^'Ti- OF :_^ H'l'ilMf,'i'r,',T,T„9.';,9'^'-IFORNIA, SAN DIEGO 3 1822 01943 8449 HF ^9 - Central University Library University of California, San Diego Please Note: This item is subject to recall. ' Date Due DEC 2 W\ A^. '^ y '^ « THE EISE AND DECLINE OF THE FEEE TRADE MOVEMENT. BY THE SAME AUTHOR. The Growth of English Industry and Com- merce. I. Early and Middle Ages {4ith Edition). II. Modern Times {3rd Edition). i. The Mercantile System, ii. Laissez Faire. An Essay on Western Civilisation in its Economic Aspects. I. Ancient Times {2nd Edition). II. Mediaeval and Modern Times {2nd Edition). The Gospel of Work; Four Lectures delivered at the Cambridge Summer Meeting 1902. AT THE UNIVERSITY PRESS. Richard Cobden and Adam Smith. THE TARIFF REFORM LEAGUE. THE RISE AND DECLINE OF THE FREE TRADE MOVEMENT. BY W. CUNNINGHAM, D.D., F.B.A. HON. FELLOW OF GONVILLE AND CAIUS COLLEGE, FELLOW AND LECTURER OF TRINITY COLLEGE AND VIC.Ui OF GREAT S. MABY's, CAMBRIDGE ; FORMERLY LECTURER ON ECONOMIC HISTORY IN HARVARD UNIVERSITY. LONDON : C. J. CLAY & SONS, CAMBRIDGE UNIVERSITY PRESS WAREHOUSE, AVE MARIA LANE. 1904 Hontion: 0. J. CLAY and SONS. CAMBEIDGE UNIVERSITY PEESS WAEEHOUSE, AVE MAEIA LANE. Claacoin: 50, WELLINGTON STREET. ILfipjig: F. A. BROCKHAUS. fifca gorh: THE MACMILLAN COMPANY. 13ombas ant) Calcutta: MACMILLAN AND CO., Ltd. [All Bights reserced.] TO THE MEMBERS OF THE COMPATRIOTS CLUB. The same inventiotis which make vast political tmions possible, tend to make states which are on the old scale of magnitude, unsafe, insignificant, second rate. Seelet, Expansion of England, 88. PREFACE. THIS volume consists of the substance of a course which I gave last Miehaebnas Term ; it was planned with the view of presenting to members of the University a dispassionate survey of the main issues involved in the present fiscal controversy. The lectures have been written out from notes which were taken at the time by my daughter, who has also helped me in supplying additional illustrations. Complaint was made by some of my audience that they could not tell which side I took. I fear I do not know for certain what my views might have been in 1783, or lj<23 or 1846 ; I have never specu- lated about pre-natal political affinities. As to the impending issue, the case is difi'erent. It hardly seems possible that any one, who has been influenced by the political ideas of Sir John Seeley and is true to the economic teaching of Adam Smith, should hesitate. I hope to march with the men who have wisdom to reconsider a decision, honesty to acknow- ledge a blunder, and courage to try to retrieve it. W. C. Tbdott Collegk, Cambridge. 1-1 September, 1904. CONTENTS. CHAP. PAGE 1 Introduction I. Pitt and the Revolted Colonies II. HUSKISSON AND TARIFF REFORM i. Thorough-going Protection ii. The necessity of a change iii. The adaptation of the revenue system to modern commercial conditions III. Peel and Restrictive Regulations . i. The Corn Laws in the Eighteenth Century ..... ii. The failure of the Corn Law of 1815 57 iii. The occasion of the repeal iv. The results of the repeal . IV. Cobden and Commercial Treaties . i. The culminating point of progress ii. The Great Divide iii. The restatement of the question 12 27 27 34 38 51 52 62 67 75 75 85 92 X CONTENTS CHAP. PAGE V. Is ONE-SIDED Free Trade expedient for England 1 100 i. The extension of trade and industry 102 ii. Is this development wholesome ? . 104 iii. The probable effects on national re sources, (a) personal and (b) physical 110 iv. The balance of loss and gain . .118 VI. Expert Opinion .... i. Economic Science as a master ii. Economic Science as a servant who provides (a) criticism, (6) advice iii. State regulation . VII. An Imperial System . i. Looking backward ii. Cosmopolitan competition . iii. The result of the survey . 124 126 133 147 151 151 158 164 INTEODUCTION. The story of the rise and decline of the Free Trade movement has a practical bearing which renders it a matter of general interest at the present time ; but it has also a special attraction for students of political phenomena. The agitation may be said to have been unique, for it had its basis in a scientific doctrine. The history of all ages of the world has shewn the play of human aspirations and passions, of racial an- tipathies and moral ideals ; but it was left for the eighteenth century to make a great advance in formu- lating the knowledge of human society and of the conditions of its prosperity. The Free Trade move- ment as a political force owed its strength to the fact that it had a scientific character : this seems also to account for its limitations and defects. The distinctive features may be rendered more clear if we contrast this new type of political force with another element which has at all times played a large part in the history of the world. Religious ideals and aspirations have frequently served to inspire political movements and military conquests. Religious feeling c. 1 2 FREE TRADE entered deeply into all the conflicts of the pagan world; the advance of Islam, and the efforts of the Crusaders to repel it, were alike affected by religious sentiment. The same sort of feeling was an impor- tant factor in the struggles which arose in the eighteenth century about the possession of the East, and the colonisation of the New World. Religion, which is concerned with man's relation to God, has in all ages made itself felt in politics, since it claims to tell men what they ought to do, absolutely. But Science makes no such pretension ; she is concerned with man's relation to external things. In the eighteenth century Economic Science had at last advanced so far that it was possible for such men as Turgot and Adam Smith to lay down a reasoned statement of the conduct that is expedient, with reference to the material prosperity of human beings. Since their claims are so different, the response which is made to a political appeal will be very different according as it is made in the name of Religion, or on Scientific grounds. When a prophet appears, preaching some action as a duty divinely commanded to be done at all hazards, he works upon the emotions; and his doctrine seems infectious. If once it establishes a hold it may spread with extraordinary rapidity, as the crusading enthusiasm was caught up in so many parts of Christendom. The progress of a scientific principle might be expected to be much more tardy; time is required for the intelligence to be convinced as to the ex- pediency of a new departure. There certainly was INTRODUCTION 3 no sudden success in the diffusion of Free Trade principles. Pitt, who was entirely convinced of the wisdom of the new economic views, could not carry either the House of Commons or the public with him; but the opinions of Adam Smith gradually obtained a greater hold on the minds of men of education, so that about a quarter of a century after his death they had obtained very general acceptance in the Councils of the Realm. It might be thought that, just because the scientific principles were built up slowly and accepted with hesitancy, they would hold their own more successfully within their limited sphere. This certainly was the feeling of many economists and publicists at the close of last century. The claim of Religion to give absolute guidance in politi- cal life appeared to have been hopelessly discredited by the disruption of Christendom, and such struggles as the Wars of the League in France and the Thirty Years' War in Germany, where both sides appealed to the will of the same God. But the reasoned treatment of what was expedient for the material prosperity of the country seemed to leave no room for such uncertainty. Their advocates thought that the new principles rested on a solid basis which could not be shaken. There was more than a trace of superciliousness in the way in which they spoke of less enlightened times. " The reign of Elizabeth though glorious was not one in which sound princi- ples of commerce were known'." Elizabethan 1 Pad. Hist. XXVII. 564. 1—2 4 FREE TRADE practice in restoring the currency, and laying the foundations of English industrial greatness, might perhaps have been studied with advantage at a time when cash payments were suspended, and all attention to technical training was discarded. But these men had no suspicion that the superior wisdom of which they were conscious would ever be called in question. They had no doubt that their principles must ob- tain increasing acceptance as education spread, and experience gave fresh confirmation. We see that the unexpected has happened ; public confidence had been shaken, and it suffered a very serious blow when Gladstone insisted that economic principles were not applicable to the practical problems of Irish life, and might be fitly relegated to Saturn. Nothing has been more curious in the fiscal controversy than the difference of opinion as to the weight which should be attached to the opinion of scientific men dealing with their own subjects\ Are we forced either to follow economic authorities blindly, or to repudiate them altogether ? Is there no mean between the exaggerated deference which was shewn to the maxims of Political Econoni}^ in the middle of last century, and the undue disparagement to which it is exposed in the present day ? We must face this question at once, for our whole attitude towards the Free Trade movement must greatly depend on our view as to the reliability of Economic Science as a practical guide in political life. 1 Compare the excellent article by Prof. J. S. Nicholson, The Use and Ahuae of Autl/orifi/ in Economics in Economic Journal, xui. 554 ; also p. 125 below. INTRODUCTION 5 The solution of the difficulty is to be found by- keeping clearly in mind the necessary limitations of Economic Science: exaggerated expectations on the part of the public have given rise to natural dis- appointment. Human society is very complex and may be viewed in many aspects for purposes of in- vestigation; Political Economy looks upon it as a mechanism, and considers the play of different factors. It assumes that all persons are actuated by a simple motive — the desire of wealth — and that their actions are in accordance with this dominant force. If we wish to investigate the material con- dition of society at a particular time, this is the point of view which it is best worth our while to take, so that we may obtain a clear analysis. It is not only convenient but it is sound. A great deal of social action does go on like a mechanism, under the operation of a well-known force, since every man is on the whole struggling for his own interest. But after all, this is not the whole truth; society is a mechanism, but it is not a mere mechanism. If we want either to diagnose the mischiefs from wliich a community suffers at any time or to suggest remedies, we must not be satisfied to analyse the mechanism of society, but we must study it as an organism with powers of self-adaptation to its environment. It is easy to find other illustrations of the same sort of inadequacy, and of discussion that is sound so far as it goes, but still very incomplete. For many purposes we can regard the human body as a mecha- nism; an eight-oared boat is an ingenious and b FREE TRADE carefully adjusted piece of mechanism. In rowing a race each individual must swing and strike the water with precision ; style in rowing is not a mere fashion, but is closely connected with the application of mechanical principles as to the manner in which muscular force can be best applied. But neither a crew, nor any one of the individuals of which it is composed, is a mere machine. The coach has not merely to consider the principles of mechanics, but to be careful that the men are in the best condition ; training is an element he must not neglect. When we pass from regarding a crew as a machine to recognise that it consists of several living beings, we enter on an entirely different order of ideas. It would be easy to shew that not only questions of hygiene but of morality may be involved in the composition of an eight; in rowing a severe race there may be risks involved which a man ought not to run, or time he ought not to spare. If we look at the crew as a mechanism we get information that is sound so far as it goes, but is neither final nor complete. Economics treats society as a mechanism, and it gives us most valuable truth, so far as it goes ; but it is never the whole truth. The analysis may be perfectly accurate, but it cannot, from the nature of the case and the point of view adopted, include all the elements that must be taken into account. So far as practical guidance is concerned, we must always bear in mind that the maxims put forward by economists rest on a foundation which is not perfectly INTRODUCTION 7 secure, but that needs to be tested over and over again. For our own immediate purpose of mere inquiry and description, this point must also be borne in mind : the varying fortunes of the Free Trade move- ment have been a most important element in English life for the last century and more. If we are to follow it intelligently in its growth and decline, we must not be content to concentrate our attention on economic phenomena, but we must take account of many affairs which are indirectly and remotely but none the less really coimected with the story. It is only in a dead subject that we can sever the nervous from the alimentary system ; in the living body they are constantly reacting on one another. Quotations of prices and rates of wages for the last century are dreary reading, if we are content to regard them as illustrations of the operation of supply and demand, and to insist that in each bargain each individual was pursuing his own interest as he conceived it. To understand the changes of social condition and physical opportunity, which made it