THE LIBRARY 
 
 OF 
 
 THE UNIVERSITY 
 
 OF CALIFORNIA 
 
 LOS ANGELES
 
 THE 
 
 Tariff Question 
 
 WITH SPECIAL REFERENCE TO 
 
 WAGES AND EMPLOYMENT 
 
 By J. SHIELD NICHOLSON, M.A., D.Sc. 
 
 
 
 
 
 M^^^ 
 
 
 
 Ijl'.^ *. 
 
 
 
 ^^HHk*^ 
 
 
 LONDON 
 
 ADAM AND CHARLES BLACK 
 
 1903
 
 // ^r 
 
 ^- 
 
 Xt>
 
 
 THE TARIFF QUESTION 
 
 WITH SPECIAL REFERENCE TO 
 
 WAGES AND EMPLOYMENT 
 
 J. SHIELD ^NICHOLSON, M.A., D.Sc. 
 
 PROFESSOR OF POLITICAL ECONOMY IN THE UNIVERSITY OF EDINBURGH 
 EXAMINER IN THE UNIVERSITY OF LONDON 
 
 LONDON 
 
 ADAM AND CHARLES BLACK 
 
 1903
 
 
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 15 JUL 1921 ,,- 
 
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 PREFACE 
 
 f The occasion of the following pages was 
 to a public lecture in connection with the 
 
 class of political economy in the University 
 
 >- 
 
 DC 
 
 g of Edinburgh, The address has been 
 
 revised, and a few supplementary notes 
 
 have been added. An abstract of the 
 
 general argument appeared in a good 
 
 many papers, and I received many 
 
 •Si requests from different parts of the 
 
 5* country for a verbatim report. The 
 
 ^ subject is treated from the economic 
 
 £ standpoint, and it is perhaps right to 
 
 mention that though, during the last five- 
 
 and -twenty years, I have written and 
 
 spoken on many topics that were the 
 
 subject of controversy, I have never taken 
 
 any part in active party politics. 
 
 I J. SHIELD NICHOLSON. 
 
 University of Edinburgh, 
 October^ iP'^S-
 
 CONTENTS 
 
 PAGE 
 
 The Complexity of the Question - - - 5 
 
 The Export Test of National Prosperity - 7 
 
 The Danger of Percentages - - - 8 
 
 The Character of the Exports - - - 10 
 
 Imports - - - - - - 12 
 
 Wages Statistics - - - - - 16 
 
 Eesume of the Argument - - - - 18 
 
 The Proposed Food Taxes and the Cost of Living 23 
 
 The Farthing Budget - - - - 29 
 
 The Compensation Inequitable - - - 31 
 
 The Proposed Taxes on Manufactures - - 32 
 
 The Taxes as yielding Revenue - - - 33 
 
 The New Taxes as Protective Duties - - 35 
 
 The Dislike of the Word ' Protection ' - - 37 
 
 One New Protectionist Argument — Dumping - 39 
 
 The Old Protectionist Argument revived - 41 
 
 Protected Wages and General Wages - - 41 
 
 Protection and Employment - - - 46 
 
 The Analogy with Labour-saving Machinery - 47 
 
 Imports paid for by Exports - - - 49 
 
 Cheap Imports cause Demand for Other Things 50 
 
 The Argument tested by Facts - - - 51 
 
 Decrease of Pauperism - - - - 52 
 
 The Occupations of the People - - - 53 
 
 Emigration - - - - - - 55 
 
 Out of Work - - - - - 56 
 
 Conclusion - - - - - - 58 
 
 APPENDIX 
 
 Note 1. — The Population and Export Trade of 
 THE United Kingdom compared with those of 
 
 Germany and the United States - - 60 
 Note 2. — The Excess of Imports into the United 
 
 Kingdom - - - - - - 60 
 
 Note 3. — Progress of British and Foreign Shipping 61 
 
 Note 4. — The Incidence of Import Duties - 62 
 
 Note 5. — Protection and Employment - - 65
 
 THE TARIFF QUESTION 
 
 WITH SPECIAL KEFEEENCE TO WAGES 
 AND EMPLOYMENT 
 
 The Complexity of the Question. 
 
 Anyone who has followed the contro- 
 versy on the Tariff Question, as it is often 
 called, must lono- ao'o have discovered 
 that it is not one question, but a whole 
 group of questions. Some of these 
 questions are so general that they cover 
 the whole field of economic inquiry into 
 the nature and the causes of the wealth 
 of nations. We have discussions on the 
 relative prosperity of different nations, 
 [ 5 ]
 
 6 THE TARIFF QUESTION 
 
 and the tests of that prosperit3^ The con- 
 dition of the working classes, the relative 
 rates of wages, the continuity of employ- 
 ment, the cost of living involve con- 
 siderations of the widest range. Questions 
 on the accumulation and the employment 
 of capital are also, it appears, of funda- 
 mental importance. Even when we come 
 to foreign trade itself the discussions 
 range over the most difficult questions of 
 theory and the history of opinions and 
 policies, and involve the marshalling of 
 complicated statistics over long periods ; 
 and when at last, after all these general 
 preliminaries, we come in contact with 
 tariffs and taxes proper, we find that 
 the difficulty is rather increased than 
 diminished by the nearer approach to 
 practical proposals, because there is no 
 longer a mere conflict of opinions, but a
 
 EXPORT TEST OF NATIONAL PROSPERITY 7 
 
 conflict of material interests. On the 
 present occasion I can only deal with a 
 part of these topics. 
 
 The Export Test of National 
 Prosperity. 
 
 Take first the idea that the best test 
 of national prosperity is the growth of 
 the export trade. That is the test that is 
 applied throughout in the lively articles 
 that appeared in the London paper with 
 the largest circulation. In a melancholy 
 array of figures it is shown that, whilst 
 the exports of Germany, the United 
 States, and even France, are increasing, 
 our exports are stationary or declining, 
 and the implication is that relatively to 
 these countries we are in a deplorable 
 state, and fast approaching ruin. 
 
 No doubt the export trade is an im-
 
 8 THE TARIFF QUESTION 
 
 portant part of the trade of the countries 
 named, but, after all, it is only a part. In 
 one of the valuable memoranda of the 
 Blue-book* just issued, a calculation is 
 given of the proportion of British labour 
 devoted to the export trade, and it is 
 stated to amount to between one-fifth and 
 one-sixth of the whole labour of the 
 country, t 
 
 The Danger of Percentages. 
 
 Next it must be observed that, even 
 supposing the export trade is the best 
 sign of all trade, the method of taking 
 percentages of the trade at two dates in 
 the different countries as the measure of 
 progress is utterly misleading. According 
 
 * This Blue-book (Cd. 1761) gives the results of the 
 official ^inquiry,' and is the source of the evidence here 
 used, except where otherwise stated. 
 
 t P. 360 of the Blue-book.
 
