assured. And this for the chief reason that the
State sees the folly of attempts at Aid which are in
reality nothing but hurtful Interference. Wisely in
England the State confines itself to securing to
every worker as a consumer the advantage of
obtaining everything he uses or consumes at lowest
possible cost, and as a producer the security that to
whatever industry or task he may devote his
energies he may rest practically assured that his
energies are not being misapplied, for they are
applied under the searching influence of open com-
petition with all the world. In such a free atmos-
phere the risk of misapplication of energy is reduced
to a minimum ; and, at the same time, advantage is
taken of every facility of production the wide world
offers.
9. But in these latter days the State has been
asked to aid and to interfere, not only within its own
frontiers, but within the boundaries of foreign states.
England has been asked by a section of her citizens
to force foreign nations to lower their tariffs ; to
force foreign nations to abolish the Bounty system ;
and to bind foreign nations to admit English goods
26 State Aid and State Interference.
on certain terms by the aid of commercial treaties.
The means that we are told are the only available
means mark the unwisdom of any such policy. We
declare that low tariffs are good and high tariffs bad ;
and then, in order to prevail on other nations to
lower their tariffs, we are to threaten to raise our
own. We declare Bounties to be bad ; and then, in
order to prevail on other nations to give up the
system, we are to threaten we will injure ourselves
to the exact amount that these Bounties injure the
nations that give them. We declare there should
be free exchange of commodities between all nations ;
and then, in order to obtain this free exchange, we
are to propose to bind ourselves to some particular
nation by a treaty arrangement of "reciprocal
advantages" specifically curtailing our freedom of
exchange with third nations. These means are, on
their very face, inconsistent with the attainment of
the end desired. They are means that have invariably
commended themselves to governments for many
years. They are means' that have invariably failed.
They are means that must be once for all discard ed.
The various States of the world are politically in-
dependent of one another. Any agreements between
them must be in the nature of free contracts. But
these contracts have this fundamental distinction from
State Aid and State Interference. 27
contracts between individuals, in that there is no
superior compelling power to enforce their fulfil-
ment. War or necessity are the sole ultimate
arbiters. Conference, arbitration, and agreement
may be appealed to, but subject only to voluntary
concession. To injure ourselves in order that others
may not injure us is a course of policy neither wise
nor useful. And yet such a principle is the basis
of all these policies by which we are to interfere
directly to reform other nations in regard to com-
merce and industry. It is ultimately a waging of
war. We know it will cost us much ; we say we
must go to war, for there are no other means of
compelling nations to do what we wish them to do.
If, however, we turn more thought into our con-
sideration of the case, we discover that this kind
of warfare has never been successful ; that it not
only fails to attain its end, but that it necessarily
costs more than any gains it can win.
And all the while we forget that to keep the
peace will induce the very results we vainly seek
to bring about by war. We wish for freedom for
commerce and industry. We wish to see this
freedom prevailing in every State. We wish to see
no one state, by its individual action, curtailing this
freedom in all other states. We, and other nations,
28 State Aid and State Interference.
have tried war for many years. We have endea-
voured to secure this freedom for all by denying it
to ourselves. Other nations, all the world over,
have done the same. More recently England has
turned back from these illogical courses. England
has said, " So far as in me lies I will commence by
giving myself this freedom. If it is this great good
we all conceive it to be, results will soon prove that
I am right." And results are conclusively proving
the wisdom of the new English policy. Other Euro-
pean nations are now beginning to ask how it is
that England and Belgium and Holland and Swit-
zerland are drawing right ahead of all others as
commercial and industrial nations. The Australian
colonies are asking why is it that New Zealand
and New South Wales are outrunning Victoria.
The United States are asking why is it that un-
protected England floods American markets with
her manufactures, and also drives American goods
out of neutral markets. The high-tariffed States
of South America are asking, " Why is it we have
to go to free-trading England for our manufactures
no less than for our capital ? " These results must
tell, and are telling. It is the force of successful
example which will lead other states to set them-
selves up free in commerce and industry. It is to
State Aid and State Interference. 29
this teaching we must trust for a coming emancipa-
tion of nations from State Interference. The means
to this end is the spread of knowledge. Ignorance
is the arch enemy to the spread of commercial
freedom. Cynics may ask whether the printing
press has in the sum total done more to disseminate
and give authority to ignorance than to knowledge ;
whether it has established in the public mind more
untruths than truths. At all events, the printing
press may be made the vehicle of facts. And it is
to the wide, universal publishing of recorded facts
we must look for restoring to experience a measure
of its lost influence in public affairs. A public
opinion ignorant of and despising experience is the
canker that eats the heart out of a nation and
thereby brings about the ruin of its civilisation.
And experience tells us that in order to secure
the highest and most lasting prosperity for com-
merce and industry, State Aid should he invoked
or utilised for the sole purpose of disestablishing
State Interference.
30 State Aid and State Interference.
CHAPTER II.
THE FAILURE OF PROTECTION IN THE UNITED
STATES.
1. The case of the United States important. 2. The Causes of
their Prosperity. 3. American Manufactures. 4. Revenue
from Customs Duties 5. Protection in each case hostile to
advance Its Future.
1. There are Free-traders and Free-traders.
Some men are Free-traders because they know
Free Trade to be best ; more men are so because
they think it to be best ; most men are so because
they believe in their chosen teachers. These two
latter classes are, indeed, imbued to the backbone
with the idea that Free Trade means wealth and
prosperity; but at certain seasons they become the
unwilling victims of most awkward questionings
both from within and without. Members of Par-
liament have been found to ask such questions; and,
in the Times, a " Letter from Mr. J. Bright on Trotec-
Failure of Protection in United States. 31
tion " figures with strange frequency. These letters
are almost invariably in answer to the evident,
if cleverly concealed question, " If Free Trade be all
you say, how is it that the United States flourish
so under a regime of Protection ? " This question
implies either a sad lack of detailed knowledge
on the part of the interrogator, or a criminal ex-
pectation of such a failing on the part of his
victim. It is my present purpose to put forward
the plain matter-of-fact rejoinder to this specious
question.
Such an investigation has a present and particular
value in that incidentally it elucidates problems of
the first importance to our own farmers and land-
owners, no less than to our manufacturers and ex-
porters. The supply of the English market with
wheat and meat ; the supply of the United States
market (a vast market, embracing such items as
the construction and maintenance of the one hun-
dred thousand miles of rails that will soon be " in
work " in the States) ; the existence and growth
of manufactories of various kinds on the other
side of the Atlantic these and others are all pro-
blems closely connected with this investigation, and
problems of the first moment to all thinking
Englishmen
32 State Aid and State Interference.
2. These inquiries range themselves under
several heads : (i.) How far is the prosperity of the
United States connected with the prevailing policy
of Protection ? (ii.) How far has Protection
succeeded in setting up native manufactures ?
(iii.) How far has Protection succeeded in supply-
ing funds to the revenue ? (iv.) How about this
Protection in the future ?
How far is the Prosperity of the United States
connected with the Policy of Protection ? This first
question lands us at once among the circumstances
that combine to bring prosperity to the United
States ; and if we look in vain among these for the
influence of Protection, it may surprise the thought-
less into attention to facts, but it will in no wise
run counter to the convictions of those who know.
Protection may be defined as the interference by
a Government with the influx of commodities pro-
duced in other States in order to serve certain ends
in regard to its own industries. It is obvious, then,
that Protection affects a country by the means of
its imports; and in judging of the causes of pros-
perity in different States, Protection will avail as
a factor in proportion to the comparative importance
of the imports. Fur instance, the British Isles
import annually an equivalent of 11/. per head of
Failure of Protection in United States. 33
population; the United States import annually but
21. per head. Thus, it may be said that in the
United States the direct effect of a policy of Pro-
tection on prosperity (for or against) is only one-
fifth what it would be in England.
But this minimised influence of Protection is
further lessened by the fact that the United States
is eminently an underpeopled, undeveloped country.
This fact, it will be seen, is at once the basis of the
national prosperity and the more than sufficient
antidote to the action of Protection.
Evidence of this is seen in the recent high-pres-
sure development of the industry of supplying food
to Europe. For some years past this tillage and
pasturage of the prairie has produced an enormous
surplus of food supplies. These would have been
mere valueless commodities, or rather would not
have been produced at all in such quantities, but
for the fact that cheap means of transit happened to
coexist to convey this surplus to European and other
markets. Thus it became wealth ; and was used in
great measure to repay other nations some of the
capital they had advanced to render such things
possible. Of the total annual exports from the
United States nearly one-half consists of this food
surplus. It is thus evident that this production
D
34 State Aid and State Interference.
alone of food from virgin soil supplying as it does
the first necessaries of the large home market, and
paying for two-thirds of what the nation buys abroad
is accountable for a major portion of the pros-
perity enjoyed by the United States.
But if to this food surplus we add the exports
of "raw-materials" of cotton, minerals, and so forth
we shall account for at least eighty per cent, of
the total annual exports from the United States
without trenching in the least on the domain " fos-
tered " by Protection. It is then not difficult to
see that the prosperity of the United States depends
on industries that have no cause whatever to thank
Protection.
These industries, however, are rapidly discovering
cause for curses and not thanks. Farmers find the
high tariff raise the prices of all agricultural tools
and implements ; millers complain of the high cost
of machinery for mills ; carriers of the high prices
of the metal-work for elevators and for railways.
Experience is proving that duties which protect one
class necessarily injure all others. The train of
cause and effect runs in the well-known circle.
Each manufacturer finds that, though the duties
that protect him are said to be ultimately paid by
the consumer, nevertheless the consumer has his
Failure of Protection in United States. 35
natural revenge in that everything the manufac-
turer uses or consumes in the process is enhanced
in price.
It is no long task to show that the prosperity of
the United States exists in spite of, and not because
of, Protection. And this is so even when no men-
tion has been made of the most important fact in
connection with this prosperity. Too seldom do we
remember that absolute Free Trade has been long
and firmly established throughout the United States,
and that it exerts an influence many many times
greater than that exerted by Protection. Free Trade
reigns absolute and supreme within the frontiers of
the United States. This is a fact writers and
speakers on both sides the Atlantic are too apt to
overlook. The full import of this fact is seen when
we remember that the rapidly increasing population,
already numbering fifty millions, only imports from
abroad one quarter of the value of goods that the
thirty-three millions of the British Isles import.
And the vast and important home market of so very
large and so very self-dependent a population is regu-
lated entirely on principles of absolute Free Trade.
The importance of this fact is all the more evi-
dent if we remember that the United States is
about as large as Europe, but with only one-seventh
D 2 .
36 State Aid and State Interference.
of the population. We have indeed a territory
equalling Europe in extent and in variety of soil,
climate, and product. But properly to picture the
case we must sweep out of Europe all the English,
Dutch, Danes, Swedes, Germans, Russians, Austrians,
Italians, Swiss, Spaniards, Portuguese, and Turks,
and then distribute and settle over the whole area
of Europe the population of France and Belgium
only. The British Isles would proportionally receive
about the population of London to work up their
prolific resources, their mines, their pastures, their
fertile soils, their ores, their fisheries, and so forth.
Then, if we add to such distribution of population
perfect freedom of interchange of products all over
this Europe, we have a picture of the condition of
the United States at the present day. It has been
the dream of Cobden's disciples to extend Free
Trade over Europe. Our American cousins have long
ago and definitively established Free Trade over an
'i ire equalling that of Uu?'opc.
It will be immediately evident that the prosperity
that ensues in the United States will be due to this
freedom of exchange and this comparative paucity
of people engaged in the highly profitable task of
developing vast virgin resources. Of a truth, so far
as its prosperity is concerned, the United States is
Failure of Protection in United States. 37
a glaring instance of the high economic value of
Free Trade. In the United States we have a group
of communities, large and small, young and old,
under-peopled and fully-peopled, and with every
variety of human and natural forces, all bound one
to another in the fertilising bonds of Free Trade.
Such is the prosperity of the United States ; such
the foundations of this prosperity. Protection, in-
fluencing only by means of a comparatively insig-
nificant import trade, is but a weakly drag on this
prosperity, which thus rests in reality, both in
regard to home consumption and to export, on
Adam Smith's " plenty and cheapness of good land,"
coupled with perfect freedom of exchange over the
length and breadth of this good land. Protection
in the United States occupies an altogether subor-
dinate position as a direct factor for or against this
prosperity ; and there is force enough at the present,
in the development of the splendid virgin resources
of this partially-peopled Free Trade continent, to
induce prosperity in spite of, but not in consequence
of, Protection.
3. How far has Protection succeeded in developing
Native Manufactures ? In disposing of this second
question we are faced at the very threshold by the
fact that the genesis of manufactures in the United
38 State Aid and State Interference.
States occurred under exceptionally favourable
auspices. Gold and other populating magnets had
attracted across the Atlantic swarms of emigrants
from Europe. A very large percentage of these
were skilled mechanics and manufacturing hands,
and these were, frequently, the men of highest spirit
and energy in their various callings. Thus the
States had simply to utilise, and not to create or even
to introduce, the best skill, traditions, and experience
of the old-world manufactures. And there soon
came about a general willingness on the part of
these immigrants to revert to their old callings as
opportunity offered ; for the new toils of unwonted
agriculture, or the disheartening failures on multi-
tudinous dummy gold-fields, gave fresh prominence
to memories of former more lucrative and more
satisfactory work. Manufactures were engrained in
the people before arrival. These habits and tradi-
tions of work needed only time for their reappear-
ance ; but it was sought to hasten this reappearance
by the curious self-sacrifice of all other interests in
favour of these manufacturers.
And yet, if we look to the surroundings of the
manufactories of the United States, we see at once
that their very life is closely bound up with the
existence of undeveloped virgin resources. When
Failure of Protection in United States. 39
bad times come and consumptive demand wanes,
then short time or stoppage of mills, and so forth,
merely throws more human energy into the opening
up of unbroken agricultural areas. A great increase
in agricultural output is the result, and, provided a
market be found for this, a recuperative force is at
once set in motion which shrouds the fact that
many of these artificially supported mills and
factories are not in unison with the true life of the
community. And, in addition, the ready supply of
food offered by virgin soil does away with any risk
of actual starvation.
In spite of these manifest " natural " advantages,
we nevertheless cannot be blind to the notorious
fact that in bad times there is more actual distress
in the manufacturing districts of the States than
in those of crowded but Free-trade England. The
special reason of this is that bad times prevent
production at profits ; and that although man can
cease being a producer for a time, he can only cease
being a consumer by leaving this world. And it is
on man as a consumer that Protection presses with
so heavy a hand. So far as Protection has any effect
in America, it enhances the price of everything to
the consumer, and this forces the manufacturer,
capitalist, and workman alike to suffer more than
40 State Aid and State Interference.
need be when bad times force him to stand by in
idleness as a producer.
And again, in prosperous times American manu-
facturers enjoy very considerable advantages not
because of Protection, but because of this wealth
of virgin resources. A great store of provisions and
of raw material is readily amassed ; and the demand
of prosperous times readily converts this into wealth.
The workers on this raw material reinforce willingly
that class of consumers who are lavish and extrava-
gant in their expenditure. This style of improvident
consumption has, as a matter of fact, become a
marked feature in the United States whenever eras
of prosperity set in ; and it is a style which is
always above paying heed to the fact that prices
are so greatly enhanced by the incubus of any par-
ticular commercial policy. Home consumption
becomes thus specially brisk, even to the extent
of causing a decrease in exports. And so an
important but artificial and unwholesome stimulus
is given to the protected industries which completely
shrouds the evil results, to the consumer, of pro-
tective duties. This unnatural vitality is the certain
precursor of a crash such as that which fell upon the
American people in 1873. This wealth of virgin
resources at once nourishes and conceals that
Failure of Protection in United States. 41
diseased condition of the body of manufacture which
is induced by Protection.
It is well also to consider the influence of this
protection of manufacture in the United States on
the supply of the home and the foreign markets.
In the first place, in the United States it has been
estimated that only one-tenth of the whole popula-
tion are even connected with manufactures. Such a
percentage, if we regard the records of other com-
munities, may fairly be set down as the unaided
issue of mere concentration of population : it certainly
shows that Protection has failed in any appreciable
manner to divert human exertion from its natural
channels. The attractions of an underpeopled soil
are too great to allow of the population being forced
to other labour.
Evidence of this is found in the failure of the
American manufacturers to supply their own home
market even with wares for which they enjoy special
facilities. This result is greatly aided by the fact
that high prices of American made goods consequent
on the high tariff act as an antidote to that tariff
so far as foreigners are concerned. English cutlery,
for instance, in normally prosperous times success-
fully competes with American even in the Western
States. Of Sheffield cutlery the States imported
42 State Aid and State Interference.
74,000/. worth in 1880, as compared with 50,000/.
in 1879. The revival of trade last year immediately
doubled the importation of iron and steel from
England. It is a curious sight to see free Americans
submitting to the fact that English iron and steel,
burdened with cost of transit and a 40 per cent,
duty, can yet undersell American steel in the
American market. When tha. railway system of
the States is completed there will be about 100,000
miles of rails laid. The mere maintenance and
necessary renewals over these lines implies an
enormous and persistent demand for rails. English
makers continue to hold their own in this division of
the American market, and it is satisfactory to
remember that the low price at which their Free-
trade opportunities enable them to supply these
rails adds to the wealth-producing and purchasing
power of our friends the consumers of the United
States.
Increase of population creates new markets, which
the population naturally endeavours of itself to supply.
And wherever population congregates in sufficient
numbers, there the necessary industries arise if
tlici) can. In America the manufacture of iron and
steel has struggled into existence, but as yet it has
only so far succeeded as to compete as it were on
Failure of Protection in United States. 43
sufferance with the supplies sent all the way from
England. Protection keeps the prices of labour and
of living so high, that the " prohibitive " duty on
English supplies, instead of keeping them out of the
market, simply becomes a bounty paid by the
inhabitants to enable the English manufactuer to
penetrate into the market. Meanwhile no one
knows whether the free manufacture of iron and
steel can be carried on in the States cheaper than
the importation of foreign iron and steel. If it can,
the Americans are buying their iron and steel now
at a dead loss to themselves. If it cannot, they are
paying to their manufacturers the annual losses on a
process of manufacture that does not pay. That
they lose by the transaction is evident ; the only ques-
tion is as to the greater or lesser amount of their
loss.
Thus Protection resolutely prevents the Americans
from obtaining the command of their own home
market even in those wares for which the country
may possess special aptitudes ; and at the same time
it prevents the Americans from finding out which
manufactures pay, and which do not. The great
fact remains that the high prices consequent on
Protection do actually act as a powerful antidote to
the high tariff, and pay for foreign manufactures the
44 State Aid and State Interference.
entrance fees into the American market which
Protection extorts.
In regard to the supplying foreign markets, it is
but logical to suppose that if Protection have its
claimed success in starting within a community in-
dustries specially suitable to the circumstances of
the community, there will be some surplus products
of those industries for export. How do the manu-
facturers of the United States fare in foreign and
neutral markets ? That they penetrate to them is
not to be gainsaid. But that they penetrate in
insignificant quantities is seen from the fact that
only one-tenth at the most of the exports of the
United States are articles manufactured in the
States. And even this export trade is manifestly
a mere result of the peculiar conditions surrounding
manufacture in the States. Americans have deve-
loped an extraordinary ingenuity of invention ;
they have also developed a tendency to "do things
big." If the opportunity is favourable they thus
manufacture large stocks of articles whose novelty
and neatness is often their chief recommendation.
But for the present the export of many such articles,
often the mere realisation of some gigantic scheme
of advertisement, or the getting rid of articles
for which there is absolutely no sale in- the home
Failure of Protection in United States. 45
market, is because of depression in the States. It
is clearly recorded that American drills and sheetings
only appear in the great China market when periods
of severe depression exist in American manufactur-
ing centres. The cost of production in normally
prosperous times is too high to favour export. The
stocks that even then accumulate become unsaleable
when good times return ; these are added to the
stock manufactured under the cheapening pressure
of depression ; and the whole " lot " is eventually to
be got rid of at abnormally low prices.
As a general result it has been noticed that just
now in the United States with prosperous years the
imports increase and the exports decrease ; whereas
the contrary seems to be the case in years of
depression. Protection increases cost of living; it
raises prices all round ; wages come to be normally
at abnormal heights. In prosperous years the local
manufacturers having to pay higher wages can only
sell at excessive prices. Americans are asked to
pay these prices ; and they do so in prosperous times.
But these same high prices, instead of fostering local
industries, simply enable the less costly foreign
commodity to enter the market even though saddled
with the extravagant duty Protection imposes. The
result is that imports increase and the local manu-
46 State Aid and State Interference.
facturers cease exporting. But they also cease
selling, even in the home market.
However, with times of depression these things
alter. Americans no longer buy. Prices are too
high. In their own phrase, they " scrape through "
till times mend. Imports decrease. Local manu-
facturers have stock in hand they are unable to
get rid of in the home market ; they also find
labour willing to put up with lower wages, and
it comes to be possible to export that for which
there is no sale whatever at home. Exports increase.
American manufacturers once more appear in foreign
markets.
It is necessary to remember, in this connection,
that in England, if industrial energy cannot find
vent in the creation of a margin at least of ex-
portable wealth, industrial pauperism must result.
In the United States, on the contrary, this
energy is not so confined ; it can and does seek
profit from the appropriation and development
of virgin resources. Labour and capital find
their natural field in the prairie and not in the
factory. It is only in abnormal times of severe
depression that these natural conditions are tem-
porarily suspended and industrial energy creates
any margin for export. Manufacturing enterprise
Failure of Protection in United States. 47
thus harassed will never achieve any palpable place
in foreign markets till the United States become
fully peopled up. It would seem only natural
that, for the present, the export trade of this large
population should be almost all made up of the
crude products of the soil cotton, minerals (solid
and liquid), and food all endeavours of Protection
to the contrary notwithstanding.
This tendency is amply verified by records. The
United States Government publish what they term
a "percentage of agricultural products (including
products of the forest) to total of domestic products
exported every year." It is well, in order to elimi-
nate temporary influences, to take the average
annual percentage for four-year periods. For the
past sixteen years these averages have been "68,
"74, *76 and "79 per cent. Records show there
has been a steady rise of this percentage all the
while that stringent Protection has been endeavour-
ing to decrease this percentage. These are facts,
not fancies.
On the whole, then, Protection in the United
States, so far from encouraging and fostering the
growth of manufactures, seems, if we look to re-
suits, only to hamper and harass those to which
concentration of population has given legitimate
48 State Aid and State Interference.
birth ; and at the same time to shield others which
have but doubtful claims to legitimacy. It shields
them from a justified death only with the assistance
of forced contributions levied as black mail from
a heedless and unthinking people. There may not
be consciousness of this in those who work these
industries ; but, they are the chiefs in the ranks
that oppose Free Trade ; and their impelling motive
is the sacred motive of self-preservation.
4. The Bevemie Argument. Protection in
America finds much political support in the plea
that money must be raised for carrying on the
government of the country. General Hancock's cele-
brated " Tariff letter," during the late Presidential
election, summarises this question in the words
" The necessity of raising money for the. admin-
istration of the government will continue so long
as human nature lasts. All parties agree that the
best way for us to raise revenue is largely by the
tariff. So far as we are concerned, therefore, all
talk about Free Trade is folly."
It is, at the least, remarkable to find such
language uttered by a prospective head of the
Democratic party ; but the sentence is a fair sample
of the plea put forward, even by the genuine
Protectionist, in favour of high tariffs. Americans,
Failure of Protection in United States. 49
as a matter of fact, have exhibited marked distrust
of direct taxation. To escape that method they
seem to be content to make large sacrifices. They
are told with truth that much revenue may be
raised by customs duties. But to argue thence to
the conclusion that therefore "all talk about Free
Trade is folly," is to miss the point of the argu-
ment. The interested manufacturers contrive with
ease to fan this plea into the flame of stringent
Protection to their own special manufactures. With
ease they lead their fellow-countrymen who in the
vast majority have little direct connection with ex-
ternal commerce to the conclusion that if revenue
is to come of customs duties, the higher the duties
the greater the revenue.
This revenue argument has been urged by Prince
Bismarck in Germany, as well as by Americans, and
it is above all the one plea on which this retrograde
policy has now and then commended itself to the
practical British Colonist. " Theoretical " econo-
mists, indeed, point out that to tax your trade is to
destroy your trade ; that " where Protection begins
there revenue ends ; " that to hamper the entry
of goods into your market by heavy duties is to
starve the goose that is to lay the golden eggs of
revenue. More practical economists will hold that
E
50 State Aid and State Interference.
it is a mere question of balances ; and that it is
conceivable that the duties may be so cunningly
adjusted, that while inevitably destroying some of
the trade incident to the smaller duties, they yet
suck more actual revenue out of what remains.
The question is really solved only by appeal to
experience. The United States, with all the
acknowledged evils of a high tariff, extract a revenue
of 27,000,000/. out of the trade of a population
of fifty millions. The United Kingdom, enjoying
the manifold benefits of a low tariff, extracts a
revenue of 20,000,000/. out of the trade of a popu-
lation of thirty-five millions. In either case the
populations contribute revenue through the customs
to the annual amount per head of eleven shillings.
But the English population enjoys in addition all
the pecuniary benefit of a trade three times that
of the Americans.
Besides this, if we compare the customs revenues
of England and the United States for even the
last ten years, we see that the English receipts
maintain a steady level of 20,000,000/. per annum,
while those of the United States have fallen steadily
from 37,000,000/. in 18G9 to 27,000,000/. in 1879.
During this period the English population increased
by four millions ; but no less than ten millions
Failure of Protection in United States. 51
more human beings .have come to live in the United
States. In other words, by looking to these records
of what has been, we find that with a low tariff a
population contributes far more revenue through the
means of customs duties than with a high tariff.
The high customs duties in the United States have
failed altogether to provide tbat steady uniform
contribution to the revenue that the low English
duties have provided. They have in ten years
rendered this particular source of revenue 25 per
cent, less profitable, though population has increased
30 per cent.
This result is no doubt partly due to the fact
that high duties inevitably give birth to manifold
methods of evasion. It would be an interesting
calculation to discover how much the signal decrease
in American customs' receipts is due to this cause.
Smuggling only finds sufficient inducement under
high tariffs. And smuggling is nowadays of ex-
tensive variety, ranging from the simple landing
of a cask of spirits while the eyes of the revenue
are turned the other way, to the elaborate machinery
of dishonest middlemen who thrive by false pack-
ing and false " declarations." By this means silk
has been known to " pass " in casks " declared " as
bottled beer. And the extreme is reached in the
E 2
State Aid and State Interference.
brazen-faced bribery which is so well known in
sundry of the more backward European ports, even
though we refuse to credit the tales of travellers
as to its existence in some of the landing places of
the most advanced community of this age of pro-
gress. These widespread systems of fraud can only
exist in the atmosphere of high duties; but in that
they flourish to artistic perfection. We hear, for
instance, of men who will buy steel rails in Europe,
" lay " them, run an engine and two trucks over
them, take them up again, and pass them through
any " amenable " custom-house as "old'" or "scrap
iron," thereby reducing the duty by three-fourths.
These things may be possible under the paramount
influence of railway " rings " ; or they may be facili-
tated by cases (however singular and rare) of guilty
connivance in the custom house. The importers
do not, probably, pocket the whole of the duty
evaded ; some of it, no doubt, disappears elsewhere ;
it is a tax on their trade, but it is a tax which
fails to swell the revenue.
Altogether it is found by the actual experience
of both methods that the contention of raising
revenue is altogether in favour of low tariffs. High
tariffs destroy the trade, and breed methods of
evasion. These methods reap no profits under low
Failure of Protection in United States. 53
tariffs, while trade by low tariffs increases fast.
This question of revenue is settled no sooner than an
appeal is made to experience ; but hitherto in the
United States the great majority have confided
in the interested minority, and have failed to
satisfy themselves that high tariffs in any way
contribute to the revenue in proportion to the
asserted ratio.
5. The Future of this Protection. In conclusion,
it remains briefly to consider the future of Pro-
tection in the United States. We are met on the
threshold of this inquiry by the pertinent question,
How is it that, in the face of the proverbial
" Yankee 'cuteness," such a state of affairs should
be permitted in the United States ? It is, in truth,
not a little astounding that Protection should be
for one moment tolerated in States whose original
and grand historical claim to independence was
liberation from bondage to the mercantile theory.
It is a strange contradiction to have to recognise
the high intelligence of the citizens of the United
States, and in the same breath to detail the follies
and evils of the commercial policy which they have
adopted in their dealings with foreigners. It is a
strange contradiction (and one that has been pub-
lished in the States) to find the shrewd American
54 State Aid and State Interference.
citizen allowing himself to be governed by men
who said some years ago, " You must not trade
with Texas it is not national territory ; " and who
this year say, " No impediment whatever shall be
allowed in the way of your trading with Texas ;
it is now national territory."
The primary explanation of this paradox is that
all evidences of evil are, as it were, gilded over by
the flood of wealth that overflows from the opening
up of new resources. It is true the high tariff
simply lessens, pro rata, the savings or profits which
naturally accrue from the employment of capital
and labour. But in a new country (and a country
whose soil yields annually some 10,000,000/. of
gold, besides abundance of other minerals and
endless agricultural products) these profits accu-
mulate with a rapidity altogether unknown in
fully developed lands : and the incidental loss
passes unheeded.
Again, in a land of unbounded virgin resources,
food, or the possibility of its acquisition, is ready to
the hand of every man. In such a land a number
of even useless manufacturers are supported with-
out complaint, for the stomachs of the people do
not feel the sacrifice. And it is an old tale that
when the more animal portions of the human
Failure of Protection in TJjdted States. 55
body are in comfortable circumstance, the head is
inclined to deal indulgently by objectionable concerns
with which it has no palpable or immediate
connection.
These conditions account in great measure for the
fact that a large nation, ever clamorous for the post
of guardian of human freedom, should voluntarily
place itself in the bondage of Protection. Each
free American citizen at the present moment is in
the toils of a villeinage to his superior lord, the
fostered manufacturer ; week by week he hands over
to him, under the guise of increased prices, so much
of the earnings of his labour, or of the profits of
his capital. But he heeds not his position, because
his opportunities bless him with abnormally good
earnings and high profits.
The conditions under which Protection exists in the
United States may be grouped' in four categories:
(1) plenty and cheapness of virgin resources ; (2)
the inflow of foreign capital; (3) ultimate govern-
ment by manhood suffrage ; (4) vested interests
fostered by Protection. How long will these con-
ditions remain in effective co-existence ?
(1) The first of these groups will for years to come
divert the major portion of the national energies to
work that has little or no direct connection with
56 State Aid and State Interference.
the foreign import trade. The farmers and miners
of the west and north, and the growers of cotton
and breeders of cattle in the west and south, will,
for years to come, have little personal feeling in the
matter of a policy directly affecting only the manu-
facturers of the east. But as population increases
and the process gives every sign of high-pressure
speed these now outlying districts will become
central ; and to their inhabitants will become obvious
and palpable the burden of a high tariff. Indeed
the farmers of the west are already complaining of
the high cost of the implements necessary to their
peculiar system of husbandry. And as population
increases, the inevitable increase in output of com-
modities will demand not only an outlet, but
some equivalent return trade. Already western
farmers are prognosticating a day when England
will be purchasing her wheat where she can pay for
it with her manufactures. This result will ensue
whenever a rise in the cost of American wheat raises
it to the same price in the English market as
Continental or Eastern wheat.
The Census of the United States, taken on June 1 .
1880, tells a significant tale. During the last decade
there lias been added to the population 10,000,000
souls. One quarter of this increase is due to immi-
Failure of Protection in United States. 57
gration, and three quarters to national growth. In
the north-east, in the older, more fully peopled and
manufacturing States, there has been the least
increase, amounting only to 15 per cent. In the
south-east, among the older agricultural districts,
the increase is greater. But in the whole of the
wilder west, where manufactories are conspicuous by
their absence, there the populations have doubled in
many instances, trebled in Kansas, and actually
quadrupled in Nebraska and Colorado. Mining and
agriculture may be said to have absorbed eight out of
the new ten millions of inhabitants. This forebodes a
coming alteration in the balance of the forces that
naturally regulate external commercial policy.
(2) This rapid development of virgin resources is
assisted in its tendency to upset high tariffs by the
gradual cessation in the inflow of foreign capital and
the concomitant growth of the investment of
American capital abroad. This change in the tide of
capital has already set in. Protection has of late years
largely prevented repayment in kind. The foreigner
wishing to trade has had to finance : funds, securi-
ties, shares, have passed to American ownership. It
will thus come to pass, that if Americans wish to
export (and this wish will be largely stimulated as
their country becomes opened up) they will be
58 State Aid and State Interference.
forced to import by way of repayment. This will be
possible only with a less prohibitive tariff.