possible for the man to take from time to time a different view of his interest, is essential to a real grasp of the actual course of affairs: but this must lead us away from the strictly economic aspect to political and social history. We cannot be satisfied with mechanical analogies. We must look at English society as an organism, living and expanding and adapting itself to new conditions all the time, not as a machine, performing the same motions regularly in the same way, though 8 FREE TRADE with occasional differences in the speed. It may be necessary and useful, for certain purposes, to regard the economic system of the country at any given time as a machine ; but we must take another stand- point if we are to understand the continual adaptation which is going on over long periods in progressive countries. In particular we shaU have to notice that sometimes the political affairs of a country — its constitutional and colonial system — are read- justed to meet economic needs, and that at other times the economic system has been adapted to the political environment. These two sides must certainly be borne in mind if we hope to have any comprehension of the course which has been run by the Free Trade movement. Political views delayed the adoption of a large measure of Free Trade by this country for more than sixty years; economic conditions forced it on and contributed to its success, while political aspira- tions in other lands have brought about a reaction, and rendered the reconsideration of our attitude inevitable. The point of view of economic science is one it is essential to adopt for the detailed examination of particular episodes, but it is wholly inadequate when we come to survey the course of the movement as a whole. Economic doctrine is perfectly sound, and very valuable, but it has its limitations. It does not like a religious prophet proclaim an absolute duty ; it does not lay down any principle which holds good universally throughout the physical order. It puts INTRODUCTION 9 forward the means which may be expected under ordinary circumstances to conduce to certain ends, which are very generally desired. The principle of Free Trade declares it is expedient that there should be no restriction on the exchange of goods and services, either between communities or individuals, in order to secure (a) the greatest possible mass of goods in the world as a whole, and (h) the greatest possibility of immediate comfort for each consumer. That statement appears to me perfectly true, and I do not think it worth while to reiterate the arguments that have been brought forward from the time of Adam Smith and Turgot in order to establish it. We may accept it readily, as a doctrine which no person of intelligence can fail to find convincing; and yet we need not suppose that those who demur to it are necessarily either fools or knaves. Personally I sympathise entirely and heartily with the objects which the Free Trade advocate assumes : but I can imagine that if I spoke to the first American citizen I might meet on lauding in New York, and explained to him that the protective system of the United States was mistaken, because it was inconsistent with the greatest possible produc- tion in the world as a whole, he might say that he did not much care about the world as a whole, but that what he wanted was the greatest possible amount of wealth on the spot, in New York. Nor perhaps would he be very much concerned about the comfort of the consumer. The mere consumer appears to be an idle person battening on the labour of other people ; 10 FREE TRADE there is much to be said for those who insist that if there is to be any preference the producers should be considered primarily. A man may accept the Free Trade reasoning as perfectly true, but yet feel that it is entirely unconvincing, because he is not parti- cularly interested in the objects which Free Trade doctrine takes for granted as lying near the heart of every right-minded person. To produce the greatest amount of goods in the world, and to secure for every consumer the most in the present are objects which do not appeal to all my friends as much as they appeal to me. The aim of American protection has been to build up an independent political community on the other side of the world; the citizens have been willing to attempt this at a considerable cost. To my mind the Free Trade doctrine is economically sound ; it gives us a basis for examining and esti- mating the expense at which the protective system has been carried out ; but it is quite possible for an American to hold that his game has been worth the candle. The doctrine that protection is costly to the consumer may be perfectly sound, and yet it is rightly disregarded by men who are not content to live cheaply and comfortably themselves, but are willing to make some sacrifice in order to attain their political ideal. The incompatibility between Free Trade doctrine and political ambition is inherent in the principles themselves ; it does not merely arise in connection with their application to America. As set forward by Tiirgot and Adam Smith the doctrine tended to INTRODUCTION 11 distract attention from the nation as a political unit, it laid no stress on the well-being of any one country as a centre to which patriotism clings. This tendency to disregard the idea of a nation was probably uncon- scious, Turgot was inclined to be a theorist, who in the spirit of his age accentuated what was natural, and held good all the world over, as compared with the conventions established in different political communities. Though Adam Smith entitled his book The Wealth of Nations, he is chiefly concerned in discussing the wealth of the separate citizens — the conveniences and comforts of the individuals who compose the nations at a given time. The thought of the nation as a unit, and of the gradual develop- ment of its resources, is left somewhat in the back- ground. As time went on this tendency became more explicit : in Cobden's eyes one of the advantages of Free Trade was that it made for cosmopolitan influence, and might be expected to weaken the connection between England and her colonies'. The question as to the economic prosperity of England under Free Trade is very important, but it is only one side of the matter. We must try to take account of its political conditions and the political influences it has exercised if we are to gauge the character of the movement aright. 1 Morley, Life of Cohden, i. 2.30. CHAPTER I. PITT AND THE REVOLTED COLONIES. If we attempted to trace the origin of the Free Trade movement we should have to go back a long way in English history. Perhaps we might find the most convenient starting point in a detailed examination of the Restoration period, when so much attention was given to the systematic development of English industry and commerce. Certainly at that era the principles of Free Trade were very effectively set forth by Nortli, Barbon, Davenant, and a group of Tory pamphleteers' who urged that, since the main benefit of commerce to the country consisted in the goods that were brought to us for consumption, intercourse with such a country as France was a boon. The Whig policy of excluding French goods, with the view of encouraging the producer and mani- pulating commercial regulations so that trade might react favouraljly on industry, carried the day at the Revolution, and dominated our English life during 1 Asliley, Tory Oiigin of Free Trade, in Snrvei/s, 268. CHAP, l] REVOLTED COLONIES 13 the long period when the Whigs controlled the affairs of State ^ The seventeenth century pam- phleteers had anticipated much of the teaching of Adam Smith, but they had no real opportunity of carrying it into effect. The publication of TJie Wealth of Nations marks the period when the Free Trade movement came into the sphere of practical politics. The economic advantages of free inter- course were stated much more fully and convincingly than had been done by other writers, and the cir- cumstances of our own country were favourable to attempts to adopt them in more than one direction. When the issue of the War of Independence rendered it necessary to place the commerce between England and America on a new footing, Pitt set himself to give effect to the new principles, and to introduce greater facilities for trade, not only with such ports as New York and Boston, but with France, and with Ireland as well. The objects he had in view, and the lengths which he was prepared to go in the direction of Free Trade, deserve at least a passing glance. Pitt seems to have been ready to deal with the economic life of the country without direct regard to political requirements. The mercantile system as he found it had been gradually reared by consciously subordinating every factor of material prosperity to the object of building up the naval 1 The Tories failed finally in tlicir attempt to reduce the barriers which bad been erected to prevent trade with Fi-ance, when Parlia- ment refused to confirm the commercial clauses of the Treaty of Utrecht in 1713. 14 FREE TRADE [CHAP. power of the country. Pitt seems to have beeu inclined to break down the main props of the maritime strength of the realm, under the impression that it could stand by its own inherent force, and that the buttresses could be dispensed with. He was prepared to disregard the political considerations which had hitherto been paramount in all the attempts to regulate commercial intercourse between this and other lands. The fullest expression of his views is to be found in connection with his scheme for the management of Irish affairs. Much of the jealousy of Irish pro- sperity which had been shewn by the Whig party in Parliament had been due to the fact that the revenue of that country was not under the control of the House of Commons, and that a development of its resources would give the Crown an independent revenue, which would render it possible to disregard constitutional checks on arbitrary power. It was Pitt's first care that a contribution from customs and excise should be made by the Irish Parliament "towards defraying the expense of protecting the general commerce of the Empire in time of peace'." He proposed that, on this condition, Irish interests should be no longer treated as subordinate to those of the mother country", but that Ireland should be 1 Pari. Hist. XXV. 328. 2 " There were," he said, "bnt two possibly systems for countries situated in relation to one anotlier hko Britian and Ireland. The one, of having the smaller subservient, and subordinate to the greater — to make the one, as it were, an instrument of advantage, and to make all her efforts operate in favour, and conduce merely l] REVOLTED COLONIES 15 " admitted to a permanent and irrevocable participa- tion of the commercial advantages of this country." It was part of his scheme "for the general benefit of the British Empire, that the importation of articles from foreign states should be regulated from time to time in each kingdom, on such terms as may afford an effectual preference to the importation of similar articles of the growth, product and manufacture of the other'." He aimed at the wealth and pro- sperity of the whole Empire and held that the local sources from which they arose might be regarded with indifference". Pitt was prepared to face the to the interest of, the other. This system we had tried in respect to Ireland. The other was a participation and community of benefits, and a system of equality and fairness, which, without tending to aggi'andize the one or depress the other, should seek the aggregate mterests of the empire. Such a situation of commercial eqiaality, in which there was to be a community of benefits, demanded also a community of burthens; and it was the situation in which he was anxious to place the two coimtries." Pari. Hist. xxv. 318. 1 Pad. Hist. xxv. 314, Resolution IX. 2 " The fundamental principle, and the only one on which the whole plan can be justified, is that I mentioned in the begiiniing of my letter — that for the future the two countries ^\ill be to the most essential purposes luiited. On this gi'ound, the wealth and prosperity of the whole is the object: from what local sources they arise is indifferent. We trust to various circumstances, in belieraig that no branch of trade or manufacture will shift so suddenly as not to allow time, ui every instance as it arises, for the mdustry of this comitry gradually to take another dii'ection; and confident that there will be markets sufficient to exercise the industry of both countries, to wliatever pitch either can carry it, we are not afraid in this liberal view to encourage a competition which will ultimately prove for the common benefit of the empire, by giving to each country the possession of whatever branch of trade or article of manufacture it is best adapted to, and therefore likely to carry on with the most advantage. These are tlie ideas I entertain of what 16 FREE TRADE [CHAP. hostility of British manufacturers', but he found it impossible to carry through this statesmanlike pro- posal. Fox played upon English suspicion of Ireland^; the English manufacturers, under the leadership of Wedgewood, organised a vigorous agitation in defence of their exclusive privileges, and the sen- sitiveness of the Irish Parliament to any infraction of its constitutional independence combined with other causes to wreck the measure. Lord Rosebery deplores the manner in which this opportunity of inaugurating a system of Free Trade and preferential tariffs within the Empire was allowed to slip. " When we consider the object and the price : that the price was free trade and the object commercial, and, in all probability, complete union with Ireland; we give to Ireland, and of the principles on which it is given. The unavoidable consequence of these principles brings me back to that which I set out with — the indispensable necessity of some fixed mode of contribution on the part of Ireland, in proportion to her growing means, to the general defence." Coireaponclencc beticeen the night Honourable WiUiam Pitt and Charles DtiJce of liutliuid, 65. 