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 LIBRARY 
 
 OF THE 
 
 UNIVERSITY OF CALIFORNIA. 
 
 i 
 
THE RETURN TO PROTECTION 
 
JB^ tbe Same Butbor. 
 
 STUDIES IN ECONOMICS. 
 
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 THE 
 
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 MACMILLAN AND CO., LIMITED. 
 
THE RETURN TO 
 PROTECTION 
 
 BY 
 
 WILLIAM SMART 
 
 M.A., D.PHIL., LL.D. ; ADAM SMITH PROFESSOR OF POLITICAL ECONOMY 
 IN THE UNIVERSITY OF GLASGOW 
 
 "En cticrg countrg it altoaus is anb must be the interest 
 of the great botiD of tlic people to buij luliateber theij toant 
 of those toho sell it cheapest."— Adam Smith. 
 
 MACMILLAN AND CO., Limited 
 
 NEW YORK : THE MACMILLAN COMPANY 
 1904 
 
 All rights reserved 
 
r-F^' 
 
 »n 
 
 
 GLASGOW : PRINTED AT THE UNIVERSITY PRESS 
 BY ROBERT MACLEHOSE AND CO. LTD. 
 
'=^0 mp Mitt 
 
PREFACE. 
 
 This book is based on a series of lectures de- 
 livered to popular audiences in Glasgow and 
 Edinburgh during February and March of the 
 present year. I had no thought or intention of 
 publishing them, and I have done so only in 
 deference to the many friends and hearers who 
 urged it on me. 
 
 Those — if there are any — who read this in 
 future years, may be reminded that it was written 
 during the universal discussion which accompanied 
 and followed Mr. Chamberlain's propagandism of 
 Preferential Tariffs, and Mr. Balfour's advocacy 
 of Retaliation. It seemed to me that both these 
 proposals led back to the system discarded in 
 1846, and that any adequate discussion of them 
 must begin with some consideration of the theory 
 of international trade and of the principles which 
 underlie the rival policies. Mindful of M. Yves 
 Guyot's warning that we, in this country, are so 
 used to the blessings of Free Trade that we do 
 not appreciate its merits — "just as a man is in 
 good health when his organs work without his 
 feeling them " — I have given some space to the 
 
viii PREFACE 
 
 consideration of Protection, especially to its aspect 
 as delegated taxation. There are two sides to 
 the question now before the nation ; the gain or 
 loss, economically and politically, of the return to 
 Protection, and the gain or loss, economically and 
 politically, of the abandonment of Free Trade. 
 It is only, I think, when these two sides are fully 
 considered, that the dangers of the present pro- 
 posals reveal themselves. 
 
 The fourteen teachers of Political Economy 
 who signed the Manifesto for Free Trade in 
 August of last year have been much abused as 
 " men of theory " — as if theory were not the soul 
 of facts. But, although proud to be one of the 
 fourteen, I may claim exemption from the re- 
 proach of knowing nothing practically about 
 business. I was a Free Trade manufacturer in 
 this country, and a Protected manufacturer in 
 the United States, long before I became a 
 teacher. 
 
 My most grateful thanks are due to the staff 
 of my department for their affectionate help in 
 revising, suggesting, and, particularly, in the col- 
 lection and checking of statistics. And I am 
 under deep obligation to the anxious care of one 
 who read the proofs with microscopic eye, and 
 let no careless expression pass without a note 
 of interrogation and remonstrance. 
 
 WILLIAM SMART. 
 
 University of Glasgow, 
 April, 1904. 
 
CONTENTS. 
 
 CHAP. PAGE 
 
 I. What Trade is, i 
 
 II. Our Foreign Trade, . . . . 7^ 
 
 III. The Balance of Trade, • - - - 15 
 
 IV, The Equivalence of Imports and Ex- 
 
 ports, 28 
 
 V. Some Conclusions and a Moral, - - 36 
 
 VI. The Rival Policies, 45 
 
 VII. Protection, 53 
 
 ^iii. The Principle of a Protective Tariff, 67 
 
 IX. Possibility of a Scientific Tariff, - 76 
 
 ^ X. Conclusions as to Protection, - - 89 
 
 XI. Protection as Indirect and Delegated 
 
 Taxation, 93 
 
 XII. Protection Judged by the Canons of 
 
 Taxation, 108 
 
 XIII. Retaliation, 118 
 
 xiv. Retaliation on Protective Tariffs: 
 
 Prospects of Success, - - - 123 
 XV. Retaliation on Protective Tariffs : 
 
 Method and Effects, - - - 136 
 
 XVI, Dumping, 144 
 
 XVII, Retaliation on Dumping, - - - 160 
 
 XVIII. Tests of Prosperity, - - - - 170 
 
CONTENTS 
 
 CHAP. PAGE 
 
 XIX. Exports as a Test of Prosperity, - 179 
 
 XX. The Stagnation of Exports,- - - 186 
 
 — XXI. Employment as Affected by Exports 
 
 and Imports, 20c 
 
 XXII. Preferential Tariffs, . - . . 216 
 
 XXIII. The Canadian Preference, - - - 219 
 
 XXIV. Our Possible Gain from Colonial 
 
 Preference, 227 
 
 XXV. The Price of Preference, - - - 234 
 XXVI. How Preference will Affect Agricul- 
 ture, 245 
 
 xxvn. The Price of Empire, - . . . 249 
 
 XXVIII. Taking Stock, 260 
 
 Appendix. The Abuse of Shipping Statistics, - 275 
 
 INDEX, 281 
 
CHAPTER I. 
 WHAT TRADE IS. 
 
 All Trade, home orfoi-eign, is an exchange of goods. In modern 
 societies, the real co-operatioii of producers to serve each other as 
 constimers takes the form of competition with each other. Btit, in 
 home trade, the competition is most prominent ; in foreign trade, the 
 co-operation. 
 
 It is impossible to come to a fair judgment 
 on the comparative merits of Free Trade and 
 Protection without understanding, not only how 
 trade between nations is carried on, but what all 
 trade essentially is. 
 
 Trade is an exchange of Services. The services 
 are generally embodied in material goods, and 
 then called Commodities, but in many cases they 
 are simply rendered by personal acts. It is these 
 mutual services which explain the whole industrial 
 organisation. As received, they fill and satisfy 
 our lives : as rendered, they are our claim for 
 wages, salaries, interest, profits, and we take our 
 payment in them. 
 
 We are all servants of each other — sitting in 
 a ring, as it were, making goods to our own 
 demand, and throwing them into a heap in the 
 
 A 
 
2 THE STRUGGLE chap. 
 
 centre. If we could see more clearly, it would be 
 our pride and pleasure, as it is our interest, to add 
 more and more to the heap ; for, the greater the 
 heap, the more there is to eat, to wear, to use, to 
 satisfy that strange complex of wants and desires 
 and energies which we call Life. But, in his- 
 torical development, this essential co-operation of 
 the working life has taken on the outward form 
 of competition. Producers no longer work for 
 their own hand and to satisfy their own wants. 
 Industry is divided up and organised into pro- 
 ducing units. The simple " hand-process " has 
 developed into the "production-process," extending 
 over long periods and gathering its material from 
 all quarters. It becomes more difficult to see the 
 end from the beginning — to realise that, as always, 
 it is the Services for which we work, and the 
 Services in which we get paid. And, with this, 
 the great common issue and goal of producing 
 more goods is obscured by the differences of 
 interest which emerge as to the distribution of the 
 goods ; that is to say, the essential co-operation of 
 the workers to make and increase the heap of goods 
 becomes more difficult to remember ; the com- 
 petition of the workers to get their share comes 
 more to the front. Thus it seems to those 
 engaged in the industrial life as if they were all 
 struggling against each other. The working man 
 thinks he is bargaining with a greedy employer, 
 and fighting against " blacklegs " who would 
 fain take his job. The employer thinks he is 
 struggling to keep his feet with workers ready 
 to revolt, and knows that he is fighting for life or 
 
TO SERVE 
 
 death with his brother employer in the next 
 street. All the time, the truth is that we are 
 sitting in a ring, just as before, feverishly adding 
 to the heap of things in the centre — competing 
 with each other for the chance of adding most. 
 It seems as if I were trying to steal your thread, 
 and you were trying to sneak away my needle. 
 So, often enough, it is ; but, all the same, the heap 
 of things in the centre grows. And the end of 
 the things is Life. 
 
 It reminds one of a foursome at golf Two of 
 us are partners, and we play into each other's 
 hands. But each couple fights for all it is worth 
 against the other couple. In the end one couple 
 wins. Does the other lose ? Yes ; it loses the 
 match. But both have won, — both have gained 
 in what, after all, is the end of the game : both 
 go home to their dinner, richer in skill, in 
 exercise, in health, in appetite. Or, perhaps, it 
 would be truer to say that, after being one up and 
 one down all the round, the two couples come in 
 square. This is merely a lighter reading of the 
 phenomenon we put in economic terms when we 
 say : Industry is the making and exchanging of 
 Commodities and Services for the support of man's 
 life. 
 
 It is a hierarchy of Service. A gang of negroes, 
 under a burning sun, cultivate and gather cotton ; 
 fighting among themselves, with lowering glances 
 at their overseer, but — gathering cotton. Ships 
 compete to carry it home ; the lowest freight gets 
 the cargo ; fighting again, but — the cotton is 
 shipped. In a Lancashire mill, workers are on 
 
4 IN HOME TRADE, STRUGGLE; CHAP. 
 
 the brink of a strike ; trade union men watching 
 the owners, watching the " blacklegs " ; employers 
 keeping a smiling face with fear in their hearts ; 
 fighting all, but — the cotton is spun and woven. 
 In a Manchester warehouse, are half a dozen 
 travellers trying to sell cloth, watching and wait- 
 ing, fawning or bullying ; fighting again, but — 
 the cotton is sold. In a London street lines of 
 shops are offering the same cloth ; some keeping 
 back the truth, others adding to it ; all advertising 
 that this and this only is the best ; and we — 
 for whom the whole long struggle of competitive 
 service is undergone — we carry it off to cover 
 our shivery bodies withal. 
 
 All the long struggle ends in Service to us. It 
 is a struggle to serve — Service through Competi- 
 tion. 
 
 What, in a word, is the constant and daily 
 struggle of competitive industrial life but the 
 effort to make goods " cheap " ? But what is 
 Cheapness ? It is only another expression for 
 Abundance. Things fall in value and in price 
 just as we get more of them. In the Garden of 
 Eden there could be neither value nor price. 
 
 In home trade, it is the Struggle that catches 
 the eye more than the Service — for, indeed, in the 
 long production-process the end is so far from the 
 beginning, and each worker makes such a little 
 bit of a thing, that it is difficult to realise that, 
 what men work for, is the things that support 
 our many-sided Life. A man who spends his 
 life turning threads on a screw can scarcely be 
 
I. IN FOREIGN TRADE, SERVICE 5 
 
 expected to realise that he is making part of his 
 own kitchen table. 
 
 But, in trade between nations, it is the Service 
 that is brought out rather than the Struggle. 
 For the chief phenomenon here is that countries 
 supplement each other. Almost no modern civil- 
 ised life can be supported, no breakfast table 
 covered, by anything less than the co-operation of 
 goods and services from all the world we know. 
 Nations send to each other what they alone can 
 grow, or dig, or make ; or what they can grow, or 
 dig, or make better and cheaper than the others. 
 In this view, the type of mutual service is, 
 say, an exchange of oatmeal from Scotland for 
 claret from France, or, better perhaps, an ex- 
 change of steam coal from Wales for hematite 
 ore from Spain. 
 
 The Struggle does come in, and, in late years, 
 has come in very bitterly. It scarcely emerged 
 so long as each country had the " natural pro- 
 tection " of distance, and accordingly exported 
 only products for which it had obvious natural 
 advantages — in days when France sent wines, and 
 America maize, and Norway timber. We do not 
 grow these things, and we had to pay heavy 
 freights, and so a heavy price, if we wanted them. 
 But now when America sends wheat, and France 
 woollens, and Norway butter, the Service they 
 render becomes somewhat obscured by the 
 Struggle which ensues with our own producers. 
 We sell cheap ships to Germany and cut the feet 
 from under her own builders. She sells cheap 
 steel to us, and our makers cry out. 
 
6 SERVICE THROUGH COMPETITION CH. i. 
 
 That is to say, as nations become drawn 
 together by steam, and electricity, and the inter- 
 national post, and international banking, and as 
 sea carriage becomes cheaper than railway car- 
 riage, the struggle to serve becomes almost as keen 
 between Britain and Germany as between Lan- 
 cashire and Glasgow ; and we British makers do 
 not like it, any more than Glasgow weavers like 
 Lancashire competition. But, seen from above, it 
 is just the same old struggle to serve on the 
 larger scale — Germans and Englishmen competing 
 to serve Germany, and Englishmen and Germans 
 competing to serve England. 
 
 There are, of course, some who speak against 
 Competition in itself as a bad thing. So it would 
 be, if it were that kind of struggle where nations 
 try to blow each other to pieces. But when com- 
 petition is clearly seen to mean the struggle to 
 provide you and me with Abundance, the matter 
 puts on another aspect. If we ever get that all- 
 sided Free Trade which everybody seems to think 
 so desirable, there will be a struggle to serve 
 such as we have never seen before, and I only 
 hope that England may be able to hold her own 
 in it. Anyhow, through it international trade 
 is, on a large scale, what home trade is on a 
 more restricted one — the Struggle to Serve. If 
 we shut out foreign competition, we shut out 
 foreign service. These things will come out 
 pretty clearly when we go on to ask what our 
 Foreign Trade consists of 
 
CHAPTER II. 
 OUR FOREIGN TRADE. 
 
 A glance at our Imports and Exports shows, as we should expect, 
 the special importance to us of foreign trade, hi essence, it is an 
 extettsion of home trade — an exchange of goods ; similar in its motive 
 and conduct ; similar, too, in its method of payment, for, as gold 
 does not pass, the values of goods either way a?-e put in contra- 
 account, and Exports tend to balance Imports. 
 
 It would be rather short-sighted to gauge the 
 importance to us of foreign trade by the fact that 
 it is perhaps only one tenth or one eighth of our 
 total trade. If the United States were to shut 
 herself up inside a prohibitive wall of tariffs, she 
 would still be almost self-sufficient.^ But we lie 
 between 50 and 60 degrees north latitude; ours 
 is a very small country at best, with a dense 
 population ; and we have, besides, sunk much of 
 our capital and specialised much of our labour 
 in industries which depend on other countries for 
 
 ^ "When, on Pike's Peak in Colorado, the thermometer is down 
 to 12° or 13°, and, in the North-west is only a few degrees above 
 freezing point, in New England it will be moderately cool — say 43°; 
 in the Mississippi valley it will be comparatively warm — say 52°; 
 and in Florida it will be at summer heat — 75"." — Lawson, American 
 Industrial Problems, p. 43. 
 
8 THE IMPORTANCE TO US chap. 
 
 their material and for their market. It seems, 
 too, as if we were destined by nature to be 
 ocean carriers. 
 
 Take one short excerpt of our Imports for the 
 last fiscal year. It comprises, in round figures, 
 £^ millions of Wines, ^5 millions of Petroleum, 
 £^\ millions of Tobacco, £,6\ millions of 
 Caoutchouc and Gum, ;i^8 millions of Leather, 
 £Z\ millions of Tea, ;^ii-| millions of Maize, 
 ^14! millions of Sugar, £>2^ millions of Timber, 
 £\\\ millions of Raw Cotton. It is needless to 
 say that we require all these things for immediate 
 consumption and as materials for our industries, 
 and that we must, for the most part, import 
 them. 
 
 Another excerpt comprises £,6\ millions of 
 Eggs, £6\ millions of Cheese, £\2 millions of 
 Barley and Oats, £\'j\ millions of Bacon and 
 Hams, ;^20 millions of Wool, i^20^ millions of 
 Butter, £2']\ millions of Meat living and dead, 
 ;^36 millions of Wheat and Wheat Flour. These, 
 indeed, are all products which we could raise or 
 make at home, but we could scarcely provide 
 the whole of them without encroaching seriously 
 on the provision of other things. 
 
 Take, again, a few of our Exports. There are 
 £^\ millions of Linen Manufactures, ;^ 5 f millions 
 of Ships, £6\ millions of Apparel and Slops, ^17 
 millions of Machinery, £2\\ millions of Woollen 
 Manufactures and Yarn, £26^ millions of Coal, 
 ;;^29:^ millions of Iron and Steel, £6^ millions 
 of Cotton Manufactures and Yarn. These figures 
 show how much we have specialised in making 
 
II. OF FOREIGN TRADE q 
 
 goods for foreign countries. But a more gratify- 
 ing feature is that the long h'st of our exports 
 shows that, in addition to these great staples, we 
 are exporters of " odds and ends " : it indicates 
 a healthy state of things that there is scarcely an 
 industry one could name which does not export 
 something. 
 
 Our foreign trade, then, altogether amounts 
 to ;^877,ooo,ooo ; made up of iJ" 5 28,000,000 
 of Imports, and ;^349,ooo,ooo of Exports 
 (^65,000,000 of these being re-exports). These 
 are values of solid Commodities brought in and 
 taken out over British seas ; and — partly as reflex 
 and consequence — of the 32,000,000 gross tons 
 of shipping i^ the world, we own the half^ 
 
 How is this foreign trade done? 
 
 A good deal of the mystery which seems to 
 surround the subject would disappear, if it were 
 realised that it is done /reefy by individual mer- 
 chants and manufacturers in the various countries, 
 working for a profit, with no consideration for 
 
 1 The above figures of Imports and Exports, taken from the 
 Statistical Abstract 1903, do not inchide Bullion and Specie, of 
 which we imported, in 1902, ;^2i,629,ooo of gold (^8 millions 
 from South Africa, £^^ millions from India, £^ millions from 
 Australia), and ;,^9, 764,000 of silver (;i^8 millions from the United 
 States), and exported ;,^ 15,409,000 of gold and ^10,716,000 of 
 silver. Nor do they include, either as imports, exports, or re- 
 exports, excisable foreign merchandise transhipped under Bond, 
 (;^ 1 3,683,000). To the imports should be added ;i^5, 380,000 of 
 diamonds from the Cape, not declared to the Customs. It may be 
 noted that fish of British take, landed in the United Kingdom, are 
 not included among imports. The value of these in 1901 was 
 /9,ooo,ooo. 
 
lo FOREIGN TRADE AN CHAP. 
 
 national interests ; and that it would not be done 
 unless there were a profit in it. 
 
 A sugar merchant here, for instance, appoints 
 an agent abroad and supplies him with samples 
 and quotations. The agent either sends orders 
 at these quotations, or wires home what price 
 he can get. If the price is below the quota- 
 tion, the merchant goes down to Greenock, and 
 sees if he can induce some refiner or other to 
 quote lower. But there is no reason that the 
 refiner should sacrifice his profit because the sugar 
 is wanted for a foreign country. And, although 
 the sugar merchant may do so on occasion, it is 
 only from considerations of future profit. 
 
 Or, say that the manufacturer is the exporter — 
 as, evidently, he is tending to become. He has not 
 one cost for goods sold at home and another for 
 goods sold abroad. He will sell at cost (including 
 profit) in the one market as in the other. Some- 
 times, indeed, he will sell under this cost abroad in 
 order to " get in," but so he does at home. 
 There is nothing preferable in foreign trade unless 
 he gets a better profit by it, or, it may be, gets 
 his cash more easily, or sells in larger bulk. The 
 motive in both cases, then, is the same — profit. 
 
 Nor is the method different. A merchant here 
 receives an order from a town in Great Britain, 
 and sends down the goods packed to the railway. 
 By the same post comes an order from New 
 York, and the goods packed are sent down to the 
 harbour. In the latter case, the goods require to 
 be more carefully invoiced and described, and the 
 invoice has sometimes to be sworn to before a 
 
II. EXTENSION OF HOME TRADE ii 
 
 consul as accurate, but this should not be very 
 difficult for an honest man. 
 
 Nor yet is the way in which payment is 
 made essentially different. In due time, home 
 goods are paid by a cheque ; foreign goods, by a 
 bill of exchange.^ Indeed, in many cases, when 
 goods are put on board ship, the Bill of 
 Lading is given to a bank here, which does 
 not give it up till cash is paid abroad, the 
 bank meantime giving an advance to the 
 exporter to a large proportion of the value. 
 In either case, the sender gets his payment, in 
 British money, through his own bank, and each 
 transaction ends with a payment. The export 
 of goods, again, from other countries to us 
 takes place in exactly the same way — mer- 
 chants and manufacturers, there also, sending out 
 goods for a profit, getting paid in their own 
 money, and the transaction ending with the pay- 
 ment. 
 
 What we have, then, in international trade is 
 just an extension of home trade. We send goods 
 as naturally to France as we send them across 
 the other channel to Ireland. 
 
 If there is one thing more prominent than 
 another as to the means of payment in home 
 trade, it is that Gold does not pass between 
 buyer and seller, debtor and creditor. It might 
 
 ' Without going into the mysteries of banking, it may suffice to 
 say that the reason why payment for foreign goods is not made by 
 cheque is that each country's banking system does not extend be- 
 yond its own shores. 
 
/ 
 
 12 GOLD DOES NOT PASS chap. 
 
 pass ; but it never occurs to anyone to take 
 this cumbrous method when an easier and more 
 economic one is within everybody's reach, and 
 when there is one great class of traders waiting 
 and anxious to make a profit by arranging pay- 
 ments through their books. Why, then, this 
 persistent assumption on the part of some people 
 that, when goods are sold to foreign countries, 
 they are paid for in gold ? 
 
 As in home trade, they may be paid for in gold. 
 Gold will pay for them, and sometimes it may be 
 more convenient to pay in gold than in anything 
 else : — it is quite clear, for instance, that gold-pro- 
 ducing countries pay for much of their imports 
 with gold. But it is just as true that they may 
 be paid for in any other kind of goods. 
 
 It takes a little thinking to realise that, in home 
 trade, payments are made by setting debts against 
 debts, and that this is merely another way of say- 
 ing, "setting goods against goods." You send me 
 ;^ioo worth of goods, and I, for the moment, 
 am in debt, and send you a record of it in the 
 shape of a promise to pay in three months. 
 On the other hand, I send you ;^ioo worth of 
 goods, and you give me a promise to pay in three 
 months. The promises may be bought and sold 
 and pass into other hands ; in any case, they 
 remain in existence as debts for three months. 
 At the end of that time they are brought together 
 and cancel each other.^ What really has happened, 
 
 ■■It is strong testimony to the literal "trust" which under- 
 lies the credit system that, in the great majority of home transac- 
 tions, the promise is not put in documentary shape at all ; goods are. 
 
II. A CONTRA-ACCOUNT IN GOODS 13 
 
 of course, is that the one sending of goods has 
 been put in contra-account against the other. So 
 banking is just a vast complex system of contra- 
 accounting — value of goods represented for the 
 moment by documents put to the debit and credit 
 sides of bankers' books. Happily, this need not 
 be dwelt on, because, in international trade, the 
 foundation of the contra-account is quite obvious 
 and prominent. 
 
 To one standing at Gravesend, and watching 
 the innumerable ships that pass in and out of 
 the Port of London, it must be evident that 
 valuable goods are being brought in and valuable 
 goods are being sent out of the country. All these 
 goods must be paid for. i\.nd if there is, in all 
 countries, a special trade set aside for, and doing 
 almost nothing else than, arranging payments 
 between buyers and sellers, debtors and creditors, 
 it is evident that these valuable cargoes will 
 be set against each other. There are bills 
 drawn from the one side and bills drawn from 
 the other ; these put the values of the goods into 
 figures, and afford documentary records of the 
 transactions ; and these records can be easily set 
 against each other in debtor and creditor account. 
 But, underlying all these records, is the something 
 recorded, and that something is the valuable goods 
 sent either way. 
 
 As has been said, all these cargoes could be paid 
 
 sold on customary terms of credit, and paid on a mere reminder 
 that payment is due. Perhaps there is no belter instance of the 
 recognition of a "common interest" and a "general will" among 
 whole peoples than this. 
 
14 EXPORTS PA V FOP IMPORTS CH. ii. 
 
 for in gold. It is conceivable that there might be 
 a constant current of gold crossing the seas either 
 way. But, as the chief function of gold is not 
 for consumption but for circulation, it would be 
 a singularly futile and wasteful proceeding to 
 send gold oversea, only to get it sent back 
 again. 
 
 Gold does, indeed, pass between nations : every 
 week, the financial journals tell of so much bullion 
 or so many sovereigns sent out or brought in. 
 But this gold current evidently pursues a course 
 of its own, regulated for the most part by the 
 needs of the nations for bank reserves : instead 
 of making payment, it is, perhaps, more often than 
 not, going counter to the course it would take if 
 it were being sent in payment of goods. 
 
 If, then, the only object of sending goods 
 abroad is to sell them ; if the only object of 
 selling them is to get paid for them ; if goods 
 cannot be paid in mere promises ; if they are not 
 paid in the universal commodity, gold ; and if, 
 as a rule, no man is conscious of not being paid 
 — why, then, we should naturally expect to find 
 that there is a contra-account in goods : that 
 Imports are paid for and balanced by Exports. 
 
CHAPTER III. 
 THE BALANCE OF TRADE. 
 
 The constant excess in our Imports over our Exports is due to 
 statistical necessities. It is explained, fro?n the side of exports, (i) 
 by shippiftg charges ; (2) by bankers' and other comtiiissions — these 
 two are " invisible exports " : frotn the side of imports, (3) by returns 
 on capital lent and invested abroad ; (4) by boarding expenses, and 
 by some smaller items. 
 
 Allowing for time and accidental disturbances, 
 there should, apparently, be equivalence in 
 value between the Exports and Imports of a 
 country. 
 
 No sooner, however, do we get this length in 
 deductive reasoning than we have to face the fact 
 that, according to the last statistics, Spain is 
 the only country whose exports and imports 
 do balance each other. Germany has a balance 
 of Imports over Exports of some £^'j millions; 
 France, some £2}^ millions; Holland, ^^22.4 
 millions; Belgium, £>\2 millions; Italy, ^^8.7 
 millions ; Norway, £j millions ; Denmark, £6\ 
 millions ; Sweden, £6 millions ; Portugal, £^ 
 millions ; Japan, £^.Z millions. On the other 
 hand, the United States has a balance of Exports 
 
i6 THE BALANCE OF TRADE chap. 
 
 over Imports of ;^ii8 millions; Russia, £^ 
 millions ; Austro-Hungary, £6 millions ; Egypt, 
 £\.6 millions; Argentine Republic, ;^7. 7 millions; 
 Chili, £1-2) millions ; Uruguay, £\.^ millions.^ 
 
 This is the phenomenon called the Balance of 
 Trade, of which we hear so much.^ Practically 
 every country has a balance the one way or the 
 other, and, as a rule, the balance is a persistent 
 
 ^ The above figures are averages of the last five years, taken 
 from the Statistical Abstract for Foreign Countries of 1903. 
 
 ^ The expression Balance of Trade is intelligible ; not so, to 
 modern ideas, the adjective "favourable," applied to a balance of 
 exports over imports, and "adverse" to a balance of imports over 
 exports. The explanation is historical, and rests on the import- 
 ance attached to gold and silver by early mercantilist writers. 
 "Adverse" related to the effect, or supposed effect, of carr}'ing 
 gold and silver out of the country, caused by an excess of imports. 
 The extraordinary importance attached to the precious metals was 
 perhaps justified in times when there were no bankers ; when 
 Europe was starving for a sound currency, and industry hampered 
 by the want of it. All countries took strong measures to attract 
 and retain gold and silver ; even Spain — the depot of these 
 metals — prohibited their export under the most drastic penalties. 
 When in time it was seen that such measures were useless, it 
 was conceived that there was a more natural way of effecting the 
 same object ; if encouragement were given to exports while imports 
 were handicapped, there would tend to be a " favourable balance " 
 — that is, the excess of value would come in gold and silver ; hence 
 bounties on exports and duties on imports. So, said Adam Smith, 
 " the attention of Government was turned away from guarding against 
 the exportation of gold and silver to watch over the balance of 
 trade as the only cause which could occasion any augmentation or 
 diminution of these metals. From one fruitless care it was turned 
 away to another, much more intricate, much more embarrassing, 
 and just equally fruitless." It is notable that, in this regard, duties 
 on imports were not, primarily at least, intended for the protection 
 of home industries so much as for the protection of gold and silver. 
 
III. SHIPPING SERVICES 17 
 
 and not a passing one. And the state of the 
 case with us is that, taking the average of the 
 last ten years, excluding bullion and specie, our 
 country shows a Balance of Imports over Exports 
 of .^ I 55,000,000, or, taking 1902, .^^ 179,000,000. 
 If, however, exports tend to be equivalent in value 
 to imports, how is this balance to be explained ? 
 
 I. The first item in the explanation is not 
 very difficult to understand. Those who love 
 things in the concrete might consider what would 
 be the state of imports and exports in Tyre when 
 the Phoenician fleet set sail from the east, with 
 cargoes of dyed wool, gems, and spices, and, after 
 many days, brought back tin and other pro- 
 ducts of the western isles. If the voyage were 
 conducted on commercial principles, the imports 
 would exceed the exports in value. 
 
 In international as in home trade, payment 
 is made for goods, not only by other goods but 
 occasionally by Services — ^just as a physician may 
 square his butcher's bill by medical attendance 
 on the butcher's family. It happens that there 
 is a trade, and a great trade, which is carried on 
 outside our national boundaries, and, equally, out- 
 side the boundaries of any other nation — on the 
 No Man's Land of the sea. It is peculiarly a 
 British trade. But it has no material product. 
 It is a transport service — the service of ocean 
 carriage, including insurance. It sums up a 
 great number and variety of costs incurred after 
 goods have left our shores, or other shores, as 
 statistical exports, and these costs must be added 
 
i8 SHIPPING SERVICES CHAP. 
 
 to the selling price of the imported goods if other 
 nations are to get our goods, and if we are to 
 get other nations' goods. 
 
 Where these Services, then, are rendered to 
 foreigners by persons residing in Great Britain, 
 they must be paid for to Great Britain. They 
 are paid, as usual, in goods, and the payment 
 appears as an import against which there is no 
 export recorded in our official trade returns — 
 for, as I say, this trade is carried on outside the 
 national boundaries. 
 
 It is merely another way of stating this, to 
 say that our Exports are entered F.O.B. and 
 our Imports C.I.F, In the official returns of 
 imports and exports, occur the words : " The 
 values of the Imports represent the cost, insur- 
 ance, and freight ; or, when goods are consigned 
 for sale, the latest sale value of such goods. The 
 values of the Exports represent the cost and the 
 charges of delivering the goods on board the ship, 
 and are known as ' free on board ' values." In 
 other words, our Exports are entered at home 
 prices — that is, free on board ship — the same 
 prices at which they would be delivered to a 
 warehouse in this country. But they appear 
 as Imports in other countries at our home price 
 plus freight and insurance. On the other hand, 
 goods which appear in the official books of other 
 countries as their Exports at their "free on board" 
 price, are entered in our official books as Imports 
 at their foreign or exported price plus freight and 
 insurance. Thus, where our ships carry the goods, 
 the exports will always appear as less than the 
 
I. AN INVISIBLE EXPORT 19 
 
 imports which pay for them by the amount of 
 the freight and insurance.^ 
 
 One can see the reason of Sir Robert Giffen's 
 suggestive name for this — " Invisible Exports." 
 Suppose that neither England nor France owned 
 any ships ; that all the trade between the two 
 was conducted by the Channel Islands ; and that 
 these islands did no other foreign trade — as was 
 very much the case with Venice in old days — 
 would it not be true that the Channel Islands' 
 official returns would show all imports and no 
 exports ? And if the Channel Islands' returns 
 were not entered separately, but lumped with the 
 British returns, would there not be a permanent 
 excess in our statistical imports over our statistical 
 exports, while France showed a balance the other 
 way about ? 
 
 It may be expected, then, that a nation which 
 owns half the world's shipping, and carries for 
 foreigners as well as for British merchants, will be 
 paid a very large sum for this service. The 
 amount was estimated by Gififen, in 1898, as 
 ;^90,ooo,ooo. An independent calculation,^ on 
 
 ^ A convenient formula for this is as follows : Suppose that freight 
 is 5 per cent, on the value of goods, and that our ships carry the 
 goods both ways, then ^100 worth of our exports appears as ;[^io5 
 worth of another country's imports, and ^xo'-) worth of the other 
 country's exports appear as^^iio worth of our imports. 
 
 "^Memoranda, Statistical Tables, and Charts, with reference to 
 various matters bearing on British and Foreign Trcuie and Indus- 
 trial Conditions, p. 99. This is the Blue Book called out by the 
 present fiscal enquiry (Cd. 1761), and published in August, 1903. 
 It should certainly be in the hands of all who wish to make a serious 
 study of the fiscal question. As I shall have constantly to refer to 
 
20 A SECOND INVISIBLE EXPORT CHAP. 
 
 quite different lines, was put forward by the 
 Board of Trade in 1903, and makes it ^89^ 
 millions.^ 
 
 This is the first item which explains our appa- 
 rent Balance of Imports. Our exports are really 
 ;^90,ooo,ooo more than the statistical exports 
 shown by the official returns.^ 
 
 II. There is another Export of Services, or 
 Invisible Export, which works out in the same 
 way. It is not only ships that do business outside 
 the boundaries of our country, but Men. 
 
 If a journalist, sitting in his study in London, 
 writes an article for a German newspaper, that 
 newspaper has, presumably, to pay him. His 
 export of service goes under a postage stamp, but 
 
 it, I may, for convenience sake, call it in future references the 
 Board of Trade Blue Book. 
 
 ^ Gifi'en's calculation was first made in 1882 {Essays in Finance^ 
 Second Series, p. 132), and was revised in 1898 {Royal Statistical 
 Society's Journal, 1899, p. 11). His method was to take the British 
 gross tonnage earnings at ;^I5 and ;i^5, for steamers and sailers re- 
 spectively, at the former date, and at ;^I2 and £i, at the latter. The 
 Board of Trade, on the other hand, took the total exports and im- 
 ports of the principal countries of the world, which are, of course, 
 the same goods valued at points of departure and arrival ; accepted 
 the ;if224,ooo,ooo difference in their value (see p. 41) as represent- 
 ing freights and insurance ; halved this sum to represent our share 
 of the carrying tonnage of the world ; deducted 9 per cent, for 
 colonial ships, and further deducted ^12^ millions for coals and 
 stores purchased abroad, harbour and other dues ; and arrived at the 
 figure of £^0)\ millions. 
 
 ^ The importance of Shipping as a British export industry may be 
 realised by remembering that ;i{^90, 000,000 is just about the value 
 of our colton and woollen exports combined. 
 
III. BANKERS' SERVICES 21 
 
 the value of what is contained in the wrapper is 
 not, one may hope, represented by the stamp. 
 If the German paper pays him by sending a 
 couple of guineas' worth of German books, then 
 this is an import of goods, although, as passing 
 through the post it would not appear among 
 official imports. 
 
 This is merely an illustration of the fact that 
 there are very large classes in this country who 
 perform services for foreigners which have no 
 embodiment in material goods. If one considers 
 what is involved in the statement that London is 
 the clearing house of the world— that a bill or draft 
 on London is the best and most widely known 
 form of international currency — one will under- 
 stand that British bankers, sitting in London, do 
 business all over the world, and that the payment 
 for these services must come in goods, or in other 
 services. But, besides bankers, there are the 
 fire and life insurance companies, and the great 
 army of commission merchants, who do business 
 very much in the same way. 
 
 Services like these cannot be put into statistical 
 figures — there is no possible means of getting at 
 them — but, the more one considers the magnitude 
 of this business, the more one will be disposed 
 to say that several millions should be added to 
 our statistical exports on this account. 
 
 One may question the exactness of any figure 
 put on these invisible exports — take a few 
 millions off it, or add a few millions to it. But a 
 country which does half the shipping trade of the 
 world, and is, at the same time, the headquarters 
 
22 INTEREST AND PROFITS chap. 
 
 of the banking trade of the world, must have a 
 very large sum due to it by way of payment, and 
 this must come in some valuable shape. If it 
 does not come in imports of goods or services, 
 in what does it come? Or where does this 
 " invisible " export appear as a statistical export ? 
 
 III. There still remains a good deal to make 
 up the Balance. But there still remains a large 
 department of international relations which has 
 not yet been taken into account. Nations buy 
 from and sell to each other. But they are also 
 connected with each other as debtors and creditors. 
 Let us see how this affects imports and exports. 
 
 The third item of the balance is due to the 
 fact that we have, notoriously, been lending to 
 all the world and investing capital all over the 
 world, and that the returns come home annually 
 in the shape of goods. 
 
 How much our capital lent and invested 
 abroad may amount to, is a matter of rather 
 rough calculation. It is variously estimated from 
 ^2,000,000,000 to ;^2, 500,000,000. 
 
 The corresponding returns which pay income 
 tax in our country amount to £62\ millions, but 
 this includes only the interest on foreign and 
 colonial securities, coupons, and railways. To 
 this must be added the dividends on miscellaneous 
 industrial undertakings abroad. After all de- 
 ductions on account of other countries which 
 have lent and invested capital with us,^ we 
 
 ^ " Unfortunately, there are no official figures with regard to the 
 investments of foreigners in this country, though they are certainly 
 
III. ON FOREIGN INVESTMENTS 23 
 
 may accept the Board of Trade conclusion 
 that " £62\ millions is a minimum figure, which 
 is probably largely exceeded." In 1898, Sir 
 Robert Giffen estimated it at £(^Q millions, and 
 probably more,^ 
 
 It will be noticed that, while the Invisible 
 Exports should be added to the statistical exports, 
 the income from capital invested abroad takes 
 shape as, and accounts for, a permanent excess of 
 Imports. In other words, if from this moment we 
 stopped lending and investing abroad, we should 
 still receive, year after year, till the capital was 
 repaid, some £60 to ^90 millions worth of value, 
 and most of that value would be embodied in 
 goods. 
 
 It is not quite correct to say that this repre- 
 sents an import against which there is no export. 
 In many cases, there may have been an export of 
 goods, at the time when the loan was made, to the 
 full amount of the loan, as, for instance, when a 
 colonial government borrows to build a railway, 
 and gets the rails and rolling stock from England. 
 It may, on the other hand, represent no sending 
 of goods at all. If India wants to borrow 
 another million from us, and is owing us ;^i8 
 
 very much smaller in the aggregate than British investments 
 abroad. America is the only foreign country, so far as known, 
 whichh as made important investments in the United Kingdom in 
 recent years," Board of Trcuie Blue Book, p. 102. On this whole 
 subject, the admirable article in the Blue Book should be referred to. 
 '^ Royal Statistical Society's Journal, March, 1899. Giffen's calcu- 
 lation, however, includes Pensions, etc., from India and other 
 countries to civil servants living here, of which the Board of Trade 
 says nothing. 
 
24 BOARDING EXPENSES chap. 
 
 millions a year as it is, all she has to do is to 
 lay hands on a million's worth of goods that 
 otherwise would have come home to us as imports, 
 and keep them — in which case the loan would 
 take shape as a diminution of imports into this 
 country. 
 
 The point to emphasise is that, in any case, 
 the contracting of the debt, or the investment of 
 the capital, is in the past. But the obligation 
 to pay the interest is a permanent obligation to 
 export a stream of value from foreign countries 
 to our shores as imports. 
 
 Here, again, one may question the exactness of 
 the figures. But if Great Britain has sent out 
 capital to other countries and these countries 
 have not sent a corresponding amount of capital 
 to it, it seems undeniable that there must be a 
 permanent excess of imports into Great Britain 
 to pay the interest. 
 
 IV. There is another class of Imports which 
 stands on the same line with the returns from 
 capital invested abroad. It has been happily 
 called " Boarding Expenses " — values sent from 
 one country to another, not to sell or invest, but 
 to consume. This is not a small item. Italy has 
 been credited with i^ 14,000,000, and Switzerland 
 with ;^8,ooo,ooo spent by sightseers. Americans 
 are said to spend some ;^20,ooo,ooo a year in 
 foreign travel. How much of such boarding ex- 
 penses comes to this country, it is impossible to 
 say, but it must be very large. London is the 
 centre of the world, where everybody who can 
 
III. PAID IN IMPORTS 25 
 
 afford it goes once in a lifetime at any rate. Our 
 own Highland hotels get a considerable share. 
 This category includes remittances sent home to 
 families and schools in England by Civil Servants 
 and military men abroad, furlough expenses, and 
 the like ; and under it, perhaps, fall professional 
 earnings of Englishmen temporarily abroad, such 
 as the gains of theatrical and concert companies 
 on tour. These all represent imports against 
 which there is no corresponding export.^ It must, 
 however, be remembered that large sums are sent 
 abroad by us to other countries for similar pur- 
 poses, and, as Englishmen travel perhaps more 
 than any other nation, the imports on this account 
 may not very greatly overbalance the exports. 
 
 ^ At the rislc of being tedious, I may repeat here that such board- 
 ing expenses involve sending of goods to pay for any balance there 
 may be between countries. All the traveller knows, of course, is 
 that he takes with hiin, say, circular notes, and, on presenting 
 these, gets money of the country handed over to him. But, suppose 
 that English tourists, in the course of a year, have cashed ;f 100,000 
 of circular notes in Rome, and that Italian travellers have cashed 
 ;^ 50,000 of their circular notes in London, the Italian and English 
 bankers have simply honoured each other's promises. England is 
 now in debt to Italy to the amount of £\oo,ooo, and Italy is 
 in debt to England to the amount of ^{^50,000. The two sets of 
 promises are set against each other, but there remains a sum of value 
 of ;i{^5o,ooo due to Italian bankers. How is this to be paid ? If the 
 London bankers send drafts on London, this only gives the Italian 
 bankers a claim on gold in London — promises to pay gold there. 
 Even a Bank of England note is, after all, only a promise to pay 
 gold on presentation of the note at the Bank. Some time or other, 
 unless London is to run deeper and deeper in debt to Italy, the 
 accounts must be squared. But, as has been demonstrated, it is 
 usually more convenient to send Bills of Exchange than gold — that 
 is, to give claims on goods sent to Italy in the ordinary course of 
 business — in which case the real payment of the balance is in goods. 
 
26 SMALLER LTEMS chap. 
 
 Smaller or more occasional items are : 
 
 {a) The price of old ships sold on the high 
 seas. It is well known that we are continually 
 selling our ships and replacing them with new 
 ones, and these ships do not appear as exports.^ 
 
 {b) Profits which accrue from capital that was 
 neither lent nor invested abroad, but is yet owned. 
 There are many businesses, or branches of busi- 
 nesses, which have grown up from small beginnings 
 into dividend-paying concerns. Many English- 
 men, again, own land in foreign countries which 
 may have risen indefinitely in value owing to 
 growth of population or the finding of minerals, 
 etc. 
 
 {c) Gifts, Charities, and Subscriptions, such as 
 the sums sent home from Irishmen in the United 
 States. 
 
 All these go to swell the stream of imports 
 against which there is no, or practically no, cor- 
 responding export. Together, they must run into 
 many millions. 
 
 The summing up, then, is this : 
 
 Our Statistical Imports are ;^5 28,000,000. 
 Our Statistical Exports are ^^^349,000,000 ; to 
 which fall . to be added, at least, another 
 ;^90,ooo,ooo of Invisible Exports of shipping ; 
 making a total of ;^43 9,000,000. This leaves a 
 Balance of Imports of ^^89,000,000. But it has 
 
 ^ It should be noted, in comparing exports of past years with 
 present figures, that new ships, sold from this country, were not 
 included among our exports before the year 1899, and are properly 
 excluded in comparisons with years before that date. 
 
III. PROBABLE BALANCE OF EXPORTS 27 
 
 been shown that what we should expect is from 
 ;^6o,ooo,ooo to ^^90,000,000 of annual imports 
 from capital lent and invested abroad, not balanced 
 by any annual exports. All this is to leave out 
 of account the many millions of imports which 
 we receive as Bankers' and other Commissions, 
 as Boarding Expenses, and from the smaller items 
 just mentioned. 
 
 The probability, in fact, is that our real Balance 
 of Trade is the other way about from what it is 
 usually considered to be ; that it is a Balance of 
 Exports. The excess may be accounted for by 
 the fact that a good deal of interest and profit 
 never comes home, but is invested as capital in 
 the countries where it is made.^ 
 
 In all this, certainly, there is nothing to shake 
 our faith in the deductive conclusion that, given 
 the exceptions and disturbances noted above, 
 Imports and E^^ports tend to balance each other. 
 
 1 Compare the calculation of the French balance by Professor 
 Gide : "As regards France, if, on the one hand, we put to her 
 debit 4500 million francs of imports, 360 millions for carriage of 
 that part of her merchandise which sails under a foreign flag, 
 some hundreds of millions (say 500) for Frenchmen travelling 
 abroad, or against French property held by foreigners — in all, 
 5400 million francs : and if, on the other hand, we put to her 
 credit 4000 million francs of exports, 1 100 millions as interest on 
 capital lent or invested abroad, 600 millions for expenses of 
 foreigners living in France — in all 5770 million francs ; we see 
 that not only is the required equivalence restored, but that there 
 should remain a considerable surplus to her credit." — Principes 
 d' Economic Politique, 8th edition (1903), p. 283. See also Giffen's 
 remarks on the Balance of other countries : Royal Statistical 
 Society's Jotirnnl, March, 1899, p. 12. 
 
CHAPTER IV. 
 
 THE EQUIVALENCE OF IMPORTS AND 
 EXPORTS. 
 
 The equivalence we should expect is equivalence simply bctiveen 
 a country's total imports from, and its total exports to, the rest of 
 the world. Imports call out a return current of exports, and exports 
 of imports, through the rise or fall of (i) the foreign exchanges, 
 (2) the freights. But paymeitt is made in very roundabout ways ; 
 not necessarily in imports from the country to which exports are 
 sent, but _/)'<?;« any other country with ivhich there are comme7xial 
 relatiojis. 
 
 What we have found in the phenomena of im- 
 ports and exports is, first and most important, the 
 Trade Current — a cross-current of exchange — 
 goods sold to other countries calHng out return 
 goods from other countries, and vice versa. 
 Omitting smaller services, this would tend to 
 equivalence between imports and exports if the 
 great item of sea carriage could be dispensed with, 
 or if the carrying for all the world were done 
 entirely by an independent maritime nation whose 
 only outside industry it was. But, as it is, when 
 our invisible services are added to our statistical 
 exports, the two sides tend to equivalence. 
 
CH. IV. EXPORT OF CAPITAL 
 
 29 
 
 Into these main cross-currents, however, are 
 constantly injected, from one side or other, 
 feeders which make the total cross-currents in 
 any one year quite unequal. The principal 
 factor of disturbance appears under the third 
 head ; a steady stream of goods bringing home 
 the interest and profits of foreign loans and 
 investments. But the lending: and investing' 
 themselves cause a disturbance. The transfer of 
 capital may appear as a temporary excess of 
 exports : it may appear as a temporary diminution 
 of imports. It is clear, for instance, that, if 
 Australia borrows a million to build railways, the 
 rails, rolling stock, etc., are probably sent from 
 here, and the whole million appears among our 
 exports of goods. But suppose she borrows in 
 order to build reservoirs, what she wants is not 
 English machinery so much as money to pay 
 wages. Here the lending body buys up bills 
 representing goods already sent or being sent to 
 Australia, and remits them to the Australian 
 Government. In the ordinary course of trade, 
 the goods thus sent would have called out a 
 return current of goods (imports) to pay for them ; 
 but, as it is, the money is retained in Australia 
 as a loan. It is, in fact, as if the Australian 
 Government laid hands on a million worth of 
 goods intended for export into this country, sold 
 them, and kept the proceeds. Here the loan ex- 
 presses itself, not as an excess in our exports, but 
 as a diminution in our imports. A similar but 
 converse disturbance occurs in the rarer cases where 
 capital, whether loans or investments, is paid back. 
 
30 THE EQUIVALENCE IS NOT chap. 
 
 When our Balance of Trade is thus explained, 
 it becomes evident that what we have in the 
 relation between the two sides, is not an 
 equivalence of imports and exports so much as 
 an equivalence of debts and credits — an equation 
 of indebtedness. 
 
 It must, however, be carefully noted that the 
 equivalence spoken of is ^equivalence between the 
 total imports and the total exports of a country 
 — the import and export relations between it and 
 the rest of the world. When, as is often the case, 
 this balance sheet of a nation's total exports and 
 total imports is understood as implying or suggest- 
 ing the real equivalence of exports ^nd imports 
 between a particular country and any other parti- 
 cular country, and as demonstrating that there is 
 something far wrong where there is a discrepancy 
 which cannot be explained by " invisible exports," 
 or other disturbing causes, the conclusion 1j quite 
 illegitimate. There is no such equivalence except 
 by chance. 
 
 There is no doubt that, in still undeveloped 
 countries, if the merchant who brings goods to 
 them will not take in exchange the goods which 
 the home merchants have to offer, the attempt to 
 trade speedily comes to an end ; and so it was in 
 earlier times when the exporter and importer were 
 one, or, much later, when agents abroad sent home 
 the proceeds of a consignment in produce. And 
 if we were confined to trading with one nation, 
 that nation would have to take what we offered or 
 we should not sell ; if there were exchange at all, 
 there would be equivalence. 
 
IV. BETWEEN TWO COUNTRIES 31 
 
 But in modern circumstances, when each nation 
 does a foreign trade with many nations, it is 
 entirely different. It would, indeed, be a curious 
 coincidence if one country were to find just the 
 things it wanted to buy for home consumption in 
 another country where it found it profitable to sell 
 what it made, and were to buy there just to the 
 same value as it sold. But does any one now 
 think that commerce is impossible between, say, a 
 nation of teetotallers and a nation of wine growers, 
 because, although the wine growers want the 
 cotton of the teetotallers, the teetotallers will not , 
 take wine, and the wine growers have nothing else 
 to sell ? Surely if a Canadian friend sends me a 
 barrel of apples and has no fancy for Scotch 
 oatmeal, I may pay him by sending a bag of 
 oatmeal to another friend in Seville and getting 
 him to send on a box of oranges to Canada. So 
 the wine growers import the cotton, sell wine to a 
 wine-drinking nation, give claims on the proceeds 
 to the teetotallers, and, finally, though it may be 
 round a long chain, the claims are liquidated by 
 goods imported from some country which has 
 goods to sell such as the teetotallers want. But 
 in this case there is no equivalence between the 
 imports and exports of the two. 
 
 The great improbability of equivalence between 
 any two countries may be easily seen if we give 
 up our abstract way of speaking as if "countries" 
 traded, and realise that it is single individuals 
 in each country who trade. Let us consult 
 the facts of importing and exporting between 
 say, Canada and Great Britain. The Canadian 
 
CAUSAL RELATIONS chap. 
 
 sends his wheat to this country on consignment. 
 There is always a market here for wheat, and it 
 sells at the market price. The proceeds are put 
 to his credit ; he gets paid finally in Canadian 
 " money " ; and the transaction is finished so far as 
 he is concerned. He may go on increasing his 
 sending of wheat indefinitely; still he sells and 
 gets paid. He knows nothing of any limit in 
 imports. He knows nothing of any payment but 
 in " money." He is simply a grain exporter. 
 There is no direct connection between his exports 
 and any import. On this side, again, is an exporter 
 of cotton goods. He sends them on consignment to 
 Canada ; sells them ; gets paid in English money; 
 and this transaction also is finished and stands by 
 itself There is this difference — that the English 
 exporter has to think more carefully of what he 
 is doing ; the market is more limited ; the goods 
 must suit a particular purpose or fashion ; and he 
 has to pass through a tariff of 23J per cent. But 
 the difference is not essential. Experience tells 
 him that there is a demand at a certain price — the 
 price being determined by competition of Canadian- 
 made cottons and similar goods from the outside 
 world — and, so long as he gets this price, he sends 
 his goods and sells them. 
 
 The point — and it is one of real difficulty — is 
 that there is no visible or conscious or arranged 
 connection between the exports of wheat and the 
 imports of cotton as regards Canada, or between 
 the exports of cotton and the imports of wheat 
 as regards England. The exporters and importers 
 have no knowledge of each other's doings. There 
 
IV. OF IMPORTS AND EXPORTS 33 
 
 is no occasion or motive, thus far, to equivalence 
 of value. May it not be the case, then, that 
 Canada, finding a free market for a universal 
 necessary, may send us hundreds, while we, find- 
 ing a more contracted market for cotton, may 
 send Canada tens ? 
 