(3) These tendencies towards Free Trade will have
a severe struggle with the two last of our four
groups. It has been said that wise men learn from
the experiences of others, but that fools can only
learn from their own. At the present time ultimate
political power in the States is largely in the hands
of those who ignore knowledge of ascertained human
experiences ; and who at the same time fail to
win the guidance of those possessed, aud disinter-
estedly possessed, of such knowledge. These masses,
it would seem, must in a measure await the teaching
of their own experience though the spread of
education will hasten their due recognition of the
experiences of others. But their present prospects
of good guiding are far from hopeful. Facts tell us
that they become the ready instruments in the hands
of those who trade upon their ignorance and upon
the essential human tendency to lend willing ear to
all that flatters innate selfishness. Thus, to win the
votes of wage-earners in America no more powerful
political cry has been devised than that of " pre-
serving Americans from the competition of the
underpaid labour of Europe."
It appears for the present hopeless to point out
Failure of Protection in United States. 59
that, as a matter of fact, Protection does not accom-
plish this end. The wage-earner in the manufac-
turing districts is by no means so well off as he
would be in the manufacturing districts in England.
It has over and over again been pointed out how
well the American politician knows the electioneer-
ing value of appealing to the nominal rates of wages,
but carefully omitting all reference to relative pur-
chasing powers. The American wage-earner may be
sure of one point: whatever work Protection brings
him, whatever work he gets and would not get if
competition were free, has to be paid for by him out
of the wages he gets for doing it. Five cents per
yard on cotton prints is the duty charged to counter-
vail English facilities of production. The American
manufacturer thus charges four cents more per yard
for the cotton prints he makes. This protection
enables him to make cotton prints and employ
people in the factory. But the wage-earners so
employed have to pay four cents more for every yard
of cotton they buy. And, not only so, but, while they
get wages from one industry only, Protection influ-
ences many others as well, and all prices are enhanced
above what they otherwise would be. This extra
charge on all he buys is the direct effect of the com-
petition of the " underpaid " labour of Europe.
60 State Aid and State Interference.
Protection is powerless to prevent the effect. All
Protection does is to shift the charge from the pro-
ducer to the consumer; and the wage-earner, if
a producer in the factory, is all the more a con-
sumer at home. Manhood suffrage in the less
settled districts is not yet sufficiently bound up
with the foreign trade to care to busy itself
with foreign policy ; manhood suffrage in the
more settled districts awaits the spread of know-
ledge to force on it a due appreciation of its real
position.
(4) For the present, the most serious and distinct
obstacle is the powerful one of vested interests. The
manufacturers, chiefly located in the eastern States,
derive most benefit and relief from protective duties.
These duties are paid by the nation at large, and a
major portion of the contributions come from other
distant districts. These manufacturers thus thrive
on the contributions they levy of their heedless dis-
tant countrymen. Protection institutes rates for
the support of two classes of persons the one class
consisting of those who could live, and live better,
without this aid : the other class consisting of
those who, without this aid, would have to turn to
other modes of livelihood which would be a gain,
and not a loss, to the nation at large. Industries
Failure of Protection in United States 61
involving legitimate national superiorities would
nourish all the better without Protection. But
industries of the illegitimate kind, whose works are
so much waste of energy, inasmuch as they make
goods that can be made cheaper elsewhere at the pre-
sent ; industries which will come into being unaided
when times are ripe for them these would perish in
the absence of Protection. Such manufacturers owe
their all to Protection; of this they are well aware,
and they accordingly put forth every nerve to keep
their hold on a system, in the absence of which they
must devote their energies to other work. The
vested interests, of a type altogether pernicious to
the general well-being, thus exert their influence in
exact proportion to the harm they do to the State
as a whole.
Their power was exhibited in the late Presidential
election ; the Democratic candidate was forced to woo
their favour by a partial recantation of the wise
doctrine adopted by the Democratic party, that the
tariff should be arranged with a view to revenue
only. The sop of " incidental Protection " was
thrown, though without effect. These particular
vested interests know they stand or fall with full-
bodied Protection, and their present power is well
exemplified in this violent political endeavour to
02 State Aid and State Interference.
win their favour by the surrender of an important
principle.
This necessarily cursory view of the facts of the
case brings us, then, to four conclusions :
(i.) The prosperity of the United States is due to
plenty of fertile virgin soil, to great mineral and
natural resources, and, above all, to the strict free-
dom of trade over the whole United States continent.
The protective tariff simply impedes this prosperity,
(ii.) In regard to the setting up of manufactures,
the high tariff succeeds in hampering those to which
concentration of population gives legitimate birth :
and in upholding those which are, at all events for
the present, a dead loss to the community at large.
(iii,) American (and other) politicians maintain
that the high tariff is a good method of raising
revenue ; but facts show us that even within the
last ten years this high tariff (in a variety of ways)
has cut down by nearly one-third the actual amount
of revenue formerly derived from custous duties,
and which, in a more healthy condition of things,
must have in some measure kept pace with an
increase of population during the same period <>f
more than one-third.
(iv.1 The intelligent American citizen puts up with
Failure of Protection in United States. 63
Protection because it affects him but little in his
absorbing occupation of opening up the vast interior.
The assured success of this internal development,
coupled with the ebb of foreign capital, will gradually
overcome both the heedless vis inertice of manhood
suffrage and the knowing vis moliva of vested
interests.
64 State Aid and State Interference.
CHAPTER III.
BOUNTIES.
1. Bounties never likely to succeed. 2. Attempts to revive
Shipping Trade in the United States. 3. Similar attempts
in France.
1. In Bounties, above all other schemes and
policies, State interference assumes most cunningly
and most successfully the trappings and outside
semblance of State aid. Under the guise of assist-
ance to the native and discouragement to the foreign
producer of a given article, many a Government has
won popularity for itself from an ignorant and
thoughtless people by the simple device of insti.
tuting a Bounty system. And the more their
ignorance of their own trades, the more their
innocence of their own true interests, the more
these fostered classes admire and support a Govern-
ment which promises to protect them by Bounties
against foreign competition.
Bounties. 65
Happily in England most of us feel strongly that
Bounty-giving is nothing more nor less than taking-
money from the great body of taxpayers and handing
it over to a few privileged individuals, in order
that these latter may carry on industries that might
not otherwise pay. Even supposing that Bounties
give artificial advantage to any special industry,
yet this artificial advantage all comes out of the
pockets of the people at large. Bounties may for
a time give an artificial and temporary stimulus
to a trade, but such stimulus seems invariably to
suck the life out of the community, and to leave
the field eventually in possession of those foreign
rivals who have preferred the wholesome food
of free enterprise and the bracing air of open
competition.
Bounties are pleasing to the sense of self-interest,
to the selfishness of the class in whose favour they
are imposed. But this means, that if once you
allow or adopt the principle of Bounty-giving, the
oTanting a Bounty to one trade or industry simply
provokes other trades and industries to claim similar
treatment. The State which grants Bounties to
sugar-refiners soon finds itself compelled in very
fairness to grant Bounties to shipbuilders. And
the future looms dark with the forms of all other
F
OG State Aid and State Interference.
industries, possible and impossible, hovering round
to claim their share in the generous distribution
of the public moneys.
And for similar reasons such a policy adopted
by one State provokes other States to similar action.
States are very apt to follow one another's blind
leadings. Sugar Bounties have been instituted now
in several European countries, simply by reason of
the strange idea that if Bounties are given to
foreigners Bounties must be given to natives as
a protection. And when this plea of "fairness"
>nce steps in, nothing more is heard of the fact
that Bounties do more harm than good to the
trade and to the country which the Government
seeks by their agency to aid. People forget that
Bounties come eventually out of the pockets of
the taxpayers; and tbey forget what is of yet more
direct importance, that Bounties have never yet
succeeded in winning a victory against those commu-
nities which refuse to have anything to do with their
suspicious aid. In this and the following chapter
I wish briefly to collect certain recorded results of
two illustrative classes of Bounties those given to
promote shipping and sugar industries respectively.
$ 2. It is probable that in few States have more
stringent measures been taken to foster a shipping
Bounties. 67
trade than in the United States. It is certain
that in no States has there ever been a greater
collapse of the shipping trade than in the United
States. The facts of this collapse are the " common-
places" of all literature dealing with such subjects.
Here again there crops in and acts as a chief
element the necessary evil of all such State inter-
ference. With shipping, as with sugar and all
other industries, there are two distinct industrial
phases or divisions ; and they are, in their very
nature, antagonistic to one another if once they
are to be " fostered " out of any common funds.
These two phases are those of production and of
use. If you protect the production of ships, in so
far you limit their use; and if you protect the
use of ships, in so far you limit their production.
In the United States it was sought to encourage
shipbuilding in the country by prohibiting the
importation of ships and by encouraging the native
building of ships. Immediately the shipowners found
they were hampered in the supply of ships. Ships
cost American more than thev cost English owners.
American ships were no longer purchased, and
then, as a consequence, they were no longer built.
At the same time the shipbuilders had been pro-
tected, and so could nut object that other industries
F 2
68 State Aid and State Interference.
should be protected likewise. And shipbuilders
found, to their cost, that they had to pay for their
material and for their labour far more than ship-
builders in other countries that had no protection-
And now all the American seaboard is crying out
for the remission of all duties on the materials
employed in shipbuilding, and for the removal of
all the burdens that Protection imposes on the
industry.
Meanwhile American shipowning has died down,
and shrunk to comparatively nothing from its former
dimensions. The Great War no doubt had consider-
able effect, but that effect should be past and gone
before now ; and the Americans must often sit down
and look at the flags flying thick in New York
harbour, and ask themselves how it is that they
are nearly all those of a nation which makes every
endeavour to free all its industries of all State
trammels, of all so-called State support. Xo doubt
England has unrivalled capacity for production in
her readily available stores of coal and iron, but
America also yields large quantities of coal and
iron, and her woods arc at least as good and as
plentiful as those of the British Isles. Her sea-
board is long, her harbours numerous, and her
population much given to maritime pursuits; and
Bounties. 69
yet her shipping industries cannot do more than
struggle to maintain a precarious existence, clogged
and handicapped by vigorous State support, and
altogether unable to compete against the free
and altogether private enterprise of the shipping-
industries of the United Kingdom.
3. With this clear example before her we find
France, already with a very respectable marine, never-
theless deliberately devising a new scheme of bounty
protection to her shipping trades. As with all such
State interference so with this ; so great is the
number of technical and legal formalities, that the
effective operation of the law is seriously impaired.
However, after overcoming these, the French Go-
vernment offers definite money Bounties to those
who build vessels in France or to those Frenchmen
who own seagoing vessels. The Bounties are not
given to Lines otherwise subsidised by Government.
They are given on tonnage built in France and on
the number of miles run at sea by French-owned
vessels. It is at once evident there is considerable
contradiction involved. France pays nearly 1,000,000/.
per annum in subsidies to steamers for carrying
mails. By this new law a steamer, provided she does
not carry mails, becomes entitled to a subsidy or
Bounty. And then again a Bounty is given for
70 State Aid and State Interference.
making long and numerous voyages. This bounty
is If. 50c. per ton per 1,000 miles. For a trip across
the Atlantic and back a French-built steamer of
3,000 tons receives 1,000/., provided she carry no
mails. If she be English-built she receives 500/. It
becomes a question of relative cost of English-built
and French-built ships. If the Bounty on building fail
to make good this difference, then the French ship-
owner may profit most by using English -built ships.
But suppose that this act succeeds to the full in
its purpose. Suppose it doubles the French mer-
cantile marine by adding one million tons of French-
built shipping, and sends this million tons voyaging
over the seas, at average voyaging pace. Suppose this
continues for five years. Then the French taxpayers
will have to provide say 15,000,000/., or, in other
words, pay to French shipbuilders and shipowners
3,000,000/. per annum for doing nothing but mind
their ow r n business. And this payment includes
measures for defeating its own end, because it
includes the enabling French owners to purchase
foreign-built ships even when these are dearer than
French-built ships. As we have seen in the Atlantic
trade, an owner may run an English-built steamer
for a year against French-built mail steamers on
equal terms, because he will obtain a Bounty which
Bounties. 71
they will not obtain. If this Bounty-law were to
raise French shipping to anything equalling that of
English shipping a't the present moment, the French
taxpayer would find himself at least one hundred and
fifty millions sterling out of pocket. The question
remains, would there be any possibility of recouping
this sum out of any trade that could be developed ?
The chances are that the question will never be put
to the test, because there will be severe foreign
competition. France need not fear the kind of
competition threatened by Prince Bismarck a
competition in kind a retaliatory imposition of
countervailing Bounties by Germany. But France
will find competition very severe and hopeless with
England. It is. not by making the nation as a
whole pay for national shortcomings that any par-
ticular industry can be made successfully to compete
with countries enjoying greater natural facilities.
Shipbuilding has grown to be a great industry in
the British Isles, partly because of a natural wealth
in coal and iron ; partly because of a maritime
genius fostered both by geographical position and
by great and world-wide trading propensities ;
partly because of the policy of Free Trade, which
enables the shipbuilder to obtain all the materials he
uses at the lowest possible cost. Other countries cut
72 State Aid and State Interference.
themselves off from those of these advantages that
can be acquired, and they are thus the less able duly
to utilise such of those advantages as they may
enjoy by the bounty of nature. If the French or
the United States wish to develop a profitable
mercantile marine, the only road is to reduce and
simplify their tariffs, and then see whether in the
consequent free course of commerce and industry
the shipping trade arise of itself or not. In other
ways they may give artificial fillips, but to the
nation at large the balance will be on the wrong
side ; the industry will be fostered at the expense of
the community ; money will be transferred from the
pockets of the people to those of a few individuals ;
French shipowners may buy more of English ship-
builders, and English shipbuilders may start yards
in France and gather in a harvest of French
Bounties ; but in the long run the French people
will find the millions they may spend disappear into
the pockets of builders and owners, and leave France
with no greater increase in her mercantile marine
than has come of all the strenuous efforts to
increase that of the United States.
Sugar Bounties. 73
CHAPTER IV.
SUGAR BOUNTIES.
1. Cane-growing in the Colonies continually advancing. 2. Beet-
growing not due to Bounties. 3. Neither Beet-growing nor
Refining flourish in Bounty-giving countries. 4. How to do
away with Bounties. 5. Britisli Sugar Industries more
prosperous than any others.
1. The most remarkable case in regard to
Bounties is that of the Sugar Bounties. It is a case
which has all the advantages of having been well
ventilated. Its details have in every respect been
worked out and tabulated : and its value and im-
portance are best attested by the virulence of the
controversy to which it has given rise. There are
few results recorded in economic history that yield
such distinct and clear lessons.
It may be well to quote these results as I sum-
74 State Aid and State Interference.
marized them in a recent article in the Westminster
Review :
" Mr. Kitchie's Committee was appointed ' to in-
quire into the effects upon the Home and Colonial
Sugar Industries of this country by the system of
taxations, drawbacks, and bounties on the exportation
of sugar now in force in various foreign countries.'
It is our present purpose to deal specially with the
second of these two provinces of inquiry.
But there seems to be some strange fatality that
appears to haunt the very term ' Colonies.' No
sooner is this term used than the affairs treated of fail
of just appreciation, not only here in England, but
even in the Colonies themselves. The very men who
should know most, are often misled themselves into
statements that are hard to reconcile with the records
upon which they themselves found these statements.
In the records of this particular committee there
occur instances of this ; and instances, moreover,
directly compromising the most important points
involved. For instance, in his answer to question
3,858, one of our most trusted authorities on West
Indian matters tells us that the ' diminished pro-
duction (of sugar in the West Indies) commenced in
1872.' But the figures of sugar exported recorded
Sugar Bounties.
75
in the tables provided by this same authority are as
follows :
Sugar Exported trom the British West Indies in Tons.
British Guiana
West India)
Totals...
1871.
1872.
1873.
1874.
1875.
1876.
1877.
89,000
211,000
300, COO
76.000
173,000
84,000
195,000
84,000
1SS.000
80,000 1 102,000
237,000 j 214,000
96,000
181,000
249,000 ! 279,000 272.000 1 317,000 ; 316,000
i 1 !
277,000
The ' diminished production that commenced in
1872' did not continue even till the following
year.
Again, the same high authority tells us (3,960)
' I think that in, say, ten years, half the pro-
duction of the West Indies would be knocked on
the head altogether ; in fact it has begun already.
I do not think I should be outside the mark if I
stated that nearly fifty estates are in course of
abandonment now (1879). I think about fifty have
come under my own knowledge, principally in
Jamaica; about six or eight months ago, so far as
my recollection goes, twenty-six estates were
advertised for sale without any buyer.'
This latter sentence somewhat qualifies the
former ; but if we turn to the Jamaica Bluebook
76 State Aid and State Interference.
itself, we find recorded in dry and hard official columns
that only four estates were abandoned during the
year 1879. And it is further to be noticed that these
four were of very small size, making altogether only
323 hogsheads of sugar, in an island which exports
annually over 30,000 hogsheads. Moreover, there
is, in the opposite column, the very significant entry
of one ' abandoned ' estate brought back into culti-
vation.
It is indeed high time that more attention was
paid to the actual condition and the actual prospects
of this sugar growing in the West Indies. We shall
here briefly lay out the facts of the case, collating
all by the aid of recent personal experience in almost
every West Indian island. We shall confine our
exposition, in the main, to these islands ; they yield
us three-quarters of our own colonial supply.
Sugar that is grown in the Mauritius and the East
Indies, in Natal and in Queensland, finds its chief
market in the Eastern Hemisphere. It may be
noticed incidentally that the local demand in South
Africa and in Australia is increasing rapidly, but it
is increasing out of all proportion to the increase of
sugar planting in these large colonies. In Australia,
at the beginning of this century, there was no
market for sugar. Now, in the Australias there
Sugar Bounties. 77
has come to exist a rapidly increasing population
of nearly 3,000,000, and all great consumers of
sugar. Over the vast interior of the ' island con-
tinent ' sugar is among the most important of the
'rations,' which form part of the pay of shepherds,
stockmen, and others ; and in the cities, that are
appearing with such rapidity, well-to-do communi-
ties of Englishmen are vying with the mother
country in their large consumption of sugar per
head. But these West Indies these 'tropical
farms of the British Isles,' as they have been termed
are the English sugar colonies in most direct con-
nection with the English market, and therefore the
group of colonies most typical of our colonial sugar
industries, so far as they are influenced by European
Bounties.
At the very threshold we must notice that there
is one great fact persistent throughout the history
of West Indian sugar-planting, and that is the fact
of the perpetual plaint that all is going wrong.
The ' groans of the planters,' that made so great
a stir in 1670, have never ceased since then to
burden the atmosphere. This is, indeed, fresh
evidence in support of the plausible theory that
the secret of Englishmen's success is their native
propensity to grumble. West Indian planters, like
78 State Aid and State Interference.
their fellow-agriculturists in England, are never
satisfied ; and it is well they are not. They will
have it that what they attempt is done better
elsewhere, and the consequence is that they do
things better than they are done elsewhere. They
grumble that the French have tramways in Guada-
loupe, and with this grumbling they introduce
better trams on their own estates.
The outrageous assertions of the present evil
effect of the Bounties do not surpass the frantic
anticipations of evil which centred, in days gone
by, respectively rouud the abolition of slave labour,
the competition of slave versus free-grown sugar,
and, more lately, the extinction of the sugar duties
in England. Forebodings just as dismal, arrays of
figures just as curious, arguments just as little
founded on fact, cropped up in these episodes, and
with the same urgency and the same need of ex-
planation as in this last. But the sugar-growing
industry has managed to survive. It may be it
has changed ; it may be it is destined to yet further
change ; but its destruction would seem to be as
far off as ever
The English public that abolished slavery and
the sugar duties, offered speedy compensation in
the greatly increased consumption of sugar in Eng-
Sugar Bounties. 79
land that followed on each of these high-principled
acts. In 1840 the total sugar consumed in Eng-
land was 4,500,000 cwt., its value was about
10,000,000, and the consumption at the rate of
15 lbs. per head. In 1873 the consumption had
risen to 51 lbs. per head. The duties were finally
abolished in 1874, and for the year 1879 the total
of consumption was at the rate of 65 lbs. per head,
representing a total of 20,000,000 cwt., for which
no less than 27,000,000 was paid.
We are now face to face with the latest phase
of these complaints. We are told that the abolition
of these duties injured West India sugar-growing
by allowing unbridled play to the baneful effects of
Bounties that are given in sundry foreign countries
on the export of sugar. Incidentally, however, it
will be remarked that these very Bounties them-
selves only exist in countries where sugar duties
continue to be levied ; and the abolition of these
duties in England set up England herself as a most
successful example of a country thriving in an
atmosphere where Bounties are impossibilities, and
where the market for cane sugar is free of access.
That this example has not been without effect we
see in the fact that the French and other Bounty-
yielding countries, are already exclaiming they can
80 State Aid and State Interference.
no longer compete with English refiners, or with
colonial growers of sugar. Thus this much-com-
plained of abolition of sugar duties has in itself
come to be one of the most powerful arguments
towards the destruction of these very Bounties
that are regarded with such pious and unfeigned
horror.
Before considering the Bounties themselves, the
real measure of their effect, and the best means to
their removal, it is well briefly to examine, by the
light of recent local knowledge, the present condition
of the industry of sugar growing in our West Indian
colonies. We shall at once find that these colonies
have, during the present century, passed through
three periods the one, of corruption and collapse
culminating in the abolition of slavery in 1838 ; the
second, of mismanagement and uncertainty, lasting
up to some ten or twelve years ago, when matters
became more settled ; the third period that has since
set in is of steady progress, and of a far more healthy
and hopeful tone generally of enterprise and man-
agement. The most significant feature of the middle
or transition period was the odd reluctance with
which those most concerned came to recognise the
dawn of new and more favourable conditions. It
has alwavs been common to confine causes to the
Sugar Bounties. 81
single influence of slavery and emancipation. And
this common error is rarely rectified by the alto-
gether necessary, if forgotten addition of the fact,
that prices of sugar have seen as great changes as
this labour question. In the world's market, from
causes quite extrinsic to the West Indies, the price
of sugar has since the period of emancipation fallen
from 50/. to 20/. a ton. It is true, that here again
the vast increase in consumption which England's
free trade policy has enabled her to enter upon, has
in great measure compensated this enormous fall in
prices. Prices may have fallen to one-third of what
they were, but the Englishman consumes just three
times as much as he used to do. This would be
very palpable compensation, but for the fact that the
West Indian growers do not provide him with the
extra supply he now consumes. And this is in great
measure the fault of the West Indian grower him-
self: but it is a fault he is fast remedying. His chief
obstacle has, hitherto, been his being trammelled at
every step by the traditions and the arrangements
created by and for a state of affairs that has passed
away. And the dying voice of this old dispensation
is the present persistent outcry that Bounties are
creating much loss, suffering, and injury to our West
Indian su war-growers.
G
82 State Aid and State Interference.
As a matter of fact the West Indian colonies,
even under present arrangements, seem capable of
producing sugar cheaper than it can be produced
elsewhere, or from other plants. Mr. Quintin Hogg
pointed out (Ques. 3871) : ' You get in saccharine
matter four times as much to the acre in Demerara
as you would get in France/ Any one conversant
with the West Indies will acknowledge that the
actual cost of growing and manufacturing sugar
ranges from 91. to 121. per hogshead. The cost of
putting this sugar in the English market ought not
to exceed SI. or 41. a hogshead. European beet-root
growers and manufacturers universally declare that
a price of 181. a ton is a price that will, if per-
manent, destroy their industry altogether. The
limit that will destroy beet-growing will only curtail
profit in cane-growing as at present carried on in
the West Indies. This fact should suffice to show
Bounty-giving countries the prompt necessity of a
reform of their ways. The boasted effect of these
Bounties is to lower prices in the great English
market ; but this, in the end, is to abolish Bounties,
by rendering impossible the industry they were insti-
tuted to support. The 'bounty-fed' refiners already
cry out. M. Leon Say himself complains: ' Ce qui
est certain, dans tous les cas, e'est qu'a l'inverse de
Sugar Bounties. 83
ce qui existe pour les raffineurs Francois, les raffi-
neurs Anglais peuvent obtenir leur matiere premiere
a un prix inferieur a ce qui devrait etre son prix
norma].'
Growers are also discovering their error. In his
Report for Mr. Ritchie's Committee on the sugar
industry in Germany, our Secretary to the Embassy
tells us, 'the average cost of manufacturing raw
sugar from beet would be about thirty marks (30s.)
a cwt.' And at the present, whatever the actual
cost of production on the spot, the governments of
these countries allow the general public to sub-
scribe to make good any losses the refiners and
growers may become subject to, owing to the low
prices forced upon the market. How far, and for
how long, a confiding public will thus continue
this thankless and baneful charity time only can
prove.
It is well worth putting on record the figures
supplied to Mr. Ritchie's Committee by Mr. Hogg
of the export of sugar from the British West Indies.
They exhibit a marked, sustained, and definite in-
crease. They, of course, vary from year to year.
There are few crops more variable than the cane
crop. It will therefore be well to record the totals
for four-year periods, and so eliminate this element
g 2
84 State Aid and State Interference.
Years.
1841-47
184851
185255
185659
186063
186467
186871
187275
187679
of uncertainty, and better fit the figures for general
perusal
Export of Sugar from the British West Indies.
Totals per four-year
periods, in Tods.
554,000
544,000
608,000
649,000
754,000
797,000
903,000
900,000
975,000
From 1844 to 1865 for twenty-one years the
actual annual total never reached 200,000. Since
1865 for sixteen years the annual total has never
been below 200,000, except in the two years 1869
and 1872. It will be observed, also, that in the
period 1872-75 there is a falling off, slight indeed,
but still not an increase. This is worth noticing, in
spite of the more than compensating increase in the
next period, 1876-79; this latter great increase, it
will be remembered, comes immediately after the
abolition of sugar duties when Bounties were said
to be of most effect. That this abnormal decrease
was the effect of seasons alone, we know when we
see that the crops of 1872 and 1873 were very much
below the average (amounting but to 400.000 for the
Sugar Bounties. 85
two years) ; and there is further proof in the fact
that for those two years the prices of sugar were,
in the words of the Report of the Committee,
' abnormally high.'
It is well to notice parenthetically, that, though
the present condition of the industry of sugar
growing in our West Indian colonies is in a con-
dition which enables it to contemplate without
anxiety the competition of beet-root in the future,
it is in a condition, nevertheless, which is itself
capable of vast improvement. Those concerned with
the West Indian industries themselves give palpable
proof of this in the vast sums annually expended
in machinery, and the introduction of improved
methods of cultivation and manufacture. In Bar-
bados, for instance, sugar land fetches nearly 100/.
an acre at this day. These prices would not be
maintained in a despairing community.
It has been remarked that the sight, not uncom-
mon in Jamaica, of a ruined windmill or watermill
is a welcome sight, inasmuch as it tells a tale, not
of relapse, but of advance ; a tale of the fertilizing
introduction of steam power and fresh skill and fresh
capital ; and, in a similar sense, it is true that of late
years the records of estates abandoned, and of estates
sold for what they would fetch, are signs, not of
86 State Aid and State Interference.
demise, but of fresh life. In the days of slavery
and of high prices estates were started over large
areas ; in the coarse of years most of these became
encumbered with jointures and charges. In the
days of collapse that ensued, both in regard to*
the labour question and in regard to price, the
absentee proprietors of these charges and encum-
brances let matters ' drift ' in the hope of better
times ; they looked to the future to solve both the
labour and the price troubles. In most cases these
estates were owned in groups, and the very favour-
ably situated paid sufficient profit to cover, for the
time, the losses on the badly situated. By degrees
that were altogether too slow, estates were one by
one put out of cultivation or sold ; and it is one
great advantage of low prices that they considerably
accelerate this salutary process. There were many
estates continued io working that had yielded profits
when sugar was at 50/., but which had no chance
of doing so with sugar at 20/. There were many
estates that could well yield profits sufficient for one
or two incomes, even when prices had so fallen ; but
such estates only too often remained charged with
the supply of the five or six private incomes that
had of old easily been yielded by the higher prices.
It is, then, a gain to all to find the one class of estate
Sugar Bounties. 87
absolutely put out of cultivation, and to find the
other sold for what it will fetch ; and sold, moreover,
to new owners who, no longer burdened with the old
charges and jointures, may proceed forthwith to
make excellent commercial profit out of the legiti-
mate advantages the West Indies undoubtedly
possess over most other countries in this matter of
sugar growing.
These high prices also helped to maintain among
many planters a proud abstention from attempting to
remedy the losses and difficulties that had come of
the abolition of slavery. There arose, not unnatu-
rally, a bitter class feeling, brooding over the fact
that in order to achieve a national object the indi-
vidual had been made to suffer ; there had been an
apparent breach of justice, and the injured class sat
down on their estates, and when things went wrong,
enjoyed an uncouth and baneful satisfaction in
proving to the world that the injury done was
material. These ideas are not yet completely
eradicated, and they are partly to blame for a
slowness, apparent most in Jamaica, among planters
to improve their cultivation. Already, however,
sufficient has been done to prove at once the actual
value of these improvements and spread the know-
ledge that they are possible. Ploughing, weeding,
88 State Aid and State Interference.
manuring, and irrigation, have been proved to
greatly increase the quantity of cane to the acre.
Better breeding, better care, and better handling of
the ' working oxen,' have curtailed largely the
expenses of ' hauling ' or taking the cane to the
mill. Tramways, and ' wire railways ' for ravines,
have been introduced with similar effect. The
' Usine ' system will probably pay in certain dis-
tricts when introduced. The railway extensions, and
new coastwise steamers, will largely relieve many
districts of their heavy expenditure in the matter of
the carriage of the sugar to the port of shipment.
Altogether, there are many prospects of considerably
cheapening the present cost of production.
It will be seen then, that, so far as facts go, the
West Indian sugar industry is in a far better and
far healthier plight than it has ever been before.
This industry has, indeed, suffered from two causes
natural and 'human.' Adverse seasons in the
one case, and our own widespread commercial de-
pression in the other, have acted most deleteriously
on production and on consumption.
2. These two -classes of causes have, however, in
recent investigations, been ignored in favour of one
small species of a third genus the political. And
yet it is difficult eminently difficult to trace any
Sugar Bounties. 89
real effect of any magnitude directly to this parti-
cular division. The centre of the argument, at
which we have now arrived, is the fact that certain
foreign countries give Bounties, on the export of
sugar. We pass, then, to ascertain the real measure
of this effect, and the best means for the removal of
these Bounties.
The battle waged round these Bounties may be
well likened to some mediaeval struggle for a
standard, wherein leading knights find themselves
suddenly the cynosure of all eyes ; and when the
real contests and material combats of the rest of
the field are forthwith hushed and suspended, as if
by mutual consent, in order that all eyes may feast
on an intrinsically insignificant incident that has
now become the centre and point of all effort. The
possession of the standard in itself is of little value
so much wood and linen, or, it may be, silk. So
with these Bounties; all other arguments seem
suspended, and the contest centres itself on a some-
thing, which, the more we look into it, the less does
it prove to be of material value or influence. As
with the military standard, so these Bounties are
fought over with such fierce excitement that all
inquiry is for the time ignored as to the intrinsic
value of the Bounty itself. Many men rush to the
90 State Aid and State Interference.
attack with the battle-cry, ' Bounties lower prices ; '
they heed not, neither do they require proof of the
measure of this asserted influence, or of the con-
nection of the result with the asserted cause.
The whole influence of these Bounties needs to
be set out clearly. Many of those interested in the
trade have of late years sought to impress the
outside public with the idea that Bounties are the
cause of all these ills. The instinct of the outside
public has, as yet, refused to credit all this ; and it is
well, in the interests both of those concerned in the
trade as well as of the general consuming public, to
seek out the grounds on which this instinctive
reasoning is based.
The Bounties, in the first place, are supposed
greatly to encourage the production of sugar from
beet-root. Granting that this be so, it is obvious
the cane-grower cannot complain, unless this action
lowers prices. From some of the Tables in the
Appendix to this Report we can cull most apposite
figures, even though we regret that these tables fail
to bring results further than the year 1874.
Years 1664. 1S05. I860. 1867. 1808. 18ti:>.
s. (I. s. d. s. d. s. d. s. d. s. d.
Triers uf cane sugar ... 28 11 ... 23 S ... 22 2 ... J-J 5 ... LM 1 ... 25 10
Hundreds of ( of bee M * 5 .; 7 7
thousands of "* {
tons grown I '^'^ j 11 M 15 I! 10 10
Sugar Bounties. 91
YeaYs (continued) 1870.
1871.
1872.
1873.
1874.
s. d.
. d.
s. d.
s. d.
s. d.
Prices of cane sugar ... 24 1 .
.. 26 3 .,
.. 26 11 .
.. 23 2 .,
.. 22 4
Hundreds of f of beet ) 9
thousands of s , u ar {
9
11
11
10
tons grown [ ot c j e j 16
16
18
18
17
We see there is a sustained increase, year by
year, in both crops till 1874, in which year there
is a slight falling off in both largest proportionately
in the beet crop. We see also that beet increases
far faster than cane ; and, in the ten years under
review, beet, from monopolizing in the first year
about 2-9 ths of the supply, comes in the last year
to monopolize over 3-9ths. But it will be noticed
that prices show no tendency whatever of Icing
affected by the alterations in the proportions of
beet and cane supplies. Commencing at a high
figure, prices fall rapidly ; but only to rise again
nearly to the same height, and then again to
fall.