1 As Pitt writes to the Duke of Rutland, his scheme would give Ii-eland more than a bare equality with England ; but he I'ecognises that if " it were bare equality, we are dejiarting, in order to effect it, from the policy of prohibiting duties so long established in this country. In doing so we are perhaps to encounter the prejudices of our manufacturing [interests] in every corner of the kingdom. We are admitting to this competition a country whose labour is cheap, and whose resoui'ces are unexhausted, ourselves bm'deued with taxes, which are felt in the price of every necessary of life and of course enter into the cost of every article of manufacture." Ibid. p. 62. 2 "The whole tendency of the propositions appeared to him to go the length of appointing Ireland the sole guardian of the laws of navigation, and gi-and arbitress of all the commercial uiterests of the Empire." Pari. Hist. xxv. 333. l] REVOLTED COLONIES 17 that there was, in fact, no price to pay, but only a double boon, to use Pitt's happy quotation, 'twice blessed; it blesseth him that gives and him that takes,' it is difficult to avoid the impression that there has been throughout the past history of England and Ireland a malignant fate counteracting every auspicious chance, and blighting each oppor- tunity of beneficence as it arises^" Pitt's action in regard to France is less instructive so far as his policy is concerned : but it was not so futile as his Irish scheme. He had at least a temporary success in opening up a larger measure of free intercourse with France, by the treaty which was concluded in 1786. He had to meet the fierce opposition of Fox, who " contended that France was the natural foe of Great Britain and wished by entering into a commercial treaty with us to tie our hands," but Pitt defended the agreement most ably on fiscaP and political grounds. "By promoting habits of friendly intercourse, and of mutual benefit, while it invigorated the resovirces of Britian it made it less likely that she should have occasion to call 1 Lord Rosebery, Pitt, 75. 2 "The surrender of rovenue for great commercial purposes was a policy by no means unknown in the liistory of Great Britain; but here we enjoyed the extraordinai-y advantage of having it retm-ned to us in a thi'ee-fold rate, by extending and legalizing the importation of the articles. When it was considered that the increase must exceed the concession wliicli we made it \vould no longer be an argument that we cannot afford this reduction. Increase by means of reduction, he was obliged to confess, appeared once a paradox ; but experience had now convinced us that it was more than practicable." Pari. Hist. xxvi. 389. c. 2 18 FREE TRADE [CHAP. forth these resources. It certainly had at least the happy tendency to make the two nations enter into more intimate communion with one another, to enter into the same views even of taste and manners : and while they were mutually benefited by the connection, and endeared to one another by the result of the common benefits, it gave a better chance for the preservation of harmony between them, while, so far from weakening, it strengthened their sinews for war^" Pitt's anticipations were not realised: the treaty was not popular in England, but in France the opposition gathered in strength as time went on. English manufacturers were so far successful in flooding the French markets with goods that the native producers demanded a return to a protective policy. There was a revulsion from the Free Trade principles of Turgot and his associates under the Revolutionary government, and the agreement came to an end. The United States of America were much more willing than any other power to respond to Pitt's proposals for increased freedom of intercourse. Turgot had himself recognised that the ideas he had done so much to disseminate would find a congenial soil on the other side of the Atlantic. Some^ months before the American colonies had actually declared their independence, he drew up a Memoir^ in which 1 Pari. Hist. xxvi. 392. 2 This and the following paragraphs have already appeared ia the Economic Ilcrieiv for Jan. 1901. » Mtmoir, dated G April, 1770, in (Euvres, viii. 431. I] REVOLTED COLONIES 19 he stated his grounds for thinking that the colonists would be successful, and gave a forecast of the economic policy they would probably pursue. " It will be a wise and happy thing for the Nation which shall be the first to modify its policy according to the new conditions, and to be content to regard its colonies as if they were allied provinces and not subjects of the mother country. It will be a wise and happy thing for the Nation which is the first to be convinced that the secret of success, so far as commercial policy is concerned, consists in employing all its land in the manner most profitable for the proprietory, all the hands in the manner most ad- vantageous to the workmen personally, that is to say in the manner in which each would employ them if we would let him be simply directed by his own interest, and that all the rest of mercantile policy is vanity and vexation of spirit. When the entire separation of America shall have forced the whole world to recognise this truth and purged the European nations of commercial jealousy, there will be one great cause of war the less in the world." And when the colonies had been successful in the field, and during the critical period when the separate states were feeling their way towards a settled Constitution, there were leading statesmen in America who would have been glad to see their country play the part which Turgot had anticipated, and set an example to the world of the benefits of Free Trade. Jefferson, who was much influenced by French wTiters, spoke decidedly on the subject. "1 tJiink," he wrote to 2—2 20 FREE TRADE [CHAP. John Adams in 1785, "all the world would gain by- setting commerce at perfect liberty." He regarded the " natural " progress of opulence, and the develop- ment of the United States as a nation of farmers, to be the wisest course for his countrymen to pursue. "We have now," he says, "lauds enough to employ an infinite number of people in their cultivation. Cultivators of the earth are the most valuable citizens. They are the most vigorous, the most inde- pendent, the most virtuous, and they are tied to their country, and wedded to its liberty and interests by the most lasting bonds. As long, therefore, as they can find employment in this line, I would not convert them into mariners, artisans, or anything else. But our citizens will find employment in this line till their numbers and of course their productions become too great for the demand, both internal and foreign. This is not the case as yet, and probably will not be for a considerable time. As soon as it is, the surplus of hands must be turned to something else ; I should then, perhaps, wish to turn them to the sea, in preference to manufacturers, because comparing the characters of the two classes, I find the former the most valuable citizens. " I consider," he goes on, "the class of artificers as panders of vice, and the instruments by which the liberties of a country are generally overturned'." At this date, 1 Tucker, Life of Thomas Jefferson, i. 200; also more fully in Notes on Vircjinia, 275. At a later date be admitted that be bad been mistaken. He modestly accepted AH.sti)i's suggestion tbat the purity of his mind had rendered it impossible for him to l] REVOLTED COLONIES 21 tlien, the Free Trade course seemed to him to be preferable, both on economic and political grounds; and Alexander Hamilton, whose social connections were entirely different, since he desired to render the capitalist and commercial classes' dominant in the new nation, was ready to admit the soundness of Free Trade principles. In the Memoir on manu- factures which he wi'ote in 1791, he summarises Turgot's doctrine, and adds that if it had governed the conduct of nations more generally than it has conceive the depravity of European statement [The soundness of the policii of protecting domestic mamifactures, 1817, p. 8). "Who in 1785 could foresee the rapid depravity wliieh was to render the close of that century a disgrace to the history of man ? Wlio could have imagined that the two most distinguished in the rank of nations, for science and civilisation, would have suddenly de- scended from that honourable eminence, and, setting aside all those moral laws established by the Author of Nature between nation and nation, as between man and man, would cover earth and sea with robbei'ies and piracies, merely because strong enough to do it with temporal impunity, and that under this disbandment of nations from social order we shoidd have been despoiled of a thousand ships, and have thousands of our artisans reduced to Algeria slavery. Yet all this has taken place. The British inter- dicted to our vessels all harbours of the globe, without having first proceeded to some one of hers, these paid a tribute jiroportioned to the cargo, and obtained her license to proceed to the port of destination. The French declared them to be lawful prize if they bad touched at the port, or been visited by a ship of the enemy nation. Thus we were completely excluded from the ocean. ...We have experienced what we did not then believe, that there exist both profligacy and power enough to exclude us from the field of interchange with other nations. That to be independent for the comforts of life we must fabricate them ourselves.... Experience has now taught me that manufactures are now as necessary to our independence as to our comfort." Eandolf, Memoirs, rv. 278. 1 Kabbeno, American Commercial Polio;/, 293, 300. 22 FREE TRADE [CHAP. done, " there is room to suppose that it might have carried them faster to prosperity and greatness'." When we find the author of the Declaration of Independence and the virtual framer of the Constitu- tion agreed in accepting these principles, when we remember the extraordinary difficulty which was found in creating an authority that should be capable of devising and enforcing an economic policy for the whole country, we cannot but be surprised that America did not develop as a Free Trade country from the first. The reason was very simple ; American statesmen did not feel free to apply their principles"; they were forced into legislative efforts to foster 1 Report on Manvfactuics (1793), p. 4. 2 Hamilton puts the matter as follows: — "If the sj'stem of per- fect liberty to industry and commerce were the prevailing system of nations, the argument which dissuades a country, in the pre- dicament of the United States, from the zealous pursuit of manu- factures would doubtless have great force.... But the system which has been mentioned is far from characterising the general policy of nations. The prevalent one has been regulated by an opposite spirit. The consequence is that the United States are to a certain extent precluded from foreign commerce. They can indeed, with- out difficulty, obtain from abroad the manufactiu-ed supplies of which they are in want, but they experience numerous and vei*y injurious unpediments to the omission and vent of their own commodities.... A constant and increasing necessity on their part, for the commodities of Europe, and only a partial and occasional demand for their own in return, could not but expose them to a state of impoverishment compared with the opulence to which their political and natural advantages authorise them to aspire...." He adds, " If Europe will not take from us the products of our soil on terms consistent with our interest, the natural remedy is to contract as far as possible our wants of her." Hamilton, Report of the Secretary of the 2'reasury of the United States on the Subject of Manujactures, p. 31. l] REVOLTED COLONIES 23 shipping and manufactures in self-defence, and as a consequence of the action of other countries, and especially of England. Pitt was convinced that it was to the interest of England to develop her trade with North America to the fullest extent, and realised that this could be most certainly done by permitting maritime inter- course to continue on the same conditions on which it was carried on while Massachusetts and the other States had still been parts of the British Empire. He was ready to waive the policy of the Navigation Acts, and to allow American ships to ply between the English West Indian Islands and New England. But English shipowners were unwilling to relinquish any part of their monopoly of the carrying trade. Lord Sheffield made himself their spokesman in his Observations on the Commerce of the American States. Pitt was clear that our wisest course was to open an intercourse with America as early as possible in order to prevent other countries from getting the start of us and carrying their goods to the American market'. He hoped by conceding to their shipowners a footing in the West Indian trade to secure the maintenance of a practical monopoly of the American demand for manufactures. When Fox came into power the policy prevailed of maintaining the Navigation Acts, and this was tantamount to new restrictions. The measures he proposed were quite inadequate from the point of view of those who desired to preserve the 1 Pari. Hist. xxra. 725. 