 THE DANGER OF PERCENTAGES 9 
 
 to the gloomy tables of the Daily Tde- 
 grapJi, the German exports in thirty years 
 from 1872 were doubled, whilst those of 
 the United Kingdom only increased by 
 about 10 per cent, I say nothing of the 
 year chosen, but it should be noted that 
 at present the population of Germany is 
 about 39 ])er cent, larger than that of 
 the United Kingdom, and yet when we 
 look to the absolute trade, the total exports 
 of the United Kino-dom are about 
 £40,000,000, or some 16 percent, greater 
 than the total exports of German}^, in 
 spite of all the education and the tariffs 
 that are supposed to give Germany so 
 great an advantage. 
 
 Again, the population of the United 
 States is nearly double that of this 
 country, and yet, in spite of its immense 
 territory and wonderful resources, its ex-
 
 lo THE TARIFF QUESTION 
 
 ports on the average do not exceed those 
 of this country. If you calculate the 
 exports per head of population, then the 
 exports from this country are nearly double 
 those of Germany or the United States, 
 and if we include in the exports, as we 
 ought, new ships and also the services of 
 our ships, our exports are more than 
 double. I do not pretend to say that 
 therefore we are twice as prosperous, 
 but if the export test is to be the test of 
 industrial progress over a period, then also 
 it ought to be the test of the relative 
 prosperity of countries at the same time.* 
 
 The Character of our Exports. 
 
 But we are not only told that the 
 amount of our exports is stationary, but 
 that their character has changed for the 
 
 * See note (1) in Appendix.
 
 THE CHARACTER OF OUR EXPORTS n 
 
 worse. It is said that we are exporting 
 less of manufactures and more of raw 
 material, especially coal. It is implied in 
 this argument that manufactures employ 
 very much labour, and that coal and raw 
 material are, so to speak, the gifts of 
 Nature, and employ little labour. Such 
 an idea is, of course, utterly baseless. In 
 England and Wales the number of those 
 employed in coal-mining is by the last 
 census about 1 per cent, more than those 
 employed in cotton. In a valuable paper 
 by Mr. D. A. Thomas published in the 
 Royal Statistical Journal (September, 
 1903), it is shown that, of the Welsh coal 
 for export, about 80 per cent, of the value 
 goes as wages, and only 4 per cent, as 
 royalties. It is shown also in the same 
 paper that directly, and indirectly through 
 the encouragement of freights, the export
 
 12 THE TARIFF QUESTION 
 
 of coal is closely associated with the 
 prosperity of our shipping trade. And 
 as regards shipping, the earnings of 
 British vessels in foreign trade are about 
 £90,000,000 a year. This, again, is 
 almost the value of our exports of cotton 
 and woollen goods combined, and there a 
 considerable part of the value is in raw 
 material from foreign sources. Our car- 
 rying trade is our most important invisible 
 export, and logically should be added to 
 the visible commodities. 
 
 Imports. 
 
 Let us now look for a moment at the 
 other element in the balance of trade — 
 namely, the imports. There is no question 
 that over a long series of years the excess 
 of imports of commodities into this 
 country over its ex^^orts has been increas-
 
 IMPORTS 13 
 
 ing. It is really curious to find that 
 there is so much alarm over this adverse 
 balance ; the resurrection of the most 
 ancient of all trade fallacies is, indeed, 
 quite remarkable. It has been pointed 
 out over and over again that if a country 
 exports goods it must receive payment in 
 imports. Similarly, if it does a carrying 
 trade with its ships, it must be paid again 
 in imports ; and if it invests cajjital abroad, 
 it must receive the interest in imports ; 
 and so on of a number of less important 
 elements in the national balance-sheet.* 
 
 If we had to choose between exports 
 and imports as a sign of national pros- 
 perity over a long period, it would be far 
 more rational to take imports. A country 
 consumes and enjoys its imports whilst 
 the foreigner consumes and enjoys its 
 
 * See note (2) in Appendix.
 
 14 THE TARIFF QUESTION 
 
 exports. It is not worth while to 
 dwell further on this point ; some argu- 
 ments must be taken for granted, even if 
 some people have never heard of them. 
 It will be more interesting and profitable 
 to test this notion of the adverse balance 
 of trade by reference to the very latest 
 official figures. This is a return by the 
 Board of Trade that comes down to 
 31st July, 1903. In order to bring 
 the figures down to the latest date, the 
 trade is compared over the first six months 
 of the last three years. Let us, then, 
 look at these figures for the trade of this 
 countr}^ and that of the United States for 
 the first six months of 1901 and 1903. 
 What do we find ? 
 
 Take the United States. The imports 
 for the six months of 1903 show an 
 increase of £5,000,000 over the corre-
 
 IMPORTS 15 
 
 spending period in 1901 ; whilst as 
 regards exports there was a decrease of 
 £5,000,000. For the same dates and 
 periods the imports into the United 
 Kingdom diminished and the exports 
 increased. Thus, if an increase of exports 
 is good, and that of imports is bad, it is 
 the United States that is on the down- 
 ward grade, and not the United Kingdom. 
 I may mention also that, in spite of 
 Protection, in Belgium, France, Italy, 
 Canada, and Germany, the imports exceed 
 the exports. Thus, on this test they are 
 all in a bad way, and in the case of 
 Germany the excess of imports was a 
 larger percentage of the exports in 1901 
 than it was in 1896, which shows, by 
 mixing the fallacy of the adverse balance 
 with the percentage fallacy, that Germany 
 is rapidly descending the downward path.
 
 l6 THE TARIFF QUESTION 
 
 Wages Statistics. 
 
 Perhaps, however, everyone will admit 
 that in testing the progress of wages in 
 different countries, instead of making de- 
 ductions from the amount and the character 
 of its export trade, which perhaps does 
 not account for 10 to 20 per cent, of the 
 total labour, it would be better to refer 
 to the actual returns of waofes in each 
 case. Here the Blue-book"^' gives a most 
 interesting table of comparisons. Taking 
 the years 188G-1900 as the basis of com- 
 parison — and I take this year 1886 
 simply because the figures for Germany 
 do not go further back — and comparing 
 the rise of wages in the United Kingdom 
 (1886-1900) with the rise in Germany, 
 the United States, France, and Italy, we 
 find in the first place that the rise has 
 
 * Page 127.
 
 ^WAGES STATISTICS 17 
 
 been greatest of all in the United 
 Kingdom. And it is still more remark- 
 able to find that in the United States 
 wages rose more rapidly in the period 
 from 18 80 to 1890, in which there had 
 been a slight reduction of tariffs, than 
 they did in the period from 1890 to 
 1900, in which there had been the great 
 increase of tariffs (McKinley, Dingley). 
 And, most curious of all, the rise of 
 wages in the U^iited Kifigdom was most 
 rapid after the United States had in- 
 creased its tariffs. 
 
 Such is the result of the direct and 
 simple appeal to statistics collected for 
 this famous inquiry into the result of 
 tariffs. America raises its tariffs, and 
 it is waofes in the United Kino'dom that 
 rise most in response.
 
 i8 THE TARIFF QUESTION 
 
 Resume of the Argument. 
 