And this relation of price to this beet v. cane
argument is further illustrated by a table supplied
by Mr. Lubbock. In this Mr. Lubbock gives most
interesting data in regard to the effect of the
detailed growth of the beet crop on detailed prices
of cane sugar, and the results are most sig-
nificant.
92 State Aid and State Interference.
Years :
-1865.
1866.
1867. 1868.
1869.
1870.
s. rf.
*. d.
s. d. s. d.
s. d.
*. d.
Prices of cane (Trinidad)
21 6 .
.. 18 8 ...
20 10 ... 22 5
... 22 11 ,
... 19 8
Beet crop ; increase or \
decrease per cent. |
over previous year's j
crop. J
+ 34
+ 22
+ 4 + li
+ 27
+ 11
Years (continued) :-
-1871.
1872.
1873.
1874.
1S75.
s. d
s. d.
s.d.
s. d.
s. d.
Prices of cane (Trinidad)
23 4
... 24 10
... 20 1 ...
19 7 ...
18 4
Beet crop ; increase or >
decrease p<r cent. (
over previous year's j
crop. J
-7
+ 31
-3
- 5
+ 20
According to these figures, it would strangely
appear, increase in the price of cane sugar is usually
accompanied by increase in the amount of beet pro-
duced ; whereas, in two of the only three cases
when the crop of heet was less than the previous
year, there is a decided fall in price over that of the
previous year; and in the remaining case there
is a decided rise in price in the following year,
though the production of beet showed an increase
of no less than 30 per cent. We have seen that
the consumption of sugar in the world increased
during this same period from 18 to 27 ; that of these
proportions, cane supplied respectively 14 and 17,
while beet, supplying 4 in the first instance, came
to supply no less than 10 in the latter. Beet has
thus monopolized the supply of a great proportion
of this increased demand ; but the figures have yet
to be produced, it seems, which shall prove that this
Sugar Bounties. 93
new supply is in direct connection with any definite
fall in price. Indeed, in the evidence before Mr.
Ritchie's Committee, the "West Indian planters over
and over again assert their confidence in their
ability successfully to cope with beet-root competi-
tion, ' provided bounties be done away with,' and
the two methods be left to unrestricted competition.
It would seem, then, that beet-growing in itself has
little to do with this loivering of prices. The question
remains do the Bounties affect these prices ; and
if so, to what extent ?
When one's own case is good, it is often well to
assume, for the sake of argument, the correctness
of the evidence brought forward by one's opponent ;
and in this present case we may even admit, with
the most eager opponent of Bounties, that a duty
of 2s. on every sort of sugar imported from Bounty-
giving countries would effectually ' countervail '
the effects of this Bounty. But we must in that
case also make it clear that, as at most only one-
third of our sugar supply comes from Bounty-giving
countries, the actual effect of the Bounties, so far
as growers are concerned, is not 2s., but only 8d.
a cwt. Again, we see that if sugar (as was stated
in answer to question 6028) at the price of 18s. 6d.
was being grown 3s. below its cost price, Bounties
94 State Aid and State Interference.
at their best, must be merely partial causes of this
effect, even when we allow them the full influence
attributed to them by their most ardent opponents.
And the advocates of this countervailing duty will
have to devise some remedy to correct this larger
class of influences, double the effect of the Bounties,
which, if true and lasting, must absolutely drive all
sugar out of cultivation."
3. But there are other matters in connection with
this asserted effect of Bounties which merit more
attention than they have received. If we look to
the condition of the industries in the Bounty -giving
countries themselves, we find much to countenance
Sir L. Mallet's opinion :
' Ques. 6344. I myself greatly doubt whether
the effect of this Bounty is such as to enable the
receivers of the Bounty to sell their produce at a
very much lower rate than they would be able to sell
it without the Bounty.'
One thing is certain, that even the keen desire
to do away with Bounties exhibited by English
refiners and importers, is no whit keener than that
shown by Frenchmen, at all events, who are inter-
ested in sugar. And these Frenchmen have reason
for their keenness. Among others, they complain of
Sugar Bounties.
the fact that the English refiner can, and the French
refiner cannot, avail himself of the Austrian Bounty
on raw sugar ; indeed, French statesmen have already
asserted that the Bounty given to French refiners
may be defended as the duty that countervails the
advantages reaped by the English refiners in
obtaining Austrian Bounty-fed raw sugar free of
duty.
The French authorities gave valuable evidence
before the Committee. M. F. Georges described
the position of the industry of growing beet for
sugar as ' extremely critical! The fabricants, he
declares, 'are almost at the last gasp, and if they
lower the prices of beet the farmers will entirely
leave off growing beet.' West Indian planters should
notice that, even while the dreaded Bounty system
lasts, prices are now so low that a fall, even frac-
tional, will prevent beet-growing altogether. Prices,
so far as beet-competition is concerned, are at their
lowest ebb. But the cultivation and manufacture
of beet is at its highest perfection. Neither of these
assertions can be made of sugar-cane growing in
the West Indies.
M. F. Georges also gives evidence to the effect
that sugar-beet production in France is even
diminishing, and certainly not increasing. West
96 State Aid and State Interference.
Indian growers should pay attention to question
6074 :
' Ques. I understand, to summarize your evi-
dence, you believe that Austrian and other Bounties,
if they continue, will greatly damage the French
growers of sugar ? '
' Ans. It will destroy the French manufactures
entirely in a certain number of years ; that is to
say, that the productions will be reduced to a certain
extent every year. I would add that, if the price
of beet were to be lowered, the farmers would not
be able to grow it any more.'
This means the lapse of 400,000 tons of sugar
now grown annually, and whether the French re-
finers are to continue to refine by importing cane
sugar (and probably to abolish import duties on
it), or whether France has to buy her sugar else-
where either way cane growing would be largely
benefited.
This is a most useful example of the com-
plexities and intricacies that come of State inter-
ference with production. If we abolish the Austrian
Bounties, French refiners and French growers con-
tinue as now ; if we do not abolish the Austrian
Sugar Bounties. 97
Bounties, English growers and English refiners both
prosper over French.
And another French authority, M. Fouquet, gives
it as his opinion : ' If all the Powers, Austria,
Germany, and Belgium, continue to have Bounties, '
Ave shall be in a very short time obliged to leave off
entirely making sugar in France!
And M. L. de Mot, on being asked
' Why should the production fall off so much
in France while the home consumption is so large
as it is at present,' replied, ' Because of the actual
price. We sell under cost price actually ; and there
is no doubt that, if things are to go on as they are,
in two or three years production will diminish
We expect, if things go on as they are, that, next
year at least, probably 40 factories will he closed. '
From Belgium, the Secretary of Legation re-
ports : ' Very small advantages indeed must have
been derived by Belgian refiners from the surpluses
(Bounties) they obtain, judging from the fact that
for the last fifteen years sugar refining has steadily
diminished in Belgium! It is not surprising to find
Belgium, as a Bounty-yielding country, eager to
abolish Bounties ; they do her no good, for she
imports but little sugar. From the Hague comes
ii
98 State Aid and State Interference.
the same tale of diminishing exports, in spite of
the Bounty which exporters can secure by means of
the drawback. In Italy there is great dread of
Bounties; and both Government and Legislature
recommend 'that no time should be lost by the
Government in entering into negotiations with other
States interested in the sugar question, with a view
to taking measures for guarding against the con-
version of drawbacks into Bounties.' In Germany,
as the industries, both of sugar growing and of
refining increase, so does the revenue derived from
,sugar fall off, because incidentally the exports in-
crease and take so much the more in drawbacks.
And the German refiners themselves make an in-
teresting complaint. They say, concerning 'moist'
sugars :
' Nor can the German refining industry compete
in these products with English refiners drawing
their supplies of German raw sugars from Germany,
inasmuch as Germany pays a larger drawback of
duty on the export of raw sugar than would be
paid proportionally on the export of the refined
sugar produced from it.' And their report pro-
ceeds : 'The German refineries buy duty-paid raw
sugars. . . . The German refining industry employs,
Sugar Bounties. 99
spread over upwards of fifty establishments, a large
capital (3,000,000 florins), invested in buildings,
fixtures, and stock. The sad results obtained on
an average from these institutions during the last
few years, threaten this capital with annihilation.'
And again, further on : ' The condition of German
sugar refineries has been for a long time, not only
an unfavourable one, but, indeed, has declined from
year to year!
Lastly, we come to Austria. Our Secretary,
Mr. Jerningham, reports : ' The drawbacks allowed
hitherto, instead of remaining that which they
were intended, viz., a true return of the excise
duties, have in reality proved Bounties to the
manufacturers ; and the history of sugar taxation is
that of the struggle of the Government to remedy
this.' The system of assessment was necessarily
at fault, and encouraged fraudulent practices.
Matters came to a crisis in 1876, when it was
discovered that on the system in vogue, Govern-
ment paid 947,000 florins in drawbacks on sugar
exported, and which had only paid 931,000 florins
duty and taxes. Government has consequently
interfered in self-defence of its own revenue, and
ordained that eventually sugar is to pay annually
h 2
100 State Aid and State Interference.
a contribution to the revenue of 10,000,000 florins.
This revenue argument is thus one of im-
mense cogency. The Belgian Government have
similar experience ; they know that some two
million francs more revenue ought and could be
obtained from sugar, but that this now finds its
way into the pockets of the growers, because of
the insuperable difficulties of collection wherever
sugar is concerned. Russia is in similar evil
plight.
But the success of the Austrian growers and
refiners at the expense of their country, has in its
course roused and frightened other nations. Thus,
M. Jacquemont, speaking on behalf of French
sugar manufacturers, after describing these results
in Austria, recommends, on behalf of France,
' That in all treaties of commerce which may be
negotiated, measures be taken to suppress Bounties
on export generally. If not, we may expect to see
our great agricultural industry succumb in this
struggle, so strangely unequal, which it sustains,
not only against rival industries, but against the
revenues of the different European States.'
And it may be noted incidentally that this
action of the Austrian Government will have the
effect of almost doing away with the asserted
Sugar Bounties: 101
outside effect of the Bounty ; for, if we judge by
the present state of the industry as pointed out
by M. Jacquemont, ' If the proportion of the
exportation to the total production should diminish,
the Bounty would increase ; if, on the contrary,
the proportion should increase to 60 or 70 per
cent, of the total production, the Bounties would
decrease/ Thus, the case in Austria is at the
present moment eminently favourable to English
refiners and. growers.
It would thus appear that in one and all the
countries that now give Bounties there is a strong
desire, on the part both of Government and of
manufacturers, to abolish any Bounties on the ex-
portation of sugar, whether raw or refined.
It is remarkable to trace in the history of the
negotiations to put an end to Bounties that have
already taken place between the Governments
interested, that they have invariably originated
in the desire of these Governments to remedy
defects in their own financial arrangements. The
advantage to the sugar industries was merely in-
cidental, and, indeed, only brought to the light
of day by the sugar manufacturers and refiners
themselves.
It is also remarkable to notice that in all these
102 State Aid and State Interference.
countries where Bounties are gained, the sugar in-
dustries are in a precarious condition ; refining
dwindles where Bounties exist, while it is on the
increase in England. Growers of beet all the Con-
tinent over declare themselves ruined by the Bounty-
fed competition of each other. It is, therefore,
exceedingly remarkable to find so many of the wit-
nesses before the Commission, ' interested in sugar,'
so persistently, in the face of the figures they have
themselves produced, declaring that refining must
die out in England. It was shown them that,
on their own calculations, the Bounties received
annually in England was so many million pounds
sterling ; that every few years these Bounties paid
into England as much capital as all that invested
in English sugar industries : that thus, even sup-
posing the Bounties did destroy the industry, never-
theless they would have paid for both capital and
' good-will ' over and over again.
4. It is, then, evident that all the countries in-
terested are anxious to do away with these Bounties.
There are but two methods of procedure desirable.
The one is the freeing of sugar from all connection
with the Exchequer. This has been accomplished in
England ; but it is not within the range of ' practical
politics' that this should be accomplished in many,
Sugar Bounties. 103
still less in all, of the States that at present, in spite
of themselves, grant Bounties.
We are compelled, then, to fall back upon the
second and less satisfactory of the two desirable
methods that of manufacturing and refining' in
bond. Here again we find much happy unanimity
arising among the various Governments interested.
When this remedy was broached years ago there
were many more or less idealistic objections put
forward, on the score of the evils of direct Govern-
ment interference in industrial details. Some evils
are, however, necessary evils. Taxation itself is one
of these ; and it is not altogether illogical to infer
that the collection of taxes should follow suit in this
respect. But even in France refiners themselves
have withdrawn their objections, and chiefly by
reason of the experience there gained since 1852 by
the manufacturing in bond of beet sugar. On this
point the authorised evidence of M. Georges is
conclusive :
' Ques. 4047. In the opinion of the fabricants in
France is the refining in bond the only efficient mode
of abolishing bounties ? ' ' Yes ; it is the sole one, in
their opinion. For ten years past they have been
soliciting this measure. At the Trade Congress, at
104 State Aid and State Interference.
Brussels, they passed a resolution that refining in
bond was the only means of abolishing bounties.'
M. Fouquet handed in to the Committee the
joint agreement entered into by the refiners and
the fabricants of France advocating refining in
bond. Already, in Austria, the excise authorities
test sugar, supervise in the factories, and examine
books. The factory-owner is required by law to
provide accommodation for these officers. The
Austrian Government and the fabricants are thus
already working without trouble a system of Govern-
ment inspection, which involves more interfering
than even the refining in bond calls for. But after
all has been said to show the desirability of re-
fining in bond, there remains the difficult task of
realizing the proposal. And the apparent difficulty
hinges on the desire or demand that any action in
the matter must be action accepted and joined in
by all the sugar-growing States. Here again crops
up the great difficulty of all general international
action the absence of what in law would be
termed the sanction. There is need of a common
compelling power.
The decision has now been come to that a
Conference of the Powers interested will have no
Sugar Bounties. 105
good issue, unless they meet on the understanding
that they will create some sanction as a common
defence of themselves against those who may elect
not to join such a convention as may be agreed
upon. It has, therefore, been suggested that the
Powers joining such a Conference shall agree
beforehand to the insertion of a 'Penal Clause.'
Of what nature is this clause to be ? The
French Government maintains that it should im-
pose a specific duty on any sugar imported from
the recalcitrant country or countries. It has,
indeed, been held that the mere insertion, or even
intention to insert such a clause, will accomplish
the desired effect, and scare all the Powers inter-
ested into joining the Convention. For an English
Government, however, to assent to such a clause
is simply impossible in the present temper of the
English people. They will not impose fresh import
duties for any other than revenue purposes. The
English people are happily well aware of the
prosperity and growth that has followed on their
definite adoption of free trade principles; and to
go back to interferences with trade for industrial
purposes is a retrograde step that is happily an
impossibility in the England of to-day.
There is another penal clause that is worthy
106 State Aid and State Interference.
of mention, and that is the declining to receive
sugar from the erring State. This would be a
specially powerful weapon in the hands of Eng-
land. It would encounter many difficulties such
as those that cluster round ' certificates of origin ' ;
but both as a threat and as a check it would
in all probability have much direct success. Con-
cerning the principles on which it is founded, it
is no doubt an interference with the free course
of trade, but we are working for concert with
Powers that follow a policy of protection. We
do not levy a duty ; we do not seek or obtain
revenue ; there is nothing fiscal in the whole ar-
rangement ; it is merely, as it were, joining in the
concerted blockade of a nation that is generally
felt to be acting contrary to the best interests of
all. Such a clause has the merit of assured effi-
cacy, if of nothing else. But it is a measure of
warfare and not of peace.
The question remains, what have we left Ave
can trust to in the absence of a penal clause ? We
have, on the one hand, the welcome fact that all
the nations interested are in favour of establish-
ing the manufacture and refining in bond. The
history of previous sugar conferences is the history
of the elimination of objections to such united
Sugar Bounties. 107
action. In 1862 attention was drawn to the fact
that the various arrangements of drawbacks and
duties on sugar were practically Bounties. Each
country soon saw the error of its ways, and ex-
pressed its intention to do away with Bounties.
But the one great obstacle was the fact that other
countries might continue in their independence.
The Conference in 1862-1863, was occupied in the
main on the futile search for some method of ex-
actly measuring percentages of sugar, either raw or
refined. The standard of colour was adopted ; and
the consequent greater exactness certainly reduced
the effect of the Bounty system. But it was soon
seen that colour was no reliable test of strength ;
not only was it liable to ' manipulation,' fraudulent
or otherwise, but sugars from different countries
and of the same strength are often differently col-
oured ; and again, sugars of the same colour are
often of different strengths.
These, and other practical obstacles arose, and
gave rise to fresh Conferences each of them a
step in the right direction. By the year 1872 a
fresh Conference was proposed, in which the British
delegates were instructed to ask for refining in
bond. Nothing came of that Conference save a
recommendation for further investigation.
108 State Aid and State Interference.
The following year, 1873, another Conference
was held ; and at this, ' saccharimetry ' of a highly
scientific type was proposed as a method of deter-
mining with all-sufficient accuracy the relative per-
centage of sugar in the raw material. England
this time withheld her consent.
The Conference in 1875 led to the Convention
of that year which was to establish refining in
bond in France and Holland. Holland withdrew
on the plea of a misunderstanding as to her re-
tention of her liberty at any time to abolish her
sugar duties altogether. France then defended
herself by establishing Saccharimetry.
Next followed the Paris Conference of 1876.
At this conference Saccharimetry was carefully
inquired into and declared finally to be a failure.
The Conference eventually suspended its sittings
without any agreement having been arrived at, in
order to report to the respective Governments, with
a view to the subsequent resumption of the Con-
ference, to which it was proposed to invite Austria,
Germany, and Italy. This Conference was resumed,
but the three new States declined to send dele-
gates : and eventually, after the fashion of its pre-
decessors, it separated without visible effect.
During these eighteen years of effort much
Sugar Bounties. 109
advance was, however, made. The Dutch and the
French Governments declared in favour of refining
in bond, and the other sugar-producing countries
were invited to join. Moreover, the first motion
was then made towards discussing Bounties on raw
as well as on refined sugar. The Governments
of Italy and of Austria are in favour of abolishing
Bounties. These are new developments ; and yet
there still remains the hard task of prevailing on
these various States to carry out in combination
what each one individually desires to see realized.
5. England comes to a new Conference with clean
hands. She has taken what is admittedly the very
best course ; she has suppressed sugar duties alto-
gether. And in her hands she wields the powerful
lever of the recorded success attending on this
move. Our very sugar refiners, despite the real
effects of bad times and low prices, and despite
the more supposititious effects of Bounties, are doing
far better than the refiners of these Bounty-pro-
tected States. We continue to make use of more
and more raw sugar, to consume more and more
sugar. But we also export more and more re-
fined sugar ; and we also import less and less
refined sugar. The very latest figures are those
for the first five months of 1881 ; it is well to
110 State Aid and State Interference.
put these side by side with those of the last two
years :
The first five Months In
1879 1 S^o 1SS1
* ^mlheXtat!^} 728 '^ " 617 > 000 " ^> 000 = " HS,000to n ,
"' TonfFranfe^.!} 47 ' 000 " 31 > 000 ~ 2S.000 = - 19,000
m * R fro"rL s gund E !!!} 197 ' 000 - 167 ' 000 - 203 ' 000 = + 6 > 000
French refiners in these respects are stationary,
and Dutch and Belgian actually retrogressing. Our
West Indian producers also continue to increase
their output ; and these facts give the lie to the
supposition that Bounty-fed beet-growing is or can
be in any way successful in supplanting the cane-
growing of the tropics.
It is in these facts that England has her most
powerful argument her one great lever. We
could even contemplate the substitution for the
troublesome penal clause, in a convention of this
example, of the pre-eminent success of England's
freed production of sugar, both raw r and refined.
So may England, in years to come, bring the
Bounty-giving States to see that, while they dis-
cover that Bounties injure their own native indus-
tries, and become a terrible drag on their own
exchequers, yet that these Bounties are quite
incapable of making anything like a ' disastrous
Sugar Bounties. Ill
impression ' on the ' Home and Colonial Sugar In-
dustries of this Country/ for the reason that these
industries in the British Empire are free of the
baneful incubus of the Bounty system. With these
facts in our pockets we may safely face negotia-
tions for a new convention ; we may trust, even if
with hope rather than with confidence, that other
Governments will in due course pay heed to their
experience in their own exchequers, and to the
unanimous opinions of their own sugar growers
and refiners, as to the deleterious influence of the
Bounty system, and that they will follow the
successful lead of England in removing all that in
any way directs or restricts industrial energy and
deprives it of its essential liberty to follow its
natural bent.
112 State Aid and State Interference.
CHAPTER V.
PROTECTION IN YOUNG COMMUNITIES.
1. Parallel cases of Victoria and New South Wales. 2. The
Promotion of Manufactures. 3. The Raising of Revenue.
4. The Promotion of General Prosperity. 5. Value of
this test case.
1. John Stuart Mill has told us that Protec-
tion, altogether demolished as a general principle,
might be found under certain conditions economically
defensible in a young community. This hypothetical
concession on Mill's part has had a direct and
practical effect on the commercial policies adopted
in some States notably in one or two of our own
Colonies and in the United States. But Mill in this
argument expressly declares he is only dealing with
what might be, ami that the whole argument only
applies, provided certain conditions come to be
realized. Professor Sumner, of Yale, one of the
Protection in Young Communities. 113
ablest economists in the United States, well sums
up the point in the words, " In these, as in other
matters, we cannot argue with certainty from what
might have been." Both he and Mill regret the
absence of recorded facts on this point of Protection
in Young Communities.
Recent experiences enable me in some measure to
make good this deficiency, and to fill up this gap in
the experiential foundations of Political Economy,
with what, for all practical purposes, is a test case.
For this purpose I simply summarise facts recorded
in authoritative official records.
The history for the past ten years of our two great
Colonies of Victoria and New South Wales provides
us with the necessary records. This is the first time
in history that we meet with the story, told in the
details of actual fact, of two young communities
growing up side by side with practically similar eco-
nomic environments and opportunities, but pursuing
the one a Free Trade and the other a Protectionist
policy. In Victoria, in the year 1865, Sir J. Mac-
Culloch introduced a modified form of Protection,
and since 1871 there has prevailed that very inten-
sified form of which the late Premier, Mr. Graham
Berry, has been the persistent advocate. Over this
same period, and more especially since 1874, New
I
114 State Aid and State Interference.
South Wales has followed an essentially Free Trade
course.
It may be added that I had the good fortune to
sojourn in these Colonies in the year 1870, and
again in the year 1878. This implies the advantage
of personal and local experience of the two Colonies,
and of the two Colonies at two periods separated by
an appropriate interval of eight years.
So far as the purpose in hand is concerned, these
two Colonies were in the year 1870 sufficient
counterparts of each other in regard to economic
environments and opportunities. Either community
may be described as a pioneer band of the great
English nation, engaged in opening up virgin lands
rich in all natural wealth. Our fellow-countrymen
in Victoria and in New South Wales had provided for
themselves all the aids and advantages our present
civilisation offers. Eoads, railways, telegraphs, postal
arrangements, sea communications, education, and so
forth, were all in a high state of perfection. All the
facilities of life under the care of energetic adminis-
trations had developed with marked rapidity. At
the same time these two Colonies yield to no country
in the world in the richness of their natural endow-
ments. Both above and below ground the soil is
pregnant with wealth ; and the climate is all
Protection in Young Communities. 115
Englishmen can desire for the due exertion of their
productive energies. Thus in these two Colonies
the scientific industry of this nineteenth century
had found its most favourable opportunities.
In the nature of things, these two Colonies are, for
the present, producers mainly of raw material which
they exchange for the manufactured products of more
populous centres. Thus we find the inhabitants of
these Colonies import twice as much value per head
as the inhabitants of the British Islands. This is a
fact of much value to our present purpose. The
United States have been perpetually put forward in
the Free Trade controversy. But the United States
only import a value of 21. per head of population
per annum. We in these British Islands import,
say, 10/. per head. But in these two Colonies the
imports are, in value, 20/. per head of population
per annum. Consequently, the direct effect of high
or low tariffs is ten times as great in these instances
as in that of the United States, and the value of
these instances ten times as great to the economist.
The necessary starting-point of the comparison is
the determination that at the beginning of the
decade these two young communities were the
sufficient counterparts of each other in regard to
economic environments and opportunities. The
I 2
116 State Aid and State Interference.
Protectionists of Victoria offer justification or
apology for their swerving from the straight course
pursued by New South Wales on the three pleas
of lesser extent of territory, larger population, and
absence of coal.
In regard to this lesser extent of territory, we find
that Victoria has sold 11,000,000 acres, and has
45,000,000 still unsold ; and that New South Wales
has sold 33,000,000 acres, and has still 165,000,000
acres unsold. In each case the State has sold, or
in other words has settled, from one-fourth to one-
fifth of its area. In each case there remain over
three-fourths of the area open for settlement. At
present the population to the square mile in Victoria
is ten persons, and in New South Wales three
persons. In the United Kingdom the proportion
is 270. Both Colonies are thus only on the
threshold of their career as populated and developed
countries. There is the real difference that the
future capabilities of New South Wales are greater.
But the present case refers solely to the past ten
years. And during that decade the extent of the
unoccupied lands is not so much to the point as
the fact that in either case there are three-fourths
of the soil of the Colony still open for settlement.
In each Colony men are pushing on with their
Protection in Young Communities. 117
flocks and their herds to occupy new areas of
virgin soil, and the plough follows in their track
to pioneer agricultural settlement. In neither
case has this operation as yet advanced over the
whole. That is the condition at the present ; and
we are dealing with the past, and not with the
future.
In regard to the larger population of Victoria,
that also is a relative matter. Each Colony is but
sparsely populated. Victoria, the size of England,
Wales, and Scotland combined, is at the present
peopled by a population equalling that of Kent
only. New South Wales is about three times the
size of Victoria, with a somewhat smaller population.
In either case, after deducting the quarter of the
population that congregates in the capital of each
Colony, we have but a very sparse and scattered
population over the interior. It must be conceded,
however, that in so far as the population of Victoria
is relatively denser than that of New South Wales,
in so far manufactures, or revenue, or prosperity, or
growth should develop with greater natural speed
in Victoria than in New South Wales ; in so far
as Victoria had a larger or a denser population than
New South Wales, in so far Victoria started with
superior natural or inherent advantages in those
118 State Aid and State Interference.
very objects to foster which Victorians instituted
their policy of Protection.
In regard to the great superiority of New South
Wales in the production of coal, it is well to re-
member that this coal is produced on the Hunter
River, and has to be earned thence by sea to
Sydney, which is the centre of manufacturing
enterprise. It is well known that when once coal
has to be shipped the difference in length of voyage
of one day to Sydney or three days to Melbourne
makes but little difference in actual cost. So that
in the question of fuel for manufacturers there is
little practical difference in regard to coal supply
in the two Colonies. As a wealth-yielding force
against the coal of New South Wales must be set
off the great superiority of Victoria in the produc-
tion of gold. It is true that the gold industry has
declined rapidly in Victoria in output, and in
number of men employed. But we must
remember there is also a gold-mining industry in
New South Wales which has also declined. This
decline is due to the fact that gold was first dis-
covered in alluvial soil, disintegrated from the quartz
by the action of nature. Alluvial diggings provided
a rich harvest ; but they soon became exhausted,
and miners had to turn to extracting the gold from
Protection in Young Communities. 119
the primeval envelope of quartz. This led to a
complete revolution in the mining industry. The
falling off of the output in gold consequent on this
revolution was not the annihilation of capital, nor
was it the forcing labour to leave the Colony in
search of employment. The city of Ballarat survived
and continued to thrive as the great centre of the
investment of capital in mining, which had super-
seded 'digging.' Quartz reefs had to be attacked
instead of alluvial plains, and this change involved
investment of more capital : powerful engines,
colossal stamping machinery, and miles of tunnelled
galleries and shafts had become necessary, and gold
mining needed and absorbed a far greater amount of
capital than in the old days when picks and shovels
and wooden cradles were all the plant and imple-
ments requisite. Much of the very capital that the
rich gold ' diggings ' had yielded was at once in-
vested in these new works. But there remained
over much capital so accumulated which was not
thus utilised, and which was there ready to start or
promote any new industries.
Labour, too, was set free. In 1871 there were over
57,0U0 gold-miners in Victoria, By the year 1878
the number had dwindled to 37,000. This had set
free in Victoria some 20,000 men of the artisan and
120 State Aid and State Interference.
mechanic class of a class, too, which was originally
recruited very largely from the manufacturing dis-
tricts of the Old Country. There was thus provided
during this decade, labour of a very applicable type
for those very manufactories which were now to be
fostered by Protection. Thus in this respect, in this
very failure of the gold industry, Victoria gained
over New South Wales in this supply of capital and
of appropriate labour for those purposes for which
the high tariff was imposed.
Besides this, the greater amount of gold obtained
in Victoria had attracted at once a far larger popula-
tion, and yielded forthwith much capital. This led
to the fact that in Victoria, at the beginning of the
decade under review, the railway system, and indeed
all the facilities of life, had reached a higher stage of
development than those of New South Wales. In
every respect, then, we see that if there was any
difference between the two Colonies ten years ago, it
was a difference in favour of Victoria, so far as the
starting manfactories, the affording revenue, or the
promoting the general growth of prosperity were
concerned. And these were the objects fur which
the high tariff was imposed.
In 1870, then, such were the relative economic
positions of Victoria and New South Wales. What
Protection in Young Communities. 121
happened during the succeeding decade is set out in
a variety of official documents and records, in greater
part issued by the Victorian Government. These
results range themselves conveniently under the
heads Manufactures, Revenue, General Prosperity
and Growth.
2. Manufactures. When Protection speaks of
fostering manufactures it speaks of fostering those
industries which result in the production of commo-
dities other than food and raw materials. And the
plea is that, except for such fostering, these industries
will be slow to arise in the community. Do we find
justification of this in fact ? The evidences are to
be seen in the employments of the people and of
capital ; in the output of manufactured articles ; and
in the number and kind of manufactures developed.
In regard to the employment of the people, we
find that at the end of the decade there were 25,000
persons making their living in manufactories in New
South Wales, equivalent to 37 per cent, of the total
population. In Victoria there were 28,000 persons
so employed, equivalent to 3*2 per cent, of the larger
population of that Colony. This so far disposes of the
argument so often advanced that Protection pro-
motes civilisation by providing civilised employment
for the people in a new community.
122 State Aid and State Interference.
Again, in Victoria during the decade, population had
increased by one-eighth ; but the number of hands
employed in manufactures had increased one-third.
Side by side with this we remember the very pertinent
fact that the greater falling off in gold-mining had
set free a large body of appropriate labour. There
was this transference from one congenial occupation
to another, but no development of any new class of
operatives. By this transference of forces Victorian
manufactures received an impetus totally uncon-
nected with any fiscal or commercial policy.
Unfortunately the official records are in number of
manufactories, and they afford no evidence of the size
of the units so recorded. The number of foundries,
clothing manufactories, agricultural implement and
other works, has largely increased in both Colonies.
So far as kind goes we find that as great a variety
of manufactures has come into being under the
low as under the high tariff. In either case the
development as compared with the great natural
industries of the country is insignificant. In
one or two instances such industries have as-
sumed larger dimensions in Victoria than in New
South Wales. There are now, for instance,
750 hands employed in woollen manufacture in
Victoria as compared with the 300 in New South
Protection in Young Communities. 123
Wales. But then, to counterbalance this, we find one
manufacturing industry which has grown up in the
Free Trade and dwindled in the Protectionist Colony,
and that is the important industry of shipbuilding.
Ten years ago Victoria built 800 tons of shipping, and
New South Wales built 1,800 tons. Now the annual
output is only 400 tons for Victoria, while it has risen
to 3,000 in New South Wales. Under the low tariff
this important industry has doubled itself; under
the high tariff it has diminished by one-half.
As an example of what is at present proceeding we
have a report of its committee to the Association of
the protected bootmakers at Melbourne, in which the
following passage occurs : " Our travellers report to
us that they find very great difficulty in placing our
goods on the neighbouring markets, -principally
through the ' competition of Sydney with their own
manufacture, and European imported, sold suffi-
ciently low to secure the custom. It must be
remembered that Sydney has always had a steady
export of her own manufactures, and that her
manufacturers are giving inducements to our best
workpeople to remove there. It also must be re-
membered that all leathers the boot manufacturer's
raw material are admitted free into the port of
Sydney, while an import duty of 7^-, 10, and 20 per
124 State Aid and State Interference.
cent, is enforced in Victoria, thereby placing the
Sydney manufacturer at an advantage."
It is not easy, in the absence of definite records,
to estimate the actual output from these manufac-
tories, and in neither Colony is there any appreciable
export of commodities locally manufactured. But
if we compare the articles which are imported into
Victoria under a heavy duty, and which enter New
South Wales free, we shall find that, in spite of the
increase in price, Victoria still is forced to supply
herself with these ' prohibited ' or ' weighted '
foreign articles ; and imports of these classes, on an
annual average, about as much as the unprotected
New South Wales.
