HF 
 
 1755 
 
 D5
 
 r 
 
 :Y |. 
 
 LIBRARY 
 
 UNIVERSlW OP I 
 
 CALIFORNIA I 
 
 SAN DIEGO /
 
 THE UNIVERSITY tlBWAR'SI 
 umVERSITY OF CALIFORNIA, SAN D1TO7 
 THE U\ JOIU. CALiFOPNiA 
 
 PREMISES OF FREE TRADE 
 EXAMINED. 
 
 BY 
 
 GEORGE BASIL DIXWELL. 
 
 From the Bulletin of the National Association ok Wool 
 Manufactueers. 
 
 CAMBRIDGE: 
 JOHN WILSON AND SON. 
 
 Sanifatrsttg |3rrss. 
 1881.
 
 Z)5 
 
 TPIE PREMISES OF FREE TRADE EXAMINED. 
 
 As the text-books from which political economy is taught in 
 most of our colleges are generally by English authors, or by 
 Americans who have adopted the English views, it is not 
 surprising that we should meet with a great many highly 
 educated men who believe the trans-Atlantic ideas to be 
 invulnerable. They have been taught that economical phe- 
 nomena are too complex to be investigated by the a posteriori 
 method, and that nothing can be relied on but reasoning from 
 assumptions ; and they have accepted with delight certain 
 most attractive argumentations, in which the wasteful futility 
 of protection appears to be demonstrated, just as the mathe- 
 matician demonstrates that the three angles of a triangle are 
 in all cases equal to two right angles. But deductive rea- 
 soning has its own liabihty to error. Very eminent autliors 
 may change the subject or change the premises or reason from 
 an apparent axiom, which upon careful examination is found 
 little better than a blunder, or an identical proposition. The 
 writer believes that all these logical faults are to be found in 
 the supposed demonstrations above alluded to ; and he i)ro- 
 poses in this paper to point out a few of them, in the hope 
 that some able minds may be led to review their conclusions, 
 and to read or read again, with a candid spirit, what has been 
 urged by Rae, Phillips, Carey, List, Bowen, Seaman, Thomp- 
 son, Greeley, E. P. Smith, Kelly, Elder, and many others 
 who have written in favor of protection. 
 
 Let us first examine Mr. J. R. McCulloch's apparent dem- 
 onstration that absenteeism is not financially injurious to a 
 country. He argued in this way : —
 
 1st. "We get nothing from abroad except as an equivalent for 
 something else ; ami the iiidivicliuil who uses only Polish wheat, Saxon 
 cloth, and French silks and wine, gives, by occasioning the exportation 
 of an equal amount of British produce, precisely the same encourage- 
 ment to industry here as he would give were he to consume nothing 
 not directly produced among us. The Portuguese do not send us a 
 single bottle of port, without our sending to them, or to those to whom 
 they are indebted, its worth in cottons, hardware, or some sort of 
 produce ; so that whether we use the wine or its equivalent is, except 
 as a matter of taste, of no importance whatever." 
 
 But if it be indifferent whether an Irish landlord resid- 
 ing in Dublin consumes an Irish or a foreign product, it is 
 evidently indifferent whether he consumes the one or the other 
 in Dublin or in Paris. Therefore, absenteeism, as far as its 
 financial effects are considered, is a matter of entire indiffer- 
 ence to the Irish people. 
 
 If the premises be correct, the conclusion appears to be in- 
 evitable ; but in this, as in other cases, where the result of 
 reasoning contradicts the almost universal opinion of man- 
 kind, it is well to look again very closely at the premises. 
 Let us do this, and, in order not to perplex ourselves by in- 
 terposing money, let us suppose that the annual produce of 
 the land of Ireland is equivalent to 30,000,000 bushels of 
 wheat, and that the landlord's portion for rent is ten per cent, 
 or 3,000,000 bushels of wheat. If this ten per cent of the 
 rude product of the land be sent off in the form in which it is 
 raised, it is evident that it might as well be burned, as far as 
 the people of Ireland are concerned. The people will have 
 raw products to consume equivalent to 27,000,000 bushels of 
 wheat. This we will call case first. 
 
 Now, alter the supposition, and let the 3,000,000 bushels of 
 wheat be exchanged for Irish manufactured products, and 
 these last be exported. Then, clearly, the people of Ireland 
 will have available for consumption one-ninth part more of 
 the products of the land than they had under the first suppo- 
 sition. This is case second. 
 
 Now, vary the supposition yet again. Bring home the 
 landlords, and confine them and their dependents to the use
 
 of Irish manufactures. The people of Irehind will then have 
 for consumption the same quantity of wheat as in the last 
 case, and also the manufactured products which are exported 
 under case second. This we will call case third. 
 
 In the first case, the raw produce constituting rent is sent 
 abroad. It might as well have been burned. In the second 
 case, it is given to productive laborers, who give in exchange 
 manufactured products, which are exported. Here the Irish 
 people get 3,000,000 bushels of wheat to consume in addition 
 to what they had under case first. In the third case, the 
 Irish people, altogether, have for consumption the additional 
 3,000,000 bushels of wheat (the same as in case second), 
 and also an equal value of other products, subject only to a 
 deduction of what the landlords and their wives and children 
 actually use themselves ; and, if we go through the expendi- 
 tures of a wealthy family, we shall find this deduction to be 
 very trivial. A very large part of their incomes are ex- 
 changed for professional and personal and commercial ser- 
 vices. Those who render such services constitute, according 
 to the census of the United States, more than one hundred 
 and thirty distinct classes, and are over one-fourth part of 
 the whole working population. 
 
 Mr. McCulloch saw very clearly that the landlords living 
 in Paris would only obtain services and commodities by ex- 
 changing for tliem their rents or other Irish products into 
 which their rents were converted: what he appears to have 
 overlooked is that the landlords, when living in Dublin, would 
 obtain Irish commodities and services only in exchange for 
 their rents or other Irish products into whicli those rents were 
 converted. The producer of Dublin stout will not give a 
 single bottle of it, except in exchange for other commodities, 
 any more than will the Portuguese producer of port. It 
 would appear, then, that the premises of Mr. McCulloch were 
 quite inaccurate, and that the conclusion drawn from them 
 must be abandoned. Mr. J. S. Mill, in his " Logic," in book v. 
 chapter iv., end of paragraph 4, has a similar eiror. lie says 
 it is indifferent whether an Englishman buys British or French 
 silks, because British commodities must be produced and ex-
 
 ported to pay for the French silks. He forgets that the 
 necessaries, conveniences, &c., of the British weavers are as 
 much British commodities and employ as much industry to 
 produce them as do the commodities which pay for the 
 French silks in the other case. The only difference is, that 
 in one case the British weavers are deprived of their support, 
 and in the other case they are not. Everything else remains 
 the same, except that the consumer may get the French silks 
 a trifle cheaper, — a matter altogether too trivial to be com- 
 pared with the national loss. 
 
 Professor Cairnes, in his book entitled "Some Leading 
 Principles of Political Economy," repeats this mistake, and 
 props it up with the remark that if it be an error, " we seem 
 to have made a mistake in repealing our protective laws ; nor 
 were protectionists, after all, so very wrong in seeking to en- 
 courage native industry by compelling expenditure towards 
 domestic productions !" See part ii. chap, i., note at the end. 
 
 Mr. Mill makes use of the error to prop up the free-trade 
 doctrine, and Professor Cairnes makes use of the free-trade 
 doctrine to prop up the error. 
 
 Let us now examine another specimen of reasoning : the 
 doctrine that a universal glut of all commodities is impos- 
 sible, — not a permanent glut, but a???/ glut. This doctrine 
 makes a business man open his eyes wide with astonishment. 
 They get at it in this way : — 
 
 1st. " Human desires are unlimited. 
 
 2d. " Commodities are paid for by commodities. 
 
 3d. " He who has produced a commodity has therefore the means 
 of purchasing the other commodity he desires. Double the number of 
 products, and everybody would bring a double demand as well as sup- 
 ply. It is a sheer absurdity that all things should fall in value, and 
 that all producers should, in consequence, be insufficiently remun- 
 erated." 
 
 Thus says Mr. John Stuart Mill ; and Professor J. E. 
 Cairnes, in his work entitled " Some Leading Principles of 
 Political Econom3%" before alluded to, maintains that with 
 regard to commodities, demand and supply, as general phe- 
 nomena, as aggregates, cannot be discriminated. He says :
 
 " An article is produced and is offered in the market : it is now sup- 
 ply ; but the possession of the article confers upon the owner a pur- 
 chasino- power, and this power being exercised, the article becomes a 
 source of demand ; nor is there any other source from which demand can 
 spring. Demand as an aggregate cannot increase without supply, nor 
 supply without demand. This," he says, "is fundamental in the 
 theory of exchange ; and all assumptions to the contrary must be 
 regarded as baseless and absurd." 
 