 The answer is, that there is a real, though un- 
 seen, connection between the cross currents. If 
 hundreds are sent from Canada and tens from 
 England, there is an urgent demand for the 
 technical means of payment to Canada, the bills, 
 and an over-supply of the technical means of 
 payment to England. There is something to be 
 gained on the exchange by sending more goods 
 to Canada, and there is something of a handicap 
 in exchange on the sending of goods from Canada. 
 On such inducements, those who make their living 
 by small percentages and large turnover are not 
 slow to accelerate or retard the movement of goods. 
 
 There is another connection of a similar nature 
 in freights. If, to put it popularly, ten ships 
 come from Canada and there is return freight for 
 only one from England, shipowners are conten 
 to take a low return freight from England ; ship- 
 owners command a high freight from Canada ; 
 and this calls out sendings in the one case and 
 discourages further sendings in the other. 
 
 The point is that it does not matter to the 
 exporter how he makes his profit, so long as he 
 makes it. He will not go on sending goods abroad 
 unless he makes the same profit as at home. 
 But there are three items on which he may gain 
 or lose : the goods themselves, the freight, and 
 
 c 
 
34 THE CIRCULAR PAYMENT chap. 
 
 the remittance. If the freights come down, or 
 if the exchange be favourable, he can afford to 
 invoice his goods a Httle cheaper ; and, if an 
 extra profit is to be made on freight or exchange, 
 this will tend to increase his sendings. 
 
 Where, then, the sendings to and from two 
 countries consist of widely used commodities like 
 wheat and cottons, the sendings on either side 
 will be very sensitive to such inducements, and 
 there will be a tendency to equivalence of imports 
 and exports between these two countries. 
 
 But where one country is sending a universal 
 necessary like grain, and the oth sending 
 
 manufactured articles t-hat meet a bmall and 
 fluctuating demand, it is hard to believe that the 
 advantages to be gained by exchange or cheap 
 freights will ever call out sufficient sendings to 
 adjust the balance. It seems as if, in the absence 
 of any direct and ca^isal connection between im- 
 porters and exporters, there might be any amount 
 of margin between the real exports and imports 
 of either country — that is, even when freights 
 both ways, commissions, interest, etc., are fully 
 calculated and allowed for. 
 
 But why should we expect equivalence between 
 Canada and Great Britain if there is any signifi- 
 cance in the illustration of the wine-growers ? If 
 Canada sends us hundreds and we send her only 
 tens, it is as certain that the Canadian is getting 
 paid for his hundreds as that we are getting paid 
 for our tens, but it by no means follows that we 
 are paying the difference by exports, visible or 
 invisible, to Canada. Precisely as in the case of 
 
IV. IN THE COMMERCIAL COMMONWEALTH 35 
 
 the wine-growers, we may be squaring the trans- 
 action by exports, visible or invisible, to some 
 other country. 
 
 It is misleading to describe this, as the text- 
 books do, as " triangular exchange," as if goods 
 exported from A to B were paid for by a third 
 country, C, with which both countries have com- 
 mercial relations. The notorious fact is, that the 
 whole world is now such a network of commercial, 
 banking, and debt relations, that every country has 
 become a mere province of the great industrial 
 and commercial commonwealth ; and we should 
 no more look for equivalence between the exports 
 and imports of any two countries than we should 
 look for equal sendings of goods between London 
 and Glasgow, or, indeed, should expect a cotton 
 spinner to pay for his coals by sending yarn to 
 the colliery. Every sending of goods from one 
 country to another takes for the moment the 
 form of a debt ; these debts are bought and sold 
 as " third commodities," or cancelled by being set 
 against each other ; and the debt relations, created 
 by one country sending goods to another, may be 
 balanced by debts created by sendings . of goods 
 between quite other groups of nations. The only 
 equivalence, I repeat, which we ought to look for, 
 is that between the total of a nation's exports and 
 the total of its imports, or, more scientifically, the 
 equation of its debts and credits.^ 
 
 * On the subject of this chapter, the reader should consult Clare's 
 A B C of the Foreign Exchanges, or Mr. Ewing Matheson's 
 pamphlet, The Principles of Foreign Exchange as affectitig Pre- 
 ferential Dealing with the Colonies. 
 
CHAPTER V. 
 
 SOME CONCLUSIONS AND A MORAL. 
 
 Conclusion L : the foregoing explanation disposes of, the suggestion 
 that our excess of imports is paid h^ '''' selling securities''- — which is, 
 in any case, an appeal to the unknown. Conclusion II. : the Balance 
 of Trade iji itself never indicates either prosperity or decay. Moral : 
 whatever checks imports, checks exportSi 
 
 If what has been said is true, there seem to 
 be two obvious deductions to be drawn, and at 
 least one practical warning to be given, 
 
 I. The first is that, if the balance sheet of our 
 foreign trade, as drawn up in Chapter III., be 
 accepted, anfl the apparent discrepancy between 
 our exports and imports acknowledged to be 
 statistical and not real, there seems no place for 
 the rival explan ation that Great Britain is " living 
 on its capital." 
 
 I confess I have some difficulty in under- 
 standing this explanation, particularly i«n face of 
 Sir Robert Giffen's rejoinder that a nation cannot 
 be living on its capital till it has ceased to save.^ 
 
 ^ In 1877 he calculated that the national savings were some 
 ;,^200, 000,000 a year. In a letter to the Times of 3rd December, 
 190J, he puts them down at ;,^264,ooo,ooo. 
 
CH. V. SELLING SECURITIES 37 
 
 It assumes that the statistical discrepancy is 
 a real one ; or, at least, that the invisible ex- 
 ports, the stream of interest and profits from 
 abroad, the boarding expenses, etc., are much 
 over-stated ; and it finds another " invisible ex- 
 port " in the shape of Securities. 
 
 John Bull is like a spendthrift farmer, sending 
 out £zA9 vvorth of crops to sell, and spending 
 ;^528 on his household expenses. If one asks, 
 "Is John Bull then running into debt?" there 
 are some who do not hesitate to answer that 
 he is. " A statement was actually brought to 
 me on one occasion," says Giffen, " showing 
 that the country had become indebted to 
 foreigners in twenty years to the extent of 
 i^ 1, 000,000,000, which had never been paid and 
 was all represented by bills, the non-payment 
 of which would bring out, some day, a financial 
 collapse." ^ Considering that it is not nations 
 which import and run into debt, but individuals, 
 and that our importers have not as yet shown 
 any sign of being in any such parlous state, 
 this ridiculous explanation may be passed by. 
 
 The other answer is to the effect that John 
 Bull's father left him some money in United States 
 Bonds and other good securities, and that this 
 reckless son is taking these out of his safe, and 
 selling them to pay the balance. He is " draw- 
 ing on his capital," and everybody knows what 
 that ends in ! 
 
 But, to follow out the simile, suppose it were 
 discovered that John Bull had other sources of 
 
 ^Essays in Finance, Second Series, p. 1 61. 
 
38 SELLING SECURITIES chap. 
 
 income — say that, in addition to selling his i^349 
 worth of crops, he was getting £go for doing 
 the carting for his neighbours ; that he was doing 
 a little quiet insurance business among them, 
 which brought him in something ; that he was 
 boarding a maiden aunt as a "paying guest"; 
 that he got a good many presents from married 
 sons at Christmas ; and that, besides, he had, 
 some years before, invested money in a gold 
 mine, which was sending him another ^90 in 
 dividends ; — why, there would seem every justi- 
 fication for him spending ^^528 on his household 
 expenses, and for the suspicion that he was pro- 
 bably laying by money besides. And, if it were 
 still found that John Bull was selling out his 
 United States Bonds, would it be reasonable to 
 say that he was doing so because he had to 
 pay his debts ? 
 
 It may very well be that our people every now 
 and then sell out their securities — wise men 
 often do when they get a good price. It does 
 not seem to me that it is any sign of distress 
 to withdraw capital from foreign investments and 
 employ it at home, or even to build a house with 
 it. Or, assume that it be true — as is often asserted 
 — that, ten years ago, two-thirds of the Pennsyl- 
 vania Railway Company's stock were held in 
 Europe, while now two-thirds are held in the 
 United States, what does that prove ? I suppose 
 the Americans know their own business ; but, if 
 they parted with Caledonians in order to buy 
 Pennsylvanians, it is difficult to see that they are 
 any better off, or we any worse. 
 
V. AN APPEAL TO THE UNKNOWN 39 
 
 If Englishmen do sell their foreign securities, 
 they get value for them. Why is it assumed 
 that capital is a good thing abroad and a bad 
 thing at home ? Is it possible that some people 
 yet think that selling a thing for money is part- 
 ing with a good thing in exchange for a bad ; 
 or imagine that, when a man " realises his 
 money," he goes straight away and drinks it, 
 or throws it into the sea ? 
 
 There is undoubtedly much movement of 
 national securities as a recognised form of in- 
 ternational currency. What the extent of this 
 movement may be, it is impossible to say, seeing 
 that securities go through the post, and that no 
 periodical census of the stock — whether national 
 securities or industrial scrip — held by people of 
 different nations is possible. For one class of 
 prominent securities that is largely sold on any 
 special occasion, there may be hundreds of lesser 
 known securities that are being quietly bought. 
 
 All this, then, is an appeal from the known 
 to the unknown — I rather think, to the unknow- 
 able. But there is one thing we do know ; — that 
 the returns to Income Tax of interest on 
 colonial and foreign securities, coupons, and 
 railways, were ^3oi millions in 1881, £>^\\ 
 millions in 1891, and £62^ millions in 1901 — 
 over 100 per cent, increase in twenty years. 
 With these figures before us, it seems as if we 
 might rest satisfied that we are not selling out our 
 foreign securities at any rate. 
 
 II. The second deduction is, that the Balance 
 
40 THE BALANCE INDICATES CHAP. 
 
 of Trade tells us almost nothing as to the pro- 
 sperity or adversity of a nation. 
 
 Our own Balance indicates two things. One 
 is that several of our greatest trades, such as 
 Shipping, Banking, and Insurance, are engaged 
 in producing and sending abroad goods that never 
 take any material form, and are not entered in 
 any table of exports. The returns to these trades 
 come to us in imports, and make up an appa- 
 rent excess of something over ;^90,ooo,ooo, 
 the reason being that the real exports which 
 balance and pay for them are not counted at 
 all. The other is that we have for long been 
 the money lenders of the world, and that we 
 have invested very large sums abroad. This 
 accounts for a permanent excess of imports of 
 some ;^6o,ooo,ooo to ^90,000,000. 
 
 The presumption, of course, is that these 
 trades are prosperous — the Income Tax returns 
 seem to show that they are — and that the 
 interest and profits represent a fair return to 
 our capital abroad. But, from the Balance of 
 Trade, all we know for certain is the two facts, 
 that we have these large trades, and that we 
 have large investments abroad. 
 
 But another country, from choice or necessity, 
 may not number Shipping among its industries, 
 and yet be employing all its labour and capital 
 profitably. And it may not only find a remunera- 
 tive use for all its savings at home, but may 
 find it cheaper to borrow largely from other 
 countries, getting a better return from the using 
 of the capital borrowed than another country gets 
 
V. NEITHER PROGRESS NOR DECAY 41 
 
 by lending it — just as one sometimes finds a 
 very rich man borrowing from a very poor re- 
 lation. As consequence of this, such a country 
 may have a balance the other way about. 
 No one now-a-days thinks that America is any 
 the less prosperous that, in 1902, she had a 
 Balance of Exports of ;i^ 100,000,000. 
 
 If this be true, it follows that even a posi- 
 tive fall- in our exports might indicate nothing 
 but a change in our industries or in our fields 
 of investment — just as, in the converse case, 
 America seems no less prosperous that, this year, 
 her imports show a large increase and her ex- 
 ports a considerable diminution. One is disposed 
 to think that the enormious activity in our 
 Municipal enterprises of late years, and the ease 
 with which such local bodies have borrowed 
 huge sums, would have some effect in putting 
 the drag on our exports. And yet it is by no 
 means certain that Municipal industries may 
 not be as profitable as gold mines. 
 
 But if anyone still thinks that an excess of 
 imports is a proof of growing decay, let him 
 consider this. We have statistical records, more 
 or less accurate, of the exports and imports of all 
 the great nations. The total imports of these 
 nations are ;^2, 5 16,000,000 ; their total exports 
 are ;^2, 292,000,000. Here is a " debit balance," a 
 balance of imports over exports of ii^2 24,000,000. 
 Either it must be believed that more goods arrive 
 in port than ever set sail, which seems a little 
 curious ; or that all the great nations are going 
 downhill at a very rapid rate — for the balance is 
 
42 WHATEVER CHECKS IMPORTS chap. 
 
 growing ; or the Board of Trade explanation 
 must be taken, that the balance is accounted for 
 by shipping charges ; — that is, costs incurred 
 after the goods have left any shore as statistical 
 exports. 
 
 The practical warning conveyed by the ten- 
 dency towards equivalence of exports and imports 
 seems to stare us in the face. It is that anything 
 which checks imports is a check to exports. This 
 follows inevitably from the fact that foreign trade 
 is an exchange of goods and services, goods sent 
 out paying for goods brought in, A tariff not 
 only shuts out foreign goods ; it shuts in home 
 goods. If we were to set up absolutely prohibi- 
 tive tariffs against imports, we should make it 
 impossible to export. For, if the consignee in 
 the foreign country found that, since no goods 
 had been sent to England, he could not buy a 
 bill to cover his remittance, he would send gold. 
 If this were to continue on any large scale, the 
 export of gold from the foreign country would 
 be reflected there in a fall of prices — the prices 
 of imported goods among others. As the only 
 object of exporting goods is to sell them, the 
 low prices realised by our exports would make 
 further exporting on our part unprofitable. 
 
 If, again, we were to set up tariffs which did 
 not exclude foreign goods but made them dear, 
 we should diminish the consumption of and so 
 the demand for them, and reduce the amount of 
 the exports which we could send in return. If, 
 in these circumstances, we still exported goods in 
 
CHECKS EXPORTS 43 
 
 the former amounts, the consignee in the foreign 
 country would find that there was a premium on 
 the means of remittance, which would make the 
 transaction pro tanto less profitable, and act as 
 a check on our further exports.^ 
 
 These things are not less real because they are 
 unseen — hidden by the fact that, in foreign trade, 
 each transaction of exporting and importing 
 stands by itself, and ends with a payment in 
 money. Only those who do not see, or who 
 choose to ignore, any mutual and causal relation 
 between imports and exports, can believe that 
 putting a tariff on imports will have no effect in 
 checking exports. This is the meaning of the 
 
 ^This is amply confirmed by experience. When Peel, in 1842, 
 took off or reduced duties on over a hundred articles, the exports 
 rose from £a,'o millions to £(iQ millions in 1845. When the Corn 
 Laws were repealed, the exports rose from ^60 millions to nearly 
 ;^IOO millions in 1853. In the late tariff wars, exports suffered 
 correspondingly with imports. See Cd. 1938 : Commercial, 
 No. I. {1904). "Every time," says Gide, "that a treaty of com- 
 merce or any other cause has considerably increased a country's 
 imports, its exports have never failed to increase in like pro- 
 portion. Thus when, in i860, France threw open her ports 
 to foreign products, her imports rose from 2,521,000,000 francs 
 (the average of the previous five years) to 3,231,000,000 francs 
 (the average of the next five years) ; but her exports like- 
 wise rose, between the one period and the other, from 
 2,813,000,000 francs to 3,449,000,000 francs. Thus the increase 
 in imports was 23 per cent., in exports, 28 per cent." On the 
 whole question, the chapters on International Trade, in Professor 
 Gide's Principes d^ Economic Politique, as the utterances of a 
 French economist, are particularly interesting and suggestive. 
 The above quotation is from the 3rd edition, p. 261, but, as 
 very considerable changes have been made, the 8th edition (Larose, 
 Paris, 1903) should be studied. 
 
44 LOOK AFTER THE IMPORTS CH. v. 
 
 homely adage : — " Look after the imports and the 
 exports will look after themselves." It simply 
 suggests that, if no restrictions are put on imports, 
 there will be competition from all nations to send 
 in what goods they can, and the necessity of 
 paying for them will bring out a return flow of 
 exports to the same value. 
 
CHAPTER VL 
 
 THE RIVAL POLICIES. 
 
 Every nation needs a revenue, and so levies customs duties. But, 
 while a Free Trade country has in this no object ulterior to revenue, 
 a protected country has. Apart from political considerations, which, 
 in many cases, determine fiscal policy, the protectionist argument is^ 
 based on the assumption that the interests of the producer are not the 
 same as those of the consumer, and come first. 
 
 The difficulty of defining Free Trade seems very- 
 much due to this ; that the word " free " is itself 
 so entirely ambiguous. 
 
 Freedom, as a philosophical conception and 
 as a practical thing, never means the absence 
 of restraint. It is not opposed to Law or 
 Morality. It means putting ourselves under con- 
 scious and purposed restraint — the drunkard who 
 drinks as much as he likes is the very last man 
 we should call " free." 
 
 For this reason, internal trade is never free in 
 the sense of having no restrictions placed on it. 
 We are a Free Trade country, but we keep as 
 sharp an eye on the manufacture and sale of 
 liquors as any other nation does on their entry : 
 there is no freedom to purvey these as we like. 
 This reminder gives us the cue to a definition. 
 
46 TAXATION FOR REVENUE CHAP. 
 
 Every nation needs a revenue for national 
 purposes. A Free Trade country is one which 
 imposes duties on imports with no other con- 
 sideration than that of revenue. This comes out 
 quite clearly in the case of spirits and beer. We 
 make them pay Customs duties when they come 
 from abroad, whether from other nations or from 
 our own Colonies ; but any idea that we make 
 them pay because they come from abroad is at 
 once dissipated by the knowledge that we put 
 similar and equivalent duties on spirits and beer 
 made at home, calling the duty, in this latter 
 case, Excise. A distillery or a brewery, in fact, 
 is a kind of island on a lake. We do not allow 
 their products to be imported from them into the 
 surrounding country, without paying the same 
 amount of duty as is paid on similar products 
 coming from countries which are really outside. 
 
 The actual figures suggest the extent and 
 intention of this government interference. We 
 raise by Customs on foreign beer and spirits, at 
 the gateways of our island, £a^\ millions. But 
 we raise by Excise on our own distilleries and 
 breweries no less than £'^ i \ millions. These two 
 things hang together. It is for the purpose of 
 taxation that we put a duty on home spirits and 
 beer, and we put a similar duty on imported spirits 
 and beer that the foreign articles may not be 
 favoured. Thus the sole explanation of this 
 Customs duty is Taxation : not taxation of the 
 foreigner, not a price for admission, but taxation 
 of the home consumer. 
 
 In our country, then, we have Import Duties, 
 
VI. TAXATION WITH ULTERIOR AIM 47 
 
 and heavy import duties, but there is not a 
 shadow of anything ulterior to revenue purposes. 
 It is pure and simple taxation, imposed, as it 
 should be, on ourselves by ourselves, — the special 
 mark of a free nation. 
 
 What, on the other hand, we call a Protected 
 country is one that frames its Customs duties 
 with an aim ulterior to simple taxation of its 
 own citizens. It does not object to the revenue, 
 but the revenue is not its sole purpose, nor even 
 its main purpose. How such a system works out 
 may be understood if one notices what would 
 happen if we imposed duties on spirits and beer 
 from abroad, and imposed no excise at home. 
 Whatever the object of this might be, it is 
 evident that it would handicap foreign imports 
 and favour the home distiller and brewer. 
 
 These, then, are the rival policies which we are 
 asked to set against each other. 
 
 Free Trade, it may be said at once, is the econo- 
 mist's policy. From his point of view, it seems as 
 if there were no question between Protection and 
 Free Trade. He looks on men as wealth pro- 
 ducers and wealth consumers. To g-et the largest 
 amount of wealth-production with the least amount 
 of human exertion, the greater the division of 
 labour the better. He would like the boundary 
 walls of empires broken down entirely as regards 
 trade and industry, and the division of labour 
 made territorial. Whether goods come from Ire- 
 land or from France, is to him the same, so long 
 as they are good and abundant. The whole 
 
48 THIS DEAR DEAR LAND chap. 
 
 world of man ought to be a vast co-operation of 
 industrial servants, and all hindrances to this 
 co-operation should be removed. So far as pure 
 economic theory goes — and putting aside consider- 
 ations of revenue — customs, excise, duties, tolls, 
 octrois, are remainders of the dark ages. . For all 
 these things cause friction and expense, and the 
 resources of the world, are not fully -exploited. 
 It looks almost' as foolish to im'pose a tariff at 
 Calais and Hamburg, as it would be to tax goods 
 passing through Berwick-on-Tweed. 
 
 All the same, I am inclined to accuse English 
 economists of being too economic. I think they 
 forget that it suits us to put economic interests 
 first, and the rest nowhere ; they forget how 
 peculiarly favoured we are as compared with most 
 other countries. 
 
 Shakespeare put it long ago, in words that ring 
 through us like the blast of a trumpet : 
 
 " This royal throne of kings, this sceptred isle, 
 
 This fortress, built by nature for herself 
 
 Against infection and the hand of war ; 
 
 This happy breed of men, this Httle world, 
 
 This precious stone set in the silver sea 
 
 Which serves it in the office of a wall, 
 
 Or as a moat defensive to a house 
 
 Against the envy of less happier lands j 
 
 This blessed plot, this earth, this realm, this England 
 
 This land of such dear souls, this dear, dear land 
 Dear for her reputation thro' the world — 
 England, bound in with the triumphant sea."' 
 
 ^ King Richard II. 
 
VI. THE POLITICAL CONSIDERATION 49 
 
 But the very words which emphasise our insular 
 strength also bring out how peculiar our position 
 is among nations. Between us and attack lies the 
 silver sea — a wall or moat defensive of our house. 
 We have no Alsace and Lorraine to atone for. 
 Our boundary is not a river across which one may 
 throw a stone, like the Rhine, crossed and re- 
 crossed in the past by invading armies. We are 
 not like an old Hanse town, set in a plain, within 
 whose walls we might be shut up, and forced to 
 grow our food in the city streets and make our 
 arms in the city smithies. Our little island is 
 what Venice and Holland were a few centuries 
 ago — a country too small to have many internal 
 resources, but seated, like a spider in its web, at 
 the cross roads which lead to and from the great 
 world. 
 
 Thus it is that, secure against invasion and the 
 hand of war, our island life is more purely eco- 
 nomic than that of any continental country. 
 Hence, perhaps, the angry jibe of Napoleon at 
 the " nation of shopkeepers " — a very poor jibe, 
 as the Parisian is notoriously the very type of 
 shopkeeper. It annoyed him that we, and we 
 alone, of European nations, could give most of 
 our time and energies to industry. No conti- 
 nental economist, I imagine, would hesitate to 
 say that Free Trade is the policy for us, and 
 that nothing but Free Trade would have given 
 us the position we hold. 
 
 But Frenchmen and Germans are like Nehe- 
 miah's men ; they have still to hold the trowel 
 in one hand and the sword in the other. The 
 
 D 
 
so THE POLITICAL CONSIDERATION CHAP. 
 
 atmosphere of two centuries ago is still around 
 them. Wars, in which they personally take part 
 — and not by a shilling a day deputies — keep 
 alive a narrowed national and patriotic life which 
 is strange to us. To guard it, they have to 
 sacrifice — not, like us, in pocket only, but in time, 
 in ease, and sometimes in blood. 
 
 This is the defence and explanation of the 
 fact that continental economists are, many of 
 them. Protectionists. They aim at making their 
 countries self-sufficient first and rich afterwards. 
 They are not willing to depend too much on nations 
 that might some day encircle them with fire. 
 
 And so we might imagine that our economic 
 policy of Free Trade is the " natural " policy — 
 the policy to which they have yet to come 
 when the barbarism of war disappears. 
 
 Here, however, we come right against the fact 
 that there is a country where economic pursuits 
 are even more absorbing than with us ; a country 
 with no army to speak of; with absolutely no 
 foreign question except what she brings on her- 
 self; perfectly secure against attack or invasion ; 
 and that in it Protection has reached its highest 
 point. The country in question is, of course, the 
 United States. Evidently we must find another 
 explanation of Protection beyond the political 
 point of view. 
 
 There is an explanation, which, if not economic, 
 is at least based on an economic consideration. 
 It is that the continued existence of a nation, as 
 a nation, depends on its finding employment for 
 its own people. 
 
VI. PRODUCER VERSUS CONSUMER 51 
 
 The Protectionist finds that the world of man is 
 divided into two categories, although the people 
 who occupy these categories are pretty much the 
 same, Consumers and Producers. As a consumer, 
 everybody's anxiety is to get things plentiful and 
 cheap ; and there is no difficulty so long as he 
 has plenty of money in his pocket to buy with. 
 But the only way in which, as a rule, he can get 
 the money is ^by industry. Thus industry comes 
 first. Although the producers, numerically, are a 
 smaller body, they are, economically, more im- 
 portant. Give a man plenty of work and he will 
 have the money. 
 
 Here seems a plausible case: that the interests 
 of the consumer are selfish, short-sighted, tending 
 to national disintegration. It is especially plaus- 
 ible in the ears of the working man. " The rich 
 are those who have the means of benefiting by 
 cheap goods. The poor — well, there is a previous 
 process with them before they get any goods at 
 all, cheap or dear." Therefore, it is said, the 
 attention of government must be directed to pro- 
 tecting the interests of the producer qua producer. 
 
 One part of the argument certainly appeals to 
 the economist. He could wish that every man 
 had so much capital at his back as not to be 
 dependent altogether for his daily bread on his 
 daily work. As things are, however, the great 
 majority of the nation have nothing to earn 
 money with but their two hands. Continuous, 
 steady employment, then, is certainly a much 
 more important thing than a halfpenny off the 
 loaf. . 
 
52 STEADY EMPLOYMENT CH. vi. 
 
 It is a common idea that economists underrate 
 the importance of steady employment. Only 
 very ignorant people can think so. What can 
 be worse than intermittent work, if the object of 
 work be the increasing of the wealth that sup- 
 ports and satisfies life ? What can be worse for the 
 skill and habits of industry than days spent out 
 of work ? Nay — although it is often said that 
 the economist has nothing to do with any but 
 material things — what can be worse for moral 
 beings than compulsory idleness ? I confess I 
 have never been able to find a satisfactory place 
 in economic theory for the Non-Worker. Cer- 
 tainly he has no place in God's universe. He 
 is not even a sponge — for one can wash with a 
 sponge. Work — independent of its product, but 
 necessitated by its product — is the education in 
 which, and only in which, we become men. In 
 idleness alone, as Carlyle said, is there Eternal 
 Despair. 
 
 Prove, then, that Protection will permanently 
 give the people of this nation fuller employment 
 at the same rate of real wages, or more continuous 
 employment even at a slightly lower rate of wages 
 — to say nothing of higher rates of wages — and 
 we economists will at least reconsider the ques- 
 tion. But what we must ask is, first, to be assured 
 that producers need the help of government, and, 
 second, that government can give this help. This 
 is what we are inclined to deny. 
 
CHAPTER VII. 
 
 PROTECTION. 
 
 P>-otcction is protection against competition from outside. It does 
 not say that home producers must for ever be subsidised. It uses 
 generally the Itifant Industry argument, which mighty indeed, have 
 some weight if it were not for the notorious fact that these infants 
 never groiv up. What does grow Jip is the Vested Interest, against 
 which nothing short of an economic revolution seems strong enough 
 to prevail. 
 
 One may very well deprecate the word Pro- 
 tection. It seems to assume that industry can be 
 put under the government as the citizen is put 
 under police — that is, under a power which can 
 protect honest people against those who woulcj do 
 them harm. 
 
 But the Protection with which we are dealing , 
 is not protection against evil doers: in spite of 
 the militant expressions of many of its advocates, 
 the foreigner who sends us cheap goods is not an 
 evil doer. It is protection against Competition 
 from outside, and therefore from Service from 
 outside. It always seems to me remarkably like 
 that kind of protection which closes the entries 
 of village sports against the, presumably, stronger 
 
54 PROTECTION AGAINST CHEAPNESS chap. 
 
 outsider, and so secures the prizes — raised by 
 subscription from the countryside, of course — to 
 the villagers. And, being protection against com- 
 petition, it is protection against Cheapness — 
 protection against Abundance. 
 
 Other nations want to send in their goods at 
 what we may, roughly, call " cost price " — mean- 
 ing cost plus carriage. The protected country 
 says, " No, you shall not, because our people can- 
 not produce so cheaply even when the ' natural 
 protection ' of distance is taken into account ; they 
 must not be undersold ; they must be allowed to 
 sell at their cost price." That is to say, the home 
 consumer must pay a higher price in order to let 
 the home producer sell his goods at all. For, if 
 the protected country could make as cheaply or 
 more cheaply, the argument for Protection would 
 disappear. 
 
 The rationale of the matter comes out in the 
 absurd provision of the United States, that 
 " works of art by American artists temporarily 
 residing abroad are admitted free ; all other 
 works of art, including paintings, pastels, pen 
 and ink drawings, and statuary, pay a duty of 
 20 per cent." American artists, evidently, are 
 regarded by their government as tradesmen. No 
 wicked nonsense of Art for Art's sake there. If 
 Americans will buy pictures from Italy and 
 France — well, they must pay for passing by their 
 own countrymen. It is a very good illustration 
 of the contagion of Protection : if a people, with 
 government funds and powers, protect one industry, 
 they must protect all, even the professions ! 
 
VII. HOW PROTECTION PROTECTS 55 
 
 How, then, does Protection protect ? 1 
 
 Let us suppose that, in England and America, 
 the cost price of equal goods is lOOs. And, for 1 
 clearness sake, let us disregard the additional cost 
 of ocean carriage. America puts on a tariff of 
 50 per cent. English goods, then, would require 
 to be sold in America for 150s. 
 
 At these prices, if the American goods are of 
 equal quality, the English goods will not be sold 
 at all. In this case, American producers find that \^ 
 they have the monopoly of their own market, and it 
 would be remarkable if they did not take advantage 
 of it to raise their prices. So long as they can get 
 something under i 50s., they keep the English goods 
 shut out and that is all they want. This is certainly 
 protection of American producers. But the ques- 
 tion, of course, is, Where, in this case, is the need 
 of Protection? If there were no tariff, the ; 
 American would sell at lOOs. and have his profit. 
 Why penalise the American consumer to give 
 the American producer an extra profit ? 
 
 Take another extreme case. Suppose that the 
 English cost price is lOOs. and the American 
 cost price 200s. Then the English goods sell in 
 America at 150s. The result, of course, is that 
 the Americans cannot sell at all. The Ameri- 
 can consumer gets his goods cheap enough, but 
 there is no American manufacture. 
 
 Take, lastly, the more likely case, that the 
 English cost is lOOs. and the American cost 
 I 50s. Then the English goods come in on an 
 equal footing of competition with the American 
 goods. The American consumer has, indeed, to 
 
56 INFANT INDUSTRY ARGUMENT chap. 
 
 pay 50 per cent, more for his goods than he need 
 have paid if he had taken them all from England, 
 but the American manufacturer has his profit, and 
 his industry is " protected." 
 
 Of course it would not appeal to anybody, 
 if the claim were baldly put forward that a 
 country must, permanently, pay a half more for 
 its goods than it need pay, in order that certain 
 home manufacturers may get a living. The 
 nation would naturally ask, " Cannot we get on 
 without these manufacturers ; are there not other 
 industries that do not need such a costly poor- 
 rate ; would it not be wise to devote our labour 
 and capital to these, taking the cheap goods from 
 abroad with thanks ? " And, certainly, a nation 
 like America, which sends us every year some 
 £121 millions, mostly the produce of her magnifi- 
 cent natural resources, would know that she had 
 plenty of industries which need no protection, 
 and that the exported products of these industries 
 would pay for all the imports she wanted. 
 
 ; But this bare-faced claim, of home producers 
 to live permanently at the expense of home con- 
 sumers, is not put forward. What is put forward 
 is an argument that appeals to everyone on the 
 face of it, and has even met with some counten- 
 ance from economists, the Infant Industry argu- 
 
 ( ment.^ Here Protection is defended as a kind 
 
 ^ This argument, unanimously adopted by American protectionists 
 on the appearance of Alexander Hamilton's famous Report on 
 Manufactures in 1791, was elaborated by Friedrich List in his 
 National System of Political Economy, published 1841. Protec- 
 tion, he said, was a "national apprenticeship"; a stage in a 
 
VII. INFANT INDUSTRY ARGUMENT 57 
 
 of Patent Law privilege, or Copyright for a certain 
 limited period ; or, to use a favourite metaphor, 
 a kind of apprenticeship, during which the 
 apprentice simply spoils things, and cannot earn 
 a wage. It is the contention, not so much that 
 manufactures are profitable /^r se, as that a varied 
 industry is necessary to a nation's continuous 
 growth, just as a varied diet is. Free Trade, 
 it is said, would condemn a young country 
 too long to mere exploitation of its natural re- 
 sources, to the neglect of industries for which 
 the country is naturally fitted, or is, at least, 
 under no disadvantage : these industries are pre- 
 vented from rising by this exclusive attention to 
 what is easiest, or by some artificial or removable 
 cause. Cotton spinning and weaving in America 
 are cases in point. It seems most natural that 
 they should be carried on where the raw material 
 grows, and where power and coal are abundant. 
 But how are these industries to arise among 
 a population bred in agriculture, unskilled in 
 machinery, unaccustomed to an indoor life, 
 unless steps are taken to protect them in their 
 first stages ? 
 
 nation's progress, not its final form. List is oflen quoted as an 
 out-and-out Protectionist. He was nothing of the kind. He said, 
 for instance, that the maintenance of Protection in England at 
 the time he wrote was a mistake due to the stupidity of the ruling 
 class. Going over the history of the great nations, he showed that 
 they had all had this period of apprenticeship : first, Free Trade in 
 the agricultural stage, when there were no separate manufactures on 
 a great scale ; then Protection ; last, he said, should come Free 
 Trade. The same ideas, and the same moderation, are found in 
 Alexander Hamilton. 
 
58 /. S. MILL CHAP. 
 
 The argument is very plausible. Owing to 
 
 the progress of science and invention, quick and 
 
 cheap transit, the mobility of capital and of 
 
 highly skilled men, Mill's words are much more 
 
 true now than when they were written, that 
 
 " the superiority of one country over another in a 
 
 branch of production often arises only from having 
 
 begun it sooner," and that a country which can get 
 
 I or hire skill and experience may, in other respects, 
 
 \ be better adapted to the production than those 
 
 ) which were earlier in the field. I am not, how- 
 
 \ever, going to contest Mill's statement that "a 
 
 /protecting duty, continued for a reasonable time, 
 
 will sometimes be the least inconvenient mode in 
 
 which the nation can tax itself for the support 
 
 of such an experiment," ^ because it has no 
 
 bearing on our present problem, 
 
 ^This concession of Mill has so often been torn from its con- 
 ) text and used to support doctrines which he would have abhorred, 
 that it is advisable to quote the next sentence : ' ' But the protection 
 should be confined to cases in which there is good ground of 
 assurance that the industry which it fosters will, after a time, be 
 able to dispense with it ; nor should the domestic producers ever 
 be allowed to expect that it will be continued to them beyond 
 the time necessary for a fair trial of what they are capable of 
 accomplishing." — Principles of Political Economy, v. x., i. One 
 may read along with this Sidgwick's statement : " I hold that, 
 when the matter is considered from the point of view of abstract 
 theory, it is easy to show that Protection, under certain not im- 
 probable circumstances, would yield a direct economic gain to the 
 protecting country ; but that, from the difficulty of securing in 
 any actual government sufficient wisdom, strength, and singleness 
 of aim to introduce protection only so far as it is advantageous to 
 the community, and withdraw it inexorably so soon as the public 
 interests require its withdrawal, it is practically best for a states- 
 man to adhere to the broad and simple rule of taxation for revenue 
 
VII. A DIVERSIFIED INDUSTRY 59 
 
 I consider it fallacious to say that Protection 
 is necessary for the rise of a diversified industry. 
 Industries would naturally take root in an agri- 
 cultural country by the growth of what one might 
 call the supplementary industries ; beginning with 
 the jobbing and repairing trades that merely put 
 things together, and make things that cannot be 
 imported — just as the smith and the joiner set 
 up repairing sheds in country districts, and are 
 found ere long to be taking contracts for making 
 and building.^ But the argument has no applica- 
 tion to us. If we are going to adopt Protection, 
 it will certainly not be because our industries 
 are infants. And, as it happens, this is exactly 
 where the argument breaks down as regards 
 America. 
 
 only." — Principles of Political Economy, book iii., chap. v. It 
 may be said that we, in this country, have statesmen with such 
 wisdom, strength, and singleness of aim. But how long should we 
 have them if they were exposed to the influences which attend 
 Protection ? 
 
 ^ What is meant may be illustrated from the history of Barrow- 
 in-Furness. Fifty years ago it was a sandhill. Then hematite 
 ore deposits were discovered, and steel-making settled down beside 
 the raw material. Next came shipbuilding to take advantage of 
 the steel. Clustered round this are now all manner of subsidiary 
 industries, making machinery and other auxiliaries for shipbuilding 
 and steel-making, and the prosperity of the town is no longer 
 dependent on any one industry. Or take the familiar pheno- 
 menon of the overflow of capital in South Africa from the gold 
 mines to coal fields, water supplies, machinery making, etc. Does 
 any one think that the working out of the gold mines would leave 
 nothing but a few holes in the ground ? Has not, indeed, gold- 
 mining set many communities on their feet, and left them with 
 the " varied industry" desiderated? 
 
6o ONCE INFANT, ALWAYS INFANT chap. 
 
 The suggestion is that manufacture, in a new 
 country, is a child which requires to be protected 
 against winter and rough weather, till such time 
 as it is fuller grown and is able to take its place 
 in the competition of nations. Unfortunately, 
 experience shows us that this time never arrives. 
 Once an infant, always an infant. 
 
 Sir Charles Tupper declared long ago that, 
 given fifteen years of Protection, the infant 
 industries of Canada would be able to stand 
 alone. The fifteen years are gone ; twenty-five 
 years are gone. The infants are still in arms. 
 
 So with America, whose favourite argument 
 this still is, even as regards that Mellin's Food 
 baby, the Steel Trust. Practically, all industries 
 there are protected. We must conclude, then, 
 either that all the industries are yet in their 
 infancy — and a century is a long time for long 
 clothes — or else we commit ourselves to some 
 theory of permanent infancy. 
 
 When the question, then, is put — as it should 
 be put — why America is still protectionist, the 
 answer may be given in a sentence. It is the 
 strength of the Vested Interest. 
 
 It is not sufficiently remembered that, while 
 Free Trade may be called the " natural " policy, 
 inasmuch as it applies to foreign trade the policy 
 and principles which we find every country adopt- 
 ing in its home trade, it is not the historical policy. 
 
 It is only since the Reformation that the 
 idea of the Nation-State began to evolve. The 
 Nation then became an entity — a whole, which 
 
Vii. PROTECTION ONCE UNIVERSAL 6i 
 
 it was worth any sacrifice to hold together, and 
 inspire with a common purpose. Naturally, for 
 some centuries, the course of evolution was that 
 each nation became an object of jealousy, sus- 
 picion, and dislike to other nations. When 
 Colbert, Louis XIV.'s great Minister, established 
 a heavy tariff against all other countries, he did 
 indeed draw the French nation together. But, 
 at the same time, he accentuated the enmity of 
 other states, and thus, says Adam Smith, " began 
 the. spirit of hostility which has subsisted be- 
 tween the two nations ever since." 
 
 This policy was followed by every other country, 
 under the pernicious idea that one nation's gain 
 is another nation's loss. Consequently, down 
 till the middle of last century, all nations were 
 shut in by a tariff based on the principle 
 known in Scotland as " keeping their ain fish 
 guts for their ain sea maws." We ourselves 
 were as heavily protected as other countries ; 
 and we had, moreover, enjoyed the very special 
 protection of the twenty years of the Napoleonic 
 war, during which we had freedom to apply the 
 new discoveries and inventions to manufacture, 
 while the rest of Europe was devastated by in- 
 vading armies, and had enough to do to live. 
 
 The abolition of the Corn Laws in 1846, 
 and the adoption of Free Trade, was an almost 
 revolutionary movement, made possible perhaps 
 by the dread of a bloodier revolution. It was 
 a quick, sharp spasm, like the cut of the surgeon's 
 knife. It introduced the " natural " system at 
 great loss and suffering to some, but it cleared 
 
62 VESTED INTERESTS chap 
 
 the way for the free development and full use 
 of the great inventions and cheap communication 
 which were changing the face of the world. 
 
 That is to say, the innumerable vested interests, 
 which had grown up under Protection, were ruth- 
 lessly cut at the root. But in other countries 
 they remained, still remain, and tend to grow 
 stronger the older they grow. 
 
 I should not like it to be thought that I 
 mention " vested interests " with any contempt, 
 or that the expression carries its own condemna- 
 tion. Most of our interests are vested, in greater 
 or lesser degree. I only take it as a fact of human 
 nature that, when a man's bread and butter is 
 bound up with the continuance of a system, how- 
 ever bad, the vested interest that appeals to him 
 is the interest of the wife and children at home ; 
 and these interests sometimes make him singularly 
 shortsighted as to the real interests of himself and 
 others. 
 
 In early days, it is said, the joiners in Japan 
 protested against the introduction of the • fire 
 engine, on the ground that it interfered with 
 their industry of rebuilding the wooden houses.^ 
 This seems absurd enough, but it is absurd only 
 because the interest is a small one. But consider 
 this case. Of the 39 millions of population in 
 France, nearly one-half are interested in agricul- 
 ture. Most of them are small peasant proprietors. 
 
 ' At the end of the eighteenth century, the southern counties of 
 England petitioned Parliament against the opening of the Great 
 North Road, on the ground that it would bring the products of the 
 northern counties into the London market. 
 
VII. REQUIRE A REVOLUTION 63 
 
 They are the salt of France. But these peasants 
 could not compete with foreign grain introduced 
 free. Free Trade would mean an entire re- 
 organisation of agriculture, and, probably, of the 
 land system. It would be an economic revolution. 
 
 Here is one vested interest which extends over 
 half a nation, and makes it impossible for any 
 ministry such as France has known for thirty 
 years to even mention the free import of grain. 
 
 But America never had an economic revolution 
 such as we had. She had no need to protect her 
 agriculture. Hence her people could always get 
 the prime necessaries of life cheap and good. 
 They never knew what it was to have wheat 
 at 80s. — the price which, it was thought, the 
 agricultural interests in this country should have 
 for their own safety ; and they, consequently, 
 never saw rents rising, and one privileged class 
 flourishing, while the people starved. This cheap 
 agricultural produce, moreover, they could export, 
 and with it buy what they wanted of other things. 
 But at an early stage they adopted Protection for 
 their manufactures, and the beginning of it was 
 perfectly natural and explicable. 
 
 Up till 1808, the nation had remained very 
 much as when it was a number of British 
 colonies — exclusivelyagricultural; importing manu- 
 factures, and paying for them (i) by exports of 
 agricultural produce to the West Indies and to 
 those countries of Europe where the French 
 armies were trampling down the fields, and (2) 
 by the invisible exports of shipping, shipbuilding 
 being then a chief industry of New England. 
 
64 HISTORY OF PROTECTION chap. 
 
 Then came the Berlin and Milan Decrees of 
 Napoleon, the Embargo, and the Non-Intercourse 
 Act of 1809, followed by the war with England in 
 1 8 1 2. Practically all foreign trade was stopped, 
 and America thrown on her home resources. 
 
 This, of course, gave an enormous stimulus to 
 those branches of industry whose produce had 
 before been imported, and the manufacture of 
 jcotton goods, woollen cloth, iron, glass, pottery, 
 and other articles sprang up like mushrooms. 
 1 When the war was over, there remained, 
 naturally, a feeling in favour of these manu- 
 factures, and higher duties were imposed to give 
 tpem a chance in competition with the English 
 goods which then began to pour in.^ This was 
 
 ^ " The manufacturers of Great Britain, well knowing the needs of 
 the American markets, made haste to send over their goods, which, 
 in the early summer of 1815, began to arrive in fleets of merchant 
 vessels, in such quantities as had never before been known. Coming 
 over consigned to nobody, the goods were hurried by the super- 
 cargoes and captains in charge of them to the auction block, where, 
 to the surprise of the owners, high prices were obtained by the sharp 
 competition of eager buyers. . . . During April, May, and June, 
 1 81 5, the duties paid at the New York custom houses on goods, 
 waies, and merchandise brought from England amounted to 
 3,960,000 dollars. When the news of the quick sales and great 
 profits at auction reached Great Britain, whole fleets of vessels were 
 loaded and despatched to America. One day in November, 1815. 
 twenty square-rigged ships came up the harbour of New York. On 
 another day fifteen ships and eight brigs arrive ; and what went on 
 at New York was repeated at every seaport along the Atlantic coast. 
 The gainers by this unusual trade were the British manufacturers, 
 the British ship-owners, the auctioneers, and the Federal and State 
 treasuries. The sufferers were the American importers, manufac- 
 turers, and wholesale merchants, who without delay appealed to 
 Congress for protection." — Prof. M 'Master in Cambridge Modern 
 History, vol. vii. p. 354. 
 
VII. IN AMERICA 65 
 
 Strengthened by the shutting out of agricultural 
 produce from England under the Corn Laws. It 
 was, in fact, very much our stringent protective 
 policy which forced America into manufacturing 
 for herself She was not allowed to pay for her 
 imports by agricultural exports. For twenty years 
 from 1 8 16, the protective policy was continuous, 
 and it was based on the Infant Industry argument. 
 By 1830, or perhaps earlier, the "diversified 
 industry" was attained ; the Infant Industry argu- 
 ment lost its force. In 1833, for instance, it was 
 said that the cotton industry was ready and able to 
 meet imports on a free-trade footing. Between that 
 and i860, there was great vacillation in the tariff 
 policy ; high and low tariffs succeeding each other 
 in a very unprincipled way. From i 846, indeed, 
 the country seemed to be approaching Free Trade. 
 Then, unhappily, came again the old spring 
 and excuse of Protection. To raise revenue for 
 carrying on the Civil War which began in i860, 
 every possible article, home and foreign, was taxed, 
 and taxed heavily. The statesmen in power were 
 protectionists, and Protection ran riot. After the 
 war, the removal of internal and excise taxation 
 was not accompanied by removal of the customs 
 tariff. The war tariff of 1864 remained in force 
 for twenty years without reduction. The growing 
 feeling towards Free Trade disappeared. Many 
 industries had grown up, or been greatly extended, 
 under the influence of the war legislation. That 
 some were unsuitable to the country did not 
 appeal to those who had sunk their fortunes in 
 them. The infant industry, crippled from its 
 
 E 
 
66 PROTECTION IN AMERICA CH. vii. 
 
 birth, appeared as good a subject for protection as 
 the infant industry that only required benevolent 
 care during its early years.^ 
 
 And, ever since, the Vested Interest has riveted 
 its hold. What appears, then, in America is the 
 phenomenon of the employers in practically all 
 manufacturing industries crying out, in the name 
 of justice, for equal Protection ; and the workers 
 are easily persuaded that their living depends on 
 the continuance of these industries. 
 
 At the back of it all are the two facts : that 
 America is a country of such vast natural resources 
 that it would be difficult for any fiscal system to 
 keep back the progress of the nation, and that, 
 within its great area, there is absolute free trade. 
 
 1 See passim Taussig's Tariff History of the United States, and 
 Rabbeno's American Commercial Policy, 
 
CHAPTER VIII. 
 THE PRINCIPLE OF A PROTECTIVE TARIFF. 
 
 IVhat principle regulates the differeiitiation of rates in a tariff? 
 Is it prohibition, or equalisation of labour costs, or equalisation of 
 costs generally? Whatever principle be alleged, experience shows 
 that rates are determined by warring interests, either as a victory 
 or as a compromise. 
 
 So much for the genesis of Protection and its con- 
 tinuance. It does not arise from a thought-out 
 poHcy : the economists are not consulted. During 
 the restriction of a war, a country starts making 
 things for itself, without regard to " natural ad- 
 vantages," or, indeed, to anything but necessity. 
 When the war is over, it is thought that the pro- 
 ducers have deserved well of their countrymen ; 
 the government undertakes to secure them from 
 rapid extinction at the hands of more advanced 
 nations ; and it is only a question of time till 
 the vested interests can neither be overlooked nor 
 silenced.^ 
 
 1 This, of course, does not account for the rise of Protection in 
 our self-governing Colonies. Here the explanation is the natural 
 tendency of a tariff for revenue to pass into a tariff" for protec- 
 tion. Every colony, however new, needs a revenue. It is diflicult to 
 
68 PRINCIPLE OF A TARIFF chap. 
 
 But a tariff is not a simple thing. It is not 
 a uniform rate. It consists of a great range 
 of differential duties, some low, others high, 
 some few prohibitive. And, inevitably, at every 
 revision — and the American tariff has been altered 1 
 some forty times since 1789 — the question is| 
 raised as to what is the principle of these differ- j 
 ences. 
 
 I cannot answer this question. It is not as 
 if the protected country drew up a tariff with the 
 object of getting the largest revenue at the least 
 hardship to the consumers. It admits foreign 
 goods of compulsion and unwillingly. A self- 
 sufficient country like the United States, for 
 
 get it from internal taxation (whether levied directly on income or 
 land, or, levied indirectly, on commodities), on account of the small 
 and scattered population ; and the obvious course is taken of imposing 
 heavy taxes on imports. Behind these import duties, gradually 
 rise vested interests. It is represented, in the usual way, that a 
 " diversified industry " is necessary, and cannot spring up without 
 enough protection to overcome the natural handicaps. The infant 
 industries, once supported by government crutches, never willingly 
 abandon them, and the vested interest does the rest. 
 
 There is another explanation forcibly put by Fawcett {Free Trade 
 and Protection, p. ii). It is that emigrant artizans have difficulty 
 in finding in a colony the kind of employment to which they have 
 been accustomed. They do not take willingly to the land ; even 
 gold mining is found not always a short cut to wealth. So they 
 naturally favour the establishment by Protection of industries 
 where their old skill can find opportunity. And, in several of our 
 Colonies, "labour legislation," as it is called, is almost alarmingly 
 prominent. While these sheets were passing through the press, the 
 Premier of New South Wales had to point out to a deputation of 
 men unemployed through the cessation of public works that the 
 government did not borrow money merely to find employment for 
 the citizens. 
 
VIII. M'KINLEY: ROOSEVELT 69 
 
 instance, might be quite content to have no 
 imports. But, as Sumner says, " As soon as we 
 get the home market firmly shut, so that nobody 
 else can get in, we find that it is a question of 
 life and death with us to get out ourselves." ^ 
 And the exports inevitably bring the imports 
 which pay for them. Hence the need of differ- 
 entiating the tariff, so as to admit imports with 
 the least harm to home producers. In such 
 circumstances, a principle is scarcely to be looked 
 for. But I may quote some utterances which 
 seem to admit that the need of a principle is felt 
 — if it be only to make the tariff respectable. 
 
 President M'Kinley, presented his revised tariff 
 Bill with the following words: "The object of tariff 
 taxation is not the raising of revenue, but, on the 
 contrary, the reduction of revenue, and ultimately 
 the extinction of revenue, by duties to be raised 
 to a height sufficient for the accomplishment of 
 this end." 
 
 Here is a confession that the aim of Protection 
 is Prohibition. First put on a tariff If foreign 
 goods come in, raise it higher. If they still come 
 in, raise it again, till " revenue is extinguished " ; 
 that is, till no goods come in at all. 
 
 With more plausibility. President Roosevelt, in 
 the Message to Congress, December, 1901, said: \ 
 " Every application of our tariff policy to meet 
 our shifting national needs must be conditional 
 upon the cardinal fact that the duties must never 
 be reduced below the point that will cover the 
 difference between the labour here and abroad." 
 
 ^Protectionism, p. SS. 
 
 / 
 
70 EQUALISATION OF LABOUR COSTS CHAP. 
 
 This seems to assume that the American labourer 
 has, somehow or other, got his wages up so high 
 that the wages have raised the cost of production 
 of American goods, and that the goods coming 
 from other nations must be taxed to raise them 
 to the same price, or else wages will be brought 
 down. It is the so-called Pauper Labour argu- 
 ment — an argument, by the way, which was used 
 by ourselves in 1779 in regard to Irish labour, 
 when Lord North proposed to allow Ireland to trade 
 with the Colonies and with foreigners on the same 
 footing as England. But it reads very strangely 
 to those who remember that France and Germany 
 urge the need of protection against America 
 for precisely the opposite reason, namely, that 
 American labour is so well paid and productive ! 
 