 It will be convenient at this point to 
 resume the main points of the argument 
 as regards the export trade. In the 
 popular argument for tariff reform it is 
 assumed that the export trade is the 
 surest test of national prosperity ; and it 
 is further implied that it is the best sign 
 of the employment of labour, and if the 
 export trade rises or falls it is assumed 
 that wages rise and fall in a correspond- 
 ing way. 
 
 Well, then, even in the United 
 Kingdom it is shown in the recent Blue- 
 book that the labour employed in the 
 export trade is only from one-sixth to 
 one-fifth of the whole of this labour. At 
 the best, then, the export trade is only 
 one part of the industry of the nation, 
 probably not 20 per cent.
 
 RESUMlt OF THE ARGUMENT 19 
 
 Next, even if we take this export trade 
 as the test, it is fahacious to take per- 
 centages of the rate of increase, especially 
 if we take an abnormally inflated year as 
 our starting-point, such as 1872, But 
 apart from that altogether, if at this pre- 
 sent time we compare the export trade of 
 the United Kingdom with that of other 
 countries, it is the greatest of all, ahso- 
 lutely, if we take account of our shipping -/^ 
 and relatively to the numbers of the 
 population, our export trade, apart from 
 shipping, is almost double that of Ger- 
 many or the United States. Now, I 
 do not assert that this export trade is 
 the best and the only true test of national 
 prosperity, but I do say that, to apj^ly the 
 test at all as a mark of national prosperity, 
 you must take account of the size of the 
 
 * See note (3) in Appendix. 
 
 2—2
 
 20 THE TARIFF QUESTION 
 
 nations. But as regards the rates of 
 wages it is better to go to the statistics 
 direct. These statistics are, of course, as 
 the compilers of the Blue-book point out, 
 very rough, but they are fairly representa- 
 tive, and, at any rate, they are far better 
 than mere deductions from the export 
 trade. And these figures show that wages 
 rose more rapidly during the last twenty 
 years in theUnited Kingdom than in the 
 United States, and the rise was relatively 
 greatest in the United Kingdom after the 
 United States had so much increased its 
 tariffs. 
 
 Now, observe carefully that I do not 
 mean for a moment to imply that the 
 export trade is not of great, and even 
 of vital, importance to this country, but 
 so also, and to a proportionately greater 
 degree, if we reckon by the numbers of
 
 R^SUMjfe OF THE ARGUMENT 21 
 
 the people employed, are other occupa- 
 tions. We have been told that we are 
 a manufacturing nation, and that agri- 
 culture can never be our main support — 
 that our agriculture is ruined. A state- 
 ment of this kind suggests much more of 
 the false than the true. For again the 
 Blue-book tells us that in agriculture, in 
 England and Wales, there are employed 
 more people than in the four great textiles 
 put together — viz., in cotton, wool, silk, 
 and linen. There are even now more 
 people employed in the agriculture of 
 England and Wales than in all these 
 industries. In the same way there are 
 more employed in building trades than 
 in these textiles ; and if we put agricul- 
 ture and building and coal-mining to- 
 gether, and make the usual allowance for 
 the families of the adult workers, these
 
 22 THE TARIFF QUESTION 
 
 three industries support more than one- 
 third of the population of England and 
 Wales. The point, then, is this : that in 
 making any fiscal changes, in making any 
 tariff reforms, it is not right to consider 
 only the foreign trade — it is not safe to 
 consider even the whole of the manu- 
 factures. 
 
 Especially, if it is proposed to impose 
 fresh taxes on articles of universal con- 
 sumption and on primary necessaries, we 
 must projDcrly consider the effect on the 
 masses of the people. After this effect 
 has been made clear, we may look to the 
 incidental and partial advantages that are 
 supposed to follow. 

 
 THE PROPOSED FOOD TAXES 23 
 
 The Proposed Food Taxes and the 
 Cost of Living. 
 
 It is now apparently definitely and 
 finally admitted that any effective pre- 
 ference to the colonies will involve duties 
 on corn and meat. Certain kinds of 
 grain may be exempted, and certain kinds 
 of meat, but not enough to affect the 
 general argument. 
 
 Now, obviously the first question of 
 importance to decide at this point is the 
 incidence of these new taxes — that is, by 
 whom will they be paid ? And, in par- 
 ticular, will they fall on the foreigner or 
 on the home consumer ? It is generally 
 admitted by economists that, under certain 
 conditions, part of any import duty may 
 for a time, and possibly for a long time, 
 fall on the foreign producer. But it is
 
 24 THE TARIFF QUESTION 
 
 equally admitted that these conditions 
 are so unlikely to occur that, if we have 
 to choose one simjole rule, it is safer to 
 suppose that any tax on a consumable 
 commodity falls on the consumer.* 
 
 Prominence has been recently given t 
 to the opinion of some unknown, or, rather, 
 unnamed, authority as to the incidence of 
 taxes on corn and meat, which is indeed 
 strikingly fresh and curiously precise. It 
 was asserted that the proportion of the 
 tax that falls on the home consumer is 
 in proportion to the quantity the taxed 
 imports bear to the whole amount con- 
 sumed : that is, if two-thirds are im- 
 ported, two-thirds of the tax will fall 
 on the home consumer ; and if only 2 per 
 cent, is imported, 2 per cent, only will 
 
 * See note (4) in Appendix. 
 
 f See Mr. Chamberlain's Glasgow speech, October 6, 
 1903.
 
 THE PROPOSED FOOD TAXES 25 
 
 fall on the home consumer. Unfor- 
 tunately, the reasons for this opinion 
 were not given, and perhaps some mis- 
 take has been made in the adaptation of 
 the opinion of the expert for popular 
 consumption. But, at any rate, the 
 theory is in striking contradiction to the 
 figures that are given in the Blue-book. 
 In the case of France, for example, it is 
 shown that in the years of considerable 
 importation the price of wheat in France 
 was higher than that in the United 
 Kingdom, nob only by the full amount 
 of the duty, but, on the average, to the 
 extent of one - third more than the 
 duty. It was only in the years of so- 
 called minimum importation the price did 
 not rise to the full extent of the duty — 
 curiously enough, on the average, the 
 rise was one-third less than the duty.
 
 26 THE TARIFF QUESTION 
 
 On the whole, it may be safely said that 
 over a series of years the price rose by at 
 least the extent of the duty. 
 
 In the case of Germany, until recently 
 the importation of wheat was relatively 
 small, and the price did not rise to quite 
 the full extent of the duty ; but as the 
 import has increased, so has the rise in 
 the price of the wheat. 
 
 Until the unnamed expert gives his 
 theory in a scientific form, it is best to 
 assume considering^ our larsfe foreio^n im- 
 ports that an import duty on wheat and 
 meat will fall on the home consumer, or 
 that the price will rise to the full extent of 
 the duty, and possibly even more. In this 
 case it is, of course, only the foreign food 
 that is taxed for the benefit of the revenue, 
 but the consumer is taxed on all the food 
 by the rise in price.
 