 Now, every business man knows that the aggregate demand 
 for commodities is sometimes greater and sometimes less ; so 
 much so, that the quantities in stock are sometimes greatly 
 reduced and sometimes greatly increased, — even to the ex- 
 tent that is called a glut. What, then, has perplexed the 
 abstract reasoners ? The doctrine of value appears to be the 
 culprit. The value of anything, they say, is what it will 
 exchange for in other things ; it is a ratio ; and so, of course, 
 it is absurd to say that all values can rise or all fall together. 
 Hence Mr. Mill and Professor Cairnes maintain that the 
 supply of commodities cannot outrun the demand. But it is 
 just here, in applying to commodities the arguments appli- 
 cable to values, that the reasoning breaks down, and is found 
 to consist in changing the subject. That all values cannot 
 rise or fall together may be perfectly true ; but it does not 
 follow that all commodities — the total annual product — 
 may not rise or fall in exchangeable value ; because the total- 
 ity of commodities does not constitute the totality of values. 
 Besides commodities, there are the rights to incomes, and the 
 totality of fixed capital, the possession of which gives incomes. 
 The annual product in the United States being taken at 
 6,000,000,000, those other values are estimated at 80,000,- 
 000,000 ; and, in fixing their minds upon commodities alone, 
 the eminent authors in question overlooked five-sixths of the 
 values which the money power has constantly to measure. 
 Let no one suppose that Messrs. Mill and Cairnes intended to 
 include all these under the term " commodities." They meant 
 to include nothing beyond the annual product, as would bo 
 abundantly evident if there were space to copy their argu- 
 ments in eztenso. They argued the case as if there existed
 
 8 
 
 iiotliing besides commodities, and as if men liad no desires for 
 anything else, — overlooking that most pervasive and per- 
 sistent instinct of man to increase his income or better his 
 condition, of which Adam Smith remarks, " that it comes 
 with man when he issues from the womb, and continues with 
 him until he enters the grave.'' 
 
 Now, the action of this instinct sometimes causes an in- 
 creased demand for commodities, and sometimes a great 
 diminution and a glut. When many possessors of property 
 yielding an income arrive at the conclusion that the coun- 
 try has outgrown its fixed capital, — that it needs more 
 houses, farms, mills, forges, &c., — they can descend into the 
 market, sell or pledge a portion of their bonds, shares, or 
 other property, and proceed to the construction of new rail- 
 roads, houses, cities, mills, forges, &c. ; and this movement 
 will involve the fuller employment of the community, a con- 
 sequent diminution in the stocks of commodities, and an ad- 
 vance in their exchangeable value. It seems to be of the 
 nature of such movements to run to excess, as each onward 
 step causes a larger and larger demand and stimulates more 
 and more to an increased production by making the earlier 
 enterprises profitable ; but, finally, just as the most prudent 
 give up looking for a crash, it comes. It suddenly reveals 
 itself to the community that more fixed capital has been 
 formed than can for the time being be profitably used. Then 
 comes a violent reflux of opinion. Men rush into the belief 
 that more has been done in that direction than the country 
 will require for twenty years. Every new enterprise falls into 
 discredit ; the population which was engaged in converting 
 floating into fixed capital, — that is, engaged in converting a 
 portion of the annual product into instruments designed to 
 increase the future product, — this portion of the population 
 is dismissed into idleness, and is thereby forced to diminish 
 enormousl}^ its demand for commodities ; and here we find 
 ourselves face to face with a glut. The productive energies, 
 which had adapted themselves to meet the effectiTe demand 
 of a fully employed community, find themselves in excess in 
 presence of the diminished demand of a community only par-
 
 9 
 
 tially employed. There is over-production or under- consump- 
 tion ; and, as a necessary' consequence, the exchangeable 
 value of the whole annual product suffers a great diminution. 
 Those who had been producing upon borrowed capital find 
 themselves unable to meet their obligations ; there are fail- 
 ures, panic, forced liquidations. The possessors of fixed capi- 
 tal next find their incomes diminished. They, for the time 
 being, are no longer able to save ; no longer able even to 
 maintain their previous scale of expenditures. These are 
 next diminished, with the effect of throwing more people out 
 of employment, diminishing still farther the aggregate de- 
 mand for commodities, and consequently their aggregate ex- 
 changeable value. Next, or coincidently, all instruments of 
 production decline ; the productive energies ada23t themselves 
 after a while to the new conditions ; a new scale of exchange- 
 able values is evolved ; a smaller gross annual product, in- 
 volving a smaller average annual net individual income, 
 issues, and the community gradually and slowly settles itself 
 upon a lower level, from which in time to take a fresh start. 
 To trace the steps of recovery, and see how a progressive 
 community, after a number of years, works back to its former 
 level and beyond it, might or might not be interesting, but 
 would exceed the limits and go beyond the object of this 
 paper, which in this portion is simply to show, not that gluts 
 do occur, for this everybody knows, but that just reasoning 
 ought to have anticipated them, — ought to have seen that in 
 the present state of our knowledge they are inevitable and 
 likely to be of considerable duration. The panic of 1873 
 was not entirely over before 1879. 
 
 The next specimen of abstract reasoning is the free-trade 
 argument published by Adam Smith in 1775, and repeated in 
 a somewhat modified form by Mr. J. S. Mill three quarters of 
 a century later. 
 
 It will shorten the examination if we first establish one or 
 two preliminary points. 
 
 Between 1860 and 18G5 the Northern States supplied the 
 government with commodities or money, which, directly or 
 indirectly, was converted into commodities of the value of 
 
 2
 
 10 
 
 about 84,000,000,000 in currency, or say $3,000,000,000 gold 
 value, in four years. The inducement was government 
 bonds promising a continuous income. Suppose, now, that 
 instead of government bonds issued to carry on a war, there 
 had been offered to the community new industries promising 
 to yield as great an income. It is evident that in the same 
 time $3,000,000,000 would liave been forthcoming for the de- 
 velopment of those industries, — a sum greater than the whole 
 fixed and floating capital employed in 1860 in the manufac- 
 turing and mechanical industries of the United States. The 
 country, then, could have doubled those industries in four 
 years. That the annual product of commodities does not in- 
 crease with this rapidity is not, then, because of the inability 
 to find capital, but because men do not discover mutual wants 
 so rapidl3\ Perhaps more than one-third of the annual prod- 
 uct falls to the share of those who desire to save rather than 
 increase their annual consumption. They must be tempted ■ 
 to spend by the discovery of new j^roducts or new services, or 
 by the gradual growth of a more liberal scale of living. 
 Failing this, a portion of tlie annual product remains in stock, 
 diminishing profits and holding in check the expansion of the 
 known industries. This it is which limits the field of indus- 
 try in a community still possessed of a vast amount of unde- 
 veloped resources. Industry, then, as a matter of fact, is not 
 held in check by the want .of capital, but by the want of a 
 sufficiently profitable field of employment, and by the accu- 
 mulated stocks of finished products and of materials awaiting 
 conversion. The legitimate loans of banks of issue are made 
 chiefly upon these ; and these loans in the United States, we 
 all know, exceed $1,000,000,000. 
 
 :Mr. Mill recognized that these stocks of goods were unem- 
 ployed capital ; but, in spite of this, he, as well as Adam 
 Smith, argues the free-trade question upon the assumption 
 that, in a normal condition of things, every atom of the actual 
 and potential capital of a country is and must be fully em- 
 ployed upon productive industry, so that anything taken for 
 new industries must be taken or withheld from the old. 
 
 We come now to the argument of Adam Smith, contained
 
 11 
 
 in the second chapter of the fourth book of his " Inquiry into 
 the Nature and Causes of the Wealth of Nations." The 
 limits of space forbid the quotation of his whole chapter, 
 which contains a great deal of rhetorical repetition ; but 
 nothing shall be passed over which demands reply. 
 
 In his first paragraph he calls protected industries monop- 
 olies. This they may have been in his time, when almost 
 every trade and manufacture was a close guild ; but this they 
 are not in our time and country, with 50,000,000 of people 
 free to exercise them. To use the word now is anything but 
 complimentary to the intellect of the listener or reader. 
 