 One could understand this if the high wages of 
 America were artificial ; if, for instance, Trade 
 Unionism were there so powerful that wages were 
 raised quite apart from the product of work. But, 
 notoriously, this is not the case. Trade Unionism 
 in America is weak. The high wage is evidently 
 the result — the natural and happy result — of high 
 industrial skill, working with cheap raw material, 
 and fed on abundant food. " This claim for Pro- 
 tection to American industry, founded on the high 
 scale of American remuneration, is a demand for 
 special legislation and in consideration of the 
 possession of special industrial facilities — a com- 
 plaint, in short, against the exceptional bounty of 
 nature."^ 
 
 If the proposition is read in any other way, 
 
 ^ Cairnes, Some Leading Principles, p. 385. 
 
VIII. EQUALISATION OF COSTS 71 
 
 it seems to amount to this : that prices generally 
 in a protected country are high ; living, accord- 
 ingly, is dear; and workers need high wages to 
 pay the high prices. But, as wages are " labour 
 cost," the high prices are assumed to be the 
 result of high wages ! High prices explain high 
 wages, and high wages explain high prices — a 
 very pretty example of circular reasoning. 
 
 All this is exceedingly crude ; so I turn to a 
 principle suggested by an American economist, for 
 whom we all have a very high respect. Professor 
 J. B. Clark, of Columbia University.^ " It would 
 be entirely reasonable," he says, " to reduce each 
 duty to an amount that equals the difference in 
 cost between the American and the foreign article. 
 Find out accurately how much the owner of an 
 
 '^ The Control of Trusts: Macmillan, 1901. Economists in 
 America are in rather a difficult position. If they speak in defence 
 of Protection, they lose their scientific reputation. If they speak 
 fearlessly against it, even if they escape being turned out of their 
 Universities, they lose their influence with the people — for Political 
 Economy in America, it has been said, is regarded as the science 
 of tariff regulation. Besides, they have always the consciousness 
 that an industrial system which is protected from head to heel re- 
 quires a revolution to change it, and they have to weigh the 
 advantages of setting industry on a sound economic basis against 
 the gigantic disturbance and loss which would, in the first instance, 
 accrue. "Whatever may be said about the wisdom of having 
 tariffs at all," says Professor Clark, "a country which actually has 
 one, and which under it has built up industries that are still in some 
 degree dependent on it, will be cautious in abolishing it." But they 
 are all tariff reformers ; and, in the present case, Professor Clark, 
 acknowledging that the actual tariff is "irrationally protective," 
 puts forward a principle which, without saying anything for the 
 abolition of Protection, would show that a reduction of tariff' 
 was "entirely reasonable." 
 
A 
 
 72 y. B. CLARK CHAP. 
 
 American mill has to spend in the creating of 
 a particular product, ascertain with the same 
 accuracy how much the European spends for the 
 same purpose, and make the duty on the com- 
 pleted article equal to the difference between the 
 two sums. The European can then place his 
 goods on the American market at an outlay 
 which, when duties are paid, equals the outlay in- 
 curred by his American rival. The two will then 
 be more nearly on an equal footing, and success will 
 come to the one who improves his processes more 
 rapidly, and makes the largest savings in the 
 advertising and selling of his wares. The public 
 will get the benefit of this rivalry in economical 
 production, and will get its goods at the maximum 
 of cheapness."^ The principle is, that a tariff 
 should put home producer and foreign producer 
 on a footing of perfect competition ; competition, 
 in Professor Clark's view, being " the regulator of 
 prices and wages, and the general protector of the 
 interests of the public." ^ The idea that a tariff 
 should give any monopoly to the home producer 
 is expressly disclaimed. 
 
 This is not the place to go into any detailed 
 criticism of the principle thus laid down. It is 
 enough, perhaps, to say that, when Professor Clark 
 says " European," he seems to have been thinking 
 of " British " ; in other words, to have been think- 
 ing of the difference of cost as between a protected 
 and a free-trade country. But other protected 
 nations send their goods into America, and every 
 nation has a different cost. A tariff based on his 
 
 1 The Control of Trusts, p. 43. "^ Ibid. Preface, p. v. 
 
VIII. THE REAL DETERMINANT 73 
 
 principle, then, would seem to involve differential 
 duties against every separate country. And I do 
 not think he has sufficiently considered the diffi- 
 culty of arriving " accurately " at cost in any 
 country except by taking the selling price. Apart 
 from all this, it seems clear that few Protectionists 
 would admit that the end of a tariff is merely 
 to equalise costs and secure competition. They 
 always aim at partial or total monopoly. 
 
 But one gets tired of seeking for a principle in 
 a tariff where, at each revision, the changes are so 
 obviously determined, not by sober scientific and 
 economic calculation, but by the weight of the 
 influence brought to bear on the politicians.^ In 
 1882, Congress appointed a Tariff Commission to 
 collect evidence and report. With the exception 
 of one person, it consisted entirely of Protec- 
 tionists. It recommended a reduction of 25 
 per cent, saying wisely : " Excessive duties are 
 positively injurious to the interests which they are 
 supposed to benefit. They encourage the invest- 
 ment of capital in manufacturing enterprises by 
 rash and unskilled speculators, to be followed by 
 disaster to the adventurers and their employes, 
 and a plethora of commodities which deranges 
 the operation of skilled and prudent enterprise." 
 Its recommendations were simply put aside ; and 
 the new tariff of the next year was " kicked about 
 
 ^ I once asked a manufacturer in the United States why the duty 
 on his goods was 40 per cent. — not 30 per cent, or 50 per cent. 
 His answer, I fancy, put the truth in a nutshell. "Our Congress- 
 man," he said, "came round and asked, what duty do you want? 
 and we said 40 per cent, would do." 
 
74 WES GUYOT CHAP. 
 
 in committee till it came out a grotesque com- 
 promise of warring interests." 
 
 The experience of France is the same. To 
 quote M. Yves Guyot : " Not only does Protec- 
 tionism plunge the country which adopts it into ^ 
 a war of tariffs with all other countries, but, even 
 within the country, it rouses a spirit of antagonism 
 in every district which thinks itself sacrificed to 
 other districts, and in every industry which de- 
 mands to be protected over and above other 
 industries, and at their expense. Under Protec- 
 tion, economic rivalry gives place to political 
 rivalry. This is confirmed by the daily experi- 
 ence of every Protectionist country. I have had 
 special opportunities of seeing how private in- 
 terests combine against the public interest in the 
 French Parliament, The whole art of M. Meline, 
 who has been the Protectionist leader for close on 
 25 years, has consisted in uniting groups of often 
 contradictory interests, paying court to them, 
 effecting bargains between this and that party, 
 always to the detriment of the consumer, who is 
 the general public. ' Beetroot strikes a bargain 
 with Wine ; Cotton and Iron come to an under- 
 standing.' There, in a nutshell, you have the 
 part which Protection plays in parliamentary 
 life." ^ 
 
 Lastly, take our own experience. In 1840 a 
 Committee of the House of Commons reported as 
 follows : " The tariff of the United Kingdom 
 presents neither congruity nor unity of purpose. 
 No general principles seem to have been applied. 
 
 '^ Fortnightly Review, ]\i\yy igo'^. 
 
VIII. OUR OWN EXPERIENCE 75 
 
 The tariff often aims at incompatible ends ; the 
 duties are sometimes meant to be both productive 
 of revenue and for protection, objects which are 
 frequently inconsistent with each other. Hence 
 they sometimes operate to the complete exclusion 
 of foreign produce, and' in so far no revenue can 
 of course be received ; and sometimes, when the 
 duty is inordinately high, the amount of revenue 
 is, in consequence, trifling. They do not make 
 the receipt of revenue the main consideration, but 
 allow that primary object of fiscal regulations to 
 be thwarted by the attempt to protect a great 
 variety of particular interests at the expense of 
 revenue, and of the commercfal intercourse with 
 other countries. Whilst the tariff has been made 
 subordinate to many small producing interests at 
 home, by the sacrifice of revenue, in order to 
 support their interest, the same principle of inter- 
 ference js largely applied by the various dis- 
 criminating duties, to the produce of our colonies, j 
 by which exclusive advantages are given to the 
 colonial interests at the expense of the mother 
 countr}^" 
 
 The conclusion seems inevitable ; that, where 
 duties are differentiated with the view of protect- 
 ing, not the industries which should exist but the { 
 industries which do exist, and where the amount 
 of the differentiation is arrived at by a struggle 
 of competing interests and unequal weight of 
 influence, it is useless to look for a principle. 
 
 ■ / 
 
 I 
 
CHAPTER IX. 
 POSSIBILITY OF A SCIENTIFIC TARIFF. 
 
 In the framing of a tariff by a country hitherto Free Trade, certain 
 broad principles would be cucepted, but each presents its own diffi- 
 culties, (i) Exotic goods allowed in free wotdd not, indeed, cot)ipete 
 with home industries, but they are the favotirite objects of revenue 
 taxation. (2) Free food conflicts with the interest of the home agri- 
 culturist. (3) Free raw materials conflict, not only with agricul- 
 tural atid mining industries, but with those who use home-produced 
 ra'iv material. But the attempt to define ^^raw" material presetiis 
 endless difficulties. And the importance of cheap raiv materials, 
 as compared with the importance of cheap manufacttired materials^ 
 if these should happen to be the basis of national industries, is not 
 obvious. (4) Taxed manufactures encounte) the latter objection, and, 
 besides, include tools. One begins to see why it is that a country 
 which once adopts Protection ends by taxing every thittg. 
 
 But even if one is convinced of the impossi- 
 bility of revising a tariff on anything Hke 
 economic principles, when once vested interests 
 have tightened their hold, there may remain a 
 belief that a scientific tariff could be drawn up 
 by a country which had hitherto been Free 
 Trade. 
 
 Without attempting to define the adjective 
 " scientific," which would, perhaps, prejudge the 
 
CH. IX. TAXING EXOTIC GOODS AND FOOD 77 
 
 case, let us look at certain deductions of ex- 
 perience as to the taxing of imports. 
 
 I. Common sense dictates the free admission 
 of things a country cannot grow or make. 
 Dear goods, as dear goods, are bad. If, then, 
 a government, in order to protect certain indus- 
 tries, is going to make many things dear, there 
 is all the more reason that it should let in j 
 non-competing things cheap. 
 
 But here steps in the Chancellor of the 
 Exchequer. He must have a revenue, and he 
 cannot raise all that revenue by direct taxes. He 
 knows that, in proportion as the protective tariff 
 is successful, there will be little revenue ; if it 
 be completel}' successful, none. Such luxuries, 
 then, as Tea, Tobacco, and Spirits are the 
 things on which he can most easily raise an 
 assured revenue, with a minimum expense of col- 
 lection. So, under a protective tariff like that of 
 Canada, heavy import duties, amounting to an 
 average of 170 per cent., are put on such goods. 
 
 n. Common sense seems to dictate the free 
 admission of Food. The prosperity of a com- 
 munity surely depends, fundamentally, on getting 
 the animal basis of life as cheap as possible. 
 The human worker is, after all, the great Tool. 
 The argument is strengthened, in our case, by 
 the consideration that many of the countries 
 with which we compete do not require to protect 
 their agriculture. Nature has done it for them. 
 For us to put on such a duty, seems like 
 
78 TAXING FOOD chap. 
 
 deliberately handicapping ourselves in the inter- 
 national race by raising the cost of production 
 of Man. Hence, up till the present, it was 
 thought that, if there be a form of Protection 
 which would be totally indefensible in this country, 
 it is the taxation of food. 
 
 But here steps in the agriculturist, and asks, 
 with some heat, if the manufacturing classes are 
 to be favoured, while the oldest industry in the 
 world, and still the largest, is to be left to 
 merciless competition with cheap food from every 
 country under heaven? Indeed, in our case, if 
 there is an argument for the protection of any 
 class of producers, it almost seems as if it should 
 be protection for the producers of food, seeing 
 that we are actually at a natural disadvantage, as 
 compared with many other countries, by reason of 
 our climate and the narrow area of land suitable 
 for each crop. And if there is an industry in 
 the country which has some reason to think 
 meanly of Free Trade, it is Agriculture — remem- 
 bering, always, that the agricultural interest 
 which can and does make itself heard most, is 
 the interest of the landowner. In fact, it was 
 made a special claim for Ireland — in a Royal 
 Commission — that its agriculture was destroyed 
 by Free Trade, and that it never had the 
 manufacturing industries on which to make up 
 the loss. 
 
 III. If a country has sunk most of its capital 
 I and specialised most of its energies in manufac- 
 ( turing, the free import of raw materials seems 
 
IX. TAXING RAW MATERIALS 79 
 
 almost necessary. This has generally been re- 
 cognised by the most protectionist countries. 
 
 There is scarcely room for difference of opinion 
 as to the admission of materials a country cannot 
 produce for itself But, beyond such imports, the 
 free admission of raw materials encounters the 
 opposition of those who raise similar or com- 
 peting raw materials at home, and naturally 
 object to the competition of countries which can 
 raise them more cheaply. At this point arise 
 the most serious conflicts of interest. Wool, for 
 instance, is a raw material of many manufac- 
 tures. But if, to suit the woollen manufacturer, 
 it is admitted free, this comes into rough colli-/ 
 sion with the interests of the farmer — one of his 
 staple products being sheep. Say, however, that 
 wool is not admitted free, then, in many coun- 
 tries, the silk, cotton, and linen manufacturers are 
 favoured ; as using foreign raw material, they get 
 the basis of their industries presumably more 
 cheaply. For it should not be forgotten that 
 woollens do compete in use with cotton and linen 
 and silk. Everyone knows the position which 
 flannelette — a cotton fabric — has taken in the 
 clothing of the poor. In certain shop windows, 
 one sees a strenuous attempt — backed by expert 
 evidence — to prove that linen is a healthier under- 
 wear than wool, while Dr. Jaeger brings his own 
 evidence to prove the contrary. Silk, of course, 
 is an active competitor with wool in the same 
 line, except that it is so expensive. In socks and 
 stockings, again, there is competition between 
 Lisle thread, silk, worsted, and mixtures. So in 
 
8o TAXING RA W MA TERIALS chap. 
 
 carpets, hangings, table covers, and the like, 
 with the addition here of jute as a serious 
 competitor.^ 
 
 The endeavour to secure cheap raw material 
 for the manufacturer who employs imported 
 material as his base, and yet to give equal treat- 
 ment to the manufacturer who uses home raw 
 material, becomes almost hopeless where the pro- 
 tected country not only produces the raw 
 material, but works it up. Here the grower 
 clamours for protection and the manufacturer for 
 free admission. One would think that, if there 
 is a raw material which should be admitted free 
 into France, it is silk fibre, silks being, 
 of course, the traditional export of France. 
 Yet, in 1892, the Communes could scarcely 
 resist the agitation for the protection of the 
 home cultivated cocoon, and only escaped it 
 by offering a bribe to the home producers, in 
 the form of a grant of over 3,000,000 francs 
 for primary and technical education in agri- 
 culture.2 
 
 Here is another case, difficult to put under a 
 category. It is where two raw materials are 
 necessary for one fabric, and the one material 
 comes from abroad, while the other is produced at 
 
 ^ In 1902, the Agrarian Party in Austria asked for a duty 
 against raw cotton, with the avowed object of protecting wool 
 and flax. The argument used was : If raw cotton from 
 abroad is admitted free, cotton goods are produced more cheaply 
 than woollen and linen goods, whose raw material is grown at 
 home, and a blow is struck at the farmer and flax grower. 
 
 ^ Economic /otirnal, September, 1896. 
 
IX. TAXING RAW MATERIALS 8i 
 
 home, Farrer gives an example which might be 
 paralleled, in all probability, from other industries. 
 Everyone knows those mixed cotton and silk 
 fabrics, made in the factories of Lyons. Here 
 cotton yarn is woven along with silk yarn. But 
 cotton yarn is an import heavily taxed in order to 
 protect the cotton spinners of Lille. The Lyons 
 weavers, then, complained that many of their 
 yarns could not be obtained except from Eng- 
 land, and, moreover, that they were suffering 
 competition from Switzerland, where cotton yarns 
 were admitted free. The Lille spinners, on the 
 other hand, urged that " the distress among 
 the Lyons weavers was nothing to that prevail- 
 ing among the Lille spinners." Here it is French 
 spinners against French weavers.^ 
 
 The fact is, that any particular raw material 
 may be the sole base of one manufacturing in- 
 dustry, or one of the bases, or only a trifling 
 auxiliary ; while it may, at the same time, occupy 
 a different position, as basis or auxiliary, in several 
 competing industries. It is impossible to recon- 
 cile all these interests. 
 
 But what is a " Raw Material " ? The term 
 is not a scientific one. No definition of it appears 
 in the Dictionary of Political Economy. It is not 
 even a Board of Trade or Custom-house category. 
 
 ^ The remedy suggested by the President of the Lille Chamber of 
 Commerce shows the ridiculous impasse in which attempts to recon- 
 cile warring interests often land. It was to raise the duty on agri- 
 cultural products, in order that French agriculturists might grow 
 rich and become better purchasers of French manufactures ! — Farrer, 
 Free Trade versus Fair Trade, p. 167. 
 
 F 
 
82 WHAT IS RAW MATERIAL? chap. 
 
 Generally, we are left to infer that what does not 
 appear under the category " manufactured," is raw 
 material — so long as it is not " food and drink." 
 According to our official trade accounts, Sawn 
 Timber is not a raw material, which would seem 
 to show that only tree trunks are "raw"; in which 
 case a thing remains raw if an axe is laid upon 
 it, and is manufactured when passed through a 
 saw mill. In the German and French tariffs. 
 Pig-iron is a raw material, excluded from the 
 category of " manufactured " ; with us, and with 
 the United States, it is included. Even Slates 
 and Stones with us are manufactures. 
 
 In highly protective countries, one has to infer 
 what is counted raw material from the fact of its 
 paying the lowest rate of duty. With us wool, 
 dirty or clean, is considered raw material. But 
 there is a refinement in the American tariff which 
 is very suggestive. 
 
 Unwashed wools are wools shorn from the 
 sheep's back without any cleansing. Washed wools 
 are wools washed with water only, on the sheep's 
 back or on the skin. Wools washed in any other 
 manner are " scoured." The importance of the 
 subtle distinction comes out in the provision that 
 washed wools pay double the duty of unwashed 
 wools, and that scoured wools pay three times 
 the duty. So that, if a bottle of sheep-dip is 
 put into the water at the washing, it would 
 seem that treble duty is payable, while leaving 
 sheep altogether unwashed allows the wool to 
 get in at the lowest figure — a premium on dirt 
 and disease which, I imagine, would not be 
 
IX. TAXING MANUFACTURED MATERIAL 83 
 
 without its effects. So far as this goes, it 
 seems to indicate that the difference betvveei 
 " raw material " and " partly manufactured 
 material is a question of soap and water. Thos^ 
 people, then, who speak so glibly about letting 
 in raw material free, have evidently some work 
 before them when they try to determine at what 
 stage any material is " raw," and at what stage 
 it should be taxed. 
 
 But this is not a mere difficulty of classifica- 
 tion. Even if we could define a raw material 
 with absolute accuracy, the proposal to admit it 
 free, while taxing all other " material," is exceed- 
 ingly serious. What affects the home producer is 
 not in the least whether the material he buys is 
 really " raw " or something very far from being 
 raw. The thing that affects him, and his trade, 
 is that the material with which he starts should 
 be cheap. Why is it that the non-taxation of 
 raw material appeals to everybody as reasonable? 
 Is it not that it is the interest of the producer, of 
 the consumer, and of the exporter, that goods 
 should cost as little as possible? If the raw 
 material accounts for a large part of the selling 
 price of the manufacture, and we tax that mate- 
 rial, we make the finished article proportionally 
 dear. But if our national manufactures happen 
 to begin with a material which is not " raw," but 
 has already passed through some processes of pre- 
 paration before it comes here, is not the hurt of 
 import duties to these industries — their producers, 
 consumers, and exporters — exactly the same as if 
 we taxed the raw material? Can anyone say 
 
84 TAXING MANUFACTURED MATERIAL chap. 
 
 why our manufacturers should begin with the 
 so-called raw material, or be penalised because 
 they do not? Is it not as profitable perhaps 
 to begin with material already partly manufac- 
 tured ? 
 
 It is quite clear that, in home trade, the manu- 
 factured product of one industry becomes the 
 material and substance of another. Our weavers 
 do not spin ; they buy yarn from the spinners and 
 weave it. The tailor begins with the cloth. The 
 watchmaker begins with a whole complex of ready- 
 made components. Why should it be made a 
 misfortune that the first — and, presumably, less 
 skilled — process of manufacture should not be 
 done in this country? Is it a misfortune that 
 our silk manufacturers begin with silk that has 
 already passed through several stages ; that our 
 cycle makers begin with a few components 
 bought from America ; that our joiners do not 
 begin with tree trunks, but with sawn timber, 
 or even with ready-made doors and window 
 sashes? Is not the taxation of partly manu- 
 factured materials in flat contradiction to all 
 we have been taught, since Adam Smith, of the 
 advantages of the division of labour?^ 
 
 The only ground I can find for the belief that 
 raw material should be admitted free, as compared 
 
 ^As regards the Brewing trade, it has been pointed out that 
 staves come from Norway, hoops from Holland, capsules from 
 Germany, casks from Sweden, hops and grain from various 
 countries: that, as a matter of fact, all this country contributes 
 in the way of raw material is the water used in the manufacture, 
 and the straw for packing. But brewing is one of our staple 
 British industries. 
 
IX. FOOD AND RAW MATERIAL 85 
 
 with everything which has passed through a pro- 
 cess, is the ineradicable belief of some people that 
 we ought to do everything ourselves ; and that, if 
 an article passes through six stages before it 
 comes out a finished good for consumption, we 
 are somehow defrauded if we do not secure more 
 than five of them. It seems to me almost as 
 absurd as insisting that we teachers should read 
 nothing but English books, or, perhaps, should 
 write our own books. 
 
 One would think these are difficulties enough, 
 but I should like to note one more. It is 
 that of distinguishing between Food and raw 
 material. For, as it happens, imported food is 
 the raw material of much of our new agriculture. 
 It is said, indeed, that the salvation of modern 
 farming has come from the possibility of getting 
 cheap feeding for cattle. Mr. Balfour put this 
 strongly, in May of 1903, when defending the 
 abolition of the tax on grain. " Let me ask 
 farmers," he said, " if they really think that, from 
 the point of view of feeding stuffs, the tax is 
 really to their advantage? ... I maintain that 
 the tax has operated as a burden on the raw 
 viaterial used by farmers!' 
 
 Flour, again, is a Food. But is it not also 
 the raw material of several things we undoubtedly 
 call manufactures ? Maize is the substance of 
 corn-flour, and corn-flour is a food ; but the 
 spoiled corn-flour goes into starch, and starch is 
 a manufacture. If, again, meat is taxed as food, 
 is this not a tax on leather, the raw material of 
 many industries ? 
 
86 TAXING MANUFACTURES chap. 
 
 IV. The only class of goods remaining for con- 
 i' sideration, after foreign products that we cannot 
 make, food, and raw materials, is what we call 
 Manufactures. And generally, ever since the 
 days of Colbert, the opinion of rising countries is 
 
 \ that the import of manufactures should be pro- 
 hibited or handicapped wherever they interfere 
 with or threaten similar home manufactures. 
 Manufactured commodities, it is assumed, are the 
 goal of industry. It is in order to manufacture 
 them cheaply that we admit food and raw material 
 free. If we allow free entry to the manufactures 
 of other countries, we give away the case for free 
 entry of food and raw materials. 
 
 The inadequacy of this argument appears the 
 moment we notice our own classification of 
 manufactures, as " manufactured and partly 
 manufactured." Suppose that we could put the 
 " manufactured " into a category of their own 
 called Consumption Goods, meaning by that, 
 goods ready for being consumed in the support 
 of human life and not requiring any further pro- 
 cess of labour, the difficulty would at least remain 
 as regards all the others. For all " partly manu- 
 factured " goods are simply the substance and 
 
 I base — the " material " — of further home industries. 
 
 ■ To tax them, as I say, has exactly the same effect 
 as to tax raw materials. 
 
 But, again, among " manufactures " — one would 
 say, among " finished manufactures " — appear 
 tools of all descriptions. But tools surely 
 stand on the same line as raw materials ; they 
 also are necessaries and foundations of all in- 
 
IX. TAXING MANUFACTURES 8; 
 
 dustry. To agricultural countries, the taxing 
 of agricultural implements is a recognised and 
 serious evil. To judge of its effect, one has 
 only to take a walk anywhere in rural France, 
 and witness the peasant working with ploughs 
 only fit for a museum — such ploughs as might 
 be seen on a Roman frieze, but never in English 
 fields. 
 
 So it comes that, if a country adopt this pro- 
 tection against manufactures, it is driven to make 
 such a complex and detailed tariff, that it is very 
 expensive, very difficult to work, very vexatious, 
 and, at the same time, very open to evasion of 
 all kinds. The contents of any shop window, 
 with its huge variety of articles which must be 
 called " manufactures," show how impossible it is 
 to group them into intelligible classes. And thusj 
 one finds in tariffs such absurdities as that o 
 certain house furnishings being taxed, not a 
 single goods, but as complexes of wood, steel, 
 copper, brass, etc., on each item of which is levied 
 a different duty. It reminds one of the old rail- 
 way casuistry whereby a bicycle was charged for 
 under the classification of " a perambulator with 
 two wheels." ^ 
 
 From all these considerations, one begins to see 
 
 ^ Cf. a recent decision affecting an American fruit dealer who 
 imported from Italy, along with a shipment of lemons, a bushel of 
 snails intended for his own table. The authorities decided that a 
 duty on the snails was necessar}', but were for a long time at a loss 
 under what category to place them. Finally, they paid duty as 
 " wild animals " ! 
 
88 TAXING EVERYTHING CH. ix. 
 
 why it is that, when a government once adopts the 
 protectionist faith, it is driven by force of circum- 
 stances, not to select and categorise, but to tax 
 everything ; and when it tries to let in some 
 things free, or at a reduced rate, is met with a 
 storm of opposition from hundreds of vested 
 interests.^ 
 
 ^ The kind of problems presented may be illustrated by the treat- 
 ment of colza oil in France. It is manvifactured from the seeds of 
 a kind of turnip, which is also a valuable feeding stuff. To protect 
 the growers, in 1890-2 the Commission of Customs proposed that 
 colza should be protected by a 6 per cent. duty. But the oil is 
 burned in lamps, and the consumers rebelled. To protect their 
 interests, it was proposed that other illuminating oils should be 
 admitted free. Again, colza is largely used in the making of cer- 
 tain soaps, and these soap makers rose in arms. To propitiate 
 them, it was proposed that oleaginous substitutes used in the 
 making of other soaps should also be taxed, and all soap makers 
 put on an equal footing of disadvantage. Thus, to favour the 
 farmer, colza was taxed and lamp oil made dear ; oleaginous sub- 
 stitutes were taxed and all soap made dear. The later develop- 
 ment, I believe, is that, in 1903, the home colza growers asked for 
 the taxation of all oil-producing grains as well. To propitiate the 
 French Colonies on the West Coast of Africa, it was proposed to 
 admit their colza free. The Colonies refused the offer, knowing 
 that they "would have to pay for it" in other ways! One may 
 judge if Sumner exaggerated when he said: "Tax A to favour B. 
 If A complains, tax C to make it up to A. If C complains, tax B 
 to favour C. If any of them still complain, begin all over again." 
 — Protectionism, p. 78. 
 
V- 
 
 CHAPTER X. 
 CONCLUSIONS AS TO PROTECTION. 
 
 A protective tariff which does not present all manner of anomalies 
 and inequities is impossible. Protection tends to political and com- 
 mercial immorality. It raises cost and checks exports. 
 
 From what has been said, four conclusions seem 
 to suggest themselves. 
 
 I. That it is beyond the wit of man to draw 
 up a tariff which will protect whole ranges of 
 industries without causing all sorts of anomalies 
 and inequities. 
 
 Under Free Trade, self-interest, urged by com- 
 petition, directs capital into the industries which 
 pay, and buys its material and tools wherever 
 it gets them cheapest and best. But Protection, 
 having for its object the restriction of competi- 
 tion, even where it allows the free entrance of food 
 and raw material, taxes other material and tools 
 differentially, according to the circumstances and 
 needs of particular home trades ; that is, not 
 according to any principle of suiting the needs of 
 those trades which use the material and tools, 
 but according to the circumstances and needs of 
 
 \y 
 
/ 
 
 \ 
 
 90 PROTECTION TENDS TO POLITICAL chap. 
 
 Other home trades. Thus one industry may- 
 get in its material at a low rate because the 
 home producers of that material do not need 
 much protection ; another industry, which com- 
 petes with it, may have to pay a high rate for 
 its materia] because the home producers are at 
 a natural disadvantage. Every industry, again, 
 in this artificial system knows its own weakness 
 or strength against outside competition ; but out- 
 siders do not know, and every man keeps his 
 own trade secrets. Even granted, then, that 
 there are, in each business, experts or men 
 who know just what amount of Protection is 
 needed to " protect," no Legislature has the 
 knowledge or the means of getting at the 
 knowledge. If the Legislature simply asks 
 each industry how much Protection it needs, 
 what kind of answer will it get ? Or suppose 
 a tariff is based on the cost of thoroughly 
 efficient home producers, how will this suit the 
 average, or the inefficient ? Will it not tend to 
 throw industry, as it has done in other countries, 
 into the hands of great combinations, and end in 
 monopoly ? 
 
 II. That Protection tends to political immor- 
 ality. 
 
 Under Free Trade, the statesman is the voice 
 of the nation. He is elected, indeed, by a section, 
 and he is bound, to a certain extent, to look after 
 ; the particular interests of that section, but the 
 interests of the wider community are always par- 
 amount. He takes his seat as a member of one 
 political party, but that party has, and tries to 
 
X. AND COMMERCIAL IMMORALITY 91 
 
 carry out, a national programme. At the very- 
 worst, he stands for no selfish or sordid interest. 
 But what becomes of the purity of political life 
 when every elector looks to his member, not to 
 think of the local and national interests, but to 
 give him a tariff high enough to let him earn a 
 profit ? Nay, what becomes of the party to 
 which he belongs when the whip calls one way 
 and the vested interest another ? How, in these 
 circumstances, can the State remain the " armed 
 conscience of the community " ? ^ 
 
 III. That Protection tends to commercial im- 
 morality. 
 
 Law ought not to lead men into tempta- 
 'tion. And nations should have some regard 
 to the temptation which their laws put in 
 the way of other nations. We are all too 
 apt to think that our obligations to obey stop 
 at the boundaries of our own country and the 
 limits of our own laws. There are very few 
 Englishmen who will not do a little smuggling 
 when they cross the channel — the tariffs of other 
 countries, they argue, are " so irrational." And 
 when it is found, not only that tariffs are irra- 
 tional, but that, on the one hand, the adminis- 
 
 * Where an industry can be made or unmade by a few lines in 
 a tariff schedule, the interest which people take in politics tends 
 to become absorbing in a wrong direction. Although one does not 
 like to cast reflections on one's neighbours, there is some truth in 
 the statement that Americans regard politics as a "business pro- 
 position," and spend large sums in it and on politicians as 
 a business investment. "The day we adopt Protection," said Sir 
 John Brunner, "we may say goodbye to honesty in the House 
 of Commons." 
 
92 PROTECTION HANDICAPS EXPORTS CH. x. 
 
 tration of them is modifiable by influence or 
 bribery, while, on the other, custom-house officers 
 are ready to pounce, with fine or confiscation, 
 on the error of a careless invoice-clerk, the 
 temptation to regard the tariff as a fair mark 
 for ingenuity is all but irresistible. But this need 
 not be dwelt on. The annals of Protection are 
 full of tales of evasion, of connivance, of bribery 
 — to say nothing of smuggling. 
 
 IV. That Protection, as it raises the price of 
 everything imported, and, as consequence, the 
 price of everything raised or made at home, 
 increases cost and handicaps exports to neutral 
 markets. Only great natural resources, great 
 superiority of skill, or production on a very large 
 scale, can outweigh this handicap. Unless, in- 
 deed, recourse is had to the complicated and 
 mischievous machinery of " drawbacks " on export, 
 with the extraordinary corollary that the pro- 
 ducer charges dear for his goods at home and 
 sells them cheap to the foreigner ! 
 
CHAPTER XI. 
 
 PROTECTION AS INDIRECT AND 
 DELEGATED TAXATION. 
 
 Taxation is a price paid to government for common seivices 
 rendered. In its indirect form, certain goods are charged customs 
 and excise ditties, and the extra ive pay goes first to the government, 
 and then comes back to 7<s, minus the expenses of collection, in benefit. 
 But, lender Protection, the government, -wishing to benefit its 
 producing classes, delegates the pozver of taxation to them ; it shuts 
 out foreign competition ; and the extra price, made possible by taxing 
 foreign goods, is taken by these producing classes. It is as if a 
 government, recognising the services of distillers as employers of 
 labour, were to impose custoius duties on foreign spirits and no excise 
 on home spirits. Protection, then, is paid for by the nation in 
 indirect taxation. 
 
 We know that government does certain things 
 for us. We realise, probably, that these things 
 cannot be done for nothing, and that our taxation 
 is the price of these services. In the annual 
 Finance Accounts is found, on the one hand, 
 the cost of the services which the State renders, 
 and, on the other, the price we pa)'. Last year 
 the price was £\'^\\ millions. 
 
 What, then, is Taxation? It is, as a whole, 
 the annual sum paid to the government— and the 
 
94 TAXATION NO BURDEN chap. 
 
 government, of course, is just a grand committee 
 of ourselves, put in power by our own votes to 
 carry out our own wishes — in exchange for 
 which the government gives back to us the whole 
 amount, less the expenses of collection and 
 administration, in Common Benefits. If Pro- 
 tection, then, be added to the recognised functions 
 of the State, it is not to be expected that such 
 a function can be performed without heavily 
 adding to the taxation. 
 
 But we are so accustomed to hear that 
 Protection " taxes " the people — meaning, by that, 
 " burdens " the people — that we do not so readily 
 realise that, if a tax does burden the people, it 
 is a bad tax. It seems, then, of the last import- 
 ance that we should understand where Protection 
 stands in the scheme of taxation. For, indeed, 
 the term Taxation is too good for it. 
 
 The thesis of the present chapter is that, by 
 Protection, a government delegates and gives 
 away its sacred and sovereign power of taxation, 
 and permits certain of its citizens to impose 
 taxes in their own interest. 
 
 In old times, when a sovereign wished to 
 befriend a favourite, he gave him a monopoly of 
 some import. The favourite, having a monopoly 
 of the goods, charged what prices he liked, or 
 could get, and the public bore this burden. They 
 paid the subsidy to the favourite in high prices 
 just as certainly as if they had given a sum 
 out of their pockets. This, in ordinary cir- 
 cumstances, was Burden. It was quartering a 
 
THE DELEGATION OF TAXATION 95 
 
 worthless character on the homes of England. 
 Only in form was it taxation. 
 
 Suppose, however, that Elizabeth gave the Earl 
 of Essex leave to levy sixpence a barrel on every 
 cask of wine that came into the port of London, 
 because Essex manned and maintained a fleet 
 of ships to patrol the entrance to the Thames 
 against pirates and foreign fleets, then the mon- 
 opoly was only payment for services rendered 
 to the nation. It might be a bad way of paying 
 him — bad taxation ; that is all that could be said 
 against it. 
 
 This, however, is the kind of taxation that 
 Protection is. The government might go straight 
 to the people ; take a sum openly out of their 
 pockets called, perhaps, the Industrial Subsidy ; 
 and spend this in giving each deserving manufac- 
 turer a sum equivalent to what he would have 
 got in profits under Protection. There is no 
 doubt that this would be direct taxation. As it 
 is, the government gives a monopoly of the home 
 market ; not indeed to a favourite, but to a 
 favoured class, the producers — they being con- 
 sidered to render services which deserve recog- 
 nition — and by this allows them to charge as 
 high a price as they can get under the monopoly. 
 Thus all who buy the goods are forced by the 
 government to pay a subsidy out of their pocket 
 for the maintenance of this favoured class. 
 
 Fully to understand the difference between the 
 two systems and the difference between their 
 effects, we must go a little deeper into what 
 Taxation always means and always does. Usually 
 
96 TAXATION A PRICE chap. 
 
 the individuals of a nation provide each other 
 with goods and services by each making and 
 selling what he likes. But, as a nation, we have 
 many common interests which can best be pro- 
 vided for in common. National Defence is one 
 of these. In times not very long ago, the noble 
 surrounded himself with a band of retainers, 
 whom he fed, uniformed, and housed. Many 
 of them were domestic servants of various sorts ; 
 many of them were merely private policemen. 
 When, again, a rich citizen went to supper at a 
 late hour through one of the parks, he hired an 
 armed escort. When we learn that Sir Robert 
 Peel first established the splendid force we still, 
 in grateful remembrance, call Bobbies or Peelers, 
 the fact suggests — what was true — that, before his 
 day, men took their local defence into their 
 own hands ; they carried swords, and their 
 servants were armed. But from very early times 
 it was seen that national, as distinct from local 
 and personal defence, was not a matter for private 
 effort. An army and navy were provided by the 
 central authority, and were paid for by a subsidy 
 levied on the citizens. Justice is another common 
 interest. No man should get more than justice 
 because he is rich and able to hire lawyers or 
 employ strength, and no man should get less than 
 justice because he is poor ; it was to secure this 
 even-handed justice that the expenses of courts, 
 judges, and administration generally were got from 
 the citizens by way of a general levy. So even 
 with the more ornamental parts of the constitu- 
 tion. For some time after the Conquest, kings 
 
XI. FOR COMMON BENEFITS 97 
 
 paid to be kings. They had immense expenses 
 for armies, the administration of justice, etc., 
 and they paid for these out of their own estates. 
 When they spent more than they could afford, 
 they generally took simple ways of getting their 
 subjects to assist them. Taxation was called 
 Benevolence, Aids, Gifts, Contributions, and, 
 when appealed for on higher motives. Duty. 
 And one reason given for the fact that there 
 was so little friction between our early kings 
 and their people, was that the Scottish kings 
 lived within their incomes, and did not come on 
 the people for taxes. But, some time ago, it 
 was discovered that it was a bad thing for the 
 sovereign to defray anything of his kingly duties 
 out of his own purse. We do not like unpaid 
 secretaries even now. We were not willing to 
 be under an obligation ; we wanted to have 
 some control of what he spent. So we put 
 him on a salary like any other government 
 servant, and the " Civil List " of ^470,000 
 appears in the same category of the Finance 
 Accounts as the £$ paid to the Precentor of 
 the Town Church of Glasgow. 
 
 The idea of taxation, then, is that of a sum, 
 contributed by each man out of his income, in 
 payment for the great common services. It is 
 compulsory indeed. It could not be otherwise. 
 However good the things we buy, we all natur- 
 ally want to escape paying for them if we can : 
 and, as natural men, I have no doubt we should 
 be quite willing that Mr. Carnegie should pay 
 the heavy end of our taxes, as he does our 
 
 G 
 
98 INDIRECT TAXATION ALL chap. 
 
 University fees. But this is not consistent with 
 political freedom. We want every man to pay 
 taxes ; to know that he is paying taxes ; and to 
 have the right to say to the government, " You 
 shall not spend my money except in a way that 
 I approve." By imposing the duty of paying, we 
 give him the right of dictating the spending. In 
 this, as in many other directions, we compel a man 
 to be free — just as we ourselves are not free till 
 we put ourselves under the compulsion of the 
 Good Will. 
 
 Unfortunately, we cannot carry out the idea 
 of taxation as we should like. Although we are 
 the most enlightened of all peoples as regards 
 the bearing of taxation, even we cannot stand a 
 I5d. income tax unless in time of war. It seems 
 too much to give up all at once. Besides, if we 
 raised all our taxation by income tax, we should 
 get no contribution from the poorer incomes — at 
 least more would be spent in collection than 
 was collected. Yet as all men should pay taxes, 
 we get them to pay in another way — both 
 those who object to pay too much income tax 
 and those who would escape because their in- 
 comes are too small. We stop tobacco, spirits, 
 tea, etc., at the Custom House. We make the 
 importer pay a certain duty on them, and then 
 he recovers that duty in the price which he 
 charges us for the tobacco, spirits, and tea. Thus 
 every one who purchases these commodities, 
 pays part of his taxes every time he buys. 
 This we call the " indirect taxation " of Customs 
 Duties. 
 
XI. COMES BACK IN SERVICE 99 
 
 Here, then, is taxation taking the shape of a 
 raised price — an extra above the price at which 
 the goods would otherwise be put in the shops. 
 And this is the form which protective taxation 
 takes. It is an extension of the Customs Duties 
 for revenue. If the United States had no internal 
 taxes, but raised a sufficient revenue from a tariff 
 on goods coming into the country, this might 
 very well be the sole taxation of the United 
 States. It would all be indirect taxation, but 
 there is no doubt whatever that it would be 
 taxation. So when the tariff is not for revenue 
 purposes but for protective purposes, it is not 
 essentially different in form. It taxes the con- 1 
 sumers inside the country in high prices. 
 
 But there is a difference. We tax tea by 
 Customs Duties, and so tax all tea, for we have 
 no tea but what comes into the country. Hence 
 government gets all the revenue ; that is, all the 
 tariff charges. I say the government gets it all, 
 and, when we pay the extra price, we know that 
 the extra is coming back to us in services. The 
 natural man might grumble at having to pay a 
 tax on tea which amounted to 6d. a week, but 
 he could have little reason to do so if he found 
 that the government was paying this 6d. to a 
 policeman to guard his house. This, then, is the 
 idea of taxation : we pay, but it all comes back 
 to us. 
 
 In the case of a protective tariff, however, we 
 pay, but it does not all come back to us. The 
 government taxes foreign cotton cloth, and 
 raises, say, ;^iooo by this tax. The money 
 
lOO 
 
 AN EXCISE GIVEN chap. 
 
 goes to the Exchequer. When the cloth is sold, 
 the ;^iooo is added to its price, and the con- 
 sumers of the cotton cloth pay their taxes to the 
 \ amount of ;!fi^iooo in proportion to their purchases. 
 But, unlike the tea, other cotton cloth is made 
 inside the country — say, as much again. If it 
 also passed through the custom house, it also 
 would pay ;^iooo, and here again i^iooo would 
 come back to us. But it does not. There is no 
 excise. The home-made cloth pays nothing. 
 But, nevertheless, we are charged the same 
 price for it as we are for the imported cloth. 
 Where does this second ^looo go? To 
 the home makers of cloth. We are being 
 taxed ;!^iooo for their benefit. Notice, then, 
 that, if there were no home trade, a double 
 quantity of cloth would be imported from abroad ; 
 ^2000 would be raised from it ; we should pay 
 higher prices as in the other case : but we should 
 get all the ^2000 back. Taxation, indeed, is like 
 evaporation. The moisture is taken out of the 
 ground and rises into the clouds. But the clouds 
 dissolve in rain, and give it back again. And 
 what I am trying to bring out may be suggested 
 by this ; the moisture may be taken out of the 
 soil of Great Britain, but the rain may fall in 
 Ireland. 
 
 The difference emerges in the absence of an 
 excise. We tax spirits coming into the country, 
 and the government gets the whole of the customs 
 duty. We tax spirits made in the country — 
 isolating the distillery as if it were an island on 
 a lake — and, again, the whole of the excise goes 
 
XL TO PRIVATE PRODUCERS loi 
 
 to the government. The price of all spirits, 
 whether imported or made at home, is raised by 
 the same amount in either case, and the whole of 
 the tax comes back to us in services. But if 
 there were no excise, the home distiller would be 
 in the position of the home producer of cotton 
 cloth under Protection. He would charge the 
 same — or nearly the same — price as the importer,^ 
 but the whole of the sum, which otherwise would 
 have gone in duty, goes to him as private gain. 
 
 The question is : — Is this as good a bargain 
 for the nation? Is it as good that £\OQO should 
 go to the few makers of cloth as if it came to all 
 who wear cotton ? 
 
 The answer may be this, " No ; it is not so 
 good ; but it is advisable as a temporary measure 
 — on the Infant Industry argument. It only 
 needs time till the home maker can set up on a 
 large scale, and then the cost of making at home 
 will come down. In time, the home-made cloth 
 will be able to undersell the duty-paid cloth. 
 Given more time still, and the duty can be 
 
 ' This, of course, would not be true in all circumstances. There 
 would remain competition among the home producers, and, if 
 foreign goods were shut out by the duty, the high profits would 
 induce a rush of capital which probably would for a time make the 
 competition very severe and reduce prices. This, indeed, is a 
 common phenomenon of Protection, and has already been em- 
 phasised in the quotation from the Tariff Commission of 1882, on 
 P^ge 73- But such competition, under Protection, usually ends in 
 a Trust or price agreement, whereby prices are put up again to a 
 monopoly level just sufficient to prevent the competing foreign 
 goods coming in — in which case, the country loses the revenue it 
 would otherwise have had, and the consumers do not get either 
 relief or compensation. 
 
I02 IN MUNICIPAL INDUSTRIES chap. 
 
 removed altogether. Then we shall have no 
 ;^iooo of revenue, but we shall have cheap cloth. 
 We lose in one way to gain in another." 
 
 All this may be admitted. But, if the desired 
 does not happen : if the manufacture of cotton 
 remains an Infant Industry all its days, and the 
 cost of making does not come down : what does 
 it mean but that the nation continues to be taxed 
 and burdened as Consumers, to give a profit to 
 the Producers ? 
 
 The momentous point of difference is, perhaps, 
 better illustrated from Local Taxation, where 
 the government services rendered are largely 
 industrial. 
 
 The Municipality of Glasgow has raised large 
 sums by borrowing, and sunk them, as capital, in 
 providing the machinery for the great common 
 services of water, gas, and tramways. For these 
 sums, it has to pay interest ; and, to cover the 
 interest and the running expenses, to provide for 
 depreciation, and to lay aside a sinking fund to 
 wipe out the capital borrowed, it charges a price in 
 the shape of water rates, gas rates, and tramway 
 fares. Here, then, are three great industries 
 carried on by the local government. Who pay 
 for them ? Those who burn gas ; those who use 
 water ; and those who ride in tramway cars ; — in 
 other words, the Consumers. 
 
 Perhaps it has never occurred to many people 
 that, when they pay id. for a Municipal car fare, 
 they are paying taxes.^ It would be quite clear, 
 
 ^ It should be said that, in the literature of economic science, 
 there is considerable difference of opinion as to what payments to 
 
XI. THE CONSUMERS PAY 103 
 
 were it not for the obstinate idea that a tax is 
 a " burden " — something one does not get full 
 value for. Suppose that, each morning, the Muni- 
 cipal scavengers cleared our ash bins, and charged 
 us each morning a halfpenny for the service. 
 Would this be different from charging 3d. a 
 week? Would it be different from charging is. a 
 month or 1 3s. a year ? Suppose, then, that the 
 Municipality, instead of charging by an ordinary 
 bill, sends in a blue tax paper saying that, under 
 the Statute Labour provisions, the tax — or rate as 
 it is called — for cleansing amounts to 13s.: what 
 is the difference? In this case, we should see 
 clearly enough that a tax or a rate is a payment 
 made to the Municipality as doing certain things 
 for the great body of the citizens, which otherwise 
 the citizens would have to do for themselves, or 
 get others to do for them. 
 
 If this is clear as to the carrying away of 
 ashes, is there any difference between this and 
 the carrying of persons in a tramway car ? The 
 difference, of course, is merely in the mode of 
 
 government are properly called Taxes and what called " fees " or 
 " prices." Many restrict the word to cases where the attempt to 
 measure and assess benefit, if present at all, is a minor matter, thus 
 making the method of assessment the criterion of whether the 
 payment is a tax or not. This would exclude such charges as 
 postage stamps, gas rates, tramway fares. Others, again, while 
 including such services as those of the Post Office in the purview of 
 taxation, would restrict the tax proper to the net revenue or 
 "profits." There are great difficulties in any classification. But, 
 for the present purpose, the academic distinctions may be left out of 
 account, and the word may be used to include all payments for 
 government services to large bodies of general consumers, however 
 rendered, and however assessed and measured. 
 
I04 IN PROTECTION ALSO chap. 
 
 payment and the basis of assessment. We pay 
 the car every journey ; we pay the rate once a 
 year. If there were "free ferries" across the 
 Clyde, does anyone think that we should not pay 
 for them ? We should, of course, have to pay for 
 them by an annual rate. 
 
 But, in the case of Tramways, it is only a few 
 years since the Municipality followed another 
 method. It gave a private company the mon- 
 opoly of the car lines, and charged them a rent 
 of several thousands a year for it, allowing them 
 within limits to charge what fares they liked. 
 This rent was paid by the private company out 
 of the car fares, and a dividend was earned 
 besides. 
 
 In this latter case, the tramway fares represent 
 the kind of taxation the protected consumer pays. 
 The protective government — with one significant 
 exception, that it charges nothing for the grant of 
 monopoly — deals with the industries of the country 
 as the Glasgow Municipality formerly did with 
 the tramways. It gives its producers a partial 
 or total monopoly of the national market. It 
 charges importers a heavy sum on foreign goods, 
 which they pay on entry of the goods, and this is 
 the indirect taxation called Customs Duties. The 
 people who bear this taxation are not the im- 
 porters, but the consumers, who thereafter buy 
 the goods and pay the heightened price. This 
 is very simple and quite unexceptionable. It is, 
 so far, merely taxation for revenue — the same 
 kind of taxation as is levied in colonies where 
 the tariff is not primarily protective. 
 
XI. THE CONSUMERS PAY 105 
 
 But something else ensues. Within the country, 
 there are a number of manufacturers making the 
 same kind of goods as those imported. Probabh' 
 they cannot make the goods at the same cost. But, 
 whether they can or cannot, one thing is certain : 
 that they will not sell their goods under the 
 price of the imported articles — except in so far 
 as they have over-production, and cannot dispose 
 of all the goods at the high price. Thus it 
 comes that all these goods, imported and home- 
 made alike, carry a tax contained in the price. 
 
 The government has practically said to its home 
 producers : " We know that you cannot produce 
 so cheaply as an old country, and that your prices 
 must, accordingly, be higher if you are to exist 
 at all. But we want you to exist ; and, instead 
 of giving you a direct subsidy or bounty, we shall 
 shut out, wholly or partially, the goods of other 
 countries. This will cut off a good deal of the 
 competition " — it would probably be called the 
 "unfair competition" — "at least, it will prevent 
 your being undersold ; and you will be permitted 
 in peace to charge a price that will cover your 
 necessarily higher costs." 
 
 The result is, that all who buy goods in a 
 protected country — that is, the Consumers — are 
 taxed, although they do not know it, for the 
 benefit of their own Producers. Only now and 
 then does it seem to occur to the citizen of a 
 protected country that he does not gain much 
 if he gets twice the wage and profits that we 
 get, on condition of paying twice as much as we 
 do for everything he buys. 
 
io6 COLLECTION ALSO MAKES chap. 
 
 What this indirect subsidy costs in figures, it 
 is impossible to say. It was an American who 
 said : " The tribute which a few rich men are 
 enabled by this system to levy upon the rest of 
 the community — at the most moderate estimate 
 — is three times the amount of duties actually 
 collected by the government upon such pro- 
 ducts " ^ — which means, one may suppose, that, 
 for every £\ which the government gets in cus- 
 toms duties, private individuals get i^3 in excise. 
 What should we say if our breweries and dis- 
 tilleries were managed on such a system ? 
 
 This, then, is the answer to the question, Who 
 pays for Protection ? The Nation pays for it in 
 Indirect Taxation. 
 
 And what it pays in this way is quite addi- 
 tional to, and independent of, the costly — indeed 
 extravagant — machinery of collection of import 
 duties. This is always an expense. When I 
 said that the community gets its taxation back — 
 that it is not a burden but a price — I should 
 have added " minus the expenses of collec- 
 tion." These expenses are always and necessarily 
 Burden. 
 
 Happily, with us, the expense of collection is 
 reduced to a minimum. One of the things we 
 aim at is a system of taxation which shall 
 take out, and keep out, of the pockets of the 
 people as little as possible. But in Protection, 
 where everything entering is watched, and 
 generally taxed, the machinery of collection is 
 
 ^ T. G. Shearman, Natural Taxation, Putnams, p. 24. 
 
XL THE PRICE A HEAVY ONE 107 
 
 enormously costly, and all this must be paid for, 
 as pure burden, by the nation through its ordi- 
 nary taxation. So that, apart from this heavy 
 indirect taxation just spoken of, there is a 
 second taxation — both of them for the benefit of 
 the protected industries. 
 
CHAPTER XII. 
 
 PROTECTION JUDGED BY THE CANONS OF 
 
 TAXATION. 
 