 THE PROPOSED FOOD TAXES 27 
 
 This point is of the greatest importance, 
 because in the scheme it is proposed to 
 give compensation to the consumer by 
 reducing other taxes. If, then, this com- 
 pensation is to be real and equitable, the 
 consumer must be compensated not only 
 for what is paid into the treasury from 
 this new tax, but also for the rise in price 
 which gives nothing to the revenue. Take 
 the case of wheat alone. In the Blue- 
 book (p. 108) the figures show that, 
 roughly, one-third of our wheat (and 
 corresponding flour) is produced within 
 the Empire, and two-thirds comes from 
 foreign countries. Roughly, also, it may 
 be said that a tax of 2s. per quarter on 
 the foreign wheat would yield about 
 £2,000,000 to the revenue ; but besides 
 this, the consumer would have to pay 
 another £1,000,000 tlirough the rise in
 
 28 THE TARIFF QUESTION 
 
 price. Or the matter may be put more 
 simpl}^ in this way : If owing to a tax the 
 price rises by the amount of the tax, the 
 loss to the consumer is measured by the rise 
 in price on the whole consumption. Thus, 
 if wheat rises 2s. per quarter, and the total 
 consumption is 30,000,000 of quarters, 
 the consumer will so ftir lose £3,000,000. 
 
 But wheat is only one of the food 
 products to be taxed ; there are other 
 forms of grain, and also various kinds of 
 meat. 
 
 In the case of meat it is said that two- 
 sevenths are imported. In this case, for 
 every £2 received by the Exchequer there 
 would be in addition £5 lost by the con- 
 sumer. In the same way we might go 
 through the list of foods, and the calcula- 
 tion given b}^ Mr. Ritchie seems probable 
 enough — namely, that if the new taxes on
 
 THE FARTHING BUDGET 29 
 
 food yield, roughly, £6,000,000 to the 
 revenue, they will take £16,000,000 from 
 the consumer. There is nothing new in 
 this argument : it is the standard argu- 
 ment against differential duties. If, then, 
 the consumer is to receive compensation in 
 taxes, he must receive not only compensa- 
 tion for the £6,000,000 that the Treasury 
 receives, but also for the other £9,000,000 
 or £10,000,000 that in some form or 
 other is paid to the agricultural interests 
 of this country and the colonies. 
 
 The Farthing Budget. 
 
 There is another method of dealing 
 with the real burden of the new taxes 
 that is at present very popular with tariff 
 reformers, but one that is very untrust- 
 worthy. A budget, namely, is calculated
 
 30 THE TARIFF QUESTION 
 
 of the ordinary expenditure of the ordinary 
 working man and his family, and then the 
 effect of the new taxes and of the pro- 
 posed remissions is worked out in farthings 
 in this weekly hudget. 
 
 There are two objections to this plan : 
 In the first place, there are great difficulties 
 in constructing an average budget of this 
 kind. Very few statistics are available. 
 We know accurately the total amount of 
 tea consumed in this country, and pretty 
 accurately the amounts of other important 
 articles consumed by the whole nation, 
 but we have very little information of the 
 actual amounts consumed by diflerent 
 classes and types. And, in the second 
 place, this method gives no indication of 
 the yield to the revenue, and of the cost 
 of raising the revenue. It conceals or 
 evades the fundamental difficulty that the
 
 THE COMPENSATION INEQUITABLE 31 
 
 whole of the tax on tea goes to the 
 revenue, but only part of the tax on corn 
 or meat. It conceals the ftxct that, if 
 the working man pays just the same as a 
 consumer — that is, more on bread and less 
 on tea — still the Treasury suffers a great 
 loss. This loss must be made up out of 
 other taxes, and it is easy to show that 
 this will involve, on the scheme proposed 
 — viz., taxation of manufactures — further 
 loss to the working classes. 
 
 The Compensation Inequitable. 
 
 Before considering this point, however, 
 it may be noted briefly that, apart from 
 the cost and burden of these differential 
 duties on food, the method of compensa- 
 tion proposed is altogether inequitable. 
 It is the poorest classes that spend most
 
 32 THE TARIFF QUESTION 
 
 of their income on bread, and who will 
 suffer most by a rise in its j)rice. Again, 
 it may be said, also, that to reduce the 
 price of tea and to raise the price of bread 
 is to encourage the consumption of the 
 former at the expense of the latter, and 
 it is well known that with insufficient 
 food more is spent on tea than is bene- 
 ficial. 
 
 The Proposed Taxes on Manu- 
 factures. 
 
 But, as already indicated, the revenue 
 must be compensated by new taxes, and 
 for this purpose it is proposed to tax 
 the importation of foreign manufactures. 
 On the average, they are to be taxed 
 10 per cent., some more, some less. This 
 part of the scheme demands the most 
 careful consideration. In the first place.
 
 PROPOSED TAXES ON MANUFACTURES 33 
 
 it is the part of the proposal which is 
 Hkely to be popular with the manufac- 
 turing classes in this country, because it 
 defends or protects their industries. And 
 it needs careful consideration, because the 
 indirect consequences to industry are of 
 more importance than the yield to 
 revenue. 
 
 The Taxes as yielding Revenue. 
 
 Let us first, however, look at the 
 simple revenue question. Here again 
 the difficulty is : Who pays the tax — the 
 foreisfner or the home consumer ? We 
 may, of course, make different suppositions, 
 and probably the actual incidence for the 
 time being and ultimately will vary in 
 different cases. But again taking the 
 view supported by experience, to begin 
 
 3
 
 34 THE TARIFF QUESTION 
 
 with at any rate a good deal of the tax 
 on most thinofs would cause a rise in 
 price. 
 
 If, then, on the whole manufactures 
 rise in price, the cost of living must again 
 be increased. The idea that it is only 
 the rich that consume foreign manufac- 
 tures is disproved at once by a reference 
 to the kinds and the quantities of such 
 imports. There are, for example, the 
 various textile fabrics ; there are boots 
 and shoes, glass, cutlery, clocks and 
 watches, furniture, and, indeed, all kinds 
 of things that occasionally, if not regu- 
 larly, enter into the expenses of the 
 working classes. It is accepted, or used 
 to be accepted, as a rule of finance, that 
 you can only raise a large revenue from 
 consumable commodities if they are of a 
 kind that are widely consumed — that is, by
 
 THE TAXES AS YIELDING REVENUE 35 
 
 the masses of the people. Another point 
 to notice is that the expenses of collecting 
 a revenue from all manufactures would be 
 very great, and in a multitude of cases 
 the revenue would not pay the cost of 
 collection and the prevention of evasion. 
 It is on this point that the financial 
 history of the nineteenth century is so 
 instructive. It is not, however, mainly 
 for revenue that the tax on all foreign 
 manufactures is proposed. That is 
 evident from the proviso that the tax is 
 to be heavier in proportion as the articles 
 are finished products or are supposed to 
 interfere with British labour. 
 
 The New Taxes as Protective 
 Duties. 
 