 His third paragraph maintains that 
 
 "The general industry of the society never can exceed what the 
 capital of the society can employ. As the number of workmen that 
 can be kept in employment by any particular person must bear a cer- 
 tain proportion to his capital, so the number of those that can be con- 
 tinually employed by all the members of a great society must bear a 
 certain proportion to the whole capital of that society, and never can 
 exceed that proportion. No regulation of commerce can increase the 
 quantity of industry in any society beyond what its capital can main- 
 tain. It can only divert a part of it into a direction into which it 
 might not otherwise have gone ; and it is by no means certain that 
 this artificial direction is likely to be more advantageous to the society 
 than that into which it would have gone of its own accord." 
 
 But the number of workmen that can be kept in employ- 
 ment by any particular person does not bear a certain propor- 
 tion to his capital. When the market for his products is 
 dull, a large part of his capital is locked up in unsold goods; 
 he must then lessen his production and dismiss some of his 
 workmen. Quicken the demand for goods, and his ability to 
 employ workmen increases ; and the same is true of society 
 taken together. In a normal condition of things there may 
 be, for instance, a stock of goods equal to two months' con- 
 sumption of the whole community, — a value in the United 
 States at the present time (1881) considerably exceeding a 
 thousand millions of dollars. And observe that these stocks 
 of commodities are the very things — the food, the raiment, 
 the tools, &c. — which are requisite, and in fact used, in
 
 12 
 
 carrying out iiny new undertakings. The proposition, tlien, 
 that *• industry never can exceed what the capital of the soci- 
 ety ca7i support " is totally irrelevant.* One-half of the capi- 
 tal normally unemployed is ample for the inauguration of 
 gigantic enterprises, and these, if within the strength of the 
 communit}', will not prevent anything being done which 
 would otherwise have been done. On the contrary, the pre- 
 viously existing industries will be stimulated to larger pro- 
 duction. 
 
 Let us suppose that the United States at the end of 1879 
 were producing and consuming commodities equal to a value 
 of $6,000,000,000 for the year, and with a surplus stock equal 
 to a value of $1,000,000,000. If at that time they commenced 
 forming new instruments (mills, forges, farms, houses, and 
 railroads) to an annual value of $300,000,000 over and be- 
 3'ond the regular and normal movement, there would be, as we 
 see, $1,000,000,000 of unemployed floating capital out of which 
 to take the funds ; but these funds would go to recompense the 
 producers of the new instruments, and would be by them ex- 
 pended for the most part for commodities, thus relieving the 
 capitalists of a portion of their stocks and placing them in a 
 position to employ more labor for the sake of enlarging their 
 production of commodities. But whatever they thus expend- 
 ed for labor would lead to the production of more than twice 
 the value expended in labor,! and it might well have happened 
 that at the end of 1880 the gap made in the stock of unem- 
 ployed floating capital was quite repaired, and the country as 
 ready to continue a similar movement in 1881 as it was to 
 commence it a year before. Meanwhile, the extra recom- 
 pense to labor during the year would have been not less than 
 $600,000,000. 
 
 Vary the amounts if you please, but you will find that any 
 
 * It never can, for any considerable time, be nearly as great as the capital 
 can support ; for, if it were, there would be no stock of commodities, which 
 would cause such high prices and such high rates of interest as must inevitably 
 moderate the industrial movement. 
 
 t The census of 1870 gave, as the total value added to materials by the me- 
 chanical and manufacturing industries, $1,744,000,000, of which $776,000,000 
 went to labor.
 
 13 
 
 new enterprise not out of proportion to the existing surplus 
 stock of commodities will result, 1st, in an enlarged em- 
 ployment of laborers ; and, 2d, in the creation of new subsidi- 
 ary capital, or say rather of new instruments of production, 
 which would not otherwise have come into existence. But a 
 free-trader may say, How do you know that there is any 
 surplus stock of commodities? and we should reply that, in 
 the first place, we know it as a matter of fact, which can be 
 verified, any day you please to take evidence, in State Street 
 or Wall Street or anywhere else. But as our free-trade 
 brethren do not like facts, nor believe in them unless they 
 agree with conclusions deduced from postulates admitted by 
 their own authors, we will try to show that in an industrial 
 community there must be normally a stock of commodities or 
 of unemployed capital. 
 
 First, then, take industry A. Those who commenced it 
 did so for the sake of profit. But, so long as they obtained a 
 satisfactory profit, the same motive would lead them to en- 
 large their production. If one man did not, another would ; 
 and so the increase of tlie industry would go on until it over- 
 ran the demand. A stock would then accumulate, bringing 
 down profits and locking up a portion of the producer's capi- 
 tal at the same moment. But what is true of industry A is 
 true of B, C, D, &c. ; and we thus arrive at the conclusion 
 that each carries along a surplus stock. When this stock is 
 diminished by a novel or increased demand, prices rise, and 
 the industry is stimulated ; when the stock is increased, prices 
 fall, and the industry is checked. 
 
 No economist, so far as we know, has noticed the vast ag- 
 gregate amount of these stocks, nor the manner in which they 
 regulate the play of the industrial forces ; and yet, without 
 knowing about them, it is impossible to understand what hap- 
 pens upon the commencement of a great war, or of a great 
 industrial movement. When we have ascertained what the 
 ordinary average stock is, — whether equal to two or three 
 or more months' consumption, — it will become possible to 
 form a rational opinion as to how far any industrial move- 
 ment can be pushed without bringing on a scarcity of floating 
 capital and a stringency in the money market.
 
 14 
 
 But, meanwhile, it is something to have satisfied ourselves 
 that such stocks must and do exist, and that systems framed 
 in ignorance or disregard of them are necessarily erroneous. 
 Such a system is that of Adam Smith in his third paragraph 
 above quoted. He starts with a self-evident axiom that 
 '* the general industry of the society never can exceed what 
 the capital of the society can employ." He then repeats the 
 idea in different words three several times ; and then, mis- 
 taking apparently this rhetorical artifice for logic, he draws 
 his conclusion that "• a regulation of commerce can "only di- 
 vert a portion of the capital of the society into directions into 
 which it might not otherwise have gone." This conclusion 
 will follow from his axiom, whenever an industrial commu- 
 nity shall be found in which there exists no unemployed cap- 
 ital, and no funds, which, though originally intended for 
 private expenditure, are capable of being diverted to the sup- 
 port of productive labor the moment a protective law affords 
 a sufiicient motive for doing so. Until such a community be 
 found, the conclusion does not follow from the premises. 
 His argument, if it can by any stretch of courtesy be called 
 an argument, does not cohere. 
 
 In the next four paragraphs he argues from the supposed 
 interests and motives of men that they would in certain cases 
 act in accordance with the public interest, and he thence 
 concludes that they are "led by an invisible hand to promote 
 an end which was no part of their intention." 
 
 This is a stupendous generalization to be jumped at from a 
 few verj"- uncertain coincidences. Had he inquired, after the 
 inductive method laid down by Bacon, as to whether the sel- 
 fish private acts of men coincided generally with the interests 
 of the society, he would have found that innumerable nega- 
 tive instances forbade any such conclusion. 
 
 His next paragraph argues that men can judge what is for 
 their own interest better than any statesman can. This does 
 not seem to be very evident, in light of the fact that over 
 ninety per cent of business men fail ; and, if it were evident, 
 it has been noted already that there is no scientific basis for 
 the assumption that individual private interests generally
 
 15 
 
 coincide with those of the public. All that is evident is, that 
 a statesman cannot undertake to attend to the private affairs 
 of each individual, who, therefore, is left to manage for him- 
 self, under the restraint of general laws. These, however, 
 forbid him to build unsafe ships or houses, to encroach upon 
 or prevent the laj-ing out of a public way, to set up lotteries 
 or gambling-houses, to tie up property indefinitely, to use 
 other than certain weights and measures, &c., ad infini- 
 tum. Uninstructed common sense recognizes ever3avhere 
 that the immediate interest of the individual is, in an im- 
 mense number of instances, quite opposite to the interest of 
 the community ; and one of the instances is, when the indi- 
 vidual buys of the foreigner at the smallest difference of 
 price, while his fellow-citizen, who could make the article, 
 sits idle or becomes a charge upon the society. 
 