24 FREE TRADE [CHAP. prosperity of the West Indian Islands'. But the ultimate influence on the American States was far more serious: the New Engianders were compelled in self-defence to enter into commercial and industrial rivalry with Great Britian. They soon found as a matter of fact that economic independence was essential if their political independence was to be 1 " The Petitioner lias received Accounts from Jamaica, since the Pubhcation tliereof , that the above Order has ah'eady operated most grievously to the People of that Island; that Lumber, and other American Commodities, rose at once to nearly the War Price, and that it was particularly hard on the Inhabitants of Kingston, who had begun to rebuild the Houses Inirnt about two Years ago ; and that this Order is deemed equal to a Prohibition, as it is not probable that the Americans will admit British Ships into their Ports, whilst they are precluded from ours ; and representing to the House, that the Planters in general in the said Island, being deeply involved ui Debt, and taxed both in Great Britain and in Jamaica beyond what their Produce will bear, instead of being loaded with new OlJljressions, require every Assistance and Indulgence that can possibly be held out to them, but more particularly ui the Ai'ticles of Lumber and Provisions, as their very Existence depends upon the Reduction of those necessary Expenses of their Estates ; and that the Petitioner sees the Propriety and Necessity of Great Britahi's Attention to the Carrying Trade and her keeping as much of it as she possibly can to herself, but he sees at the same Time the Impractica- bility of excluding the Americans from it ui the "West Indian Islands, as they will carry their Lumber and Provisions to the French, Dutch, Danish, and other Islands, not under the Dominion of His Majesty, to the singula!' and partial Emoluments of those Islands, from whence tlicy will be clandestinely carried to our Islands, loaded with double Freight, double Port Charges, double loading and un- loading, Charges of going tlnough a Second Hand, and the Provisions in particular in a worse and unwholesome Condition : And therefore praying, That so nnu'h of the said Act as empowers His Majesty in Council to issue Orders and Directions, as in the said act mentioned, may not be continued, or if continued, may be limited and restricted in such Manner, that the Island of Jamaica may receive no further Detriment tlioreby." Commons Journals, xxxix. p. 810. l] REVOLTED COLONIES 25 a reality. They were crowded out of a lucrative trade, while a few years later, in the time of the French Revolution and of the Continental System, the Americans were seriously distressed because of the interruption of the usual supplies of foreign manufactures. What they desired was room to grow, freedom to allow of healthy and natural economic development, and this they could not get without taking pains to foster a mercantile marine and to protect manufactures. The opponents of Pitt con- verted the United States to the impracticability of being Pioneers in a Free Trade movement, and they were not deterred from fostering manufactures by the solemn warning of an English Economic expert' as to the absurdity of their attempt. Thus it happened that all the experiments which Pitt had endeavoured to make in Free Trade were frustrated. There can be no doubt that his views were economically sound ; but when we view the matter in its political aspect it is hardly possible in retrospect to condemn the somewhat narrow patriotism of Fox and his associates ; in the disturbed state of the world, Pitt's scheme was premature". England had emerged from one great struggle, but she was about to enter on another that would try her resources more severely ; there was no guarantee of continued peace in the world at large. The contest 1 On Manufactures in America, 1797, in Annah of Agricul- ture, XXIX. 131. 2 There is also room fox- doubt whether it would have been really favom-able to the constitutional development of the colonies. See below, p. 153. 26 FREE TRADE [CHAP. I. with Napoleon turned on the possession of dominant power by sea : it is probable that if the Navigation Act had been relaxed and American shipping had developed earlier, the difficulty in regard to neutral trading would have been greater, and it is possible that the issue might not have been the same. Such speculations may be idle, but at least we may feel that the final struggle with France was not one in which England could afford to forego any advantage. CHAPTER II. HUSKISSON AND TARIFF REFORM. i. Thorough-going protection. A GENERATION elapsed from the time when Pitt carried through his French treaty in 1780 before any further step was taken in the direction of breaking down the complicated restrictions and limitations which had been imposed, with the view of regulating our trade to the greatest advantage. The methods of fostering economic life which had been carefully thought out in the days of Lord Burleigh, were put into effect systematically by Walpole, and carried on with great success during the eighteenth century. The building up of the maritime power of the country was the great object in mind ; the development of fisheries and of the mercantile marine were means on which reliance was placed with the view of attaining this end. Though encouragements to shipping were placed in the forefront in the Elizabethan Age, they were never an exclusive object of attention. Under all 28 FREE TRADE [CHAP. the Stuarts, and more particularly after the Restora- tion, great pains were taken to improve manufactures, and especially to regulate commerce in such a fashion that it should react favourably on industrial develop- ment. Spain had created a great maritime and colonial power, but she afforded a warning rather than an example to Englishmen. They had already realised, at the time of the Armada, that her strength was not overwlielming ; it appeared that the expansion of mining enterprise in the colonies had been almost injurious, from the way in which it caused a drain on resources at home. Englishmen were nervously anxious to avoid this blunder, and to develop their commerce, together with the consequent colonial ex- pansion, on lines in which it should stimulate and foster native industrial energy. In this they followed the Industrial System which is associated with the name of Colbert in France, and they tried to organise trade so that it should bring raw materials to our shores, and should also "afford a vent" for our finished goods in lands across the sea. The regulation of commerce, so as to foster industry, was, as it were, the second plank in the Mercantile System ; a third was added in the period succeeding the Revolution. Once more Spain could be viewed as a warning, while Holland gave an example to be followed. Agriculture did not flourish in Spain ; her dependence on an imported food-supply was a source of weakness, and the Dutch did a profit- able business in transporting corn from the Baltic to the Iberian peninsula. The Corn Bounty Act of 1689 II] TARIFF REFORM 29 was intended to stimulate English agricultural pro- duction so as to provide an adequate food supply for home consumption even in unfavourable seasons; while at the same time in good years there was an ample surplus, which our ships could be profitably employed in exporting. It thus came about that the Mercantile System in its final form, as it was main- tained in the eighteenth century, was by no means so one-sided as its name implies, but was an all-round system. It took account of the interaction of the several interests, and aimed at the complete develop- ment of all the economic resources of the country, so as to give a firm basis to her political power. So far as its political objects were concerned, the Mercantile System had proved its success when Napoleon was forced to succumb in 1815. The power of England had increased in an extraordinary fashion, during the period when this scheme of economic policy was in vogue ; and it certainly seems as if the means employed had been well adapted to the end in view. It is scarcely possible for us to realise to what a low position England had sunk at the time when Burleigh began to guide her destinies. Elizabeth was utterly destitute of the means of defending the realm at the outset of her reign. There was no plant for casting guns, and no workmen who were competent to do it. For supplies of ammunition we were dependent on foreign powers ; sulphur and other ingredients for the manufacture of gunpowder were principally brought from countries under papal influence. England was utterly un- 30 FREE TRADE [CHAP. prepared for a quarrel with Spain, at the time when the reign of Philip and Mary came to an end, and a rupture seemed to be imminent. Good use was made, however, of the interval which elapsed before the Invincible Armada actually sailed. Works had been started, and skilled artisans brought from abroad, so that the English ordnance was superior to that of Spain. This was the turning point ; and the general scheme of policy, which had been so successful under Burleigh's care, was pursued with similar results through all the constitutional changes of the seven- teenth century. English resources increased and the power of the realm developed ; the country was able to take a foremost place in the eighteenth century, and to hold her own against Napoleon's desperate efforts to destroy her. Despite the burden of taxation, the strain on her credit, and the deprecia- tion of her money, she had an enormous marine, and was well able to fit and victual her ships. She could command foreign markets and her industry increased by leaps and bounds, even while the strain of the war was most severe. It is difficult to conceive of any more startling development of political greatness, than that which took place under the Mercantile System. This growth in political influence and naval strength may be said to have been almost entirely due to the increase of material wealth, from which the sinews of war could be drawn. We have no means of accurately gauging the extraordinarily rapid progi'ess which took place in every department Il] TARIFF REFORM 31 of economic life under this highly protective system, but the broad conclusion is unimpeachable. There is ample evidence that an advance had been made in every sort of manufactures between the reign of Charles II. and 1786. At the former period the English complained that they were ruined by the fine goods imported from France ; when intercourse was reopened by Pitt, the French manufacturers could not hold their own against English competition. This was only the beginning of the change ; the improved implements introduced by Kaye and Hargreaves were coming into general use, but there had been very little application of power in the textile trades. Success had been attained in the use of coal for smelting and manufacturing iron, and the enormous development of the hardware and engineering trades was just commencing. Enterprise was also being shewn in the development of coal mining and the improved facilities for internal communication. The steady development and sudden expansion of in- dustrial activity, which rendered England the work- shop of the world, occurred under a highly protective system. The progress of agriculture had also been remark- able ; the relative stagnation of centuries came to an end, and the eighteenth century was the era of spirited proprietors, who devoted themselves sedulously and at considerable cost to the introduction of better husbandry. Tull introduced a revolution in the cultivation of roots, and Bakew'ell was a pioneer in the scientific breeding of stock. We can hardly 32 FREE TRADE [CHAP. suppose that it was a mere accident that the period when the Corn Bounty policy was in force should have been marked by the discarding of traditional methods, and the development of unwonted enterprise in the management of land'. That a period of high protection should have been characterised by great enterprise and rapid progress is so entirely inconsistent with the preconceived opinions of some economists that they are tempted either to ignore the fact as mere " ancient history," or to attempt to explain it away^ It is often asserted, as an axiomatic truth, that protection is enervating, and that the bracing air of competition is necessary to stimulate progress. That protection may some- times lull men into being content with slovenly or inefficient methods is highly probable, but I cannot believe that this is always the case ; it seems to me to be largely a matter of personal qualities, whether a bracing air invigorates or benumbs. Pro- tection affords the protected persons an opportunity of gain in their callings. If a man is enterprising he will be inclined io make the most of this opportunity; if he is sluggish, he may consider that the gain that 1 Another great era of agricultural improvement began in 1836, while a protective policy was in force. R. E. Protbero, in Social Ewjland, vi. 212. 2 The report of the committee on agricultural distress in 1821 iirges that the groat period of improvement took place after 1773, when the protection for English corn growers was reduced. They did not apparently take into account that in 1773 the new method.s of agi'icnltural impiovenient had i>assod out of the ex))i»rirnontal stage, !uid that loss encouragement was needed to induce men to adopt what was already a proved success. Il] TARIFF REFORM 33 is secured to him is good enough and not be at pains to increase it. We might even distinguish between the two factors in the production of wealth — labour and capital. There is generally an element of com- pulsion and discipline in getting a full day's work out of the labourer ; it is true that necessity is to some extent a stimulating influence; and possibly, as has been alleged, the best way to ensure that land should be well worked by cottiers or small farmers was to "salt it well with rent." Pressure of some kind is quite likely to elicit more strenuous effort. But with capital, especially with the sinking of capital in a new undertaking, the case is different. Capital goes where it is attracted, not where it is compelled. Unless there is some probability that the outlay will be replaced at a profit, capital will not be invested in new machines or expensive plant. A low rate of interest, with no appreciable risk and no worry, can always be obtained for it. Chronic insecurity and the danger of being exposed to competition with subsidised rivals do not seem to me to be obviously the most favourable conditions for the development of industry, in an age when capital has become the dominating influence in production. However that may be, the fact remains that the eighteenth century, when protection was carried out most consistently, was a period of wholly uni(|ue progress both in agricultural and industrial enterprise. 