Consequently, in regard to the development of
manufactures in these new communities, we find
there is not much difference in results between the
Free Trade and the Protectionist policy if we look at
the employment of people, output of manufactured
articles, and number and kind of manufactures
actually developed.
$ 3. Revenue. Protection, especially for young
communities, is over and over again defended on the
plea that revenue must be raised. This plea is
common with statesmen not only in one or two of
our own Colonies, but in the United States. It is
Protection in Young Communities. 125
the great plea set up in Germany by the Bismarck
party. This plea proceeds on the assumption that
the higher the tariff the greater must be the revenue
derived from the customs duties. Theoretical econo-
mists point out that " to tax your trade is to destroy
your trade ; " that " where Protection begins there
Revenue ends ; " that " to hamper the entry of goods
into your market by heavy duties is to starve even
unto death the goose that is to lay your golden
eggs of Revenue." More practical economists
hold that it is a mere question of balances, and that
it is conceivable so cunningly to adjust the duties
that, while inevitably destroying some of the trade
existing under a lower tariff, this higher tariff yet
sucks more revenue in the aggregate out of the
lesser trade that remains. The question is really
solved only by appeal to experience. And ex-
perience tells us that a low Customs' tariff
yields most actual revenue. It appears, if we look
to the records, that the annual revenue derived
from the high tariff in the United States has fallen
steadily during the last decade from thirty-seven to
twenty-seven millions sterling. During the same
period the English low tariff steadily contributed
and still contributes an annual contribution to the
revenue of twenty millions sterling. During the
126 State Aid and State Interference.
decade the population of the United States has been
increased by ten millions of people, that of the
United Kingdom by only four millions. So the
English people, with all the acknowledged advantages
of a low tariff, contribute, pro rata, actually more
revenue by the means of customs duties than the
citizens of the United States, who are hampered
by all the acknowledged evils of a high, a very
high tariff.
The recorded results over the same decade in
Victoria and New South Wales corroborate in a
striking manner this matter-of-fact conclusion.
During the decade the amount derived from customs
duties in New South Wales has gradually risen
from 950,000/. to 1,300,000/. Over the same period
the high tariff' has provided to the Victoria revenue
annual contributions which, if they have fluctuated
at all, have shown a downward tendency, and now
yield annually 1,400,000/. It will be observed that
the smaller population of New South Wales con-
tributes as much to the revenue by the means of its
low tariff as the larger population of Victoria con-
tributes by means of its high tariff. These are facts
and not fancies, and it is only by ignoring them or
being ignorant of them that any responsible authority
can put forward this revenue argument.
Protection in Young Communities. 127
4. General Prosperity and Growth. I have said
that Victoria and New South Wales each imports
twice as much per head of population as we do in
these islands. It is obvious that any policy which
affects their imports must affect their general life
and well-being to a degree unknown even in these
commercial islands. And I pass to compare the two
Colonies in regard to general prosperity and growth.
The signs of this are external and internal; the
signs are to be seen in their dealings with the out-
side world and also in their domestic condition.
Firstly, then, as regards their dealings with the
outside world. This is a most significant index of
their actual welfare, seeing that their external trade
is double in value per head of population to what it
is even in England. This trade is a sure indicator
of prosperity, inasmuch as it is a sure indicator of
any increase or decrease in consumption and pro-
duction, the two visible factors of prosperity. Ten
years ago New South Wales was doing an external
trade of the annual value of 19,000,000/. A
decade of steady increase brought this total up
to 29,500,000/. in 1880. Ten years ago Victoria
was doing an annual external trade of 27,600,009/.
In the succeeding decade a wavering line of
rise and fall brings us to an annual total of
128 State Aid and State Interference.
30,500,000/. for 1880. Under the high tariff external
trade increased during the decade by one-ninth
only. Under the low tariff external trade increased
by more than one-half of its previous annual total
The full significance of this is seen when we find
New South Wales, at the end of the decade, doing
10,000,000/. more annual trade than at the begin-
ning, while Victoria was only doing some 3,000,000/.
more. Ten per cent, profit on such trade would
mean an addition to the annual national income of
New South Wales of 1,000,000/., and to that of
Victoria only some 300,000/.
Incidentally it is worthy of note that the German
Government, perhaps the best informed Government
at present in existence, has chosen for the head-
quarters of its Consul-General for Australasia the
capital of the low tariff Colony, although the high
tariff Colony is at the present moment ahead in
number of population and in value of external trade.
The Germans evidently judge of the certain future
by means of the recorded past.
Further instruction follows on further analysis of
this external trade. If we turn to the exports we
find that ten years ago the value of articles, the
produce or manufacture of the Colony itself, was
exactly 77 per cent, of the total value exported from
Protection in Young Communities. 129
each Colony. At the end of the decade we find the
amount of this native produce exported had risen to
83 per cent, in New South Wales, but had fallen to
68 in Victoria. In other words, under the low tariff
there had been increase, and under the high tariff
decrease, in the exportable surplus of native products,
a most important sign of prosperity and growth.
If we turn to the imports we find that ten years
ago there entered New "South Wales goods to the
value of 9,000,000/. At the end of the decade this
annual value had mounted to 14,000,000/., an increase
of 60 per cent. Ten years ago the imports into
Victoria were of the value of 12,500,000/. At the
end of the decade this 'annual value had mounted to
14,600,000/., an increase of 20 per cent. only. In
other words, not only the power but the using of
the power to purchase foreign produce (and there
was profit accruing to each purchase made) increased
by about three times the speed under the low tariff
to what it did under the high tariff.
There is another point in this external trade of
much significance. In New South Wales there has
been an increase in the tonnage of the shipping-
visiting the Colony during the decade, from 1,500,000
to 2,600,000 tons. In Victoria the increase has been
from 1,300,000 to 2,200,000. It may be said that
K
130 State Aid and State Interference.
this difference in growth is inevitable under a low as
opposed to a high tariff, but it none the less repre-
sents a fountain of popular well-being, drawn upon
in the one case to a much more profitable extent
than in the other.
In connection with this shipping there are the
very important records of ballast. There came to
New South Wales during the decade 3,000,000 tons
of shipping in ballast. There left New South Wales
during the decade 117,000 tons of shipping in ballast.
There came to Victoria during the decade 113,000 tons
in ballast. There left Victoria 2,500,000 tons, the
greater proportion of which proceeded to New South
Wales. Empty ships arriving in New South Wales
have increased from an annual tonnage of 220,000
in 1870 to a tonnage of 320,000 in 1880. Empty
ships leaving Victoria have increased from an annual
tonnage of 198,000 tons in 1870 to a tonnage of
250,000 in 1880. 1 It will be observed that the con-
ditions are exactly reversed in favour of the growth
of the low-tariff colony.
1 The Sydney Morning Herald, in an able loader on my article,
very properly suggests that some of this ballasting may be tine to
the fact that vessels freighted to Melbourne afterwards come on to
New South Wall's for coal. But the Herald p lints out that hesides
this Sydney is rapidly becoming the one mercantile centre of tin-
Australian seas.
Protection in Young Communities. 131
The domestic or internal condition and progress of
these two Colonies will complete the illustrations we
would give of their growth and prosperity.
In the first place, in regard to poipidation, we find
that that of New South Wales has increased from
520,000 in 1870 to 740,000 in 1880, an increase of
48 per cent. The population of Victoria has in-
creased from 730,000 in 1870 to 860,000 in 1880,
an increase of only 17 per cent. In the second
place, in regard to wealth, already we have seen in
every point we have touched upon the far greater
rapidity with which wealth-producing developments
have been proceeding in New South Wales than in
Victoria. From this we infer the fact that wealth is
being produced in similar ratio. And when we read
that the value of rateable property has doubled in
New South Wales in the decade, and only increased
by one-half in Victoria, we have our inference
signally verified by recorded facts.
Singular evidence is afforded, also, by the statistics
of the Savings Banks. In New South Wales the
deposits have increased from 930,000/. to 1,500,000/. ;
and the number of the depositors from 21,000 to
32,000. In Victoria the deposits have increased
from 1,100,000/. to 1,000,000/.; but the depositors
have increased in number from 38,000 to 70,000.
k 2
l:>2 State Aid and State Interference.
In other words, the average amount deposited has
risen in New South Wales steadily from 44/. per
head to 47/. In Victoria the average deposited per
head has fallen from 29/. to 15/. This is evidence
corroborating the fact so commonly asserted that in
democratic Victoria wealth is accumulating in the
hands of the few. This is a result generally asso-
ciated with a high tariff by all writers on political
economy. It is a result which, in its direct an-
tagonism to the wholesome principle of equable
distribution of wealth, stamps it as one of the most
injurious results of a high tariff.
Illustrative of this tendency is the fact that the
average wages of skilled labour grew in New South
Wales, during the decade, from being lower to being
higher than similar wa<res in Victoria. That wages
should have risen under a low tariff faster than
under a high tariff is a fact of great importance,
especially to countries wherein manhood suffrage
gives to the wage-earner so much political power
and responsibility. But it is a fact of which most
people are ignorant.
It is well also to notice that the prices of the
necessaries of life of wheat, tea, and provisions
and tools and implements are generally lower in
New South Wales than in Victoria. This, of course,
Protection in Young Communities. 133
adds much force to the before-recorded results in
the nominal rates of wages, for it adds the essential
element of greater relative purchasing power under
the low tariff.
In order to form an exact estimate of social well-
being we must build a general judgment on numerous
details ; and among these details marriages afford
apposite information. In New South Wales during
the decade the annual number of marriages has
steadily increased from 3,800 to 5,100 an increase
of one-third ; in Victoria the increase in annual
number has been from 4,700 to 5,100; an increase
of one-eighth only. While in New South Wales
marriages are in the proportion of 7 to every 1,000 of
population; in Victoria they are but 6 per 1,000.
And this is the more remarkable when we remem-
ber that in New South Wales there are 80 women
to every 100 men, whereas in Victoria there are
90 women to every 100 mem
Ample details have thus accumulated during the
past decade to show that in regard to all outward
signs of prosperity and growth social, industrial,
commercial the Colony with the low tariff has pro-
gressed with far greater rapidity than the Colony
with the high tariff. This exhibits the great prac-
tical use of statistics. They are thus brought to
134 State Aid and State Interference.
substantiate, by the cold logic of recorded acts and
facts, the reports and rumours that have been rife in
these two Colonies. The newspapers, it is true, had
provided from day to day pictures of New South
Wales altogether devoid of the sombre economical
colouring that had become the salient feature in the
accounts of Victoria. Nor has there been in New
South Wales that general outspoken discontent
among capitalists as well as among working men
which has from time to time manifested itself in
Victoria. Under the high tariff each industrial
class in Victoria has in its turn bitterly complained
of the duties that specially weigh upon it. The
latest information carries on the tale to deputations
of miners demanding of Government a lowering of
duties on imported mining machinery and tools. The
farmers have been for some time threatening to give
up their farming because of the high prices they are
forced to pay for their implements and materials
high prices unknown over the border in the low
tariff colony of New South. Wales. Multitudes of
labourers, the very men who by their votes supported
the policy of "Protection" to native labour, have
had from time to time to stave off starvation at relief-
work wages. It has been for some time more than
suspected that capital had set in a strong current
Protection in Young Communities. 135
towards other Colonies ; it was not, however, known
that the current of labour, far less easily transferable,
had set in the same direction. The skilful and
conscientious estimates of population made from
year to year by the Victorian Statistical Depart-
ment, under the guidance of that very able statist
Mr. Hayter, proved, when the actual records of the
census of this year came to be taken, to be no less
than 76,000 of people over the mark in a population
of 850,000. Mistaken popular opinion refused to
recognise the enormous emigration of labouring men
and their families that had been proceeding all the
while. But by this official recording of facts this
popular error has now been set straight.
5. It is well, in conclusion, to summarise the
general lessons of these recorded results. In his
address to the Economic Section at the jubilee meet-
ing of the British Association, Mr. Grant Duff put
forward as a text the sentence, " Methods that
answer follow thoughts that are true." This idea
may be profitably amplified into the corollary,
" Thoughts that are true follow knowledge of
methods that do not answer." It has been my
object to afford knowledge of methods that answer
and also of methods that do not answer; and this
knowledge has been sought in the recorded results
136 State Aid and State Interference.
of rival methods. This knowledge, when acquired,
must be followed by thoughts that are true. In
Victoria itself it is hoped this record of what has
already taken place will give fresh impulse to the
reactionary movement in favour of a lower tariff.
Signs of this movement are already apparent. The
new Premier, Sir Bryan O'Loghlan, has issued a
Royal Commission to inquire into the working of
the tariff, and he apologetically promises the people
of Victoria ' a free breakfast - table.' These are
thoughts that are true, and they seem to be following
on the knowledge of methods that do not answer.
In the wider sphere of the British Empire these
recorded results may stimulate local Parliaments
to maintain low tariffs. We must look to the
spread of sound knowledge and to the honest
subordination of class interests to the common
national good rather than to fostering duties on
foreign wheat, if we would successfully set the great
and growing commerce of the empire on sound and
profitable economic foundations. Until the Canadian
Dominion, for political rather than economic pur-
poses, not long .ago swerved from the right path,
there was but one Colony, and that one the unfor-
tunate Colony of Victoria, among the eight great
self-governing Colonies enjoying independence of
Protection in Young Communities. 137
fiscal action, that had burdened itself with a high
tariff. It would seem that Victoria has paid the
penalty of its backsliding. That the others did not
follow suit is plain evidence of the great practical
common sense and public loyalty of the majority of
British Colonists. To this and to the spread of
knowledge of recorded results we may look for a
continuance of this tendency towards low tariffs
throughout the British Empire. This tendency, if
persevered in, will enable every Englishman, no
matter where he may be domiciled over the wide
empire, to thrive on the fact which has done England
itself such unbounded material good, that whatever
he uses or consumes is obtained by him at the lowest
possible cost. Such action is urgently recommended
by economic science, for it must contribute to the
material prosperity of every industrial worker
throughout the who]e British Empire.
138 State Aid and State Interference.
CHAPTER VI.
ONE-SIDED FEEE TRADE.
1. Supposed necessity for Customs Duties. 2. Hong Kong
growing and prosperous with no Customs Duties. 3. People
increasingly employed in Arts of Civilization. 4. Ample
Revenue raised.
1. Four of the commonest pleas put forward in
defence of the imposing a high tariff, at all events in
Colonies, are
(1.) We must have Revenue, and we can best get
it by the means of customs duties.
(2.) Even Mill allowed there might be something
to be said for protecting, by a high tariff, the
industries of a rising community.
(3.) If you don't protect by customs duties, you
will have a merely barbarous state with no manu-
facturers, no civilized industries.
(4.) You must protect yourself by a high tariff
when you have a much more populous neighbour
rigidly protecting himself by a high tariff.
One-sided Free Trade. 139
These are the pleas we have heard used by states-
men in Germany, Victoria, the United States, Canada,
and other places ; and we know they are pleas that
are acted up to.
I would call the attention of those who hold such
views for one moment to certain recorded results, in
which they will find ample food for reflection.
2. I would ask them to consider the one instance
of Hong Kong. Here is a small community, intimate
neighbour to an empire which is out of all compari-
son more populous and which protects itself by every
means of restriction and exclusion. And yet this small
community is in a most flourishing condition; thriving
in all civilized industries, manufacturing much, and
contributing a sufficient revenue of 1/. Is. per head of
inhabitants; although it levies no customs duties
whatever. These are recorded results that Pro-
tectionists everywhere should carefully weigh and
ponder over. I do not for one moment say that all
the prosperity of Hong Kong is due to her having no
customs duties. All I wish to point out is, that a
young community contributes a very large revenue,
and flourishes in all civilized prosperity, not even
omitting manufacturing industry, though it imposes
no customs duties whatever. It flourishes in all these
respects without the aid of that shield of Protecting
140 State Aid and State Interference.
duties which Protectionists tell us is vitally essential.
It flourishes in every way, though it pursues a policy
of what some call ' one-sided Free Trade/ that is,
about as one-sided as such a policy can well be.
Full details of all this happens to 'have been
recently published in an Official Report, by the
Governor, Sir John Pope Hennessy, on the condition
of Hong Kong in the year 1876, and again in the
year 1881. This official comparison is both suggested
and rendered possible, because it so happens a census
was taken in the year 1876, and again in 1881, when
all the British Empire underwent the same process.
In the absence of a customs tariff, it is scarcely
surprising to find trade and commerce increase at a
rapid rate. Nor is it surprising to find a concomitant
development in all the divisions of social growth.
On the one hand we find that the boats used in the
harbour for landing and transferring cargoes, which
numbered 1,860 in the year 1876, had, by the year
1881, increased to a total of . 2,780. There are tour
times as many steam launches in the latter as in the
former year. And the Chinaman traders the busy
Hongs, who introduce English manufactures into
China and the various branches of money-lenders
and local traders, and dealers, had risen iu number, in
five short years, from 1,200 to 4,000. It seems but
One-sided Free Trade. 141
natural to read after these figures, that in all details
of social growth considerable and corresponding pro-
gress had taken place. For instance, during the last
year to which the Report refers, Chinese had pur-
chased landed properties in the Colony to no less
an amount than 600,000/. This is a very surprising
growth ; but Free Traders will only say of it that it
was but to be expected.
And yet when we look further into details, we see
much that must interest those who allow there is
something in the four contentions mentioned at the
commencement of this chapter. We find that the
population had increased from 139,000 to 160,000,
and that the increase was largely accounted for by
an increase of 20,000 in the number of Chinese.
Many of these were immigrants from China, and the
remainder natural increase of previous arrivals, who
preferred Hong Kong to China. And yet in China
all industries are hedged round with a wall of Pro-
tection, to defend them from those breezes of free
competition to which all industries in Hong Kong
are so fully exposed.
3. In each census elaborate details are given of
the employment of the population. We may con-
veniently class these under four heads. Commerce
and Trade, will include the Hongs, money-lenders,
142 State Aid and State Interference.
dealers, traders, merchants, and all engaged in ex-
change especially in such Chinese commodities as
birds-nests and joss-house requisites. Manufacturing
will include the numerous makers of innumerable
articles of boats, cigars, glass, matches, sails, boxes,
lanterns, rifles, sauce, soap, spectacles, sugar, tooth-
powder, umbrellas, and vermilion. Among mechanics
and artisans we find carpenters, smiths (of all metals),
masons, rice-pounders, stone-cutters, and tailors.
And lastly, we have a large class more intellectually
employed as doctors, druggists, dentists, architects,
fortune-tellers, schoolmasters, portrait-painters, stu-
dents, and photographers. Placed in a tabulated form
these records yield a significant lesson.
TABLE.
Employment of Chinese in Hong Kong, 1876 and 1881.
Employment.
No. in
1870.
rernentni e
of Total
Pornlo-
tion.
No in
ISM.
IYr'TTltv."l'
of Total
i Popula-
tion.
i Commerce
1,400
1
1,300
10
Manufactures
9S0
t;
in
1,490
1 "'.a
Mechanics
r,os i
' 10
10,200
'' "' 10
i Intellectual Occupations
1,CG0
10
3,240
2
Totals
10, 520
"Ys
19,230
12
One-sided Free Trade. 143
There has thus been a steady and large growth in
the employment of the natives in the arts and
industries of civilization. No doubt much of this is
due to the particular encouragement given by a
free port to commerce and shipping. We read, for
instance, in the description of Hong Kong, given in
the Colonial Office List : " Hong Kong is well pro-
vided with dock accommodation. There are five
docks and three slips, which are well supplied with
shears, engineers' and carpenters' shops, foundries,
and every requirement for making large repairs to
ships of war and merchant vessels." But if we add
to the list the European adults, we shall find engaged
in these and numerous other industrial and manu-
facturing works more than 20,000, in a total popula-
tion of only 160,000. Such a result compares very
favourably with what has been attempted in the
Colony of Victoria in Australia for instance. There
a high protective tariff has been set up, specially for
the purpose of fostering manufactures, and yet we
find that there only 56 ; 000 people are employed in
manufacturing industries out of a total population
of 860,000, one for every 15. In Hong Kong, with
no tariff whatever, and with an enormous densely
populated protected country of similar race in close
proximity, there are 12 ; 000 people so employed out
144 State Aid and State Interference.
of a total population of 160,000, one for every
13 of total population. Thus not only in the
matter of prosperity but of employment as well
there exists a state of things in Hong Kong the very
reverse of what the advocates of Protection tell us
must occur in young communities unless they set
up protective customs tariffs.
4. Another class of theorists, many of whom arro-
gate to themselves the functions and fame of states-
manship, tell the world "We leave to academic
political economists this question of high, low, or no
tariffs ; we are concerned with every-day life ; we have
to raise revenue ; and our academic friends involved
in the clouds of abstract theory will not condescend
to allow us the means of raising revenue." Many
have said and written, that customs duties, and high
customs duties too, are absolutely necessary in Colo-
nies, for the purpose of raising the necessary revenue.
And yet we find Hong Kong, like the Colony of the
Straits Settlement, successfully raising a very con-
siderable and an elastic revenue, without the aid of
any customs duties whatever. I do not for one
moment advance this in evidence as to the universal
and absolute condemnation of customs duties, but
merely as proof, by recorded results, that revenue
can be raised, and successfully and abundantly raised,
One-sided Free Trade. 145
in their absolute absence. The following short table
exhibits clearly the relative Revenues derived from
taxation in four of our Colonies, per head of
population :
Revenue
Revenue. Population. Per Head.
s. <t.
Victoria High Tariff . . . 1,700,000 ... 850,000 ... 2
New South Wales Low Tariff. 1,400,000 ... 720,000 ... 1 19
Hong Kong No Tariff . . . 221,000 ... 160,000 .. 1 7
Straits Settlements No Tariff . 366,000 ... 270,000 ... 1 7
When we remember that the Straits Settlements
and Hong Kong have little or no interest to supply
on any public debt but that both Victoria and New
South Wales are considerably burdened in this
respect, we shall see that these two free ports obtain
ample revenue without resort to customs duties.
It is often supposed that Hong Kong can afford to
do without customs duties, because of her rich opium
monopoly. It is therefore worth while noticing that
the opium taxation only yields one-fifth of the total
Revenue. The bulk is derived from licences of vari-
ous kinds and stamps, house-duty, and sundry small
fees. And, after all, this opium revenue is 40,000/.,
from a population of 160,000, or 5s. per head ; and
the revenue from tobacco in England is 8,000,000/.,
from a population of 34,000,000, or as nearly as
possible the same amount per head. An adequate
L
146' State Aid and State Interference.
revenue is raised without appeal either to customs
duties or income-tax ; and the experience of Hong
Kong is, so far, a recorded result of the highest
value, no less to the practical statesman than to the
student of political economy.
The four objects mentioned at the beginning of
this chapter ; the raising of Revenue ; the starting
industries ; the promotion of the arts of civiliza-
tion in a young community ; and the defending a
young community of small size against the over-
whelming influences of a mighty Protectionist neigh-
bour ; are found, in the recorded case of the recent
growth of Hong Kong, to be obtainable without the
aid of any customs tariff whatever. This is a lesson
which may well and wisely be taken to heart by
many statesmen, not only of our own Colonies but of
the United States, and even of the Mother country
as well and it is a lesson which should be specially
valuable to those who talk and write so much
on the subject of " One-sided Free Trade."
A Low Tariff Empire. 147
CHAPTER VII.
A LOW TARIFF EMPIRE.
1. Our Trade with our Colonies is growing faster than our Foreign
Trade, and more steadily. 2. We are not as yet properly
alive in England to the importance of securing this New
Trade. 3. We are the only nation that does not endeavour
to secure Free Trade within its own frontiers. 4. We have
several Classes of Colonies all of which would profit by Intra-
national Free Trade. 5. The several Colonies should unite
with England in spontaneously agreeing to keep their tariff's
low. g 6. Then they need not fear outsiders, but will one aud
all secure their own highest prosperity.
1. It is commonly acknowledged that since its
adoption of the principles that now regulate its
commercial policy, the English nation has enjoyed
forty years of unexampled growth and prosperity.
But what is not so often acknowledged is the equally
important fact that the nation in this prosperous
development has appropriated vast unoccupied tracts
of the earth's surface ; and that these appropriations
which, not many years ago, were penal settlements,
l 2
148 State Aid and State Interference-
struggling whaling stations, or distant trading fac-
tories, have now grown into communities, whose
wealth, success, and importance already give them
claim to take rank among the prominent States
of the earth.
This rapid growth of the oversea portion of our
Empire is at the present moment silently but surely
making its weight felt in the most important
interests and works of the nation. Among these
none holds so important a place as the interchange
of the products of industry. ^Natural and human
forces exist in so vast a variety of combinations that
each country seems always able to supply to every
other country some definite products at a profit ;
and it is on this natural exchange that the progress
of the human race in prosperity seems to depend.
These forces at present at work in England make us
produce a large surplus of manufactures. And if we
cannot sell this surplus, so much of our labour is
in vain, and the product of so much of our energy
absolutely valueless. What we must have is access
to outside markets. But if we sell in markets in
other communities we can only do so by obtaining
access on terms settled by these other communities,
and often dictated by considerations which have
but little relation to commercial or even to economic
A Low Tariff Empire. 149
needs. The terms of this access in Holland not
so long ago, and in France at the present moment,
depend rather on the political strategy of ministries
than on the economic advantages of the nations
concerned.
And yet our export manufacturers are putting
forth all their vigour to prevent a rise in the French
tariff. Our whole manufacturing body freely and
liberally support the efforts and expenditure of our
Foreign Office in its endeavours to keep low on the
European continent the " price of access to conti-
nental markets." England spares no effort and no
expense to maintain this established " custom." But
up to the present, England has paid only too little
heed to a new " custom," springing up in unlooked-
for directions, a new "connection" which bids fair
year by year to rival and to supplant this older
connection.
Probably few of our manufacturers are aware of
the following recorded results :
TABLE I.
Value of English Manufactures Exported to
Europe. Other Foreign Countries. Our Colonies.
1S70 . . 54,600,000 34,600,000 44,200,000
18S0 . . 52,400,000 32,900,000 58,500,000
Decrease 2,200,000 Decrease 1,700,000 Increase 14,300,000
130 State Aid and, State Interference.
TABLE II.
Valce of Total Trade of United Kingdom with
European Neighbours.* Other Foreign Countries. Our Colonies.
1873 . 157,000,000 373,000,000 152,000,000
1877 . 150,000,000 332,000,000 165,000,000
Decrease 7,000,000 Decrease 41,000,000 Increase 13,000,000
* France, Belgium, Holland, and Sweden and Norway.
From these two tables we learn two lessons. The
first is that our own Colonies are growing into
markets not only already equalling in magnitude the
older established markets of other lands, but pos-
sessed of the further admirable attribute of unlimited
future growth. Our trade with France is practically
stationary ; our trade with our Australian Colonics by
itself already equals our trade with France. With
France we have no reasonable prospect of a larger
trade, because France is fully peopled and fully
developed. With Australia our prospects of increased
trade are commensurate with the fact that in
Australia we have a continent capable by its own
inherent fertility of supporting in prosperity a popu-
lation of 200,000,000 human beings, and at pre-
sent yielding wealth to a bare 3,000,000 of human
workers. We make every effort to secure access to
the dwindling French market : we make no public
or appreciable effort to secure access to this real
" market of the future " that invites us in Australia.
A Low Tariff Empire. 151
And what holds true of France and of Australia
holds true of the whole of Europe contrasted with
the whole of our Colonial Empire. In Europe we
have a market old-established indeed, but in com-
munities themselves fully developed, and moreover
of natural and human forces very similar to those of
our own islands. In our Colonies we have all this
new grand possibility of markets (of which we have
an earnest in their present rapid growth) in com-
munities differing essentially in the character of
their natural and human forces ; and therefore of far
more certain value in the natural interchange of
products of industry and enterprise. The Australian
continent is overrun to grow wool, but its sparse
workers in such industries congregate only reluc-
tantly with sufficient concentration to produce con-
ditions favourable to the genesis of the industries
that find favour with the close- packed population
of these islands. The areas we occupy in the tropics,
where white labour is impossible, can be our allies
but never our rivals. They can supply us with cotton
and with sugar. But it will require a new civiliza-
tion, a new order of mankind, to enable them to make
for themselves machinery or even clothes on terms
that can at all compete with the human vigour and
the applicable mineral resources these islands possess.
152 State Aid and State Interference.
Nor is it only of trade between England and the
Colonies that cognisance is being forced upon us.
There exists also a rapidly growing inter-colonial
commerce already of vast dimensions. The tonnage
of the shipping employed in this trade alone already
excels that of France and Germany added together.
The great Australian tea-market is now being largely
supplied from Ceylon and Assam. The very life
of some of our West Indian Colonies depends on
the fact that ships bring them continual supplies
of labour from India. As the British Empire grows,
so is it proved that the mainspring of its prosperity
is free intercourse between its parts.
The second table supplies us with a second lesson,
significantly witnessing to these things. We see in
this table the recorded effect of commercial depres-
sion on our trade. The Colonies record a protest,
and no mean protest, in our own favour. During
the four years of depression immediately succeeding
to that notorious period of inflation culminating in
the year 1873, we find our trade with our Colonies
continued to incitase to the amount of 11 per cent. :
we find our trade with foreign countries continued to
decrease to the amount of 11 per cent. If we pay
heed to it, we have here an invaluable hint as
to the compensating influences resulting from width
A Low Tariff Empire. 153
of area and diversity of forces, both natural and
human, provided their individual energies contribute
in mutual union.
2. The surface of the World, so far as Englishmen
are concerned, is held by two classes of communities ;
the one class altogether independent one of another
in sentiment and kinship, and only held together in
any kind of forbearing union by the selfish interests
of each individual community. The second class is
a whole made up of homogeneous parts bound to one
another by the powerful ties of national character and
sentiment, as well as by the selfish interests of each
individual community. This former class presents a
mere discrete agglomeration of Foreign States ; the
latter class embraces the wide-spreading provinces
of the British nation. The one class Englishmen
seem to be able to affect only by the means of
threats and destructive retaliation ; the other class is
directly ruled and controlled by Englishmen.
It needs to insist upon the strange fact, that while
England is maintaining at great effort a precarious
and utterly untrustworthy commercial connection
with foreign states, the average public seems dog-
gedly to shut its eyes to the opportunities afforded
by England's extensive empire. It is true this
unaccountable error disappears when we look to
154 State Aid and State Interference.
that main but silent current of industrial endeavour,
which runs its course, fed by every streamlet and
font of individual interest and enterprise, consistently
in the true direction of success. This current has
long ago recognised that within the frontiers of its
own empire the lively productive enterprise of the
English race has plenty of scope for the profitable
exercise of all its powers : there are long years, long
centuries of work, before these ample resources shall
be, all of them, opened out. The Australias, by
themselves, are equal in area and in natural capacity
to the whole of Europe. In the Canadas and the
districts of South Africa the English race possesses
yet another potential Europe. And in India and the
various tropical Colonies the nation possesses surface
and wealth of resources equalling those of Europe.
TJie nation owns, then, an extent of surface and a
variety of natural resources equal to three Uuropes
conjoined. Here then we have a field not altogether
insufficient for employing the best energies of a
nation of 50,000,000 people, and for providing
unlimited scope for an unlimited increase of this
nation.
Mr. Neufchatel in Endymion makes the appro-
priate and wise remark, " We do not want measures ;
what we want is a new channel." At the present
A Low Tariff Empire. 155
moment our manufacturers and our exporters want
for their relief not measures but new channels ; and
trade, if we look to figures, is endeavouring to carve
for itself a new channel in the mutual supplying of
our wide empire. The great engine to the successful
development of a vast mine of rich natural endow-
ments is assured freedom of exchange. Labour and
capital, energy and enterprise, skill and abstinence
these bases of successful production must be assured
their opportunities of exertion over this vast field.
In such case, and in such case alone, there opens out
for Englishmen a new future of signal prosperity.
But the fact is that although England enjoys free
trade, Englishmen do not. There is free trade in
Great Britain ; there is free trade in the Britsh Isles.
But there exists also a greater Britain ; there are
British Isles, ay, and British continents, over the
Atlantic and the Pacific, that at the present have not
the assured advantage of free trade, and thus every
moment run the risk of a relapse to the evils of
fettered production and fettered exchange. It is
undoubtedly true that the British Empire is, in itself,
for the next century or so at all events, a complete
world of production and consumption. But it is a
world which does not at the present enjoy that true
commercial union which insures freedom both of
156 State Aid and State Interference.
exchange and of production. And yet it is a world
so circumstanced that it may, immediately if it will,
institute for itself the undoubted benefits of such
union ; for it is a world inspired at the present by
the two essential bases of human union, community
of material interests and community of national
spirit.
3. The very prime question in the whole matter
is the reason why there is not this free trade. And
the answer is simple. Under present conditions any
' self-governing ' Colony finds itself free to adopt a
policy of protection if it will. Consequently English
merchants, manufacturers, or producers, no matter
where they may 'build their castles within the
Queen's dominions,' have at the present no guarantee
that they shall enjoy freedom of exchange in regard
to other portions of these same dominions. This is a
statement that can be made of no other nation past
or present, and it states a condition of things diame-
trically contrary to all accepted principles of national
union.