 In the next two paragraphs Adam Smith argues that 
 
 " It is the maxim of every prudent master of a family never to at- 
 tempt to make at home what it will cost him more to make than to 
 buy," and that " What is prudence in the conduct of every private 
 family can scarce be folly in that of a great kingdom. If a foreign 
 country can supply us with an article cheaper than we can make it 
 ourselves, better buy it of them with some part of the produce of our 
 own industry, employed in a way in which we have some advantage. 
 The general industry of the country, being always in proportion to the 
 capital which employs it, will not thereby be diminished, no more 
 than that of the above-mentioned artificers, but only left to find out the 
 way in which it can be employed to the greatest advantage." 
 
 Here are two fallacies of confusion. The first is in com- 
 paring a nation which, by his own supposition, is not hilly 
 occupied, with an individual who, by his own supposition, is 
 fully occupied. Let us correct this by supposing the individual 
 to have employment only four days out of six. He will then 
 be a very im-prudent and thriftless master of a family if he sits 
 idle two days in the week, because somebody else excels him in 
 all save his special trade. He will set himself about some- 
 thing, will gradually acquire skill and become more indepen- 
 dent ; and his income all the time will be augmented. The 
 second fallacy is introduced by the use of the word cost. We
 
 16 
 
 immediately figure to ourselves what the article would cost, 
 calciiluting his labor at what he earns during his four occu- 
 pied days ; but what he makes while he would otherwise be 
 idle costs him nothing ; and what a nation makes with labor 
 otherwise idle and with capital which would otherwise be 
 lying unemployed, or whicli perhaps would never have 
 come into existence, costs the nation nothing. By producing 
 the article it w^ould otherwise import, it adds to the national 
 revenue the total gross value of the article produced, or 
 ratlier the total value of what would have otherwise been 
 exported. The argument that industry will not be dimin- 
 ished because it is always in proportion to capital, would be 
 good if true, but is good for nothing after we have found out 
 that industry is held in check, not by the want of capital, but 
 by the want of a field of employment sufiQciently profitable to 
 attract capital. 
 
 Adam Smith continues : — 
 
 " Though for the want of such (protective) regulations the society 
 should never acquire the proposed manufacture, it would not, on that 
 account, necessarily be the poorer in any period of its duration. In 
 every period of its duration its whole capital and industry might still 
 have heen employed, though upon different objects, in the manner that 
 was most advantageous at the time. In every period its revenue 
 might have been the greatest which its capital could afford, and both 
 capital and revenue have been augmented with the greatest possible 
 rapidity." 
 
 This would be correct, were the facts as to capital such as 
 he imagined. He knew nothing of the normal existence of 
 unemployed capital ; nothing of the rapidity with which new 
 capital can be taken from income ; nothing of the impetuosity 
 with which the savers rush upon and occupy every field of 
 employment which promises a profit. 
 
 But the world has learned something in a hundred years ; 
 and in the light of the newly observed facts, we know that in 
 consequence of such regulations the nation will in every 
 period of its duration enjoy a larger revenue and acquire a 
 larger capital.
 
 17 
 
 We come now to the an ti -protectionist argument of Mr. 
 John Stuart Mill. He says : — 
 
 " There caa be no more industry than is supplied with materials to 
 work up and food to eat. Self-evident as the thing is, it is often for- 
 gotten that the people of a country are maintained and have their 
 wants supplied, not by the produce of present labor, but of past. They 
 consume what has been produced, not what is about to be produced. 
 Now, of what has been produced, a part only is allotted to the support 
 of productive labor; and there will not and cannot be more of that 
 labor than the portion so allotted (which is the capital of the country) 
 can feed and provide with the materials of production. 
 
 " Yet, in disregard of a fact so evident, it long continued to be be- 
 lieved that laws and government, without creating capital, could create 
 industry." 
 
 This is Adam Smith's argument over again, and is, in 
 brief : — 
 
 1st. Industry cannot exceed what capital can maintain. 
 
 2d. Industry, therefore, cannot increase until new capital 
 has been created. 
 
 3d. Laws and governments cannot create capital. 
 
 4th. Therefore laws and governments have no power to 
 increase industry. 
 
 But to make the later propositions flow from the first, a 
 vast gap has to be filled up ; it requires to be proved that 
 in a normal condition of things there is no unemployed capi- 
 tal, and no funds, which, although intended for unproductive 
 consumption, are capable of being instantly turned to the 
 support of production the moment that a new industry, in- 
 trenched by a protective law, presents a profitable field of 
 employment. 
 
 This is a question of fact ; and the moment we inquire into 
 the facts, we find that the unemployed capital in the United 
 States is vast, probably much exceeding $1,000,000,000 ; and 
 that the ability to reinforce this out of the funds intended 
 for unproductive consumption within the year is also vast, 
 probably a good deal over $700,000,000. Before these facts 
 the whole argument falls to pieces. 
 
 Mr. Mill continues as follows : —
 
 18 
 
 " Not by milking the people more laborious, or increasing the efli- 
 ciency of iheir labor : these are objects to which the government can 
 in some degree contribute. But, when the people already worked as 
 hard and as skill'ully as they could be made to do, it was still thought 
 that the goveruuient, without providing additional funds, could create 
 additional employment." 
 
 These are wonderful words, as showing how far the most 
 conscientious man may be led in misrepresenting his oppon- 
 ent's positions. Tlie protectionist does not maintain that the 
 government can increase the industry of a people who already 
 work as hard and as skilfully as the}* can be made to ; but 
 that of a people who do not already work as hard and as skil- 
 fully as they can be made to. Indeed, to suppose that they 
 who already did all they could might still be made to do 
 more (whether the government provided additional funds or 
 not), seems to be one of those blunders or bulls which one 
 would hardly expect to find in the deliberate composition of 
 one who has written so admirably upon logic. 
 
 Mr. Mill continues : — 
 
 " A government would, by prohibitory laws, put a *top to the 
 importation of some commodity; and when by this it had caused the 
 commodity to be produced at home, it would plume itself upon having 
 enriched the country with a new branch of industry, would parade in 
 statistical tables the amount of produce yielded and labor employed in 
 the production, and take credit for the whole of this, as a gain to the 
 country, obtained through the prohibitory law. Although this sort of 
 political arithmetic has fallen a little into discredit in England, it flour- 
 ishes still in the nations of continental Europe. Had legislators been 
 aware that industry is limited by capital, they would have seen that, the 
 aggregate capital of the country not having been increased, any por- 
 tion of it which they by their laws had caused to be embarked in the 
 newly acquired branch of industry must have been withdrawn or with- 
 held from some other, in which it gave, or would have given, employ- 
 ment to probably about the same quantity of labor which it employs in 
 its new occupation." 
 
 Here the cat jumps out of the bag, and we see how Mr. Mill 
 made out his proposition, which he called invulnerable. He 
 translates his original proposition that industry cannot exceed
 
 19 
 
 what capital can maintain, into the words, " industry is lim- 
 ited b}' capital," which are ambiguous. In one sense they are 
 identical with his original and fundamental proposition ; but 
 his conclusions, as we have seen, cannot be deduced from this. 
 In the other sense they mean that, in point of fact, industry 
 does not increase because there is not any unemployed capital 
 nor any other funds which can be at once turned into capital. 
 His conclusions would logically follow from this proposition ; 
 but this proposition, as we have seen, is not true. But, by 
 converting his first and fundamental proposition into an am- 
 biguous form, he misled himself and his readers, and seemed 
 to prove that, when millions of practical men believed they 
 had been enriched by a protective law, they were only as 
 many millions of idiots for thinking so. In doing this, he 
 committed precisely the error which he denounced in his 
 " Logic," chap. vi. sec. 4, where he says : — 
 
 " The commonest aud certainly the most dangerous fallacies of this 
 class, are those which do not lie in a single syllogism, but slip in be- 
 tween one syllogism aud another in a chain of argument, and are com- 
 mitted by changing the premises, A proposition is proved, or an 
 acknowledged truth laid down, in the first part of an argumentation ; 
 and in the second a farther argument is founded, not on the same 
 proposition, but on some other resembling it sufficiently to be mis- 
 taken for it. Instances of this fallacy will be found in almost all the 
 argumentative discourses of unprecise thinkers," &,c. 
 
 But here an instance is found in his own argument : a great 
 logician, when closely examined, is seen committing a capital 
 error in logic, and thereby teaching us how signally unreliable 
 is the purely abstract system of reasoning, and how constantly 
 it requires to be checked and verified by comparison with 
 facts. 
 