 Such taxation, as indirect taxation spread over a targe field of 
 commodities, cannot distribute the charge equitably ; it is an income 
 tax levied on all consumers without abatement or exemption. Pro- 
 tection introduced in our country, then, would throiu out the whole 
 of our carefully arranged scheme of taxation ; would tax, not ac- 
 cording to the circumstances of the tax payer, but according to the 
 circumstances of the producer ; and so give a legitimate grievanie 
 against those who benefited by the high prices. 
 
 Suppose, then, we grant that Protection is taxa- 
 tion of the people ; that it is of the nature of a 
 subsidy given to producers : it must, as such, be 
 gauged by the ordinary canons of taxation. Is 
 it good taxation or bad ? Does it spread the 
 inevitable charge equitably ? 
 
 It might be an argument for it if it could 
 assure the community a better distribution of 
 the charge of taxation. But all our experience 
 of indirect taxation is that its incidence is en- 
 tirely indeterminate. When we put a full income 
 tax on incomes above £yoo, and a degressive 
 rate on certain incomes under it, and no tax at 
 
CH. XII. BAD INDIRECT TAXATION 109 
 
 all on incomes under £\6o, we at least know 
 where we are. We have made the attempt to 
 free small incomes, to put a moderate rate on 
 moderate incomes, and to lay the heavy end of 
 the charge on the rich. But if we tax con- 
 sumption — as is done in indirect taxation — we 
 cannot secure this.^ If liquor is taxed, and the 
 rich man is a teetotaller, he escapes ; if the poor 
 man spends a third of his income on liquor, he 
 pays enormous taxation. 
 
 But if a man is forced to pay taxes on all 
 goods he buys, and if the amount of tax which 
 the goods contain is determined, not by anything 
 in the circumstances of the consumer, but simply 
 by the needs — often, I am afraid, the needs of in- 
 efficiency — of the producer qua producer, what 
 guarantee is there that there will be even an 
 approach to equitable taxation ? If the poor 
 man buys woollens, and the woollen manu- 
 facturers are protected by 100 per cent, duty, 
 while the rich man buys silks, and the silk 
 manufacturers are protected only by 50 per cent, 
 duty, how can this work out but inequitably ? 
 
 This disposes of the shallow idea that Protec- 
 tion takes from the rich and gives to the poor. 
 It is difficult to see how raising the prices of 
 everything, and raising them unequally, affects the 
 poor more favourably than it affects the rich. 
 In the matter of prices, it is the rich who know 
 where to find the bargains, not the poor. Given 
 one man who spends his wage on a small range 
 
 ^ The ordinary, but necessarily very rough, calculation is that 
 the poor pay three-fourths of the taxes on consumption. 
 
no INCOME TAX WITHOUT EXEMPTIONS CH. 
 
 of articles, as compared with another man who 
 can distribute his income over a very wide range, 
 it is evident who can avoid the dear, and double 
 on the cheap. 
 
 The objection was well put by Fawcett : " A 
 protective duty, by making the commodity on 
 which it is imposed, unnecessarily dear, virtually 
 levies a tax from all those who purchase it. 
 When such commodities are in general use, the 
 effect of the duty is precisely the same as if 
 an income tax were levied from the entire com- 
 munity. Such a tax cannot, however, be adjusted 
 or equalised as is the case with the income tax in 
 our own country. Small incomes cannot be ex- 
 empted ; for, however poor a man may be, the 
 tax will fall with unerring certainty on all that 
 portion of his income or his wages which is 
 expended in the purchase of the protected articles. 
 But, besides, when, by protection, the instruments 
 and the plant of industry are made more costly, 
 their products become necessarily more expen- 
 
 sive." 1 
 
 When we pay a tax for police, we get police 
 service in return for it. And, if a man is con- 
 sidering whether he should take a house in any 
 particular city or not, he always asks, " What 
 police rates shall I have to pay ? " He first, as a 
 natural man, thinks of police rates as a burden, 
 and then, as an economic man, he puts against 
 that what he gets in return, the security which 
 the police give him. So when an Englishman 
 emigrates to the United States, he finds and 
 
 1 Free Trade and Protection, p. Ii8. 
 
XII. CAN TAXATION INCREASE WEALTH? in 
 
 grumbles, as a natural man, that he has to pay 
 much higher prices for almost everything he 
 buys. But, as an economic man, he asks him- 
 self what he gets in return for the high prices. 
 If he finds that he gets no better goods, he seeks 
 some other explanation. Possibly he finds it in 
 the fact that, in his own business, whatever it is, 
 he gets high prices for the goods he makes. But, 
 again, he has to weigh against this, the high price 
 he has to pay for all his material where similar 
 material is taxed on entry, the high wages he pays 
 because high prices need high wages to pay the 
 high prices, and so on. In short, he never thinks 
 that high prices are an unmixed good ; he finds 
 all sorts of makeweights against them. He is 
 told then that the duties put on goods are taxes 
 levied on the citizens to ensure the prosperity of 
 the citizens. He is not stupid enough to think 
 that taxes, as taxes, are anything but money 
 taken out of his pocket — deductions — and so he 
 asks how the deduction on the one hand is 
 balanced by the " value received " on the other. 
 If it is simply a game of raising prices all round 
 how can that do him any good, unless the system 
 allows him to impose miore taxes than his 
 neighbours ? 
 
 It comes down to this : Can the wealth of a 
 country be increased by its tax system ? The 
 first aspect of taxation is deduction from income; 
 and, to this extent, the citizen is poorer by his 
 taxation. But the sums handed over to the 
 government, even after allowing for the expense 
 of collection, may be used by the government 
 
112 PROTECTION WOULD THROW chap. 
 
 more wisely and beneficently than they could be 
 by the private citizen, and wealth thus econo- 
 mised is wealth gained. It all depends on how 
 the money is used. If Protection is taxation of 
 this kind, then Protection is justified in the same 
 way as our Telegraph service is justified : the 
 citizen pays sixpence for services which, we may 
 say, he could not get otherwise for less than 
 sevenpence. If this economy cannot be proved, 
 then the argument for Protection must be that 
 of the Infant Industry ; — that the tax is the 
 seed which the husbandman buries in the ground 
 with tears, in the hope of, some time, rejoicing 
 in a more abundant harvest. If this argu- 
 ment is not proven, what is to be said for 
 the tax ? What is the sense in paying six- 
 pence to the government to get back sixpence ? 
 Who pays for collecting the sixpence ? And if a 
 penny is paid for collecting the sixpence, is not 
 the net result this ; — that the citizen pays sixpence 
 to get back fivepence ? 
 
 There is, then, one great objection to any 
 change in our fiscal system which would re- 
 introduce Protection in however modified a form, 
 and I do not think it has been fully weighed. It 
 is that it would make a serious change in our 
 system of taxation. The taxation of a country is 
 always one of its greatest problems. With all its 
 faults, we in Great Britain have probably the most 
 perfect tax system of any nation. It did not come 
 to us out of the brain of one man. It is the result 
 of the labour and study of Chancellor after Chan- 
 cellor, each thinking how he could adjust the taxes 
 
XII. OUT OUR TAXING SYSTEM 113 
 
 so as to raise larger and larger sums, and yet throw 
 the burden on those who were best able to bear 
 it — to tax according to Ability. We have, as the 
 backbone of our system, the degressive Income 
 Tax, to get at the incomes of the well-to-do and 
 yet not burden the smaller incomes unduly — a tax 
 which can be increased on due occasion with least 
 disturbance to industry. We have the Death 
 Duties, a kind of cumulative income tax, de- 
 signed to further get at the larger incomes ; and 
 these follow the principle of Progression, so that 
 the very rich pay very heavily, and pay at the 
 time they feel it least — that is, when they can 
 feel nothing at all. We have the Indirect Taxes 
 to get at incomes which escape — taxation which 
 can be avoided by the thrifty poor, and strikes 
 particularly at those who buy superfluities and 
 luxuries. We have the Postal and Telegraph 
 services, by which a man pays strictly according 
 to the measurable Benefit that he gets. 
 
 Of course, these are merely the great broad 
 lines of theory on which our system is conducted. 
 It does not always work out equitably. But, at 
 least, it has a principle, and its defects are the 
 subject of anxious thought and attempted remedy. 
 And, besides, when a tax is old and can be 
 counted on, it is generally found that the burden 
 has gradually been shifted and shifted till it rests 
 where there is a surplus which can bear it. It 
 has, moreover, the crowning merit that it cuts 
 the cloth according to the coat. The government 
 does not first get a sum of money, and then 
 think how it is to spend it. It finds what the 
 
 H 
 
114 PROTECTIVE TAXATION chap 
 
 necessary services will cost, and then imposes 
 taxes to raise the necessary sum. 
 
 And is all this old and thought-out system 
 to be interfered with by a form of taxation of 
 which no one can say on whom it will fall ? All 
 that is known is that it will fall upon those who 
 buy certain goods and in proportion to their 
 purchases : that the home producers will be per- 
 mitted to tax their consumers in high prices — 
 all their consumers, rich and poor. And, of the 
 amount that will be raised in this way, all we 
 can know is that, if the taxation be successful in 
 its end — that is, the keeping out of foreign pro- 
 duce — it will yield nothing. 
 
 It is only when we consider this indirect 
 taxation aspect of it, as well as the directly 
 protective one, that we understand how an 
 American economist should describe Protection 
 as " at the same time a social abuse, an econo- 
 mic blunder, and a political evil." ^ It exhibits 
 such faith in the power, and wisdom, and im- 
 partiality of governments, while, at the same 
 time, it makes impartiality impossible. Govern- 
 ment, with our money, can maintain an army 
 and navy to protect us against invasion — 
 justice and police to protect us against criminals 
 — poor rates to protect us against starvation. 
 Therefore, government can protect us against 
 Competition ! And then, the government, being 
 given this terrific power, delegates it ; allows pro- 
 ducers to collect the taxes and police their own 
 
 * Sumner, Protectionism. Preface, p. vi. 
 
XII. GIVES TARGETS FOR ATTACK 115 
 
 interests. It is simply another form of the old 
 abuse of " farming out the taxes " — giving in- 
 dividuals a right to supply the city with bad 
 water, and bad gas, and inefficient service, at 
 non-competitive prices. 
 
 One admirable feature of our British taxation 
 is that it gives us no class to complain of Before 
 the abolition of the Corn Laws, whenever there 
 was depression of any sort, there was one target 
 for all attacks — the landowners ; those who were 
 supposed to be keeping up the price of food in 
 their own interests. But under our present system, 
 even in the misery of a strike, when the poor man 
 has to cut his expenses down to bare bread, he 
 cannot feel resentment against any class which is 
 making his bread dear. We see distillers, brewers, 
 publicans grow rich, but we do not ascribe it to 
 the high prices they charge us. When a man is 
 reminded that he is paying part of his taxes 
 every time he buys tobacco, he feels no 
 grievance against any one connected with the 
 tobacco trade. It may be that he is a very 
 heavy smoker, and so is paying more taxation 
 than he need pay, but, at any rate, it is like money 
 spent at a bazaar — " for a good cause." He 
 knows that the government will do its best to use 
 his money in the interests of everybody. But 
 if it were ever to come into his head, that he 
 was paying taxes in order that some tobacco 
 company should make a profit ; if he were 
 further to suspect that, although he might be a 
 very poor man, he was paying a very high price 
 for his necessaries in order to add to the fortune 
 
ii6 TIN PLATES chap. 
 
 of some millionaire; — he would have a real griev- 
 ance, and that even though he paid just a very 
 little in taxation every time he bought a dutiable 
 article. 
 
 What needs to be emphasised is that the 
 amount of taxation which one pays in a protected 
 country is not determined, as it should be, by the 
 circumstances of the taxpayer, but by the circum- 
 stances of the home producer. This annihilates 
 the very idea of taxation. Take Tinplates. Sup- 
 pose the American government had consciously 
 resolved to spend their ;!^5, 000,000 on rooting 
 this industry in America. There was nothing 
 against that in itself: the Americans may be 
 presumed to know their own business. But they 
 should have said to themselves : This is taxation ; 
 we must see that the payment of these ;!f 5,000,000 
 falls on the right people ; that, at the very least, 
 the rich pay the heavy end of it. As it is, they 
 have levied it in such a form that everybody who 
 buys a tin of canned anything has to pay accord- 
 ing to his purchases. No one knows where such 
 a tax will light with most severity : we only know 
 that it is the poor who must buy, and the rich 
 who can choose not to buy. Then, making tin- 
 plates dear, they damage their own growing trade 
 in canned fruits ; that is to say, they fix the 
 tinplate trade as a parasite on the canned fruit 
 trade. Finally, their steel makers throw their 
 steel below cost into England, and our makers 
 selling cheap tinplates to Germany, Canada, 
 Australasia, etc., give these countries the canning 
 trade. 
 
XII. JV//V CONSUMERS STAND IT ii; 
 
 But why, it may be asked, do the consumers in 
 protected countries not rebel against the system 
 if it be, demonstrably, so bad ? 
 
 Two reasons have been suggested, at any rate 
 as regards America. One is that, where there is 
 no tax on food, the badness of the system does 
 not come home to the poor. The other is that, 
 even if Americans were aware of the truth, they 
 would rather submit to taxation than be thrown 
 back, as they fancy they would be, to the dull 
 monotony of purely agricultural life. 
 
 I suggest a third. It is that the great mass 
 of the people do not compare prices — have not, 
 indeed, knowledge sufficient to enable them to do 
 so. Without knowing the prices of goods in 
 other countries, they cannot compare home 
 prices. Nor can they judge of prices of differ- 
 ent things within their own country, for they 
 do not know what should be cheap and what 
 must be dear. One knows how thoroughly de- 
 ceived a man may be in an auction room. He 
 is tempted to buy this, that, and the other thing 
 by the assurance that they are cheap ; but the 
 shop prices are not within his range of experience, 
 and, when he goes home, he may find that he 
 has paid twice what he should. Very much the 
 same is it in a protected country where there is 
 no experience of anything else than a range of 
 prices dictated b}^ the interests of the producing 
 classes. 
 
CHAPTER XIII. 
 RETALIATION. 
 
 If Retaliation be not Revenge, the suggestions concealed in the 
 word require careful analysis. We find action called for on tioo 
 perfectly distinct grounds :—[\) hostile tariffs abroad, (2) dumping 
 here. 
 
 It may be that I am a man of peace, but I 
 cannot see that the case for Retaliation is self- 
 evident. " Revenge," said Adam Smith in a 
 celebrated passage,^ "naturally dictates retalia- 
 tion." But revenge is perhaps the stupidest and 
 most immoral gratification in which man can 
 indulge. That you hurt me, is no reason why I 
 should hurt you — although I grant that, in the 
 heat of a blow, one does not pause to think 
 of that. It is a very good reason why I should 
 recover damages from you, but that is not 
 because the damages hurt you, but because they 
 recoup me. To do people justice, revenge does 
 not play any important part in the real world, 
 however largely it bulks in innumerable novels. 
 It generally takes time to plan and to carry 
 
 ^ Wealth of Nations, book iv., chap ii. 
 
CH. XIII. TWO DISTINCT GRIEVANCES 119 
 
 through, and I, personally, have never met the 
 nasty sort of person who "harbours a grudge," 
 and is really pleased when he pays the other 
 party out. I do not believe he exists in decent 
 society. What is often called " revenge " is 
 something very different. It is best seen in 
 that pleasant form of retaliation called the lovers' 
 quarrel, where the one does not want to hurt the 
 other, but only to show how much he or she 
 has been hurt. It is a compliment, indeed, which 
 hurts one to pay! The very first glance, then, 
 shows that the word Retaliation covers and con- 
 ceals suggestions as to motive, purpose, and 
 policy, and requires most careful analysis.^ 
 
 The subject of Retaliation seems to divide 
 itself into two according to the grievance which 
 calls for it. The first grievance is, that we are 
 injured by foreign tariffs ; the second, that we 
 are injured by what is called " Dumping." 
 
 I. When we ask what is the harm done to us 
 by foreign countries which prompts Retaliation 
 
 ^ Again and again, during this fiscal enquiry, I have been 
 reminded of my old friend's warning: "There are masked words 
 droning and skulking about us in Europe just now, which 
 nobody understands, but which everybody uses, and most people 
 will also fight for, live for, or even die for, fancying they mean 
 this or that, or the other, of things dear to them. There never 
 were creatures of prey so mischievous, never diplomatists so 
 cunning, never poisoners so deadly, as these masked words ; they 
 are the unjust stewards of all men's ideas : whatever fancy or 
 favourite instinct a man most cherishes, he gives to his favourite 
 masked word to take care of for him ; the word at last comes 
 to have an infinite power over him, — you cannot get at him 
 but by its ministry." — Ruskin, Sesame and Lilies, p. 20. 
 
I20 IV//V "RETALIATION"? chap. 
 
 on our part, we are told that they have raised 
 hostile tariffs against us so that we cannot, or 
 can with difficulty, get our goods through. 
 
 I confess I cannot see that this calls for retalia- 
 tion. If they want to keep themselves to them- 
 selves, they have as much right to do so as 
 we have to lock our front doors. We cannot 
 very well deny to foreign nations what we have 
 allowed to our Colonies — the right to surround 
 themselves with tariff walls. Is it reasonable for 
 Englishmen to arrogate to themselves the right to 
 dictate to other nations wh^t they are to do with 
 their own property ? 
 
 But, it is said, they have taken unfair advantage 
 of our free ports ; they send and sell us what they 
 like. 
 
 The reply is obvious: Is not "open ports" the 
 policy deliberately adopted in 1846 as one that 
 suited us ? There was no bargain with other 
 powers. It was our own selfish policy ; ^ and, for 
 sixty years, we have been boasting that it was the 
 very best policy that ever was. Are we, in sober 
 earnest, complaining that these nations enter our 
 free ports ? I thought we were always saying 
 how good a thing it was for us that they did ; we 
 got cheap food, cheap material, cheap everything. 
 How is it we have only now discovered that 
 some wrong is done us when we get what we 
 asked for ? 
 
 It must come to this : not that any wrong is 
 done us, but that we made a mistake in not 
 making a bargain for reciprocity, and that we are 
 
 ^See Peel's words, Jan. 27th, 1846, Hansard, 
 
Xlll. PUTTING ON TO TAKE OFF '^x^l^.S^^^ 
 
 v.. 
 
 now going to try back and find the means of 
 making one. This is a quite sound and intel- 
 ligible proposition. Entire free trade on our part, 
 it may be said, suited us for half a century and 
 more. So long as nations kept their tariffs 
 moderately low, we could pass through them. 
 But now they have raised them higher and higher ; 
 we find it more and more difficult to get our 
 goods in ; and we mean to call a parley. But why 
 call this " retaliation " ? Why cause bad blood 
 among nations, and stir warlike feelings among 
 ourselves, by speaking of " big revolvers " — of 
 " hitting back " ? Let us return to common 
 sense. We said, and we thought, that our free 
 imports would be balanced by at least moderate 
 protective tariffs abroad. They have not been 
 sc. Then, as Mr. Balfour says : " The only 
 alternative is to do to foreign nations what 
 they always do to each other, and, instead 
 of appealing to economic theories in which 
 they wholly disbelieve, to use fiscal inducements 
 which they thoroughly understand." 
 
 The first proposal of Retaliation, then, is : that, 
 on due occasion, we should put on import duties 
 against certain nations, in order to take them off 
 again when they have succeeded in bringing these 
 nations to their senses ; which, being translated, 
 means, when they come prepared to make some 
 modification in our favour. " At no time during 
 my career," says Mr. Chamberlain, " either as a 
 business man or as a politician, was I ever able 
 to make a satisfactory bargain unless I had 
 something to give." 
 
122 AGAINST CHEAP GOODS CH. xiii. 
 
 II. The second argument for Retaliation takes 
 entirely different ground. Up till lately, as was 
 said, we congratulated ourselves that, under free 
 trade, we got all goods cheap, and we used to 
 point out that other countries, by taxing imports, 
 were making everything dear, and so preventing 
 themselves from competing with us in neutral 
 markets. But now we have an outcry against 
 the admission of certain goods on the ground 
 that they are too cheap. And the proposal 
 is, that we should take measures against other 
 countries to prevent this evil. 
 
 The essential difference of these two grievances 
 should be realised before we assume that one 
 remedy will cure both; — will lower other countries' 
 tariffs to admit our cheap goods, and will prevent 
 them sending us their cheap goods. 
 
CHAPTER XIV. 
 
 RETALIATION ON PROTECTIVE TARIFFS: 
 PROSPECTS OF SUCCESS. 
 
 The only justificatio7i of Retaliation is success. Bid the retaliation 
 before 1846 succeed? Have the tariff wars since succeeded? Granted, 
 however, that other nations are anxious to keep our great Free Trade 
 tnarket, and are open to conviction through force ; ( I ) we are qtdte 
 unprepared for a retaliatory policy ; (2) they believe in Protection, 
 and, besides, could not give tts better terms without giving the satne 
 to others. 
 
 In this and in the succeeding chapter, we shall 
 consider Retaliation simply as a weapon em- 
 ployed to lower the protective tariffs of other 
 nations in our favour. 
 
 As those who advocate Retaliation generally 
 call themselves Free Traders, we must assume 
 that it is a temporary measure. If retaliatory 
 duties are imposed, it must be on the under- 
 standing that they are to be taken off whenever 
 they have served their purpose. Retaliation is a 
 weapon used solely " for the purpose of increas- 
 ing free trade." ^ 
 
 The first thing that strikes one as to this pro- 
 posal is : that, as putting on duties will evidently 
 
 ^ The words are Mr. Balfour's. 
 
124 ADAM SMITH ON RETALIATION CHAP. 
 
 do some harm to our own people, in preventing 
 them getting the cheap goods which other nations 
 wish to sell, it must be shown that the advantage 
 which certain of our producers are to gain at 
 least warrants the sacrifice. 
 
 If, then, Retaliation aims at anything u^orth 
 doing, its justification must be its success ; that 
 it will give us what we want, and not merely inflict 
 an injury ; particularly when — as in the lovers' 
 quarrel — the Retaliation is likely to hurt most 
 the person who retaliates. Has Retaliation of 
 this kind ever succeeded ? 
 
 Adam Smith, at least, did not think it had, 
 and he lived in a time of bitter tariff wars. He 
 said there " might be good policy in retaliations 
 when there is a probability that they will secure 
 the repeal of high duties and prohibition," and 
 then he went on to show that the first result 
 of Colbert's tariff was actual war between France 
 and Holland, and " the rise of that spirit of hos- 
 tility between France and this country which has 
 subsisted ever since, and prevented either nation 
 from moderating its duties against the other." 
 Adam Smith, then, can scarcely be cited as a 
 witness for Retaliation. 
 
 Coming down three-quarters of a century, what 
 do we find? In 1843, J- L. Ricardo spoke of 
 the commercial wars as " now bringing us such 
 calamities." In 1 844, the tariffs of France, 
 Austria, and Germany were " restrictive," that of 
 Spain was " tyrannical," that of Portugal, " incon- 
 sistent and capricious " — I am quoting the words 
 of a former Secretary of the Board of Trade. 
 
XIV. RUSSO-GERMAN TARIFF WAR 125 
 
 In 1 84 s, the Edinburgh Review said that a war 
 of tariffs was being carried on between the civil- 
 ised nations of the world. 
 
 It was amid such circumstances of Retaliation 
 and Counter-Retaliation that Peel said : " Wearied 
 with our long and unavailing efforts to enter into 
 satisfactory commercial treaties with other coun- 
 tries, we have resolved at length to consult our 
 own interests, and not to punish other countries, 
 for the wrong they do us in continuing their high 
 tariffs upon the importation of our products and 
 manufactures, by continuing high duties ourselves." 
 
 But this is ancient history, and it may be 
 reasonable to think that we can manage better 
 now. Take, then, more recent experience. We 
 have had tariff wars within the last few years. 
 In 1893, Russia raised the duties on all German 
 goods by 50 per cent. Germany replied by 
 raising her own tariff — already higher for Russian 
 exports than for those of any other country — 
 against Russian goods. The war lasted only 
 eight months — not long enough to dislocate per- 
 manently the conditions of trade, particularly as 
 it took place during the winter, when, for most 
 of the time, the Baltic ports were closed by ice. 
 Nevertheless the suffering and loss caused by it 
 were very considerable, as appears from the con- 
 fessions made on both sides when the struggle 
 was concluded. In the opinion of both govern- 
 ments, a continuation of the war would have led 
 to very serious consequences — some of a political 
 character — and there appears to have been great 
 relief when peace was concluded. 
 
126 OTHER TARIFF WARS chap. 
 
 There was another tariff war between France 
 and Switzerland from 1893 ^o 1895. By the 
 substitution of the general for the minimum tariff, 
 Swiss goods entered France at an increase of duty 
 of 41 per cent, French goods entered Switzer- 
 land at an increase of 190 per cent. The decline 
 in the French exports to Switzerland, in three 
 years, amounted to nearly 45 per cent., while the 
 decline in Swiss exports to France was nearly 
 35 per cent. In the end, Switzerland obtained 
 some small concessions from France. The trade 
 relations between the two countries have not even 
 yet recovered their prosperity of thirteen years ago. 
 
 France and Italy played the same game from 
 1889 to 1898. Special duties were imposed 
 by the two nations on each other's goods, and 
 differential dues and surtaxes were imposed on 
 each other's shipping. In ten years, the import of 
 Italian goods for consumption into France fell 
 off by 57 1 per cent, and the imports of French 
 goods into Italy fell by fully 50 per cent. The 
 whole loss of trade to the two countries during 
 the continuance of the war has been estimated 
 at i^ 1 20,000,000. Italy now finds the French 
 market practically closed to her exports of silks 
 and wines, which formerly represented the most 
 important part of her trade with France. In spite 
 of the new Commercial Treaty, Franco-Italian 
 trade has not shown any permanent indication 
 of improvement since — the total volume not ex- 
 ceeding the half of what it was before.^ 
 
 ^The above details are taken from Reports on Tariff Wars 
 between certain European States, Cd. 1938 : Commercial No. i 
 
XIV. WE GAIN BY THEM 127 
 
 As a fact, the explanation of the monstrous 
 tariffs of continental countries is not hostility to 
 England, so much as hostility to and fear of 
 each other ; each country keeping a very high 
 general tariff in order that it may be able to 
 "give something off"; one tariff rising as another 
 rises, on the principle that one bad turn deserves 
 another. Meantime, during those tariff wars, Eng- 
 land stood by, holding the hats ; stealing away 
 what trade she could ; and enjoying afterwards, 
 under the Most Favoured Nation Clause, what 
 little good result came from it. It is not, perhaps, 
 known that we have forty-two treaties with foreign 
 powers which contain this clause, giving us the 
 same minimum tariff as they give to any other — 
 even to the nation with which they may have just 
 been fighting.^ 
 
 Perhaps, too, the corollary is still less realised ; 
 that, if we engage in Retaliation against any one 
 nation, and manage to reduce its duties, other 
 nations, under this clause, get the same advantage 
 
 (1904). These reports are particularly interesting as indicating 
 the diversion of trade during the struggle to other countries and 
 other routes. 
 
 ^ The Most Favoured Nation Clause may be defined as that 
 clause in a commercial treaty which binds the parties to give to 
 each other, in certain matters, the same treatment they give, or 
 may afterwards give, to the natipn which receives from them the 
 most favourable terms in respect of these matters. Of course, the 
 clause does not operate in our favour in two cases : where we 
 cannot export, and where we should probably be the largest ex- 
 porters but for the duty. The German reduction on petroleum to 
 Russia does us no good ; and duties, say, on textiles, are not likely 
 to be lowered to any other country. 
 
128 OTHER COUNTRIES chap. 
 
 as we do. There is a beautiful unselfishness about 
 Retaliation which one cannot but admire. 
 
 This is worth remembering when we are told that 
 we made a mistake in giving up our duties ; that, if 
 we had kept them on, we should at any rate have 
 had " something to give away." Other nations 
 have not made this mistake : they have always had 
 plenty to give away : if they offered to conclude 
 treaties giving mutual concessions, and failed, then 
 they put on something more, in order to give it 
 away : and what has it all ended in ? That the 
 tariffs of protected countries against each other 
 have risen and risen, and that we are at least as 
 well off as any of them — under the Most Favoured 
 Nation Clause. 
 
 If, then, it be the case that other nations have 
 not been conspicuously successful in their re- 
 taliatory wars, while we have gained by them, 
 the question comes to be if there is any good 
 reason for thinking that we shall succeed better 
 than they have. 
 
 The chief argument for the success of Retalia- 
 tion on our part is that we are the largest market 
 for the foreign trade of most other countries ; that 
 the stake which they have in keeping this market 
 open is very great ; and that they are, accordingly, 
 very open to conviction if our persuasion takes 
 the shape of a " revolver." Indeed, it is freely 
 said that the only reason why we have not got 
 better terms is that we have done no more than 
 show uneasiness ; we have not even asked for 
 them. So, it is argued, quite honestly I believe, 
 
XIV. MUST HAVE OUR MARKET 129 
 
 that Retaliation will be no more than an unloaded 
 revolver ; it will not require to be fired. 
 
 This is a respectable argument, and respectable 
 arguments deserve respectful answers. One sees 
 quite well that the industries of new countries 
 to-day are a kind of hot-house growth. These 
 countries do not pass slowly and by centuries from 
 the wilds and wastes of barbarism to the condi- 
 tion of England. They have — what no state in 
 past time had — every rich nation waiting at their 
 gates, hat in hand, offering to lend them money. 
 They pledge their future against loans, and in- 
 stantly the whole resources of civilisation are 
 at work turning the desert into a rose garden. 
 " Take our money," we say. " Let us send you 
 goods and men ; build your towns ; reclaim 
 your land ; net it over with railways. We 
 simply ask your note of hand for the amount, 
 and an annual sum for interest." This explains 
 their rapid growth. But that growth would 
 be arrested were it not that the old countries 
 provide them with a market infinitely larger 
 than their own. Could the United States, for 
 instance, or Canada, or Australia, have developed 
 so fast were it not that this great hungry Eng- 
 land has taken all their millions of wheat and 
 maize and meat and wool and timber? This, 
 too, explains why new countries, when they start 
 industries, go in for buildings and plant on the 
 same large scale as ours : they cannot afford, they 
 say truly, to manufacture at greater cost than old 
 countries ; they want the best and they get the 
 best. And then, perhaps, they discover, when 
 
 I 
 
I30 JVE ARE UNPREPARED chap. 
 
 the mills are up, that they have forgotten to ask 
 where the trade is to come from ; for the new 
 country cannot buy more than it has wealth to 
 buy with, and a nation of corn growers may not 
 have a use for millions of yards of fine cloth, or 
 even for steel girders. But what matters ? They 
 have this great free market of Great Britain to 
 fall back on. They can sell their goods in their 
 own country, under Protection, at a high price, 
 and they can get rid of the balance to us. Surely 
 such countries are very open to the " argument of 
 the revolver." 
 
 Undoubtedly, the contention is a strong one. 
 Our gigantic imports show that it is. The 
 amount that the great nations send us in com- 
 parison with what they take from us, shows that 
 it is. One is tempted to believe that the mere 
 showing of our teeth would bring other nations 
 to their senses. And certainly if, by a threat, 
 we could lower the tariffs of other nations, we 
 should have done a great thing. 
 
 But "bluff" is a game which a nation dare 
 not play without showing that it is ready to 
 follow up the threat, and we must look into a 
 good many things before we begin. 
 
 I. The first consideration I would put forward 
 is, that retaliation by import duties is a thing 
 for which we are utterly unprepared. It is like 
 an English civilian accepting a challenge from a 
 German officer when he has forgotten his fencing 
 — if he ever knew it. Putting on duties and 
 taking them off — heightening and lowering — is 
 
XIV. FOR RETALIATION 131 
 
 part of the day's work with other countries. 
 They have all the machinery for Retaliation. A 
 few instructions to the port officers, that such and 
 such goods are to be taxed 10 per cent, or 50 
 per cent, more, and the thing is done. But we 
 have no such machinery except the limited tariff 
 for revenue goods, and we chose these revenue 
 goods for taxation very much because they in- 
 volved so little machinery in their collection.^ We 
 have, as I say, forgotten our duelling weapons.^ 
 
 II. The second consideration I would put for- 
 ward, is to ask : How will other nations take this 
 new departure ? 
 
 To answer that such a question is " pusil- 
 lanimous " ; that we have nothing to do with how 
 
 ^ It is, of course, quite misleading to point to our action as 
 regards bounty-fed sugar as an example of how easily Retaliation 
 may be carried out. To say nothing of the facts that sugar is 
 already a revenue article, and that, as coming in bulk— often in whole 
 cargoes — it is easily watched and detected, it cannot already be 
 forgotten that we are only one member in an international com- 
 bination, all taking similar prohibitory measures. 
 
 -There is a special difficulty which comes of our freer political 
 organisation. Other countries have a much stronger and more 
 irresponsible Executive than we have. A German Chancellor "hits 
 back," and afterwards comes to Parliament to confirm the mandate : 
 the German government is not liable to votes of censure. We 
 should not allow our Executive any such power. Every act of 
 Retaliation would have to be submitted to Parliament ; argued out 
 there ; all the details made public, so that our enemies might be 
 well prepared ; and, if there were a strong Opposition, I am not 
 sanguine that any government would get a very clear mandate at 
 the best. For this is not a political matter. Every interest hurt, 
 as well as every interest advantaged, would make itself heard, and 
 the most rigorous party discipline would not be able to secure a 
 party vote. 
 
132 FORCE NO ARGUMENT chap. 
 
 other nations take it ; that they have done as 
 they Hked, and we are going to do as we like ; — 
 is mere folly. Looked at from the standpoint of 
 other countries, this Retaliation of ours seems 
 to me, as regards the end it proposes, little short 
 of an impertinence. We are urged to retaliate 
 in order to force other nations into free or freer 
 trade. Force, however, is not usually the weapon 
 by which you make a person reason ; you may 
 " bring him to reason," but it is not his own idea 
 of reason you bring him to. It is an old theo- 
 logical argument that the fear of hell was a 
 means of compelling people to walk straight ; I 
 never heard of it being of any use to make a 
 person love God. 
 
 One must remember that Protection is not 
 mere stupid adherence to a shibboleth. It is at 
 least a respectable creed. Rightly or wrongly, 
 the protectionist country believes in Protection 
 just as firmly as we believe — or did believe — in 
 Free Trade, and is as little disposed to be patient 
 under dictation or compulsion as we should be. 
 
 Nor should it be forgotten that the taxation 
 system of protected countries is bound up with 
 Protection — that they calculate on it to provide 
 them with a great part of their revenue — that 
 their peoples have become accustomed to be 
 without internal taxes which are familiar to us. 
 One may see how this works out by the obstinate 
 refusal of France and America to face a direct 
 Income Tax. 
 
 If, then, we practically declare : We shall tax 
 your products in order to make you go against 
 
XIV. VERY LIKE IMPERTINENCE 133 
 
 your own cherished convictions ; how will a 
 strong nation take it ? It is only to be expected 
 that, in the first instance, it will re-retaliate — for 
 this, of course, is not in the very least contrary 
 to its policy. Indeed, the adoption of Protection 
 on our part would be less of a challenge. A 
 protected nation cannot possibly object to other 
 countries becoming protective, but it may very 
 well object to be threatened with the object of 
 making it give up its own Protection. 
 
 Thus if our Retaliation is aimed undisguisedly 
 at making Germany or the United States reduce 
 their duties, so as to allow us to send in our 
 goods, surely the first answer of these nations will 
 be : We did not frame our tariffs primarily to 
 shut you out. It was not a hostile measure, 
 but a policy framed to " protect " our own manu- 
 facturers. That you are kept out, is an incident. 
 At any rate, the intention to favour our own 
 people must not be interpreted to be the same 
 thing as the intention to injure other people. 
 Be sure that, if we forbid you the house, 
 it is not to punish you, but to keep our family 
 from your influence. And now you ask us to 
 drop our tariff because it hurts you ; that is, to 
 abandon the policy which we have deliberately 
 entered on for the protection of our own children ; 
 and you threaten us that, if we don't comply with 
 your demand, you will do us an injury. It is an 
 impertinence which we resent. 
 
 And their second answer will be : Suppose that, 
 as an incidence of our policy, our tariffs shut 
 you out, they shut other nations out as well. 
 
134 THE MOST FAVOURED NATION chap. 
 
 Whether, then, it might or might not suit us to 
 reduce our duties to you, we have no intention to 
 reduce them to other nations which either do not 
 treat us so well or cannot use so big a revolver 
 as you can. 
 
 This brings us back to the Most Favoured 
 Nation Clause. It seems to me that this clause 
 makes it very difficult for any protected country 
 to " back down " over our Retaliation — even if it 
 wished to — even if it suited it to do so. With true 
 British conceit, we are always thinking our- 
 selves first and other nations nowhere. So we 
 ask indignantly, " Why do these countries not 
 give better terms to us — us, who give them free 
 ports, while the rest of the world shuts its doors ? " 
 What we forget is, that, in its commercial 
 policy, every other nation has to think of its 
 tariff relations with the whole of the world — of 
 which we are not always the largest part. And 
 what we should remember is, that it would be a 
 very serious thing for a protected country to give 
 us advantages that it might otherwise be inclined 
 to give us, when, under its Most Favoured Nation 
 Clause, it would have to give the same advantages 
 to other nations. 
 
 Here, then, is a consideration which may well 
 make us doubtful of the success of Retaliation. 
 We are asked to engage in a war at which the 
 other nations stand by rejoicing. We fight their 
 battles and our victory is theirs. And, in refusing 
 our demand and fighting, the other country is not 
 fighting us alone, but fighting all our temporary 
 allies — those who will get the Most Favoured 
 
XIV. CLA USE PREVENTS " BACKING DOWN'' 135 
 
 Nation treatment whatever happens. America, 
 for instance, might be very sensible of our claims 
 to better treatment, and inclined to give it, while 
 she would not be willing to give the same to, 
 say, Germany This seems to me a very strong 
 presumption against our success. 
 
CHAPTER XV. 
 
 RETALIATION ON PROTECTIVE TARIFFS : 
 METHOD AND EFFECTS. 
 
 If we retaliate by Import Djiiies, what kinds of goods are tve to 
 tax without gi-eatly hurting ourselves ? And will any possible 
 Retaliation seriously hurt the country retaliated on? Meanwhile, 
 the effect in disturbing ottr own industries T?iay be serious enough. 
 Protective tariffs already do us two injuries ; let us see that Retaliation 
 does not add a third. 
 
 Suppose, however, that, in spite of all the con- 
 siderations just advanced, the government gets a 
 mandate from the country to retaliate.^ How is 
 it to retaliate ? The only way suggested as yet 
 is by Import Duties against the offending country. 
 But import duties cannot be imposed without 
 raising prices, and the bearing of this must now 
 be considered. 
 
 It is not a small matter for Great Britain 
 to shut out anything. We have so long been 
 free traders that our industrial organisation is 
 very much based on buying everything as cheap 
 
 ^ There is nothing in the theory of Free Trade against Retaliation 
 as retaliation. It is "an expedient; not a policy." It must be 
 judged by its success and its effects. 
 
CH.xv, WHAT SHALL WE TAX? 137 
 
 as the world has offered it. If, then, we resolve 
 to* make a retaliatory attack on a country whose 
 tariff, in our opinion, is too high, we must look 
 at the various kinds of imports which we might 
 tax, and consider the effects. 
 
 I. Are we to tax goods we cannot make or 
 grow ourselves ? What would be most promin- 
 ent in such a case is the cost of it — and the 
 futility of it. It would be taxing a foreign 
 monopoly. Say we tax Bechstein pianos from 
 Germany. This would mean dear Bechsteins 
 here. But would it hurt Germany ? Would 
 not our consumers, as for the most part rich 
 persons, pay the extra price, and the import from 
 Germany continue as merrily as before ? There 
 might be a slight falling off in demand ; that 
 is all. 
 
 II. Are we to tax Food? This would be very 
 serious. It would not only raise the price of 
 imported grain, but raise the price of our own 
 grain ; thus raising for us the cost of production 
 of everything made by human hands. 
 
 III. Are we to tax Raw Materials? But we 
 have held the lead in the world's manufacture so 
 long because we got the cheapest raw materials 
 from all countries. 
 
 IV. Are we to tax Manufactures ? It has 
 already been pointed out that there are certain 
 manufactures, the taxation of which is open to 
 all the objections urged against the taxation of 
 raw materials. It does not matter to us whether 
 a material is " raw " or " partly manufactured," so 
 long as it is the foundation and substance of our 
 
138 THE FIFTY MILLIONS ARE chap. 
 
 industries.^ And to tax machinerv and tools 
 seems suicidal. 
 
 Beyond these, a somewhat careful calculation 
 seems to show that there are some i^5 0,000,000 
 of manufactures which it would be possible to 
 tax without hurting British industries. On these 
 fifty millions, then, we might retaliate, in some 
 confidence that the only hurt would be to our 
 consumers who would pay dearer prices. This is, 
 perhaps, the most innocuous form of Retaliation 
 in which we could indulge. 
 
 This is the one side — the side of what we 
 suffer. But I suppose we are going to retaliate 
 to make other countries suffer ; for, unless they 
 suffer, we should have all the trouble and expense 
 for nothing. I do not believe in kicking a 
 bicycle that has thrown me. Nor do I believe in 
 the blow that hurts the man who gives it, and 
 falls on a person who does not feel it. If we are 
 going to retaliate, let us first see what it is going 
 to cost us, and then make sure that we hit hard. 
 
 Perhaps ;!^5 0,000,000 looks a large figure — 
 large enough to retaliate on at any rate. But the 
 fifty millions come from all the world, and we are 
 
 ^ It may be thought that no harm is done if we accompany such 
 taxation by drawbacks on exports — a drawback system, as has 
 been said, being the safety-valve of Protection. This is very short- 
 sighted. Does it seem reasonable to make it easy for our producers 
 to sell goods abroad cheap, while the same goods are sold to us 
 dear ? Is foreign trade the only thing to be considered ? Have our 
 own people not some claim on us for cheap goods? But, even if 
 there were no other arguments against it, the drawback system is 
 notoriously an inadequate compensation for dear material. 
 
XV. SCATTERED OVER ALL NATLONS 139 
 
 not going to retaliate on all the world. And 
 some of the goods we do not make ; while others 
 of them are goods — even if "made in Germany" — 
 which are better than anything of the kind we 
 do make. It is when we come to Retaliation 
 in practice that the full difficulty meets us. 
 
 Take Russia, sending us i^2 5| millions of 
 exports. ^132 millions of these are food-stuffs, 
 and ^10 millions are raw materials. This leaves 
 a field for retaliation of -^2,000,000. Would it 
 be common sense to retaliate on a couple of 
 millions worth of goods ? Really, it reminds one 
 of the " Private Secretary " : — " If you don't stop, 
 I shall be compelled to give you a little knock." 
 
 Or take the United States, sending us 
 £\ 27,000,000 of exports. Of this, p^i 06,000,000 
 are raw material and food-stuffs, leaving 
 ^21,000,000 on which to retaliate. But these 
 i^2 1,000,000 are scattered over forty categories, 
 of which only five are over a million ; namely, 
 Leather manufactures, ;^3| millions ; Iron and 
 Steel manufactures, ;^3 1 millions; unwrought and 
 partly wrought Copper, £2\ millions ; Oil, ;^i.3 
 millions; Oilseed Cake, £\.\ millions. 
 
 The possibility of retaliating on Germany is a 
 great deal less. Of her manufactured exports, 
 only two categories are over the million ; namely. 
 Woollen manufactures, i^ 1 1 millions, and Cotton 
 manufactures, £i.\ millions. The next items 
 are Musical Instruments and Toys, some three- 
 quarters of a million each. 
 
 Consider, again, what must be done in the 
 process of giving this " little knock." One, 
 
I40 EVEN TEMPORARY DUTIES chap. 
 
 perhaps, thinks of a million and a half worth 
 of Musical Instruments and Toys coming over 
 from Germany all in one ship ; it seems so easy 
 to put lo per cent, duty on the cargo. But 
 these goods come in small lots, in perhaps hun- 
 dreds of ships, along with other cargo which is 
 not being retaliated on ; yet every ship must be 
 arrested and searched to see if there are not a 
 few toys or fiddles on board. Nor is it only 
 German ships that are to be arrested and searched. 
 It is all ships from Germany, including our own 
 that carry for Germany. Duties, again, call out 
 smuggling devices. So Belgian imports must be 
 watched, and Dutch, and Austrian, and Italian ; 
 even French and Swiss, in case the German goods 
 should be sent through these countries. 
 
 I can only say that, if this is the answer to 
 how we are to retaliate, it seems to be a very 
 inadequate one. The Retaliation is calculated to 
 take the most skin off our own knuckles with the 
 least damage to the skin of the foreigner. 
 
 *fc.^ 
 
 But there is another effect besides the raising 
 of prices to our consumers, and hurting the 
 foreigner. According to our principles, we are 
 bound to take off the retaliatory duties whenever 
 the policy has secured its object. Under tariff 
 duties, as we have seen, vested interests spring 
 up, and have a claim on consideration. Under 
 retaliatory duties, it may be said, there will be 
 no time for vested interests to spring up. But 
 the Retaliation may last long enough to have 
 very unpleasant effects. 
 
XV. AfAY HAVE UNPLEASANT EFFECTS 141 
 
 Suppose that we decide to retaliate on 
 Germany, for the injury done us in that she 
 sends us £zzh millions of goods and takes from 
 us only iS^2 2f millions ; and that we impose a 
 retaliatory duty on Toys.^ The immediate result 
 is a rise in the price of toys here. This comes, 
 not from the " rapacity " of the English toy 
 makers, but from the sudden shutting off of so 
 large a part of the supply : the old demand 
 cannot be met at the price. And, it may be 
 added that prices are likely to rise all the higher 
 if competition has hitherto been very keen, and if 
 it is suspected that the " close time " will be short. 
 The further consequence will be — perhaps not that 
 capital will rush into this trade and give hos- 
 tages to fortune in the shape of new mills and 
 machinery, but — that those who are already in the 
 trade will spread their sails to catch the favouring 
 breeze. They will extend their operations as far 
 as they can ; probably add to their buildings, 
 certainly, to their plant. Meanwhile our children 
 suffer so far as the family purse cannot afford 
 the raised price of Noah's Arks. 
 
 This, let us say, brings Germany to her senses. 
 She gives in, and reduces her tariff, on condition 
 of our taking off the retaliatory duties. What 
 now is the position of the English toy makers ? 
 
 ^The illustration looks a little ridiculous, but that is the fault 
 of circumstances. The alternative to taxing toys seems to lie 
 between taxing woollen or cotton manufactures and taxing musical 
 instruments. The consequences of the incidental protection to 
 our woollen and cotton manufactures would, probably, be too 
 serious, while a tax on pianos at any rate would not have any 
 appreciable effect in diminishing the sale. 
 
142 THE INJURY PROTECTION DOES US chap. 
 
 For a time, they have been sunning themselves 
 in the warmth of Protection — a Protection they 
 did not ask. Unaccountably, so far as they were 
 concerned, the British government gave them 
 Protection. As unaccountably, from their point 
 of view, the government withdraws it. The 
 favouring breeze dies down, and the free import 
 of German toys begins again. The British toy 
 maker finds himself with extended premises and 
 increased plant, and possibly with long contracts 
 for supply of material. And a large part of his 
 demand has suddenly fallen away. Will it not be 
 a little difficult to convince him that his trade 
 should have been trifled with and upset, for the 
 benefit of the trades which export to Germany ? 
 
 The question is not, Are we injured by foreign 
 protective tariffs ? Of course we are. We are 
 not injured so much as we appear to be when 
 we look at our small direct exports to such 
 countries ; for, happily, other countries are always 
 anxious to export, and the door that opens 
 outward opens inward. They must be paid for 
 their exports ; and, though they may not take the 
 payment from us direct, they must take it from 
 other nations to which we export. But, all the 
 same, we are injured. And we are injured in 
 another way that does not so readily meet the eye. 
 Protection, in itself, as I have tried to show, does 
 not increase the wealth of a nation ; so far as it 
 is indirect taxation, it fetters its growth by re- 
 distributing its wealth in the wrong way, giving 
 to the rich and taking from the poor. But this 
 hurts us, for these nations are our customers, 
 
XV. BLUFF 143 
 
 and our exports depend on their purchasing 
 power. It is not only, then, that we are not 
 allowed to send them so much as we would, but 
 that they, not being so rich as they might be, 
 have not so much to send us. We are doubly 
 injured by protective tariffs. 
 
 But this Protection is the settled and believed- 
 in policy of other nations. It is a pity, perhaps, 
 that they were not content that we should remain 
 the " workshop of the world." But they were not 
 content. They determined to be manufacturing 
 nations. At great cost, as we believe, they have 
 made themselves so by Protection, and, rightly 
 or wrongly, they consider that their manufacturing 
 still needs the protection of high tariffs. And 
 before we try to break down these tariffs by 
 Retaliation, I should like to be sure that we are 
 not going to make things dear in this country, 
 and so inflict a third injury on ourselves all to 
 no purpose. Certainly we shall expose ourselves 
 to the ridicule of the protected world as well, if 
 we have no thought-out policy of how to retaliate 
 beyond the expedient of Bluff. 
 
 But, so far as I can see, the only part of Re- 
 taliation for which we are prepared is the threat 
 of it. So great is the power of the British Lion's 
 roar that it even seems enough to show that he is 
 opening his mouth ominously. Suppose the other 
 beasts of the forest do not fall down and creep 
 to his feet, what then ? Would it not be better 
 to change his mind ? It will scarcely be digni- 
 fied to pretend that he was only going to yawn. 
 
CHAPTER XVI. 
 DUMPING. 
 
 We cannot object to the import of " naturally cheap " goods. But 
 the double 7notiopoly of Trusts, dumping their surplus, presents new 
 features, the most serious being that the dumping is intermittent, 
 Biit (i) it has compensations, not so juuch in cheap goods as in 
 cheap material for many of our industries — a Nemesis which the 
 dumping coufttries are beginning to notice. And (2) its extent as 
 yet seems exaggerated; ^^ duf?iping" is often blamed for inability 
 to compete when ^^ inefficiency''^ would be a bettei- word. 
 
 We do not and cannot object to the importation 
 of cheap goods as cheap goods. Our fruit growers 
 may find it hard when the weather is more 
 friendly to France than to us, and the imports 
 of French fruit prevent them raising their prices 
 to compensate for a short crop at home ; but 
 this is an incident in Free Trade. We have not 
 refused cheap wheat, although it meant ruin for 
 many agricultural interests. Nor shall we object to 
 Belgian iron or American steel if the reason of their 
 coming in is that they are more cheaply produced 
 in Belgium and America than they are here. Show 
 us, in short, that cheap goods mean " naturally 
 cheap goods," whether the cause of cheapness lies 
 
XVI. NATURALLY CHEAP GOODS 145 
 
 in better natural resources, in better labour, or in 
 better organisation, and we shall accept them — 
 just as we should never have signed a Sugar Con- 
 vention if it had been the case that beet was, by 
 nature and not by subsidy, a cheaper sugar than 
 cane. 
 
 It would, indeed, be rather unreasonable if, after 
 having for years pinned our faith to a policy based 
 on the international division of labour, and deluged 
 foreign markets with cheaper goods than they 
 could make for themselves, we should now 
 object to the import of their naturally cheap 
 goods. As a fact, England went far beyond 
 " natural cheapness." We very often sent our 
 goods to other countries at a loss — either a loss of 
 profit or an absolute loss. I have known articles 
 sent to India year after year at half the home 
 price, in order to accustom the natives to the 
 goods, with the view of ultimately raising the 
 price to a paying level. In this we did nothing 
 more internationally than we do nationally. If 
 any home manufacturer wants to introduce his 
 goods, the " natural way " and the first thing he 
 does, is to sell them cheaper than other people. 
 If a man wants to "get in" to the London 
 market, he will sell his goods there under the 
 price at which he sells them in Glasgow, so long 
 as he is not afraid of their being brought back 
 and underselling himself And it was generally 
 safer to undersell abroad, for goods would not 
 usually pay the carriage back. We could not, 
 then, in reason, complain if foreign producers 
 treated us in the same way. 
 
 K 
 
146 TRUSTS AND KARTELLS chap. 
 
 But, a few years ago, there appeared, in several 
 countries, the phenomenon known as the Trust 
 or Kartell. This phenomenon altered things very 
 considerably, and made a good many of the old 
 arguments against Protection not quite up-to- 
 date.^ 
 
 Twenty years ago, Fawcett could say : " The 
 amount of manufactured goods which is sent 
 from America to England is so extremely small 
 that it could make scarcely any difference if 
 this particular part of the trade between the two 
 countries were to cease altogether." And again : 
 " No single case can be brought forward in which 
 English trade suffers, to any appreciable extent, 
 by foreign products underselling in our own 
 markets the same articles of English manufac- 
 ture." 2 This could scarcely be said now. 
 