It was a quarrel about duties that caused us the
irreparable loss of the United States. And the very
first action taken by the citizens of the New Republic
was solemnly and irrevocably to institute perfect
freedom of exchange within the frontiers of their
A Low Tariff Empire. 157
own new empire. Within those frontiers customs
duties are to this day an impossibility. This emi-
nently wise resolution has been one main element in
the growth and prosperity of the United States. In
all ages so soon as and whenever industry and com-
merce win for themselves a supremacy in the face of
politics and war, at once extended freedom of com-
mercial intercourse is sought as an essential to exist-
ence. A Customs Union was the first sign of a
modern German nation. The jealous ' national
independence ' of the petty German states in the
early years of this century soon discovered the fact
that free interchange of products was the one great
mutual interest none could afford to forego.
Moreover, at the present moment, if we look Iq
foreign nations, we see everywhere signs of a ten-
dency towards 'customs union.' Italy is straining
every nerve, by the curious means of an elaborate
reciprocity, to bind up as many nations as possible
in close intercourse with herself. Belgium and
Holland, and also Austria and Germany, are con-
templating closer customs union. The United States
is eager to obtain secured commercial footing in
Europe. Spain is in earnest struggle to adjust the
commercial connections of her colonial empire.
Thus the English nation stands at the present
158 State Aid and State Interference.
moment in a very singular position. It is an
anomalous and a self-contradictory position, but yet
one of those that recur in the history of nations that
grow, and are not manufactured. The thoroughly
English principle of self-government has now de-
veloped to such perfection in the larger provinces of
the English Empire, that the fiscal policy of each
province is Tegulated by the local Parliament. But
this development has had an unlooked-for, an
unexpected issue.
There have arisen cases in provinces where this
self-government rules, in which the fiscal liberty has
run to seed, and become fiscal licence. The con-
sequence is that what was originally a grant or
concession of liberty to the individual has threatened,
in these latter days, to become a liberty that is
destructive of the same liberty granted to the other
individuals.
It seems to me that so long as this nation remains
a nation it is not only its interest, but its paramount
duty, to see that the liberty of any of its component
parts be not in any way infringed by the action of
other parts. Moreover, the fiscal liberty originally
granted was merely and simply the handing over,
tor geographical reasons, to each separated commu-
nitv <f Englishmen their right to devise and supply
A Low Tariff Empire. 159
the means to their own local government. To use this
liberty for other purposes, such, for instance, as the
discouraging the importation of particular products
from some other English community, seems to me a
direct subversion of this liberty, a distinct breach of
the grounds on which the nation made the conces-
sion. And the proof of this is the fact that the
using of it for these other unforeseen purposes at
once interferes with the grant of this liberty to the
other English communities.
Earl Russell in one of his speeches about the time
of these concessions, distinctly acknowledged this
principle :
" With regard to our colonial policy, I have already
said that the whole system of monopoly is swept
away. What we have in future to provide for is that
there shall be no duties of monopoly in favour of one
nation and against another, and that there shall be
no duties so high as to be prohibitory against the
produce and manufacture of this country."
Earl Russell, with penetrating foresight, saw the
high commercial value our Colonies were to be to us.
And yet Canada has set up a high tariff, shutting
out some of our products ; and Victoria has done the
same. It is, however, satisfactory to hear in mind
1G0 State Aid and State Interference.
that of our eight self- governing Colonics, only these two
have as yet stepped aside from the right path. Canada,
however, proffers the somewhat valid excuse of
special necessities, bred of her political contiguity to
a 'foreign' state of peculiar commercial views, and
Canada has taken the lead in demanding free trade
for all within the Empire. Victoria has no excuse
but the fact that a crude but specious theory com-
mends itself for the present to a majority of her
manhood-suffrage rulers.
The awkward question remains, why, when with
self-government the nation conceded the obvious
addition of fiscal liberty so far as the raising of revenue
was concerned, the nation did not rigorously watch
that any other fiscal action, which in any Avay cur-
tailed the liberties of other sections of the nation,
and for purposes other than revemic, should have been
allowed or disallowed as a totally distinct question.
4. To the practical politician the interest centres
in some adequate remedy: for the evil is accom-
plished : and any analysis of its demerits and its
causes is only of use so far as it enlightens us in
regard to its removal.
Inadequate information or thought leads many to
forget that an authority still exists supreme over ;i!l
others within the Empire. It is, indeed, only under
A Low Tariff Empire. 161
the shield of this central authority that the various
self-governing provinces enjoy this liberty to govern
themselves. But these various self-governing bodies
are constitutionally subordinate to the Imperial
Parliament ; the true explanation of their virtual
independence is the fact that the Parliament has
delegated, for the sake of obvious expediency, some
of its powers to certain bodies of Englishmen, segre-
gated by long distances of ' disassociating ' ocean.
But the natural tie of supremacy remains ; sanctioned
by the indisputable fact of the far greater material
and human power congregated in the centre of the
Empire ; and illustrated both by the eager willing-
ness of the mother-country, on the first suspicion of
danger, to spare no exertion to render adequate
assistance to her oversea provinces, as well as by
the wise habit of colonial statesmanship to look to
the St. Stephen's Parliament for political inspiration
and guidance.
Nevertheless self-government, implying self-sup-
porting government, involves self-taxation, and so
the self-adjustment of fiscal policies. Each com-
munity of Englishmen may tax themselves how they
will to maintain their community in its corporate
concerns; but to strain fiscal policies beyond the mere
maintenance of government is a course of action legal
M
162 State Aid and State Interference.
only on the condition that it do not touch upon the
independence of otlier provinces of the Empire, and
so interfere with the grant of self-government to the
other provinces.
It is against the equity no less than the interests
of the Empire as a whole that any one band of
Englishmen should impede the industrial progress of
any other band. It is by the crediting aid and
material support of the rest of the Empire that our
Colonies spring into being and continue to rise in
stable prosperity. England sent money, brains, skill,
and muscle to Victoria, as she is now sending them
to Natal. So is a prosperous community originated.
Is that community to turn round and, with scant
thanks, say, ' Now you have given us all we require,
we will, if you please, keep all this for ourselves, and
not allow the rest of the Empire to participate in the
benefits it has conferred on us ' ? Communities of Eng-
lishmen, at all events, are not likely to proceed on
these pleas. They may, for the nonce, be led astray to
consider they are doing themselves good by protec-
tion or other such policy, but they will recognise, at
the same time, that not only their duty but also
their interest lies in maintaining the spirit and the
principles that have brought their race all its signal
prosperity. It may be hold, thou, that with all the
A Low Tariff Empire. 163
various grades of self-governing communities which
form the British nation at the present time, some
means of expression is surely attainable which shall
make all acknowledge in their various degrees of
constitutional spontaneity the essential utility and so
the absolutely binding nature of freedom of exchange
within the boundaries of the Empire.
The St. Stephen's Parliament takes direct fiscal
charge of most of our Colonies. Many of these have
been with extraordinary success made into abso-
lutely free ports. Such are the thriving entrepots of
commerce, Hong Kong, Singapore, and Gibraltar.
There remain those groups of Colonies possessing the
right of spontaneous action in this matter in
Canada, in Australia, and in South Africa.
These three cases differ essentially from one
another. In Canada we have a community of some
four millions in political contiguity to an energetic
foreign state of some fifty millions. This state,
keeping closed its own markets against Canadian
produce, attempted to flood Canadian markets. The
Canadians, in natural pique, raised up the wall of a
high tariff to stay this evil. This policy has been
inspired by two motives, the one to force the United
States to a policy of reciprocity at all events, if not
of mutual free trade ; the other simply to reserve
M 2
164 State Aid and State Interference.
the Canadian market at all events for Canadian pro-
duce. This latter is no doubt the policy most in
favour with Canadians. They feel there is dangerous
similarity between the products of Canada and of
the States, these being the resultants of similar
natural and human forces. They know the compe-
tition of the larger threatens to swamp that of the
smaller. Canada feels that if she be shut out from
her own market her case is hopeless. And yet the
case is little mended by her shutting herself up in
her own market. Happily for Canada she yet
retains, if she will, the market of the world through
England. England is eager to buy of Canada if
Canada will only buy of England ; and in this case
there is no destructive competition because the pro-
ducts exchanged are the resultants of very diverse
natural and human forces. Such a policy at once
opens up the whole world as a market for Canadian
produce. It enables Canada to compete, at insuper-
able advantage, with the United States for Eng-
lish custom. Englishmen will naturally purchase
American produce where they can pay for it
' in kind.' Trade always flows in those channels
where it maets with least obstruction. The ship
that leaves England to load with wheat will
always go by preference to that port where an
A Low Tariff Empire. 165
outward cargo of English products can be sold
with. least obstruction.
The case of the Australians is of a totally different
character. Here we have seven large Colonies at the
present existing in total fiscal independence of one
another. But as these seven Colonies fill up with
population they feel more and more their geo-
graphical contiguity ; and already in addition to the
increasing expense of collection of duties along thou-
sands of miles of border, all the evils incident to
fettered intercourse are rapidly developing. At the
recent conference in Sydney every Colony, with the
single exception of Victoria, strongly supported a
movement in favour of a uniform and low tariff
for all the Australasian Colonies.
And Australians are looking further afield. They
know that each . one's staple products wool, and
wine, and gold, and wheat, and meat are exactly
similar ; the resultants of precisely similar natural
and human forces. Thus, if they would achieve a
right prosperity, they must exchange them with
other commodities, the resultants of differing natural
and human forces. This is necessary if they would
secure the rewards due to their peculiar productions.
Australians, both before and after the question of a
customs union amongst themselves, will be ready to
166 State Aid and State Interference.
acknowledge the high benefits of assured freedom of
exchange in the widespreading and varied market of
the British Empire.
The case of South Africa just now occupies promi-
nent public attention The quarter-million of Euro-
peans colonising South Africa have been and are
unable to hold their own physically with the vast
hordes of natives within and -without the territory
they have taken on themselves to civilize. The rest
of the Empire aids them in this their uphill task.
Were it not for this aid, the European element in
South Africa would long ago have been driven into
the sea. The people of England are paying to retain
South Africa as a market for their wares and as an
area of supply. They have the right, let us hope
they will have the reason, to see to it that they are
repaid by the mutual benefits of freedom of com-
mercial intercourse. The Cape Colony, alone in
South Africa, has fiscal independence of the Home
Government. But the Cape is as much interested
as any to secure permanent European supremacy
over the African natives. This can only bo secured
by the permanence of English aid, and the price of
this, a price the wise men at the Cape will, for their
own interest, willingly pay, is the secured assurance
of freedom of exchange with the rest of the Empire.
A Low Tariff Empire. 167
All the Colonies must feel that commercial union
is even more important for them than for England.
They know they obtain, by means of continued con-
nection with England, safety and credit ; those two
pillars of prosperity which alone support a com-
munity from sinking under hostile aggression or
commercial restriction. But this connection is a tie
which must defend in the main on identity of material
interests. And this identity can only be preserved
by the means of commercial union.
All these Colonies do feel that commercial union
is desirable. Indeed we have just witnessed in
England what may be described as the first com-
bined act of our Colonies on approaching manhood ;
the first great move in Imperial politics that has
originated in the Colonies. Accredited representa-
tives of their interests have met in London, and with
the assistance of leading Englishmen have founded
an association " for the promotion of the commercial
interests of the British Empire, and for the preserva-
tion of its unity and integrity to draw closer the
trade relations between its various component terri-
tories." This is a startling reply to those who in
ignorance conceived that the colonists, the very men
who, by the indubitable standard of practical success,
were admittedly the best judges, made no move in
168 State Aid and State Interference.
the matter. That the Colonists should come to
England and agitate in favour of low tariffs through-
out the Empire is a most welcome sign of the increased
vitality of the English race. It remains for those to
whom the prosperity of their nation is matter of
concern to support and recognise this wholesome
movement.
5. The British Constitution has, then, to be drawn
upon to provide for a new development which has
grown up with the growth of the Empire, and which
presses on us as the inseparable accompaniment of
the continued prosperity of the Empire. It needs
no keen sight to see that community of material
interests is crying aloud for unfettered commercial
intercourse; and we know that community of
national sentiment and tradition, as well as of enter-
prise and industry, yet flourishes in the nation ; and
that this community is the one powerful agent in
any national effort. We have a national conscious-
ness of the right end : statesmanship has to see that
efficient means are adopted to give effect to this
consciousness.
I must own that the one main fact graven on my
own mind after sojourning in nearly every one of our
Colonies is the fact that the English nation, if it
remains in close commercial union, is only in the
A Low Tariff Empire. 169
infancy of its career. All great statesmen who have
understood our Colonies have come to this con-
clusion. Earl Russell summarised the case in the
strong words, " There is no greater benefit to man-
kind that a statesman can propose to himself than
the consolidation of the British Empire."
And great statesmen have discussed the means to
this end. Lord Grey, in an article in the Nineteenth
Century, has shown most amply and conclusively the
great material injury that attempts at Protection in
our Colonies have done to their own individual pros-
perity as well as to the commerce and industries of
Great Britain. He laments with great power of
reason the policy that has prevailed in late years of
relinquishing the control previously exerted by the
Imperial Parliament over the commercial policies of
our Colonies ; and he would resuscitate the ancient
' Committee of Council for Trade and Plantations ; '
and, with the aid of the various Agents-General of
our self-governing Colonies, set up in England a body
of such authority and influence as to justify Imperial
supervision of all Colonial commercial policy in the
spirit of justice to all members of the Empire.
It may not be without advantage to set side by
side with this yet another scheme with similar aim.
The essential principle of procedure is simple. The
170 State Aid and State Interference.
Imperial Parliament resumes its supreme control
over the commercial as distinct from the fiscal
policies of the Empire ; but in so doing it takes
ample cognisance of the fact that large portions of
the Empire have a prescriptive constitutional voice
in this rearrangement. Indeed, action should be
taken on the invitation of the various self-govern-
ing Colonies. There must be combination and
mutual agreement, quasi- diplomatic if necessary, in
favour of low tariffs throughout the Empire. And
the Imperial Parliament will be charged with the
task of defending and maintaining for the future
this new charter of industrial prosperity. It is true
the United States will not allow local tariffs even for
the purpose of raising revenue ; but the low tariff
necessary for revenue purposes is practically but little
hindrance to trade. All that is necessary is that, by
the direct means of the spontaneous action of enlight-
ened local government, and by the indirect influence
of advice and information, the various communities of
the British Empire may come to subscribe, each in its
own degree of autonomous action, to an agreement to
keep its tariffs low. For this purpose one of two prin-
ciples would suffice. Earl Russell suggested the one,
viz., that no customs duties should exceed a certain
ad valorem percentage. A second principle would be
A Low Tariff Empire. 171
the rule that no customs duty be levied for any pur-
pose save that of raising revenue. Thus could be
secured the inauguration of that free exchange of
products between all Englishmen which, if we regard
the teachings of the past, augurs a future of unpre-
cedented prosperity.
6. I have reserved till the last what is perhaps
the most important point in the whole case ; and
that is the question as to the position such a com-
mercially unified Empire is to hold to outsiders.
The courses possible are practically reduced to two
the one the exclusion of outsiders, the other the
non-exclusion of outsiders.
To exclude outsiders is to appeal to the selfish
concurrence of one or two interests affected favour-
ably by such action. It is not and cannot be denied
that the nation as a whole must be the loser. All
see there is no reason in a policy which shuts off
supplies and custom other communities are willing
to afford. The advocates of this policy have but one
plea that is likely to obtain patient hearing. This is
the plea that high duties to those outside the union
are the sole means to inducing those outsiders to
lower their tariffs and join the union.
It is even said that without some such national
fence Colonies themselves will be loth to join. I
172 State Aid and State Interference.
have already given the grand answer to this conten-
tion in noting the recent actions and expressions
proceeding from the Colonies themselves. This point
is sometimes not quite grasped in high places ; the
feelings and acts of two only of our forty Colonies,
because they chance to be feelings and acts that run
counter to the general national tendencies, are apt
to assume undue prominence, and have even been
regarded as typical of the acts and feelings of the
whole. They are distinctly not so. All the en-
couragement our Colonies require is the guarantee
that low tariffs shall exist en permanence in all
British markets.
The alternative plan, the non-exclusion of out-
siders, implies a low tariff for all without exception.
It is a plan which will ultimately prevail if only we
pay any heed whatever to reason, experience, and
expediency. A low tariff all over this vast agglo-
meration of English markets will supply all these
markets with products at their lowest cost of pro-
duction. Each English community will then batten
on the fact, which has done so much to enrich
England, that whatever it uses or consumes will be
obtained ;it the lowest cost possible. This is the
one main condition of profitable production. This
plan prevents any portion of the nation wasting its
A Low Tariff Empire. 173
energies on products that can be produced cheaper
elsewhere.
For instance, for many years to come the Colonies,
if they judge aright of their real economic position,
will be the natural markets for manufactures, the
natural producers of raw materials. Manufactories
only thrive in centres of dense population. Sparse
populations, occupying vast tracts of fertile and
virgin soil, if they would profit most will produce
cotton, and wool, and wheat, and minerals. Among
such populations, if there is no baneful interference
of high tariffs to subvert the natural order of pros-
perity, our home manufacturers will be assured
natural and extensive markets for their wares, and
reliable and inexhaustible supplies of those raw
materials and food-stuffs which we are prevented
producing in these islands by reason of the fact that
our manufactures employ a population too dense for
so utilising our limited area of soil. We have to live
on and not out of our soil, because we are in the
manufacturing and not the pastoral or agricultural
stage. Our Colonies are in these other stages,
and to keep tariffs low is to enable all to profit by one
another s opportunities through the medium of free
exchange.
; That a high tariff for outsiders is unnecessary, we
174 State Aid and State Interference.
see when we remember the natural expediency of a
low tariff. Trade is forced, by the insuperable power
of its own inherent attributes, to flow along that
channel which has fewest obstructions. Interchange
of products always does and always will thrive and
increase most where there are fewest restrictions.
To that community, in which low tariffs are esta-
blished with certainty of no upward change, trade
will be diverted by the damning obstructions of
high tariffs elsewhere. In this we shall find the
natural ' sanction ' that low tariffs, permanently
established over the British Empire, will increase
the interchange of products, and in so far develop
every industry and enterprise.
There will be a natural tendency to buy our
wheat of Canada and not of the States when we
know our manufacturers meet with no obstruction
in the one case, and with every obstruction in the
other. And we shall take not only wheat but
watches, or lard, or any other specialty of American
production for which Canadian soil or people may
develop special aptitude. And so with Australia,
or India, or the Cape, we shall go to them naturally
for our wool and our tea and our wine, if outward
cargoes of manufactures can be sent in the ships
that fetch home these goods.
A Loiv Tariff Empire. 175
With low tariffs so established over the British
Empire we shall win the vast advantage of being
less affected by the actions of foreign and inde-
pendent countries. These actions, by the reason of
their uncertainty, have been our bane in the past,
and bid fair to be our bane in the future. We made
treaties to obtain for ourselves wider markets and
wider areas of supplies in the days when we had
only foreign countries open to us. But now our own
kith and kin, we ourselves, have become possessed of
countries offering in the future more than the equi-
valent of these markets and these areas ; and by the
simple expedient of preventing the rise of restrictions
on commercial intercourse we are likely to secure
these markets and these areas, and to win for our-
selves exemption from the only compelling power
that of old forced us to seek to conciliate foreign
powers. We can now, if we will, take our stand on
our own self-sufficing independence. On this secure
ground we can tell foreign nations we have no need
of treaties. We are our own market and our own
source of supply ; and if foreign nations bar them-
selves by high tariffs from the great benefits of free
intercourse, it concerns them indeed, but it concerns
us no longer. The new British Empire affords us
other avenues and other openings.
176 State Aid and State Interference.
The malign influence of differential duties, elabo-
rate treaties, bounties, reciprocity, retaliation, and
even protection itself, together with all the evils
incident to the interference of policies having no
political, national, or economic connection with
countries they deleteriously affect, will all be
banished from within the frontiers of the British
Empire. Their evil results will recoil on the
foreigners alone, and leave the reproductive energy
of our vast Empire to work out its own great
prosperity untrammelled and unimpeded ; with that
true freedom of action which consists in the power
of acting independently of foreign determining
causes, and which is the condition most essential
to the success of that human co-operation or ' band-
work' which has been shown to be the one main
lever of human prosperity.
Foreign Competition in Agriculture. 177
CHAPTER VIII.
FOREIGN COMPETITION IN AGRICULTURE.
1. The British Islands are becoming more Manufacturing and
well-to-do, and less purely Agricultural. 2. American
Prairie-cropping must in a few years wear itself out. 3. The
price of American "Wheat must increase. 4. America be-
comes rapidly populated. 5. Americans really compete
chiefly with our other Foreign Purveyors. 6. Canada will
supply Wheat, but not at permanently lower prices. 7. Eng-
lish Wheat-growing has many intrinsic and local advantages.
8. Foreign Competition has roused English Agriculture to
improve itself.
1. Not long ago it was held that Agriculture
was by far the largest of English industries.
And although, since these good old days, we have
become more than ever a nation of shopkeepers, and
carriers, and manufacturers, we nevertheless con-
tinue to farm, and to farm well, as much land in
these islands as we can obtain for the purpose. It
may be true nowadays that but a portion of the
N
178 State Aid and State Interference.
population is really connected with the land, so
far as the earning its livelihood is concerned. But
then the whole of the rest of the population lives
by eating the produce of the soil ; and so, after all,
the utilisation of its soil is, to Britain as to every
other nation, a primary concern. It is no wonder,
then, that our agricultural prosperity or depression
affects every fraction of the community, and that
the recent bad seasons have stirred up a wide-
spread public agitation on the subject of land
generally.
Pending the results of the labours of the Royal
Agricultural Commission, much good and useful
work has been done towards creating a correct
public opinion in this matter ; and yet, if we may
judge by their utterances, both public and private,
it is only too common to find a most gloomy view
of things which materially affects their energies and
their enterprise, taken by the two classes more
directly concerned the great farming class on the
one hand, and, on the other, that large proportion
of wage-earners in this industry, whose winnings
only too frequently barely cover the expenses of
subsistence. To dispel this unnecessary but not
unnatural gloom there is only needed the light
of a wider knowledge of facts; and a more thought-
Foreign Competition in Agriculture. 179
ful heed to the actual conditions, past, future, and
present.
This atmosphere of gloom is greatly brightened
if we pay even momentary attention to the history
of the past twenty years. Hereby we immediately
recognise the radical modifications that have been
imposed on English agriculture by increase of popu-
lation plus increase of wealth. These two must
be taken together. Even in the last ten years,
while population has been found at the Census
of 1881 to have increased about 11 per cent.,
wealth has increased 30 per cent. Trade, com-
merce, manufactures, and facilities of communi-
cation have all increased with even greater speed.
This is no mere increase of mass of human beings,
but of spending, and, above all, of working human
beings. The British hive has not only increased
in numbers, but both the reason and the result of
this increase in numbers is increased production of
wealth. The population is not only larger, it is also
more busy and more well-to-do.
The direct effects of this growth on agriculture
are twofold : on the one hand we have a new use
for large areas of soil ; on the other hand we have
greatly increased means for the purchase of food grown
elsewhere. We have manufactories, railways, canals,
x 2
180 State Aid and State Interference.
docks, mines, and so forth, ousting agriculture from
areas of soil that in the aggregate sum up an
important total. We have cities, towns, far-reaching
suburbs, garden-surrounded villas, and great parks
rapidly extending themselves over the land. And
these carry in their hands the proof of their utility in
the higher price by which they buy out agriculture
from its occupation of the soil. The nation has so
developed that it becomes more profitable to utilise
the soil for these productive or residential purposes
than for the growth of food alone. It will be found
on calculation that the land so occupied is a no
inconsiderable portion of the total area in our
islands that can produce food. But this new occu-
pation is a type or sign of what is going forward
among us.
Another sign of progress is the fact that annually
we import as much wheat as we grow, simply that
the population may be fed. The signal import-
since of this fact will be appreciated by farmers
when they bear in mind its necessary corollary,
that if wo would food Englishmen on home-grown
bread and no other we must actually double the
acreage devoted to wheat-growing. On this analogy,
in regard to the food-supply generally, we must
double the area we farm. But we already farm 50
Foreign Competition in Agriculture. 181
of the 80 millions of acres, which is all the sea allows
these islands to possess. It is then a physical
impossibility to double the area, and to double the
whole production is certainly beyond the dreams
of the most extravagant of 'scientific farmers,'
considering the fact that, acre for acre cultivated
for the purpose, English farmers already produce
far more than farmers of any other nation. We
may, as knowledge advances, increase our total
produced ; we cannot do so to any large extent ;
nor can we extend the productive area to any large
extent. We must be content, as a prosperous,
industrial nation, to buy much of our food elsewhere.
That the nation accepts and makes the most of
these incidents of its growth is seen in the fact
that of the food we import one-third at the least
is food of a kind euphemistically described in the
returns as that ' not usually produced ' in the
British Islands. We are not only importing food,
but we are enjoying, in addition, that variety and
plenty which results from our ability to lay under
contribution the uttermost ends of the earth.
Iceland moss and Ascension turtles, Canadian apples
and Guinea cocoa-nuts, Australian meat and Cali-
fornian barley, assure for the English market not
only variety but certainty of supply.
182 State Aid and State Interference.
Thus, while the producer has continued to produce
as of old, the consumer has asserted the natural
order of things, and sought abroad for the supplies
necessitated by the great increase in demand. New
developments in industry and commerce supply
the wherewithal for the purchase of this extra food.
And if we thus give proper prominence to the
immediate past, and recognise the true nature of
the national growth, we see that foreign supplies
of food are a necessity of our new position, and
that ' foreign competition ' in this supply is in
very great measure no competition at all, but merely
the supply in quantity, no less than in kind, of food
that the physical limits of British agriculture forbid
the English farmer to supply.
2. But this appearance of the foreigner in the
English food market has created a kind of panic,
and for the nonce the British agricultural brain
appears to be bereft of its accustomed shrewdness.
Among the more important foundations of a sound
judgment of the present, is a proper estimate of
the probabilities of the near future. This is an
estimate which has been strangely ignored. Un-
kindly seasons and low prices seem to have riveted
attention on the gloomy present, and the eye of
intelligence is thereby prevented from looking
Foreign Competition in Agriculture. 183
into the past for the sure and only prognostics of
the future. For instance, 'American competition'
is a bugbear only if we disregard the future as
well as the past of the United States. Prairie-
farming for the supply of the home and the European
market is an industry of recent growth and
developed under most peculiar conditions. Meat
and wheat are produced on the spot at low prices.
In twenty or thirty years' time at the most this
industry will be at an end, so far as the maintenance
of the present prices is concerned.
The United States at the present is an under-
peopled but fertile country. At present there are
vast tracts of virgin soil awaiting development.
With Nature so favourable to its advances, a large
community, with every appliance of an eminently
practical civilization at its command, has but little
difficulty in at once and with ease procuring a lavish
supply of foods. But in such cases there exists
a tendency and the United States are no exception
to the rule for this very facility of production to
outrun prudential methods of production. Wheat-
growing in the United States has afforded a notable
example of this tendency. The more settled and
populated districts on the east coast had developed
a system of farming but little differing from that
184 State Aid and State Interference.
prevailing in the fully-peopled communities of the
European continent. But, as the increasing popu-
lation pushed westwards, vast tracts of wheat-
producing soil were opened up by energetic men
greedy of present results. Wheat became, to adopt
SirT.Brassey's happy phrase, 'the ready-money crop
of the pioneer farmer.' But the system of cultiva-
tion adopted was the ' earth-scratching ' of Gibbon
Wakefield ; and the profits of the system hung
on the very roughest cultivation and the very
cheapest access to the soil.
But even so, this rough prairie-cropping was soon
found to be liable to unexpected risks. Success in
the ' Far West ' was frequently checked by causes
to which the English farmer is happily a stranger.
The farms are necessarily extensive ; and, with this
cropping on a vast scale, weeds, as if inspired by
the surroundings, appear in quantities commensurate
with the true magnitude of American operations,
and on a scale inconceivable in carefully cultivated
England. Weeds have been known so to choke
a whole crop as to render it absolutely not worth
the ingathering. And there are plains in California
State, all part and parcel of the boasted ' wheat
area,' which enjoy a rainfall sufficient for a crop
only once in four or five years. And there are
Foreign Competition in Agriculture. 185
seasons when all the scanty crops are consumed by-
locusts and grasshoppers. Again, the danger of
prairie fires is greater the greater the area covered
by wheat.
These and other risks are further supplemented
by the fact that the supply of labour in these
wilder States is not only precarious, but is very
frequently absent at the critical times. A new
mining rush, busy times reviving suddenly in other
districts, or other counter-attractions, not infre-
quently force the farmer to leave good crops to rot
where they stand from the sheer absence of the
physical labour necessary for the harvesting. And
there are other surroundings of this prairie-farming
that do not readily occur to the English mind.
Thus, for instance, it is found that for every four
acres devoted to wheat one acre has to be cropped
in fodder for the support of the horses or cattle
necessary for carrying on the farming operations.
Or, again, grain has been often known to ripen too
quickly and to turn out ruinously light in the ear.
These are among the drags peculiar to the rough
cropping of the prairie. But, by way of antidote to
these, we find access to the soil is remarkably
cheajj ; labour is only needed in small quantities ;
machinery can, in great ^measure, be made its
186 State Aid and State Interference.
substitute ; and little more capital is invested or
risked than suffices to pay for sufficient seed. Thus
in lucky seasons the price of wheat on the spot is
proportionately low under present conditions.
3. But it is important to remember that the
price of this wheat on the spot and its price in
England are two totally distinct facts. And, again,
the price in England now and the price in England
hereafter are no less distinct. And, after all, this
price is the main item for the British farmer. It
is well, then, to note the facts and prospects of
the several elements of this price of American
wheat in the English market ; among these we find
cost of production on the spot, cost of carriage,
influence of middlemen, and, lastly, the fact that
numerous other countries supply our markets with
wheat.
In regard to the first of these elements, the
paradox may be advanced with truth that the
cheaper wheat is produced in the prairie the sooner
will it disappear from the English market. The
low price on the spot prevailing at present depends
on the abnormally cheap use of good virgin soil,
and on the possibility of a system of cropping, (for
it cannot properly be termed cultivation,) which
obtains large present returns on insignificant
Foreign Competition in Agriculture. 187
outlay. This method necessitates a continual taking
up of new land and a continued abandoning of that
which has been cropped. And even in the United
States there is a physical limit to virgin prairie-
lands that will grow wheat. The saying is attributed
to the eminent American economist, Carey, that by
thus growing wheat for export, Americans were
exporting their own soil. The truth of this saying
may be seen in the impoverished tracts from which
all the good has already been literally exported.
The cheaper wheat can be produced by this system
of cropping the more rapidly does this wave of
exhausting energy pass over the land.
Several results follow. In the first place, so far
as this pioneer wheat-growing and prairie -grazing
succeeds (or, in other words, pays) in the same
proportion does it attract people. For, as Adam
Smith puts it, people congregate where they can
live cheapest. This incidental increase of popula-
tion on the spot, due to the lowness of cost of
production, at once raises cost of production. The
first pioneer takes up his 10,000 acres, and for his
first year's crop he feeds his cattle and horses on
hay, cut gratis on the surrounding prairie but in
a year or two these surrounding prairies are also
taken up, and he is forced to devote 2,000 of his
188 State Aid and State Interference.
acres to growing fodder he is deprived of so much
of his ready-money crop. The price of the re-
mainder must rise if he is to reap the same profits.
And again, this cropping is the work of man, and
this increase of population largely stimulates the
consumption on the spot of food produced in the
district for both man and beast. And again, the
competition incident to this increase of population
sends up the value of this access to the soil ; culti-
vation has to succeed to cropping ; the terms
' manure,' and ' drainage,' and ' water-supply ' are
introduced to common use ; and the farming that
ensues produces wheat but little cheaper than it is
produced in more fully peopled lands.
In the second place, this cheap production of
wheat on the prairie is a result which acts as a cause
of the rapid increase of the population of the States.
The United States in good years produce at the
present 350 million bushels of wheat, which, at the
English average of consumption, is sufficient for,
say, 70 million people. This conclusion is verified
by the fact that the United States, with a population
of 50 millions, exports one-third of the wheat
produced. But if we calculate on the average
increase of the population of the United States
for the past eighty years, we see that the number
Foreign Competition in Agriculture. 189
of the population twenty years hence will be 100
millions. In other words, by the close of this
century there will be added to the population of
the United States a mass of human beings con-
suming three times the amount of wheat the United
States now export. If the European market is still
to receive the amount of wheat that now comes to
it from the United States, Americans will have to
produce about double the amount of wheat they
now produce ; and they will have to produce it at
the same low price if English farmers are to be any
way concerned.
But it may well be asked where in the United
States are new fresh wheat-producing areas to be
found sufficient for this gigantic purpose ? Even the
short history of this prairie -farming incontestably
proves that as this cropping-wave succeeds in over-
running new ground out West, it recedes, pari passu,
from old ground, so far as this cheap method of
cropping is concerned. In the doubling of the area
at present in use we must allow for what is deserted
in the process. For if we include the farming of
the old ground we find at once increased cost of
production.