 The real object of these taxes is to 
 protect home industries. And at this 
 
 3 — 2
 
 36 THE TARIFF QUESTION 
 
 point a protest must be entered in the 
 interests of clearness of language and, 
 indirectly, of clearness of thought. A 
 Customs duty on anything that is im- 
 ported, which is not accompanied by an 
 equivalent Excise duty on the thing made 
 at home, is a protective duty. It is 
 no less a protective duty because other 
 nations tax our exports. The essence of 
 Protection is to tax the same goods less 
 if produced at home than if imported 
 from abroad. The system of Protection 
 can be defended and has been defended 
 on logical grounds — e.g., variety of indus- 
 tries, infant manufactures in new countries, 
 etc. — and most economists, including 
 Adam Smith and Mill, have admitted 
 that in certain cases protection to home 
 industries is desirable. It can, however, 
 only lead to hopeless confusion to call
 
 DISLIKE OF THE WORD 'PROTECTION' 37 
 
 a 10 per cent, duty on foreign manufac- 
 tures, the home products being free, non- 
 protective duties. 
 
 The Dislike of the Word 'Protec- 
 tion.' 
 
 The simple truth is that the word 
 Protection has such unpleasing associa- 
 tions that it is not popular even with 
 those who most wish for the thing. It 
 suggests dearness and scarcity ; it sug- 
 gests also inferior quahty ; it suggests 
 that the consumer is not to be free to 
 spend his earnings as he pleases. And 
 none of these suof^estions are or can be 
 made pleasing to the consumer. Even 
 when we look at the producers, the term 
 Protection is not very nice. It seems 
 as if the home producers were afraid of 
 competition, and as if they did not use 
 
 38';'959
 
 38 THE TARIFF QUESTION 
 
 the best methods ; it suggests partiality 
 and favouritism and the benefit of certain 
 classes, and it suggests all sorts of un- 
 popular devices to modify tariffs in certain 
 interests. 
 
 Many other displeasing things might 
 be mentioned which are associated with 
 the luord Protection, and it is no wonder 
 that tariff reformers object to their 
 schemes being branded as Protectionist. 
 
 This objection to the use of the word 
 seems natural enough when we look into 
 the reasons why the word Protection 
 has such disaofreeable associations. The 
 real reason — the one reason that includes 
 all the rest — is tliat the thing Protection 
 in the past was actually associated with 
 all the disagreeable things that are now 
 in this country only suggested by the 
 word.
 
 ONE NEW PROTECTIONIST ARGUMENT 39 
 
 One New Protectionist Argument — 
 Dumping. 
 
 Accordingly, those who now propose 
 to resort to protective duties ought in the 
 first place to show that the duties they 
 propose are not open to these old objec- 
 tions. But the curious thing is that, 
 although we hear a great deal of the 
 change in the conditions of trade, the 
 arguments that are brought forward in 
 support of the new Protection are, with 
 perhaps the exception of one, all of them 
 of the most ancient style. The only new 
 argument is that we now need protection 
 against what is called dumping, which is 
 assumed to be a very modern and a very 
 foreign device. It is worth recallinp- that 
 long ago one of the favourite arguments 
 in support of Protection in America was
 
 40 THE TARIFF QUESTION 
 
 that the English manufacturer sold goods 
 below cost — that is to say, we practised 
 dumping in America to begin with. But 
 this dumping argument as now used is a 
 dangerous and double-edged weapon. For 
 it implies that owing to the protection 
 at home the home producers — say, the 
 Americans and the Germans — can sell to 
 their own countrymen at a dear price, and 
 thus can afford to sell to the foreigner — 
 that is, the unfortunate Briton — at a very 
 low price. 
 
 Well, then, suppose we adopt Protec- 
 tion, are we not also liable to the same 
 consequences, namely, dear prices at home, 
 so that the export trade may be en- 
 couraged ?
 
 THE OLD PROTECTIONIST ARGUMENT 41 
 
 The Old Protectionist Argument 
 revived. 
 
 I do not propose to deal at present 
 with all the stock arguments in favour of 
 the protection of home industries ; such 
 an examination forms part of any syste- 
 matic study of economics. I will only 
 notice one argument, but the most wide- 
 reaching of all. It is said that, even if 
 prices rise to some extent, still, the work- 
 ing classes will be compensated by a rise 
 in the rate of wages and by an increase 
 of employment. 
 
 Protected Wages and General 
 Wages. 
 
 Now, in dealing with this argument we 
 must distinguish between a partial rise of 
 ivages in some favoured industry or group
 
 42 THE TARIFF QUESTION 
 
 of industries, and the general effect on all 
 sorts of wages and earnings. Everyone 
 would admit that protection to any one 
 industrial group — at any rate, for a time 
 — would, by giving a partial monopoly to 
 that group, increase the profits and, if the 
 men were strong enough in bargaining 
 power, the wages of that group. The 
 benefit might not be very lasting, owing 
 to competition, but it would be real 
 enough as long as the effect of the 
 protection lasted, and when that had 
 ceased perhaps more protection would 
 give another encouragement to the 
 favoured group. That Protection can 
 give a partial advantage to some industry 
 is admitted by the strongest Free Traders. 
 But, then, the very fact that Protection, 
 to be effective, must be partial is one of 
 the strongest arguments against Protec-
 
 PROTECTED AND GENERAL WAGES 43 
 
 tion. The point was admirably put by 
 Lord Goschen, in the House of Lords, 
 when he asked this simple question, 
 namely. By what economical process are 
 you to transfer this partial rise in the 
 protected and favoured industries to the 
 industries that are not subject to foreign 
 competition ? If you raise wages in some 
 important manufactures by raising prices, 
 how is this to benefit those engaged in 
 domestic service, in shipping and railways, 
 in agriculture, in building, in education, 
 in office work, and so on of a multitude 
 of other occupations ? 
 
 Even supposing that the whole of the 
 10 per cent duty on manufactures were 
 obtained by the workers in manufactures, 
 the question is. What will be the effect 
 on the general rate of earnings throughout 
 the country ?
 
 44 THE TARIFF QUESTION 
 
 But the probable result will be rather 
 to lower general wages in other employ- 
 ments. The workers in these occupations 
 will suffer, as already explained, a fall in 
 real wages, even if their money wages 
 remains the same. But their money 
 wages, so far as this element is con- 
 cerned, will also tend to fall. A large 
 part of the things classed as manufac- 
 tures that are imported are used in the 
 productive processes of other industries. 
 A rise in the prices of these materials 
 means an increase in cost, and if wages 
 remain the same it means a rise in price. 
 This, again, means a check to demand, 
 and this must react on wages. 
 
 The essence of the argument as regards 
 the general rate of wages may be put in 
 a very simple form in this way : The 
 result of Protection is to diminish on the
 
 PROTECTED AND GENERAL WAGES 45 
 
 whole the volume of commodities avail- 
 able for consumption. Things formerly 
 imported now cost so much more to 
 produce, and that means that the pro- 
 ductive powers of the nation are not 
 employed to the best advantage. The 
 total real national income is less, there is 
 less to divide, and so far general wages 
 also suffer. In the end, the wages of the 
 protected groups will feel the effect of 
 this general fall, and will also fall. 
 