 The absurdities into which abstract reasoning may run by 
 overlooking important economical facts is curiously shown by 
 another doctrine, enforced at great length by Mr. J. S. Mill. 
 This is the doctrine that a demand for commodities " does not 
 and cannot create any employment, except at tlie expense of 
 other employment which existed before." This flies in the
 
 20 
 
 face of two economical facts. First, that people are con- 
 stiintly striving to save ; and, second, that there always, in a 
 normal condition of society, exists a stock of unsold goods or 
 of materials awaiting transformation, — in short, a vast ag- 
 gregate of unemployed capital. He argues thus: — 
 
 " A consumer may expeud his income either in buying services or 
 commotlities ; he may employ part of it in hiring journeymen brick- 
 layers to build a house, or excavators to dig artificial lakes, or laborers 
 to make plantations and lay out pleasure-grounds ; or, instead of this, 
 he may expend the same value in buying velvet and lace." 
 
 If he does the latter, Mr. Mill concludes that the additional 
 quantity of velvet which his demand causes to be produced 
 could not be produced at all were it not that the bricklayers, 
 &c., being now without work, their demand for necessaries, 
 &c., ceases, and hence the production of those necessaries, &c., 
 ceases ; and hence the precise amount of capital necessary for 
 a larger production of velvet is set free. " There was," he 
 says, " capital in existence to do one of two things, — to 
 make the velvet or produce necessaries for the bricklayers, — 
 but not to do both ! " 
 
 Imagine the case of a young man, who, being imbued with 
 these doctrines, is thrown into practical life in the United 
 States, and obliged to consider business problems into which 
 enters as a factor the probable amount of the capital unem- 
 ployed at the moment, he being utterly ignorant of the fact 
 that the aggregate is generally very large and sometimes 
 enormous. "What grave blunders he would make, and at how 
 fearful an expense would he unlearn what he had been taught 
 at school or college ! If we take Mr. Mill's consumer as 
 merely the embodiment of the totality of consumers, we know 
 that in one phase of the revolving phenomena of society he 
 may have been saving until the general glut of commodities 
 has reduced all profits so low that there is no longer a suffi- 
 cient inducement to save. If, then, he sets his bricklayers at 
 work and buys his velvet, his purchases will relieve the velvet 
 maker of a portion of the stock of goods which held his in- 
 dustry in check, and will enable him to make more velvet ;
 
 21 
 
 and the bricklayers, now employed, will purchase a portion of 
 the overstock of necessaries, and enable their producers to 
 augment their production. And this can go on until the pro- 
 duction of commodities has become so profitable that it may 
 appear desirable to increase the aggregate of productive in- 
 struments ; and the employment of men to construct these 
 will cause a further demand for commodities, a further dimin- 
 ution of the unemployed capital, a further rise in profits, con- 
 current with a greatly increased demand for labor. 
 
 But our young man has been taught that an increased 
 supply of commodities is impossible, unless at the same time 
 there is an equal diminution in the demand for services, or 
 for other commodities ; that a glut is impossible ; that demand 
 cannot in the aggregate increase beyond supply, nor supply 
 beyond demand ; that no new industry can be introduced 
 except by diminishing or preventing some other industry ; 
 that the demand for labor cannot increase suddenly, but only 
 gradually and slowly, as capital is, little by little, saved out 
 of income. He has been taught these and other errors, which 
 tend to seriously mislead him in practical life, and may ruin 
 him, if he wants that quick perception and almost intuitive 
 interpretation of facts which are needed to place him where 
 he would have been had he never studied these subjects 
 abstractly. 
 
 In Professor Cairnes's book, entitled " Some Leading Prin- 
 ciples of Political Economy," already alluded to, we have an 
 elaborate work, designed evidently to affect public opinion 
 in the United States and on tlie continent of Europe in favor 
 of free trade. Let us examine its logic. He says, part iii., 
 chapter i., paragraph iii. : — 
 
 " Secondly, when it is said that international trade depends on the 
 difference iu the comparative, not in the absolute, cost of producing 
 commodities, the costs compared, it must be carefully noted, are the 
 costs in each country of the commodities which are the subjects of ex- 
 change, not the different costs of the same commodity in the exchang- 
 ing countries. Thus, if coal and wine be the subjects of a trade between 
 England and France, the comparative costs on which the trade de- 
 pends are the comparative costs of coal and wine in France as com-
 
 22 
 
 pannl with the compnrntlve costs of tlie same articles in England. 
 Knglantl might be able to raise coal at one-half the amount of labor 
 nnil abstinence needed in France ; but this alone would not render it 
 profitable for France to obtain lier coal from England. If her disad- 
 vantage in procuring other commodities was as great as in producing 
 coal, she would gain nothing by an exchange of products, and the con- 
 ditions of a trade between the two countries would not exist. But, 
 supposing she was, in the case of some other commodity, under a less 
 disadvantage than in that of coal, still more, if she had, with regard to 
 that other, — as in wine, — a positive advantage, it would at once be- 
 come her interest to employ this commodity as a means of obtaining 
 through trade her coal from England, instead of producing coal di- 
 rectly from her own mines." 
 
 All that this proves is, that in some cases it will be advan- 
 tageous for France to get its iron from England in exchange 
 for wine. That it will not be so in all cases is easily shown, 
 as follows : Let the utmost requirements of England for wines 
 be .£2,000,000 sterling; let the requirements of France for 
 iron be £10,000,000 sterling. She (France) can in this case 
 obtain from England iron somewhat more cheaply, — we say 
 somewhat, because the advantages would be divided between 
 the two countries, — but she would have to go without four- 
 fifths of the iron she required. Her saving of labor and ab- 
 stinence upon the iron she did get from England would be a 
 considerable percentage, of the value of, let us say, 100,000 
 tons of iron ; her loss would be the enormously greater value 
 of 400,000 tons of iron. 
 
 Professor Cairnes's reasoning, then, leads only to a particu- 
 lar conclusion, and can be used only as a particular, not as a 
 universal, premise. 
 
 Further on in the same paragraph Professor Cairnes quotes 
 the instance of Barbadoes buying to advantage its food in 
 Kew York, and paying in tropical products, notwithstanding 
 that it could raise food also more cheaply than New York. 
 
 Here is another particular instance from which no general 
 conclusion can be drawn. It may or may not be well for a 
 small island inhabited by a handful of people to purchase 
 their food and clothing and other conveniences, by giving for
 
 23 
 
 them sugar and coffee and spices ; but scarcely even a lunatic 
 would propose to 100,000,000 of people to do the same thing ; 
 because the quantity of sugar and coffee and spices which 
 they could find a market for would not procure them a twen- 
 tieth part of what they required in other things. 
 
 We come now to Professor Cairnes's chapter iv., entitled 
 " Free-Trade and Protection." Unfortunately he based the 
 main portion of his argument upon the statistical deductions 
 of Mr. David A. Wells. The Professor probably did not 
 know how roughly these had been handled in Congress ; but, 
 being a prominent economist, he ought, one would think, to 
 have distrusted the accuracy of figures which appeared to 
 prove that the real wages of the people of the United States 
 had declined twenty per cent between the years 1860 and 
 1868. However, he accepted them in full faith, and based 
 upon them his main argument, which amounts to this: — 
 
 So great a deterioration in the condition of the people must 
 have a cause. I look about in every direction, and cannot 
 find anything to attribute it to, except the Morrill Tariff. 
 Here we have a sufficient cause. It puts on duties averaging 
 forty-seven per cent. 
 
 "Every article, therefore, produced in the United States, which 
 would not have been produced there but for the protective tariff, rep- 
 resents an expenditure of labor and capital greater than would have 
 been necessary to obtain the same article had it been obtained under 
 free trade. In a word, American labor and capital, as a whole, have, 
 effort for effort and outlay for outlay, been producing smaller results 
 since 1861 than formerly; and, this being so, what other explanation 
 do we need of the actual facts which we encounter, — of diminished 
 returns on American industry, of a fall in the real wages of labor ? " 
 
 Scores of times it has been shown by American writers 
 that, when an industry has been raised up by protective 
 duties, its products have boen often cheapened and scarcely 
 ever augmented by the amount of the duties. Scores of 
 times the free-trader has replied, Where, then, was the neces- 
 sity for the duty ? and scores of times they have been told, 
 The duty was necessary in the first place to establish the
 
 24 
 
 industry, and afterwards to prevent it from being maliciously 
 overwlielmed l)y English goods sold at a loss, which was to 
 be more than made up by the higher prices obtainable when 
 we no longer wore able to help ourselves. 
 