34 FREE TRADE [CHAP. ii. The necessity of a change. There was, however, another side ; in spite of its real success, both political and economical, the Mer- cantile System was condemned in 1820 as very unsatisfactory; it was from many points of view unwholesome, and it was certainly out of date. During the seventeenth century the land of the country had been the great fund from which the revenue was principally drawn ; it had been politically desirable to render the conditions of life as favourable as possible to the agricultural classes, since they bore the main share of the public burdens. But farther, since the landed men bore the chief burden, it was not unnatural that they should enjoy a very large share of political power. The great mercantile interests were not adequately represented, aiid the manufacturing classes were hardly enfranchised at all, before the reform of 1832. In the course of the eighteenth and early nineteenth centuries the rapid development of the trading and industrial classes had entirely altered their importance relatively to the landed interest in the community; but the consti- tutional system of the country had not been brought into accord with the economic change. In the counties, and still more in the close burghs, the landed gentry were able to exercise the influence of a privileged class ; and the effort to bolster up these privileges had given rise to wide-spread ad- ministrative inefficiency and political corruption. The Il] TARIFF REFORM 35 evil had been aggravated by the Com Law of 1815, which helped to maintain the status and prosperity of the landed proprietors at the expense of the com- munity generally ^ It was most important that some steps should be taken which should bring the welfare of the community as a whole into clearer light, and give a far larger body of citizens an effective voice in the government of the country. The power of the landed gentry was a survival from a state of society which England had outgrown, and Cobden had a genuine enthusiasm for breaking it down, and for cutting away any props that supported it. The system was out of date, not merely politically but commercially; it had taken shape while medieval ideas were still dominant in the management of trade, and it had never been thorouglily adapted to the modern conditions which had come into vogue during the eighteenth century. The medieval merchant was not a mere private person, but a public character mth special status and responsibilities : a private individual could not obtain a footing in a foreign town so as to transact business regularly; it was only through be- longing to an authorised company that he was able to carry on his trade. As a consequence he was bound to consider, not merely his own private ad- vantage but the policy of the company in the manner in which he did business, and to conform his practice to the rules of " well-ordered trade," which were supposed to take account not of the immediate benefit of individuals but of the continual prosperity 1 See p. 56 below. 3—2 36 FREE TRADE [CHAP. of the trading interest. The medieval merchant shij)ped a stock of goods and tried to sell them at the highest price he could; the regulations of his company were intended to prevent any risk of his failing to get a fair profit on each transaction; he had very little idea of stimulating a demand by offering his goods at a low price, and thus disposing of a large quantity on remunerative terms. The company system, whatever its merits may have been, left little scope for initiative ; and in the seventeenth century the "straggling merchants" and "interlopers" made strenuous efforts to break do\\Ti this well-ordered trade ; during the eighteenth century they were suc- cessful in obtaining the right to engage in almost every branch of trade. They thus broke down the rules of the companies, and left each trader free to carry on his business in the manner which he regarded as most profitable. So soon as the right of the individual trader, as against the company, was thus recognised, the question came to be raised as to the expediency of all the regulations laid down by the State in the supposed interest of trade. Why should the State interfere with the bargains which any man chose to drive, except in so far as it was necessary to raise revenue ? Why should not every merchant be left as free as possible to transport what he liked, where he liked, in any ship which was available ? A mass of rules of considerable antiquity and doubtful utility survived till 1825 in regard to the industry of the realm. It had ceased to be clear why govern- ment should make any regulations for the good of Il] TARIFF REFORM 37 the trade of the country. They seemed to be inex- pedient since they hampered individual enterprise, and in the new conditions of trade, — when intercourse was more frequent, and the facilities of credit and new developments of industry made it possible to meet any new demand by an increased supply,— the whole atmosphere of commercial life was inconsistent with the maintenance of the highly organised mercantile system which had proved so beneficial in earlier days. Society is so complex that the judgment, as to the success or failure of any particular line of policy, will often depend on the criterion we apply. The parliamentary Colbertism of the eighteenth century had been successful in raising the maritime strength of the country to an unprecedented height : but the result on the welfare of the community, in the earlier part of the nineteenth century, was deplorable. The condition of the labouring classes, both in town and country, was miserable in the extreme. The introduction of machinery had caused an enormous expansion of industry on the whole ; but it had taken place in a series of violent fluctuations. The periods of good trade had given the enterprising employer the opportunity of piling up a large fortune, but there had also been times when business was carried on at a loss; the position of the wage earners was severely depressed, and many of the skilled operatives in the cotton trade were habitually dependent on assistance from the rates'. The rural districts were 1 Compare in regard to Oldham, Beijorts, 1824, vi. 405, with 1834, XXVIII. 921. 38 FREE TRADE [CHAP. in an even worse condition; they had been denuded of remunerative opportunities of domestic employ- ment, the labourers of many districts had been reduced to a miserable state of hopeless degradation', while the capital of innumerable tenant farmers had been exhausted in a desperate struggle for existence. In addition there was a great difficulty about the finances of the realm; the pressure of taxation was very severe, and it was difficult for the administration to pay its way, or to do anything to reduce the enormous burden of debt. However they might differ in diagnosing the nature of the malady, all public-spirited men were agreed that the economic condition of the country was very serious, and that it was necessary to devise some kind of remedy. iii. The adaptation of the revemie system to modern commercial conditions. Huskisson has the credit of determining the manner in which it was wise to deal with the diffi- culties of the situation. He realised that com- merce had come to be the main factor in English prosperity, and he was inclined both by tradition and education^ to favour the principle of rendering com- mercial intercourse as free as possible ^ The landed 1 Wakefield, Sioing unmashct'l (1831), p. ',). 2 Ab a joiuig man he had resided in Paris and come in contact with tho circle of econojnists there. Biographical Memoir iu SjjcecJics, I. 9. « " Au open trade, especially to a rich and thriving country, is mfiiiitely more valuahle than any monopoly." Speeches, ii. 321. Il] TARIFF REFORM 39 interest did not now occupy even the second rank; there had been centuries when English trade consisted chiefly in exporting such raw products as wool or corn, and when the progi-ess of commerce was closely connected with the development of rural resources. In the nineteenth century these interests were almost antagonistic ; the shippers depended on the manu- facturers for their exports, and products such as corn were the most convenient returns they could import. The economic life of the country could best be developed on lines that were quite different from those which had seemed most desirable at the beginning of the eighteenth century ; and what had formerly been helps had become hindrances. The restrictions which fettered English trade were of two distinct kinds ; on the one hand there were definite regulations as to the ships which might be employed and the points between which commerce should be carried on by Englishmen, while on the other the customs- tariff had been drawn up, not so much with regard to the revenue, as with a view of favouring national development on healthy lines. Huskisson was con- cerned in reducing the malign influence exerted on commerce by existing restrictions of all kinds, but his most lasting work was in the changes which were begun in connection with the revenue system of the country. The demands of the commercial community had been formulated by Thomas Tooke in the Merchants' Petition of 1820— " That foreign commerce is eminently conducive 40 FREE TRADE [CHAP. to the wealth and prosperity of the country, by enabling it to import the commodities for the pro- duction of which the soil, climate, capital and industry of other countries are best calculated, and to export in payment those articles for which its own situation is better adapted; that freedom from restraint is calculated to give the utmost extension to foreign trade, and tlie best direction to the capital and industry of the country; that the maxim of buying in the cheapest market and selling in the dearest, which regulates every merchant in his individual dealings, is strictly applicable as the best rule for the trade of the whole nation ; that a policy founded on these principles would render the commerce of the world an interchange of mutual advantages, and diffuse an increase of wealth and enjoyments among the inhabitants of each state; that, unfortunately, a policy, the very reverse of this, has been, and is more or less adopted and acted upon by the govern- ment of this and of every other country; each trying to exclude the productions of other countries, with the specious and well-meant design of encouraging its own productions; thus inflicting on the bulk of its subjects, who are consumers, the necessity of submitting to privations in the quantity or quality of commodities, and thus rendering what ought to be the source of mutual benefit and of harmony among states, a constantly recurring occasion of jealousy and hostility; that the prevailing prejudices in favour of tlie i)rotective or restrictive system may be traced to the erroneous supposition that every importation Il] TARIFF REFORM 41 of foreign commodities occasions a diminution or discouragement of our own productions to the same extent; whereas, it may be clearly shown, that although the particular description of production which could not stand against unrestrained foreign competition would be discouraged; yet, as no im- portation could be continued for any length of time without a corresponding exportation, direct or indirect, there would be an encouragement for the purpose of that exportation of some other production to which our situation might be better suited ; thus affording at least an equal, and probably a greater, and certainly a more beneficial employment to our capital and labour; that of the numerous protective and prohibi- tory duties of our commercial code, it may be proved, that while all operate as a very heavy tax on the community at large, very few are of any ultimate benefit to the classes in whose favour they were originally instituted, and none to the extent of the loss occasioned by them to other classes ; that among the other evils of the restrictive or protective system, not the least is, that the artificial protection of one branch of industry, or source of production against foreign competition is set up as a ground of claim by other branches for similar protection; so that if the reasoning upon which these restrictive or prohibitory regulations are founded were followed out consistently, it would not stop short of excluding us from all foreign commerce whatsoever ; and the same train of argument, which with corresponding prohibitions and protective duties should exclude us from foreign 42 FREE TRADE [CHAP. trade, might be brought forward to justify the re- enactment of restrictions upon the interchange of productions (unconnected with public revenue) among the kingdoms composing the union, or among the counties of the same kingdom ; that an investigation of the effects of the restrictive system at this time is peculiarly called for, as it may, in the opinion of the petitioners, lead to a strong presumption that the distress which now so generally