But even if we grant the most extravagant
anticipations of prairie-farmers, and agree that this
]90 State Aid and State Interference.
cheap production of wheat will still be possible, we
are faced by another fact of experience already
amply demonstrated. The cheaper the production
of wheat in the prairie, the less the production of
wheat in better-farmed districts in America itself.
The home market, rapidly increasing in its con-
sumptive demands, rapidly loses its former sources
of supply. To feed itself only, the American nation,
by the end of this century, would have to nearly
double its present production of wheat. If this is
all to be accomplished by the prairie process, this
process will have to be trebled in effect by reason
of its incidental action in destroying other national
sources of supply. The very cheapness of this prairie
method, if continued, would cause it more and more
to confine its energies to the supply of the home
market. And this home market of the United
States is in its infancy, and it will be centuries
before even the ' magnificent resources ' of this
large area can be so utilised as to outrun these
local demands in the supply of wheat.
But at the least as important an element in
this matter of price is the cost of carriage. There
is truth here, also, in a paradox. The cheaper the
cost of carriage in the present the sooner will it
rise to a height barring present prices. If freights
Foreign Competition in Agriculture. 191
and rates had been at normal heights a long-con-
tinued and steady trade might have been possible ;
but freight and rates have been the resultant of
altogether abnormal conditions ; and their very
lowness will largely stimulate and hasten the ma-
turity of normal conditions altogether prohibitive
of such facilities for export.
However true it may be that, at the present, in
favourable years wheat and meat are produced on
the spot at remarkably low prices, yet the market
for such large supplies of food is a long way off,
and the very industry itself would never have come
into being but for the fortuitous co-existence of
altogether abnormal facilities of carriage. The
people of the United States early determined to
spread over their vast territories an elaborately
planned network of waterways and railways. Means
of communication were not only devised but per-
fected long before the necessities of communication
had grown up. This proleptic action owed the fact
of its realization to the abundance of capital, chiefly
in other lands, that chanced at the moment to be
anxiously looking for employment. But the rail-
ways were before their time ; no dividends were
forthcoming ; and they passed, for the most part,
into the hands of mortgagees. Much of their first
192 State Aid and State Interference.
cost was dropped in the operation. The immediate
future seeks only to provide interest on this dimin-
ished capital. Thus, for the present, over such
portions as are now completed it positively pays
to carry goods at rates a few years ago deemed
inconceivable, and which, not many years hence,
will be altogether impossible.
The very lowness of these rates was thus the
opportunity of prairie -farming. Thus is supplied
the incentive and, in addition, the means to popu-
lating large areas. The march of the invading
immigrants has already reached far into these
wheat-producing districts. Towns, or rather cities,
have sprung up with the proverbial American
rapidity. Thus the very lowness of rates will
hasten the development of the social conditions
for which the railways have been planned and
constructed. But this pioneer wheat-growing has
been more than mere result, it has also been cause
of more vigorous extension of railways. It has
afforded forcible pretext for the present and hasty
realization of plans schemed for more populated
times. And even the very abandonment of cropped
for virgin areas has further stimulated this move-
ment. Competition among the railways, with a
view to securing future benefits, the excuse of
Foreign Competition in Agriculture. 193
promoters that their schemes must be realized in
full before they can pay, the forced interposition
of the mortgagees, and other causes, intrinsic and
extrinsic, have enabled American railways in recent
years to lower their rates beyond all belief. These
causes are temporary, and contingent upon the
peopling up of the country. There are powerful
groups watching for their long-deferred profits. The
finance of American railways is now chiefly in the
hands of such groups. It stands to reason that if
wheat can now be thrown upon the European
market shillings per quarter below average prices,
these railway financiers, if they retain any spark
of the astuteness for which they have been famed
in the past, will of a certainty judiciously tap this
new source of revenue. In due measure will this
action raise again the price of American wheat in
foreign markets. It will be the object of these
financiers to maintain the price of wheat at the
highest rate commensurate with the continuance
of the trade. The details of sharing the new pro-
fits will have to be arranged between the farmer
and the companies, but the price will and must be
enhanced in the operation.
But even this arrangement as to price is sub-
ject to another important factor, viz., the influence
o
194 State Aid and State Interference.
of the indispensable middleman. A commodity
in general demand, and produced in such vast
quantities and in large proportion for distant
markets, must necessarily pass through the hands
of middlemen. The prices must be regulated in
accordance with what are or may be the needs of
distant communities. The prescience on which
these middlemen must needs depend is often at
fault : now it is too daring, now insufficiently so.
This raises the ultimate price of the commodity
dealt with. It thus comes to pass that wheat has
actually been purchased in Liverpool for less than
was paid for it in Chicago. And, on the other
hand, large fortunes have been made out of wheat
by buying it in Chicago and selling it within the
month in Liverpool. The recent gigantic specula-
tion known as the ' Keene wheat corner ' is typical
of these things. The partners in this ' pool ' held
at one time as much as sixteen million bushels
of wheat, and thus obtained complete command of
the market for the sake of their own advance-
ment.
4. The last element of this important feature
of price to which we need revert is the fact that the
English market numbers among its purveyors others
besides Americans. We in England have for years
Foreign Competition in Agriculture. 195
past imported wheat on an annual average sufficient
to feed fifteen millions of people. Last year, because
of short harvests, we imported sufficient for twenty
millions. The United States, in good years, produce
an exportable surplus sufficient to feed twenty
millions of people ; but a large proportion of this
does not reach the English market. The great
sting of this American competition will be felt by
our foreign purveyors, more especially in all such
years as we ourselves are blessed with good harvests.
I have adverted to the fact that this prairie-
farming has already scotched one source whence
supplies would have reached the English market.
The New York and New England farmers have
been forced to cease competing with the wheat
supplies from the West. Prairie-farming has thus
created for itself a great gap in the supply of the
American home market, and in so far has diverted
from export a large amount of its own produce.
But it is further necessary to remember that,
although under these present exceptionally favour-
able conditions the United States grow one quarter
the wheat the Western World consumes, yet not
more than one quarter of what they grow is ex-
ported. The price of the wheat thus exported must
become regulated by the prices prevailing in the
o 2
106 State Aid and State Interference.
European markets. The United States supply to
Europe one-twelfth only of the annual supply. The
price of this twelfth must assimilate to that of the
remaining eleven-twelfths. The only imaginable ob-
stacle in the way of this assimilation of prices is the
resolution of Americans, once they are established
iu the European market, to refuse to take as much
as they can get for their commodity. The history
of American enterprise does not warrant such
expectations. The English farmer must remember
that American competition affects all the purveyors
of the English market, and not only of that, but of
the whole European market ; and that, in this
larger view of the actual facts of the case, it will
at once be seen that even the low prices possible to
the present system of prairie-farming have a merely
fractional effect on the European market. What
then becomes of the claims put forward by
enthusiastic Western farmers to the effect that
their prairies are to become the granaries of the
world, and their capital the flour metropolis of
humanity? These sanguine anticipations, in the
ratio of their successful realization, would drive
wheat-cultivation out of Europe. The monopoly of
supply, and so of price, would fall to Americans.
But we must remember that the very existence of
Foreign Competition in Agriculture. 197
the industry, and so of the monopoly, depends
altogether on the continuance of those low prices
which enabled it to come into existence. In a word,
if these sanguine anticipations are to be realized
Americans must accomplish the dual feat of quad-
rupling their present produce of wheat, and at the
same time of maintaining the population of their
country at the exact figure at which it stands at
present. If they fail in either task the price
of wheat must rise ; and this rise would be
the signal for the re-appearance of wheat-growing
in Europe, and of the consequent fall of their
monopoly.
The conditions I have now detailed combine to
render possible for the present this large export of
breadstuffs and food. The main fact for English
farmers and landowners is that this export is from a
fund on which Americans will not be able to draw
much longer. Even under the present most favour-
able conditions of access to pasture and of freights,
sound meat cannot always be placed in the English
market below the price of better grown English
meat. And similar conditions will soon arise in
the supply of wheat. Thus a careful survey of the
facts of the case brings us to the conclusion that,
if present conditions continue, the great areas in
198 State Aid and State Interference.
the Western States will in, say ten years' time,
be no longer able to export wheat and meat at
prices below those which yield profit to the English
farmer. In ten years' time ' American competition '
in the English market will be in rapid natural
decline. Thus the future of agriculture in the
United States need not clash with the future of
agriculture in the United Kingdom. And, after
all, the prospects of English farming are in the
future and not in the past, or even the present.
5. In dealing with the competition in English
markets of the United States, it is essential to a
right judgment of this question to remember that
Canada, in opening up her North-Western territories,
has without doubt brought before the world a wheat-
producing area of enormous extent. The soil and
climate of that portion of this area already opened
up produce crops double as heavy as those of the
prairie lands in the States ; and there are districts
where continuous cropping for fifteen or even twenty
years docs not appear to exhaust the rich soil.
Moreover the coming Canadian Pacific Railway is
penetrating this area. It is not surprising, then,
that with all these inspiriting prospects the sanguine
pioneer farmers of the North- West should declare
and, in a measure, prove their ability to produce
Foreign Competition in Agriculture. 199
and place wheat in the English market at an average
little over 38s. a quarter.
But these sanguine anticipations must be taken
cum grano. They are the first reports from a raw
and untried district. And, indeed, the more we
inquire into detail the more we find cause largely to
discount these alleged anticipations. In the very
first place we find the area has been gravely ex-
aggerated, so far as wheat-production is concerned.
Geographically, it may be true there are some 150
million acres awaiting the plough and the seed of
the farmer, but practically it seems certain that a
vast proportion of these acres will continue to wait
till the end of time. Large curtailments of this
area must be made owing to physical causes. And
even where the climate is favourable, large tracts
are found on inspection to be too sandy or too
swampy for wheat, while in others there is dearth
of water for the cattle that are indispensable in the
carrying out of such extensive farming operations
as are the main element in the cheap production
of prairie wheat. Sinking wells, damming, draining,
or irrigation like manuring are not adjuncts of
prairie-farming, pure and simple. They add largely
to the cost of production.
Again, although the crops are heavier than those
200 State Aid and State Interference.
farther south, they are, nevertheless, found to be
even more liable to tlie various scourges I have
detailed. Fire has already eaten up valuable crops,
and fire comes when all things are dry, in the
autumn, when the crop is just ripe ; grasshoppers and
caterpillars have devastated large areas ; the sun has
been too favourable and ripened the ears too quickly
for weight ; and already the proof of these things
is seen in that farmers, even in this much
vaunted North-West, have been forced to sell out
or to carry on at a loss through had seasons and
low prices.
A great point is the enormous interest (15 or 20
per cent.) now actually paid for money advanced for
agricultural purposes on the security of these new
lands. This is sure evidence of the existence of a
deep-seated conviction that land will rise in value,
and that such a rise will take place is of course a
mere truism in the face of the advent of population.
There is ample precedent in the eastern provinces of
the Dominion. There agricultural land, manifestly
and avowedly inferior to that of the North-West, is
now worth 8/. and 10/. an acre. Such a price, when
it comes to prevail in the North-West, will at once
raise the price on the spot of wheat from 3s. 6(7. to os.
the bushel. Such a rise will not, however, take
Foreign Competition in Agriculture. 201
place unless and until the North-West proves its
claim to be the wheat ground of America. But rise
in the price of soil must accompany any and every
step in the successful realization of these vast wheat-
growing anticipations.
In this great North- West, if you can get your land
at first prices, if you have good years, and if freights
remain low, then you can export at a low price. But
already these conditions are changing ; already there
is a steady enduring flow of population to the North-
West. The farmers in the older provinces are either,
taking to stock-raising and dairy and fruit farming
or selling out and going west to grow wheat. Im-
migrants from all parts of Europe are seeking this
great wheat area ; it is the paradise of that large
class of farmers who start without any great extent of
capital. The great evidence of the fact of this vast
migration is that the men who are already there
farming on the borders of this area and getting their
twenty and even thirty bushels to the acre, sell all
they grow as seed and as food for these immigrants.
Human beings are coming down on the land like a
swarm of locusts ; they and their beasts devouring
what is reaped ; and big cities springing up rapidly
in their track. Not till this area is peopled will
it export to any great extent. But by that time
202 State, Aid and State Interference.
land will be far dearer it has already doubled in
value and cost of production on the spot will rise
pro raid.
And yet, in spite of all this, for long years to
come wheat grown in the North-West must be
grown there cheaper than it can be in England. The
English farmer will find comfort in this, for he
must also acknowledge that this fact makes the
Canadian North-West the natural granary not of
Europe but of America. Prairie-farming in the
United States, obtaining ten to fourteen bushels per
acre, at once substituted itself for the wheat-growing
of the old Eastern States as the principal source of
supply to the American market. The new method
was prosecuted with such impetus and success that
it also maintained and, in a small measure, increased
the ratio that the export of wheat bore to other ex-
ports. The bright prospects of this Western farming
were, however, destined to be ruthlessly disturbed by
the discovery that the prairies north of the Canadian
boundary line not only produced wheat but produced
double the quantity, acre for acre, with no additional
expenses. The inevitable and natural consequence is
now following. The North-West is succeeding to
the West as the West succeeded to the East.
We see, (hen, that there will be hut little export from
Foreign Competition in Agriculture. 203
the Canadian North-West till that North- West is
peopled. In the next place, when so peopled, the cost of
production on the spot will have risen considerably ;
and, lastly, the wheat so groionfor export will find its
chief market in America and not in Europe.
It is thus evident, if we give proper prominence to
the immediate past and duly weigh the probabilities
of the near future, that ' American ' and other com-
petition in agricultural matters is a fluctuating
factor; and that it will wax and wane in accord
with the growths and developments of other
communities.
6. There remains the task of facing the present,
which we thus clearly understand, and seeing what
good and true use may be made of it.
The farmer in these islands will remember that
his dread of American competition was chiefly bred
of an untoward and rare succession of bad harvests.
But he will find on his own farm many substantial
crumbs of comfort. In this matter of wheat, for
instance, the farmer does not live by the ears alone ;
for even in the very production of these ears he gains
2s. a bushel on the American in the value of straw.
This is an important item in wheat-growing ; and on
the prairie the straw is not only of no use but wastes
the certain amount of labour necessary to burn
201 State Aid and State Interference.
it as rubbish. The getting rid of manure on
the richer prairies is likewise an actual additional
expense to the farmer. Again, the fertility of some
English districts, when properly farmed, is so great
that it outbids all possible prairie competition. The
yield per acre is above competition. Again, in most
good districts English wheat is of higher intrinsic
value (often 3s. and 4s. the quarter) than any that
can be grown on the prairie system. Again, we
have Mr. Prout's records of his experiment of ' con-
tinuous wheat-growing ' to show that even in the
exceptionally bad years through which we have
recently passed such "scientific agriculture" con-
tinues to yield profits.
Free Trade and density of population also range
themselves on the side of the British farmer. Forty
years of English progress have made fewer more
important marks on the state of affairs than in
regard to agricultural labour. This commodity has
now become certain in its supply and, as times go,
cheap. It is 15 per cent, cheaper than labour of
similar type in America. The fact is that both the
farmer and the labourers he employs are in capital
position as consumers. When our short wheat crop
last year forced us to import half as much again of
wheat as usual, there was a fall rather than a rise in
Foreign Competition in Agriculture. 205
price of this first necessary of life. The commercial
policy England has adopted has enlarged greatly the
general wealth chiefly by the channel of easier con-
sumption. Our farmers, deprived of profits, by the
cruelty of the season, as producers, nevertheless
found compensation and relief as consumers in the
accommodation afforded by the wisdom of the
national policy.
7. But though the weight of this American
competition is temporary, and aggravated by reason
of bad seasons in England, it will nevertheless have
an abiding effect which is altogether salutary. Agri-
culture is an industry which has a proverbial
tendency to extreme conservatism. Its very success
seems to engender a condition of bucolic content-
ment which is little in keeping with these times of
' Progress.' The British landowner no less than the
British farmer in the future will have cause for deep
gratitude to his Transatlantic rival for rousing him
to a sense of the needs of the day. It is one of the
great benefits conferred by Free Trade, that where it
prevails no industry can fall behind the best know-
ledge of the day. The United States have taught
Europe the great fact that even in the most trivial
tasks, the brain can be made the most profitable ally
of the hand. English agriculturists have never been
206 State Aid and State Interference.
wanting in shrewdness or in energy ; they have
occasionally lagged in knowledge ; and even this
recent short scare has set them thoroughly to work
on the science of agriculture. But this science must
not be confined to the chemical cultivation of the
soil or to the mere physiological processes of organic
growth wisely and well it will be extended to
embrace the economic and political as well as the
natural factors of agricultural success. Commercial
geography and statistical information will prove as
precious to the English farmer as local lore of hus-
bandry. It will henceforth be recognised as more
useful to know that in a particular series of years
pasture or roots will pay better than cereals because
of the state of distant competing markets, than to
abide by some chemically perfect rotation of crops.
It may be that for the immediate present, wheat-
cultivation that is not of the highest order will be in
abeyance in England. A true science of agriculture
shows the political reasons for this temporary sub-
version of natural courses. But this same knowledge
will again forewarn farmers of the time when the
fuller growth of America will enable the revival of
wheat-growing even on the poorer soils where for the
time it had been given up.
We may trust this American competition scare
Foreign Competition in Agriculture. 207
especially to influence landowners. The report of
the tenant farmers' delegates to the Canadian North-
West are full of allusions to the highly profitable
absence in Canada of the interference of " lawyer
factors." The facts of this competition may awaken
us to the removal of what is antiquated in our
present system of land tenure. Adam Smith's
vigorous, nay, pathetic, denunciation of entails and
other ' remnants of feudal anarchy ' have hitherto
made little impression ; but now, coupled with these
lessons from America, such reasonings are likely to
generate a new zest in the minds and work both of
owners and tenants, and thus considerably to
enhance the profits that have for years been
carelessly deemed sufficient for landed property.
8. Profits also will come from the transference
of agricultural activity. The general tendency of
this transference may be described as towards meat-
growing, dairy-farming, poultry-breeding, and
market gardening in the words of Professor Aldis
towards " the growth of such products as, from
their nature, must be consumed comparatively near
to their point of origin." No doubt the British
farmer will seek for crops and produce that are not
readily transported, by reason of their perishable,
bulky, or fragile nature. He will come to regard
208 State Aid and State Interference.
the risks and costs of carriage as his natural ' pro-
tection.' And he will come to learn that in other
ways, in the superior productive power of the
English soil and climate, and of the English system
or skill in farming, he yet retains, if we judge by
results, a sure pre-eminence. And he, of all men,
will acknowledge that, after all, whatever the theory,
the cause or the reason the proof of the pudding is
in the eating.
As an instance, the English agriculturist will ask
himself, " How is it I do not grow beet for sugar-
making ? I know there is just twice the amount of
beetroot grown in Europe for this purpose that there
was only ten years ago ; I knoAv that England uses
just twice as much beet-sugar as she used even ten
\-ears ago ; I know our English refiners buy abroad
every year nearly 200,000 tons of raw beet-sugar ; I
know root-crops in England produce more, acre for
acre, than they do abroad. And yet I don't grow
beet ; I grumble that no crops pay nowadays ; I
don't suppose more than that can be said of beet.
Caird and Duncan and such other authorities tell me
I have a capital climate for the purpose. Am I in
the position of the Irish before they grew the
national potato ? Am I still under the Napoleonic
spell? I know Bonaparte started beet-growing on
Foreign Competition in Agriculture. 209
the Continent as one of his many devices for destroy-
ing England's commercial greatness, by the ruin of
her sugar colonies. Can't I have my revenge by
taking this leaf out of his book ? " And he will find
his consoling answer in a matter-of-fact conclusion
that he cannot tell till he tries.
It has been my object to focus the attention of
agriculturists on a wider appreciation of the facts
of the past as well as of the present, in order that
we may judge aright of the future. The question
of its food-supply is to any nation its primary
concern, and the utilisation of the soil is a main
element in this question. It is often mistaken for
the whole of the question. It is well to bear in
mind that since the inauguration of free trade we
have added eight millions to our population, and
we have increased our imports of food (of kinds
usually grown in England) by something like
80,000,000/. value in the year. It may be said,
then, that these new eight millions of people spend
10/. each per annum to pay for foreign supplies
which they fail to obtain from English sources.
Thus, seeing that our system of agriculture is more
productive than that of other countries, we are
driven to acknowledge that at least a partial cause
of this purchasing abroad of these foods is that
p
210 State Aid and State Interference.
we do not farm sufficient soil to feed our own
population.
Two questions remain : Is this owing to actual
lack of land ? do we practically make the best of
all the soil we possess that is fit for the purpose ?
Or, on the other hand, assuming that soil exists
sufficient for the purpose, is not mUch of this now
utilised for industries or purposes that pay better
than the direct production of food ? This latter
explanation is, at all events, supported by the fact
that annually we increase our consumption of foods
that cannot be grown in England. In 1840 we
spent 9s. per head per annum on these foreign foods.
In 1878 we spent 30s. per head. As compared
with pre-free-tKide days, we now buy three times
the amount of currants, ten times the amount of
oranges and lemons, four times the amount of tea,
and so in all other details. Manufactures, mining,
and carrying have progressed in proportion ; but
population has only increased by one-fifth. We are
driven, then, to the conclusion that capital, labour,
and probably large areas of actual soil, have been
turned to other and more profitable uses than the
direct production of food. The Census records are
significant. In 1S41 the rural population of England
and Wales (the portion, that is, connected with
Foreign Competition in Agriculture. 211
the direct production of food) numbered 8,200,000 ;
the town population (that portion not connected
with the direct production of food) numbered
7,700,000. The country folk outnumbered the
townsfolk ; those who produced food outnumbered
those who only consumed. But in 1871, while the
rural population only increased its numbers by some
2,000,000, the town populations had increased by
no less than 5,000,000. In 1871 the tables were
reversed; the townsfolk largely outnumbered the
country folk those who produced food were largely
outnumbered by those who only consumed it. The
Census of 1881 proved that the urban population
continues to increase nearly twice as fast as
the rural. We have more people, we have more
money, and we have found for certain areas of soil
more profitable use than the manufacture of food.
What wonder, then, that the national food market
is supplied in some measure by foreigners ?
We have thus, in brief, the whole case of this
foreign competition. British agriculture will derive
invaluable benefit from these alleged inroads on its
prosperity if, as seems probable, this competition
of virgin soils directly or indirectly rouse English
agriculture to a survey of the needs of the day .
By the close of this century, twenty years hence,
p 2
212 State Aid and State Interference.
prairie. produce will be more and more absorbed in
its own home market ; and even wheat-growing
in England may again have reverted to its old
courses. English agriculture will then be found,
without doubt, to have passed through the fire
of competition improved vastly in quality, purged
and hardened for a long future of prosperous
activity.
Foreign Competition in Manufactures. 213
CHAPTER IX.
FOREIGN COMPETITION IN MANUFACTURES.
1. "What Foreigners are doing and what they are asserted to
be doing. 2. The modem tendencies of Foreign Tariffs.
3. Of Colonial Tariffs. 4. Pauperising effects of High
Tariffs. 5. Foreign Exporters of Manufactures.
1. There is no field of human industry for
which the aid of the State is more often invoked
than for that of manufactures. To start non-existent
manufactures; to foster and cherish manufactures
that are hard pressed ; to protect all classes of
manufactures against foreign oppression or aggres-
sion ; are held by many to be among the , first
duties of a national government. Such is the end
put forward. And to attain this end means are
suggested in which assumption and assertion entirely
swamp experience. Government are told to start
and cherish and protect manufactures by the means
and instrumentality of customs duties. What I
wish in this chapter to suggest is that these means
214 State Aid and State Interference.
have proved by no means infallible. Indeed, if we
look to recorded results, we find that the lower the
customs tariff the more do manufactures originate,
progress, and prosper in a country. Experience tells
us that if you would start and encourage and main-
tain manufactures that shall be profitable to the
community, you must jealously watch that your
tariff of customs duties be low enough not to
interfere practically with the free course of industry.
There is no more self-evident proof of this to be
found anywhere than in the records of what manu-
facturers are actually doing in England and in
foreign countries. And these records belie in a
most astounding manner the assertions on the
subject that are, strange to say, commonplaces in
books and newspapers, no less than on the platform
and in the public utterances of those who aspire
to be leaders and advisers of the community at
large.
2. One of the commonest of these assertions is
to the effect that "Foreigners are by their tariffs
shutting us out of their markets," and that "hostile
tariffs abroad are closing to our manufactures the
markets of the world." In the first place, this type
of assertion is absolutely and, in the second place,
it is relatively contradicted by the facts of the case.
Foreign Competition in Manufactures. 215
It is absolutely untrue because, as a matter of
fact, the various foreign countries have, for instance,
during the last twenty years, in the aggregate
taken great strides towards Free Trade principles
in regulating their tariffs.
Lord Sandon did his party a sterling benefit by
calling for a parliamentary return recording the
rates of duty in English money levied on articles
of British produce or manufacture imported into
the various foreign countries and chief English
Colonies in each of the years 1860, 1870, 1875, and
1880. These returns are now before the public,
and to ignore them is to ignore recorded facts of
the highest value at the present moment.
On the continent of Europe we find, from these
returns, that during the last twenty years tariffs
have been generally and considerably lowered ; the
numbers of articles taxed has been considerably
reduced; and all the states of the Continent have
either granted or expressed their willingness to
grant most favoured nation treatment to English
goods.
It may be well to place on record here a few of
the details of this notable European movement.
In the first place, in regard to the tendency
towards reduction of tariffs. Comparing the tariffs
216 State Aid and State Interference.
of 1880 with those of 1860, we find that in only
two out of the sixteen European states is there
any increase. These two exceptions are Italy and
Greece. And even in these two cases there are
explanations that are most satisfactory. In Italy
the change is due to the fact that in 1880, by the
lapse of special treaties between Italy and third
countries, English imports fell under a 'general
tariff" higher than that they had enjoyed under most
favoured nation treatment. In Greece the change was
due to the fact that all duties were raised 10 per cent.
ad valorem by the promulgation of a financial law
requiring all duties to be paid in new instead of old
drachmas. Of the other states of Europe in France
and in Turkey the tariffs remained the same ; in
Denmark, Portugal, and Switzerland there has been
reduction when there has been change ; in Spain,
Germany, Russia, Sweden, Norway, and Austria
there has been general and, very often, great
reduction.
A point of great additional importance is the
number and kind of items in which alteration has
been made. If we omit Italy and Greece on account
of their present anomalous position, we find that of
the 2,140 'items' existing in 1860, 136 only have
been raised, while 000 have remained the same and
Foreign Competition in Manufactures. 217
no less than 1,104 have either been lowered or
removed from the list altogether.
Or the 136 that have been raised, 30 are in
Denmark, 53 in Germany and Russia, and the
remaining 53 scattered over all other countries. It
is desirable also to remember the kind of items so
altered. In Denmark the increase has taken place
in the duties on spirits, raw sugar, butter, and
fire-arms. In Russia the increase has been in wool,
engines, and machinery. In Germany the chief
rise has been in yarns of various kinds. In Holland
there has been increase on raw sugar. In Sweden
and in Norway on spirits and raw sugar. In Austria
on railway carriages. Generally speaking we find
that the duties have been raised in 61 cases on yarns,
raw materials, and food ; in 20 on spirits ; in 19 on
tissues ; and in 37 on sundry manufactured articles.
Thus the English manufacturer has been directly
favoured in many more instances than he has been
directly hampered in the comparatively few instances
in which duties have been raised on the Continent.
Incidentally it may be mentioned that in Russia
alone a very great advance in favour of the English
manufacturer has been made in the abolishing the
distinction which was drawn in 1860 between goods
arriving by sea and by land. Tissues, hosiery,
218 State Aid and State Interference.
carpets, earthenware, refined sugar, iron-castings,
paper, and other items of English export, were all
saddled with these extra duties in 1860 from which
they were relieved in 1880.
As to the 1,104 items that have been lowered,
the English exporter has even more definite cause to
congratulate himself. In 200 cases there is a
decrease in the duties levied on raw materials and
food. In 400 cases there is a decrease in the duties
on yarns and tissues, and the remaining 504 cases
are in sundry items of manufactured articles.
Perhaps the most conclusive testimony is that
which deals with the comparative height of the pre-
sent tariff's. It may be held that a tariff not exceed-
ing 10 per cent, ad valorem will not greatly interfere
with trade. A tariff that is, in the aggregate
average, above 20 per cent ad valore?)i may be set
down as decidedly high and ' hostile.' An inter-
mediate tariff may be described as medium. If,
then, we classify continental countries under the
three categories low, medium, and high, accord-
ing as their tariffs are under 10 per cent., between
10 per cent, and 20 per cent., and above 20 per
cent., we shall find that Switzerland, Turkey, Hol-
land, Norway, Sweden, Belgium, and France, range
themselves under the first category. Italy, Denmark,
Foreign Competition in Manufactures. 219
and Germany may be described as medium. Spain,
Greece, Portugal, Austria, and Russia still remain
under the category of high tariff countries. It is
not our province to deal with prospects, but it may
be mentioned that Italy, Portugal, and especially
Spain, are determined to advance themselves out of
this backward class so soon as they can. It will
thus be seen that during the last twenty years
tariffs have been generally and considerably lowered
on the continent of Europe.
We must also recognise the fact that the number
of articles appearing in the tariffs has been very
considerably reduced. In only three States in
Germany, Italy, and Denmark has there been
any increase in the number of items on the list.
In the other States the average number of articles
scheduled has fallen from 134 in 1860 to 118 in
1880. And there are now only three States that
have more than 200 articles on their schedule. This
tendency is of course a tendency invaluable to
freedom of commerce, for it clears the channel of
numerous obstructions that otherwise impede and
hamper that free current of commercial intercourse
which is so absolutely essential to a healthy state
of trade.
Perhaps the most definite advance is, however,
220 State Aid and State Interference.
the general adoption of the most favoured nation
principle. This is a great step out of the com-
plications and impediments to trade inevitable
to the system of many and separate commercial
treaties. It seems that in 1860 we enjoyed this
favour by express treaty with eight only of the
sixteen European states. In 1880 we had actually
secured the privilege with no less than fourteen,
and the remaining two had expressed their definite
determination to adopt the arrangement so soon
as treaties could be arranged. The high importance
of this increasing inclination of foreign nations to
give us most favoured nation treatment is seen in
the fact that it is one half the battle at the least in
our competition to supply a foreign market. We
have ' opposed ' to us the native and the foreign
competitor ; and this ' most favoured nation ' treat-
ment at once puts us on an equal footing with our
foreign competitor. As for the native competitor,
he, so far as he can compete at all, can only hope
to compete with success provided he enjoy the same
facilities as a consumer that we enjoy in conse-
quence of low tariffs. We have thus advanced the
great step since 18G0 which places us in nearly all
European markets on an equality with all foreign
competitors in those markets. This is a distinct
Foreign Competition in Manufactures. 221
and general advance along the whole line in the
direction of greater freedom of commercial inter-
course. And on the whole we see that on the
continent of Europe the tariffs are becoming less and
less hostile to English goods.
3. A subsidiary but none the less common and
important complaint is put forward that our Colonies
shut us out by hostile and Protective tariffs. Indeed
Protectionists, not only in England but in other
countries, have twitted us with the assertion that
however ' Freetrade ' we may be ourselves, never-
theless our colonial offspring, so soon as they acquire
fiscal liberty, immediately raise up hostile tariffs
against us, and adopt the policy of Protection for
themselves. This strange and utter misrepresenta-
tion of what is actually occurring holds sway over a
strangely wide domain. It is reflected in leading
articles in leading newspapers ; it is even a common-
place on the platform, in Parliament, and even
within the precincts of the Cobden Club itself.
Professor Bonamy Price is indeed one of the few
public authorities who has. put the matter in its
true light. In an address in 1878 he well put
the matter in the sentence : " Victoria, at the
instigation of an ignorant democracy, breaks the
financial uniformity of a mighty empire, and loads
222 State Aid and State Interference.
the merchandise of the central State with har-
rassing duties." As a matter of fact we have nine
Colonies that arrange their own fiscal affairs in
independence of the Colonial Office. Of these,
only two, Canada and Victoria, have ' hostile '
tariffs. The Cape of Good Hope, New South
Wales, Queensland, Tasmania, South Australia,
New Zealand, and Newfoundland, all have tariffs
that would fall under the ' low ' category as being
under 10 per cent. They are all tariffs imposed
solely for the purposes of revenue. And of our
remaining Crown and other Colonies all have low
tariffs excepting, indeed, those which have no
tariffs at all.
Canada and Victoria have both of them set up
high tariffs within recent years for the special and
avowed purpose of Protection. But Victoria, as we
have seen in detail in a previous chapter, has
grievous cause to repent this fiscal backsliding. In
Canada the main reason for the adoption of a
Protective policy is political and not economical. It
is a measure of self-defence against the supposed
overshadowing of its great neighbour. The Canadian
Government determined to protect itself by a high
tariff against the United States. And, yielding only
to the definite law of the British Empire, that within
Foreign Competition in Manufactures. 223
its boundaries there should be no differential duties,
the high tariff had to include British as well as
American goods though the Canadians themselves
pointed out it was distinctly not hostile in intention
to British goods.