 It by no means follows, then, that forty-seven per cent was 
 added to the cost of articles caused to be produced by the 
 Morrill Tariff. It is almost certain that with the tariff we 
 liave still to offer in foreign markets as great a surplus of the 
 commodities " in raising which we have an advantage " as can 
 be well sold ; that, if we offered a larger quantity, the net re- 
 turns would be less in the aggregate than they are now ; and, 
 if so, the commodities produced by reason of the tariff are just 
 so much clear gain. The question was, " Are protective laws 
 a burthen to the country imposing them ? " and the Pro- 
 fessor surely made a grave slip in undertaking to prove they 
 were, by assuming that they were I If the statement of Mr. 
 Wells had been a fact, and the average real wages of the in- 
 habitants of the United States had actually been reduced 
 twenty per cent, there are many other conceivable causes be- 
 sides a tariff. In 1874 to 1879 there was a serious fall in the 
 rate of wages as measured by money, and also probably as meas- 
 ured by commodities ; but there has recently (1881) been an 
 enormous advance. Did the tariff cause both the decline and 
 the advance? We certainly are not called upon to draw any 
 such absurd conclusion. The fall in 1873-74 was sufficiently 
 accounted for by the sudden cessation by the community 
 from the construction of new instruments of production, and 
 the recent advance is sufficiently accounted for by the move- 
 ment in the opposite direction now going on. When the 
 community is fully employed, the gross annual product is 
 large : there is much to divide, and wages and profits advance 
 together. When a portion of the community is dismissed into 
 idleness, the annual product is diminished : there is less to 
 divide, and wages and profits fall together. 
 
 Professor Cairnes feels great anxiety about the Illinois 
 farmer, lest he should not get enough for his corn, and have 
 to pay too much for other things. He and M. Mongredien 
 would like to have us confine ourselves to that in which we
 
 25 
 
 have an advantage, and take the other things from England. 
 The farmers could take $1,000,000,000, and the rest of the 
 community converted into farmers could take another $1,000,- 
 000,000 ; and, twenty -five years hence, when we number 
 100,000,000 of people, we could take twice as much, or say 
 81,000,000,000 of other things. What would be the price of 
 the other things under such circumstances, — whether double 
 or treble what it is now, — and what the price of the corn, — 
 whether two-thirds or half of what it is now, — ought not 
 to trouble political economists ! 
 
 On looking further, I see I am in error, and that Pro- 
 fessor Cairnes does not agree with M. Mongredien. He does 
 not expect us all to become farmers ; on the contrary, he tells 
 us that — 
 
 " (1) As regards the industries of raw produce, protection does not 
 call into existence a single branch of production which would not 
 equally have existed under free trade, — it merely altei's the propor- 
 tions in which such industries are carried on, hindering their natural 
 and healthy development ; (2) in the domain of manufacturing indus- 
 try it is equally inefficacious as a means of creating variety of pursuits, 
 
 — for if on the one hand it secures a precarious existence for certain 
 kinds of manufactures, on the other, by artificially enhancing the price 
 of raw material, it discourages other kinds which in its absence would 
 grow and flourish ; while (3) over and above all these injurious cflfects, 
 it vitiates the industrial atmosphere by engendering lethargy, routine, 
 and a reliance on legislative expedients, to the great discouragement of 
 those qualities on which, above all, successful industry mainly depends, 
 
 — energy, economy, and enterprise. To conclude, having regard to 
 the geographical position, extent of territory, and extraordinary natural 
 resources of the United States, as well as to the character of its people, 
 trained in all the arts of civilization, and distinguished beyond others by 
 their eminent mechanical and business talents, there seems no reason 
 that they should not take a position of commanding influence in the 
 world of commerce, — a position to which no other people on earth could 
 aspire. But, to do this, they must eschew the miserable and childish 
 jealousy of foreign competition which is now the animating principle of 
 their commercial policy. If they desire to command a market for 
 their products in all quarters of the world, they must be prepared to 
 admit the products of other countries freely to their markets, and must
 
 26 
 
 loam to seek the benolks of international trade, not in the vain ambi- 
 tion of unilerselling other countries, and so making them pay tribute in 
 gold and silver to the United States, but in that which constitutes its 
 proper end and only rational purpose, — the greater cheapening of 
 commodities and the increased abundance and comfort which result to 
 the whole family of mankind." 
 
 But the ''world of commerce" in which we are invited to 
 partake is a world in which Great Britain, by immense efforts, 
 — warlike, industrial, diplomatic, social, and literary, — has 
 been able to find markets for only about twelve hundred mil- 
 lions of dollars in value of the products of her mechanical and 
 manufacturing industries ; while our own market, which we 
 are invited to share with Great Britain, is now some four or 
 five times as great, and pretty sure to be ten times as great in 
 twenty-five years. The invitation has a humorous aspect, 
 and might be passed over with a good-natured smile, if the 
 matter were not one of such transcendant importance. Any 
 attempt to put his recommendations in practice would place 
 in peril a large proportion of our capital and industry, and 
 also the high rate of real wages which we have thus far been 
 able to sustain. The farmer is not very likely to sanction it. 
 He knows too well what protection he gets from the removal 
 of nearly half the population from the soil ; and he knows 
 too well how his farm rises in value when the mill or the 
 forge settles down beside him. No ! the men who thought- 
 lessly favor such movements are professional and literary 
 men and the possessors of incomes. All these are apt to 
 think it would be well if they could get their clothing and 
 other conveniences cheaph'' from England. They forget that 
 with a diminution of the rate of wages must also come a 
 diminution of fees, salaries, profits, and incomes. "When the 
 incomes from mills, forges, railroads, houses, all fell off, they 
 would lament the day that they assisted to inaugurate so 
 perilous, so pernicious, an experiment. 
 
 Professor Cairnes tells us that protection does nothing to 
 diversify industries. His reasoning has been found exceed- 
 ingly liable to error in other instances, and is exceedingly 
 unsubstantial in this. Facts all over the world confute him.
 
 27 
 
 Let us now turn over the leaves of a livelier author, M. 
 Bastiat. He, at all events, entertains us. He gives us a 
 most amusing petition from the manufacturers of gas for the 
 abolition of sunshine. We laugh ; but we remember that 
 no one proposes to employ labor to produce an inferior substi- 
 tute for what can be had for nothing. Nor does anybody 
 propose to raise pineapples under glass as a substitute for the 
 tropical product. The climate is too much against us, except 
 indeed when the article to be produced is of sufficient im- 
 portance to make it worth our while to set civilization against 
 sunshine, as was done in the case of sugar from the beet, and 
 done with complete success. 
 
 Another point which Bastiat urges with great wit and 
 vivacity is that our object in building railroads and steam- 
 ships and telegraphs is to facilitate intercourse, — to re- 
 move impediments to intercourse. But the moment we have 
 done this we set about undoing it, by enacting protective and 
 prohibitory tariffs, which are equivalent to breaking up the 
 railroad or burning the steamship, or at least the equivalent 
 of a serious diminution of their utility. But when we build 
 a railroad or a steamship we know that these beneficent in- 
 struments, like most others, may be perverted to pernicious 
 uses. They are excellent for carrying passengers ; but it 
 does not follow that they should be used by every passenger. 
 A thief, a spy, a murderer, a person afflicted with the small- 
 pox, may surely be refused a passage, without subjecting the 
 directors to a charge of absurdity. They are also excellent 
 for carrying freight ; but they do not become any less excel- 
 lent when their managers forbid infectious or dangerous or 
 injurious commodities being conveyed by them. 
 
 We form these instruments of locomotion to promote such 
 commerce as for good and sufficient reasons we deem advan- 
 tageous, and the multiplication of railroads and steamships 
 and their good dividends bear witness to the fact that there is 
 plenty for them to do, in spite of the wicked and absurd pro- 
 tective laws. Men have not yet found reason to adopt the 
 general proposition, that Whatever traffic is carried on by 
 railroads or steamships is ipso facto and necessarily beneficial !
 
 28 
 
 Nor yet this other general proposition, To forbid any traffic 
 which is carried on by means of a railroad or steamship is 
 absurd and ridiculous. Such arguments, when stripped of 
 the wit and rhetoric by which Bastiat and his imitators have 
 covered them up, need no refutation. To show them as they 
 are is sufficient. 
 
 One who reads Bastiat's admirable chapter upon Capital 
 and Interest is filled with wonder at the venerable blunders 
 found in other parts of his work. As one example, he says : 
 
 '' On what depends the demand for labor ? On the quantity of 
 disposable national capital. And the law which says, ' Such or such 
 an article shall be limited to home production and no longer imported 
 from foreign countries,' can it in any degree increase this capital? 
 Not in the least. This law may withdraw it from one course and 
 transfer it to another, but cannot increase it one penny. Then it can- 
 DOt increase the demand for labor." 
 