prevails, is consider- ably aggravated by that system ; and that some relief may be obtained by the earliest practicable re- moval of such of the restraints as may be shewn to be most injurious to the capital and industry of the community, and to be attended with no compensating benefit to the public revenue ; that a declaration against the anti-commercial principles of our restric- tive system is of the more importance at the present juncture, inasmuch as in several instances of recent occurrence the merchants and manufacturers in foreign states have assailed their respective govern- ments with applications f Morley, Life of Cobden, ii. 144. IV] COMMERCIAL TREATIES 77 ample confirmation of this view. In particular he held that economic dependence is the best guarantee for political alliance'. According to Cobden, in- creased facilities for commerce would make the consumers in each country realise how much they gained by trade, and render them jealous of any governmental action that might interrupt it. Each year's experience of any arrangement for freeing commerce was a pledge of further progress in the same direction. It thus came about that Cobden was entirely an opportunist in endeavouring to promote free intercourse ; and that at length in 1860 he separated himself from those who were Free Traders on principle since they deprecated measures which could not be defended as practical applications of the doctrine of unfettered exchange. In 1843 Cobden had voted with the advocates of insular Free Trade against Peel, who was at that time in favour of gradually enlarging the circle of intercourse by means of treaties with other Powers. When ten years had elapsed, from the period of repeal, and other nations had not followed the English example, Cobden began to hesitate as to the course which should be pursued ; 1 To this opinion experience was not altogether favourable. The Tory party from tinae immemorial had aimed at renderuig the American colonies economically dependent on England ; but the measures taken with this object had not served to cement the attachment of the colonists to Great Britian. It is, however, possible to dra\v a distinction and urge that a forced dependence had strained allegiance, but that voluntary interdependence will be nmtually beneficial, and will tend to istrengtheu the alliance of two friendly peoples. 78 FREE TRADE [CHAP. he definitely broke with the economic experts who believed that the principle of free intercourse was certain to appeal to rational minds sooner or later. He felt that it was useless to appeal to the French to modify their tariffs on grounds of pure reason, not because of any insular contempt for the French, but because no country ever had been convinced by such reasoning. Peel had been converted by it, but no other responsible statesman had been carried away by it, and England had required other arguments'. Cobden looked back on the careful strategy and the pressure of starvation by the help of which victory had been secured in England, and he was not surprised that the French were slow in accepting our policy. He felt that we must meet them half way, and thus in 1859 he fell in with the project of securing increased oppor- tunities for foreign trade by means of commercial treaties. In taking this line he had the cordial support of Mr Gladstone, who stated his view very forcibly. "I understand the statement of the moderate Free Trader who says that half a loaf is better than no bread, that all breaking down of restrictions is good, and that it is wiser to break down our own restrictions and leave those of our 1 Murley, Life of Golden, ii. 339. " These people seem to tbiuk that Free Trailc in France can be carried by a logical, orderly, niethouical i)roccss, without resorting to stratagem, or anytbhig like an uidirect proceeding. They forget the political plots and con- trivances, and the fearful adjuncts of starvation, which were necessary for carrying similar measures in England. They forget how Free Trade was wrested from the reluctant majorities of both our IIouscH of I'arliament." IV] COMMERCIAL TREATIES 79 neighbour standing if we cannot touch them, than to perpetuate both. That is true and reasonable ; but I cannot understand those immoderate and unmanage- able Free Traders, who come from other quarters, many of whom have not long been thus fastidious and jealous on behalf of Free Trade in its most rigid purity, and who seem to think it is a positive evil to induce our neighbours to break down their restrictions. They do not see that what they condemn is a doubling of the benefit. They think there is a chivalry in Free Trade, which is degraded if it becomes a matter of bargain, whereas it appears to me that bargain is really the true end and aim of the whole'." Though the Free Trade movement had not made such progress as Cobden anticipated, it was clearly in the ascendant ; there was an active propaganda in its favour both in America and France. Opinion in the United States appeared to be trending in this direction ; the tide seemed to have turned. The policy of protecting American manufactures had been adopted in 18 16^ and was vigorously pursued till at length the ' Abomination of 1828 ' was passed. In 1831 and 1833 a reaction set in ; and in 1846 a much more liberal tariff was introduced, while an important manifesto was issued by Mr Walker, the Secretary to the Treasury, setting forth the Free Trade principles and urging their adoption by the 1 10 Feb., 1860. 3 Hansard, clvi. 842. " Rabbeuo, Ainerican Comviercial Policy, IS."). This was ap- parently in retaliation for the Com Law of 1815. Shortt, Impenal Preferential Trade, 33. 80 FREE TRADE [CHAP. United States \ From this period until the very eve of the Civil War" there seemed to be good reason to suppose that the Americans were becoming more prepared to follow the English lead and abandon protection altogether. The doctrine of Free Trade appeared also to be gaining ground in France. The tradition of French economic science as established by Turgot was main- tained by a new generation, among whom Bastiat — an intimate friend of Cobden's — took a prominent part. The nation generally was protectionist, but this academic group had the ear of Government and exercised an influence out of all proportion to their numbers. Napoleon III had persuaded himself that Free Trade was a bold course which it was wise to adopt; acting as the "organisation of the masses ^" in opposition to the organised manufacturers, he was so far absolute in matters of tariff that he was able to make the experiment which expert opinion recom- mended. Symptoms of the increasing prevalence of Free Trade ideas could be noticed in other directions during the Fifties. Austria and Germany included the territory from the Baltic to the Adriatic in one system of internal Free Trade. The Zollverein and Austria entered into very close commercial relations in 1853 ' ; the barriers against the outside world were 1 Quoted by Peel, 3 Hansard, lxxxiii. 278. ' Kabl)eiio, American Commercial PoHey, 200. •' Morley, Life of Cobden, ii. 340. * On tlie elements which composed tlie Free Trade party in IV] COMMERCIAL TREATIES 81 maintained, but those which had prevented free inter- course between the German-speaking peoples were greatly reduced. The economic doctrine of Free Trade in one form or another ' seemed to be steadily winning its way in all the great commercial countries. England had taken the lead, America and France were ready to follow suit, and Austro-Germany was moving in the same direction under Prussian guidance. The progress was not so rapid as had been expected, but though slow there seemed to be good reason to believe it was sure. The political atmosphere in Europe generally was in many ways congenial to the growth of the international intercourse from which Cobden hoped for so much. The era of International Exhibitions and friendly rivalry in mechanical ingenuity was inaugurated in Hyde Park in 1851 ; it was a monu- mental protest against militarism which found an echo on many sides. The Radicals in England had always insisted that the army and navy were main- tained on a large scale in the interest of the classes, for whom they provided pleasant and remunerative posts, and that the welfare of the masses demanded considerable retrenchment. On the Continent, Libe- ralism — in an academic rather than a party sense — was making rapid progress. The opinion had gained ground that on the whole government is an evil, and that the less there is of it the better ; there was a Germany, and tlieir difference fi-om the English advocates see Lotz, Die Ideen der deutsvlien Haiidehpolitik, in Leipsic Schnften des Vereins fur SocialpoUtik, l. 13. ' Ihid. 8. c. 6 82 FREE TRADE [CHAP. tendency to limit the range and interference of government as much as possible, so as to leave the fullest freedom for individual action. Liberalism, in this sense, is opposed to Socialism, since one seeks to limit the functions of government, and the other to extend them ; and the attitude of resistance to the ruling authority, rather than dependence upon it, commended itself to some of the popular leaders. The revolutionary movements of 1848 had brought the aspirations for liberty within, and for tranquil relations with neighbours into line. There was a feeling that the wars and quarrels between nations had been dynastic in character and due to the ambition of kings, but that the life of the people was bound up with solid advance in material well- being. These ideas of the brotherhood of nations were favourable to freedom of commercial intercourse, and they were becoming diffused at the time when new facilities for traffic by railway and steamer were coming into general use. Everything seemed pro- pitious for the breaking down of barriers which prevented the industry of the world from being developed in the most suitable circumstances. There was good reason to hope that any country which adopted Free Trade, even temporarily, would find so much benefit from increased commerce that all opposition would ere long be etFectually silenced. Such was the position of affairs when Cobden succeeded in passing the commercial treaty with France in 1860. The Anglo-French Treaty of 1860 was important from the manner in which it enabled each country to IV] COMMERCIAL TREATIES 88 participate in the natural advantages of the other ; the French opened up their markets to English iron, and French wines were imported in much larger quantities. The main importance of the agreement lay in the fact that it served as a foundation-stone on which a whole fabric of treaties securing greater freedom of commercial intercourse was built up. The treaty contained a most favoured nation clause; according to this England pledged herself not only to lower her duties on French products, but on similar products from other countries, and France made a corresponding engagement. " This was not reci- procity of monopoly, but reciprocity of freedom, or partial freedom. England had given up the system of differential duties, and France knew that the products of every other country would receive at the English ports exactly the same measure of treatment as her own. France, on the other hand, openly intended to take her treaty with England as a model for treaties with the rest of Europe, and to concede by treaty with as many Governments as might wish, a tariff just as favourable as that which had been arranged with England. As a matter of fact within five years of the negotiation of 1860 France had made treaties with Belgium, the Zollverein, Italy, Sweden, Norway, Switzerland, and Austria'." These treaties, like another which was subsequently con- cluded between England and Austria, recognised the "most favoured nation" principle, the "sheet-anchor of Free Trade, as it has been called. By means of 1 Morley, Life of Cohdcn, n. 341. 6—2 84 FREE TRADE [CHAP. this principle, each new point gained in any one negotiation becomes a part of the common commercial system of the European confederation. ' By means of this network/ it had been excellently said by a distinguished member of the English diplomatic service, ' of which few Englishmen seem to be aware \ while fewer still know to whom they owe it, all the great trading and industrial communities of Europe i.e., England, France, Holland, Belgium, the Zollverein (1870), Austria, and Italy, constitute a compact international body, from which the principle of monopoly and exclusive privilege has once for all been eliminated, and not one member of which can take off a single duty without all the other members at once partaking in the increased trading facilities thereby created. By the self-registering action of the most favoured nation clause^, common to this network of treaties, the tariff level of the whole body is being continually lowered, and the road being paved towards the final embodiment of the Free Trade principle in the international engagement to abolish all duties other than those levied for revenue purposes I' " It thus came about that during the decade from 1860 — 1870 the principle of Free Trade was very 1 A further result of this iguorauce is that comparatively few people are aware how far other countries have witlulrawn the facilities for free intercourse which they fo'"mcrly afforded to England. Compare Fuclis, Die IlandelspoUtilc Englands, 33 — 65. 2 Canadian dissatisfaction with the results of Free Trade took the form of a demand to be consulted in all treaty arrangements which affected their commerce. Davidson, Commercial Federation, 64. 