 Take for illustration the case of agri- 
 culture. Everyone will now admit* that 
 if the old protective system had been 
 retained the progress made by this 
 country would have been impossible. 
 The total wealth of the country would 
 have been far less, general wages would 
 have been less, and in all probability even 
 agricultural wages would have been less. 
 
 * Cf. Mr. A. J. Balfour's pamphlet.
 
 46 THE TARIFF QUESTION 
 
 Protection and Employment. 
 
 It is time, however, to notice the most 
 popular argument in favour of protection, 
 namely, that it will give more employment 
 to home labour. Thus, we have been told 
 that, compared with twenty years ago, we 
 import £52,000,000 more of manufactures 
 than we export. Then it is said that this 
 increased import of foreign goods has 
 deprived British labour of wages to that 
 amount, and this is worked out to be 
 333,000 in constant employment at 30s. 
 a week. And this, again, is interpreted to 
 mean that about one and a half millions of 
 people — that is, including the families of 
 the workers — might have been supported 
 in comfort if these foreign goods had 
 been excluded."^ This argument is the 
 
 * See note (5) Appendix.
 
 LABOUR-SAVING MACHINERY 47 
 
 oldest and the weakest of all the 
 arguments used in favour of Protection. 
 It assumes that the labour that is dis- 
 placed by some foreign import cannot find 
 other employment — that it goes to swell 
 the ranks of the unemployed. 
 
 The Analogy with Labour=saving 
 Machinery. 
 
 It is exactly the same argument that 
 long ago used to be brought forward 
 against the use of machinery. The 
 labourers argued that labour - saving 
 machinery must displace labour, and 
 accordingly the introduction of such 
 machinery was resisted, often with riot 
 and destruction of propert3^ And there 
 can be no question that in many cases 
 the immediate effect of such machinery 
 was to displace labour or to convert the
 
 48 THE TARIFF QUESTION 
 
 skilled labourer into a lower grade. But, 
 again, it is also certain that in the end 
 the use of machinery of this kind has in- 
 creased employment and increased wages. 
 This beneficial result is so well recognised 
 now by the working classes themselves that 
 the trade-unions at present scarcely ever 
 oppose improvements in machinery. They 
 know too well that efficient production is 
 the basis of prosperity.* 
 
 Precisely the same argument may be 
 applied to foreign imports. Suppose an 
 import displaces labour. That labour will 
 seek employment in other directions. But, 
 then, it is said that it may seek it, but it 
 will not find it. No doubt, as in the case 
 of machinery, there may be some difficulty 
 and some loss ; but we must, from the 
 national point of view, look at the whole 
 
 * See Webb's ' Industrial Democracy.'
 
 IMPORTS PAID FOR BY EXPORTS 49 
 
 process of displacement and its effects. 
 Consider, then, what must happen from 
 the national standpoint. 
 
 Imports paid for by Exports. 
 
 In the first place, in some way or other 
 this new import or this increased import 
 must be paid for. It may be paid for by 
 an increase of coal or ships, or of the 
 work of ships. In some way or other, 
 then, labour must be devoted to this new 
 or this increased export. It may not be, 
 probably will not be, the precise labour 
 that is displaced that will make the new 
 export, but there will be a gradual shifting 
 of labour. There is no getting over this 
 fundamental axiom of foreign trade : An 
 import must be 2^'T'i<i ^^^, ^nd nobody 
 but Mr. Seddon supposes it can be paid 
 
 4
 
 50 THE TARIFF QUESTION 
 
 for except by value in commodities or 
 services. 
 
 Observe, we are considering the effect 
 of an increase of imports, so that there 
 is no need to compHcate the argument by 
 reference to the imports due for interest 
 on past investments. 
 
 Cheap Imports cause Demand for 
 Other Things. 
 
 Another point is also to be noticed. 
 The new import is cheaper than the 
 displaced home product. Accordingly, 
 those who formerly bought the old home 
 product have now so much more to spend 
 on other things ; and the making of these 
 other things involves more employment 
 for labour. Thus, if less is spent on 
 the weekly budget, more may be saved 
 for buying a house, and thus cheap im-
 
 THE ARGUMENT TESTED BY FACTS 51 
 
 ports may encourage the building trades. 
 That is the old Free Trade arg-ument 
 against Protection, and it is no answer 
 to say that it is old ; an old argument is 
 never too old for an old fallacy. 
 
 The Argument tested by Facts. 
 
 But let us test the argument and the 
 fallacy, or, if you prefer the two con- 
 tradictory opinions, by reference to facts, 
 and let us take our facts from the recent 
 Blue-book which has been compiled for 
 this very purpose of testing the arguments 
 of Free Traders and tariff reformers. 
 
 I take as the basis of comparison the 
 year 1860, because that was the year 
 which marked the final adoption of the 
 Free Trade principle * that taxation 
 should be for revenue purposes alone, and 
 
 * Cf. Sydney Buxton's ' Finance and Politics.' 
 
 4 — 2
 
 52 THE TARIFF QUESTION 
 
 that protective differential and preferential 
 duties should be abolished. The great 
 Budget of 18 60 cleared the tariff of most 
 of the surviving taxes of a non-revenue 
 character. The consequence has been an 
 enormous increase of imports, including 
 manufactures. But what about the effect 
 on employment and wages ? 
 
 Decrease of Pauperism. 
 
 Take first the returns for pauperism. 
 In 18 60 the numbers in receipt of Poor 
 relief in England and Wales was 4*7 per 
 cent, of the population ; in 1899 it was 
 only 2*6 per cent, of the population. Or 
 take it another way. In 1860 the 
 number of those in receipt of relief 
 under the heading of Adult Able-bodied 
 exclusive of Vagrants w^as over 168,000 ; 
 in 1899 the number was less than 104,000
 
 DECREASE OF PAUPERISM 53 
 
 — that is, an enormous reduction abso- 
 lutely, in spite of an increase of 60 per cent, 
 in the population. Now, if foreign imports 
 displaced labour into the unemployed, there 
 should surely be an increase, and not a 
 falling- off, in these numbers. 
 
 Taking all classes of those in receipt 
 of relief together, there were absolutely 
 less in 1899 than in 18 GO; but the 
 falling-off is far greater in the class of 
 able-bodied. Nor can this falling-off in 
 pauperism be accounted for by greater 
 stringency as regards relief, for the 
 amount actually paid was in 18 GO about 
 £6,000,000 and in 1899 £10,000,000. 
 
 The Occupations of the People. 
 