 Let us see. A nation is, as before supposed, producing an- 
 nually commodities worth $6,000,000,000, and it has normally 
 in stock $1,000,000,000, being commodities in the hands of 
 producers or dealers and advanced upon by banks or moneyed 
 men. 
 
 Now the law steps in and saj^s : There is an article (say 
 woollen goods) for which there is a large demand in the 
 country, but which has hitherto been brought from abroad. 
 We are under no disability as to climate. When we have 
 acquired the requisite skill, we can produce with as little 
 cost (in labor and abstinence) as any other country. Let 
 there be a duty placed upon importations sufficient to amply 
 protect the new industry. 
 
 Under these encouragements capitalists all over the coun- 
 try subscribe to establish woollen mills, to build the mills 
 and furnish the floating capital, and then to proceed to 
 work. Let the movement be of large dimensions, say to 
 the extent of §300,000,000 the first year paid away to work- 
 men. The 81,000,000,000 of unemployed capital is ample 
 without disturbing any previous industry. It is more than 
 three times what is ample. So far, so good ! But the
 
 29 
 
 money paid out for labor will nearl}'' all be spent by the 
 laborers — for what ? For the very commodities which con- 
 stitute the unemployed capital. The producers of these, 
 finding an extra demand to the extent of nearly a third of 
 their stocks, are all along in condition to increase their pro- 
 duction by employing more labor and paying more wages. 
 They may do this to nearly the extent of $800,000,000, with 
 the result of producing commodities worth more than twice 
 the wages disbursed. Here, then, the community at the end 
 of the year finds its floating capital about the same as at the 
 beginning, and its fixed capital increased $300,000,000 ; and 
 its laborers have had and used during the year $600,000,000 
 more than they would have had without the law. But M. 
 Bastiat, as we have seen above, lays it down as the indubi- 
 table teaching of his science, that the law cannot increase tho 
 capital disposable for the payment of wages a single penny. 
 This is the patriarch of free-trade sophisms or blunders, 
 having been born in the house of Adam Smith more than a 
 hundred years ago. 
 
 As another example of venerable blunders, take the follow- 
 ing. He says : — 
 
 " France, according to our supposition, manufactures 10,000,000 of 
 hats at fifteen francs each. Let us now suppose that a foreign pro- 
 ducer brings them into our market at ten francs. I maintain that 
 national labor is thus in no wise diminished. It will be obliged to 
 produce the equivalent of the 100,000,000 francs which go to pay for 
 the 10,000,000 of hats at ten francs, and then there remains to each 
 buyer five francs, saved on the purchase of his hat, or, in total, 50,- 
 000,000 francs, which serve for the acquisition of other comforts and 
 the encouragement of other labor." 
 
 Let us see, France, according to his first supposition, pro- 
 duced 10,000,000 of hats selling for 150,000,000 francs ; but 
 the recipients of these 150,000,000 francs did not eat or drink 
 or live in them. They exchanged them for other 150,000,000 
 francs of products. Here, then, were 300,000,000 francs of 
 French products, every franc of which (see M. J. B. Say) 
 was net income to some Frenchman. Total net income, then, 
 under this supposition, 300,000,000 francs.
 
 30 
 
 Utulor the other supposition, foreigners bring in 10,000,000 
 hats and receive French products worth 100,000,000 francs. 
 The French consumers get their hats the same as before ; 
 and, if they spend the whole of the 50,000,000 francs saved 
 by the change to a foreign producer, tliere will be an addi- 
 tional demand for 50,000,000 francs of varied products. The 
 total French product, then, under this supposition, will be 
 150,000,000 francs, every franc of which will be net individ- 
 ual income to somebody. Total net income, then, under this 
 supposition, 150,000,000 francs. The aggregate of the French 
 incomes, then, has been reduced 150,000,000 francs by the 
 change from a French to a foreign producer. 
 
 But the hat-makers, you may say, will do something else. 
 But in saying this you introduce a new element into the 
 question ; and, moreover, you are by no means warranted in 
 your assumption. Mr. John Stuart Mill ought to be a good 
 enough authority for free-traders, and he says, in regard to a 
 similar case (see book i. chap. v. sec. 9) : — 
 
 " The very sum which the consumer now employs in buying velvet 
 (for velvet, read English hats) formerly passed into the hands of jour- 
 neymen bricklayers (for journeymen bricklayers, read French hat- 
 makers), who expended it in food and necessaries, which they now 
 either go without or squeeze, by their competition, from the shares of 
 other laborers." 
 
 The change of the demand for hats from France to, say, 
 England does not increase the demand for other French prod- 
 ucts a single franc, even on the supposition that the hat con- 
 sumers spend all they save in the price of hats upon other 
 products. If they capitalize any of their savings, the gross 
 demand for other French products will be less than before. 
 The hypothesis, then, finds no funds for the support of the 
 displaced French hat-makers. They must starve, or squeeze 
 a living (by competition) out of the remuneration of other 
 laborers. 
 
 Tliis is not only a venerable blunder ; but worse still, it is 
 a dead blunder. It was killed by Sir John Barnard Byles in 
 the " Sophisms of Free-Trade," in 1849, and witness was 
 borne to its peaceful interment by William Lucas Sargant in
 
 31 
 
 the "Science of Social Opulence," a work favoring free trade, 
 published in 1856. But this ghost of a blunder so long 
 buried was produced afresh as a valid argument in M. Bas- 
 tiat's " Sophisms of Protection," translated for the instruction 
 of the American public under the auspices of " The American 
 Free-Trade League." 
 
 A large proportion, however, of American converts to free 
 trade become so really through influences which are quite 
 natural and amiable, but which are perfectly innocent of 
 logic. A vast host of wealthy and cultivated persons every 
 year visit Great Britain, where they find almost every man, 
 woman, and child a free-trade missionarj^ ready to ten- 
 derly influence and instruct their less fortunate cousins from 
 the western side of the Atlantic. Every man, woman, and 
 child is completely possessed with the conviction that polit- 
 ical economy is already a science, but one, alas ! only under- 
 stood in England. Our ignorance is gently forgiven, our 
 wayward perversity is borne with, any wavering in our convic- 
 tions is greeted with encouragement and suitable applause, any 
 symptoms of actual conversion are received with unmeasured 
 caresses. The stateliest doors fl}' open to the truly repentant 
 protectionist; and the highest talent of the land can find 
 time to pause approvingly and to recognize that the individ- 
 ual who, having been born in utter darkness, can still thus 
 bare his eyes to the almost overpowering glare of truth, must 
 possess not only a good heart, but also a commanding intel- 
 lect ! A large portion of the beliefs and opinions of men are 
 rather, as it were, inhaled or absorbed from the social atmos- 
 phere around them, than arrived at by any process of rea- 
 son. We find it easy and pleasant to agree with those who 
 treat us with delicacy and attention, and almost anything 
 seems logical which brings us into accord with the great, the 
 wise, and the good. We do not reflect that Bacon, in his 
 time, could not easily have avoided ])elieving in witchcraft ; 
 that Samuel Johnson was ready to be scared out of his wits by 
 reports of a ghost ; and tliat tlie present opinion of Mr. Glad- 
 stone or other great thinkers and scholars in favor of free trade 
 has intrinsically no more value than had theirs in favor of the
 
 beliefs which tlie world has now so entirely outgrown. The 
 universality of an opinion is so far from being proof of its 
 correctness, that it should rather inspire a fear of error, — a 
 fear that only one side of the question had been heard. 
 
 It is really curious to observe the unanimity with which 
 our English cousins believe themselves masters of political 
 economy ; but one of themselves, an author who has made 
 valuable additions to the materials of political economy, 
 declares, in reference to Great Britain, tliat 
 
 " Political economy is little understood, even by educated men. A 
 few of its doctrines, indeed, — those, for example, relating to the divi- 
 sion of labor and free trade, — have taken their place in the familiar 
 philosophy of Western Europe. Men learn them, however, by rote, 
 not by study." 
 