 ^ The Continental Kartells are looser forms of combination than 
 the Trust. The constituent firms, retaining their separate organisa- 
 tions, sell to a central agency, the output and the price being both 
 fixed. The methods in which Kartells are formed and worked are 
 not always similar, but the principle is generally the same — the 
 regulation of prices, by curtailment of home production and so of 
 home competition. The way in which this system affects other 
 countries is most clearly seen in the Austrian Iron Kartell. Here each 
 constituent member is limited in the amount which it is allowed 
 to produce, but "in the contract of limitation are not reckoned 
 products which are exported, either by being sold directly into the 
 foreign country, or through being sold to manufacturing establish- 
 ments {e.g. manufacturers of wagons or locomotives), and by them 
 used for export." Thus large production and cheap production are 
 secured ; and, even if the maker makes nothing on what he exports, 
 he gains an extra profit on what he sells to or through his Kartell. 
 See the exhaustive memorandum in the Board of Trade Blue 
 Book, p. 297. 
 
 "^ Free Trade and Protection, pp. 75, 83, 
 
XVI. THE DOUBLE MONOPOLY 147 
 
 A Trust, in itself, is quite unexceptionable. It 
 is simply the amalgamation of a great number of 
 businesses, to get the well-known economies of 
 large production. The one great firm does all 
 the business that was done formerly by the 
 smaller firms then in competition ; only it reduces 
 costs in a dozen ways.^ The danger of Trusts, of 
 course, is that they become monopolies, and use 
 their economies not to reduce prices, but to make 
 excessive profits. But a Trust, under a Protec- 
 tive system, is a double monopoly. In virtue of 
 Protection, it gets rid of competition from outside, 
 and, in virtue of being a Trust, it has got rid 
 of competition at home. There is thus every 
 encouragement and motive to keep its prices 
 high and its profits high. But the largest Trust 
 can do so only up to a certain point. It is, after 
 all, no more than a producing unit. There is a 
 limit to the consumption of everything produced : 
 there comes a point in production where any 
 further output can be got rid of only by reducing 
 price. 
 
 Take, merely for purposes of illustration, Motor 
 Cars. When the price is, say, i^8oo, only a 
 comparatively few people will buy motor cars. 
 Suppose the price should come down to ;^5oo, 
 it will probably not much increase the demand. 
 If, however, it came down, say, to ^250, the 
 demand might easily double. Suppose, then, a 
 Trust has started this manufacture : its interest 
 is to make cars as cheaply as possible, and, the 
 
 ^ On the whole question, see my paper on " Industrial Trusts" in 
 Xht Journal of the Society of Arls, ]din. 16, 1903. 
 
148 . DEFINITION OF DUMPING CHAP. 
 
 larger the trade, the more cheaply it can produce. 
 But there is this limit I speak of. If it produces 
 more than will be taken off its hands at ;!^8oo, 
 it will not be able to sell appreciably more unless 
 it reduces the price to ;^2 5o. So what happens 
 is, that it makes more cars than it can sell at 
 the high figure in the protected country ; but 
 sells abroad the surplus it cannot sell at home 
 without bringing down the price. Thus it may 
 pay quite well to sell the surplus cars abroad at 
 or under cost, while it sells the limited number at 
 home at the high price : the gain being in the 
 cheap cost consequent on making the larger 
 quantity. This is the phenomenon to which the 
 term " Dumping " seems now to be confined : 
 where a protective system enables makers to 
 charge an artificially high price and obtain arti- 
 ficially high profits in the home market, and to 
 sell their products abroad at or under cost.^ 
 
 This is freely called " Unfair Competition." It 
 is a special grievance of a free-trade country. 
 It looks like an abuse of our hospitality. The 
 
 ^The expression "at or under cost " may very well be objected 
 to. Total Cost in a producing unit includes, roughly, Fixed 
 Charges and Running Expenses. A manufacturer, unless he is 
 selling in agreement with others at a fixed price list extending over 
 all markets, very seldom distributes his fixed charges proportion- 
 ally ; he adds to some goods, or in some markets, more of the fixed 
 and less of the running expenses, and he may, indeed, lay the 
 whole of the fixed charges on certain goods, or certain markets, 
 selling in the others at what is usually called Prime Cost. So, if a 
 manufacturer sells some goods at high prices and others at low, it 
 may be questioned if he is selling "under cost," so long as, in the 
 price of his total output, he covers all his cost, fixed and running, 
 and has his profit over. 
 
XVI. SERIOUSNESS OF DUMPING 149 
 
 protected country, on the one hand, forbids our 
 entry to its market, and, on the other, comes into 
 our market, and undersells our makers in virtue 
 of the tax it is enabled to levy on its own 
 countrymen. It is not that such countries com- 
 pete with us in neutral markets ; it is that they 
 invade us in our own market under the en- 
 couragement of a kind of bounty. 
 
 Dumping, then, depends on two things — on 
 Protection and on the Trust. Without Protection, 
 the Trust, as an economic producer, would be 
 formidable enough, but it might be met by similar 
 economic combinations on our side. And, with- 
 out the Trust, Protection would scarcely allow the 
 manufacturer to dump, as there would generally 
 be enough competition at home to prevent mono- 
 poly prices and profits. It is this combination 
 of evils that we have to reckon with. 
 
 Dumping is a very serious thing for the home 
 manufacturers whom it affects. I am not con- 
 vinced that we should welcome it from any point 
 of view. I have heard it said : — " If anybody 
 would dump . me my breakfast every morning 
 for nothing, I should only feel grateful." This 
 seems to me rather short-sighted. Timco Danaos 
 et do7ia ferentes. 
 
 If we knew that, for all time, some kind 
 foreigner would send us our pig iron and steel 
 sheets 50 per cent, under our price, we should 
 know what to expect, and no one in this country 
 would make pig iron or sheet steel. But what 
 we know is. that this dumped supply will be 
 
I50 ITS INTERMITTENT CHARACTER chap. 
 
 intermittent, and that it will remain cheap only 
 so long as we continue making the same goods. 
 Its uncertainty is its evil. When other countries 
 are prosperous, little comes in, and our makers 
 get a decent price ; when those countries are 
 depressed, in come the dumped goods, and wipe 
 out the profits. I can scarcely believe that this 
 intermittent underselling is a good thing for us. 
 It is not a spur to invention and economy. I 
 hesitate, indeed, to call it " unfair competition." 
 But it is not competition that can be counted on 
 and prepared for. No watching and economy of 
 costs will meet it. At any moment, a manufac- 
 turer may be put on short time, because a good 
 line is snatched from his fingers by a foreign 
 firm which wishes to get rid of its surplus. 
 
 But, as the dumping is intermittent,^ em- 
 ployers do not sacrifice their fixed capital and 
 change their trade. They hang on, hoping that it 
 will stop. They go on short time — which means 
 waste of fixed capital, waste of organisation, waste 
 of labour. Similarly, workers do not change into 
 other trades. They put up with the short time, 
 hoping that it will be short. And short time 
 
 ^ See, for instance, the statement in the Board of Trade Blue 
 Book, page 326: "The details given in the appendix show that, 
 while the manufacturers of this country were free from the com- 
 petition of American iron and steel in 1899, the first months of 
 1900 saw the United States begin an invasion of the British market, 
 which was carried on with remarkable energy until the early part 
 of the following year, after which this campaign came to an end." 
 But the United States Steel Corporation has just now announced 
 its intention of selling steel rails abroad at $20 per ton, while its 
 price at home is $28. 
 
XVI. COMPENSATIONS OF DUMPING 151 
 
 is wasted time. Our manufacturers may deserve 
 well of the community. They may have done 
 all that men can do : kept profits low and prices 
 low. It does not seem healthy that, for no fault 
 of theirs, they should now and then be thrown 
 idle. If there had been makers of manna among 
 the Israelites, who had specialised and sunk their 
 fortunes and energies in supplying their fellows 
 with the morning bread, I think they would 
 have had something of a grievance even against 
 high Heaven that sent it for nothing. 
 
 On the other side, however, there is a good 
 deal to be said. 
 
 I. Dumping has compensations. One re- 
 members the argument used against doing any- 
 thing to check the Sugar Bounties ; not only that 
 we enjoyed cheap sugar for home consumption, 
 but that, on cheap sugar, was based a new group 
 of industries — Jam, Confectionery, Biscuits, Con- 
 densed Milk, and others — employing larger 
 numbers than Sugar Refining ever employed.^ 
 
 ^ A good deal has been made in controversy of the threatened 
 destruction of our "primary" and "staple" industries. "Free 
 imports have destroyed sugar refining," said Mr. Chamberlain, 
 "one of the great staple industries of the country, which 
 it ought always to have remained. . . . Sugar has gone ; let 
 us not weep for it : jam and pickles remain." The sarcasm takes 
 a good deal for granted. It may be questioned whether sugar 
 refining was ever more than a local industry, and whether it was 
 one which we could expect to keep. It may be questioned whether 
 a few large staples are a healthier basis of prosperity than a great 
 many smaller ones — particularly as regards exports. It may be 
 questioned whether any peculiar sacredness attaches to a " primary" 
 industry which begins with raw material as compared with an 
 
152 THE NEMESIS OF DUMPING CHAP. 
 
 So now the argument is, not so much that the 
 consumer gets cheap goods, as that other pro- 
 ducers get cheap raw material. The steel maker 
 cannot be expected to rejoice in dumping, but 
 the shipbuilder, the galvaniser, and the tinplate 
 worker openly do. 
 
 There is an almost ludicrous Nemesis in the 
 compensation. America makes her own tin 
 plates excessively dear, and spoils her own trade 
 in canned goods. At the same time she dumps 
 cheap steel into South Wales. Our tinplate 
 manufacturers, in consequence, send out cheap tin 
 plates to Germany, Russia, Australia, and Canada, 
 and give them a hold on the canned fruit and 
 meat trade which otherwise America might have 
 kept from them. It reminds one of a besieging 
 army smuggling ammunition and food into the 
 beleaguered town. 
 
 . The Board of Trade Blue Book, quoting our 
 Consul-General at Hamburg, says that there are 
 four surveyors from Lloyd's Registry stationed at 
 Diisseldorf to superintend and standardise the 
 shafts and other heavy iron forgings which are 
 being sold to English shipbuilders at cheaper 
 prices than they are to German. So Germany, at 
 great expense, is doing all she knows to establish 
 a shipbuilding and shipping trade, while her own 
 manufacturers are giving us the materials for 
 underselling her. It is playing our game as 
 
 "inferior subsidiary" one which begins with partly manufactured 
 material. And it may be questioned, in the present case, whether 
 sugar refining ever employed as much capital and labour as the 
 group represented by "jam and pickles" does. 
 
XVI. A LITTLE PATIENCE 153 
 
 effectually as if Germany sent her best football 
 players to play for us against a German team ! ^ 
 
 In face of this Nemesis, then, even if we 
 consider that the compensations do not out- 
 weigh the injury, it would be well to have a 
 little patience. It is not unnoticed in Ger- 
 many at least. Even protectionist Chambers of 
 Commerce are complaining, in so many words, 
 that " cheap German exports of materials make it 
 possible for firms abroad to offer serious competi- 
 tion in Germany." Suppose we found that our 
 Clyde steamers were being built in Germany 
 because our Lanarkshire steel makers were sup- 
 plying that country with plates cheaper than 
 they would supply to Glasgow, we should, I 
 think, have something to say. But this is what 
 is happening with the Rhine steamers. " The 
 building of boats," says the Board of Trade 
 Blue Book, " for the Rhine river navigation has 
 passed over almost entirely to Holland, because 
 the works in the Rhenish Westphalian district, 
 producing heavy plates, deliver in Holland at 
 lower prices than in the interior of Germany." 
 Evidence, in fact, is accumulating that this selling 
 of material below cost to the industries of a rival 
 country is pulling down with one hand what is 
 being built up with the other. 
 
 ^At the annual meeting of the Palmer Shipbuilding and Iron 
 Company in 1903, the chairman, announcing a large increase in 
 their exports to Germany and the United States, said that, for the 
 past three years, the firm had purchased in Germany steel castings 
 and forgings at 30 per cent, below English prices, built them into 
 ships and machines, and sent them back to Germany. 
 
154 EXTENT OF DUMPING chap. 
 
 II. The amount and value of the goods dumped 
 is not, as yet, very serious. 
 
 It cannot have escaped notice that the word 
 Dumping is being appHed very loosely ; that 
 everything coming in from abroad cheap is said 
 to be " dumped," from aliens to French plays. 
 It is not correct, according to our definition, to 
 speak of Belgian joists, girders, rails, and plate 
 glass as dumped ; nor yet of the light-blown glass 
 and chemical apparatus from Germany : if we 
 say that such imports are dumped, we must 
 admit that we ourselves deserve the name of 
 the " champion dumpers" of the world.-^ It would 
 be well, then, to remember the statement of the 
 Board of Trade in 1902, as regards the imports 
 from the United States and Germany, in a 
 Meuiorandmn on Comparative Statistics : " The 
 increases have been comparatively small in 
 amount, and there is nothing which can in any 
 way be described as an inroad on our home 
 market. " 
 
 It is, of course, from our iron and steel in- 
 dustries that we hear most complaints about 
 dumping. Germany exports to us pig iron, 
 blooms, angle iron, girders, rails, rolled wire, 
 rolled tubes, wire nails. America exports pig 
 iron, iron pipes, bars, bedstead angles, steel, 
 ship plates, rails, boring machines. Most of 
 these are products of Kartells and Trusts ; but, 
 
 ^ I have heard an east coast fanner say that he was suffering from 
 the dumping of German potatoes. Considering that he was a seller 
 of that highly- favoured monopoly article, the Dunbar red-soil 
 potato, the complaint seemed to nie rather suggestive. 
 
XVI. IN IRON AND STEEL 155 
 
 considering the cheapness of coal and trans- 
 port, and the difficulty of getting comparative 
 prices — German bars, for instance, have often been 
 of inferior quality — it is impossible to say what, 
 and how much of them, are, properly speaking, 
 " dumped." 
 
 The total value of the iron and steel trade 
 of Great Britain, Mr. Hugh Bell tells us, is 
 something between ;^i5o and £160 millions. 
 Of this very large total, i^iSf millions come 
 as imports ; the remainder is home produced. 
 Of this p^i5| millions, ;^8 millions come from 
 Germany, Holland, and Belgium. " Is this paltry 
 quantity," he asks, " going to destroy the whole 
 of our great industry ? In the year in which 
 they sent us the ;^8 millions, we sent them 
 £6\ millions of similar articles. In the same 
 year, we sent America upwards of ;^io millions 
 of iron and steel. I should be interested in 
 knowing," he continues relentlessly, " the names 
 of firms whose liquidation has been due to 
 foreign dumping. I know of none, but I do 
 know of many who would have had the greatest 
 difficulty in weathering the bad trade of the last 
 three years had cheap foreign steel been denied 
 them." 
 
 It almost seems that the iron and steel 
 makers who most complain of dumping are 
 crying out before they are much hurt. Like 
 many, perhaps most, manufacturers, they would 
 welcome Protection, restriction of competition, 
 and high prices ; and one may expect to hear 
 them saying that the future contains terrible 
 
156 AN OBJECT LESSON chap. 
 
 possibilities.^ But when official returns tell us 
 that, in 1891-2, the gross income returned to 
 Income Tax as " Profits of Iron Works," was 
 
 ^ It would not be fair to quote any single case unless the facts had 
 been examined in the fierce light of the public press. But the fol- 
 lowing, which was discussed for weeks, may be taken as an 
 instance. Mr. Joseph Brailsford, the Chairman of the Ebbw Vale 
 Steel, Iron, and Coal Company, wrote an alarmist letter to Mr. 
 Chamberlain, which Mr. Chamberlain sent to the Thnes on 31st 
 November, 1903. In this letter, he said : " It is only a matter of 
 a few months before the English steel makers will be crushed out of 
 existence, and the English market will be at the German's mercy." 
 He was promptly reminded that, in the years when dumping was 
 unknown, before 1892, his firm had paid practically no dividend ; 
 that, in the eleven years since, it had paid 4I per cent., and in the 
 present year, 5 per cent. — which, he had said, considering that 
 their stock stood at £2, in 1892, and at;!^; now, was equal to 15 per 
 cent, to the great majority of the shareholders. Mr. Brailsford 
 replied that his Company made its profits by coal mining as well as 
 by iron and steel making, and that it was only the steel that was 
 hurt by dumping. Then his own words were brought up against 
 him : that, in coal, the improvement in gross profits was ;^49,ooo, 
 while, in steel, the improvement was ;^84,ooo. Further reference 
 to his Chairman's speech of June, 1903, showed that, in 1892, " the 
 concern was insolvent" — "on the verge of bankruptcy" — its 
 •' machinery and rolling stock fallen into disrepair " — its steel plant 
 "entirely obsolete." Since 1892, when the new management 
 came into power, the net profits, which for ten years before had 
 shown an average of ;i{^Soo a year, had jumped to ;i^5o,ooo a year 
 for the last eleven years — to say nothing of a trifle of ;i^25o,ooo laid 
 aside out of net profits, during these eleven years, to reserve and 
 improvement account. The assets had doubled ; the yearly output 
 had increased by 40,000 tons ; wages for the last year had increased 
 by ;i^2000. And, finally, he recommended an expenditure of 
 ;if 150,000 on new plant. 
 
 When a responsible gentleman says that the steel industry in 
 England will be crushed out of existence within a year, and yet re- 
 commends a new expenditure of ;^i 50,000, it reminds one of nothing 
 so much as the action of the late Mr. Baxter, who prophesied that 
 
XVI. INEFFICIENCY MORE TO BLAME 157 
 
 under ;^3, 000,000 ; in 1 900-1, was nearly 5 J 
 millions; and, in 190 1-2, was ^6,000,000, one 
 is tempted to say that the iron and steel trade 
 is a very majestic ruin. 
 
 There are, undoubtedly, a good many concerns 
 which are heavily hit. But when so many others 
 are doing well, one suspects that the causes of this 
 may be found nearer home. It has been said of 
 textile factories in America that no firm can 
 compete which is not content and able to put 
 in new plant every ten years : perhaps, in 
 view of modern improvements and changes of 
 process, the unwillingness to make rapid and 
 expensive changes may explain the general 
 statement that " our iron trade is in a bad 
 way." South Wales certainly needed a lesson. 
 Its mills were, many of them, ill-situated, in 
 valleys far away from the sea and dependent 
 
 the world was coming to an end within twelve months, and took a 
 new lease of his house for twenty years ! 
 
 The instance points a moral. There is not the slightest doubt 
 that great employers like Mr. Brailsford and Sir Thomas Wright- 
 son — who said the same kind of things before, and met with a 
 similar rejoinder, that in five years his concern had paid dividends 
 to the amount of three-quarters of its capital — are perfectly 
 honourable men. They think their case so clear that they do 
 not hesitate to put it before the nation and to ask Protection. 
 The case is examined from all sides, and the verdict is, at least, 
 Not-Proven. But if these same gentlemen had been living under a 
 government which was very willing to lend its ear to those who cried 
 out before they were much hurt, and could have put their case, 
 thus persuasively and strongly, before their representatives and 
 before members of the Cabinet who had not the means of checking 
 their statements by cross-examination or public discussion, is it 
 not in the highest degree probable that they would have got 
 Protection ? 
 
158 DUMPING NOT A chap. 
 
 on single railways ; and many were " family 
 affairs," "seething in corruption and bristling 
 with abuses," as the Ebbw Vale Company 
 itself was eleven years ago. The future 
 course of this industry must be in the direction 
 of consolidation, amalgamation, and economy. 
 We can only meet gigantic Trusts like the 
 American Steel Corporation by combinations at 
 least large enough to secure the same efficiency 
 — and, remembering that, beyond a certain point, 
 size is a weakness and not a strength, this 
 should be quite possible. Certainly, regret it or 
 not as we may, the day of the small iron and 
 steel maker is as much past as the day of the 
 small miller. 
 
 Two facts should not be forgotten. The first 
 is that, except where it is the "selling off" of 
 practically bankrupt stock, as has been the case 
 with Germany for the last two years, dumping 
 is possible only where it is a small proportion 
 of the total output that is thus sacrificed. 
 "You can afford to sell lo per cent, of your 
 make at a loss if you thereby reduce the 
 cost of your whole production by an amount 
 greater than the loss on the lO per cent. 
 But this proposition cannot be true if you are 
 consuming lO per cent, and dumping 90 per 
 cent., and the advantage of dumping disappears 
 long before you have got anything like these 
 figures." ^ 
 
 The second is that, where there is any con- 
 siderable elasticity of demand, it would generally 
 
 1 Mr. Hugh Bell, in Spectator, 1st November, 1903. 
 
XVI. PERMANENT TRADE POLICY 159 
 
 be more profitable for the Trust to reduce its 
 prices and sell all its output at home, than to 
 sell a smaller quantity at home at a high price 
 and sacrifice the surplus abroad. There are com- 
 paratively few things for which the demand would 
 not increase in greater proportion than the reduc- 
 tion of price. 
 
 These two considerations seem to suggest that, 
 annoying and depressing as it is, dumping can 
 scarcely be considered an established trade policy 
 of other countries.^ 
 
 1 " Some of us may easily be misled into supposing that a Cartel 
 or Syndicate is created for the express purpose of dumping. No 
 doubt the severe economic depression of Germany during the years 
 1900-2 (caused by over production) forced the syndicates into their 
 export policy for the purpose of relieving the congested home market. 
 But that was an incident, like the blood-letting of an apoplectic 
 patient. The real object of German Cartels is to proportion pro- 
 duction to the market demand, and so to avoid overproduction. In 
 other v^fords, the Cartels exist to do away with the necessity fur 
 dumping, so far as human foresight can do it. The dumping is not 
 calculation, it is mis-calculation." — C. H. Oldham, in current issue 
 of the Jou7-nal of the Statistical Inqtmy Society of Ireland. Mr. 
 Oldham calls attention to the latest development of the Kartell 
 system, the syndication of syndicates, in the Steel Works Association 
 now being formed for the whole of Germany, and already signed 
 by all but two of the great groups. " What has brought about this 
 Association seems to have been the necessity of doing away with the 
 dumping policy of the syndicates controlling raw materials (coal, 
 coke, pig iron, and half finished steel products) by which German 
 home manufacturers of finished iron and steel goods have been placed 
 at a disadvantage as compared with foreign firms in the exploitation 
 of the mineral resources of Germany." 
 
CHAPTER XVII. 
 RETALIATION ON DUMPING. 
 
 We cannot very well ask a foreigii government to stop its indivi- 
 dual citizens doing in foreign trade what it cannot stop them doing 
 itt home trade. We know how underselling is met in home trade — 
 by similar underselling. But the only retaliation yet proposed 
 against miderselling nations is the imposing of Import Duties here, 
 and this, surely, is merely a defensive measure. Will this, however, 
 cure dutnping in our case wheti it has not cured it elsewhere ? But, 
 once adfnitted that dumping constitutes a claim on government protec- 
 tion, whei-e are we to stop? And who or what is to define what 
 ' ' selling at or under cost " means ? 
 
 Granting, however, all the compensations of 
 Dumping ; granting that it is more harmful to 
 the nations that dump than it is to us ; and grant- 
 ing that the extent of the dumping is small : let 
 us assume that the actualities are so annoying, 
 and the possibilities so great, that we must seek a 
 remedy. In the present chapter, then, we shall 
 consider Retaliation as the proposed remedy. We 
 premise, as before, that we have no thought or 
 intention of protecting home industries ; that we 
 are Free Traders in theory, and mean to return 
 to Free Trade in practice whenever we have 
 attained the end aimed at. 
 
XVII. DUMPING NOT A NATIONAL POLICY i6i 
 
 Is it duly realised that Dumping is not a 
 government policy like a protective tariff, but a 
 thing done by the individuals of a nation as one 
 of their business methods — "unfair" competition, 
 perhaps, but still individual competition ? It is 
 not even a bounty ; it is only an indirect result 
 of two things, the government policy of Protection 
 and the private Trust. 
 
 In other words, protective duties by them- 
 selves are part of a specific government policy. 
 We can fight them either by free imports, 
 as Cobden advised us to do, or by another 
 government policy, namely, counter protection. 
 But this dumping is not an organised attack 
 of the American or German nation on the 
 English ; it is not, indeed, a thing recognised 
 by the American or German nation at all : it is 
 an act done by individuals, by Trusts or Kartells, 
 in their own self-interest. What happens is that 
 some individual foreign exporter, for one reason 
 or other, offers goods for sale in this country to 
 some individual firm of importers at a low price. 
 All the nonsense one hears about dumping as a 
 " national conspiracy," is derived from that falla- 
 cious idea which thinks of another nation as an 
 industrial unit. 
 
 When, then, we find our trade interfered with by 
 foreign Trusts and their policy of dumping, are we 
 to go to the Government of these countries and say, 
 " You must stop this or we shall — do something " ? 
 Why, the American government is as convinced as 
 we are of the evils of Trusts, but it can do nothing ; 
 it cannot even prevent one State dumping in 
 
 L 
 
i62 RETALIATION BY IMPORT DUTIES chap. 
 
 another State. Is it reasonable to ask it to muzzle 
 its Trusts when they affect us — to stop this in- 
 ternational dumping — to prevent underselling in 
 other countries, when it cannot stop underselling 
 at home ? 
 
 In what way, then, isthe proposed remedy to be 
 worked ? What the merely academic person, who 
 assumes that words have a meaning, understands 
 by Retaliation, is "hitting back," and, from long 
 experience of a trade where cutting of prices was 
 one of the commonest incidents, I venture to say 
 that this is what the business man means by it. 
 The " negotiation " to which I was accustomed 
 usually took this form : " You are underselling 
 us in X, where you have a small trade and we 
 have a large one. It doesn't hurt you much, 
 but it is serious to us. If you don't stop it, 
 we shall go to Y, where you have nearly all 
 the trade and we have very little, and cut prices 
 30 per cent, or so. This won't hurt us, but it 
 will be very serious to you." This was Retalia- 
 tion ; and, as between a large firm and a small, 
 it was very effective. There was simply no answer 
 to it — on the part of the small one. As between 
 two large firms, however, it usually involved a 
 bitter war of cutting prices, much bad feeling, 
 and great loss to both parties and to the whole 
 trade. 
 
 But, being curious to find out if the advocates 
 of international retaliation meant this or anything 
 like this — if, perhaps, they contemplated some 
 method of government subsidy by which we 
 could attack some large, and therefore vulnerable 
 
XVII. IS PROTECTION OF HOME INDUSTRIES 163 
 
 and sensitive trade of other nations, without much 
 hurting ourselves — I put this question in a letter 
 to several of the leading newspapers last autumn : 
 How is our Government to take effective measures 
 against the actions of individuals not recognised by 
 their Government ? 
 
 The answer I got was the answer I expected — ■ 
 that the way to stop dumping was to put a tax 
 on the dumped articles. 
 
 Precisely. But why is this called Retaliation ? 
 It is not " reprisals " ; it is not a counter attack. 
 It is simple defence. America and Germany 
 dump steel on us ; we are to answer by 
 putting a duty on American and German steel. 
 May one ask in what this differs from what 
 we used to call Protection of the steel industry ? 
 If it differs in nothing, then I submit that 
 the retaliation has overshot its mark. It stops 
 the "unfair" competition, but it does a great 
 deal more. It presumably aims at securing our 
 manufacturers against loss, — against being obliged 
 to meet dumping, and bring down the home 
 prices to, or under, cost. What it does, is to 
 secure them in a quasi-monopoly profit, by 
 giving them the power to raise the price of 
 home steel by something under the amount of 
 the retaliatory duty. What I think we must ask, 
 then, is : Is Mr. Balfour's Retaliation, after all, 
 anything different from Mr. Chamberlain's undis- 
 guised Protection of home manufactures ? 
 
 The next question is fairly obvious : Will this 
 stop dumping ? 
 
i64 WILL THIS STOP DUMPING? chap 
 
 Why should it? Suppose we put a lo per 
 cent, tax on foreign steel, it is pretty certain that 
 our price in England — the price of home steel as 
 well as the price of imported steel generall}- — 
 will go up, either lo per cent, or a little less. 
 Say it goes up lo per cent. Then we shall be 
 precisely as we were. The foreigner will dump 
 his steel at lo per cent, higher price than he did 
 before, but he will be as much under our price 
 as before. In other words : If our home price 
 for steel is lOO, and America has been dumping 
 at 90; then, if our price goes up to iio, the 
 American will dump at 100, will still be 10 per 
 cent below our price, and will not make a 
 farthing more sacrifice. 
 
 It would be different if, when the 10 per cent, 
 duty was put on, our steel makers kept their 
 prices unchanged. Then the foreigner who meant 
 to undersell as before would have to pay the 10 
 per cent, duty, and would be 10 per cent, worse 
 off than he was. But it is more than human 
 nature to suppose that the price of home steel 
 would not go up. Suppose it went up only 5 per 
 cent. Then the foreigner would have to sacrifice 
 5 per cent, in addition to what he sacrificed 
 before in dumping. This would make dump- 
 ing a little more expensive, but I am by no 
 means convinced that it would stop it. Whether 
 it would stop it or not, depends on the pro- 
 portion of his home trade to his dumping 
 trade. If the home trade is 96 per cent, of 
 the whole output in the United States, as Mr. 
 Carnegie says it is, then it might pay to send 
 
xvn. PROTECTED COUNTRIES CANNOT 165 
 
 away the other 4 per cent, to be sunk in the 
 sea.^ It paid the Dutch East India Company in 
 past times to destroy some of its produce, and even 
 some of its plantations, rather than sell the pro- 
 duce too cheap. It used to pay Billingsgate to 
 destroy its fish rather than let the surplus spoil 
 the market and bring down prices. Similarly, it 
 might pay America to get nothing for her surplus 
 if the surplus is a small proportion of the total 
 output. 
 
 But, as it happens, we have an instance of what 
 a 10 per cent, import duty cannot do. Belgium 
 has a tariff, not of 10 per cent., but of some i 3 per 
 cent, ad valorem. The imports of wrought iron and 
 steel into Belgium were 6,885,000 kilos in 1891 ; 
 13,223,000 kilos in 1900; 21,423,000 kilos in 
 1 90 1.- These imports were, I believe, dumped 
 from Germany. How did Belgium save herself? 
 In the Consular Report, No. 3104, on the state of 
 Belgium in 1902, Mr. Hertslet says: "The iron 
 and steel industries suffered, not only from local 
 over-production, but from that in the neighbouring 
 countries. A market, however, was found for a 
 large quantity in the United States. The crisis 
 was thus averted, and the end of the year saw a 
 general improvement." 
 
 ^ The Census statisticians say 93 per cent. Giving the figures for 
 1900 as follows : — Agricultural products, £^y^ millions ; manufac- 
 tured products, £2(iOQ millions; mining products, £,2\o millions 
 —total, ;f 3760 millions ; they add: — "This was all consumed at 
 home, except the sum of ^^275 millions, or about 7 per cent., repre- 
 senting the value of all articles of domestic merchandise exported in 
 the year 1900.'' T'uelfth Census of U.S., 1900, vol. vii., p. Iviii. 
 
 '^Foreign Statistical Abstract, p. 98. 
 
1 66 THE RETURN TO PROTECTION chap. 
 
 Here, then, is a much needed correction of an 
 ordinary assumption ; that we, as the great Free- 
 Trade country, are " the one dumping ground of 
 the world." ^ In the above case, we have first Ger- 
 many dumping wrought iron and steel into Belgium 
 — a protected country — and then Belgium saving 
 herself by dumping her iron and steel into a much 
 more heavily protected country. Similarly, we find 
 from the Board of Trade Blue Book, that Germany 
 dumps coke into Austria and France, and coal 
 into Holland and Belgium ; and that Bohemia in 
 turn dumps lignite into Germany " at any price 
 obtainable." Finally, we hear that German manu- 
 facturers are in a panic at the promised invasion 
 of the United States Steel Trust.^ 
 
 What it all comes to is ; — that this Retaliation, 
 which was to prevent dumping, and may or may 
 not do so, is to end in Protection of the iron and 
 steel industries, and, as a probable sequence, the 
 formation of Trusts on the American model. Our 
 steel makers are to have the privilege of making 
 steel dear at home, and the second privilege 
 of selling it at or under cost to other countries, 
 our rivals. And the Times, in its issue of 5 th 
 December, 1903, confirms this by telling us that 
 " an average 10 per cent, duty may be reached by 
 charging 100 per cent, upon some, 50 per cent. 
 
 ^The words are Mr. Chamberlain's. 
 
 ^ This possibility of dumping into other countries may remind us 
 that, if the dumping is diverted from us to neutral markets in which 
 we compete, any success we may have in excluding dumped goods 
 from our own country will not necessarily protect our exporting 
 industries at any rate. 
 
XVII. WHAT IS ''COST PRICE"? 167 
 
 upon others, i 5 per cent, upon another category, 
 and nothing at all upon the remainder," and that 
 the principle upon which Mr. Chamberlain would 
 act is, that, "when the Germans charge 30 per 
 cent, upon steel bars, he would put the business 
 on a free-trade footing {sic) by putting the same 
 duty on German bars." It reminds one of the 
 simple-minded proposal of some people, that we 
 should "let other countries make our tariff for us," 
 by putting on their goods precisely the duty they 
 put upon ours ! 
 
 If, however. Protection is the only remedy 
 for Dumping, we may well hesitate. A man 
 may be suffering from a slight cold, but may 
 object to take a medicine that will throw him 
 into fits. 
 
 The moment we admit that Dumping is a 
 claim for counter duties, we seem to have taken a 
 long step and a perilous one. At what stage in 
 the dumping is the aid of the State to be 
 invoked ? Is it when a thousand tons have 
 been dumped, or a hundred thousand, or a 
 million ? Surely, a smaller trade may be ruined 
 by dumping before any large figure is reached. 
 Or are we to stop the danger before it emerges, 
 by putting an "average duty of 10 per cent." 
 on all manufactures ? 
 
 And who is to decide what is Dumping, as dis- 
 tinguished from " fair competition " ? Is it selling 
 at cost ? — or under cost ? — or far under cost ? 
 What is " cost " ? When students in a Political 
 Economy class have got the length of answering 
 
i68 EVERY CLAIM WOULD REQUIRE chap. 
 
 that question, they have very little more to learn. 
 Even economists are not agreed as to what 
 elements should be regarded as entering into 
 " cost " and what should not. The wonderful 
 ideas of some Municipalities, as to the place, 
 function, and extent of Depreciation Funds and 
 Sinking Funds, emphasise this. 
 
 Or may one take the rough and ready way of 
 saying that a country dumps when she sells at a 
 higher price at home than she does abroad? This, 
 however, as I have hinted, would be to admit the 
 contention of other countries that we are the 
 " champion dumpers," and justify them in retalia- 
 tion. I cut this out of an interview with a Canadian 
 woollen manufacturer last autumn: "The outlook 
 is gloomy. Canadian manufacturers are menaced 
 by conditions that make it profitable for British 
 woollen manufacturers to dump their goods 
 in Canada at prices which the home industry 
 simply cannot meet. Canada is being used as a 
 slaughter market." 
 
 Finally, when dumping is so glibly spoken of, 
 has it been considered that low prices are a con- 
 comitant of large orders, as well as of dumping ? 
 A million tons of coal will not be sold to Germany 
 at the price per cwt. here. Who is to determine 
 that a low price in a foreign country is not due 
 to the economies of having a large order, or to 
 a long contract taken at a time when prices were 
 low? 
 
 It is not too much to say that every claim 
 for counter duties against dumping would require 
 a Royal Commission to itself. And one can see 
 
XVII. A ROYAL COMMISSION 169 
 
 the probable corruption and bribery that would be 
 let loose to secure this government aid.^ 
 
 ' In the present chapter, I have assumed that Retaliation is 
 directed against foreign nations. But our own Colonies dump. In 
 1 901 -2, Germany, Holland, and Belgium together landed 78,615 
 tons of pig iron on our shores. The United States landed 45,973 
 tons. Canada, under a direct bounty, landed no less than 103,262 
 tons. Dumping by kinsfolk is very much the same as dumping by 
 strangers. 
 
CHAPTER XVIII. 
 
 TESTS OF PROSPERITY. 
 
 National Income : Patipe^-isni : Wages : Income- Tax returns : 
 Savings: Banking statistics : Shipping: Import of Raw Material: 
 Leisure : little luxuries. Measured by all these tests, the count7y is 
 prosperous and progressing. 
 
 Before coming to the more drastic proposals now 
 before the country, we may profitably ask how the 
 nation stands as measured by the ordinary canons 
 of prosperity. 
 
 According to the famous calculation made by 
 Sir Robert Gififen, the National Income, in 1875, 
 was ;^i, 200,000,000. His revised calculations in 
 1885 put it at i^ 1, 3 50,000,000. In a paper read 
 by him before the British Association in 1903, it 
 was estimated at ;^ 1,7 50,000,000.^ At the other 
 end of the scale are the figures of Pauperism. 
 In 1862, 47 persons per 1000 were at some 
 
 ^ This is the total money income earned by the people of this 
 country, based on the statistics of the Income-Tax Returns, and on 
 calculations for other earnings. As to the method in which the 
 figure was arrived at, see my Distribution of Income, book i. , 
 chap. ii. 
 
CH. XVIII. WAGES 171 
 
 time or other in receipt of poor relief in Eng- 
 land and Wales. In 1901, there were only 25 
 persons per 1000. Or, to take a more adequate 
 calculation, while population has increased 1 8 per 
 cent, in fifteen years, pauperism has decreased by 
 9 per cent.^ 
 
 First, as to Wages, the earnings of the great 
 mass of the people. The Board of Trade Blue 
 Book takes five groups of trades — Building, Coal 
 Mining, Engineering, Textiles, and Agriculture — 
 and, going back twenty-five years, finds that 
 wages have risen, since 1878, in the five groups, 
 from a figure indicated by 85.27 (or, in the four 
 groups, excluding Agriculture, from 82.84) to 100 
 in 1900. Since then, there has been no fall in 
 wages as regards Building and Textiles, and there 
 has been a rise as regards Engineering and Agri- 
 culture. The average, however, has been brought 
 down to 97.70 by a fall of some I2| per cent, 
 in the wages of Coal Mining. 
 
 This seems fairly satisfactory, especially when 
 it is remembered how the purchasing power of 
 money has risen : that 69d. to-day buys as much 
 as lood. did in the average of years about 1873. 
 
 ^ Pauperism, it should be noted, does not necessarily go pari 
 /a5.f« with Poverty. If one might amend Scripture, the statement 
 "the poor ye have always with you," might be changed to "the 
 pauper ye have always with you." There is nothing very opti- 
 mistic in saying that the time is near at hand when working-man 
 poverty will cease out of the land. But so long as we have drink, 
 thriftlessness, vice, insanity, and friendless old age ; so long as 
 there are men who marry, make their wives dependent and in- 
 capable of working for themselves, and then desert them ; so 
 long there will be pauperism. 
 
172 INCOME-TAX RETURNS CHAP. 
 
 Or, to use another calculation, lood. to-day buys 
 as much as I40d. did twenty years ago.^ 
 
 Comparing this with the progress of Germany, 
 an elaborate calculation in the same Blue Book, 
 p. 275, shows that German and British money 
 wages have risen about equally since 1886. 
 But, in the last twenty years, the purchasing 
 power of money in German}^ has risen only 1 2 
 per cent, as compared with 40 per cent, in 
 Great Britain. That is to say, taking quin- 
 quennial periods, " in the last five years, a 
 German worker has been able to purchase as 
 much food of the kind to which he is accustomed 
 for 100 marks as he could get previously for 112 
 marks, while the English workman has been able 
 to make 100 shillings go as far in purchasing 
 food as 140 shillings would have gone twenty 
 years before."^ 
 
 Take, next, the earnings of the comfortable and 
 wealthy classes. The following is the comparison 
 which emerges from the Income-Tax returns; 
 that is, the incomes which people with over £\^o 
 of income ^ admitted to the government that they 
 were earning : 
 
 1868-9. 
 
 Gross Income, 
 
 - i^398,794.ooo 
 
 1875-6. 
 
 >j 
 
 544,376,000 
 
 1894-5. 
 
 ]] 
 
 657,097,000 
 
 I90I-2. 
 
 5) 
 
 866,993,000 
 
 ^ For the course of prices from 1873 till now, see p. 191. 
 
 ''■Board of Trade Blue Book, p. 226. 
 
 ^Before 1894-5, incomes over^^iso were taxed. 
 
XVIII. COMPARE PRUSSIAN RETURNS 173 
 
 It should be noted that the comparison with 
 
 the decade 1868-76 is a comparison with years 
 
 of abnormal prosperity. 
 
 Confirmation of this is given by the well-known 
 
 calculation of what the Chancellor gets for every 
 
 penny he puts on the Income Tax.^ 
 
 In 1872-3, the penny yielded - i^i, 741,088 
 In 1882-3, „ - 1,962,871 
 
 In 1892-3, „ - 2,239,856 
 
 In 1902-3, „ - 2,580,000 
 
 One must be careful in applying this compari- 
 son to the corresponding returns of other nations. 
 It has been asserted that Income-Tax returns in 
 Germany show even better than ours. But Prussia 
 taxes incomes down to ^45 : thirty per cent, 
 of the population show incomes between £\^ and 
 ;^I50: less than five per cent, come under the 
 assessment over ^^150 — which permits us to guess 
 how many come under the ;^45-"^ But, as we do 
 not impose Income Tax till ^160 of income is 
 reached, and give degressive abatements on in- 
 comes under ;^700, our Income-Tax returns 
 witness to the prosperity of the comfortable 
 and wealthy class only. As regards those whose 
 income is under i^i6o, the evidence of prosperity 
 is got from the rise of wages. 
 
 Next, as to the Savings of the people. In 
 1882, Sir Robert Giffen calculated these, as a 
 
 ^ The later yields per penny would be greater but for additional 
 abatements made to the smaller incomes. 
 
 2 It seems to be the case that about two-thirds of the population 
 of Prussia, the richest state of Germany, have wages under ^45. 
 
174 FALLACIES OF COMPARISON chap. 
 
 whole, at ^200,000,000 per year. In a letter to 
 the Times of 3rd Dec, 1903, he estimated them 
 at ;^264,000,000. 
 
 The Post Office and Savings Banks deposits 
 have grown as under: In 1871, ;^5 5 millions; 
 in I 88 I, ;^8o millions ; in 1891, ;^ii4 millions; 
 in igoi, £ig2 millions; in 1902, £igy millions. 
 
 A very improper use of statistics is sometimes 
 made in comparing the amount per head of 
 Savings Bank deposits in protected countries with 
 that in our own. According to this, Denmark 
 appears at the top with ;^i 5 lis. 6hd., and Great 
 Britain at the bottom with £4 2s. 5|d. The 
 fallacy of the comparison may be suspected on 
 noticing that France appears second last on the 
 list, with £4 8s. 8^d. The reason, of course, 
 is that France limits her deposits to £60, and 
 Great Britain hers to ;^200, while, in most other 
 countries, there is no limit. Thus the savings of 
 the comfortable and richer classes are compared 
 with those of the working classes. 
 
 Such comparisons, too, are of no validity unless 
 account is taken of the other opportunities there 
 are for small investors. In a well-banked country 
 like our own, for instance, it may very well be the 
 case that people, having risen to thrifty habits 
 through the savings banks system, may pass on 
 to invest their money in other things — precisely 
 as, in the life of the individual, the money box is 
 exchanged for the savings bank, the savings bank 
 for the ordinary bank, and the bank deposit for 
 wider investments. Mr. Brabrook, indeed, called 
 savings bank deposits "infantile efforts in thrift." 
 
XVIII. 
 
 BANKING STATISTICS I75 
 
 Unfortunately, though there are very many 
 ways of investing small savings in this country, 
 the figures are not easily obtainable, particularly 
 over periods of time. It is well known that great 
 numbers of the working classes own their own 
 houses and house property generally, and hold con- 
 siderable stock in industrial companies.^ Trade 
 Union Funds are all working men's money.^ Two 
 figures, happily, are available. One is the funds 
 invested in Co-operative Societies. Comparing 
 the returns for the United Kingdom for the years 
 ending December, 1891 and 1901, the increase 
 was from £\6^ millions to £^ol millions. The 
 other is the deposits in Friendly Societies. Here 
 the increase is from ;^8 millions in 1871 to i^i4 
 millions in 1881 ; to £26 millions in 1891 ; to 
 ^43 millions in 1901. 
 
 Banking statistics offer another test of pros- 
 perity. The deposits of all the Joint-stock Banks 
 publishing accounts show the following advance : 
 in 1883, -^400 millions ; in i 888, ^^470 millions ; 
 in l893,;^633 millions; in 1898,^781 millions; 
 in 1903, ^^834 millions. 
 
 The Clearing-House returns — that is the value 
 of cheques, bills, etc., passed through the London 
 Clearing House — have increased as follows : 
 
 ^ The 2000 Building Societies in Great Britain and Ireland have 
 jQdi millions of funds. 
 
 '^The 600 Trade Unions have more than a million and a half 
 members, and nearly £$ millions of funds. The figures here and 
 above are taken from the Presidential Address to Section F of 
 the British Association in 1903 by Mr. Brabrook, Chief Registrar of 
 Friendly Societies. 
 
176 SHIPPING CHAP. 
 
 £df\ milliards in 1871 ; £6\ milliards in 1881 ; 
 £,^\ milliards in 1891 ; £(^\ milliards in 1901 ; 
 and ;^io milliards in 1903. Whatever the precise 
 importance attached to this as evidence, it shows 
 one thing at least — the universal use we make of 
 banks. But, for people to make use of banks, 
 at least shows that they have money enough to 
 open a banking account, and the figures are, of 
 course, generally, a witness to the increase of trade 
 and the position of London as the banking centre 
 of the world. 
 
 The state of Shipping is a test of prosperity 
 peculiarly significant as regards this country. The 
 increase in our net tonnage, from 5,690,798 in 
 1870, to 7,978,538 in 1890, and to 10,054,770 
 in 1902, speaks for itself, particularly if it is 
 remembered what the " net tonnage," of a nation, 
 constantly renewing its mercantile fleet, means 
 when translated into " carrying capacity." ^ 
 
 Another test one might apply. It is notoriously 
 difficult to get any figures of home trade, inas- 
 much as every man keeps his business secrets 
 to himself: and yet such figures would give us, 
 perhaps, the best test of national prosperity. 
 But we can get at something that lies at the 
 foundation of many of our industries — the import 
 
 ^ Statistical comparisons in regard to Shipping are very compli- 
 cated, and, therefore, very often misleading. See Appendix for a 
 full treatment of the subject. ('Reprinted, by kind permission of 
 the Editor, from an article contributed by me to the Glasgcw 
 Herald of 26th November, 1903.) 
 
xvrii. IMPORT OF RAW MATERIALS 177 
 
 of raw material. We can do nothing with raw 
 material but make it up into finished goods. If 
 these goods are exported, there is a check on one 
 employment of it. But if they are not exported, 
 it shows that the raw material has been used 
 up by the industries of the country, and remains 
 in the shape of goods for consumption at home. 
 If, then, the quantity of raw materials coming 
 into a country increases, it is as good an indica- 
 tion as may be of progress in a great many 
 directions. The following is the increase in 
 quantities of imports from 1886 to 1901 : 
 
 India-rubber, in cwts., 194,000 to 466,000 
 
 Copper, in tons, 197,000 to 264,000 
 
 Timber, in loads, 5,500,000 to 9,200,000 
 
 Cotton, in cwts., 15,300,000 to 16,300,000 
 
 Leather, in lbs., 77,800,000 to 148,300,000 
 
 But, beyond these formal and statistical tests, 
 take some not so easily reducible to figures. 
 Where else are the hours of labour so short ? 
 Where is there a country that has an almost 
 universal half holiday on Saturdays and a 
 universal whole holiday on Sundays ? In what 
 other nation does one find whole populations of 
 cities pouring out for a week or ten days in 
 summer, and spending what must be called 
 lavishly at coast or country? Or take a little 
 thing, and therefore all the more significant. 
 The bicycle is, probably, the most beneficent 
 invention of the last generation as regards the 
 health of the people — men, women, and children, 
 
 M 
 
178 BY ALL THESE TESTS CH. xviii. 
 
 One may go for twenty miles in the popu- 
 lous parts of rural France, and never meet a 
 working man riding a cycle. In what part of 
 Great Britain, outside of the mountainous 
 districts, would this be possible ? 
 
 Such, then, are some of the material evidences 
 of our prosperity at the present time. Let it be 
 granted that they are no evidence of national 
 character, of virtue, even of happiness. At least 
 they are not evidence of want of character, of 
 viciousness, of unhappiness. The moral life may 
 be difficult above a certain income ; below it, it 
 is impossible : considering how far most other 
 countries are below our level of income, there 
 seems no doubt, that we are ahead of almost 
 every nation in the material conditions of the 
 Good Life. 
 
CHAPTER XIX. 
 EXPORTS AS A TEST OF PROSPERITY. 
 
 If a country is progressing, its Trade should increase : not 
 necessarily its foreign trade. Falling exports may indicate fuller 
 employment of home industries -which do not export, and increasing 
 exports may indicate Ti-iist dumping or home depression. Free 
 Trade exports, not being exports of superfluity, are no adequate 
 gauge of overflo'i.ving abundance. 
 
 Among the ordinary tests applied to measure a 
 nation's prosperity, there is one that has not yet 
 been mentioned, the Exports. Before discussing 
 statistics, it would be well, perhaps, to ask what 
 we should expect, as regards its exports, of a 
 country which was otherwise progressing. 
 
 There is no question that we should expect 
 such a country's total Trade to increase, for 
 the very obvious reasons that the number of 
 mouths to feed is increasing ; that the working 
 capital — the tools and instruments for creating 
 more wealth — is increasing far more rapidly ; and 
 that the Standard of Life is rising, which itself 
 involves that the wealth we are consuming, and 
 taking out of existence as wealth, is increasing, 
 and demands more labour to reproduce it. And 
 
i8o FALLING EXPORTS chap. 
 
 if our trade were altogether foreign trade, or if our 
 foreign trade were, and must be, a constant pro- 
 portion of our total trade, then, of course, our 
 foreign trade ought to be increasing. 
 
 But, this is an altogether different thing from 
 saying that a nation's exports, by themselves, 
 are an}^ adequate measure of its prosperity and 
 progress, or that the evidence of exports out- 
 weighs the other evidences. Only a couple 
 of years ago, it was generally accepted that the 
 reason why America was not exporting steel, but, 
 on the contrary, importing it, was the extra- 
 ordinary demand for steel in America : her great 
 prosperity at that time was taking the form of 
 increasing fixed plant, railways, and buildings. 
 The same was said of us in the early nineties. 
 We were then so busy that we had relatively 
 little to send abroad. This was the time when 
 other countries got their chance. We absolutely 
 refused foreign orders, not that we did not wish 
 them, but because we could not execute them. 
 It is a suggestive reminder of what people 
 seem so often to forget — that our capital and 
 labour are limited, and that we cannot possiblj^ 
 continue, at the rate of the world's progress, to 
 be the world's provider. 
 
 So, when one sees falling exports quoted as 
 a sign of national decay, the first thing to do is 
 to look around us at home. And when we do so, 
 and see the enormous development in the trade 
 called House Building ; when we inquire at the 
 Local Government accounts and find that the 
 Local Debt of England and Wales alone — to say 
 
XIX. NO SIGN OF DECAY i8i 
 
 nothing of Scotland and Ireland — has increased 
 from ;^93,ooo,ooo in 1874-5 to ;^3 16,000,000 
 in 1 900- 1 ; and that ;^ 145,000,000 of that, or 
 46 per cent., is entered as Reproductive Debt, 
 this is, capital borrowed for the starting of what 
 are virtually State Industries ; — the question arises 
 if it may not very well be the case that the 
 growing capital and labour of this country are 
 finding fuller employment in occupations that do 
 not export. And one may ask, further, if the 
 vast sums now being sunk in better and more 
 sanitary housing for the working classes, are not 
 perhaps a better investment, as regards the nation, 
 than sending out steel rails to develop other 
 countries, or sinking gold mines in the Transvaal. 
 Suppose the vast bogs of Ireland were found to 
 contain a new fuel, or that new sources of coal, 
 petroleum, and the like were discovered in this 
 country, would not capital be withdrawn alike 
 from exporting and from foreign investments 
 and be employed at home ? ^ 
 
 ^ So, when Mr. Chamberlain compares the alleged 7^% increase 
 in our exports since 1872 with the 30% increase in our population 
 within the same period, and asks, " Can you go on supporting your 
 population at that rate of increase?" (Glasgow speech, 6th Oct., 
 1903), the only rejoinder is, "What necessary connection is there 
 between exports and the support of the population?" But even 
 here one may join issue with Mr. Chamberlain. His inference 
 is that, if population has increased while exports have not, there 
 must have been less employment for the people. Sir Robert 
 Giffen, however, reminds us that this is not the case theoretically, 
 and is not the case as a fact. The value of manufactured exports 
 contains two elements, the price of the raw materials and the 
 expenses of manufacture. It is the latter only that indicates and 
 measures the employment of British capital and labour. Even 
 
i82 WHAT A FREE TRADE NATION chap. 
 