 But consider also the question from 
 the positive side. Let us refer to the 
 tables of occupations. We find, it is
 
 54 THE TARIFF QUESTION 
 
 true, that, whilst population has increased 
 60 per cent., the number employed in 
 cotton has only increased 40 per cent., 
 and in wool the increase is only about 
 3 per cent., and in linen and in silk there 
 are now about one-third to a quarter 
 of the numbers in 1860 — an immense 
 falling-ofF. But it is not true to say 
 that therefore employment has not in- 
 creased with the population — not even if 
 we also take agriculture, in which the 
 numbers employed have fallen from about 
 2,000,000 to 1,000,000. There are 
 increases in other departments of labour 
 greater than in proportion to the popula- 
 tion; thus, in the building trades and in 
 coal-raining the numbers have more than 
 doubled, and in printing and book-binding 
 the increase is about threefold. And so 
 we might go through the list of occupa-
 
 EMIGRATION 55 
 
 tions given in the census returns. We 
 find, indeed, an increase in the numbers 
 of unoccupied, a very great increase in 
 certain classes. But these increases are 
 amongst the best signs of progress : the 
 unoccupied are the children at school and 
 women employed at home instead of in 
 the fields. 
 
 Emigration. 
 
 The tables of emigration show that 
 the annual average for the five years 
 1860-1864 was 44 per 1,000 of the 
 population. In the period 1895-1899 
 the proportion was 39 per 1,000. This 
 is the lowest for any quinquennial period 
 since 18 60, except the period 1875-1879, 
 in which the number was 37 per 1,000. 
 If we compare the period 1880-1889 
 with the period 1890-1899, in the former
 
 56 THE TARIFF QUESTION 
 
 period the number of emigrants was 72 
 per 1,000 ; in the latter it was 46 per 
 1,000. 
 
 Out of Work. 
 
 I may refer to one other set of figures 
 furnished by the Labour Department of 
 the Board of Trade which are not given 
 in the Blue-book from which I have taken 
 the other figures. Returns are made by 
 various trade-unions as to the numbers of 
 their members out of employment at the 
 end of each month of the year. These 
 returns give some idea of the numbers of 
 unemployed in a large number of repre- 
 sentative industries. The mean percentage 
 for all the trades, takino- the averagfe of 
 the years 1890-1899 was 4*4 per cent. 
 There are no corresponding figures avail- 
 able for 18 50-18 59, so that a comparison
 
 OUT OF WORK 57 
 
 cannot be made. But when we consider 
 that one of the evils most commonly 
 alleged as characteristic of the present 
 system of production on a large scale 
 with machinery is the fluctuation in 
 employment, we cannot also ascribe it 
 mainly to the want of a jorotective tariff". 
 There are no figures for comparison with 
 other countries, but the recent strikes in 
 America and Germany indicate, to say 
 the least, fluctuations. And in any case 
 the average of non-employment revealed 
 by the figures I have quoted for this 
 country are not very alarming. If this 
 want of employment were evenly dis- 
 tributed over the whole labour concerned, 
 it would work out as about a fortnight's 
 holiday to each man in the course of the 
 year.
 
 58 THE TARIFF QUESTION 
 
 Conclusion. 
 
 I have no Avish to overestimate the 
 value of the figures, but I venture 
 to say that they are sufficient to show 
 that the vast increase in the volume 
 of imports since 1860 has not been 
 accompanied by a corresponding dis- 
 placement of labour into the ranks of 
 the unemployed. If the continuous in- 
 crease of imports had had such an effect, 
 it must have appeared in the returns to 
 pauperism ; and if it had driven labour 
 from the country, it must have appeared 
 in the returns to emigration. But instead 
 of increase there is decrease, and again the 
 figures, as regards actual non-employment, 
 show no more than must be expected 
 under present conditions, tariff or no tariff. 
 Since the final adoption of Free Trade in
 
 CONCLUSION 59 
 
 this country in 1860 — when, for example, 
 practically all manufactures were admitted 
 free — some industries have decayed, and 
 some have remained relatively stationary. 
 But, then, on the other hand, other 
 industries have increased. And in this 
 substitution of industries, on the whole, not 
 only has there not been a loss of employ- 
 ment, but there has been an increase of 
 wages, and the increase has been greater 
 than in the countries that have raised 
 their tariffs. 
 
 That is the broad result of the official 
 inquiry into our fiscal policy in the past, 
 and the experience of the past is the only 
 sure guide to the future.
 
 APPENDIX 
 
 Note 1. — The Population and Export Trade 
 of the United Kingdom compared with 
 those of Germany and the United States. 
 
 The population of Germany in 1900 was 56,367,000; 
 that of the United States, 76,303,000; that of the 
 United Kingdom, 41,607,000. The value of the ex- 
 ports of British and Irish produce from the United 
 Kingdom for 1902, excluding the value of ships (new) 
 with their machinery, was £277,000,000 ; the value 
 of the German exports (special), including ships, was 
 under £234,000,000; that of the United States, 
 £282,000,000. 
 
 The values of the export trade for the five years 
 1895 to 1899 were : United Kingdom, £238,000,000, 
 or £5 19s. per head; Germany, £184,000,000, or 
 £3 10s. 7d.perhead; the United States, £213,000,000, 
 or £3 Is. 3d. per head. 
 
 See the tables in the Blue-book on pp. 404, 476, 
 and 480. 
 
 Note 2. — The Excess of Imports into the 
 United Kingdom. 
 
 There is a valuable memorandum in the Blue-book, 
 p. 99, giving an analysis of the excess of imports into 
 the United Kingdom. The average excess from 1893 
 to 1902 was £161,000,000. The conclusion is that 
 £90,000,000 of this excess is on account of freight, 
 and that the income from foreign investments more 
 than accounts for the remainder. In all probability 
 the country is still on balance adding to its invest- 
 ments abroad. 
 
 It should be observed also that, if capital is with- 
 drawn from abroad, as recently through the sales of 
 American railway shares, it is not squandered, but is 
 reinvested, perhaps, in industrial companies in the 
 home country, In the face of the evidence extend- 
 [6o]
 
 APPENDIX 6i 
 
 ing over a series of years, it is absuixl to say that the 
 country is living on its capital and wasting its 
 accumulated wealth on perishable imports. 
 
 It is sometimes suggested that we can compel the 
 foreigner to pay us this excess in non-competing 
 goods — that is, in raw material, etc. — which would not 
 compete Math British labour. This idea of compul- 
 sion is quite out of place. Those who actually receive 
 the interest are paid in money, and this money 
 they spend as they do the rest of their income. 
 There is no reason why a person who receives his 
 income from a foreign source should spend more of it 
 on foreign goods than anyone in his class of life. 
 Probably the larger proportion is spent directly or 
 indirectly on British labour, and it is the demand on 
 the part of this labour for foreign commodities — e.g., 
 food or raw material or manufactures^that deter- 
 mines the actual character of our imports. To inter- 
 fere by duties with this natural play of demand must 
 either add to the cost of living or to the cost of pro- 
 duction, and in eitlier case labour would suffer. 
 
 Note 3. — Progress of British and Foreign 
 Shipping. 
 