Our Colonies and India are, as is very well known,
taking from us vastly increasing quantities of manu-
factured commodities. As we see, they most of them
have low tariffs ; but it is a notable comment on the
policy of high tariffs that the two Colonies that im-
pose them still, continue to do their share in the con-
sumption of manufactures from the mother country.
The squatters and miners of Victoria no less than
the farmers and lumberers of Canada are not to be
turned aside from their most lucrative enterprises by
any blandishments of Protection. The great bulk of
population in each of these two Colonies sturdily
refuses to reverse the natural and most profitable
order of opening up a new country. All that the
high tariff can do is to make these natural pioneers
of their country's growth and greatness pay more
for what they use. The high tariff is merely a
tax on growth which is paid without difficulty
out of the great profit that accrues from the rapid
development of virgin resources. The amount of
this tax may be fairly gauged in the comparison
224 State Aid and State Interference.
of Victoria and New South Wales we have made
in a previous chapter.
4. Recorded results tell us that the assertion
that most other countries are exhibiting in their
tariff arrangement increased hostility to British
manufactures, is absolutely contrary to truth. The
assertion is also relatively untrue. If we for one
moment ask ourselves the question who pays import
duties we shall at once see that a high tariff only
excludes foreign goods in the sense of rendering the
population of the protected country less able to buy
these goods, whether of foreign or of home make.
If it so happens that the country is rich in other
wealth-yielding forces the general effect of the tariff
will be, not to curtail the importation of foreign
goods but, simply to force the population to pay
more than other nations pay for these same goods.
We still find that, in the strictly protected com-
munities of the United States, Canada, and Victoria,
the consumption of English manufactured articles,
of the very kind the tariff seeks to exclude,
nevertheless continues to increase year by year.
Supposing that a ton of linen piece-goods can be
manufactured in England for 100/. Add to this 10/.
profit and 1/. carriage to market. The English
dealer can sell at a nrofit for 112/. The Germans
Foreign Competition in Manufactures. 225
place on this a duty of 51. in order to protect their
own linen industries. This difference is either pure
profit to the German manufacturer or it represents
extra cost of production. And so long as the higher
price is paid by the German purchaser English
goods may be able to compete, provided the added
duty only brings up the total cost of the English
goods to the level of the cost of production in
Germany. In this sense the Import duty is merely
the entrance-fee charged by the State for entry into
the German market, which fee is recouped out of
the higher prices obtaining in the market. And if
these prices are not higher the protective tariff is of
no effect.
The point of the question is, whether this
entrance-fee can be recouped out of the differences
of price. If it cannot, English goods will not pene-
trate ; but in that case the German State fails to
obtain an equivalent amount for its Revenue ; and
the German consumer has to contribute in some
other way. But it all comes in the end to the issue
that the amount of the Import duty that is paid is
ultimately paid by the German consumer.
This tells terribly on production in Germany.
The value of wages or of profits depends intimately
on their purchasing power. If a Protective duty
Q
226 State Aid and State Interference.
raises local prices 20 per cent, it makes labour 20 per
cent, dearer, and it makes profits 20 per cent, less
profitable. It is paid by the producers of the nation
qud consumers. In the enhanced prices of his
clothing and his food the labourer will contribute
out of his wages. In the enhanced prices not only
of his clothing and food, but also of his machinery
and his raw materials, the capitalist will contribute
out of his profits.
If the duty succeeds in fostering, that is inter-
fering with, industry, it can only do so by succeeding
in making the price of the commodity higher to the
consumer than it otherwise would be. And pro tanto
it reduces the earnings of labour and the profits of
capital. Pro tanto it is a dead loss to the producers ;
a dead handicap on the nation as a whole.
And there is further loss to the nation that
imposes import duties that are so high as to inter-
fere with the free course of industry. We are
all struck by the fact that any nation famed for
wealth is a nation of great commercial dealings.
There is most capital made by those nations that
trade most. Exchange is the one great fountain
head of capital, whether it be local or cosmopolitan.
The reason is not commonly understood. The
popular mind with strange perversity vainly desires
Foreign Competition in Manufactures. 227
that the nominal value of exports should balance
or exceed that of imports. The very reverse is, of
course, the more profitable account. It is out of
the profits made by importing that commerce en-
riches a nation. The exports are merely one of
many methods of paying for the imports. But
after they are paid for, imports bring with them
profit. We may put a hypothetical case. Very good
pine-apples can be grown in England at a cost of
2s. Qd. each : equally good pine-apples can be sent
from Jamaica at a cost of 6d. each, including 2d.
profit to the grower. Consequently we import
great quantities of pine-apples from Jamaica. Porter
cannot be made in Jamaica, so warm is the climate,
at less cost than 2s. 6d. a bottle. It can be made
in England at 6V/. a bottle, including 2d. profit to
the brewer. The cost of carriage to and fro is
equal for a bottle or a pine-apple. We send to
Jamaica as exports 1,000 bottles of porter costing
25/. We receive from Jamaica 1,000 pine-apples
costing 25/. The brewer in England, by having a
market in Jamaica, has made 8/. profit ; and so
too the pine-apple grower in Jamaica, by having a
market in England, has made 8/. profit. So far
each nation has been enriched. But there is a
far greater source of profit to each community in
Q 2
228 State Aid and State Interference.
the enormous saving of expense secured by the
exchange. Supposing there to exist prohibitive
tariffs in England against pine-apples and in Jamaica
against porter. Then in one country, if they drank
porter, consumers would have to pay 125/. instead
of 25/. for the 1,000 bottles ; and in the other
country they would have to pay 125/. instead of
25/. for their 1,000 pine-apples. In other words, by
the means of the protective tariff, Jamaica would
have been impoverished 100/. and England 100/. in
every such transaction.
It is in this respect that high and protective tariffs
most injure English exporters. It is an indirect and
not a direct effect. But it is none the less powerful
and telling. A high tariff prevents a nation reaping
all the profits which accrue from exchange ; and
the nation has so much the less to spend on the
necessities, the conveniences, or the luxuries of life.
In England, by our commerce, we can cat pine-
apples for Gd. that would otherwise cost us 2s. Gd.
And so, in proportion, with all other commodities,
there is profit in whatever we consume or use by
reason of our free imports. We leave trade unre-
stricted, and we know that then it will run in
those channels and in those directions which are
most favourable to the genesis of profits.
Foreign Competition in Manufactures. 229
We regret to see other nations cutting them-
selves off from such sources of profit, and we are
fain to console ourselves with the tendency there
arises for us, profiting so as consumers, to cheapen
so greatly our Costs of production as to undermine
altogether these walls that other natioDS build up
in order to keep out the fertilising and enriching
current of free commerce.
It is as though villages in the rainless Delta of
the Nile were to fence themselves and their lands
round with walls impermeable to the annual flooding
of the Nile, and set to work to manufacture manures
and distil water. Each year that river brings down,
it is calculated, so many millions of tons of fertilising
deposit and so many billions of gallons of water to
a rainless land. Supposing that one of those vil-
lages adopts the opposite policy, and by clearing
away all obstructions, invites and receives the full
flood of the fertilising and enriching Nile ; and
supposing the remaining villages continue stoutly
to keep out all such external aid not only will
this one village flourish, but its crops will become
so perennially abundant that it will shortly find
itself able to purchase with its surplus all that it
desires of the property of its desolated neighbours.
230 State Aid and State Interference.
And in the end, when, for lack of recuperative
force ; when, through despising the outside aid of
more favoured regions of the earth ; when, by reason
of refusing to admit the waters of rainy and snowy
Abyssinia, these villages of the rainless Delta dwindle
and fall into ruin, then the wise village, which has
made the most of the bounty of nature in other
lands, will be flourishing as ever, and only regretting
that the other villages should, by foolish exclusive-
ness, have so entirely pauperised themselves as to
be no longer capable of purchasing its own surplus
products.
So do nations, which open their doors to supplies
from all the world, profit not only by the large and
steady supply of all they need as consumers and as
producers, but above all by the fact that wheresoever
they can obtain a commodity abroad cheaper than
it can be made at home in every case there is
enormous profit to the nation, simply out of the fact
that it is not made at home at so much extra cost
of national labour.
5. It might be supposed, not altogether without
reason, that, if our manufactures were in actual
process of extinction by this asserted irruption of
foreign competition, these various countries, and
Foreign Competition in Manufactures. 231
more especially those which foster their manufactures,
would be all of them increasing the percentage of
manufactures exported.
In his most admirable book Freetrade v. Fairtrade,
Mr. T. H. Farrer gives the following tables, which
tell no uncertain tale.
United Kingdom.
Articles of Food, Drink, and Tobacco
1870.
1880.
Per
Amount. \ c ^ B . t -
i Total.
1
Amount.
Per
cent.
of
Total.
7,607 4
13,744 ! 7
178,236 i 89
1
S,825
23,272
190,963
4
10
86
Total Exports of British and \
199,587
100
223,060
100
!
United States.
Pood
Amount.
Percentage.
1S70. j 1880. 1870. 1880.
1870.
1880.
Dollars.
129,960
273,597
51,651
Dollars.
464,130
274,554
S5,262
21,660
45,600
8,609
96,694
57,199
17,763
28-6
60-1
11-3
56-3
33-3
10-4
Raw Materials .
Manufactured \
Articles ... J
Total
I
455,208 1 823,946
75,869
171,656
100
100
232 State Aid and State Interference.
FlLANCE.
Food
Amount.
Percejjtaoe. 1
1869.
1S79.
1869.
1
1S79. :
34,017
21.4S2
70.504
33.159
25,210
t>J .510
27
17-0
50 -o
26-0
lit -8
Total
54-2
126,003 127, S-5
100
100
Germany.
Food
Amount.
Percentage.
1S69.
1S79.
1S09.
1 79.
1S69.
1879.
Marks.
567,126
767,060
677,277
Marks.
758.970
945,660
1,071,020
28, 350
38,383
43,864
37,948
47. 2-3
53,551
25 -6
34 7
39-7
27-3
34-0
38-7
Raw Materials.
Manufactured
Articles ...
Total
2,212,003'
2,775.050
110.603*
138,782
100 100
The values tor 1S0O are estimated onlv.
It will be observed that the percentage of manu-
factures to total exports decreases in proportion as
the tariff is higher and more avowedly protective.
It is well to compare particular points.
We are frequently warned that in textile manu-
factures our day of supremacy is past and gone.
And we are told France is wise in her generation
Foreign Competition in Manufactures. 233
in keeping to an elaborate scale of duties. If we
look to results we find that in supplying the markets
of the world, we are not only at the present doing
nearly five times the foreign business that France
is doing, but within the last 20 years , while our
export of textiles has increased 50 per cent, that of
France has decreased 10 per cent. The figures are
worthy of record :
Export3 of Textile Manufactures.
(Cotton, linen, silk, and woollen.)
1S59. 1869. 1S79. 1880.
France 32,000,000 ... 35,000,000 ... 28,000,000 ... 29,000,000
England 73,000,000 ... 107,000,000 ... 94,000,000 ... 109,000,000
Perhaps there is no State in the world that has
set to work so determinedly to foster manufactures
by the means of a high customs tariff as the United
States. Mr. Mulhall in his valuable work The
Balance Sheet of Nations gives some very remark-
able figures. He tells us that in 1870 the inha-
bitants of these islands manufactured 408 shillings
per head, but that in 1880 the value of the manu-
factures was 440 shillings per head an increase of
8 per cent. In the same two years the value of
manufactures per head of population in the United
States was 354 and 355 shillings respectively. In
other words, the population of the United Kingdom
was becoming' more and more a manufacturing
234 State Aid and State Interference.
people, while the population of the United States
was remaining stationary in that very respect.
And it is not only with us that all this is so.
The Swiss exports to the United States tell the
same tale. There is increase in the watches
exported, a very significant item.
Again If we ask for the export of a manufactured
commodity for which any country is famous, and if
we also look to its tariff, we shall notice some curious
facts. On the continent of Europe France is the
great silk manufacturing country, Switzerland fol-
lowing next. In all European countries there are
heavy import duties on silk, excepting only Switzer-
land, where there is a light duty, and France, where
there is no duty at all.
Again fire-arms enter Belgium and Norway free,
and all other continental States place import duties
on them. Belgium, at all events, is the great
continental manufactory of fire-arms, and the only
one whose competition is actually felt by England.
Again it will be held that Switzerland is the
head-quarters of European watch and clock making.
And yet Switzerland of all continental countries
alone refrains from taxing the imported watches
and clocks, and is content with a merely nominal
duty.
Foreign Competition in Manufactures. 235
It may be that a country does not import in any
quantity those commodities it chiefly manufactures ;
and that therefore the duty is useless ; but the fact
none the less remains that in each instance these
manufactures flourish most when ' unprotected.'
On the whole, then, so far as Foreign competition
is actually affecting British manufactures, we find
that gradually the latter are obtaining easier access
to the chief foreign markets. Any nation that still
clings to the idea of a high tariff clings to an idea
that has a pauperising effect : and in so far its powers
are curtailed for purchasing English manufactures ;
in so far, its powers are curtailed of successfully
competing in manufacture with those nations that
enjoy all the industrial advantages of free intercourse
with the rest of the world.
236 State Aid and State Interference.
CHAPTER X.
FOREIGN COMPETITION IN MANUFACTURES.
1. What we are doing in England Our Home Market and
Foreign Purveyors. 2. Percentage of Manufactures to other
Imports. 3. Particular examples Hardware Silk Wool-
lens. 4. English Labour cheaper and better. 5. Failure of
Foreign Competition.
1. One of the commonest assertions on which is
founded an appeal to the State to do something for
English manufactures is that the English home
marJcct is heing flooded by foreign manufactures. We
must therefore form some idea of what this home
market really is, and of the place taken in it by
imported manufactures.
The British Association for the Advancement of
Science recently appointed a Committee to inquire
into the manner in which incomes were spent in
England. Abundant statistics of all kinds were
collected and collated. From the elaborate calcula-
tions of the Report of this Committee, it appears that
Foreign Competition in Manufactures. 237
we probably spend each year in England on various
manufactured commodities a sum approaching to
500,000,000/. Of these commodities we obtain only
one seventeenth, or 30,000,000/. worth, from abroad.
This amount of foreign goods is roughly distributed
as follows, and I add for comparison the values of
our export of similar articles :
Imports. Exports.
Silks and Gloves 15,000,000
Cottons and Woollens 10,000,000
Iron, Steel, and Glass 4,000,000
Miscellaneous 1,000,000
Total of these Manufactures 30,000,000
3,000,000
80,000,000
34,000,000
100,000,000
217,000,000
The silks and gloves are distinctly luxuries, and
could only be purchased by well-to-do people. A.
large portion of the ' woollens ' is to be credited
to the influence of fashion. The chief feature,
however, is the utter insignificance of the total
sums as compared with the values of what we
export. We probably send abroad ten times the
value of the manufactured commodities we import.
There is, however, a fact of much importance in
connection with this home market which largely
regulates our dealings with foreigners. And this
fact is the curious effect of fashion in the matter
of clothing. Things have altogether changed in
238 State Aid and State Interference.
this respect within the last fifty years Wear was
then the great attribute of good clothing ; but now it
is so no longer. There may be compensation in all
this. It may be that a working man spends no
more on dress in buying a 11. suit each year than
in paying 101. for a suit that lasted him ten years ;
or that his wife should buy a new 11. costume each
year instead of a new 10/. gown every ten years.
But all this has a great effect on manufacture.
Districts and classes were formerly most conserva-
tive in the matter of dress, but now fashions
penetrate all over the country and through all
classes. There is much more frequent change.
And where in old days this change of fashion
affected 1,000 people it now affects 100,000.
The sewing-machine ' the printing-press ' of
fashion in dress has been the great and indis-
pensable ally of this revolution.
A notable example of this effect of fashion has
been felt in the woollen trade. The English woollen
manufacturers were slow to recognise this new
invasion of fashion. The point was well if familiarly
put in the remark that women at one time made
balloons of themselves, and at another time mops.
At one time they were all for stiff, spreading, stand-
ing-out skirts, and at another all for limp, clinging,
Foreign Competition in Manufactures. 239
close-fitting skirts. And as fashion had come to
rule, not only in Hyde Park, but in every country
town and village, this change in the material used
for dresses had a most powerful effect on the trade.
In this case in particular English manufacturers
were slow to believe that fashion had so great an
influence on the trade. But now that the lesson
has been learnt, a more watchful eye will follow or
anticipate the vagaries of fashion.
A change of fashion has. all this widespread
effect; but it must be mistaken neither for our
industries being defeated in competition with those
of foreign nations, nor for effects of depression
among consumers. Fashion is a factor in our in-
dustrial and commercial life that has put on a new
power lately, and one we must seek to understand
and to acknowledge. And it has nowhere so great
an effect as in the English home market. What
with lowering of /prices and raising of wages the
great bulk of the people in England have now more
to spend on dress and the accessories of life than
any people have ever had elsewhere or in any other
age. This fact not only widens the domain .of
fashion, but also gives to the English home market
an importance in the national economy that makes
it paramount to all other elements.
240 State Aid and State Interference.
2. If it be true that the English home market
is now being flooded with foreign manufactures to
the detriment of home manufactures, we shall find
necessarily that the percentage of manufactured
articles to the rest of our imports is increasing. It is
thus well worth tabulating the actual facts of the case.
TABLE.
Percentage of Manufactured Articles to the Total op
Imports and Exports of the United Kingdom for the
Last Fifteen Years.
Imports.
Exports.
Percent-
Percent-
age of
age of
Year
Manufac-
Manu-
Manufac-
Manu-
tures.
Total.
factures
to
Total.
tures.
Total.
factures
to
Total.
1^7
17,600,000
27.200,000
7
175,700,1 00
181.000,000
07
lscis
19.900,000
204,700,000
7
174,300,000
180,000,000
1S60
20,700.000
295,500.000
7
ls.VOO,000
190,000,1 I
IsTO
27,200,000
30.'!. 300,000
104.100,000
200,000,000
07-'.
1.-71
20,. r >00,(
331,000,000
6
217,403,000
223,000,000
97*
1n7l>
22.200,000
354,700.000
6
240,300,000
256.000,000
07 j
1673
23,500,000
371.300,1 00
6
247,800.000
255,
"i
1-74
2.5,600,000
370,100,000
7
233,000,000
240,0*
07
1-75
27,100.1100
373,000.000
7
- 15.3i
223,000,000
96J
W,
27,700,000
375.200.1
7
104, 700,000
201,000.000
<"
1-77
28,M>0, I
304.400.0 <>
s
102.71
109,000,000
965
l-7s
20.600,000
30S.I-U0.00J
S
IsH. 900,000
193.00 1
90S
1.-70
110,000
363.0(1
s
!-<;.i
122J '
", -
ls-o
33,200,000
411,201
-
J15,U00,
. Uu.UOO
06|?
From this table it is situ, once and for all, that
tor the past fifteen years our foreign trade in
manufactured commodities lias maintained a steady
Foreign Competition in Manufactures. 241
relative level ; and that there has been no appreci-
able decrease in our relative exports nor increase
in our relative imports of manufactured to other
commodities. As our population increases in num-
bers and in wealth, it would be a very suspicious
sign indeed if we did not spend some of our increased
gains in the purchase of greater values of foreign
manufactured commodities. But that at the same
time we increase in equal ratio our purchases of raw
material and of food is clear irrefragable evidence
that our manufacturing ability is not in the least
impaired. In short, these records distinctly show
that to say that our home market is being flooded
by foreign manufactures is to reverse the truth. As
a matter of fact we continue to flood foreign markets,
and we continue to spend more and more in our
home market, but the proportion of foreign manu-
factures to native purchased in that home market
does not increase in like ratio.
3. It will not be altogether unprofitable to in-
vestigate one or two particular instances as to our
foreign trade in certain specific manufactures. The
most frequent public complaints have been in regard
to hardware, silk, and woollens.
We are frequently informed that American cutlery
and tools are driving those of English manufacture
R
242 State Aid and State Interference.
out of the shop windows. We are frequently in-
formed that continental, and especially American,
competition is altogether upsetting our hardware
trade. The following tabulated record of what is
actually happening will assist us to a correct
judgment :
TABLE.
Imports and Exports of Hardware and Manufactured
Metals betwekn the United Kingdom and the Four
Countries we principally deal with.
1S80.
Exports to Imports from
1,240,000
06i",000
1,667,000
5.075,000
228,000
860,000
190,000
2S1.000
Total
8,551,000
16.597,ii00
1,559,000
1,745,000
Total to all
25,148.000
3,304,000
If French and German and American cutlery and
tools and machines are flooding the English market,
what shall be said of English goods of the same
kind in those markets ? at all events we are
returning the compliment fiftyfold.
And if we look into the silk trade we find similar
evidence ; and yet we not unfrequently hear that
the silk trade at all events has been ruined. Even
Free Trade orators have comforted the Coventry
Foreign Competition in Manufactures. 243
mill-hands by pointing out that though the one
industry of silk manufacture has slipped from their
grasp, its place has been occupied by the manu-
facture of bicycles. The following details as to our
annual exports of ' silk manufactures ' may be
interesting :
France ... . . .
Germany
United States .
Belgium . . . .
Canada . . . .
India
Australia . . .
Other Countries
Exports of Silk
Manufactures
Imports of Silk )
Manufactures )
1869.
1880.
114,000
steady rise to 577,000
77,000
>> > >
, 110,000
279,000
uneven fall ,
, 218,000
Nil.
steady rise ,
56,000
22,000
> j > ?
84,000
10,000
>> >> >
355,000
66,000
S ?) J
205,000
542,000
uneven fall ,
425,000
^1,110,000 steady rise to 2,030,000
1869. 1880.
1,110,000 rise to 2,030,000 increase 90 per cent.
11,800,000
13,100,000
11
The tendency here again is to turn the tables on
foreigners so far as flooding markets is concerned.
Another instance is that of the woollen trade.
The facts of the case I condensed in a letter to the
Times, which I will here reprint, as it contains
evidence very much to the point :
" At this meeting at the Mansion-house it was
explicitly stated by the speakers, with the tacit
244 State Aid ami State Interference.
acquiescence of the audience, that the English
woollen trade was being overwhelmed by foreign
competition, and that that mysterious despot Fashion
marshalled and directed this new invasion. The
leaders of the movement that is to oppose this con-
jectural invasion seem content to depend on mere
allegations, and to be presumably not aware of the
figures of their own trade. They may, therefore, be
interested to know that transactions were as follows
in the year 1880 : Of woollen manufactures, in
round numbers of value, we made and consumed
in England 63,000,000/. ; we made and exported
from England 17,000,000/. ; and we imported and
consumed from abroad 7,000,000/
In other words, Fashion, marshalling to her sup-
port all the varieties and excellencies of foreign
endeavour and skill, manages to supply us with
one-tenth only of what we annually consume in
woollen manufactures ; and, on the other hand, we
supply foreigners with nearly three times the value
of woollen manufactures that we obtain from them.
The foreigner must be mightily unfashionable ; and
it seems that his eagerness to possess himself of
goods that are pronounced at the Mansion-house
to be unfashionable enables the ladies of England,
out of the profits of the trade, to wear whatever
Foreign Competition in Manufactures. 245
they may consider most suitable to their position,
their person, or their purse.
It may also be interesting to the leaders of this
new movement to know that we are year by year
using more and more ' raw ' wool in England. The
following figures testify to this :
1870. 1S75. 18S0.
Lb. Lb Lb.
1. Of Foreign Wools we Imported.. 263,300,000 ... 365,100,000 ... 463,500,000
2. Of Foreign Wools we Exported.. 92,500,000 ... 171,100.000 ... 237,400,000
"' f fo/use" T? 1S .. W ?.. re !! ill ?. d } 1"0,SOO,000 ... 193,000,000 ... 226,100,000
It is also to be remembered that as a nation
we are taking from foreigners more and more yarn
for weaving and other manufacturing purposes.
The figures are :
1870.
1S75.
1S80.
Lb.
Lb.
Lb.
Yarns Exported
... 35,500,000 ..
. 31,700,000 ..
. 26,500,000
Yarns Imported
... 10,300,000 .
.. 12.400,000 .
.. 14.900,000
Excess of Exports ...
... 25,200,000 .
.. 19,300,000 .,
,. 11,600,000
In other words, so far as the foreign trade in
yarns is concerned, we are supplying less and less
to foreigners, and taking more anil more from them ;
and, as yarns are only used for manufacture, these
facts do not exactly prove that foreigners are manu-
facturing more and we manufacturing less.
I would allude briefly to the other point the
alleged effects on British agriculture. Here, again,
246 State Aid and State Interference.
it is often better to know what is actually proceeding
than to ignore such knowledge, and allow the kindly
impulses of generosity to be led astray by the imagi-
nation. It seems to have been tacitly assumed that
both prices and quantity of English-grown wool have
fallen solely because fashion has for the time being
deserted lustre and long wool for dulness and short
wool. But the magnitude of this asserted influence
is limited by the fact that of the 150 million lbs.
of wool annually grown in these islands, 55 millions
at the least are short wool. A.nd, again, those
familiar with agriculture know very well that for
years past farmers have bred for the carcase and not
for the fleece; they have found it more profitable
over since the beginning of the century to supply
the butcher rather than the manufacturer; and the
consequent fall in the value of the fleece has been
more than compensated by the increased bulk and
general character of the carcase ; and meat is one of
the few commodities that seem always to remain
high in price. The number of sheep in England
varies but little taking one year with another. The
averages for the last four triennial periods have
been 32.}, 33, 32}, and 31} millions. The figures
always fall off in wet years. Fluke and other diseases
incidental to excessive moisture are known to have
Foreign Competition in Manufactures. 247
almost decimated flocks in certain districts of late.
The fashion for these dull wools, on the showing of
the authors of this new movement, did not enter
upon the scene till 1874. But in 1868 there were
35 millions of sheep in these islands, and in 1871
only 31 millions, in spite of the absence of all
interference on the part of fashion. It is also worth
while noting that the increase has been continuous in
the export of English-grown wool, from 9,000,000 lbs.
in 1870 to 11,000,000 lbs. in 1875 and 17,000,000 lbs.
in 1880. Foreigners are taking more and more of
our home-grown wool. The results on fashion may
be disastrous, but we have no cause to complain.
When we meet with an appeal to English ladies
to employ English labour in preference to foreign,
we find ourselves face to face with an appeal
altogether out of tune with the intelligence and
tendency of the times. If education has achieved
anything, English women will know they cannot
spend a penny on French or any other fashions
unless the penny has been earned first ; English
labour provides the English nation with the where-
withal for these foreign purchases.
On this question of fashion the ladies of England
will do well to follow the ' statesmanlike ' lead of her
Royal Highness the Princess of Wales, and not be
led astray to imagine that by purchasing what they
248 State Aid ami State Interference.
do not want they can in any way assist those whose
economic function it is to supply what is wanted.
British industries, as a rule, are quite capable of
taking care of themselves ; they require no patron-
ising, and least of all would they brook any
grandmotherly protection from foreign competition.
England manufactures nearly one-third of the wool
that is manufactured in all Europe. The English
system is doubtless capable of improvement, but it
is not trembling in its shoes because the general
prosperity enables the nation to make a few pur-
chases abroad. As long as we in England wisely
and determinedly allow as little as possible to inter-
fere with the free course of industrial transactions,
fashion can but assist in giving spice and stimulus
to industrial exertions.
To attempt to fight natural tendencies is a
beating of the air that is vain, if it be nut indeed
actively injurious to the interests involved. And it
is a fight which the wise will wage only when they
are ignorant. A generous but purblind imagination
has before now led good people to lay the lance in
rest, even against innocent windmills."
By thus gathering together facts we see that even
these three classes of manufacture, classes to which
popular rumour has specially credited most ruinous
Foreign Competition in Manufactures. 249
effect from foreign competition, retains nevertheless
all the outward signs of vitality, and of most success-
ful competition against the dreaded foreigner. In
short, there is not apparently any single instance of
manufacture in England that is not doing at the
least as well as those in foreign lands. And it is
probable that the majority of these are prospering
better, especially in regard to the export trade they
can and do command.
It may be well to append to these particular in-
stances an analysis of our exports to France during
the last few years :
Table of Exports to France from the United Kingdom.
Apparel and Hosiery.... ...
Cotton Textiles
Silk
Woollen
1869.
1874.
1880.
99,000
987,000
114,000
551,000
1,337,000
28,000
3,277,000
116,000
1,040,000
290,000
1,128,000
1,860,000
45,000
2,765,000
162,000
1,070,000
577,000
1,441,000
1,377,000
92,000
2,927,000
Worsted
Earthenware
Other Manufactures
Total Manufactures ...
Coal
Alkali
Metals Un wrought
Wool
5,793,000
7,264,000
7,546,000
879.000
63,000
941,000
380,000
1,876,000
75,000
857,000
242,000
1,552,000
89,000
905,000
63,000
Total Raw Materials ...
2,663,000
3,050,000
2,609,000
250 State Aid and State Interference.
From these records it will be seen at once that so
far as the French market is concerned we are in-
creasing our hold upon it in regard to manufactures,
but that we find the French require of us less and less
of the raw materials which manufacturers make use of.
4. If we look to England itself we shall learn
much. The prosperity of the people, and more
especially of those whose incomes are small, depends
intimately on the purchasing power of money. A
high tariff' is always opposed to increasing this
power. Its effect, if it has any, must be to raise local
prices. Indeed a high tariff has no influence of a
protective kind unless it raises prices above what
they are in other countries. Even American au-
thorities have to allow that the labourer in America,
if this purchasing power of money be taken into con-
sideration, is not so well off as tHe labourer in Eng-
land. And the United States is only to a moderate
degree affected by its high tariff, because all over its
vast interior it upholds Free Trade. In the United
States, for instance, the growth of corn and wheat
and meat is practically unlimited ; in England we
can only grow half uf that we consume, and yet in
England the prices of food are not higher than the
] trices of the same in the United States. This is all
proof of the maxim "If cheap food is not brought
Foreign Competition in Manufactures. 251
to the people the people will go to cheap food."
We have had in England a series of seven very lean
years, and yet prices of wheat and agricultural pro-
duce have not risen. The farmer as a producer has
consequently suffered : there has been no compensa-
ting rise in price for shortness in quantity of wheat
he produces. But as consumer, not only of food,
but of manures, implements, clothing, labour, and
all else, he feels the benefit of no rise in prices. And
above all, he has enjoyed the reflex action of living
on in a community where dearth of harvests has not
ruined the general prosperity. There have been no
famine prices to check industrial prosperity.
And another remarkable feature is the great
advance in steadiness of prices : not only has wheat
not risen but meat has not fallen. We open our
markets to all the world, and we are rapidly discover-
ing a steady uniform price for our own chief com-
modities. This is of special value to the farmer,
because he can tell surely what he is working for.
When he knows that prices will not alter very greatly
he can tell beforehand what it will pay him to pro-
duce ; and he will not devote a year's energies and
a year of his farm and all its belongings to the pro-
duction of something which in the outside vagaries
of market prices he may find valueless when he has
252 State Aid and State Interference.
produced it. This steadiness of price, consequent on
worldwide supply, is a main element in the steady
prosperity of agriculture.
It has been calculated that the wage-earning
classes of England win a quarter of wheat now at an
expenditure of exactly half the amount of labour they
had to give for the same quantity thirty years ago.
This represents a very great advance. It accounts
for the fact of the shortened hours of labour we in
England can institute and yet compete with all other
nations successfully. Our labour is more profitable,
and one chief reason of this is that we have no
high tariff taxing the ordinary commodities of life
and transferring money from the pockets of the
labouring classes to the pockets of the capitalists.
It is not remembered so often as it should be that a
protective tariff raises a revenue over and above that
which finds its way into the coffers of the State. The
tariff raises prices. In many protective States every
hardware article, every yard of cloth, or piece of
clothing or furniture, costs more because of the tariff.
Every labouring man has to pay this increase of
price and a great part of this increase rinds its way
into the pockets of the manufacturer and distributor.
This does nut occur in England, and as a consequence
the wase-earner is better off.
Foreign Competition in Manufactures. 253
But there is another point we have to see to. If
labour is nominally cheaper in England than in other
countries, is it really as good ? We may answer de-
cidedly in the affirmative. We shall do so if we go
into details ; we shall do so if we only look to the
fact that competition is free not only to goods but to
men ; and the English artisans and mechanics not
only completely hold their own against all foreign
invasion in England, but are to be found in almost
every manufacturing centre in the whole world. And
in each of these they are found holding prominent
positions. We are told on the one hand that we
cannot compete with France, for instance, because
our Factory Acts limit us to fifty-six hours, while
manufacturers in France obtain seventy hours work
a week from their ' hands.' The answer to this is
that we do compete. And if we do compete at so
much less expenditure of time, we find at once we
must be doing our work far more economically. This
must not blind us, however, to the danger that
State Interference, as embodied in the Factory Act,
might at any moment cause serious injury to English
industry if it prevented a natural change in the
hours of labour due to any new change in the
comparative efficiency of our labour and of foreign
labour that was working under freer conditions.