 But, if falling exports are not necessarily any 
 sign of national decay, are increasing exports any 
 necessary sign of progress ? Look at other coun- 
 tries. The dumping of iron during the last two 
 years from Germany, it is acknowledged, was the 
 dumping of practically bankrupt stock. Yet, no 
 doubt, it accounted for a considerable increase in 
 her exports. Is the dumping from America a 
 sign of her prosperity ? It is a sign of Trusts, 
 but Trusts and prosperity are not synonymous. 
 We are told continually that it is in times of 
 
 suppose, then, that our manufactured exports, as expressed in terms 
 of value, have not increased, there has been more employment 
 for labour and capital if the price of the raw material has fallen. 
 Now, in 1877, Sir Robert calculated that "the net produce of 
 British labour and capital exported abroad was ;!f 140,000,000." 
 According to the Board of Trade estimate for 1902, it is no less 
 than ;^224, 000,000, the difi'erence being ;^84,ooo,ooo, or 70% 
 of an advance over 1877, in the part of the exports which concerns 
 us. This is confirmed by the calculations of Mr. Bowley. He 
 takes the year 1881 as starting point, "partly for convenience, 
 partly because by that date foreign trade had begun to recover from 
 the sustained depression of 1879." Between 1881 and 1902, the 
 fall in price of the imported raw materials of our textiles was from a 
 level of 100 to a level of 75, or 25%, while the fall in the price of 
 exported textile manufactures was from 100 to 84 only, or 16%. In 
 the same years, the fall in price of imported unmanufactured metals 
 was from 100 to 96, or 4%, while the exports of metal products 
 actually rose from 100 to 112. The conclusion seems inevitable 
 that, even if the values of our exports had remained constant within 
 these years, the amount of labour and capital employed by them had 
 greatly increased. — Economic Journal, Sept. and Dec, 1903, and 
 National Progress in Wealth and Trade. Mr. Bowley's calcula- 
 tion of and deductions from the changes in price of imports and 
 exports, and his comparison with the relative figures for Germany, 
 are among the most valuable contributions which the present 
 controversy has called out. 
 
V 
 
 XIX. EXPORTS IS NOT ITS SURPLUS 183 
 
 depression abroad that we may expect dumping, 
 and that, in particular, the dumping we have 
 most occasion to fear is that of the United 
 States Steel Corporation, which is just now pay- 
 ing off its operatives by tens of thousands. But 
 this dumping will no doubt increase her exports. 
 To say that a country is going to the dogs 
 because her exports do not increase, seems to me 
 about as reasonable as saying that, if a man does 
 not go to the Riviera in spring but stays at home, 
 it is because he cannot afford it ! 
 
 It is always interesting, and sometimes profit- 
 able, to ask the hidden reason of some wide- 
 spread belief Why should exports be counted 
 the gauge and measure of national progress ? It 
 seems to be the assumption that what a nation 
 exports is its Surplus. 
 
 In Professor Gide's Principles of Political 
 Economy occur these words : " It is certain that 
 for Tyre and Carthage in the old world, and for 
 Venice or the Hanse Towns in the middle ages, 
 trade was everything, and even to-day it holds a 
 very large place in the national life of England. 
 All the same, in great countries at the present time, 
 trade with other nations plays only a moderate 
 part in the general movement of their trade. In 
 this respect, the position of a country differs from 
 that of individuals : in our modern communities, 
 the division of occupation has been pushed to 
 its utmost limits ; no one of us produces almost 
 anything except on behalf of his neighbours, 
 or consumes anything but what has been 
 
1 84 WHAT A FREE TRADE NATION chap. 
 
 produced by his neighbours. Thus everything we 
 produce and everything we consume must pass 
 by way of trade. It is not so in the case of 
 a country, and particularly of a great country. 
 If we wish to compare such a country with an 
 individual, we should compare it with a landed 
 proprietor living on his estate, who, himself pro- 
 ducing the greater part of what he consumes, has 
 no need of buying outside anything but what he 
 does not himself produce, and, consuming too the 
 greater part of what he produces, has no need 
 of selling outside anything beyond the surplus 
 of his crops." ^ 
 
 All this is quite true from the standpoint and 
 ideal of a protected country. Since the days 
 of Colbert, France has set before herself the object 
 of being self-sufficient as regards agriculture and 
 manufacture. It is the Nemesis of Protection 
 that her very prosperity makes the realisation of 
 this ideal impossible ; she has a surplus and 
 exports it ; and, in spite of all her planning, 
 the imports which pay for these exports compete 
 with her home producers and prevent the self- 
 sufficiency. 
 
 But it is equally the aim of a Free-Trade 
 country to break down these national barriers, 
 and send its goods for sale anywhere in the world 
 that it can get a better price than, or even as good 
 a price as, at home. If, then, we think of our 
 exports as the sale of a surplus which we cannot 
 
 * Third edition, p. 257 ; English translation, p. 237. It is 
 characteristic of the author's anxious and laborious revision that 
 the words do not appear in the last (8th) edition. 
 
XIX. EXPORTS IS NOT ITS SURPLUS 185 
 
 consume or do not want at home, we shall, of 
 course, regret to see our exports going down ; for 
 the exports, in this case, are thought of as the 
 superfluity of our wealth — the part we can spare 
 and send away in order to buy other things. But 
 when it is realised that foreign countries are not 
 the " dumping ground for surplus," but part of the 
 one common market of a free-trade country, all 
 that a diminution of exports tells us is, that we 
 are not doing so much trade abroad as we did — 
 which may be a good thing or may be a bad thing. 
 
 The point is that a country may gradually find 
 it more profitable to invest its capital at home, and 
 that the growing wealth may find full employment 
 in industries which do not export. If one con- 
 siders how much of the trained intellect of this 
 country is finding its way into personal services — 
 professional, journalistic, artistic, to say nothing of 
 domestic service — this should be clear enough. 
 
CHAPTER XX. 
 THE STAGNATION OF EXPORTS. 
 
 The statistical stagnation proved by 7'eferefice to 1872 is quite 
 fallacious ; scarcely less so the comparisoti with the period 187 1-5. 
 For t/iese were years (1)0/ abnormal expansion and activity, due, 
 among other things, to the tvar ; {2) of the highest prices, just before 
 the great readjustment of the price level. True, other nations show 
 a greater percentage of total increase in statistical exports. But 
 the only real criterion is exports per head, 7iot per nation ; and here 
 we have a long lead and are increasing it. 
 
 Although we may freely admit that Exports 
 are not by themselves an adequate gauge and 
 measure of prosperity and progress, there is a 
 good deal to cause us uneasiness if our exports 
 fall off. At least the matter calls for investiga- 
 tion ; and one might have expected the appoint- 
 ment of a Royal Commission long before this 
 to examine and report on it. In 1882, our 
 exports were ^^14,000,000 under those of 1872. 
 In 1885 and in 1886, they were ;^43,ooo,ooo 
 under, and we did not take fright. There was 
 the further excuse for alarm that these were 
 years of great depression. But it was recognised 
 then that times of great prosperity were always 
 
CH. XX. RECURRING DEPRESSIONS 187 
 
 succeeded by periods of dull trade. Depressions 
 were so regular that some people began to connect 
 them with the appearance of spots on the sun.^ 
 We expected them, and some who were prudent 
 prepared for them. But when things were very 
 bright, producers generally went ahead rushing up 
 mills and increasing output as if the sun would 
 always shine. Then some trade found that it 
 had gone, for the moment, beyond the limits of 
 consumption at paying prices. This trade had to 
 call a halt, and went on short time ; wages and 
 profits were reduced ; purchasing power was thus 
 restricted ; the shops felt it, and curtailed their 
 buying from the manufacturers ; the manufacturers, 
 in turn, limited their demand for raw material 
 and stores ; and, in a short time — no one knew 
 how — trade was found to be " depressed." 
 
 Then, when we had just realised that the 
 outlook was looking very black, it was suspected 
 that things had taken a turn. Perhaps relief 
 works were started for the unemployed, only 
 to find that the unemployed were finding work 
 in their usual occupations. And, before we well 
 knew what was happening, we were going uphill 
 again, and we heard no more of the depression. 
 
 These ups and downs of trade were so common 
 that .sensible people accepted them as all in the 
 day's work, and no one thought of blaming 
 Free Trade for them — indeed, we were all ready 
 enough to point out how much worse things 
 were in protected countries. But it seems to 
 
 ^ Jevons' explanation of the coincidence of the sun spots with bad 
 harvests is well known. 
 
1 88 STAGNATION OF EXPORTS chap. 
 
 be the case that the past wave of prosperity 
 lasted so long before it broke, and carried us so 
 far, that we think there is something mightily far 
 wrong when there begin to emerge even signs of 
 depression, and we never think of grinning and 
 bearing it, but call lustily for government to " do 
 something." 
 
 Where, then, is this terrible handwriting on the 
 wall that tells of coming decay, and " descent to 
 the rank of a fifth-rate power ? " The answer 
 given is that, although, by all other tests, the 
 country is prosperous as it never was before,^ the 
 Exports are stagnant. 
 
 The first thing to do is to look into the facts. 
 If we go back ten years, our exports seem to 
 present a fairly continuous growth, from 
 ^^2 1 6,000,000 in 1894 to ;^2 87,000,000 in 
 1903. 
 
 But when the protagonist of the new move- 
 ment opened his campaign in Glasgow on 6th 
 October, 1903, he looked back thirty years, and 
 saw that the increase in exports over 1872 was 
 the very moderate one of i^2 2,000,000. 
 
 ^"Judged by all available tests, both the total wealth and the 
 diffused well-being of the country are greater than they have ever 
 been. We are not only rich and prosperous in appearance, but 
 also, I believe, in reality." — A. J. Balfour, Economic Notes on 
 Insula}- Free Trade, p. 28. Compare Mr. Chamberlain's words 
 in the beginning of 1902 : " I see no imminent and present danger 
 to the prosperity of this country. During the last five years we 
 have enjoyed an absolutely unparalleled condition of trade, and, 
 although we cannot expect that to last for ever ... to my mind 
 the prospects are extremely good. " 
 
XX. 
 
 SINCE 1872 
 
 .89 
 
 There is great virtue in round numbers. " Thirty- 
 years ago " looks so much better in a speech than 
 thirty-two or thirty-three or thirty-four. But if he 
 had taken thirty-two years, the increase would 
 have been, not iJ^ 2 2,000,000, but ;^7 8,000,000. 
 If he had taken thirty-three years, it would have 
 been ;^8 8,000,000. If he had taken thirty-four 
 years, it would have been ^^^99,000,000. 
 
 But no statistician would ever take a single 
 year as his starting point, or compare one single 
 year with another. To eliminate special causes, 
 an average of years must be taken. Let us, then, 
 take quinquennial periods since 1856 — figures 
 before 1854 not being comparable. This comes 
 out as follows : 
 
 1856-60, 
 1861-65, 
 1866-70, 
 
 1871-75, 
 1876-80, 
 1881-85, 
 1886-90, 
 1891-95, 
 1896-1900, 
 
 1901, - 
 
 1902, - 
 
 1903, - 
 
 £124^.2 millions. 
 144.4 
 187.8 
 
 239-5 
 201.4 
 
 232.3 
 
 236.3 
 
 227.0 
 
 249.1 
 
 270.8 
 
 277.6 
 
 287.0 
 
 Here we have a very different story. The 
 average exports of the last three years are nearly 
 ;^4O,O0O,ooo above the average of the " boom 
 years" of 187 1-5. For these were "boom 
 years " in two distinct senses : they were years 
 
igo iSji—iSj^ CHAP. 
 
 of abnormal activity, and they were years of the 
 very highest prices, 
 
 I. They were years of rapid expansion, of 
 immense railway development, of great activity 
 in the coal and iron trades. But consider, besides, 
 what was happening in Europe, The proudest 
 military monarchy in the world had just collapsed. 
 The Franco-German war began in 1870. Napoleon 
 surrendered at Sedan within the year. Then came 
 the long agony of the beloved city, wrecked inside 
 by its own citizens, and ringed outside with fire ; 
 and the Third Republic was established in 1871, 
 The indemnity was ;^200,ooo,ooo, ^40,000,000, 
 payable the first year, and the remaining 
 «^ 1 60,000,000 in three years thereafter. In direct 
 cost, it was a cheap war, says Giffen, although two 
 great nations carried on unremitting hostilities 
 against each other for nearly eight months, em- 
 ploying altogether some 2| millions of men. But 
 it cost France, he calculates, ;^6oo,ooo,ooo in 
 permanent capital.^ 
 
 One can understand that here was an immense 
 hole left in the middle of Europe which all 
 nations set themselves to fill up by the pro- 
 ducts of their industry. In particular, France 
 set our factories to work, buying our products to 
 pay Germany. No wonder our exports, which 
 had risen previously by five to ten millions 
 a year, rose with a bound from ^200,000,000 
 in 1870 to ;^2 5 6,000,000 in 1872. Nor was 
 this all ; while the two nations were at deadly 
 grips with one another, we slipped in, and 
 
 ^ Essays in Finance : First Series, I. 
 
XX. SAUERBECK'S INDEX NUMBER 191 
 
 took the increase of trade they naturally would 
 have had. 
 
 II. The figures given by the statistics of 
 export are, of course, Values, and values depend 
 not only on quantities, but on prices of these 
 quantities. Let us take, then, the movement of 
 prices during these years, using Sauerbeck's Index 
 Number.^ 
 
 In 1 87 1, the price level was 100. In 1872, it 
 rose to 109. In 1873, it touched 1 1 1, the highest 
 point reached since modern prices were established 
 by the gold discoveries in the middle of the cen- 
 tury. In 1874, it fell to 102; in 1875, to 96; 
 
 ^ It may be as well to explain the method of Index Numbers. 
 Sauerbeck selected 45 leading and distinct classes of commodities, 
 thus covering fairly the field of human consumption. He collected 
 the wholesale price of these in England between the years 1867 and 
 1877, so as to eliminate both the years before 1872 and the " boom 
 years" of 1872 and 1873. Taking the average price of each article 
 during these eleven years, he represented it by the figure 100, and 
 thereafter any rise or fall in its price appears as a percentage figure. 
 If wheat, e.g., rose from 25s. to 26s., the figure for wheat would rise 
 from 100 to 104. Thus are conveniently registered changes in the 
 Price Level. Objection may be taken on the ground that each 
 commodity of the 45 has as much importance attached to it as any 
 other ; a rise in pepper affects the price level as much as a rise in 
 wheat. To meet this, other Index Numbers, such as those of 
 Palgrave, have been "weighted"; that is, each article has been 
 given an importance relative to its consumption. Practically, how- 
 ever, it is found that all Index Numbers differ very little in results, 
 and Sauerbeck's, which appears each month in the columns of the 
 Statist, is generally taken as trustworthy. The Index Number 
 begun by Newmarch is still continued in the columns of the Econo- 
 mist. For full discussion of Index Numbers see C. M. Walsh, 
 The Mcasuremait of General Exchange Value, and Professor 
 Edgeworth's Memoranda in the Reports of the British Association 
 for 1887, 1888, and 1889. 
 
192 THE GREAT FALL chap. 
 
 and from that year it fell fast and heavily till, 
 in 1886, it was 69. But this was not the 
 bottom. The lowest year was 1896, when it 
 touched 61. For the ten years, 1888- 1897, it 
 averaged 6'], and for the ten years 1893- 1902, 
 it averaged 66. 
 
 This was a stupendous fall of prices. It meant 
 that, as a whole, every article which sold for 
 100 shillings, or pence, or pounds in 1871, 
 was selling in 1896 for 61 shillings, or pence, 
 or pounds. The fall was due to the inter- 
 action of two causes. One was the immense 
 cheapening of costs, by the inventions which 
 increased the speed and carrying power of ships, 
 and by the opening of the Suez Canal, which 
 saved a journey from Western Europe to India 
 of 3750 miles, and brought goods direct into the 
 heart of the Continent. This stimulus to pro- 
 duction and increase of trade gave money more 
 work to do — just as an increase of traffic 
 would make a greater demand on railway 
 trucks. The other cause was that, just at 
 the same time, there was a great falling off 
 in the money supply available. Up till 1873, 
 silver was a full-valued money, used as legal 
 tender by France, Germany, Italy, Belgium, 
 Holland, and the United States. It was linked 
 with gold by the bimetallic system, formally 
 established at the beginning of the last century, 
 whereby 15^ oz. of silver were accepted as equal 
 in value to one oz. of gold practically all over 
 the world. That system collapsed in 1873, 
 and silver became no longer the money of 
 
XX. IN PRICES 193 
 
 Europe. The whole of the money work had to 
 be done by gold, plus the credit instruments 
 superimposed. Unfortunately, the production of 
 gold did not respond to the call upon it. Its 
 output, after rushing up to a certain point, rather 
 fell off. It was not till near the end of the 
 century that the discoveries in the Transvaal and 
 Australia began steadily and greatly to increase 
 the output, and even this was checked by the 
 Boer War. The result was that the exchange 
 value of every commodity had to be named in 
 a smaller number of coins, at the same time that 
 the number of commodities which had to be 
 named had enormously increased. 
 
 We are still under the influence of that re- 
 adjustment. Prices went up from 1896 to 1900, 
 when they reached 75. Then they fell again. 
 Now they are at 69. That is, the prices of to-day 
 are practically the same as the prices of 1886. 
 The impropriety, then, of comparing the values 
 of exports in 1872 with the values of exports 
 in 1902, needs no further proof. It is com- 
 paring a time when prices were at a level of 
 9s. id. with a time when they were at a level 
 of 5s. 9d. 
 
 Thus "stagnation in exports," between 1872 
 and now, means that we are sending immensely 
 more goods than we were, and probably em- 
 ploying more labour and more machinery to 
 produce them, while the fall in prices alone 
 makes this appear as if the increase were 
 trifling. It is not stagnation ; it is change of 
 price. 
 
 N 
 
194 
 
 FALLACY OF PERCENTAGES chap. 
 
 This is confirmed by the following cal- 
 culation. If the prices of 1873 had been 
 maintained till now, our exports would have 
 been as under : 
 
 1873, ;^2 5 5 millions. 
 
 1883, 295 millions, instead of ^240 millions. 
 
 1893. 329 » » 218 
 1902, 418 „ „ 278 „ 
 
 On these grounds, it must be said that, to 
 take the year 1872 as the basis of a com- 
 parison, is utterly unpardonable ; at least, it 
 would be unpardonable in a statistician or an 
 economist. Indeed, one may go further, and 
 say that, to take even the quinquennial period 
 embracing the years 187 1-5, as a basis for com- 
 parison with any other quinquennial period, is 
 quite inadmissible. 
 
 But, it may be said, granted that our ex- 
 ports, by comparison with previous years, are 
 not stagnant, is it not the case that the exports 
 of other countries have increased faster than 
 ours? 
 
 This is quite true. It is the case that, between 
 the years 1891 and 1901, Norway has increased 
 her exports by 24.7 per cent. ; Portugal, by 31.3 
 per cent. ; Denmark, by 40.9 per cent. ; Italy, by 
 57.1 per cent; Japan, by 107.1 percent. Eng- 
 land, on the other hand, has increased hers only 
 by 13.3 per cent. 
 
 All the same, this is a good instance of what 
 is called the Fallacy of Percentages, now so 
 
XX. FALLACY OF PERCENTAGES 195 
 
 common among careless or dishonest contro- 
 versialists. It was delightfully illustrated by 
 Mr. Asquith in a recent speech. During one of 
 our wars, he said, the temperance people in this 
 country set on foot an inquiry as to the relative 
 healthiness and powers of endurance of the total 
 abstainers in the army as compared with the 
 free drinkers, one regiment being taken as 
 sample. The return made was that, of the total 
 abstainers in this regiment, 50 per cent, had died 
 and the other 50 per cent, had been invalided 
 home, and this was very terrible and dishearten- 
 ing to the temperance people. But a different 
 aspect was put on the matter when it turned out 
 that, of the total abstainers in the regiment in 
 question, one was killed in action and the other 
 had had a sunstroke ! The truth or falsity of 
 such comparisons altogether depends on the 
 quantum with which they start. Thus, when 
 we notice that Japan, in 1891, showed 
 ;^ 1 2,664,000 of exports, while Great Britain 
 showed ^247,235,000, the reason of the dis- 
 parity in percentages stands revealed. A girl 
 of twenty-five will double her age in twenty-five 
 years ; a man of fifty never will. 
 
 But there is no such fallacy in comparing, with 
 our own, countries like Germany and the United 
 States, whose exports are very much on the 
 same scale as ours. Taking 1872 as the year 
 of comparison, Mr. Chamberlain pointed out 
 that, while our increase, under Free Trade, 
 was only ;^2 2,000,000, the increase of Ger- 
 many in the same time, under Protection, was 
 
196 THE TRUE TEST IS chap. 
 
 ;^5 6,000,000, and the increase of the United 
 States ;^ 1 10,000,000.^ 
 
 Assuming the accuracy of these figures, and 
 the propriety of taking 1872 as start, the ques- 
 tion immediately emerges whether this is a 
 legitimate comparison, and the answer is that 
 it is not. It is comparing nation with nation, 
 instead of the individuals of one nation with 
 the individuals of another. It is no better than 
 comparing the wealth of two households, with- 
 out asking whether the two households contain 
 the same number of persons. 
 
 This is a grave matter, and it cannot be put 
 too plainly. What does material progress mean 
 to us ? One may take it to mean that we, as indi- 
 viduals, are " making more money " as we say, and 
 the ordinary way of making more money is by 
 
 ^ It is not necessary to say any more as to the alleged 
 ;^22, 000,000, or 7^ per cent., of British increase since 1872. As for 
 the German increase of /56,ooo,ooo, it is impossible to say much, 
 for a different reason— that I do not know where Mr. Chamberlain 
 got the figure. The German Empire came into being only in 1872. 
 Bremen and the greater part of the State of Hamburg did not come 
 into the ZoUverein till 1888 and 1889 respectively. The Board of 
 Trade Blue Book, in its table of exports from Germany, leaves a 
 blank before 1880, with the words " information not available." 
 And again, in 1897, there was a complete break in continuity; 
 a large proportion of the " improvement" traffic was added to the 
 special exports, "so that for any years before and after that date," 
 says a Foreign Office Report, No. 490, "no correct comparisons 
 can be made." As regards the American increase of £1 10,000,000, 
 it should be noted, in addition to the other considerations 
 mentioned, that America has meantime given up competing for 
 the oversea traffic, and that, if she increases her foreign trade, 
 either of importing or exporting, her visible exports must increase 
 from the mere necessity of paying for our invisible exports. 
 
XX. EXPORTS PER HEAD 197 
 
 doing more trade. If then, we, individually, find 
 that we are doing more trade this year than we did 
 last, we are satisfied. If, again, we look across to 
 France, and find that their individuals are pro- 
 gressing in the same proportion, we may conclude 
 that both " nations " are doing equally well. In 
 short, it is the prosperity and progress of the 
 individual that concerns us. We should never 
 think of judging the " Standard of Life " of 
 a people by anything else than their consump- 
 tion per head. Neither should we count that a 
 firm of two partners was worse off than a firm of 
 four, if the latter firm was making ;!^2000 a year 
 and the former iJ"iooo. If this is true of income 
 and of trade generally, it is no less true of that 
 department of trade which exports. It is the 
 exports per head that concern us. 
 
 This calculation was made in 1899 by Sir 
 Alfred E. Bateman, then Comptroller General at 
 the Board of Trade. The figures were as follows : 
 Since 1875, the exports per head of the four 
 great countries remained nearly stationary, and 
 stood in the following rank : Great Britain, £6 ; 
 France, £1 15s.; Germany, ^3 7s.; America, 
 £2 I 8s. 
 
 Is it a deplorable thing that, head for head, 
 we should not have gone in front of our rivals ? 
 What better could we expect than to keep our 
 long lead ? Trade is done by individuals for 
 individuals. As individuals increase in numbers 
 it should be expected that they will col- 
 lectively do more trade, just because there are 
 more of them. If, to take an extreme example 
 
198 EXPORTS PER HEAD chap. 
 
 all trade were foreign trade ; if all these millions 
 in the various countries were engaged in ex- 
 porting ; and if each was making just a living 
 wage by it : then, if the increasing numbers of 
 one generation were to remain in life, they would 
 each require to be exporting just as much per 
 head as the smaller numbers of the previous 
 generation were exporting ; in this case, it 
 would be seen that the absolute increase in ex- 
 ports of one nation over another is a natural 
 phenomenon of growing population, and not in 
 the least a sign of aggressive trade policy. Con- 
 sidering that Germany has a population of some 
 56,000,000, and America a population of nearly 
 80,000,000 ; considering also that our population 
 increases about i per cent, per year against 
 Germany's \\ per cent., and America's 3^ per 
 cent. ; it follows that, if German and American 
 exports did not increase absolutely, it would be a 
 sign that Germany and America were falling back 
 — assuming, of course, that exports are a fair 
 indication of progress. In light of these figures, 
 the idea that we are losing ground because 
 America makes up on us, or passes us, in total 
 value of exports, or that France is losing ground 
 because her total exports do not increase, dis- 
 appears. 
 
 There seems to be an idea abroad that we 
 should not only be ahead of the world in foreign 
 trade, and keeping our lead, but should be in- 
 creasing it. How, in reason, can we expect this ? 
 Even if the populations of the various countries 
 were the same, how could we expect it ? Is it 
 
XX. OUR LONG AND INCREASING LEAD 199 
 
 true that we are the most enterprising, or best 
 educated, or most inventive ? But as neither 
 populations nor rates of increase are the same, 
 Germany and America may well be expected to 
 forge slowly ahead, because, in these countries, 
 there is a cumulative increase of producing units. 
 And this is not an increase of ill-fed, ill-educated, 
 lethargic black or yellow races, but an increase of 
 people as good as ourselves, and, in the case of 
 America at least, of people who have some busi- 
 ness qualities which are not so prominent in the 
 mother race. I submit that, unless we are to take 
 the absurd view that we should increase our foreign 
 trade as we increase our fleet — that is, on the 
 principle of being always equal to the two greatest 
 nations — we may rest pretty well content with the 
 fact that, in spite of our slowly increasing popu- 
 lation, we have such a long lead of other nations, 
 and keep neck for neck with them in increase. 
 
 But, as it happens, the latest figures show that 
 we are actually increasing our lead. Since the 
 above calculation was made, three years have 
 passed. Taking the triennial period 1900-2, we 
 find that Great Britain heads the list by no less 
 than £6 17s. 2d., while Germany shows £\ is. 
 I id., and the United States ;^3 i6s. 6d. That 
 is to say, Great Britain and the United States 
 have both added about i8s. per head, while 
 Germany has added only 14s. pd. 
 
CHAPTER XXL 
 
 EMPLOYMENT AS AFFECTED BY EXPORTS 
 AND IMPORTS. 
 
 It is said that we are exporting raw tnaterials which employ little 
 labour, and importing manufactures which, made at home, might 
 employ much. Btit Coal employs t/ioj-e labour for its value than 
 j)iost marmfactures. Most of the manufactured imports, again, are 
 materials of our industries. Of the remainder, there are so??ie our 
 conszmters will have ; some, foreigners can 7>iake better ; some 'would 
 require skilled labour, which, probably, is already profitably employed 
 in other ways. But are we not forgetting that all these imports 
 must be paid for, and that, to take over the making of them ourselves, 
 is to displace those who now are making for export 1 Neither Free 
 Trade nor Protection, in themselves, can secure employment for a 
 nation. 
 
 If it is proved that there is no stagnation of 
 exports ; that the total exports are increasing 
 satisfactorily, and the exports per head even more 
 satisfactorily ; one would think that there is no 
 reason for alarm, or for any attempt to regulate 
 either demand or supply. The imports from 
 abroad are being paid for in goods produced at 
 home ; as the former increase, so do the latter. 
 But here we encounter an objection which seems 
 to strike many as plausible ; — that the things we 
 
CH. XXI. DIMINUTION OF EMPLOYMENT 201 
 
 are exporting are not the right things, and that 
 the things we are importing are the wrong things. 
 England, it is said, has long been the workshop 
 of the world and should remain so ; to secure 
 this, we ought to be importing raw materials and 
 sending them out as manufactures, whereas, as a 
 fact, we are exporting more and more raw material, 
 and importing more and more manufactures. 
 
 The preliminary question, of course, is whether 
 this statement would be accepted if it were found 
 that the export of raw materials is relatively more 
 profitable than the export of manufactures.^ But 
 we may pass this by, and concentrate our attention 
 on the suggestion which has caught hold on the 
 public during the present controversy, that raw 
 materials employ little labour and manufactures 
 employ much ; and that, in these two ways, the 
 character of our foreign trade is diminishing the 
 Employment of the nation. 
 
 If one were content with a cheap victory, it 
 might be asked. Is it employment we want ? 
 Have we not, up till now, been rejoicing that we 
 are in such comfortable circumstances that we 
 could reduce the working day to nine hours ? 
 Have not many good people been saying that the 
 
 ^ Mr. Bowley has done good service in raising this point. He 
 shows that, between 1S81 and 1902, while our exports of manufac- 
 tured textiles have fallen from a price level of 100 to a level of 84, 
 exported raw materials show a rise in price from 100 to 1 14, and he 
 adds that " the price of coal does not account to any great extent 
 for the phenomenon except in 1900 and 1901." This, of course, in 
 itself does not prove relative profitableness, but it suggests questions. 
 Compare footnote, p. 203. 
 
 G 
 
202 DIMINUTION OF EMPLOYMENT chap. 
 
 time had come for the golden age : " eight hours 
 for sleep, eight hours for play, eight hours for 
 work, and eight shillings a day"? If, by all the 
 ordinary tests, our people are getting wealthy 
 hand over hand, may we not rest easy in our 
 minds about not having enough work to do ? 
 
 But the retort would be a little cheap, and is, 
 besides, not quite straightforward. That we have 
 been able to reduce the statutory hours of labour 
 in this country, is certainly not due to any cur- 
 tailment in our demand for goods, or to any con- 
 tentment with the amount of wealth we already 
 have. If, indeed, we were satisfied to live as our 
 ancestors did, a very few hours of labour would 
 produce over-supply. But as wealth increases and 
 the standard of living rises, wants increase, and 
 the new wants of a progressive people make more 
 demands on industry than the simpler ones did. 
 There is not less product from the working world, 
 but infinitely more, the explanation being that 
 we have been, in many directions, economising 
 human wear and tear by transferring the heavy 
 work to machinery, and, moreover, sending larger 
 amounts of the growing labour into occupations 
 which know no limit of factory acts and hours. 
 In the abstract, then, there is not the slightest 
 fear of labour, as a whole, having too little to do. 
 But it may be quite honestly argued that the 
 foreigner is taking some of our employment 
 from us. 
 
 I. Let us ask, then, what raw material it 
 is, the export of which should give us anxiety. 
 The answer, of course, is Coal. In 1897 and 
 
XXI. COAL AN IRREPLACEABLE CAPITAL 203 
 
 1898, we exported 35 million tons; in 1899, 41 
 millions; in 1900, 44 millions; in 1901, 41 
 millions; in 1902, 43 millions — roughly, about a 
 fifth part of our total output. 
 
 There is an argument often advanced about 
 the export of coal which does deserve serious 
 attention. It is that coal is " natural capital," 
 given us by a beneficent Creator ; that it is the 
 very source of our manufacturing greatness ; that, 
 unlike other forms of capital, it is irreplaceable; 
 and that, accordingly, it is shortsighted to dig 
 it out, as we are doing, and send it away to the 
 foreigner.^ It is very much the argument put 
 forward by the old-fashioned professor against 
 printing lectures he had repeated for many years ; 
 that, if he did, he would have nothing left to say. 
 
 Considering, however, that we are not merely 
 sending coal but selling it, it seems to me that 
 we are exchanging a very precarious form of 
 wealth for other forms which are, probably, less 
 
 ^ It should be noted that a large proportion — probably as much 
 as one-half — of the coal which appears as exported is really for 
 navigation purposes. Very little is sent abroad for manufacturing. 
 It has been pointed out by Mr. D. A. Thomas that " coal enters 
 into the production of every manufactured article, and therefore the 
 export of such commodities indirectly involves the export of coal. 
 For instance, every ton of pig iron requires the consumption of 
 something like two tons in its production, and its shipment abroad 
 virtually means, therefore, the export of two tons of coal, while 
 the export of a ton of wrought iron or steel means considerably 
 more. Consequently if any restriction is placed on the export of 
 coal on tl\e ground that we are shipping abroad capital that cannot 
 be replaced, logically we must place a corresponding restriction on 
 the export of every manufactured article into the production of 
 which coal enters." — British Industries under Free Trade, p. 367. 
 
204 LABOUR COST OF COAL CHAP. 
 
 precarious. Our coal will last, according to a 
 moderate estimate, for another hundred years 
 without the cost of raising it being increased. At 
 present it realises a comparatively high price. 
 But what will become of that high price if a 
 new fuel is found, as it probably will be long 
 before the century is out ; or if the long-sought- 
 for economy is discovered which will save the 
 90 per cent, energy that now goes out of the 
 chimney ; or if the opening up of coal deposits 
 nearer our foreign markets diverts the supply 
 from us ? 
 
 But when the export of Coal is objected to on 
 the entirely different ground that it is a product 
 which employs little labour in the getting, there 
 is no hesitation about the answer. It is that the 
 price of our ordinary coal is made up of 60 per 
 cent, of pure wages, while the price of Welsh coal 
 is made up of 80 per cent, of wages. That is 
 to say, coal, value for value, employs far more 
 labour than manufactures generally, the wages 
 element in our cotton manufactures, for instance, 
 being estimated at about 50 per cent, of the total 
 value, less that of the raw material.^ Is it possible 
 that those who make assertions in this irrespon- 
 sible way were comparing bulks and not values, and 
 thus came to the conclusion that, as compared 
 with a small parcel of jewellery, a cwt. of coals 
 must contain little labour, because it takes a cart 
 to hold a few shillings worth ? 
 
 II. What has just been said disposes of the 
 suggestion that, in importing manufactures, we 
 
 ^ Board of Trade Blue Book, p. 360. 
 
XXI. IMPORT OF MANUFACTURES 205 
 
 are curtailing the employment of our own people, 
 in so far as we are depriving ourselves of the 
 chance of making such manufactures for export. 
 If we export coal in payment of imports, we are 
 employing more labour than we should by ex- 
 porting manufactures. 
 
 But it does not dispose of the objection that 
 we have been, and should remain, the workshop 
 of the world, and that there is something wrong 
 if we are importing more and more manufactured 
 goods that compete with ourselves. Let us, then, 
 look at the imports complained of 
 
 According to the Board of Trade Blue Book, 
 p. 73, our imports of manufactured or partly 
 manufactured articles from the seven great nations, 
 in 1902, were as follows: Italy, £2 millions; 
 Russia, £2, millions; Germany, i^ 16 millions; Bel- 
 gium, i^20 millions ; Holland, i^20 millions ; 
 United States, ;^20 millions; France, ;^3 i millions. 
 In all, £\ 12,000,000. 
 
 Take, first, the partly manufactured articles, 
 and analyse the lists. A mere glance at the 
 ;^20 millions from the United States shows that, 
 of this, £\oh millions are what certainly would 
 be called " raw materials " by an ordinary un- 
 instructed man. There are £2\ millions of 
 unwrought and partly wrought Copper, £2,^ 
 millions of Leather, £i\ millions of various kinds of 
 Oil, £h million of pig and sheet Lead, ;i^900,ooo 
 of Paraffin and paraffin wax, i^i 36,000 of crude 
 Zinc, i^i 28,000 of Slates, ;^i 2,000 of Stones, etc.^ 
 
 ^ ' ' These are not the sort of things which we speak of as 
 manufactures' when our own export trade is concerned. It is 
 
2o6 SUPPOSE WE COULD MAKE ALL chap. 
 
 There is nothing quite so obvious in the 
 imports from the other countries ; but a care- 
 ful examination would show that there are 
 comparatively few things in the i^i 12,000,000 
 which do not form the basal or auxiliary 
 materials of many of our industries. 
 
 Take, second, the wholly manufactured articles. 
 Among the larger categories, from Germany come 
 Works of Art, Bronzes, China, Machinery, Musical 
 Instruments, Toys : from Belgium, Clocks, Em- 
 broidery and Needlework, Hats and Bonnets, 
 Laces, Pictures, Silk Stuffs : from Holland, Buttons 
 and Studs, Leather goods. Silks, Pictures : from 
 France, Embroidery, Artificial Flowers, Hats and 
 Bonnets, Laces, Musical Instruments, £^ millions 
 of Silk manufactures, and over £^ millions of 
 Woollen manufactures : from Italy, Works of Art, 
 Stones. The list is a long one, and contains a 
 great number of small imports. There is no 
 doubt that we could make all these things. 
 
 But we forget three things. The first is that we 
 are not only the "workshop of the world," but the 
 wealthiest consuming nation of the world. We 
 demand whatever takes our fancy, and we should 
 not be in the least willing to limit our consumption 
 to the peculiar products of Great Britain. We do 
 not take the word of our milliners and dress- 
 makers that English goods are every bit as good 
 as French ; our womenkind send to Paris for hats 
 
 an obvious reflection that, if slates, stones, crude zinc, and copper 
 are to be spoken of as ' manufactures,' we might as well include 
 coal in the same category." — Sir Robert Giffen, in a letter to the 
 Times. 
 
XXI. THE MANUFACTURES WE IMPORT 207 
 
 and dresses, and make special trips to the Bon 
 Marche for frills and furbelows. We should 
 never think of shutting out works of art from 
 Italy because there are artists in England, or 
 pianos from Germany in order to force our 
 musicians to play on English ones. We should 
 regard any such proposals as nothing better 
 than the old attempt to put back the clock of 
 civilisation and enact sumptuary laws to our 
 own hurt. 
 
 The second is that, as regards many of these 
 manufactures, there is a very good reason why 
 we do not prefer British made goods. We import, 
 for instance, £\\ millions of ladies' woollen dress 
 fabrics, mostly from Roubaix, because, rightly or 
 wrongly, we consider French colour-dyeing superior 
 to Bradford dyeing. 
 
 The third is that, even where we could make 
 things as beautiful, and as cheap, and as good 
 as the foreigner, we have not an unlimited 
 amount of capital, and the capital we have may be 
 fully and more profitably employed in making 
 other things. And we have very far from an 
 unlimited amount of skilled labour. True, in bad 
 times we have a good many unemployed, and, 
 at all times, we have several millions of wage 
 earners below the efficiency standard. But do 
 these millions consist of watch makers, musical 
 instrument makers, artists, and the like ? Or are 
 they people who could not be set to such skilled 
 work, whatever wages were offered them ? Are 
 the " unemployables " not vastly more than 
 the " unemployed " ? Is our employment really 
 
2o8 IMPORTED COMMODITIES chap. 
 
 curtailed because we do not import things which 
 we might make ? ^ 
 
 Yet this is persistently represented as " loss " — 
 as if one could lose what one never had ! " In 
 thirty years the total imports of manufactures 
 which could just as well be made in this country 
 have increased ;!^8 6,000,000, and the total ex- 
 ports have decreased i^6,ooo,ooo. We have lost 
 ^92,000,000. ^^92,000,000 of trade that we 
 might have done here has gone to the foreigner, 
 and what has been the result for our own people ? 
 The Board of Trade tells you, you may take one- 
 
 1 If all the labour that is employable were employed, there would, 
 of course, be no question about the advantage of such imports. But 
 the unemployed are always with us. It is a little startling to find 
 that, in the best times, there are always some 2 per cent, of workers, 
 in the organised trades, who do not find work. To whatever cause 
 this may be ascribed, it certainly cannot be laid at the door of Free 
 Trade. But, as regards the present question, what would require 
 to be proved is that the amount of unemployment in protected 
 countries is less than in our own, and this would be difiicult to 
 do. There are no adequate and strictly comparable international 
 statistics as to skilled and unskilled labour— remembering that such 
 statistics, to be of any value, must extend over a period long enough 
 to allow of being put into rates of progress — and none which dis- 
 tinguish what Mr. Booth has called the three phases of irregularity, 
 the short, the seasonal, and the cyclical. In this country we have 
 the returns of unemployed made to the Board of Trade by the 
 principal trade unions, the figures including London dock labourers, 
 iron and steel workers, the building, textile, engineering and other 
 trades. It may be noted that the mean percentage of unemployed 
 during 1903 was 5.1. The average percentage for the ten years 
 1894-1903 was 4.1. Between 1888 and 1903 the percentage varied 
 from 2.1 to 7.5. "It is quite impossible to study these figures," 
 says Mr. Bowley, "without coming to the conclusion that the years 
 1890 to 1900, at any rate, were years of exceptionally good employ- 
 ment."— Tiiw^;^, Nov., 1903. 
 
XXI. ARE AT LEAST PAID FOR 209 
 
 half of the export as representing wages. We 
 therefore have lost ;^46,ooo,ooo a year in wages 
 during the thirty years. That would give em- 
 ployment to nearl}' 600,000 men at 30s. per week 
 of continuous employment. That would give a 
 fair subsistence for these men and their families, 
 amounting to 3,000,000 persons."^ This quota- 
 tion brings us back to first principles. Suppose 
 we did manufacture all these things at home and 
 stopped the imports from the foreigner, would 
 this be pure gain ? Have we forgotten the pro- 
 ducers here who have, all the time, been making 
 the exports that must be sent to pay for these 
 imports, and whose employment would be cur- 
 tailed in the same proportion as the new employ- 
 ment increased ? As Mill put it — and put it so 
 tersely that the completeness of the statement is 
 apt to be overlooked : " The alternative is not 
 between employing our own people and foreigners, 
 but between employing one class and another of 
 our own people. The imported commodity is 
 always paid for, directly or indirectly, with the 
 produce of our own industry ; that industry being, 
 at the same time, rendered more productive, since, 
 with the same labour and outlay, we are enabled 
 to possess ourselves of a greater quantity of the 
 article." ^ 
 
 ^ Mr. Chamberlain at Newcastle, Oct. 20, 1903. Observe that 
 the ;^6,ooo,ooo we once had is lumped with the ^46,000,000 we 
 never had, and both are called "loss"! Is this any better logic 
 than the schoolboy's "Pins have saved many thousands of lives — 
 by people not swallowing them " ? 
 
 ^ Principles of Political Economy, v. 10, i. 
 
 O 
 
2IO IMPORTS AS AN ''ATTACK'' chap. 
 
 This kind of appeal to popular ignorance is 
 thoroughly bad. It would be just as true, and 
 just as false, if " Englishmen " and " Scotsmen " 
 were substituted respectively for " home pro- 
 ducers " and " foreign producers," and the state- 
 ment were made to London working men that 
 they were losing employment by the goods that 
 Glasgow working men were making for them. 
 What the increase of foreign manufactured im- 
 ports shows is simply the increased division 
 and specialisation of industry — the area of com- 
 petitive service widening beyond the national 
 boundaries, in manufactures as in everything 
 else.^ 
 
 What very much hides the absurdity from us 
 is the now fashionable way of speaking of foreign 
 competition in terms borrowed from warfare. Im- 
 ports are an " attack " ; when they become 
 numerous, they are a " conspiracy " ; and we are 
 asked if we are going " to take all that lying 
 
 ^ Perhaps the case may be put shortly thus. Belgium has been 
 employing a capital of ;i^ioo,ooo in making goods for London and 
 Leeds. London and Leeds have each been employing a capital 
 of ;i^50,ooo in making goods for Belgium. The import of Belgian 
 goods is stopped by a prohibitive tariff. By the same act, the 
 export of English goods pro tanto is stopped. The London capital 
 finds a market for its products in Leeds, and the Leeds capital finds 
 a market for its products in London. Only British goods are 
 now found in the two markets. But has this increased employ- 
 ment? Increased employment could only come from London 
 and Leeds putting down new capital, and exchanging their pro- 
 ducts. But then they might just as well sell the goods produced 
 by this new capital to Belgium and import Belgian goods in 
 return. There is no more employment in the one case than in 
 the other. 
 
XXI. EMPLOYMENT UNDER PROTECTION 211 
 
 down. " ^ Seeing that we have been doing just 
 the same kind of thing to foreign countries for 
 about a century, the question surely is : Are we 
 all, then, engaged in a mortal struggle to destroy 
 one another's industries ? Or are we sending 
 each other cheap goods to sell in one another's 
 markets — extending the area of Competitive Ser- 
 vice beyond our home boundaries ? 
 
 The subject of Employment as affected by the 
 character of goods imported and exported suggests 
 the wider subject of Employment as affected by a 
 protective system. It is sometimes assumed that 
 Protection secures the employment of the nation 
 better than Free Trade does. There are really 
 two questions here, and the issue is confused 
 unless they are kept distinct. The first is : Does 
 Protection give more employment ? the second : 
 Does it secure more regular employment ? 
 
 I. The idea that Protection gives more employ- 
 ment seems to argue rather dangerous ignorance 
 of what does employ the nation. Any govern- 
 ment can " make work " for its citizens so long as 
 the pockets of the taxpayers hold out ; but this is 
 
 ^"Agriculture has been practically destroyed. Sugar has gone. 
 Silk has gone. Wool is threatened. Cotton will go. How long are 
 you going to stand it ? " says a great orator. And his hearers, being 
 Englishmen and born fighters, stand on the seals, and cheer. Sir 
 Edward Grey was not far wrong : "The time is coming when, if an 
 Englishman says that England is prosperous, he will be called a 
 Pro- Boer ; while if anybody writes telling of a trade that is doing 
 badly, he will very likely be called 'one of our leading experts,' 
 and have his letter sent to the Times, with Mr. Chamberlain's 
 imprimatur." 
 
212 EMPLOYMENT UNDER PROTECTION chap. 
 
 simply diverting the employment of the people 
 from its ordinary channels into the channels on 
 which the government spends. Any war scare, 
 for instance, that sends the Clyde shipyards a few 
 cruisers to build, gives employment to one of the 
 great trades, and secures the activity of the many 
 subsidiary trades dependent on it. But the extra 
 money taken out of the taxpayers' pockets for 
 any such purpose leaves the citizens generally 
 with so much less to spend, and the other 
 parts of the kingdom suffer by Glasgow's gain. 
 The only thing that can increase general employ- 
 ment is the increase of productiveness ; that is to 
 say, in essence, the increase of wealth. The 
 " demand for labour " is not a fund of money in 
 the pockets of employers. If there were no out- 
 side employer, and each gang of workers paid one 
 of their number a wage to organise them, the 
 wages of these workers would depend on the 
 amount they could produce and the prices at 
 which they sold it. It is the whole product of 
 the working world that determines and limits 
 the " demand " for all the factors of production 
 which represent the working world ; the greater 
 that product, the greater the demand for labour 
 among other factors.^ In short, we employ each 
 
 ^The whole matter is contained in these pregnant words of 
 Marshall: "The net aggregate of all the commodities produced 
 is itself the true source from which flow the demand prices for all 
 these commodities, and therefore for the agents of production used 
 in making them. Or, to put the same thing in another way, this 
 national dividend is at once the aggregate net product of, and the 
 sole source of payment for, all the agents of production within the 
 country ; it is divided up into earnings of labour ; interest of capital ; 
 
XXI. REGULARITY OF EMPLOYMENT 213 
 
 Other. The more I produce, the more I hold up 
 in my hand as the price of the services which I 
 ask you to render me, and, the more we all pro- 
 duce, the more do we all have to offer. If we 
 call this product the National Income or National 
 Dividend, the question resolves itself into this : 
 whether the National Income is increased by Pro- 
 tection ; whether a government, by taking thought, 
 can secure that its individual producers produce 
 more. It is a pious imagination that a very wise 
 government, by taking over the industries of the 
 nation, might do better than private enterprise 
 and produce a greater net product. But this is 
 not the question ; all we are concerned with is 
 whether a government, by taxing goods from out- 
 side, can give its individual producers greater 
 stimulus and better direction than free competition 
 with other countries can. As a matter of theory, 
 this would be difficult to prove, and experience 
 does not seem to give it any support. 
 
 II. The idea that Protection ensures greater 
 regularity of employment seems to rest on the 
 belief that, under it, more security is given to 
 capital by the partial monopoly of the home 
 market. This also seems to verge on the dan- 
 gerous doctrine that the giving of employment is 
 the end of the matter: it has a family resemblance 
 to the popular belief that, by reducing the hours 
 of labour, the unemployed will be taken up. The 
 
 and, lastly, the producer's surplus, or rent, of land and of other 
 differential advantages for production.'"— /'/-/w/>/^^, p. 609. See 
 my Distribution of Income, which is, practically, a working out of 
 this single paragraph. 
 
214 NEITHER SYSTEM CAN SECURE chap. 
 
 protected industries occupy much the same posi- 
 tion as particular industries favoured by govern- 
 ment orders at the expense of the taxpayers ; 
 regularity of employment is secured at the expense 
 of the quantity produced ; the demand for labour 
 ultimately suffers by the diminution of the national 
 product. Here, again, confirmation by statistics or 
 experience is entirely lacking. That an industry 
 declines and disappears under Free Trade is no 
 proof either that Free Trade has killed it or that 
 Protection would have kept it alive.^ The fact is 
 that neither Protection nor Free Trade will 
 ensure constant equilibrium of demand and 
 
 1 "The cotton manufacture is generally regarded as the most stable 
 and thoroughly organised of our great industries, but it appears 
 from the census returns that in the single state of Massachusetts 21 
 mills, with an aggregate of 154,016 spindles, and i mill with iSo 
 looms, which reported to the census of 1890, were not in existence 
 when the census of 1900 was taken. Seven of these mills with 
 47,680 spindles were dismantled and their machinery sold ; 13 
 mills, with 101,156 spindles, stood idle in 1900, or had been turned 
 to other manufacturing purposes. One mill was burnt and not 
 rebuilt ; and one was consolidated with a neighbouring mill under 
 new corporate organisation. In addition to these cotton mills there 
 were 15 mills manufacturing cotton small wares, which went out of 
 existence during the decade. Such a record indicates that unprofit- 
 able operation is constantly in progress side by side with more 
 successful enterprise. In this particular industry, advance in 
 machinery has been so rapid that it is calculated that a cotton 
 mill must practically renew its machinery once every ten years if 
 it would keep its plant in a condition that will permit profitable 
 production, in competition with other establishments manufacturing 
 the same class of goods, with the latest pattern of machinery, and 
 the most labour-saving devices, the most effective methods of 
 management, and facilities for the largest production at the lowest 
 labour cost." — Twelfth Census of the United States, 1900, vol. vii. 
 p. 65. 
 
XXI. REGULAR EMPLOYMENT 215 
 
 supply, and this is the only way in which steadi- 
 ness of employment might be secured. Protected 
 producers, just like Free Trade producers, put 
 themselves at the mercy of demand ; they make, 
 for the most part, in anticipation of orders, and, 
 often enough, they find that their anticipations 
 were mistaken. All goes well so long as trade is 
 brisk. But when a lull comes, supply cannot 
 easily be slacked off; more is being turned out 
 than is taken off; and depression sets in, spread- 
 ing its contagion through the organised web. All 
 this is obviously independent either of Free Trade 
 or Protection. All one would say is that Pro- 
 tection, as tending to attract capital and labour 
 into artificial channels and oversupply them, 
 rather acts against the mobility which is the 
 best security of regular employment. 
 
CHAPTER XXII. 
 
 PREFERENTIAL TARIFFS. 
 
 Preference to our Colonies involves ptttting on tariffs against the 
 eutside world. Disguise it as ive may, it is Protection. 
 
 The proposal of Preference to parts of the 
 British Empire over the outside world is not a 
 new one. It prevailed for two centuries from 
 the passing of the Commonwealth Navigation 
 Act, and was abolished only by the Whig 
 Government which succeeded Peel's, and received 
 his support. But there was this difference at 
 any rate. Nobody thought of calling it Free 
 Trade. It was part of the Protective system 
 under which we lived. 
 