8 Morley, Life of Cohden, ii. 342. IV] COMMERCIAL TREATIES 85 generally brought into operation, and there was good reason to hope that the favourable results achieved would soon secure its permanent adoption, not only by the countries which had accepted it tentatively but by all other civilised states. ii. The Great Divide. During these years when the advocates of Free Trade were able to believe that they were successfully laying the foundations of Universal Peace, there was a considerable recrudescence of militarism both in Europe and America ; the economic ties and popular interests were not strong enough to induce the nations to ignore causes of difference ; political relation- ships did not adapt themselves closely to business requirements. Besides the Crimean War there was the War of Italian Independence, in which the Austrians were driven from the valley of the Po, with French help ; and the conflicts with Denmark and Austria, which raised Prussia to a position of recog- nised leadership among the German-speaking peoples. In these cases the Government made itself the leader in giving effect to national aspirations; the revived military spirit was not merely dynastic but democratic. This was still more strikingly true of the contest which had broken out in America ; the Northern and Southern States found themselves engaged in a fratricidal struggle, and peace was only declared when the resources of the weaker side were utterly exhausted. The Franco-German War of 1870 gave 86 FREE TRADE [CHAP. an object lesson to every country that desires to preserve its national traditions and live an independent life, and forced men to recognise the necessity of being well prepared for war. The fresh development of the national spirit, under new conditions, proved fatal to the continuance of those experiments in Free Trade which had been attempted in so many quarters. The revival of foreign protection, which became noticeable in the Seventies, was closely connected with these military operations. It is obvious that the expenses of war had to be paid for. In the case of America the customs duties were almost the only source of revenue which was under the authority of the central government ; and it was necessary for fiscal purposes to try to obtain the largest possible revenue by means of the tariff. A similar course was approved by M. Thiers, who had always been a convinced protectionist, when he had to administer the affairs of France'. Under the Republic the policy embodied in the Cobden Treaty was severely criticised, and in 1882 the agreement was allowed to drop". High tariffs on imported manufactures proved to be a convenient source from which to levy revenue for a country that was exhausted by war. It would, however, be a mistake to suppose that the return to protection was merely incidental ; there was a very deep and close connection between the outburst of militarism and the reversal of economic 1 A. Devers, La politique commcrciale de la France depnis 18G6, iu Leipsic ScJin/ten des Vereinsfiir Socialpolitik, Li. 155. 2 Ibid. 17-2. IV] COMMERCIAL TREATIES 87 policy. A rising sense of national self-consciousness uttered itself in both fashions. The desire to organise the economic life of the nation in independence of its neighbours was the expression in another field of the spirit which was ready to fight for national unity. The struggle in the United States had been due to an intense eagerness on the part of the North to stand out to the world, not as a congeries of little republics, but as one polity, with one national system through- out the whole of an immense territory. The contest had been occasioned by the slave question, because slavery was the most important element which severed the Southern from the Northern and Western States ; but the enthusiasm for a united polity, that should command the admiration of the world, was the great force which slave-owners brought into play against themselves. Even before the war broke out, the desire to foster national economic development had been making itself felt anew ' ; and under the tariffs, which were introduced for revenue purposes, powerful vested interests sprang up and were able to secure in- creasing protection for the native producers. A similar result was brought about in France, though by some- what different stages ; the Free Trade experiment had been the policy of the Third Empire ; it had never been really popular. "When the Empire fell the demand for protection was exceedingly vigorous, as it seemed necessary to take active steps to foster the agriculture and industry of a country exhausted by war. This positive determination to organise the economic life of 1 Rabbeno, American Commercial Policrj, 200, dates it at 1857. 88 FREE TRADE [CHAP, the nation as a whole, was in flat opposition to Cobden's aspiration after the economic interdepend- ency of nations. That had been tried, partially, and now it was deliberately rejected. The reaction against Free Trade soon spread to countries which had no special political excuse — in the effects of an exhausting war — for reverting to protection. Germany and Austria each resorted to it, on purely economic grounds, as the best means to increase their resources. German unity had at length been attained, under the guidance of the Prussian monarchs, and German ambition was fired with the desire to exercise a great influence as a world power. Her natural wealth had been left undeveloped to a considerable extent, and she hoped, by protection, not merely to make up the lee-way of centuries of division, but to build up great industries and es- tablish a world-wide commerce ; the first step, in Bismarck's opinion', was to secure the home markets ; and this was the object of the tariff" of 1879. The case of Austria was diff"erent : she had been content to remain an agricultural country, and to receive her manufactured wares from England in exchange for raw products ; but in the early seventies it became impossible to pursue this scheme, as her purchasing power was diminishing-. The extension of the Ame- rican railway system had been carried so far that the development of the Great West had begun ; the 1 Lotz, op. cit. 106. 2 Peez, Die. oesterreichische Hanilehpolitih, in Leipsic Schn'ften des Vereinsfiir Socialjjoiitik, xlix. 176. IV] COMMERCIAL TREATIES 89 competition which has proved so prejudicial to English agriculturists was equally serious to Austrian dealers. They could no longer export on such terms as to purchase English manufactures at reasonable rates, and they determined to take the course of developing native manufactures, so that the country might be independent of the variations which arose from complications and developments in distant parts of the globe. They had found that economic inter- dependence played them false, and in 1878 they deliberately fell back on the independent organisation of national economic life. This wide-spread reaction in the decade 1870-80 was brought about by felt practical requirements in different countries ; and it was not by any means without intellectual justification. Frederick List had set an example in applying the historical method to economic questions ; he laid great stress in his National System of Political Economy (1841) on the idea of development : he protested against the view of the dominant school of economists that the same principles could be advantageously applied in every country alike. He believed that when any nation had reached a high stage of progress Free Trade was the best policy for that particular country ; but he also held that Free Trade failed to give the most favourable conditions for the economic development of countries which had the requisite capabilities but were for any reason backward. Even Mill had admitted that the temporary pro- tection of infant industries was excusable ; List 90 FREE TRADE [CHAP. applied a similar doctrine on a much larger scale. He held up England as a model, and seems to have regarded her as the only country which had so success- fully built up an economic system of her own\ that she could wisely and safely run the risks of exposing her inhabitants to the full blast of foreign competition. He urged that cosmopolitanism would enable her to influence others unduly ; he insisted that the circum- stances of England were exceptional, and the policy which was most advantageous to her was unfavourable to the development of all the resources of other countries ; it tended to keep them backward and poor. In deliberately turning their backs during the Seventies upon the example set by England, the other countries were not definitely condemning her for the course she had adopted ; they were rather saying that it was one for which they were not themselves ripe. It appeared to be perfectly clear that so far as England was concerned there was a complete harmony between the cosmopolitan ideal and the national interest. The dominant factor on which the prosperity of her commerce depended was the manufacturing interest, and the English manufacturers had much to gain from Free Trade. During the eighteenth century they had obtained protection, but in the middle of the nineteenth they preferred to dispense with it. The Industrial Revolution had put them in such a position that protection could do little for them ; what they retilly wanted was the 1 National Si/ste»i of PoUticul Ecoiwiuji, 53. IV] COMMERCIAL TREATIES 91 fullest possible opportunity for disposing of their wares in any part of the world. The fact that the manufacturers had changed sides from the Protectionist to the Free Trade camp had rendered the agitation which succeeded in 1846 possible; in England the industrial classes hold the key of the position, and their private interest as against foreign rivals differs according to the stage of their growth. A small boy will naturally desire a large handicap in the one or two events for which he enters in his school games. But if he grows up such a vigorous athlete that he can win any event by the full extent of his handicap, a large handicap ceases to be worth having. He does not desire protection. What he might really like would be — though it would scarcely be sportsmanlike — that there should be no restrictions of size or age, but that he might be free to enter for all the events, and to sweep off all the prizes. This removal of all limitations might suit one particular boy, but it would hardly be in the interest of all the boys at the same time. In the same way foreigners began to urge that Free Trade was not equally advantageous to all nations at the same time. They were inclined to think that England was pursuing a policy which suited her highly developed national life, and was trying, under the pretence of cosmopolitanism, to force it on other countries to which it was inapplicable. By 1880, the failure of Cobden's effort to induce other countries to adopt Free Trade had become conspicuous. In so far as they had tried it, they had come to the 92 FREE TRADE [CHAP. conclusion that it did not suit them. The futility of this project, for lajdng a foundation of national in- terdependence on which a fabric of universal peace might securely rest, had been thoroughly exposed. iii. The restatement of the question. In 1880, when it became obvious that other countries had decided against the adoption of Free Trade, the whole question was set in a new light; the prospects of cosmopolitan commercial intercourse were changed. The advocates of Free Trade had been able to represent it as something that was within the range of practical politics, and to take for granted that, because their system was expedient for the world as a whole, every part of the world would be sure to adopt it sooner or later ; it was a mere question of time, and England was, as became her, in advance of other countries. The reversion to protection showed that universal Free Trade could not be realized within any brief period; and that the example of England was not exercisiug a persuasive influence. The whole of the cosmopolitan enthusiasm which lay behind the Free Trade movement was damped ; it could no longer be represented as a simple remedy which would exorcise the angry passions of rival nationalities. It was of course true that the change of circum- stances made no difference to the economic theory of Free Trade. The doctrine could perhaps be stated with a little more precision, but that was all. If there were universal peace, and if every country had IV] COMMERCIAL TREATIES 93 reached its full economic development, the adoption of Free Trade would be beneficial to the world as a whole and especially to the consumers in every nation. As an abstract proposition no exception can be taken to the fundamental principle of Free Trade ; so clearly is it true that it has no more practical value than any other truism. The methods which Cobden recommended of realising this improved condition had failed ; and hence the question, for any men who were seriously in earnest about it, was to consider what other steps might offer a better prospect of securing the results he had hoped for. The abandonment of Cobden 's methods had become perfectly compatible with a stedfast adherence to Cobden's ideal. Even as regards England herself, the question was entirely altered. The prospective political efiects of our course might be left out of account in any discussion of its wisdom ; we were only called upon to view it as a matter of expediency, as it affected the prosperity of the United Kingdom. The constitutional results, which Cobden had had in view in the Corn Law agitation, had been gained ; by 1880 the exclusive power of the landed aristocracy was broken and the English Government had come to rest on a democratic basis. The question of Free Trade had lost its moral significance ; the issue was simplified by being limited to a discussion of the practical bearing of the new policy on the material well-being of the community. The fact that other nations had refused to follow in our track raised the 94 FREE TRADE [CHAP. suspicion in some minds that the line we had