254 State Aid and State Interference.
A great deal has been said of our sad lack of tech-
nical education. "We are in a transitional state. We
abolished that State Interference which was em-
bodied in all the old apprenticeship and other close
trade regulations and traditions, but we put forward
no substitute. Indeed, the State forced on the nation
an altogether different commodity on the plea that
it was a fair substitute. Reading, writing, and
arithmetic were made the substitutes for technical
education. We do not yet understand the full effect
of the great error that was made when the nation, in
its proper determined enthusiasm to educate itself,
was altogether led astray by rashly assuming that
the three R's represented education. The farmer
has all along protested ; and now, at last, the manu-
facturer is protesting likewise. And we must hope
shortly to see a reform in our education policy, which
will, at last, begin with some adequate definition
of the term education.
Farmers have long pointed out that children who
are probably destined to become agricultural la-
bourers are practically better educated by being
taught the technicalities and practical operations of
agriculture than by being hurried through courses
of reading, writing, and arithmetic. Both branches
of education are good, but if you substitute the one
Foreign Competition in Manufactures. 255
for the other you will oftentimes obtain an adult
'educated,' but ignorant of all knowledge that can
serve him honestly for his life's work.
And so it is with manufacture. The dead level of
the three It's is to be imposed on all children alike
at the sacrifice of all other training. This unforeseen
tendency of the nation's first grasp on the great idea
of a thoroughly national education policy will soon
be checked, and we shall have some real and efficient
substitute for those means of technical education of
acquiring training and knowledge in their real work
of life which close guilds and apprenticeship
systems sought, however badly, to provide.
It is well for English labour that it can still com-
pete with the world, even though it has been so
hampered by a partial attempt at national education.
It is one sure hope of the future that in this direc-
tion at all events, in the direction of technical
education, considerable improvement is yet possible
and probable.
5. On the whole we see that foreign competition
in manufactures is at the present a non-existent
element in our position. We open our doors to the
foreign competitor in every sense of the term ; and
by our national prosperity, we, so to speak, invite
him to do his w T orst. In spite of all this, the amount
256 State Aid and State Interference.
of manufactures he supplies to us is altogether in-
significant if compared either with the amount of
manufactures we supply to him or with the amount
we supply to ourselves.
We remain, after what has been called ' forty
years of disastrous one-sided Free Trade,' the one
great exporting country of manufactures. We also
note, that of the other countries, those export the
greatest percentage of manufactures that have the
lowest tariffs ; and we are driven, if we look to ex-
perience, to adopt the maxim that " the export of
manufactures proceeds in inverse ratio to the height
of the customs tariff." This is not a theoretic idea,
but merely a plain matter-of-fact account of what
has actually occurred among nations. One-sided
Free Trade has, at all events, enabled us as a
nation to pay the lowest prices for everything we use
or consume. The consequence is that, flourishing
thus as consumers, we can, as producers, in the long
run undersell all foreigners who attempt to compete
with us, and who do not enj<>y similar advantages.
It is for this reason we have been able to make so
much of our coal and our iron and our climate.
What a country ran best produce is not confined
to what its soil or its climate yield, but to what
the whole of the conditions of its existence yield.
Foreign Competition in Manufactures. 257
Character, skill, perseverance, and even traditions in
the people are often quite as important as latitude,
or mineral resources, or rainfall. Forty years of free
traffic with all the world, so far as we could make it
free, have enabled us to develop many invaluable
national qualities and attributes. In addition to
this, on the one hand we have been checked from
wasting our energies on the production of com-
modities more cheaply produced elsewhere ; and, on
the other, we have been enabled to establish and
to obtain a good start in various other industries for
which we have equal, but not superior, natural
facilities to other nations, but of which other nations
have deprived themselves by a variety of artificial
restrictions.
As a matter of fact, nature is more bountiful in
regard to particular products in some districts of the
earth's surface than in others. A high tariff prevents,
and a low tariff allows, a nation to profit by this fact.
And a government which would aid its citizens in
industry or commerce by interfering with their
natural advantages, and obstructing free intercourse,
must, in the long run, injure and impede, not only
the commercial, but the manufacturing prosperity
and advance of the people.
2")8 State Aid and State Interference.
CHAPTER XI.
INTERFERENCE WITH OTHER NATIONS.
1. Four General Principles. 2. Lowering Tariffs. 3. Fighting
Bounties. 4. Commercial Treaties.
1. The Government of any one country is not
infrequently urged, proprio motu or from without,
to extend the active influence of its own commercial
policy so far as to interfere with the private and
public policies of other nations. I wish in this
chapter first of all to summarise the principles that
should lie at the base of all international commercial
policy ; and then to apply these general principles
to the particular modes in which such interference
may be embodied.
I will formulate four general principles, and then
pass on to apply those general principles to these
modes: to tariffs, bounties, and treaties. I ven-
ture to think it is no exaggeration to say that the
problem we here deal with is one of the most vital
Interference with other Nations. 259
importance to our national future. We in England
have again arrived, as it were, at cross roads in our.
commercial progress. We had done so before when
we took the right road in 1846, and again when
we took a wrong turning in 1860.
If we review generally the principles that ought
to regulate our dealings with other nations in re-
gard to commercial policy, we see at once that we
have two concurrent duties to perform. There is
our duty to ourselves, and there is our duty to
foreign nations. It is not only just as wrong, but
it is just as foolish, to forego the one duty as to
forego the other. In regard to our duty to our-
selves we light upon a first principle which I need
not dilate upon It is a principle more generally
accepted than any other. It is the promotion of
our own prosperity. In regard tp our duty to other
nations, ideas are more mixed. In the first place,
there must be international as well as national
freedom. In short, the liberty of each nation is
only confined within the limits of like liberties
in other nations. Our liberty does not authorise us
to do anything that robs other nations of a similar
liberty, and we must resent any such attempt on
the part of a foreign nation. We must neither
interfere nor suffer interference with this liberty.
S 2
2G0 State Aid and State Interference.
With this proviso in mind we come upon a second
general principle the promotion of the prosperity
of other nations. It is often forgotten of what very
great importance to our individual prosperity is the
prosperity of other nations. Many of us know the
bad effect of a famine in India or China on English
trade. But there is more than this. In the late
heated discussion in newspapers and elsewhere on
the free trade question one point seems to me to
have been altogether overlooked. Stated broadly,
this point is that much of the falling off in particu-
lar cases in our export of manufactures, and certainly
a most serious drag on any increased consumption
of our manufactures in certain countries, is, not that
they are supplying themselves ; not that protection
has fostered and developed in their midst rival
manufactories to ours but that they heavily tax
each native in his capacity as consumer, and so
discourage and weigh down his efforts as a pro-
ducer; they pauperise the nation, and render it less
able to buy from other nations. This is a fact
strangely overlooked. I do not, of course, say that
it is the case everywhere, but it is the case in
certain countries whose natural and virgin resources
do not assist the population to rcsisl ami overcome
the pauperising effects of commercial restrictions.
Interference with other Nations. 261
A third general principle that should regulate
international commercial policy is the removal of all
restrictions or obstacles to the free current of com-
mercial and industrial life. Freedom to industries is
the mainspring of industrial prosperity. Of course
this freedom is like international freedom, a mere
relation. It means freedom to do all that does not
interfere with the same freedom in others. The
chief function of Government is to watch over this
essential condition to the existence of freedom.
That is the final cause of the State's existence.
The State which busies itself with other matters is
likely to busy itself to the detriment of its subjects.
The main condition of commercial success also is
that the will, whether of the individuals or of the
State, be left as free and as untrammelled as possible.
The contravention of this principle leads to endless
conflicts of interests and to strange breaches of
justice. To say that commmercial intercourse must
be as unrestricted by State interference as possible
ought to appear to many to be a needless truism,
and yet it is a principle more commonly violated
than any other. Indeed, the true value of com-
mercial intercourse is not commonly appreciated.
Many have forgotten how Mill proved commerce to
be ' a mode of cheapening production.' Commerce
262 State Aid and State Interference.
is certainly a means to that end. The more we
import and export the cheaper we can produce.
Interchange of commodities implies saving in the
cost of production. It is this saving of price in all
the nation consumes that makes commerce a source
of national wealth. Each commodity imported re-
presents normally so much labour saved in its
production. The more the nation imports the more
it saves in the cost of production. Unrestricted
commerce will regulate itself according to the actual
profits accruing to the community. Anything that
interferes with commerce is simply a curtailment of
these profits. There is an important corollary to
this principle which most people overlook. It is true
we must never seek to compete against greater
natural superiorities in other nations. But, at the
same time, we must never forget to compete against
equal or lesser natural superiorities. It is by not
attending to this latter wholesome rule that we have
allowed the silk industries of France to steal a march
upon us in the matter of better technical education
and a higher standard of taste. This rule specially
affects Ireland. There are many industries in which
other countries have no natural superiority to Ire-
land; and some industries in which Ireland and Irish
people have actual natural superiority. Yet these
Interference with other Nations. 263
industries do not now flourish in Ireland. Lately,
however, an altogether wholesome private movement
is on foot which will, we all hope, be pre-eminently
successful in reviving in Ireland those industries for
which Ireland and the Irish have natural facilities
greater than, or at all events equal to, those possessed
by other nations.
These three foregoing principles apply to our
commercial policy in so far as it affects our industrial
and national prosperity. But our commercial policy
is also largely controlled by the need of enabling
the State to perform its duties. In most civilized
countries the commercial policy adopted has close
connection with the question of raising State
Revenue. This we are compelled to recognise in
regulating our commercial policy. And the best
general principle to act upon is to see that the
collection of Revenue does not hamper commercial
and industrial life.
2. If we apply these four principles to tariffs, we
must come to these conclusions. We have our own
tariff and we have the tariffs of other nations. Low
tariffs are everywhere desirable if we would realize
our four principles of prosperity. A low tariff, by
interfering as little as possible with the ordinary free
current of commerce, does not in practice restrict
264 State Aid and State Interference.
or direct production or exchange. There is con-
sequently no waste of labour or of capital on the
production of commodities that can be produced
cheaper elsewhere, or on the importation of commo-
dities that can be produced cheaper in the country
itself. A low tariff incidentally promotes commerce,
and so increases the profit or saving of labour
accruing from all exchange. It thus promotes the
prosperity of all nations. And besides this, so far
as the object of raising revenue is concerned, a
low tariff is right, a high tariff wrong that is, if
we judge by results. A low tariff may practically
not interfere with the free current of commercial life
if we see to it carefully that it neither oppresses
nor relieves of oppression home as compared with
foreign or foreign as compared with home products.
For instance, we not unfrequently meet with the
argument that some home industry should be
relieved of taxation. This contention has reason
in it only if a like industry in a country trading
with us in that particular commodity is free of
similar burdens. But we are apt to forget that
foreigners pay rates and taxes as well as ourselves.
It is not so generally acknowledged as it should be
that a low tariff in the course of years yields
more actual revenue than a high tariff. We have
Interference with other Nations. 265
our two colonies in Australia Victoria and New
South Wales. They are very similarly circum-
stanced. Victoria for the past ten years has had
a high tariff, and New South Wales a low tariff.
In Victoria the income from customs duties during
these ten years has remained about the same per
annum : in New South Wales it has steadily
increased. Another example is that of the United
States as compared with the United Kingdom.
During the past twelve years the English customs
revenue has maintained a steady level of 20,000,000/.
per annum, though the tariff has been low, and
even reduced during the decade. During the past
ten years, with a high tariff, the United States
customs revenue has fallen from 37,000,000/. in
1869 to 27,000,000/. in 1880. And we must remem-
ber that during this decade the population of the
United States has increased by 10,000,000 while
our own has increased only by 4,000,000. If we
add this direct result to the indirect result of
largely increased imports, each item of which brings
profit to the nation, we shall see that a low tariff
brings a vast balance of material benefits which
would overwhelm even the most extravagant pre-
tensions in the way of industrial benefit set up
by the advocates of a protectionist tariff. If w r e only
266 State Aid ami State Interference.
remember that we profit by imports even more
than we do by exports, we shall not go wrong.
We must keep our own tariff low ; that promotes
our own prosperity ; but is it also our desire to
promote the prosperity of other countries ? For
both reasons, then, we wish other nations to have
low tariffs. How are we to accomplish this ?
We are told to put on an equivalent tariff so long
as they maintain theirs. But such a retaliatory
tariff is an act of war. There must be economic
loss. Such a tariff can only be justified by success.
Where have we experience or reasons to prove that
such a tariff ever reduced any other tariff? The
cost of such an act of war would forestal much of
any ensuing profits. Such an act would breed many
evil indirect influences, which last for a long time
and which, in the everchanging arena of 'practical
politics,' may well outlast any succeeding period of
low tariffs, even assuming such a period ever came.
It is instructive also to regard the practical possibili-
ties of retaliatory duties in England to-day. In the
first place, were we to impose them, the opinion
must gain ground among other nations that we
have abandoned low tariffs. All might not think
so; but some would; and in so far the imposition
of retaliatory duties to force some nations to low
Interference with other Nations. 267
tariffs would increase the tendency of other nations
to retain high tariffs. In the second place, we must
either impose them for a term of years or until their
object be accomplished. A term of years will be
taken, especially by the more obstinate opponents,
to be merely a term of waiting. No term of years
puts us to the risk of pursuing a hurtful policy for
ever, or, at all events, for long. We should bind
ourselves, in self-contradiction, to that very policy
which we were seeking to overthrow. In the third
place, more than 90 per cent, of what we import is
food and raw material, and to put duties on these is
simply to commit industrial suicide. In the present
political state of the world, the remedy for high
tariffs is to keep our own low and free from all
foreign interference. This is the surest means
eventually to outlive the action of high or hostile
tariffs. We must hold up to the world the example
of successful fact. This is a remedy which has not
yet been tried. In the case of England, we began
it in 1846 ; but we left off in 1860, when we made
the French Treaty.
3. In determining on the principles that should
regulate our conduct towards countries that give
Bounties, we must above all keep our attention fixed
on actual experience. Mr. Gladstone has said, in
268 State Aid and State Interference.
regard to the notorious Sugar Bounties, " We do
not regard with any satisfaction the system under
which an artificial advantage is given in our
markets to the products of foreign labour." But
this idea is applicable only in the event of their
products being sold in our market at less than their
cost of production. This would deprive our own
industry of legitimate employment ; but only when
and if it takes place. The question remains, What
Bounties do actually give an artificial advantage
in our market to the products of foreign labour?
A great many people will name at once the Sugar
Bounties. Well, firstly, let us look to facts. In
regard to the countries that give these Bounties, it
is, of course, evident that the artificial advantage
comes from the pockets of the people at large.
Consequently all profits of this artificial advantage
is merely returning to a few of the people what all
the people have paid out. But there is the further
question, Are there any extra profits created by
these Sugar Bounties ? If we turn tu reasous we
shall light upon an explanation which no one seems
to notice. These bounties are drawbacks on export.
In other words, the ' bounty-fed produce ' is
produce which has escaped contributing to the
revenue, and which yields in addition certain
Interference with other Nations. 269
surreptitious profits on the transaction. But to
accomplish all these ends there must be a duty
on sugar. The greater proportion, then, of all
this labour is simply to overcome an obstacle to
industry which we in England have most wisely
abolished when we abolished the sugar duties.
It is not known so generally as it should be that
no State on the Continent gives Sugar Bounties.
The bounty is obtained in spite of the Govern-
ment, and by reason of the difficulty of assessing
a duty and an equivalent drawback on raw and
refined sugar. Each Continental Government knows
this, and each wishes to abolish so faulty a system.
The only method that can really succeed is the
doing away with all duties on sugar; and seeing
that sugar is so necessary a food, this would appear
to be both wise and necessary, and English experience
proves the entire success of the method.
But, then, there are other bounties not founded on
drawbacks. The most recent instance is the insti-
tution of Shipping Bounties by France. Their
object is to promote a carrying trade and a ship-
building trade. And they are to accomplish this
by turning to these trades labour and capital from
other employments. Much must be lost to the
community by such forced interference with industry.
270 State Aid and State Interference.
Had France population to spare to earn a livelihood
on the sea ; had France more coal and iron in close
proximity to harbours ; were France a mass of good
harbours standing midway between the Eastern
and Western civilizations ; had France committed
herself to a low tariff for purposes of Revenue only ;
had France 10 millions of Frenchmen and 200
millions of native races under her own rule domi-
ciled in all distant parts of the world ; France would
have been the natural rival of England in all ship-
ping affairs. But France has none of these things,
and it so happens that England has them all. It
is therefore not wise of France to endeavour to
rival England in a special industry due to special
environments which France does not enjoy. More-
over, we already see that Italy and Germany and
Spain are talking of Shipping Bounties. To put on
such a bounty is to invite nay, rather to incite
other nations to do likewise, and thus, even if
successful, it becomes more than ever a dead
economic loss to the country, and the instrument of
its own destruction.
It may be contended that while we in England
are waiting for other countries to experience by sad
disaster an; 1 loss the mistakes they have made, our
own particular industries may suffer from tern-
Interference with other Nations. 271
porary depression, and that thus, in order to
promote our own prosperity and also that of the
other nations, we should endeavour to put an end
to all bounties. If we take the case of England
and France we shall see the difficulty in our way.
If we place countervailing bounties on our own
industries we at once bring the two cases more on
to an equality. But then that means that we reduce
the natural advantage we now possess a natural
advantage which is only made the greater by the
artificial arrangement adopted by France. Again,
it is equally impracticable to place a duty in
English ports on all shipping that receives bounties,
because by so doing we at once put a premium on
French ships visiting foreign and neutral ports. We
have become the great carriers and builders by our
natural opportunities, and in some measure by
our rather unique low tariff. Nothing can even-
tually deprive us of this but similar conditions
arising in some other nation. If France pre-
fers to take millions a year out of the pockets of
her people, to make what M. Tirard himself has
recently called 'great and heavy sacrifices/ in
order to turn labour and capital from more profit-
able to less profitable employment, and to waste
the margin of labour and capital expended in this
272 State Aid and State Interference.
production over and above what would be expended
were things left free, we shall indeed note the ex-
pense all this is to the French people. We shall
also note the fact that in so far as these bounties
succeed in diverting capital and labour from
other industries, in so far do they open up a
new gap for English industries to fill. We shall
note, too, that whatever success may attend this
new policy will have its first effect on those ship-
building and carrying interests which exist by
sufferance under peculiar local conditions. The free
and healthy English industry will be the last to
feel their effects. We remember that the up-keep of
the ships of the French navy is nearly three times
as costly as that of English men-of-war. There
are not the same material facilities in France. All
this dead loss of a forced industry, coupled with the
direct burden of the bounty, renders it absolutely
certain that in the end England must win. And
this even without taking into account that for very
consistency's sake the logical French mind will yet
demand similar bounties for all other industries.
To destroy the Bounty System we must trust to
indirect influences. And among these the most
powerful is the care that the natural advantages
any particular industry threatened enjoys in Eng-
Interference with other Nations. 273
land be not in any way hampered. As we have
successfully braved the Sugar Bounties by taking
away all duty on sugar, so we can successfully
brave the Shipping Bounties by removing all re-
strictions on the increase of our commerce, and
promoting the efficiency and speed and comfort of
our mercantile marine. The French bounties, in
so far as they are efficacious, will greatly stimulate
private skill and enterprise in England. England
has still the great sources of supply of coal and
iron, and she has that colder climate that is so
essential to metal working. England must look to
facts and let fancies alone ; put her trust in ex-
perience, and keep her tariff low. Then the force
of nature will overcome all those artificial restrictions
placed by other nations on their own industries.
4. There remains the last of our particular
inquiries What principles ought to regulate our
dealings with other nations in respect to commer-
cial treaties ? Commercial treaties are bargains or
contracts based on a state of warfare. To have
a treaty at all you must assume that the two
countries are in a condition of antagonism. In so
far, then, as commercial treaties are treaties of
amity, in so far are they good. But in so far as
they are treaties of commerce, in so far are they
T
274 State Aid and State Interference.
restrictions on commerce. Now, they may be re~
strictions on commerce itself being restricted, as
when Japan contracts not to levy more than three
per cent, on imported goods. We find that this is
the usual tendency of modern treaties; they are
bargains by which one nation contracts with an-
other for greater facilities of commerce. But by
their very nature they also bind a nation to con-
fine these facilities to some one or two other
nations. They only do away with restrictions on
one stream of commerce by placing restrictions on
other streams. They thus compel a nation to adopt
a more costly mode of obtaining certain commodi-
ties than it would adopt were its action free and
unfettered. It would thus appear that no commer-
cial treaty is correct which binds the contracting
parties to any differential duties or tariff. Commercial
treaties that open up trade with another country
without, at the same time, restricting trade with
other countries, may be beneficial. Such are the
treaties by which England secures commerce with
China and Japan. The French Treaty is not one of
these. The treaty of 18G0 was a decided departure
from Free Trade principles ; it restricted our free-
dom in commercial dealings with other nations. We
gained indeed by the low duties France placed on
Interference with other Nations. 275
our goods ; we gained by the low duties we placed on
French goods ; but we lost in other respects. For
instance, other nations, Spain and Portugal, at once
raised their tariffs against us, and by this French
Treaty we lost our liberty of managing our own
financial and commercial affairs as we might deem
best. Mr. Chamberlain has told us " If the treaty
negotiations with France break down, the English
Government would be perfectly justified in dealing
with the wine and spirit duties as they thought best
for the interests of the country." In other words
the treaty, if made, will deprive the English Govern-
ment of its liberty to deal with duties tending to the
best interests of this country. We obtain, indeed,
entry into the French market, but in so doing, if we
may judge by experience, we close other markets to
ourselves. That is sufficient of itself to condemn the
treaty. But the question remains Is this treaty the
only means of gaining entry into the French market ?
Now, if we declare to all the world we will make no
contracts that bind ourselves, but will, from time to
time, put on and take off duties as suits our own
financial policy, will not such a policy afford them
strong reason to open their ports to us in order to
maintain commercial intercourse ? We might well
tax some luxuries more than we do, and our wine
276 State Aid and State Interference.
duties might well be readjusted. In these matters
our hands have been hitherto tied by treaties. In the
present condition of the world England would find
much saving of labour could her commercial treaties
be restricted to one clause that known as ' the most
favoured nation ' clause. Thus we should contract to
grant to all nations the fullest favours our domestic
policy will allow ; we should contract to receive
from these nations the fullest favours their domestic
policy will be able to grant. But we should leave it
to each nation to elaborate its own domestic policy.
If we abide by profitable principles of conduct we
shall not make commercial treaties that restrict our
financial policy, or that in any way, directly or
indirectly, restrict our trade with third countries.
It will be better for our prosperity to have no
treaties at all than treaties that in any way bind
us. We are more likely to lead other nations to
lower their tariffs by such action than by that
vain seeking after reciprocal concessions which has
been attempted now for more than sixty years, and
which, whenever it meets with success in one
country causes, ipso facto, an equivalent backsliding
in other countries. If we have a treaty at all it
would be well if it consisted of the one clause ' the
most favoured nation ' clause. Even this is merely
Interference with other Nations. 277
a conditional arrangement conditioned by the
peculiar political relation of nations to one another
at the present day. A treaty is the only means
existing, with the exception of warfare, for pre-
venting one nation from pressing its own liberty
so far as to encroach upon a similar liberty in
other nations.
In thus considering what principles ought to
govern our dealings with other nations as respects
tariffs, bounties, and commercial treaties, I tabulate
four principles : 1, We must promote our own
prosperity ; 2, We must promote the prosperity
of other nations ; 3, We must free from all re-
straints and obstacles the courses of commerce and
industry; 4, We must not allow the collection of
revenue to hamper commercial or industrial require-
ments.
These principles are largely conditioned by the
political relations of nations, but in applying them to
the special objects under discussion we shall see that
they lead us in regard to tariffs simply to keep our
own as low as possible ; in regard to the bounties
avoid them altogether ; in regard to commercial
treaties, to make none that in any detailed way
hamper our own liberty of financial or commercial
action. These solutions proceed on the sound and
278 State Aid and State Interference.
profitable principle of assuring, both to ourselves
and to others, the utmost individual freedom com-
patible with the like individual freedom of each
other. By such courses we shall, in doing our
duty to ourselves, also do our duty to other nations.
And if we win in the race it will be because
other nations handicap their own chances by un-
necessary and hurtful restrictions on the liberty of
the individual.
FINIS.
INDEX.
INDEX.
Abstract principles, 2
Abyssinia, 230
Access to soil, 19
Advertisement, 31, 44
Agriculture, 18, 177, 246
Agricultural competition, 177, 212
education, 206
Aldis, Professor, 207
American farming, 21, 188
Free-trade, 35
manufactures, 37, 242
railways, 193
_ tools, 42, 241
Apprenticeship, 254
Arts of civilization, 15, 143
Australia v. France, 150
Australia, 74, 165
Austrian bounties, 96
Authority, 2
Bad times, 39
Barbados, 85
Barley prices, 20
Beet sugar, 82
Belgian refiners, 97
Berry, Mr. Graham, 13
Bismarck, 112
Boot-makers, 123
Bounties, 11, 64, 271
Bounties and prices, 90
Brassey, Sir T., 184
Breeding, 246
Bright, Mr. J., 31
British agriculture, 31, 246
British Association, 14
constitution, 168
empire, 15, 148, 152
Burdens on farmers, 33, 184
Caret, Mr., 187
Canada, 163, 222
North-west, 19S
Canadian tariff, 22, 136, 160
Cane and beet sugar, 93
Civilization, 1, 15, 143
Chamberlain, Mr., 275
China market, 45
China trade, 141
Coal, 118
Cobden, 36
Colonial growth, 120, 127
and foreign trade, 143
manufactures, 21
policy, 159
trade, 16, 127
revenues, 126, 145
Commercial policy, 25S
treaties, 273
Competition, use of, 212, 257
Consumers, 38, 251, 262
Continental dislike of bounties,
102, 269
Continental tariffs, 35, 215
Corners, 194
Cost of bounties, 70
production, 82, 191
Countervailing duties, 13, 93
Coventry, 242
282
Index.
Customs duties, 34, 144.
revenue, 125
Delta of the Nile, 229
Differential duties, 223
Distress in United States, 39
Duff, Mr. Grant, 135
Dulness, 246
Duties, 21
Duty of the State, 6, 261
Education, 253
in agriculture, 206, 252
Educated ignorance, 3
Effect defined, 4
Efficiency of labour, 253
Employment of population, 142
Endymion, 154
English cutlery, 41, 242
estate, the, 154
exports, 240, 256
future, 155
home market, 236
grown wool, 247
manufactures, 35, 240
retaliation, 267
shipping, 58
sugar-beet, 208
superiority, 203, 253
European tariffs, 35, 215
Exchange, 226
Experience invaluable, 8
Exporting soil, 187
Exports and imports, 45, 129
Exports of manufactures, 241
Extravagance, 40
Factory Acts, 253
Facts, 12
Fairness. 56
Fair-trade empire, 16
Farmers' prices, 33, 251
Fashion, 237
Financial independence, 157
Floods of manufactures, 24, 231,
236
Food supply, 33, 250
Fouquet, M., 97, 104
Forcing foreigners, 25
Foreign competition, 64, 230
food supplies, 180, 209
., tariffs. 22, 215
Formulated ignorance, 4
Free exchange, 36
land, 19
ports, 14
Freedom, 9
Free trade for British empire, 15,
136, 170
Free-traders and Free-traders, 30
Free trade and Protection, 113
French complaints, 94
manufactures, 232
shipping bounties, 69, 1 29
taxation, 70, 145
trade, 249
Future of American Protection, 62
Geoeges, M., 95, 103
German Government, 128
sugar, 98
Germany, 157, 232
Gladstone, Mr., 268
Gloves, 236
Gold, 118, 238
Gold diggings, 119
Government, 6
popularity, 64
Grain crops, 33, 198
Granary of America, 202
Greece, duties, 216
Grey, Lord, 169
Groans of the planters, 77
Growth of England, 179, 210
Grumbling, 78
Half-knowledge, 3
Hayter, Mr., 135
Hardware, 241
Hennessy, Sir J. P., 140
Hero-worship, 2
High tariffs pauperise. 228. 260
Hogg, Mr. Q., 83
Holland, 108
Home markets, 35, 190, 236
Hongs. 141
Hong Kong, 15, 139
Hostile tariffs, 22, 214
Ignorance, 10
Immigrants, 38
Imperial Union, 169
Import duties, 224
Imported food, 182
Index.
283
Imports, 10, 116, 262
Improvements in farming, 205
Increase of English nation, 148
India, 223
International contracts, 27
freedom, 258
Italy, 85, 217
Irish manufactures, 262
Items in tariffs, 217
Jacqtjemont, M., 100
Jamaica, 75, 227
Japan, 274
Jerningham, Mr., 99
Laboub, 43, 119, 185
in England, 252
in United States, 250
Land prices, 180
question, 19, 209
Less hostile tariffs, 220
Liberty, 2, 158
Loss by waiting, 271
Low, medium, and high tariffs, 218
Low tariffs, 39, 133, 234, 257
for Colonies, 173, 223
Lubbock, Mr. N., 91
Lustre, 246
MacCulloch, Sir J., 113
Mallet, Sir L., 94
Manufactures, 11
Manufactures from abroad, 213,
240
Manufacturing nations, 233
supremacy, 25, 41
Markets abroad, 215
Marriages, 133
Mercantile marine, 72
Misapplication of energy, 25, 38
Monopoly, 197
Mot, M. de la, 97
Most favoured nations, 220, 276
Mulhall, Mr., 233
Napoleon-, 208
National feeling, 168
Natural advantages, 273
Nature's bounty, 257
New lands, 200
New South Wales, 14, 212
North-west, 201
Oats, prices, 20
O'Loghlan, Sir B., 136
One-sided free-trade, 15, 137, 256
Opium revenue, 145
Other nations' prosperity, 260
Pacific railway, 198
Parliament, 161
Penal clauses, 105
Percentage of manufactures, 24,
240
Pine-apples, 227
Planters, 74
Political economy, 4
Popery in politics, 2
Population, 42, 117, 187, 201
Population and wheat, 189
Prairie cropping, 33, 1 84
Price, Professor Bonamy, 221
Prices of sugar, 81
of wheat, 18, 186, 196
steady, 251
Printing-press, 29
Principles, 2
Produce of the soil, 178
Production and use, 67
Profits on imports, 226
Profitable manufactures, 213
Protection, 9, 32, 214
for young countries,
16, 112, 212
Protective prices, 34
Prosperity of United States, 32,
45, 214
Prout, Mr., 204
Purchasing powers, 133, 225, 250
Bails, 42
Bailways, 18, 191
Bainfall, 185
Baw materials, 34
Baw wool, 245
Beciprocity, 26
Befined sugar, 110
Befining in bond, 103
Beforms in farming, 207
Betaliation, 266
Bevenue, 126, 144, 263
Bitchie's, Mr., Committee, 74
Boyal Agricultural Commission.
178
Bussell, Earl, 159
284
Index.
Saccharimetry, 108
Sandon, Lord, 215
Savings' banks, 131
Say, M. Leon, 82
Self-government, 161
Sewing-machines, 218
Sheffield ware, 42
Sheep, 246
Ship-building, 67, 123
Shipping, 68, 129
Shipping bounties, 12, 66, 271
Silk trade, 242
Slave v. free-grown, 78
Smith, Adam, 37, 187, 207
South Africa, 166
States in error, 7
Steadiness in prices, 251
Steel, 42
Successful example, 28, 105, 110,
253
Sugar bounties, 12, 73
conference, 105
consumed, 79
growing, 80
refining, 94
Sumner, Professor, 112
Supreme Will, 160
Surplus products, 44
Tariffs, 22, 35, 234
and prices, 224, 250
and revenue, 48, 145
Taste, 262
Taxing industries, 264
Technical education, 206, 254
Tendency to low tariffs, 216
toward union, 157
Textile manufactures, 232
Theorists, 144
The three It's, 254
Tirard, M., 271
Tobacco revenue, 145
Tools, 42. 241
Town and country, 21 1
Trade channels, 174
depression, 152
Treaty of 1860, 274
Tropical farms, 77
Under-peopled countries, 33,
116, 173, 183
United States, 9, 31, 36, 231
Unity of empire, 170
Unkindly seasons, 178
Unprofitable manufactures, U.S.,
11,37,43
Use and production, 67
Use of soil, 180, 209
Use of treaties, 275
Usine, 75
Value of commerce, 261
Victoria, 14, 222
Victoria and New South Wales,
113
Wages, 132, 224, 250
Wakefield, Gibbon, 184
Wales, Frincess of, 247
War of tariffs, 26, 266
Wear, 238
Weeds, 184
Welfare of wage-earners, 252
Western States, 198
West Indian sugar, 75
Wheat farmers, 18, 182, 246
in England, 181
surplus, 195
Who pays bounties, 79, 99,
271
Who pays import duties, 224,
252
Women, English, 247
Woollen trade, 238
Yarns, 245
ZOLLVEItElN, 15, 171
LONDON : R. CLAY, SONS, AND TAYLOR, PRINTERS.