 Suppose we now resume the discarded prin- 
 ciple of Preferential Tariffs. It is not capable of 
 being carried out unless there is a tariff on which 
 to give a preference — " the penniless traveller 
 sings in the presence of the robber." Thus, as 
 the first step in Preference, we must impose a 
 tariff. In the long contest between the Colonies 
 and ourselves whether they are to adopt Free 
 Trade or we are to resume Protection, the Colonies 
 
CH. XXII. RECIPROCirV TREATIES 217 
 
 have won. The voices of Canada and Australia 
 have shouted down the old country. 
 
 We resume Protection then.^ But it is a very 
 peculiar Protection. Germany and America justify 
 their protective system, and escape its worst evils, 
 by the fact that they have Free Trade within 
 their Empires. The United States is by far 
 the largest Free Trade unit in the world — 
 some of her 45 states are larger than the entire 
 German Empire — and it may very reasonably 
 be contended that her prosperity is due, not 
 to Protection, but to this Free Trade. But 
 we are not to have free trade within our 
 Empire. Every constituent member of it is, 
 apparently, to have the liberty of erecting what 
 tariff it likes against other members, so long 
 as its duties are lower to Great Britain and 
 to British possessions than they are to the rest of 
 the world.- It is best described as a British 
 Empire Series of Reciprocity Treaties.^ 
 
 ' It shows what a hold the word has on the unpleasant memories 
 of the nation, that the name of Protection should be vigorously 
 protested against. Just as Mr. Gladstone thought that he had 
 gained something when he replaced the word Boycott by the word 
 Preferential Dealing, so do many try to insist that Preferential 
 Tarifts are not Protection. We want to admit our kinsmen free to 
 our house ; if we emphasise it by shutting the door in the faces 
 of our friends — well, it is merely a regrettable incident ! 
 
 ^ Even this is not clear. New Zealand proposes to give a prefer- 
 ence to Great Britain, but she adds that the same preference will be 
 given to any country which gives her equal terms. All the time, so 
 far as one can make out. Great Britain is the only pan of the 
 Empire which is not to have this privilege, but is always to give a 
 preference to the Colonies whatever they do. 
 
 ^At present the scheme has scarcely advanced beyond the 
 
2i8 PROTECTION FOR THE COLONIES CH. xxii 
 
 Disguise it as we may, it is preferential treat- 
 ment for themselves against the world outside the 
 Empire, that this small group of self-governing 
 colonies is asking. One might even say that 
 it is Protection for Canada and Australia. We 
 are to impose a tariff against the world, not 
 because we want to shut the world out, but in 
 order that we may take the tariff off the Colonies. 
 Considering that the imports from Canada and 
 Australia into this country amount to £df2\ 
 millions, and that the imports from all the six 
 self-governing colonies put altogether amount to 
 only i^5 9,800,000 ; while the imports from the 
 Free Trade portion of the Empire amount to 
 ;^47, 200,000, and the imports from foreign 
 countries to ^^421 millions, the demand needs 
 looking into.^ 
 
 enunciation of the principle. What, for instance, is to be the 
 relation of one colony to another, or of the self-governing colonies 
 to the other colonies, or of any colony to a "possession"; whether 
 India and the Crown colonies are to remain free trade or to put on 
 tariffs ; whether the Protectorates, or countries in the anomalous 
 condition of Egypt, are to be included ; whether there is to be 
 preference as regards all the imports taxed ; or even what the posi- 
 tion of revenue taxes is to be : — all these are details waiting the 
 mandate of the country before they are discussed. One might 
 hint that the possibility of such a scheme — to say nothing of its 
 advantage — depends on the working out of the details. 
 
 ^See Annual Statement of Trade (Cd. 1617), 1903, vol. ii., 
 p. 6, and Board of Trade Blue Book, p. 408. 
 
CHAPTER XXIII. 
 
 THE CANADIAN PREFERENCE. 
 
 Its results are disappointing. It changed a decline into an in- 
 crease, but the increase is not proportional to that of other countries 
 which have no preference. As differentiated, the tariff still presses 
 most heavily on us, and favours the foreigner. 
 
 There is at least one part of the scheme to 
 which we are not hkely to object. It was not 
 our wish that the Colonies ever adopted Protec- 
 tion, but, since they have done so, it seems as if 
 the least thing they could do is to give us a 
 Preference. Perhaps, then, we may begin by con- 
 sidering what has been the result of the Canadian 
 Preference. 
 
 For some years after the Federation of the 
 separate provinces into the Dominion, in 1868, 
 Canada enjo)'ed a comparatively low tariff. In 
 1874, there was a period of depression, and the 
 Conservative party, under Sir John Macdonald, 
 began an agitation for Protection. This " national 
 policy," as it was called, triumphed in 1879, ^"d, 
 for the next ten years, Protection ran riot. Still, 
 
220 THE CANADIAN PREFERENCE chap. 
 
 our imports into Canada steadily increased, till, in 
 1885, a very severe tariff, directed, to all appear- 
 ance, against our manufactures, was imposed, 
 and the imports declined rapidly. In 1890, 
 began a reaction against Protection, and, in 1896, 
 Sir Wilfred Laurier came in on a programme of 
 tariff reform. Protection, however, had now estab- 
 lished the vested interest. In 1897, the Recipro- 
 cal Tariff came into force. Rates were reduced, 
 but not greatly reduced. The standard for the 
 highest duties became 35 per cent, ad valorem. 
 It was on this tariff that the first Preference of 
 I2| per cent, on British goods was given. 
 
 No reciprocal obligation on our part was ex- 
 pected. Sir Wilfred Laurier stated, in so many 
 words, that the Preference was not a quid pro quo; 
 that Canada did not ask anything in return ; it 
 was a recognition, he said, that the Canadians 
 got in the home market of the Mother Country 
 better treatment than in any of the foreign mar- 
 kets of the world.^ 
 
 In 1898, the Preference was increased to 
 25 per cent. But, under our treaties with certain 
 foreign powers, it was found that the same pre- 
 ference was claimed by Belgium, France, Germany, 
 Spain, and many other countries. To remedy 
 this, in July, 1898, we denounced these treaties 
 as regards Belgium and Germany, and, in August 
 of the same year, the Reciprocal Tariff was super- 
 
 ^ According to Professor Flux, of Montreal, the Preference was 
 given frankly for the benefit of the Canadian consumer, with no 
 idea whatever of it being a sacrifice. — Economic Journal, Decem- 
 ber, 1903. 
 
XXIII. ITS DISAPPOINTING RESULTS 221 
 
 seded by the British Preferential Tarifif, which 
 gave 25 per cent, of reduction from the general 
 tariff to Great Britain, Bermuda, West Indies, 
 India, Ceylon, New South Wales, and the Straits 
 Settlements.^ 
 
 The Preference, how^ever, was not extended to 
 all goods. Exception was made of Wines, Malt 
 liquors. Spirits and Spirituous liquors, Medicines, 
 articles containing Alcohol, Tobacco, Cigars, and 
 Cigarettes. The average rate of duty on these 
 is about 1 70 per cent, ad valorem. 
 
 On 1st July, 1900, the Preference was raised 
 ^o ZZh Ps*" cent, at which it still stands. Sir 
 Charles Tupper, the Opposition leader, then took 
 the definite position that a quid pro quo should be 
 asked if the Preference were to be continued ; but 
 Sir Wilfred Laurier held his ground that the Pre- 
 ference was a free gift, and won with an un- 
 diminished majority. 
 
 The general results were summed up by Mr. 
 Chamberlain at the Conference with the Colonial 
 Premiers in 1902. In the five j^ears, our imports 
 into Canada which came under the preference 
 clause increased 5 5 per cent. But the general 
 trade, that is the imports from foreign countries 
 enjoying no preference, increased by 62 per 
 cent. And the imports which came in free — 
 that is, subject to no tariff and no prefer- 
 ence — increased by 67 per cent. Or, taking it 
 
 ' At the same time, the bounty on pig iron made from Canadian 
 ores was raised from ^2 to $3 per ton, remaining at %z on that 
 made from imported ores. As consequence, the production of pig 
 iron rose from 58,000 tons in 1897 to 274,000 tons in 1901. 
 
222 OUR EXPORTS INCREASED chap. 
 
 another way, the total increase of the trade of 
 Canada with foreigners was 69 per cent., while 
 the total increase of British trade was only 48 
 per cent. This unlooked-for result calls for closer 
 investigation. 
 
 Canada has been passing through a time 
 of extraordinary prosperity. In the last ten 
 years, the country has been filling up. Foreign 
 immigration has doubled. The great railways 
 and the Hudson's Bay Company have been selling 
 their lands rapidly. The Homestead entries have 
 increased 150 per cent,, owing to the enormous 
 influx of British settlers. Thousands of American 
 farmers have crossed the border and become 
 Canadians. And, among other phenomena, the 
 foreign trade has doubled in seven years. 
 
 It was to be expected, then, that British imports 
 into Canada should have increased. But up till 
 1897 they were steadily falling. In 1882 and 
 1883, they were above £\o\ millions. In 1890, 
 they were ;^8, 915,000; in 1896, -^6,776,000; 
 in 1897, iJ^6,043,ooo. Succeeding years, how- 
 ever, show as follows: 
 
 1898, - - 6,678,000 
 
 1899, - - 7,615,000 
 
 1900, - - 9,203,000 
 
 1901, - - 8,839,000 
 
 1902, - - 10,114,000 
 
 On the face of it, this seems very satisfactory. 
 But a glance at the imports from other countries 
 lessens the satisfaction. In the same period 
 
xxiii. BUT NOT PROPORTIONALLY 223 
 
 France has increased her sendings from i^ 5 34,000 
 in 1897 to ^1,371,000 in 1902. Germany has 
 increased hers from i^i, 3 34,000 to i^2, 224,000. 
 But the most suggestive figures are those of the 
 United States. In 1 890, their imports into Canada 
 were ;^ 10,744,000, and, in 1896, ;^i 2,035,000. 
 The succeeding years show as follows : 
 
 1897, - - ;^I2,667,000 
 
 1898, - - 16,172,000 
 
 1899, - - 19,111,000 
 
 1900, - - 22,570,000 
 
 1901, - - 22,702,000 
 
 1902, - - 24,834,000^ 
 
 The net result is that France's increase is 
 156 per cent; Germany's, 66 per cent.; 
 America's, 96 per cent. ; while ours is only 6^ 
 per cent. And although France and Germany 
 started from a low figure, and a percentage com- 
 parison between their increase and ours is there- 
 fore not sound argument,'^ this is not the case with 
 
 '^Colonial Statistical Abstract, 1903, p. 210. The figures in- 
 clude bullion and specie. 
 
 2 A more detailed comparison with other countries brings out 
 much more startling results when stated in percentages. For in- 
 stance, in the same six years, Holland increased her sendings to 
 Canada by 133 per cent. ; Switzerland, 148 per cent. ; Portugal, 
 184 per cent. ; South America, other than British Guiana, 194 
 per cent. ; Italy, 223 per cent. But, as starting from compara- 
 tively small amounts, these are not adequate, but only suggestive 
 comparisons. How, in face of these figures, it could be said that 
 " the increase in our trade with Canada has been very great, but 
 // has not increased largely out of proportion to the increase of the 
 trade between Canada and other countries," passes my compre- 
 hension. 
 
224 EXPLANATION OF FAILURE chap. 
 
 America, which started from a higher level. It 
 would be difficult to draw an argument for 
 the success of a Preference from figures like 
 these. 
 
 The explanation of our failure, however, is not 
 far to seek. What determines imports into a 
 country is not cheapness alone, but demand. 
 Canada wants our whisky because Canada likes 
 it, so our exports of whisky increase although 
 we get no preference, and although all whisky 
 is subject to a duty of $2.40 per gallon, Canada 
 finds the agricultural implements of America 
 more suitable for her soil, so she imports them, 
 although the duty on our implements is one- 
 third less. 
 
 Again, in judging of the effects of a tariff in 
 keeping out the goods of a particular country, 
 it is not the average rates of duty that have to 
 be considered, but the rates on the goods which 
 that country sends. There are certain things 
 admitted free into Canada, such as anthracite, 
 coal and coke, raw cotton, crude rubber, rough 
 sawn timber, undressed hemp, fur skins, hides, 
 steel rails. 70 per cent, of these free imports 
 come from the United States — for obvious reasons 
 — and this free entry does not do us much good. 
 Raw materials, again, of iron, steel, leather, and 
 wood, and many agricultural products, are ad- 
 mitted at comparatively low rates. Here, again, 
 the advantage America has over us is obvious. 
 
 The heaviest duties are on textiles — woollens, 
 cottons, silks, and linens. These are the goods 
 we wish to send into Canada, and these are the 
 
XXIII. ''ALTOGETHER DISAPPOINTING" 225 
 
 goods which the Canadian consumer would very 
 gladly take from us. But they are also the 
 goods which Canada is bent on manufacturing 
 for herself, and here, allowing for the preference, 
 we have to pass our textiles through an actual 
 rate of 23-^ per cent. 
 
 The rivalry, in fact, which concerns us is not 
 that between foreign countries — particularly the 
 United States — and ourselves for the Canadian 
 trade, but the rivalry between the Canadian 
 manufacturer and the British manufacturer. 
 There is little wonder, then, that the result of 
 the Preference was pronounced " altogether dis- 
 appointing." " The tariff still presses with the 
 greatest severity on Canada's best customer, and 
 has favoured the foreigner." As Mr. Chamber- 
 lain put it to the Colonial Premiers at the Con- 
 ference : " So long as a preferential tariff is still 
 sufficiently protective to exclude us altogether, or 
 nearly so, from your markets, it is no satisfaction 
 to us that you have imposed even greater dis- 
 ability upon the same goods if they come from 
 foreign markets, especially if the articles in which 
 the foreigners are interested come in under more 
 favourable conditions." If England cannot get in 
 at the front door, it is small consolation that 
 America is kept at the garden gate. 
 
 It would not be reasonable to say that, in this 
 comparative failure, we have an argument against 
 Preference. It might have been the case that, 
 but for it, our exports to Canada would have 
 gone on declining, while those of the countries 
 which had no Preference increased. All that can 
 
 p 
 
226 IS IT WORTH A SACRIFICE? CH. xxill. 
 
 be said is that it is impossible to see in it any 
 great argument for a Preference where the cir- 
 cumstances are similar. 
 
 It must be remembered, however, that the 
 Canadian Preference, such as it is, is a free gift. 
 We gave no quid pro quo : we made no sacrifice. 
 But how, in face of this failure, can any British 
 statesman ask his fellow-countrymen to make a 
 sacrifice ? Suppose we shut out the foreigner 
 from our market, in order to admit Canada free, 
 how will this help us to get into her' market? 
 She admits us at a third less than our rivals now, 
 and we cannot make headway. How shall we 
 be any more able to enter by giving her a 
 Preference on our imports ? The expectation 
 seems to be that, by doing so, we shall induce her 
 to increase the amount of her Preference to us. 
 But she has declared, in unequivocal terms, that 
 this is what she will, on no consideration, do.^ 
 Whether it be from want of humour on her 
 part, or from under-estimation of our common 
 sense, all she does is to hint that she might 
 raise her tariff higher against the rest of the 
 world. Neither we nor our rivals can climb 
 the thirty foot wall ; to favour us, however, she 
 will raise it to forty feet against them ! 
 
 ^ In his Budget speech of April, 1903, Mr. Fielden said that 
 any change they made might favour Great Britain against the 
 foreign competitor — "not over the Canadian manufacturer." 
 
CHAPTER XXIV. 
 
 OUR POSSIBLE GAIN FROM COLONIAL 
 PREFERENCE. 
 
 When we deduct ittiports we could not send, and imports we 
 cannot in reason hope to send, the amount of trade which we might 
 possibly take from the foreigner is quite insignificant. 
 
 The above, then, being the actual results of the 
 Canadian Preference, the next consideration is as 
 to what would be the possible gain to us from a 
 preference system adopted by all the self-govern- 
 ing Colonies, What we have to do evidently is 
 to ask how much foreign countries send into these 
 Colonies at present, and see how much of that trade 
 we could take from them under such a system.^ 
 
 According to the last returns, June, 1901, 
 Canada imported from outside (exclusive of bullion 
 and specie) goods to the value of ^^3 8,400,000. 
 Of this, ;i^8, 8 29,000, or 23 per cent, came from 
 the United Kingdom; ^^^76 1,000, or 2 per cent, 
 came from British Possessions; .^28,810,000, or 
 75 per cent., came from Foreign Countries. 
 
 ^ The details which follow are taken from the Board of Trade 
 Blue Book, p. 381. 
 
228 OUR POSSIBLE GAIN FROM chap. 
 
 What we may possibly gain is some of the 
 trade represented by the ^28,810,000. But, 
 from this possibility we must deduct : — 
 
 (i) Goods which Great Britain does not grow 
 or make, such as Sugar, £\.6 millions; Maize, 
 £\.1 millions; Raw Cotton and Cotton Wool, 
 ;^98 1,000 ; Tea, ^^463,000 ; Rubber, ;^363,ooo ; 
 Tobacco, i!^349,ooo ; Green Fruit, ;!^347,ooo ; 
 Dried Fruits, ^256,000, etc., etc. Such goods 
 make up a total of ^^6,273,000 of imports into 
 Canada which we could not take from the 
 foreigner. 
 
 (2) Many goods we do grow or make, but 
 could not, in reason, hope to supply Canada with 
 — they are almost all United States products — 
 such as Coal and Coal dust, ^2,737,000 ; Wheat, 
 ;^i, 309,000; Wood, ;£^687,ooo; Oats, i^i 95,000; 
 Bacon and Hams, ^149,000; Coke, i^ 140,000; 
 Horses, i^ 12 5, 000; Cheese, ;^ 12 5,000; Pork, 
 ;^94,ooo, etc., etc. These make up a total of 
 ;^6, 583,000. 
 
 Deducting these two items, there is left ^16 
 millions of imports into Canada which we might 
 possibly take from foreign nations and secure for 
 our own producers. But we have had a Prefer- 
 ence since 1897, and we are further away from 
 getting any of it than ever. What new induce- 
 ment is there for our exporters to do any more 
 than they are doing ? Or what new inducement 
 is there for the Canadian consumer to demand 
 that these goods be British-made and not foreign- 
 made? 
 
 But, on looking into the details of the 
 
XXIV. EXTENSION OF THE PREFERENCE 229 
 
 £\6 millions, we find something more that makes 
 the possibility still less of a probability. It is 
 that these foreign imports are scattered over some 
 seventy categories of different goods, only one of 
 them amounting to over a million. Is it to be 
 expected that seventy different trades, without 
 any new motive, will show enough new energy 
 and enterprise to wrest these imports from the 
 foreigner ? 
 
 Pursuing the same line of investigation as 
 regards the other self-governing Colonies, we get 
 the following results : 
 
 Cape Colony, in 1900, imported from outside 
 iTi;, 163,000. Of this, i^i 1,053,000, or 64^ 
 per cent., came from the United Kingdom ; 
 ;^2, 478,000, or 14! per cent, came from British 
 Possessions; ;^3,63 2,000, or 21 per cent., came 
 from Foreign Countries. The possible gain of 
 trade for us is ,^2,092,000, spread over some 
 forty categories, only five of them over iJ" 100,000. 
 
 New Zealand, in 1900, imported from outside 
 ;^io,2o8,ooo. Of this, i^6,45 3,000, or 6t^ per 
 cent., came from the United Kingdom; i^2, 239,000, 
 or 22 per cent, came from British Possessions; 
 ;^i,5 16,000, or 15 per cent, came from Foreign 
 Countries. The possible gain is i^ 1,2 76,000, 
 spread over some forty-five categories, only three 
 of them over ;^6o,ooo. 
 
 Australia, in 1900, imported from outside 
 i;40,i 88,000. Of this, ^^25,113,000, or 63 
 per cent, came from the United Kingdom ; 
 .^{^3,728,000, or 9 per cent, came from British 
 
230 OUR POSSIBLE GAIN chap. 
 
 Possessions; ;^i 1,347,000, or 28 per cent, came 
 from Foreign Countries. The possible gain is 
 ;i^8, 007,000, spread over some seventy categories, 
 only five of them over .^^250,000. 
 
 Natal, in 1900, imported from outside 
 ;^5,9i2,ooo. Of this, ^3,726,000, or 63 per cent, 
 came from the United Kingdom; i^ 1,1 47,000, 
 or 19 per cent., came from British Possessions ; 
 iS^ 1, 03 9,000, or 18 per cent, came from Foreign 
 Countries. The possible gain is ;^5 39,000, 
 spread over twenty categories, only two of them 
 over ;^6o,ooo. 
 
 Newfoundland, in 1900, imported from out- 
 side ;^i,5i2,ooo. Of this, ;^45 8,000, or 30 
 per cent., came from the United Kingdom ; 
 ;^5 82,000, or 39 per cent, came from British 
 Possessions; ;^47 2,000, or 31 per cent, came 
 from Foreign Countries. The possible gain is 
 iJ^2 20,000, spread over twenty categories, only 
 two of them over ;^20,ooo. 
 
 The total is : — 
 
 Canada, - - - i^i 5,954,000 
 
 Australia, - - - 8,007,000 
 
 Cape Colony, - - 2,092,000 
 
 New Zealand, - - 1,276,000 
 
 Natal, - - - - 539,000 
 
 Newfoundland, - - 220,000 
 
 ;^28,o88,ooo 
 
 That is the magnificent total possibility ; the 
 limit of our possible extension of trade if we 
 could secure the whole of the Colonial imports 
 
XXIV. /S SOME i\2 MILLIONS 231 
 
 which foreign countries now send.^ If we deduct 
 the Canadian £\6 millions on which we have a 
 Preference, there remain £\2 millions which we 
 might possibly take from the foreigner by the 
 extension of the preference system over all our 
 Colonies. But the probability, of course, is ever 
 so much less. In this list are numbers of things 
 that the Colonies will not take from us, even if 
 they are cheaper than competing goods from 
 other countries : we have seen how it is with 
 Canada — that what determines an import is not 
 so much cheapness as a demand for a special 
 quality or style of article.- We should be well 
 off if we gained a quarter of the £\2 millions. 
 
 If this possible but extremely improbable in- 
 crease of trade were the sole ground for overturn- 
 ing our Free Trade system, and establishing tariffs 
 against countries which send us some three-fourths 
 of the goods we import, then one would be 
 inclined to say that nothing so reckless and ill- 
 judged had ever been proposed in the British 
 Parliament.-'^ 
 
 ^ It is perhaps unnecessary to remind the reader that this sum of 
 £z%,ooo,<XiO is possible trade, not possible profit. 
 
 '^The New Zealand Premier unconsciously testifies to this, in the 
 details of his new scheme of Preference. Foreign goods are to be 
 surtaxed ; but that he does not in the least anticipate that the 
 surtax will exclude them, is evident from his estimate that he 
 will raise £^0,000 or ;,^8o,ooo on imports that amounted last year 
 to only ;^3i3,ooo. 
 
 8 "The foreign trade of this country is so large, and the foreign 
 trade of the Colonies is comparatively so small, that a small pre- 
 ference given to us upon that foreign trade would make so trifling a 
 
232 OUR POSSIBLE GAIN BY chap. 
 
 But, it may be asked, what about the future ? 
 ;6^2 8,000,000 is a small sum, but the Colonies are 
 a growing market. Think, it is said, of what 
 they will buy when their white people have 
 increased from eleven millions to forty millions.^ 
 
 Is this to be taken seriously ? Is it not noto- 
 rious that Canada, though an agricultural country, 
 and therefore, presumably, a country where 
 population grows fast, is not " holding her own 
 population," but grows from outside?" In the five 
 years from 1897 to 1902, the total population 
 has increased from 5,141,508 to 5,456,931, or 
 under 8 per cent. — not very much more rapidly 
 than our own. At the census of 1901, the rate of 
 increase was found to be less than it had been in 
 I 891. The birth rate and the number of persons 
 to a family are both decreasing. And is it not 
 a fact bitterly commented on that the " natural 
 increase " of Australasia, like that of France, is 
 arrested ? ^ 
 
 difference — would be so small a benefit to the total volume of our 
 trade — that I do not believe the working classes of this country 
 would consent to make a revolutionary change for what they would 
 think to be an infinitesimal gain." — Mr. Chamberlain, 9th June, 1896. 
 
 ^"How long are we going to be four times as many as our 
 kinsfolk abroad." ... "It seems to me to be not at all an 
 impossible assumption that, before the end of this half century, we 
 may find that our fellow subjects beyond the seas may be more 
 numerous than we are at home." — Mr. Chamberlain at Birmingham, 
 May 15, 1903. 
 
 ^In the year ending June 30th, 1902, the total immigrants num- 
 bered 64,634. Of these, 24,000 came from the United States. 
 
 " Mr. Coghlan, the Government Statistician for New South 
 Wales, reports in 1903: "Present indications give no hope of 
 a teeming population springing from Australasian parents, for 
 
XXIV. INCREASE OF COLONIAL WEALTH 233 
 
 But, of course, increase of trade does not depend 
 altogether on increase of population ; trade increases 
 also with growing wealth. A family of five may 
 buy as much as a family of ten, if it is twice 
 as rich. Think, then, it may be urged, of the 
 importance of securing this increase of purchasing 
 power. 
 
 But, under present circumstances, we have 
 secured the large proportion of the purchasing 
 power in five out of the six Colonies. In Aus- 
 tralia, New Zealand, and Natal, we have 63 per 
 cent, of the import trade ; in Cape Colony, 64J 
 per cent. ; and that without Preference. Only 
 in the one Colony which gives us a preference is 
 the proportion the other way about — 23 per cent. 
 British to 75 per cent, foreign — and the propor- 
 tion is falling. 
 
 If, then, all that Canada's Preference has done 
 for us is to secure a small and a diminishing 
 proportion of Canada's imports, and if, without 
 Preference, we have already the larger proportion 
 of the imports of the other five Colonies, is it 
 common sense to ask us to become protectionist 
 in the hope that we may secure a still larger 
 proportion ? What guarantee or hope have we 
 that, under Preference, the five Colonies will serve 
 us any better than Canada has done? 
 
 But, if they do not, the argument for Prefer- 
 ence goes by the board. 
 
 the birth rate in all the States has declined very greatly, especially 
 during the last fifteen years, and, when compared with the total 
 population, the births in three of them are proportionately less 
 numerous than in any European country, France alone excepted." 
 
CHAPTER XXV. 
 
 THE PRICE OF PREFERENCE. 
 
 If we give a Preference, it must be on articles of importance 
 to our Colonies ; hence the proposal to tax Food. This should 
 raise its price. Bnt, if it does not, the Preference has failed. If, 
 ho^uever, it does, we are taxed in hundreds to give an extra profit 
 of tens to the Colonies. Would not a direct subsidy be fnuck 
 cheaper ? 
 
 From our possible gain by getting a Preference, 
 we turn to ask what is the price we shall have 
 to pay in giving one. 
 
 An economist would say that the price is 
 the giving up of Free Trade with all that this 
 involves, and think he had said enough. Perhaps 
 he would add that we have already paid a heavy 
 price in hoisting the white flag at a time when 
 so many influences and experiences were working 
 for the lowering of tariffs abroad. But, passing 
 this by, it seems clear enough that, unless our 
 Preference to the Colonies is to be a mere empty 
 compliment, we must give them an advantage on 
 things which they send in considerable quantities. 
 This involves that we tax similar articles coming 
 from foreign countries. 
 
CH. XXV. AN UNSELFISH PROTECTION 235 
 
 It is rather an absurd principle on which to 
 draw up a tariff. The defence of ordinary Pro- 
 tection is that it protects men as producers, 
 though it makes them pay for it as consumers. 
 But here we have a Protection which does not 
 protect our producers, and certainly cannot be a 
 gain to our consumers. It is taxing ourselves for 
 the protection of our children's industries. It is 
 often alleged of the co-operator that he pays 
 a dearer price at the Stores in order to pay him- 
 self a dividend. But this goes one better. The 
 British mother is to pay a dearer price to let 
 her daughters have the dividend. It is at least 
 a very unselfish form of Protection. Hence we 
 need not expect to find our new tariff conform to 
 any canons ever yet laid down by other nations 
 in their tariffs. 
 
 Accepting the principle, however, let us ex- 
 amine the imports into our country from the 
 principal Colonies, in order to ascertain which 
 articles are of importance to them. 
 
 The imports from Canada into this country, 
 in 1902, were ;^2 3,000,000, spread over yi 
 categories. Of this, Wheat, Wheatmeal, and 
 Flour accounted for £0^ millions ; Cheese, ^^4.3 
 millions; Oxen and bulls, ;^ 1.6 millions; Butter, 
 ;^i.3 millions; Bacon, £\.2 millions. The only 
 other import above the million was sawn and split 
 Wood, £df.l millions. 
 
 The imports from Australia, in 1902, were 
 £\g\ millions, spread over 65 categories. Of 
 these, Wheat accounted for -^4.8 millions ; Meat, 
 ;^i, 285,000 ; Fresh Mutton, ;<^543,ooo; Butter, 
 
236 " YOU MUST TAX FOOD'' chap. 
 
 i^402,ooo ; Wool, ^^"9,738,000 ; Unwrought 
 Copper, ^909,000 ; Lead, pig and sheet, £^ 5 4,000 ; 
 Leather, £^ 1 3,000. 
 
 The imports from New Zealand, in 1902, 
 were ;^iof millions, spread over 30 categories. 
 Of this, Meat accounted for ^^3,91 5,000 (Fresh 
 Mutton alone constituting £^\ millions) ; Butter, 
 ;^78i,ooo; Wool, ;^3, 798,000 ; Tallow and 
 Stearine, ^^650,000 ; Hemp, ^^470,000. 
 
 The imports from the Cape, in 1902, were 
 £\o\ millions, spread over 24 categories. Of this, 
 Precious Stones accounted for i^5, 3 80,000; Wool, 
 ;^3, 148,000; Ornamental Feathers, ;^934,ooo ; 
 Sheepskins, ;^3 34,000. 
 
 To anyone examining these lists with the view 
 of finding what goods from foreign countries 
 should be taxed in order to give the Colonies a 
 substantial Preference, it must have been evident 
 that the choice lay between Raw Materials and 
 Food. And so we find that the new Protection 
 does not, of a truth, conform to any ordinary 
 canons. For raw materials being barred out by 
 the fact that Great Britain is pre-eminently a 
 manufacturing country, the only alternative is the 
 taxation of food. And this, in all probability, 
 was the genesis of Mr. Chamberlain's famous 
 declaration at Glasgow : " You must tax Food." ^ 
 
 ^ His proposals are : 2S. on foreign corn, excluding maize, and 
 a "corresponding" (but apparently higher) tax on flour; 5 per 
 cent, on foreign dairy produce and meat, excluding bacon ; a 
 " substantial preference upon Colonial wines, and perhaps upon 
 Colonial fruits"; and "a moderate duty on all manufactured 
 goods, not exceeding 10 per cent, on the average, but varying 
 according to the amount of labour in these goods." 
 
XXV. THE PRICE SHOULD RISE 237 
 
 It has generally been assumed, as needing no 
 proof, that the taxation of food will inevitably 
 raise its price.^ But, during the last few months, 
 it has so often been said that a small tax will not 
 have this effect, that the statement must be care- 
 fully examined. 
 
 I. The first thing I should say is, that it ought 
 to raise the price. The precedent is often 
 pointed out that a small rise in the tobacco duties 
 does not involve a rise in pipe-tobacco, or cigar- 
 ettes ; that the tax is spread over the producers 
 or borne by one class of them. And if the 
 statement above means that, if, and although, 
 
 i"I do not know whether the honourable member (Mr. 
 Ecroyd) thinks you can tax food without raising its price. I 
 would, at any rate, lay down the axiom, to begin with, that that 
 is impossible ; and that it is only by increasing the price that the 
 object of the honourable member can be achieved, and that you 
 can stimulate the growth and prosperity of our Colonies. The 
 modest proposal he makes (to tax grain 4s. or 5s. per quarter) 
 would raise the price of home-grown corn also, and the result 
 would be that the British consumer would have to pay a lax of 
 ;i^40,ooo,ooo, ;^ 1 4, 000,000 of which would go to the revenue if 
 the foreign importations continue, and ;^26,ooo,ooo would go, not 
 to the farmer or labourer, for, if anything is proved by the 
 experience of the past, it is that it would go neither to the 
 farmer nor the labourer, but to the landed interests, to enable 
 them to keep up their rents. All I have to say, to a proposal 
 of that kind, is that it could never be adopted by the country ; 
 or, if adopted, it would be swept away upon the first recurrence 
 of serious distress."— (Mr. Chamberlain, in House of Commons, 
 24th March, 1882.) That Mr. Chamberlain holds to his old faith 
 is evident by his proposed exemption, from the Colonial prefer- 
 ence, of maize, "a food of some of the very poorest of the 
 population," and of bacon, " a popular food with some of the 
 poorest." Why should they be exempted, unless it be that, other- 
 wise, they would rise in price? 
 
238 IF PRICE DOES NOT RISE chap. 
 
 2s. is added to the cost of a quarter of wheat, 
 the quartern loaf will sell for 6d. as before, I say 
 it is quite possible. A tax is only one consti- 
 tuent in cost ; everyone knows that the price of 
 cotton cloth is not necessarily higher because 
 oil happens to be dear, or if coal goes up, or 
 even when raw cotton rises. Taking the quarter 
 of wheat at 25s., two shillings on that means a 
 rise in the cost of the raw material of some 8 
 per cent. This additional cost must be paid 
 in some way, but it need not be by the eater 
 of bread. My thesis is, that it ought to be paid 
 by the eater of bread. The country, under this 
 scheme of Protection, is going to undertake a risk 
 — and perhaps a sacrifice — for a certain common 
 or national purpose. This is a kind of expense 
 that ought to be covered by taxation. If it is 
 added to the price of bread, it is indirect taxa- 
 tion and does tax everybody. In fact, it 
 is an Income Tax against which there is no 
 appeal or escape. It is not good taxation 
 according to any recognised canons, but it is 
 taxation. But if the 2s. charge falls on anybody 
 but the consumer, it falls on classes who, on any 
 principles of equity, should not be asked to bear it. 
 If it falls on the baker : — why, what has the poor 
 baker done that he should bear the burden of 
 a national experiment ? The same question arises 
 if it falls on the miller, or the farmer, or the 
 railways, or even the landlords. 
 
 I question if one might not go further, and say 
 it should not fall on the foreigner. To get other 
 people to pay our taxes for us is not an " ideal 
 
XXV. THE PREFERENCE HAS FAILED 239 
 
 form of taxation," as it has been called : it is 
 contrary to the idea of taxation. If I am living 
 in my father's house and paying board to him 
 for my expenses, I should not consider it right 
 to take a good friend of mine by the collar when 
 he comes to the front door, and say to him : 
 " You must pay my board for me, or I shall not 
 let you in." Such an idea is just the old fallacy 
 that the foreigner is a stranger : " Let's 'eave 'arf 
 a brick at 'im." 
 
 II. The second thing I should say is that, if 
 the price of grain, dairy produce, meat, etc., does 
 not rise, the Preference has failed. Suppose that 
 the tax is imposed ; that the foreigner pays it as 
 the price of admission to Great Britain ; and 
 that, on account of its being a small one, he con- 
 tinues to send in his foodstuffs as before, what 
 is the good of the Preference to the Colonies ? 
 
 Canada just now is sending us £,d^ millions of 
 wheat, wheat meal, and flour, when the price is, 
 say, 25s. It may be presumed that she is send- 
 ing us all that it pays her to send at that price ; 
 that, in fact, she is sending us all she can. 
 What inducement, under the new system, has the 
 Canadian farmer to send more ? He must grow 
 more in order to send it. But, presumably, he 
 is growing as much as he can. The question, 
 then, is : What temptation is there for more 
 farmers to settle in Canada and raise wheat ? 
 The price of wheat has not risen, and demand 
 in England has not increased. Things are 
 exactly as they were ; as much grain coming in 
 from America and other countries ; as much 
 
240 PROBABILITY OF THIS FAILURE chap. 
 
 being grown at home ; the same amount of 
 competition as now. Where is the inducement ? 
 And, if the Preference fails, why have we turned 
 everything upside down ? 
 
 This probabiHty of failure is surely evident. 
 The very curious thing is that so many people 
 do not see it. They mouth the magic word 
 Preference. He who gets a " preference " is 
 " favoured." He who is " favoured " must in- 
 crease his sendings. Give Canada a preference 
 and she will double her wheat acreage. Ask 
 what is the inducement to double the acreage, 
 and the bubble bursts. The only inducement to 
 a man to extend his business, is to make more 
 money. But how is this " more money " to be 
 made if the Canadian exporter does not get more 
 for his grain, and if the competition to sell it is 
 just as severe ? Suppose I am a poor thread 
 maker, not in the great combine, struggling 
 to keep a small trade against J. & P. Coats, 
 and suppose I am told that a beneficent govern- 
 ment, on my behalf, is going to tax J. & P. Coats' 
 profits lo per cent, how will this help me? I 
 shall not sell one spool more of thread, and the 
 price of thread will not rise. J. & P. Coats are 
 a little worse off, but I am no better. 
 
 The fallacy is, that the hurt of one man is 
 the healing of another.^ The American is hurt 
 undoubtedly. He gets 2s. less profit. But the 
 
 ^Of course the revenue gains; it gets 2s. on every qr. imported 
 from foreign countries. This is a gain ; but it is a gain to us, not 
 to the Colonies, And we have been told that taxation for revenue 
 is not the aim of a preferential tariff. 
 
XXV. THE ONLY POSSIBLE ADVANTAGE 241 
 
 Canadian gets no more profit than he is getting 
 now. And if the preference tax does not favour 
 the Colonies, it is useless. 
 
 The American, however, is hurt, and, at this 
 point, rises a question. Is it not true that the 
 prejudice to the American grower is, in some 
 sense, an advantage to the Canadian ? In one 
 sense, it is true. There is, just now, considerable 
 rivalry between the United States and Canada as 
 fields for emigration. Although Canada is grow- 
 ing from outside, America is growing much faster. 
 But, within the last year, hundreds of American, 
 farmers have crossed the boundary into the! 
 Dominion to get advantage of the better climate' 
 and the virgin soil. It seems reasonable to say 
 that the Preference will give an impetus to 
 emigration into Canada. 
 
 This, then, is the possible advantage which 
 the Preference may give to the Colony. It is 
 a little roundabout ; it certainly falls far short 
 of what is generally expected of a Preference. 
 It gives no help to the present colonist ; it 
 only helps to fill up his country faster. It 
 may be questioned if such a far-away gain 
 is worth the disturbance — if it is worth while 
 penalising our cousins, the Americans, for the 
 sake of an advantage to brothers who are not 
 yet in the country.^ 
 
 ^ It is no part of the idea of Preferential Tariffs and the taxation 
 of food, to protect our agriculture. But, as it is sometimes sug- 
 gested that it would not be a bad thing if they did so incidentally, it 
 may be pointed out that, if prices of food stuffs do not rise, the 
 agricultural interests remain in the same position as at present. 
 
 Q 
 
242 WHAT IT WILL COST US chap. 
 
 If it be the case, then, that a small tax on 
 food will not raise prices, it would appear that, 
 if we do not gain much by getting a Preference, 
 we gain as little by giving one. 
 
 We pass now from possibility to probability. 
 Confining our attention to corn, let us assume that 
 corn rises in price by the full amount of the duty. 
 The position, then, is that the foreigner pays 2s. 
 to get in, but, as he gets 2s. more price, he is as 
 well off as he is now, though, of course, no 
 better off. The Colonies, on the other hand, 
 get their corn in free, and, obtaining 2s. more 
 price, are 2s. better off than they were. Our 
 farmers also get the extra price, and they are 
 2s. better off How does it affect us, the 
 Consumers ? 
 
 We consumed altogether, in 1902, 84,000,000 
 qrs. of wheat and grain.^ The rise in price on 
 this, at 2s. per qr., is ^^8,400,000. This is the 
 extra price which our consumers have to pay. 
 
 Of this total, 42,000,000 qrs. come from abroad, 
 and they pay 2s. to the Exchequer, or ;^4, 200,000. 
 This, at least, is not loss ; it comes back to 
 us in government services. But 7,000,000 qrs. 
 come from the Colonies, and these pay no tax. 
 The 28. on each quarter, or ^^700,000, goes to 
 the Colonies as their share of the new benefits — 
 
 Nor does the Empire come much nearer being "self-sufficient"; 
 for, as we see, there is no inducement to the present colonist to 
 add a single acre to his holding. 
 
 ^ The figures are taken from a calculation made before the Edin- 
 burgh Chamber of Commerce on 23rd June, 1903. 
 
XXV. IF PRICE RISES 243 
 
 paid out of our pockets, of course, but, presum- 
 ably, a willing payment for the good of our poor 
 Colonial brethren. As to the 35,000,000 qrs. 
 grown at home, they pay no excise or tax, and 
 2s. on this, or i^3, 5 00,000, go to the agricultural 
 interest in the shape of higher prices. 
 
 If it be the case, then, that the taxation of 
 food will raise its price, we shall have to pay for 
 getting a Preference from our Colonies. In the 
 one item of grain alone, even when we have 
 deducted the duty levied on foreign grain and 
 paid into the Exchequer, it will cost us over 
 ;^4,000,000.^ 
 
 But perhaps it is time to remember again that 
 what all this scheme aims at is not our own 
 advantage but the advantage of the Colonies. 
 Its success, then, must be judged by this. Is not 
 the result a little inadequate? To give ;^700,ooo 
 to Canada and Australia — the others do not send 
 grain — we are to impose indirect taxation to the 
 amount of over ;^8,ooo,ooo. Sir Robert Peel 
 
 ^ Granting that ;i^700,ooo of this is a free gift to the Colonies, it 
 may be said that £t^\ millions of the tax come back to a very con- 
 siderable section of the people, the agricultural classes. True ; but 
 even here two serious considerations must be taken into account. 
 The first is that, although these classes get £,l\ millions, they have to 
 pay more for their bread, just like the rest of us. The second is that 
 the great bulk of it will never go near the farmer or labourer, but 
 will, inevitably, go to the landowner in raised rents. Of course, 
 if it be true, as alleged by the protagonist of the movement, that 
 the prosperity of one class is the prosperity of all, it does not matter 
 if the farmers have to pay high rents : the landowners will have 
 more money to spend ! 
 
244 /^ THERE NO CHEAPER WAY? CH.xxv. 
 
 once said on a s*' nilar question : " If we must 
 do it, for God's sake, let us pay it directly." I 
 ask. Would it not be much cheaper to vote a 
 sum of ^700,000 direct from the Exchequer to 
 these Colonies?^ 
 
 ^ Mr. Chamberlain's ingenious calculation that, although food 
 rises, there "will be no sacrifice," deserves only passing mention. 
 All that is necessary, he says, is a "small transference of taxation 
 from certain kinds of foods to certain other kinds of food." Man 
 does not live by bread alone, but by sugar and tea. We can reduce 
 the sugar and tea duties in such a way that the working man and his 
 family will save as much on them as they pay extra in bread. His 
 proposal is to take off half the sugar duty and three-quarters of the 
 tea duty, thus relieving the price of these commodities by some £lh, 
 millions. The Exchequer would lose this, but it would be compen- 
 sated by the new Protective duties — the suggestion, I suppose, being 
 that, instead of the home consumer paying these taxes, the foreign 
 producer would pay them. But, of course, the scheme depends on 
 the sugar and tea duties remaining at the present high level. When 
 it is remembered that, before the war, there were no sugar duties 
 whatever, and a tea duty of 4d, instead of 6d., it is seen that we are 
 to get, as compensation for dear food, what we might have expected 
 to get by the mere return of peace. 
 
CHAPTER XXVI. 
 
 HOW PREFERENCE WILL AFFECT 
 AGRICULTURE. 
 
 .4 rise in prices will induce the return to wheat growing here, 
 'luith the result that when, in time, prices fall again, our farmers 
 will be caught as they were sixty years ago. 
 
 As was said, the scheme of Preferential Tariffs 
 is not intended to protect any of our industries. 
 It has, indeed, been admitted that, incidentally, 
 it might do so, and, without much thought, the 
 suggestion may have been accepted that, if it 
 did, no great harm would be done. But what 
 if the incidental Protection does harm to the 
 very industry protected ? 
 
 According to the proposal, we are to give a 
 financial inducement to the Colonies to send us 
 wheat. It is always the first step that costs, and 
 the first step is the breaking in of new land. We 
 give a bounty to the Colonies to enable them to 
 take this first step, and the land afterwards is as 
 good, say, as our best land. Foot by foot the 
 Canadian acreage grows, till in time the Canadian 
 exports overtake the American exports. 
 
246 THE RETURN CHAP. 
 
 One thing, however, has been forgotten. It is 
 that the American wheat grower is not suffering. 
 He is not, indeed, getting the 2s. extra like the 
 colonial, but he is getting as good a price for his 
 wheat as he does now — paying 2s. duty and 
 getting 2s. more price. Will the American 
 supply stop ? Why should it ? Will the mere 
 fact that the Canadian is getting 2s. more, in- 
 duce the American farmer to grow less ? 
 
 But as the Canadian import increases, while, 
 at the same time, there is no diminution of the 
 foreign import, there comes the inevitable effect 
 of an increase of supply, a fall in prices.^ 
 
 Is there no harm in this ? Does it only mean, 
 after all, that our Colonies meanwhile have been 
 paid a bounty, and that our agricultural people 
 have got an extra price? It means much more. 
 The cost of raising colonial wheat, perhaps, will 
 fall ; but the cost of raising British wheat will 
 not. It is entirely different with us from what 
 it is with our Colonies. They have millions 
 of acres of virgin soil that only requires to be 
 brought under the plough to make it permanently 
 productive land. But we have no such surplus 
 soil. Just now, all the wheat lands that pay are 
 under wheat. If the inducement of 2s. a qr. 
 extends our wheat fields, it must be by growing 
 
 ^This is recognised and welcomed. The confident expectation 
 of Sir Gilbert Parker, for instance, is that, under this induce- 
 ment, prices will rise in the first instance, then steadily begin 
 to fall, and, ultimately, come below the present level. When it 
 is confidently prophesied that Preferential Tariffs will lead to the 
 cultivation of our derelict land and empty the slums, this should 
 be remembered. 
 
XXVI. TO WHEAT GROWING 247 
 
 wheat on lands more costly to cultivate than the 
 present. This pays so long as the price keeps up, 
 but what happens when it comes down again ? 
 Why, the fall catches our farmers just where the 
 withdrawal of Protection caught them sixty years 
 
 ago. 
 
 Before that time, wheat growing, under the 
 inducement of protective prices, was the staple 
 of farming. An East Coast farmer once told me 
 that, if he had been advised to grow potatoes 
 then, he would have answered that he was not a 
 gardener. Not only were lands entirely unsuit- 
 able for wheat put under the plough, but the old 
 pastures, rich in animal and vegetable remains — 
 literally capital accumulated in the course of 
 centuries — were broken up. Then came the 
 withdrawal of the artificial price. In many places, 
 the sweet, short herbage, so suitable for sheep, was 
 gone for ever. But, once a farmer, always a farmer; 
 and our people found there were other crops that 
 would pay, at anyrate if cultivated on a large 
 enough scale. Rents fell, and the landowner has 
 never ceased to sigh for the good old times when 
 rents were £^ an acre, even if the labourers got 
 only 7s. or 8s. a week, and lived on barley meal and 
 Swedish turnips boiled together. But farmers have 
 found a living in pasture and dairy farming, in grow- 
 ing early potatoes, turnips, celery, cabbage, mustard, 
 peas, beans, flowers, and fruit. It was becoming 
 recognised that the function of agriculture in this 
 country was to grow things that could be better 
 and more cheaply grown at home than abroad ; 
 that, as the cities extended their areas, the 
 
248 WHEN WHEAT FALLS AGAIN CH.xxvi. 
 
 province of the home farm was to provide them 
 with produce that must be supplied fresh every 
 day ; that the farmer was an employer of labour,' 
 and, like other employers, must find his profit by 
 perpetual struggle after better methods, cheaper 
 production, larger results ; that the men with 
 small capital and less brains must be left behind ; 
 that the farmer — like the professional man — must 
 accept the " fine life " as part of his real wage. 
 On the whole, it was a beneficent revolution. 
 
 And now farming is to be attracted back again 
 into a channel that is artificial, and depends for 
 its continuance on the continuance of high prices. 
 Then this high price goes — and where are our 
 farmers ? They will have to take their capital 
 out of wheat growing, and go through the long 
 process of depression and loss over again. ^ 
 
 ^ Of course, it will be answered, and very reasonably, that a pro- 
 tection of 2s. will not do much to induce wheat growing at home. 
 I merely give the above as a statement of tendency — not unneeded, 
 perhaps, in face of Mr. Chamberlain's own words about other 
 nations : "They began perhaps with a low tariff. They continued 
 it so long as it was successful. If they found it ceased to do what 
 it was wanted to do, they increased it." For there is a danger in 
 the very futility of these proposals. If the 2s. is found to give the 
 Colonies either no advantage or this trifling one, is it likely that a 
 tariff of this amount will be continued when it is obviously futile, or 
 an experiment of this magnitude abandoned for want of trying the 
 "little more" that might transform it into a success? Now, as 
 always, it is the first step that costs. 
 
\, 
 
 CHAPTER XXVII. 
 
 THE PRICE OF EMPIRE. 
 
 Summing up, the Return to Protection involved in preferential 
 tariffs is a heavy price to pay for an experiment. Granting all the 
 attractiveness of a '■^ unified empire" it is more than doubtful if this 
 would not be a long step towards its disintegration. 
 
 Thus we have summed up the gains and losses 
 of Preference. It seems to come to this : that the 
 demands of the self-governing Colonies are to 
 dictate the commercial policy of an Empire which 
 includes the not insignificant free-trade members 
 of the United Kingdom, the Crown Colonies, and 
 India. And, these " demands " are held as a 
 threat over us. It is " the only system by which 
 this Empire can be held together." 
 
 It looks a poor return for having given these 
 Colonies self-government. They have Protection ; 
 they are to retain it. They have unbounded pros- 
 perity ; they are to have more. They have cheap 
 bread ; they are to have it cheaper. 
 
 We have Free Trade ; we are to give it up. 
 We have prosperity ; we are to imperil it. We 
 have millions to whom cheap food is a vital con- 
 sideration ; we are to tax their bread and meat, 
 
250 A STRAIGHT ISSUE: chap. 
 
 their tables and chairs, their pots and pans, the 
 few poor rags of bedding and napery they possess. 
 
 At last we are faced with a straight issue. 
 This is the price of Empire. The Colonies stood 
 by us in the war. Our hearts warmed with pride. 
 It is what we might have expected of the 
 native-born, but we were glad we found it. And 
 now the bill comes in. 
 
 The demand for a quid pro quo from a mother 
 country which already gives so much, reminds me 
 of a little girl I once knew, whose mother supplied 
 her with pans and flour and raisins, in return for 
 which the child sold the mother her cakes at "shop 
 prices ! " Did any other mother country ever 
 give her colonies, not only parliaments and legis- 
 latures of their own, but liberty to tax her goods 
 even to the extent of prohibition,^ while, all the 
 time, she paid almost the entire expenses for 
 the defence of the family ? Has she not lent 
 to them freely ? Has she not put their securities 
 among her trustee investments ? Does anyone 
 think that they could borrow as cheaply as they 
 do unless they were members of the British 
 Empire? Is a preference in their tariffs not " the 
 least they can do " ? ^ 
 
 1 " Fiscal policy," says Earl Grey, "was not intended to cover 
 the liberty of establishing protective tariffs against us." His ex- 
 planation is, that, "at the time when Protection was exphcitly 
 introduced, we had people in power who had no hope — perhaps 
 no great wish — to keep the Colonies." — Commercial Policy of the 
 British Colonies, p. 14. 
 
 ^In 1897, Sir Wilfred Laurier, introducing his Preference by 
 saying, ' ' We have done it because we owe a debt of gratitude to 
 Great Britain," used the significant words: "Suppose England 
 
XXVII. THE QUID PRO QUO 251 
 
 Already the Colonies send us the most of their 
 exports. Naturally so ; not because they love us 
 and we love them, but because we are the one 
 great country which admits their goods free. 
 They do not, then, need to ask us for free trade, 
 or claim it as their British birthright ; they have 
 it. They want more ; like spoiled children, they 
 want it all — the right of free trade confined to 
 the children of the Empire. They ask us to tax 
 foreigners, that they may get some of the trade 
 which other nations are getting — trade on which 
 they think they have a claim. Is it unreason- 
 able to remind them that " reciprocity must not 
 be all on one side " ? 
 