 But the traveller is not aware of this. He is in contact 
 continually with free-trade opinions, and graduallj' acquires 
 them by contact or by infection, just as he would catch the 
 small-pox or a malarial fever ; and, in this condition of mind, 
 he returns, to be vexed and worried and made to pay out 
 money by the custom-house authorities. Here personal irri- 
 tation comes in to complete the conversion. He sees very 
 clearly Avhat he has to pay ; he does not see by any means so 
 clearly that the ample income w' hicli made his travels possible 
 had sprung from the system of which the custom-house an- 
 noyances were a necessarj' portion. He becomes a hater of 
 all tariffs, as obstructions to intercourse, and a ready listener 
 to such sophistries as the following, put forth by Mr. David 
 A. Wells since his conversion to free trade during a visit to 
 England. He says, in his " Creed of Free-Trade : " — 
 
 " The highest right of property is the right to freely exchange it 
 for other property. Any system of laws which denies or restricts this 
 right, for the purpose of subserving private or class interests, reaffirms 
 in effect the principle of slavery. "Whatever facilitates or cheapens the 
 interchange of commodities or services — good roads, the locomotive, 
 the steamship, or the telegraph — promotes abundance, and conse- 
 quently the aggregate of human comfort and happiness. Whatever, 
 on the other hand, restricts or makes costly the exchange of commodi-
 
 33 
 
 ties or services — be it in the nature of bad roads, high mountains, 
 tempestuous oceans, swamps, deserts, or restrictive laws — increases 
 scarcity, and consequently the aggregate of human poverty and dis- 
 comfort." 
 
 This seems admirable reasoning to one whose preconceived 
 opinions are all in favor of free trade. Let us see whether it 
 is so. 
 
 The first sentence contains a proposition altogether foreign 
 to political economy, which concerns itself solely with ques- 
 tions relating to social opulence. This proposition belongs to 
 the domain of law and to the domain of social science, of 
 which political economy is only a portion, a portion in which 
 this question has no place. That it is dragged into a discus- 
 sion regarding free trade shows a consciousness of weakness. 
 But a lawyer or a professor of social science would meet with 
 a smile the assertion that " the right of every possessor of 
 property to exchange it for other property is so full, uni- 
 versal, and sacred, that the whole community must abstain 
 from any regulation thereof " ! 
 
 Even if the pecuniary interests of some individuals were in- 
 jured, these ought to give way to the interests of the whole com- 
 munity ; and to liken such pecuniary interests or rights to the 
 rights to life and liberty invaded by slavery, is a monstrous 
 sophism. The insinuation that the restriction of the right of 
 exchange by protection is made in order to subserve private or 
 class interests, is to carry the discussion entirely out of the do- 
 main of truth, as the whole aim and object of protection is to 
 increase the total annual product for the benefit of the com- 
 munity as a whole. That good roads, the locomotive, the 
 steamship, and the telegraph promote abundance in all cases 
 is not true. They promote abundance when they are re- 
 stricted to beneficent exchanges ; they promote scarcity when 
 used to carry on a commerce which, after destroying our 
 means of helping ourselves, can only give us a fifth or a tenth 
 of what we enjoyed before. We have a natural advantage in 
 producing cotton, tobacco, wheat, and a few other products 
 which are salable abroad ; but the market for these products 
 is not sufficiently great, nor can it become sufficiently great, 
 
 6
 
 34 
 
 to \rarrant the employinor upon thom one-half our present or 
 a fourth of the popiihition we shall have in 1905. To endea- 
 vor to confine ourselves to these would be to transfer the 
 whole of our natural advantas^es to the foreigner, and to re- 
 duce ourselves to the condition of Ireland, Turkey, India, 
 and other countries which are prevented from helping them- 
 selves and compelled to look to England for mechanical and 
 manufactured products. This is an eminentl}- practical ques- 
 tion, upon which the rhetorical sentences quoted from jNIr. 
 Wells have no bearing whatsoever. The following is equally 
 irrelevant. He says : — 
 
 " In the absence of all freedom of exchange between man and man, 
 civilization would obviously be impossible ; and it would seem to stand 
 to reason that to the degree in which we impede or obstruct the 
 freedom of exchange, — or, what is the same thing, commercial in- 
 tercourse, — to that same degree we oppose the development of civili- 
 zation." 
 
 But this is reasoning from a " particular " proposition as if 
 it were universal. Some exchanges are necessary conditions 
 of civilization, but others may be highly prejudicial to civili- 
 zation ; there may be many exchanges which must be sup- 
 pressed in order to reach the highest civilization. The 
 suppression of some foreign exchanges may bring into exist- 
 ence many times the number of more advantageous exchanges 
 at home. 
 
 Mr. Wells thinks it strange that the American people, who 
 insist upon free trade among themselves, should object to 
 free trade with foreign countries, and thinks that " foreign 
 trade presents no element peculiar to itself." 
 
 This is a strange assertion. It would seem that foreign 
 trade is subject to foreign legislation, and not to domestic 
 legislation ; that foreign trade is especially liable to inter- 
 ruption from war ; that foreign trade (especially with Eng- 
 land and Europe) is more distant as to markets ; that 
 foreign trade is carried on with nations having very differ- 
 ent conditions of production, and having both the will and 
 the ability to greatly injure and even crush our industries by
 
 35 
 
 selling products at a loss, for the very purpose of driving us 
 from our own markets and then making us pay high prices. 
 It would seem that an exchange witli the foreigner provokes 
 only one production, where a domestic exchange provokes 
 two ; and that this alone is of supreme importance, inasmuch 
 as the ivhole price of everything produced constitutes net in- 
 dividual income to somebody, as is proved by J. B. Say. 
 
 Volumes could be filled with examples of the errors com- 
 mitted by economists of the English school in their deductive 
 reasoning. We have seen that Mr. J. S. Mill, who gave the 
 world an admirable treatise upon the science of logic, could 
 yet amaze his own scholars by giving them one of the best 
 possible specimens of the fallacy called " Changing the Pre- 
 mises," and tlius arrive at a false conclusion upon a vital 
 question in political economy. Both he and Professor 
 Cairnes, we have seen, apply to commodities the argumenta- 
 tion which is only true with respect to all values, of which 
 commodities form only a small portion. By this error tliey 
 come to the conclusion that a glut is impossible, — a conclu- 
 sion which is contrary to fact, and contradicted by all correct 
 deductive reasoning. Every economist of the English school 
 enjoins upon us to buy in the cheapest market with some 
 portion of our own products in raising which we have an 
 advantage. We reply, that the products in which we have 
 an advantage are not salable abroad to an extent which 
 would pay for one-third part of the other products that we 
 now make for ourselves. We are 50,000,000, we say, and 
 require, and actually obtain and enjoy, annually, commodi- 
 ties produced by the mechanical and manufacturing arts of 
 the value of at least $4,000,000,000. In twenty-live years 
 we shall be 100,000,000 ; and, if we continue the protective 
 policy, we shall no doubt then annually obtain and enjoy 
 similar commodities to the value of $10,000,000,000, — a sum 
 equal to about three times the total annual consumption of 
 the British Islands, of which consumption, be it noted, only 
 a small fraction could, under any possible circumstances, be 
 taken from the United States. Great Britain cannot sn[)[)ly 
 our wants ; but she can, and, if we will allow her to do so.
 
 3G 
 
 she will, prevent our siip[)lying^ them by our own inclustry. 
 >^he woukl give us a conii)anilively small quantity cheap, and 
 we could go without the balance. This is the only kind of 
 abundance (!) which free trade ever can produce for the 
 United States. 
 
 This is the abundance which free trade gives to India. In 
 that country are to be found 200,000,000 of people of a highly 
 acute and industrious race. To be on a par with the United 
 States, their annual product should be about 125,000,000,000 
 in value. It is in reality far less than a tenth of that sum ; 
 and every few years there is (now in this, then in that 
 province) a famine that carries oif from one to two millions 
 of human creatures. And what advantage does Great Brit- 
 ain obtain from this deplorable condition of affairs? The 
 pitiful advantage of selling in India some $120,000,000 worth 
 of English products, and making thereon perhaps a profit of 
 825,000,000. Where England profits a dollar, India foregoes 
 producing a thousand. 
 
 Similar has been the effect of English free trade upon Ire- 
 land, Portugal, and Turkey, and upon her own colonies. 
 Deductive reasoning leads directly to the conclusion that the 
 only way in which the British Islands, with 30,000,000 of 
 people, can be the workshop of the world, is by preventing 
 the world from helping itself; and, on the other hand, the 
 imagination w^ould fail to picturfe the magnificence of her 
 empire after a period of fifty years, should she set herself 
 resolutely to the task of developing in Ireland, in India, and 
 in the colonies the arts and sciences which she herself pos- 
 sesses. She has a heart large enough to adopt so beneficent a 
 policy. She does not do so, because sophistical arguments 
 have fixed upon her a belief which future ages will wonder 
 at, as we now wonder at her once equally unanimous belief 
 in the existence of witchcraft.
 
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