 The Blue-book gives a most valuable table of the 
 tonnage of the merchant navies of the United 
 Kingdom and various foreign countries from 1840 to 
 1902. Between these dates British tonnage rose from 
 2,768,2G2 tons to 10,054,770 tons— that is, nearly 
 fourfold. The tonnage of the United Kingdom is at 
 present about five times as great as that of Germany, 
 ten times that of France, and more than ten times 
 that of the United States — that is, as regards foreign 
 trade. It would be natural to suppose that, in con- 
 sidering the interests of a great sea Power, most stress 
 would be laid on the progress of shipping. The excess 
 of imports, as shown above, is one of the signs of the 
 prosperity of our shipping in foreign trade. Recently
 
 62 APPENDIX 
 
 there has been a great fall in freights, hut, per contra, 
 during the war they were exceptionally high. 
 
 The probable effects of protective duties and of 
 preferential duties on our shipping are of vital 
 interest, and there can be no doubt that anything 
 that interferes with foreign trade so far must inter- 
 fere with and injure British shipping. It is altogether 
 illogical to consider the export trade of the United 
 Kingdom, and frame a policy for its encouragement, 
 without considering the effects on this enormous 
 ' invisible ' export. 
 
 Note i. — The Incidence of Import Duties. 
 
 The theory of the incidence of import duties cannot 
 be made simple. For the most recent statement of 
 the theory in a scientific form the student may refer 
 to a paper by Mr. H. Cunynghame in the Economic 
 Journal for September, 1903. The general reader, 
 however, may be warned that the examination is 
 made by the aid of the graphic method. The elabo- 
 rate papers on the ' Pure Theory of Taxation ' by 
 Professor Edgeworth, in the same journal for 1897, 
 are also largely mathematical. The argument so far 
 as possible without mathematics is given by Mill, 
 Sidgwick, Seligman, Bastable, etc. The opinion of 
 f^idgwick is often quoted, but generally only in part. 
 The following sentence, for example, is omitted : ' The 
 protection given by A to one branch of her industry 
 may very likely have the secondary effect of inflicting 
 a blow upon another branch — viz., that which pre- 
 viously supplied the imports to B.' That is to say, 
 protection against imports checks the export trade. 
 Similarly, Sidgwick points out that the danger of 
 suffering from retaliatory imposts may render pro- 
 tective duties inexpedient, even when, apart from 
 this danger, they would be economically advantageous 
 on the whole. 
 
 The passage from Sidgwick that most deserves
 
 APPENDIX 63 
 
 attention at the present time is the following : ' What 
 may be called the ordinary moderate view on the 
 subject — held by practical persons who wish to avoid 
 both extremes — is, in my opinion, a cnrious inversion 
 of the truth — at least, on the practical issue most 
 commonly raised. The moderate view is that all 
 protection is theoretically Avrong, so far as purely 
 economic considerations are concerned ; but that 
 practically a little protection here and there does 
 more good than harm to industry, owing to influences 
 which abstract theory overlooks. I hold, on the 
 contrary, that when the matter is considered from 
 the point of view of abstract theory, it is easy to 
 show that Protection under certain not improb- 
 able circumstances Avould yield a direct economic 
 gain to the protecting country ; but that, from 
 the difficulty of securing in any actual Govern- 
 ment sufficient wisdom, strength, and singleness of 
 aim, to introduce Protection only so far as it is 
 advantageous to the community, and withdraw it 
 inexorably as soon as the public interests require its 
 withdrawal, it is practically best for a statesman to 
 adhere to the broad and simple rule of " taxation for 
 revenue only " — at any rate, in a free community 
 where habits of commercial enterprise are fully 
 developed ' (' Principles of Political Economy,' 
 book iii., chap. v.). Mr. Chamberlain's assumption 
 that the degree of protection suitable to each industry 
 can be decided by an expert or experts begs the 
 whole question. Government by experts is very 
 like the wise despot theory of government. 
 
 J. S. Mill's Opinions on the Incidence of 
 Import Duties. 
 
 J. S. Mill has suffered even more than Sidgwick 
 from imperfect quotation. He says, indeed, that 
 ' those are therefore in the right who maintain that 
 taxes on imports are partly paid by foreigners ;
 
 64 APPENDIX 
 
 but,' he goes on to .say, ' they are mistaken ivhen 
 they say that it is by the fcn-eign producer. ... It 
 is the foreign consumer of our exported commodities 
 Avho is obliged to pay a higher price for them because 
 we maintain revenue duties on foreign goods.' The 
 reasoning is difficult, and depends on the theory of 
 international values and the foreign exchanges. 
 Under certain conditions Mill allows that part of a 
 duty on the produce of land might fall on the foreign 
 la.nd-oumer. But this is the case when the duties are 
 so high as to diminish materially the demand for the 
 produce, and compel the abandonment of some of the 
 inferior qualities of land — that is to say, that a 
 smaller amount of produce can be raised at a lower 
 cost per unit. 
 
 With regard to discriminating duties, Mill's opinion 
 is not open to doubt. They are, he says, an emi- 
 nently wasteful mode of raising a revenue, and this 
 character belongs in a peculiar degree to Customs 
 duties on the produce of land, unless countervailed 
 by Excise duties on the home production. Such taxes 
 bring less into the public treasury, compared icitk what 
 they take from the consumers, than any other imposts to 
 ivhich cmlir.ed nations are usually subject. And he goes 
 on to say that what he has said of duties on importa- 
 tion generally is equally applicable to discriminating 
 duties which favour importation from one place or in 
 one particular manner in contradistinction to others, 
 such as the preference given to the prodiwe of a colony or 
 of a country with which there is a commercial treaty. 
 Whatever else may be alleged in favour of such dis- 
 tinctions, he says, whenever they are not nugatory 
 they are economically wasteful (cf. Mill's ' Principles 
 of Political Economy,' book v., chap, iv., sections 5 
 and 6). 
 
 Whatever may be said of the reasoning of Mill or 
 Sidgwick, it is obviously unfair to quote their authority 
 simpliciter in support of the opinion that part or the
 
 APPENDIX 65 
 
 whole of the proposed new duties would be transferred 
 to the foreigner. It would be difficult to find a more 
 emphatic condemnation of preferential duties on food 
 than that of Mill ; and Sidgwick's statement that it is 
 practically best for a statesman to adhere to the broad 
 and simple rule of taxation for revenue only is perhaps 
 the most emphatic and decided opinion in the eco- 
 nomic writings of that most cautious and wide-minded 
 of philosophers. 
 
 Note 5. — Protection and Employment, 
 
 In his speech at Newcastle on October 20, 1903, 
 Mr. Chamberlain argued that since 1872 we have lost 
 £92,000,000 of trade that ought to have been done 
 here — that is, through the import of foreign ' manu- 
 factures.' He then calculated that this meant a loss 
 of employment to 600,000 men at 30s. a week, and, 
 allowing for the families, we had lost the subsistence 
 for 3,000,000 persons. It is forgotten that the foreign 
 manufactures must be paid for, and it is overlooked 
 that many manufactures are materials of industry. 
 
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