 It is to be noted also that, in taxing foreign 
 people, we may be taxing British capital. If the 
 labour of other countries is foreign, a great deal 
 of the capital is ours. Possibly not less than 
 ;^ 1 00,000,000 of British money is invested in 
 the Argentine Republic. The part of it sunk 
 in railways, docks, warehouses, depends for its 
 dividends on the handling and transport of 
 the wheat, maize, linseed, wool, meat, cattle, 
 raised very largely on British-owned estates. Is 
 it quite reasonable to tax our own capital, even 
 for the sake of our children ? 
 
 abandoned her Free-Trade record. She would inevitably curtail 
 the purchasing power of her people. And do you not think we 
 should suffer from that, we who alone have natural resources 
 enough to feed her millions from our fertile fields ? I have too 
 great a belief in English common sense to think they will ever 
 do any such thing. . . . We know that the English people will 
 not interfere with the policy of Free Trade, and we do not desire 
 them to do so. " 
 
252 A UNITED EMPIRE chap. 
 
 There can be no question that the idea of a 
 " United Empire " is a very grand one. Believ- 
 ing that Great Britain stands for freedom and 
 peace, we must believe in its continued existence 
 and growth as a world power. The patches of 
 red on the map — these eleven million square miles 
 with their population of some 400,000,000 — are 
 connected just now, more closely than we quite 
 realise, by the coaling stations, dotted all over the 
 world, that almost secure us the command of the 
 seas. But can we not weld them together into 
 one indissoluble whole ? So Imperial Federation 
 has caught the national imagination, and will be 
 worked out in one way or another. But to make 
 Preferential Tariffs the method and the bond, and 
 to say that this is " the only system by which the 
 Empire can be held together," is not only, in my 
 opinion, quite wrong, but is to draw an antithesis 
 between Free Trade and Imperial Federation which 
 might compel us to choose between the two. 
 
 Will such a system really make for unity? It 
 looks plausible on the face of it. We are to 
 " prefer " colonial goods, not sentimentally, but at 
 some cost. Colonial merchants, being favoured 
 guests in our ports, will increase their trade 
 with us. The Preference will be a definite motive 
 to the Colonies for remaining within the British 
 Empire ; at least a deterrent from leaving it. 
 
 The preliminary question is : Is there any sign 
 that they wish to leave it ? 
 
 What Canada may do^ seems impossible to tell. 
 
 1 1 imagine the other Colonies may be left out of account ; thus 
 far, they have shown no thought of leaving the Empire. 
 
XXVII. WHAT CANADA MAY DO 253 
 
 She is the most cosmopoh'tan community on the 
 face of the earth, and, though she speaks through 
 a government which is thoroughly loyal, the 
 government of to-day may not be the govern- 
 ment of to-morrow. 
 
 Some say that it is Canada's " manifest des- 
 tiny " to join the United States. The political 
 impulse is geographical continuity ; the com- 
 mercial attraction is that she would thus get 
 a market of 80,000,000 people on a Free 
 Trade basis — with, one supposes, the corollary 
 that she would still keep our Free Trade market 
 of 42,000,000 people, to say nothing of the 
 British possessions. 
 
 It may be so. On similar grounds, it might 
 be said that Austria's manifest destiny is to join 
 the German Empire ; yet she does not. Old 
 ties of kinship, pride in the British name and 
 traditions, will have something to say against 
 any such union. The name of republic does not 
 attract everybody as compared with the reality of 
 freedom. One would think that the people of 
 Canada, having all the liberty they want, have 
 little political inducement to join the United 
 States. It is not as if she were a colony in 
 the old sense. Do we not respectfully salute her 
 as the Dominion of Canada ? 
 
 Others say that she is only waiting on our 
 adverse decision to conclude a Reciprocity Treaty 
 with the United States. This, perhaps, would 
 mean the abandonment of her Preference to us, 
 or giving the same preference to America. 
 Against this, however, stands the consideration 
 
254 WILL THIS SECURE UNITY? chap, 
 
 that Canadian manufacturers have as much reason 
 to fear American competition as they have to fear 
 ours. Evidently, what the Canadian manufac- 
 turers want, is to remain as they are, with suf- 
 ficient protection against us, America, and all 
 the world. 
 
 We hear, again, of aspirations for independ- 
 ence. This seems to me an argument made in 
 Ireland. How much better off Canada would 
 be as a Republic than as a Dominion, is a little 
 obscure, while the burdens she would have to 
 assume in making herself independent, are by no 
 means obscure. And it is not at all clear that 
 aspirations for independence would be in the 
 slightest degree checked by Preferential Tariffs. 
 
 But suppose it granted that the preference to 
 our own kinsfolk and the handicapping of the 
 foreigner is, in itself, an act which the Colonies 
 will welcome as at least a sign that we are willing 
 to make sacrifices to hold the Empire together, 
 the question remains : Will this make for unity? 
 
 Let us remember what Free Trade is. It is 
 the commercial side of our political faith. It 
 is the extension to the international sphere of the 
 freedom we have at home : the free buying of 
 what others as freely sell at " natural prices " — 
 the prices determined by free rivalry in service. 
 Sixty years ago, a free people exercised their 
 freedom of choice and adopted it. The same 
 freedom of choice this mother-country extended 
 to her self-governing Colonies. Unfortunately, as 
 we think, these colonies chose to restrict their 
 freedom to internal trade, and adopted Protec- 
 
XXVII. EVEN-HANDED TREATMENT 255 
 
 tion against outsiders, including ourselves. Now, 
 under Preferential Tariffs, we are both to go back 
 on our choice ; we each of us restrict our freedom 
 and consent to be tied by each other's hands. 
 We form ourselves into a mechanical unity ; 
 lose our natural relations with the rest of the 
 world ; and seek compensation within our own 
 house. But will this secure unity among the 
 members of the household ? 
 
 The first consideration that strikes me is that 
 a family may enjoy the shelter of the one 
 roof and yet be very far from being a united 
 family. We are not, I imagine, going to step 
 down from our own position as the mother 
 country, and become only one of a league of 
 equal states : the family must still have a head, 
 and that head must be Great Britain. But the 
 children, be it remembered, have long ago enjoyed 
 houses of their own, and will not take kindly 
 to the resumption of parental government. And, 
 being the mother country, the question will 
 be continually emerging : Are the individual 
 children of the Empire all getting even-handed 
 treatment ? 
 
 In the present proposals, the mother country is 
 asked to favour her children in a way that seems, 
 at first glance, very unfair. One Colony has its 
 chief interest in wheat, and the wheat is to come in 
 free, as against 2s. on foreign wheat. But another 
 Colony has its chief interest in wool, and there is to 
 be no duty on foreign wool.^ The duty on meat 
 
 ' Wool constitutes about half the total exports of Australia and 
 one-third of the total exports of New Zealand to the United 
 
256 EVEN-HANDED TREATMENT chap. 
 
 would benefit New Zealand as regards £'i^\ 
 millions of her exports, out of a total oi £\2 
 millions. But it would not benefit Australia in 
 anything like the same proportion. One hopes 
 that, in all this cut-and-dried scheme for the 
 taxation of food and the non-taxation of raw 
 materials, it has not been forgotten that it will 
 be the British Empire which concludes these 
 reciprocal treaties, and not Great Britain alone. 
 There is, indeed, a more fundamental difficulty 
 in these proposals. A reduction in our tariff to 
 certain Canadian products is not a preference to 
 " Canada " ; it is a preference to a certain group 
 of industries in Canada ; and any advantage there 
 is goes to the individuals in that group. Thus 
 a preference on grain benefits the North-West, 
 including Manitoba and the Territories — one- 
 eighth only of the whole population — and does 
 nothing for the other Provinces. A preference 
 on meat would be welcomed by Ontario, but 
 would do nothing for British Columbia and the 
 Maritime Provinces. It will be a little difficult 
 to convince the non-favoured provinces, and the 
 individuals of the non-favoured groups, that such 
 a preference is an inducement to loyalty. We, 
 in this country, know something of the bad feel- 
 ing which can be called forth by an " injustice " 
 to one member of the British Isles. 
 
 Kingdom (in 1902 £oi% millions out of ^igf millions for Australia, 
 and ;!^3| millions out of ;^io| millions for New Zealand). It is 
 one of the inevitable anomalies which would ensue under a Pre- 
 ference that, even if we gave a reduction on wool, Australasia 
 would not appreciably gain, as she already sends us ^13^ millions 
 out of our total import of sheep and lambs' wool of £20 millions. 
 
XXVII. INCOMPATIBLE POLICIES 257 
 
 But if we are overborne by this consideration 
 of even-handed treatment, and so far sacrifice 
 our obvious interests as to extend our preference 
 to all the great exports of our Colonies, we place 
 ourselves in a very singular position as regards 
 other countries. We shall come into rude 
 collision with the very principle on which the 
 Retaliatory proposals are founded ; we shall, in 
 all probability, do serious injury to our trade with 
 many foreign countries which have treated us 
 well, and little prejudice to others which have 
 shown us no consideration. This, of course, is 
 only one illustration of the hopeless incompati- 
 bility of the two policies which Mr. Chamberlain 
 proposes to run in double harness. It might 
 conceivably be possible to adopt Retaliation with- 
 out becoming definitely protective, but it requires 
 little judgment to foresee that the adoption of 
 Retaliation and Preferential Tariffs together must 
 land us, in a very short time, in the most illogical 
 and incongruous tariff in all Europe. 
 
 All this takes account only of the relation 
 between the Mother Country, the Colonies, and the 
 rest of the world. But beyond this, again, is the 
 relation of the Colonies to each other. To each 
 Colony every other is a competitor, just as much as 
 foreign countries are ; and we may be sure that, 
 in drawing up its tariff, each will attempt to 
 get the greatest advantage from and give the 
 least advantage to ever}- other part of the fede- 
 rated Empire. But, to keep a United Empire, 
 all these diverging interests must be reconciled 
 with the interests of the mother country, and 
 
 R 
 
2 58 A LONG STEP TOWARDS chap. 
 
 with those of the Free Trade members which 
 she has in her keeping. Such a task was never 
 yet attempted by any nation under heaven : it 
 seems to me quite beyond human power. 
 
 Lastly, there remains the question of perman- 
 ence. If this bond of Preferential tariffs is once 
 established, it cannot be broken but by the con- 
 sent of at least the majority. This means that our 
 fiscal liberty is gone, and that the fiscal liberty of 
 the Colonies is equally gone. What, then, if a 
 strong Protectionist party in the Colonies begins 
 preaching that their industries are being sacri- 
 ficed to English manufactures, and demands 
 drastic revision of the Preference clauses ? What, 
 again, if, after a temporary victory of Protection 
 and the establishment of Preferential tariffs, an 
 out-and-out Free Trade government comes into 
 power here, asking if the selfish interests of two or 
 three small sparsely populated Colonies are to 
 outweigh the interests of the Mother Country 
 and of her other possessions ? 
 
 It seems to me that, wherever we look, the 
 prospects are all of conflicting and comparative 
 interests, compromise tariffs, incessant bargainings, 
 incessant readjustments, incessant bickerings and 
 heart burnings, incessant temptation to disunity 
 and bad feeling. If this is " the only system by 
 which the Empire can be held together," we may 
 well despair of the future. Does not everyone 
 see, indeed, that the unity we now have has 
 already been perilled by the raising of questions 
 which should never have been raised ? Is not 
 
XXVII. DISINTEGRATION 259 
 
 the very inquiry we have been forced to make 
 — the gain or loss to us of Preferential tariffs — 
 one which the true patriot must heartily wish had 
 never been necessary ? 
 
CHAPTER XXVIII. 
 
 TAKING STOCK. 
 
 If the case for Free Trade remains unshaken, there are at least 
 tivo lessons we have learned. (/.) That Free Trade is merely a 
 condition under which men trade; it may be outweighed by the 
 natural resources of other countries ; by their wiser government 
 provisions ; by their better methods ; by their better habits of life. 
 {II.) That circutnstances have changed since 1846; the world's 
 growing wealth and poptilation make it quite impossible that 
 England should remain the world's sole ivorkshop and keep the 
 local trade of other countries ; the severer struggle of international 
 competition makes the demands on the individual heavier, and 
 the task of the employer inore onerous, though more honourable. 
 Finally, must be considered the position which Free Trade has given 
 us in making evety new acquisition of Great Britain an open 
 market for the whole world. 
 
 After nearly a year's unremitting discussion, 
 during which the old argument has been restated, 
 old history been retold, and present discontent 
 has found voice, one may ask, "Is the case for 
 Free Trade shaken ? " 
 
 I do not think it is. But the discussion has 
 not been wasted. It is a good thing for a faith 
 to be attacked as a fetichism and its creed as a 
 shibboleth. Free Trade was too easily taken on 
 
CH.xxviii. FREE TRADE A CONDITION 261 
 
 trust, and economists at least have long known 
 that the man in the street had very little reason 
 in his mind for the faith on his lips. I think 
 that those who were willing to be taught have 
 learned two things which were worth learning. 
 
 I. The first is that Free Trade is after all only 
 a condition under which men trade. And it is 
 not freedom but the use men make of it which 
 tells. Nations may have less freedom, and yet 
 make better use of their opportunities. If we 
 had realised this earlier, we should not have spent 
 so much time over the question why it is that 
 Protected countries have flourished under a system 
 which seems to impose so many handicaps. 
 
 There are many reasons for it. Natural re- 
 sources may outweigh wrong methods of using 
 them. No fiscal system will fill a country with 
 minerals, nor change its climate, nor give its 
 people brains ; a country that is well equipped 
 in these respects will not easily be held back, 
 even by a mistaken effort of its government to 
 guide the employment of its people. 
 
 Again, a government that we count foolish in 
 its fiscal policy may be wise enough in other 
 directions. Germany devotes large sums to edu- 
 cation, general and technical : a university training 
 is not counted a disability for business life : even 
 her military system may drill the people into 
 habits that are useful for industrial occupations. 
 France has a land and succession system which 
 secures peasant proprietorship, keeps people on 
 the soil, and gives them the most personal 
 interest in their work. Denmark, lending a 
 
262 IV/SE STATE AID CHAP. 
 
 helping hand to the co-operative organisations 
 initiated by her farmers, gives an example of 
 wise State aid which we might do well to follow.^ 
 Free Traders do not in the least minimise the 
 work that governments can do. The proof of this 
 is that ours is pre-eminently the country where 
 Factory Acts, Education Acts, and all manner of 
 sanitary regulations have expressed the " broader 
 view " of freedom against unregulated laisser fah-e. 
 All that they insist on is that the sphere of 
 government shall be limited to laying down the 
 conditions which shall allow the citizens as a 
 whole to realise the best that is in them, and 
 
 1 1 am tempted to quote from Bulletin No. 6 : Department of 
 Agriculture, Ireland, 1903, on Agricultii7-al Co-operation and Credit, 
 p. 10: "In Denmark, as in France, the State, in its action in 
 assisting farmers, is closely dependent on the co-operation of the 
 farmers themselves in voluntary associations. A State Department 
 of Agriculture exists, but it aims at encouraging and seconding, not 
 displacing, these organisations. Though the State has aided agri- 
 culture for a considerable time, it was not till so recently as 1895 
 that a separate ' Department of Agriculture ' was formed, dealing 
 with agriculture proper, surveys, cattle diseases, forestry, etc. But 
 the staff of officials is small, and is mainly occupied with accounts 
 and statistics. The agriculturists are assisted directly through the 
 previously existing voluntary local organisation with which the 
 Minister of Agriculture consults through a system of experts. The 
 Government spends annually about ;^ 108,000 in aid of agriculture ; 
 most of this amount is administered through the voluntary asso- 
 ciations, such as the Royal Danish Agricultural Society and the 
 Federations of local Societies, which Federations in turn act 
 through the local Societies. These local Societies are, it may be 
 stated, largely co-operative in their nature and methods. In 
 almost every instance — and certainly in the most prosperous agri- 
 cultural countries — the co-operative organisation of agriculturists 
 has not been initiated by the State, but has preceded the giving of 
 any assistance from the State." 
 
XXVIII. BETTER METHODS 263 
 
 to helping them to stand the firmer on their 
 own feet. 
 
 Another thing that may outweigh the handicap 
 of Protection is where other countries adopt 
 better methods of business than we do. Some 
 time ago, we found — I think I may say, with 
 some amazement — that these handicapped coun- 
 tries were disputing neutral markets with us ; 
 even coming into our own, and selling goods 
 in the making of which we thought we had a 
 clear advantage. One part of the explanation 
 at least was not far to seek. The American 
 Trust, though born of a bad ancestry, empha- 
 sised the neglected economic truth that there 
 is often immense waste in competition, and that 
 cost may be very greatly reduced by combination 
 of effort and enlargement of the unit of produc- 
 tion. The excesses and failures of the Trusts 
 leave this fact untouched. Another part expla- 
 nation is embodied in what we hear everywhere of 
 the German commercial traveller. Granted that 
 England is " dear for her reputation through the 
 world " for honest goods and straight dealing 
 merchants. Yet, when our consuls everywhere 
 inform us that German travellers, speaking the 
 native language, are waiting at every door, selling 
 in measures and money that are familiar to the 
 people, invoicing goods duty paid, making ever}-- 
 thing easy for the buyers, meeting — we may even 
 call it " pandering " — to the wishes of the cus- 
 tomers, we cannot hope that similar success will 
 attend those who content themselves with sending 
 English circulars and price-lists through the post, 
 
264 DRINK CHAP. 
 
 or send out travellers who have to use an in- 
 terpreter and remember cities only by the names 
 of the hotels in which they stayed, or " sell only 
 according to sample." A trade depression which 
 would force our manufacturers to realise that the 
 seller must now wait on the buyer, might not be 
 a calamity. 
 
 And there is still another thing that may 
 outweigh the handicap. Other countries may 
 have attained better habits of life than we have. 
 There is no social or industrial enquiry ever set 
 on foot, but brings up the fact that " England 
 free " is not " England sober." The fetters people 
 put on themselves are sometimes worse than 
 any that mistaken governments can make them 
 wear. No one who has thought out the matter 
 will contend that short hours and his^h wasfes 
 are in themselves a handicap in international com- 
 petition. But when the leisure gained is not spent 
 in healthy exercise and relaxation, and when the 
 extra wage goes to the public house, we are 
 terribly handicapped in the struggle with more 
 sober nations. Short hours, in fact, are only 
 possible, economically, if they go along with 
 high productiveness, and high wages are a com- 
 parative advantage only if the wages pass into 
 high efficiency. It does not seem too much to 
 say that, if our artizans would add to their other 
 good qualities that of coming into their work 
 when the whistle sounds on Monday morning, 
 and keeping at it till it sounds on Saturday, and 
 would not waste their sub.stance in an indulgence 
 which never ennobles and which generally de- 
 
XXVIII. NEW CIRCUMSTANCES SINCE 1846 265 
 
 grades, we should hear Httle more of these twelve 
 millions on the brink of destitution, who are 
 continually thrown in our teeth whatever " tests 
 of prosperity " we put forward. There is a pos- 
 sible reduction of cost here — every great employer 
 witnesses to it — which would enable us to force 
 our way through almost any tariff. One can but 
 sigh for another Mr. Chamberlain to rouse the 
 country to this peril at home. 
 
 II. The second thing we have learned is, 
 I think, that circumstances have changed since 
 1 846. The national stock-taking period of the 
 last year has not been lost if it forces us to weigh 
 these new circumstances, strike the balance of profit 
 and loss, and decide what our future policy is 
 to be. Those who defend Free Trade on prin- 
 ciples and on experience borrowed unreservedly 
 from the circumstances of sixty years ago, and 
 who vex their souls defending Mr. Cobden and 
 his prophecies, are taking weak ground. It is not 
 seriously doubted that, in 1846 and for many 
 years after. Free Trade justified itself. It gave 
 us the condition we needed in order to make 
 the most of our resources, and to take full ad- 
 vantage of the great inventions. At that time 
 we had a long start of the world. It is ques- 
 tionable even if moderate Protection would have 
 kept us back.^ 
 
 ^ " Sixty years ago open ports were merely an important aid ; they 
 were not a necessity as now. Of course, our heavy duties on corn, 
 aggravated by the stupid 'sliding scales,' had to be removed. But, 
 though we had long outgrown the stage at which Protection could 
 benefit any one section of the nation without doing a greater harm 
 
266 ENGLAND CANNOT REMAIN chap. 
 
 But now it is different. Other countries have 
 pulled up. Their Protection was not able to 
 keep them back. And I do not think we yet 
 recognise the truth that we cannot expect to 
 remain the " workshop of the world." We have 
 no natural monopoly of manufacturing, and we 
 send our capital, our employers, and our workmen 
 freely to other countries. 
 
 Two things are forgotten. The one is that it 
 is quite impossible that this little island can 
 supply a world, growing so fast in population 
 and in wealth, with all the manufactures it wants. 
 I have come across no more significant reminder 
 
 to others, I think we might have prospered in spite of a tariff 
 averaging, say, ten per cent. For many of our exports were such as 
 foreigners could get only from us, at all events at a reasonable 
 price ; and our manufacturers wanted very few foreign products, 
 except crude material, on which a drawback could be granted if 
 it had been taxed on entry. In fact, there never has been, and 
 never can be again a monopoly of so great a share of the best 
 business in the world as we then had. Its origin lay partly in 
 character. The English had combined order with freedom, and 
 therefore had lived strenuous lives longer than any other nation, 
 unless it were the Dutch. That was one cause. The second was 
 that the Continent of Europe was at short intervals the field of 
 barbarous wars, which were almost as hostile to the growth of 
 capital and of highly organised industry as the present ravages in 
 Macedonia. Meanwhile England, blessed for two hundred years by 
 peace at home, developed a steady enterprise, and a faculty for 
 master inventions which have not deserted her now, though she is 
 distanced by her great colony in the United States in fertility of 
 minor advantages. She has turned to full account her natural 
 advantages in waterways, in coal, and in iron, and even sixty 
 years ago she had brought almost to their present perfection those 
 broad principles of massive mechanical production which have now 
 spread over the world." — Professor Marshall, Journal of the 
 Institute of Bankers, Feb., 1904, p. 94. 
 
XXVIII. THE WORKSHOP OF THE WORLD 267 
 
 of the limits of our powers than Mr. Whiteley's 
 words at Bradford, quoted by Mr. John Morley : 
 " If every man could buy an extra woollen vest 
 for himself; if every woman could buy an extra 
 blouse ; if every child could wear an extra pair of 
 stockings ; why, the demand from all these mil- 
 lions of population, male and female, would be 
 so enormous that the whole of your plant would 
 not be able to meet it." This should remind 
 us that a ver)- moderate return of good trade 
 would cause such a run on our capital and 
 labour that, as in the early nineties, we should 
 have more than enough to do at home, and should 
 have to do as we did then — refuse foreign orders. 
 
 The other is that, as other nations grow, the}' 
 naturally develop their own home trade as their 
 most immediate and their most profitable interest. 
 Under Free Trade they would have done exactly 
 the same. The fact is, that we are still supplying 
 many goods to other countries which they would 
 long ago have manufactured for themselves, if 
 they had not been intent on devoting so much 
 of their capital and labour to industries where 
 Protection gave them the hope of large profits 
 without the stress of competition. 
 
 Circumstances, then, having so greatly altered, 
 we might have expected that, when an oppor- 
 tunity was given, and a hope held out, ever)- 
 interest hurt or pressed by the change would 
 find voice. I grant, in the fullest waj-, that we 
 have to count the cost of Free Trade now 
 as we had not to do before. In 1846 the 
 cost was paid, for the most part, by the vested 
 
268 EVEN FOR INTERNAL FREE TRADE chap. 
 
 interests, particularly the agricultural ; and the 
 advantages gained were immediate and obvious. 
 It is not so now. As I said in the first chapter, 
 it was all very well so long as each country had 
 the natural Protection of distance, and exports 
 accordingly were products for which the export- 
 ing country had obvious natural advantages — in 
 days when France sent wines, and America maize, 
 and Norway timber. But now when America 
 sends wheat, and France woollens, and Norway 
 butter, we begin to feel the hard side of the inter- 
 national struggle to serve, and to question whether 
 the service is not outweighed by the hardships 
 of the struggle. 
 
 In internal trade, all nations have, practically, 
 agreed that, on the whole, the more liberty they 
 allow to every man to make and sell what and 
 where he thinks best for his own interests, the 
 better will be the results to the community. And 
 here they have counted the cost, and decided to 
 pay it. The path of progress within every 
 country is strewn with failures. Changes in 
 demand and changes in method of supply have 
 wiped out many once prosperous men and many 
 once prosperous industries ; have arrested the 
 growth of some places, and overcrowded others. 
 And the sad debris of change lies around us in 
 men and women who have not been able to 
 keep up with the course of modern industry — 
 worse, who have not been able, from pressure of 
 poverty, to bring up their children to take advan- 
 tage of the new conditions. I need only instance 
 one case : the women-workers in our large cities 
 
XXVIII. IVE PAY A PRICE 269 
 
 who used to get a living by their needle at home, 
 and who now find their occupation gone through 
 the growth — the beneficent growth — of the large 
 clothing factories. 
 
 But, heavy though the price is, no nation thinks 
 of going back to Protection within its national 
 boundaries. In this country, however, we have 
 extended our freedom to the international field. 
 However much we may concede to the circum- 
 stances, political and otherwise, of other countries, 
 we claim for our island that this Free Trade 
 allows us to make the most of our national 
 resources, and permits us to call in other countries 
 to make up what we lack. If it cannot giv^e our 
 workers brains, it at least sharpens the brains 
 they have, makes them resourceful, compels them 
 to adapt themselves to changes : putting them 
 in competition with the whole world, it makes 
 them able to compete with the whole world, 
 relying, not on weak props and crutches of 
 government, but on themselves. 
 
 In the professions, we have not the slightest 
 jealousy of foreign methods and discoveries ; we 
 count it treachery to ourselves and to our clients 
 if we do not adopt them and build on them. 
 So, in industry also, we copy the methods of 
 our rivals, although we, often enough, persist in 
 our old courses till some of our neutral markets 
 are captured and our own home market is 
 invaded. If we were late in recognising elec- 
 tricity as the light and force of the future, no 
 one can say that we are not making up for lost 
 time now. If we allowed France to get a con- 
 
270 THE FEW MUST SUFFER chap. 
 
 siderable start of us in the making of motor 
 cars, it is perhaps not altogether bad that we 
 start now from the level which she has attained, 
 and apply all our experience and advantages to 
 making British cars which shall have a field of 
 their own. If, in footwear, we endured the 
 agony of but few sizes and only one width 
 for many a year, the welcome we gave to the 
 American boot woke up our manufacturers, and 
 our adoption of American processes, methods, 
 and machinery, is easily stemming the tide of 
 the invasion and regaining the ground we had 
 lost in exports. And those who ride cycles must 
 be grateful that, some years ago, the American 
 wheel was seen in every shop, and drove our 
 makers to the methods which have ended in its 
 disappearance. 
 
 In all this, just as in internal trade, there 
 must be many who suffer. Some industries must 
 decline if they are industries for which other 
 countries are better fitted than our own, just as 
 power-loom weaving in Glasgow has gone down 
 before Lancashire competition ; and, the freer 
 trade we get with other countries, the more 
 quickly will this come about. 
 
 Even where industries are entirely suitable for 
 our country, our employers must recognise, more 
 seriously and conscientiously than they have done, 
 what their responsibility is. Their function in 
 the industrial organism is to organise the capital 
 and regiment the labour of the nation, and " bear 
 the brunt " of change ; their " profits " are the 
 payment for this work. It is indeed a very 
 
XXVIII. THE EMPLOYEK'S LESSON 271 
 
 honourable position to fill. In a Socialistic 
 State, it would be entrusted only to men pos- 
 sessing high qualifications, both natural and 
 acquired. It is a far finer thing to organise 
 a thousand workers to earn good wages than 
 to command a brigade. For its due perform- 
 ance it requires no less than professional zeal, 
 and sometimes employers must be content with 
 little else than the knowledge that they have 
 kept the labour world employed. There was 
 a time when every one who could scrape together 
 capital enough counted himself fit to take this 
 function on himself But, with the phenomenal 
 advance of science and its applications, the super- 
 annr.ation of fixed capital tends to be very rapid, 
 the necessity of quick and expensive adaptation 
 to new conditions and methods is more marked, 
 and the place of the employer becomes more and 
 more iifficult to fill. If, in these circumstances, 
 men still rashly assume the position, it cannot 
 be said that they are fit objects for compassion 
 if they fail ; certainly they have little claim on 
 state subsidy through a protective system. It is 
 to be feared that employers have not yet got it 
 burned into them that, if they cannot organise 
 the nation, they have no business to undertake 
 the work. They themselves cry loudly enough 
 against any Trade Union interference with their 
 liberty of paying off workers who are not worth 
 a wage ; they ought to realise that no wrong is 
 done them, if the competition of employer with 
 employer remorselessly eliminates those who are 
 not worth a profit. 
 
272 OUR FREE TRADE STRENGTH chap. 
 
 Happily, the industries which we may expect 
 to decline under international competition are 
 fewer than one would think. So long as we are 
 allowed to bring in food, materials, and machinery 
 free, we are in almost as good an economic 
 situation as any other country. It is not as if 
 we were an inland kingdom, and had to carry 
 our imports over hundreds of miles of railway. 
 All around us is the path of the deep waters — 
 the cheapest means of conveyance. Ours is a little 
 island, but its economic position is enormously 
 strong, so long as we retain the freedom of 
 drawing on all the world for everything we 
 require. But if one would see how a country, 
 more favoured by nature than ourselves in many, 
 perhaps in most, respects, can throw away her 
 chances by not preserving this freedom, it is 
 enough to look at shipping in America.^ 
 
 Finally, I would very earnestly ask my 
 countrymen to consider the political position 
 which Free Trade has given us, and us alone, 
 among nations. 
 
 ' In 1835 De Tocqueville said, in his Democracy in America : 
 " Ever since the Declaration of Independence the shipping of the 
 Union has increased almost as rapidly as the number of its in- 
 habitants. The Americans themselves now transport to their own 
 shores nine-tenths of the European produce which they consume. 
 And they also bring three-quarters of the exports of the New 
 World to the European consumer. The ships of the United 
 States fill the docks of Havre and of Liverpool, whilst the num- 
 ber of English and French vessels at New York is comparatively 
 small." The words may well give thought to an American when 
 he notices that the oversea tonnage of his country now is less 
 than it was in 1840, and is not a tenth part of ours. 
 
XXVIII. NATIONAL EXPANSION 273 
 
 France, Germany, ourselves, even of late the 
 United States, are accused of thrusting our civilisa- 
 tion on backward countries at the point of the 
 bayonet. It is not missionary zeal that makes 
 us take such interest in the welfare of our 
 fellow men. It may be mere ambition ; it may 
 be a deliberate policy of preparing an outlet for 
 growing population ; it may be the last resort of 
 governments whose peoples will adventure too 
 far and get into difficulties ; it may be for 
 recovery of debts ; it may be " for purposes of 
 trade." Anyhow none of the great nations has 
 many scruples about its own expansion. Opinions 
 will differ as to whether this is a good thing 
 or a bad. Personally, I do not count it a bad 
 thing for Egypt that the bondholders were 
 influential enough to rouse two great nations 
 to take over the administration : and I do 
 count it a bad thing that political jealousies 
 are as yet too strong to prevent France thrusting 
 her civilisation on Morocco. 
 
 But, whatever the motive and intention of 
 other countries may be, as regards ourselves it 
 is generally the commercial interest we have in 
 foreign markets that first makes us cognisant 
 of the universal interest in honest and settled 
 government. And here one thing is clear : that 
 the first thing we do, after running up the Union 
 Jack over a new corntry, is to throw its ports 
 open to every nation under heaven. We at 
 least do not count it a preserve to be shot over 
 only by the owner and his friends. 
 
 Were it not for this, the growth of our Empire 
 
 s 
 
274 NATIONAL EXPANSION CH. xxviii. 
 
 would 'i probably have been more vehemently 
 resented by other nations than it has been ; and, 
 under a protective system, its further expansion 
 would certainly not be considered, as it is now, 
 a commercial gain to the whole world. 
 
APPENDIX.^ 
 THE ABUSE OF SHIPPING STATISTICS. 
 
 Shipping is one of our greatest industries. Its services, 
 as " invisible exports," play a large part in explaining the 
 Balance of Trade. It is, moreover, an industry on which 
 much, politically, depends. It is of importance, then, to 
 ascertain how our shipping stands, and whether it is gain- 
 ing or losing in comparison with that of other nations. 
 But the comparison is so beset with technical and statistical 
 difficulties that it may be advisable to set forth these in 
 some detail. 
 
 As preliminary, it seems desirable to show, in untechnical 
 language, the difiference between gross and net tonnage, 
 and their relation to cargo-carrying capacity. 
 
 Lloyd's Register gives the gross tonnage, and, according 
 to it, the Merchant Navy of Great Britain appears as over 
 i»6,ooo,ooo tons, or about half the gross tonnage of the 
 world. Statistical statements, however {e.g. the Statistical 
 Abstract and the recent Board of Trade Memoranda), give 
 the net tonnage, and this appears as 10,000,000 tons. What 
 constitutes the difference between the two ? 
 
 When a vessel is put into the water, her weight is, of 
 course, the number of tons of water she displaces. As she 
 loads and sinks deeper, she displaces so many more tons, 
 
 'See above, p. 176. 
 
276 APPENDIX 
 
 and, if nothing but cargo were stowed within the shell, the 
 additional tons over her own weight would represent her 
 cargo-carrying capacity. The tons of water displaced out- 
 side would correspond with the tons of cargo she could hold 
 inside. (It must be noted, however, that the correspondence 
 is only approximate. The vessel's internal capacity is calcu- 
 lated into weight at the ratio of 40 cubic feet of average 
 cargo to the ton, while 40 cubic feet of water weighs 
 something like one and a tenth tons.) But there is a good 
 deal of space which cannot carry cargo. In all ships there 
 is the space under the floor of the hold, the bulkheads, etc. 
 Other spaces, again, are required for the navigation of the 
 vessel — seamen's quarters, chart-rooms, stores, etc. ; and, 
 in the case of a steamer, there is also the space occupied 
 by the propelling power. When these are calculated into 
 tons and deducted, we get the " net tonnage," and it is on 
 this net tonnage as, presumably, representing the productive 
 capacity, that harbour and other dues are paid. The gross 
 tonnage, of course, is the net, plus the deductions just 
 mentioned. 
 
 But, on looking into the actual carrying capacity, as 
 shown by facts, we find that, far from being represented by 
 the registered net tonnage, it is usually, in modern ships, 
 something like one and a half times the gross tonnage. 
 Taking a steamer whose gross registered tonnage at Lloyd's 
 is 4926 tons, and her net 3147, I find that her "deadweight" 
 (or actual lifting) capacity is 7580 tons. 
 
 The explanation is that statutory allowances are made 
 for propelling space, for certain closed-in spaces, for sea- 
 men's quarters, etc., and that the ingenuity of shipowners 
 and shipbuilders is taxed to get as much as possible counted 
 in for deduction. Engines and boilers, too, are packed as 
 closely as practicable, and are steadily being made more 
 powerful for the space they occupy. And I am told that 
 it is not an uncommon practice for open spaces on steamers 
 in certain trades to be temporarily boarded up for the 
 reception of cargo or as bunkers. 
 
 The foregoing brings out the first difficulty in making 
 
APPENDIX 277 
 
 accurate comparisons between dififerent merchant navies. 
 The true test is one that compares actual carrying capacity. 
 But if ships are simply compared either by their gross or 
 net tonnage, the more modern fleet will, ton for ton, have 
 a greater actual carrying capacity than an older fleet. Now, 
 it is well known that we are constantly selling our old ships, 
 and replacing them with new, thus getting greater carrying 
 capacity relative to the net tonnage, and paying lighter 
 dues. In fact, our fleet has been to a large extent rebuilt 
 within the last 20 years, while foreign fleets embrace old 
 and less productive vessels bought from us. To compare 
 British tonnage e.g. with Norwegian, is obviously mis- 
 leading. 
 
 A second difficulty is that, in comparing rival fleets 
 simply by tonnage, sailing vessels rank equally with 
 steamers. But, according to the usual calculation, steamers 
 — presumably as doing the same work in a third of the 
 time — are three times more effective in carrying power 
 than sailers. 
 
 While, then. Great Britain owns only half the tonnage 
 of the world, she owns far more than half the carrying 
 capacity. Not only do sailers form an insignificant portion 
 of our total fleet, but we have for years been "going out 
 of s".ilers," while foreign fleets — particularly the French — 
 are largely composed of them. And, again, foreign fleets 
 consist, to a considerable extent, of wooden and composite 
 vessels, of which we have comparatively few. 
 
 Taking these two difficulties together, it seems obvious 
 that, to compare the British fleet with foreign fleets simply 
 by tonnage, is to put efficients and non-efficients as equal 
 weights in the balance. It is like lumping skilled and 
 unskilled workers together per man as "labour," the true 
 comparison being labour power. 
 
 A third difficulty is that Lloyd's Register takes account 
 only of steamers over 100 tons gross, and of sailers over 
 50 tons net. But Russia registers anything over 25 tons 
 net; Germany, \-]\ tons; Norway and Denmark, 4 tons; 
 France and Italy, 2 tons. Again, therefore, on an equal 
 
278 APPENDIX 
 
 comparison the British fleet would be much larger than 
 it appears to be. 
 
 A fourth difficulty is that, in the case of passenger liners, 
 tonnage is no indication of cargo-carrying capacity. That 
 Germany has some 20 "leviathans" of over 10,000 tons, 
 as against our 40 or 50 — a much smaller proportion of our 
 total — tells pro ianto against Germany. 
 
 A fifth difficulty is that, while the true international com- 
 parison should relate solely to ocean-going vessels, other 
 registers than Lloyd's, as we have seen, count in quite 
 small vessels whose influence on the ocean carrying trade 
 is negligible. And the American register includes the large 
 but purely local traffic of ships plying on the great lakes. 
 
 These difficulties are enough to show how carefully 
 shipping statistics must be handled, and enable us to 
 estimate the accuracy of Mr. Chamberlain's Liverpool 
 speech. In it he made much of the fact that British 
 shipping between 1890 and 1901 increased only by 1,400,000 
 tons, while foreign tonnage had increased by 2,200,000. 
 Now, this is simply a comparison by tonnage, and, if 
 there is any truth in what has been said, it raises all 
 the questions just suggested. 
 
 Independently of this, surely the only thing that con- 
 cerns us in such comparisons is the increase in shipping 
 that does or may compete with us. Now, as a fact, 
 over 1,500,000 tons out of the 2,200,000 are accounted 
 for by American " enrolled and licensed," including lake 
 and river steamers, coasting vessels (whose trade is 
 reserved for American owners), and cod and mackerel 
 fishing boats. The absurdity of such a comparison 
 requires no comment. Again, when we examine the 
 individual increases and decreases, what strikes one at 
 once is that, while most fleets show an increase, Norway 
 shows a decline from 1,705,699 tons to 1,467,089, and 
 American over-sea tonnage a decline from 946,695 to 
 889,129 tons. The only figures which may give us pause 
 is the German increase from 1,433,413 tons to 2,093,033. 
 As to this, we should require to know what kind of tons 
 
APPENDIX 279 
 
 these are ; but, even if they represent equal efficiency 
 with our tons, a percentage comparison between a fleet 
 of 10,000,000 tons and one of 2,000,000 tons is quite 
 fallacious. We, for instance, could not double our tonnage 
 without driving every other feet from the sea. France 
 could double hers without becoming an appreciably 
 stronger competitor. 
 
 Further, the comparison is very much invalidated by 
 the imperfection of the statistical returns referred to. 
 Japan, e.g. in the Board of Trade Memoranda, shows no 
 return for 1890, and the 917,879 tons of 1901 are conse- 
 quently counted as all increase, while other nations give 
 no returns for 1901. 
 
 But, if I am not mistaken, there is another fallacy still 
 in the comparison. Mr. Chamberlain is suggesting a 
 decline in British shipping, and he proves it by showing 
 that the tonnage of the "whole British Empire" has 
 increased only by 1,400,000 tons, as compared with a 
 total increase in foreign tonnage of 2,200,000. But what 
 we find from the returns is that British tonnage has 
 increased by 1,629,882, and that it is a decline of 197,582 
 tons in the shipping of the Colonies and British possessions 
 that brings the increase down to the lower figure. It 
 need scarcely be said that the only question at issue is 
 the shipping of Great Britain. 
 
 As to evidence given by statistics of clearances and of 
 building of ships abroad, only a word need be said here. 
 The difficulty of any comparison by clearances may be 
 suggested by the fact that liners which cross the Atlantic 
 or Pacific will enter and clear once only in one to four 
 weeks, while vessels trading in and with the Baltic may 
 enter and clear every few days. And, when we are told 
 that more "tonnage" is being built abroad than is being 
 built here, all the difficulties of comparison dealt with above 
 are again suggested. So long as we can build cargo 
 ships at about ^5 10s. per ton, it does not seem probable 
 that the competition is very serious, from the shipbuilder's 
 point of view at least. 
 
28o APPENDIX 
 
 Looking at the number of neglected elements which are 
 concealed in Mr. Chamberlain's apparently simple compari- 
 son by tonnage, I think one may use his own words, with 
 another reference : " Serious people ought to give serious 
 consideration to what at anyrate are signs " — of the abuse 
 of statistics. 
 
 S 5 i^7 
 
INDEX. 
 
 Africa, South, 59, 229, 236. 
 
 Agriculture, 62-63, 77-78, 144, 
 171,243,261-262. See Prefer- 
 ential Tariffs. 
 
 America, 5, 7, 23, 24, 157, 164, 
 180, 195, 19S ; Exports of, 
 16, 41, 139, 205; and Pro- 
 tection, 50, 54, 59, 60, 63-66, 
 116-117, 152, 217, 272. 
 
 Argentina, 16, 251. 
 
 Asquith, H. H., 195. 
 
 Australia, 29, 229, 232, 235,256. 
 See Preferential Tariffs. 
 
 Austro- Hungary, 16. 
 
 Balance of Trade, 15-27, 40-42, 
 
 275. 
 Balfour, A. J., 85, 121, 123, 163, 
 
 188. 
 Banking, 11, 12-13, 21-22, 175- 
 
 176. 
 Barrow-in-Furness, 59. 
 Bateman, Sir A. E., 197. 
 Belgium, 15, 165, 205, 220. 
 Bell, Hugh, 155, 1 58. 
 Bills of Exchange, li, 13, 25, 
 
 33. 42. 
 Bills of Lading, 11. 
 Board of Trade, 20, 23, 42, 124, 
 
 146, 150, 152, 153, 154, 166, 
 
 171, 172, 182, 196, 204, 205, 
 
 208, 227, 275. 
 'Boarding Expenses,' 24-25. 
 Bowley, A. L., 182, 201, 208. 
 
 Brabrook, E. W., 174, 175. 
 
 Brailsford, J., 156. 
 
 Bullion, Imports of, 9. See 
 
 Gold. 
 Business Methods, 263. 
 
 Cairnes, J. E., 70. 
 Canada, 31, 32, 60, 77, 168, 
 169, 232, 23s, 252-254. See 
 Preferential Tarifis. 
 
 Capital. See Investments. 
 
 Carnegie, Andrew, 97, 164. 
 
 Chamberlain, J., 121, 151, 156, 
 166, 167, 181, 188, 195, 196, 
 209, 211, 221, 225, 232. 236, 
 237, 244, 257, 265, 278-280. 
 
 Cheapness, 4, 51, 122, 144-145. 
 
 Chili, 16. 
 
 Clare, George, 35. 
 
 Clark, J. B., 71-72. 
 
 Coal, Export of, 5, 8, 202-205. 
 
 Cobden, Richard, 161, 265. 
 
 Colbert, 61, 86, 124, 184. 
 
 Colza, 88. 
 
 Competition, 2-6, 263, 271; 
 'Unfair,' 148, 150, 167. 
 
 Co-operative Societies, 175. 
 
 Corn Laws, 61, 65, 115. 
 
 Cotton, 3, 8, 32, 177, 214. 
 
 Demand, Elasticity of, 158-159. 
 Denmark, 15, 194, 262. 
 Depression of Trade, 186-188. 
 De Tocqueville, A., 272. 
 
282 
 
 INDEX 
 
 Diamonds, Import of, 9. 
 
 Distance, a natural protection, 5. 
 
 Drawbacks, 92, 138. 
 
 Dumping, 119, 144-159; Re- 
 taliation on, 160-169. 
 
 Duties. See Imports and Ex- 
 ports. 
 
 Edgeworth, F. Y. , 191. 
 
 Education, 261. 
 
 Egypt, 16, 218. 
 
 Employment, 51-52, 200-215. 
 
 Equation of Indebtedness, 30. 
 
 Equivalence of Imports and Ex- 
 ports, 28-35, 42-44- 
 
 Excise, 46, 100- loi. 
 
 Exports, of United Kingdom, 
 8-9 ; Excess of, 16 ; Invisible, 
 19-22 ; affected by Loans, 22- 
 24, 29 ; as test of Prosperity, 
 179-185; Stagnation of, 1S6- 
 199 ; and Employment. See 
 Employment. 
 
 Farrer, Lord, 81. 
 
 Fawcett, H., 68, no, 146. 
 
 Flux, A. W., 220. 
 
 Food, Taxation of, 77-78, 85, 
 
 117, 137, 237-244. 
 Foreign Exchanges. See Bills. 
 Foreign Trade, 5, 7, 9-14, 31- 
 
 35- 
 France, 5, 15, 27, 61, 62-63, 74, 
 
 80, 124, 126, 174, 184, 205, 
 
 223, 7.ii\. 
 Free Trade, Universal, 6, 47- 
 
 48; Meaning of, 45-46, 261 ; 
 
 Britain's Policy, 49, 120- 121, 
 
 269 ; the end of Retaliation, 
 
 123. 
 Freight. See Shipping. 
 Friendly Societies, 175. 
 
 Germany, 5, 6, 15, 124, 125, 
 131, 139, 141, 152-153, 158, 
 166, 172, 182, 195, 196, 198, 
 205, 220, 223, 261. 
 
 Gide, Charles, 27, 43, 183. 
 
 Giffen, Sir Robert, 19, 20, 23, 
 
 27, 36-37> 170, 173, 181. 190, 
 206. 
 
 Gifts, as Imports, 26. 
 Gladstone, W. E., 217. 
 Glasgow, 102. 
 Gold, in payments, 11-12, 14, 
 
 16, 42, 192-193- 
 Grey, Earl, 250. 
 Grey, Sir Edward, 211. 
 Guyot, Yves, 74. 
 
 Hamilton, Alexander, 56. 
 Holland, 15, 124, 153, 205. 
 Hours of Labour, 177, 201-202, 
 264. 
 
 Immorality, Political, 90-91 ; 
 Commercial, 91-92. 
 
 Imports, of United Kingdom, 8 ; 
 Excess of, 15, 17-27, 41; 
 Equivalence of Exports and, 
 28-35, 42-44 ; Duties on, 16, 
 46-47, 98. 
 
 Income Tax, 39, 40, 98, 108, 
 113, 132, 156, 172-173- 
 
 Income, National, 213. 
 
 Index Numbers, 191. 
 
 India, 23, 145, 218. 
 
 Infant Industry Argument, 56- 
 60, 65, loi, 112. 
 
 Insurance, 18, 21. 
 
 Investments, Foreign and Colo- 
 nial, 22, 27, 29, 37-39, 251 ; 
 Municipal, 102, 180-181. 
 
 Iron. See Steel. 
 
 Italy, 15, 24, 25, 126, 194, 205. 
 
 Japan, 15, 62, 194, 195, 279. 
 Jevons, W. S., 187, 191. 
 
 Kartell. See Trusts. 
 
 Laurier, Sir Wilfred, 220, 221, 
 
 250. 
 Lawson, 7. 
 
 Life, the end of Production, 2-5. 
 Linen, 8. 
 
 List, Friedrich, 56. 
 Loans. See Investments. 
 
 Machinery, Exports of, 8. 
 Manufactures, Taxation of, 86-88, 
 
 137-138. 
 
INDEX 
 
 283 
 
 Marshall, Alfred, 212, 265-266. 
 
 Matheson, Ewing, 35. 
 
 Mill, J. S., 58,209. 
 
 M'Kinley, President, 69. 
 
 M 'Master, Professor, 64. 
 
 Morley, John, 267. 
 
 Most Favoured Nation Clause, 
 
 127-128, I34-I5S- 
 Municipal Enterprise, 41. 
 
 Napoleon, 49, 61, 64, 190. 
 
 Navigation Act, 216. 
 
 New Zealand, 217, 229, 236, 
 
 256. 
 Norway, 5, 15, 194. 
 
 Oldham, C. H., 159. 
 
 Parker, Sir Gilbert, 246. 
 Pauperism, 170- 171. 
 Pauper Labour Argument, 70. 
 Payment in Trade, 11-14. 
 Peel, Sir Robert, 120, 125, 216, 
 
 243- 
 Percentages, Fallacy of, 194-195. 
 
 Political Influence, 73,74, 90-91. 
 
 Portugal, 15, 194. 
 
 Preferential Tariffs, 216-2 18, 227- 
 
 244; Canadian, 219-226; and 
 
 Agriculture, 245-248 ; and 
 
 Empire, 249-259. 
 Prices, Changes of, 171- 172, 
 
 191-194. 
 Profit, the motive of Trade, 10, 
 
 33- 
 
 Prosperity, Tests of, 170-178; 
 and Exports, 179-185. 
 
 Protection, Meaning of, 47 ; as 
 Prohibition, 69 ; as National 
 Policy, 50-51, 219; against 
 Cheapness, 53-55, 92 ; as Ap- 
 prenticeship, 57 ; Historical, 
 60-66, 67-68. 
 
 Rabbeno, U., 66. 
 
 Raw Materials, 78-85, 137, 
 177-201, 236. 
 
 Reciprocity, 120. See Preferen- 
 tial Tariffs. 
 
 Retaliation, 1 18-143; on Dump- 
 ing, 160-169. 
 
 Revenge, 11 8- 1 19. 
 Ricardo, J. L. , 124. 
 Roosevelt, President, 69. 
 Ruskin, John, 119. 
 Russia, 16, 125, 139, 205. 
 
 Sauerbeck's Index Number, 191. 
 Savings, National, 36, 173-175. 
 Services, 1-4, 17-27. 
 Shakespeare, W., 48. 
 Shearman, T. G., 106. 
 Shipping, 8, 9, 17-20, 28, 33, 
 
 40, 63, 176, 272, 275-280. 
 Ships, 5, 8, 26, 152-153- 
 Sidgwick, H., 58. 
 Smith, Adam, 16, 61, 84, 118, 
 
 124. 
 Spain, 5, 15, 16. 
 Steel, 5, 8, 116, 144, 149, 152- 
 
 158, 163, 180. 
 Steel Trust, 60, 150, 158-159, 
 
 166, 183. 
 Sugar Convention, 131, I45j_i5i.. 
 Sumner, W. G., 69, 88, 114. 
 Sweden, 15. 
 Switzerland, 24, 81, 126. 
 
 Tariff, shuts in home goods, 
 42-43 ; Complex, 68, 89 ; 
 Principle of, 69-75 '■> Scien- 
 tific, 76-88; Injury of, II9- 
 121, 133, 142. See Preferential 
 Tariffs, Retaliation. 
 
 Taussig, F. W., 66. 
 
 Taxation, a Price, 93, 97, 99 ; 
 for Revenue, 46-47, 77 ; for 
 Protection, 47,69,75-93-117, 
 132, 237-244; Indirect, 98, 
 109, 113. See Income Tax. 
 
 Thomas, D. A., 203. 
 
 Tools, 86-S7. 
 
 Trade, Nature of, 1-6. 
 
 Trade Current, 28. 
 
 Trade, Foreign. See Foreign 
 Trade. 
 
 Trade Unions, 4, 70, 175, 271. 
 
 'Triangular Exchange,' 35. 
 
 Trusts, loi, 146-149, 158-159, 
 161, 166, 182, 263. See Steel 
 Trust. 
 
 Tupper, Sir Charles, 60, 221. 
 
284 
 
 INDEX 
 
 United States. See America. 
 Uruguay, i6. 
 
 Venice, 19. 
 
 Vested Interests, 60, 62-66, 88, 
 140-142. 
 
 Wages, 171, 204, 264 ; in 
 America, 69-70 ; in Germany, 
 172. 
 
 Walsh, C. M., 191. 
 
 Wheat, 8, 32, 34, 144, 237-244. 
 
 Wool, Imports of, 8, 79, 82, 255. 
 
 Woollens, Exports of, 8, 168. 
 
 _^;rr;>-)0TrTP^,^^ 
 
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