taken might not necessarily be the best for our own interests. Moreover, practical experience shewed that increased communication was not always beneficial ; the re-opening of the old route to the East by Suez had not been altogether to our advantage ; there were signs that some of our industries were migrating, and that our monopoly of shipping was becoming less complete. Was the position of England really so exceptional, and her development so abnormal that the scheme which other countries had found pre- judicial to themselves was really good for us ? These uneasy questionings found admirable expression in the speech which Lord Salisbury made at Hastings on 18th May, 1892:— "After all this little island lives as a trading island. We could not produce in foodstuffs enough to sustain the population that lives in this island, and it is only by the great industries which exist here and which find markets in foreign countries that we are able to maintain the vast population by which this island is inhabited. " But a danger is growing up. Forty or so years ago everybody believed that Free Trade had con- quered the world, and they prophesied that every nation would follow the example of England and give itself up to absolute Free Trade. The results are not exactly what they prophesied, but the more adverse the results were, the more the devoted prophets of Free Trade declared that all would come right at last; the worse the tariffs of foreign countries IV] COMMERCIAL TREATIES 95 became, the more confident were the prophecies of an early victory. But we see now, after many years' experience that explain it, how foreign nations are raising one after another a wall, a brazen wall, of protection around their shores, which excludes us from their markets, and so far as they are concerned do their best to kill our trade. And this state of things does not get better. On the contrary, it constantly seems to get worse. Now, of course, if I utter a word with reference to Free Trade I shall be accused of being a protectionist, of a desire to over- throw Free Trade, and of all the other crimes which an ingenious imagination can attach to a commercial heterodoxy. But nevertheless I ask you to set yourselves free from all that merely vituperative doctrine, and to consider whether the true doctrine of Free Trade carries you as far as some of these gentlemen would wish you to go. Every true religion has its counterpart in inventions and legends and traditions which grow upon that religion. The Old Testament had its canonical books, and had also its Talmud and its Mishnah, the inventions of Rabbinical commentators. There are a Mish- nah and a Talmud constantly growing up. One of the difficulties we have to contend with is the strange and unreasonable doctrine which these Rabbis have imposed upon us. If we look abroad into the world we see it. In the office which I have the honour to hold I am obliged to see a great deal of it. We live in an age of a war of tariffs. Every nation is trying how it can, by agreement with its 96 FREE TRADE [CHAP. neighbour, get the greatest possible protection for its own industries, and at the same time the greatest possible access to the markets of its neighbours. This kind of negotiation is continually going on. It has been going on for the last year and a half with great activity. I want to point out to you that what I observe is that while A. is very anxious to get a favour of B., and B. is anxious to get a favour of C, nobody cares two straws about getting the commercial favour of Great Britain. What is the reason of that ? It is that in this great battle Great Britain has deliberately stripped herself of the armour and the weapons by which the battle has to be fought. You cannot do business in this world of evil and suffering on these terms. If you go to market you must bring money with you. If you fight you must fight with the weapons with which those you have to contend against are fighting. It is not easy for you to say, ' I am a Quaker,' ' I do not fight at all, I have no weapon,' and to expect that the people will pay the same regard to you and be as anxious to obtain your good-will and to consult your interests as they will do for the people who have retained their armour and still hold their weapon. The weapon with which they all fight is admission to their own markets, that is to say, A, says to B., ' If you will make your duties such that I can sell in your market, I will make my duties such that you can sell in my market.' But we begin by saying: ' We will levy no duties on anybody,' and we declare that it would be contrary and disloyal to the glorious IV] COMMERCIAL TREATIES 97 and sacred doctrine of Free Trade to levy any duty on anybody for the sake of what we can get by it. It may be noble, but it is not business. On those terms you will get nothing, and I am sorry to have to tell you that you are practically getting nothing. The o^jiniou of this country as stated by its authorised exponents has been opposed to what is called a retaliatory policy. "We as the Government of the country at the time have laid it down for ourselves as a strict rule from which there is no departure, and we are bound not to alter the traditional policy of the country unless we are convinced that a large majority of the country is with us, because in these foreign affairs consistency of policy is beyond all things necessary. "But though that is the case, still, if I may aspire to fill the office of a councillor to the public mind, I should ask you to form your own opinions without reference to traditions or denunciations — not to care two straws whether you are orthodox or not, but to form your opinions according to the dictates of common sense. I would impress upon you that if you intend, in this conflict of commercial treaties, to hold your own, you must be prepared, if need be, to inflict upon the nations which injure you the penalty which is in your hands, that of refusing them access to your markets. (A voice, 'Common Sense at last.') There is a reproach in that interruption but I have never said anything else. And there is a great difficulty. The Power we have most reason to 98 FREE TRADE [CHAP. complain of is the United States, and what we want the United States to furnish us with mostly are articles of food essential to the feeding of the people, and raw materials necessary to our manufactures, and we cannot exclude one or the other without serious injury to ourselves. "Now I am not in the least prepared for the sake of wounding other nations to inflict any dangerous or serious wound upon ourselves. We must confine ourselves, at least for the present, to those subjects on which we should not suffer very much whether the importation continued or diminished, but what I complain about of the Rabbis of whom I have just spoken is that they confuse the vital point. They say that everything must be given to the consumer. Well, if the consumer is the man who maintains the industries of the country or is the people at large, I agree with the Rabbis. You cannot raise the price of food or of raw material, but there is an enormous mass of other articles of importation from other countries whicli are mere matters of luxurious con- sumption But as one whose duty it is to say what he thinks to tlie people of this country, I am bound to say that our Rabbis have carried the matter too far. We must distinguish between consumer and consumer, and while jealously preserving the rights of a consumer who is coextensive with a whole industry or with the whole people of the country, we may fairly use our power over an importation which merely ministers to luxury, in order to maintain our IV] COMMERCIAL TREATIES 99 own in this great commercial battle." This was at least an effective plea for the recognition of the fact that the question was assuming a very different aspect from that which it had presented to the public mind in the Forties and Fifties. r_2 CHAPTER V. IS ONE-SIDED FREE TRADE EXPEDIENT FOR ENGLAND? So far we have been dealing with matter that is non-contentious — mere ancient history ; but our hasty review of the rise of the Free Trade movement in the world, and of its decline since 1870, has brought us face to face with a burning question : — Is it worth while to reopen the controversy which seemed to have been decided in 1846 ? Is there even n prima facie case for reconsidering the decision, or may we not regard it as a chose jiigee / There is a very strong and very wise indisposition on the part of the Englisli public against anything that seems to imply going back ou wliat has been deliberately done by tlie nation. We have no written constitution ; the whole stability of our system of government seems to depend on this habit of accepting an accomplislied fact. Those who, in opposition, may be most strongly hostile to sonic proposed change generally make no attempt to reverse it when they get into power. They IS ONE-SIDED FREE TRADE EXPEDIENT? 101 accept the inevitable and try to make the best of the sclieme they liave denounced. The obligation to take this line becomes infinitely stronger when there has been a definite appeal to the country, and the citizens have endorsed the action of Parliament ; this was fully recognised by Disraeli in his Budget Speech in 1852', and by Lord Salisbury in 1892. The fact that, as we have seen, the decision was forced on by an apparently accidental conjuncture of circumstances does not greatly weigh with us ; almost every impor- tant event in history can be represented, when we know about it in detail, as the outcome of some trivial incident. Nor need we be greatly influenced by the fact that the introduction of Free Trade has not accomplished all that was expected of it. The advocates of a change are always apt to be over- sanguine ; and the fact that they miscalculated does not necessarily shew that the course on which we entered nearly sixty years ago was unwise. Granted that Free Trade, as we adopted it, has not proved to be a stepping-stone to universal Free Trade, but that we have been thrown back on a scheme of one-sided 1 " We wished, after tlie event of the last general election, mulerstanding as we did from tlie result of that election that the principle of unrestricted competition was entirely and finally adopted as the principle of our commercial code — we wislied to consider our financial system in relation to our commercial system — to see whether they could not be brought more in harmony together, and whether in bringing them more in harmony together, we might not. ..lay the foundations of a system which should not only in future be more beneficial, but which should enlist in its favour the sympathies of all classes." 3 l/ansard, cxxiii. S38. 102 FREE TRADE [CHAP. Free Trade' , may we not have reason to be satisfied with it, as sound in principle, and successful in practice? Hence we are forced to consider how far insular Free Trade is conducive to English prosperity. Just as we discussed the good and bad of the Mercantile System, as it existed during the second quarter of the nineteenth century, so we may examine how far, during the twenty -five years with which it closed, one-sided Free Trade has been really beneficial in promoting the national prosperity of England. Statisticians are content to get at the history of the recent past as accurately as possible, but we are rather concerned to examine the stability of our present conditions, and to ask how far they portend a continuance of national prosperity. i. The Extension of Trade cmd Industry. There can be no doubt that, when tried by any ordinary criterion, there has been an enormous growth of national industry and commerce since Free Trade was adopted in 1846. We may take the method of measurement which Sir Robert Peel employed in shewing that the tentative movement in the direction of one-sided Free Trade, on which England entered in 1842, had been successful", and enquire as to the value of our exports. They may be reg-irded as pro- bably indicating that the productive power is vigorous, 1 This torm was used by Disraeli in 1852. " I look," be said, "on one-sided free-trade as an obsolete ojiinion." 3 llanaanl, cxxni. K5H. » 27 Jan. IHIO. 3 llumard, l,\xxiii. 277. V] IS ONE-SIDED FREE TRADE EXPEDIENT? 103 and as certainly sliewing that the country has a large amount of purchasing power with which it can procure commodities, or make investments in other lands. The figures, in millions, as given in the recent Board of Trade Report ' are as follows : 1840 £51,000,000. 1850 £71,000,000. 1860 £135,000,000. 1870 £199,000,000. 1880 £223,000,000. 1890 £263,000,000. 1900 £282,000,000. The year 1840 shows the condition of English trade, after the chief mechanical changes which were comprised in the Industrial Revolution had been introduced, but before Peel's changes in the tariff began in 1842. The growth which has gone on since that time has doubtless been partly influenced by the development of steam navigation and other causes ; but it is impossible to tell what allowance ought to be made for these influences ; and we can certainly say that under the scheme which England adopted in 1846 there has been an enormous growth. At the same time, it is clear that the rate of progress has not been maintained in the last decades. We may take 1850 as the year when the influence of the new policy began to be felt ; the value of the exports had increased 1 Memoranda, Statistical Tables and Charts with reference to British and b'oreifjn Trade and Industrial Conditions, 1903. 104 FREE TRADE [CHAP. ninety per cent.— from £71,000,000 to£135,000,000— before the decade was out. During the next decade the increase was forty-seven per cent.; from 1870 to 1880 the rate of increase fell to twelve per cent.; and though in the following decade it rose to nearly eighteen per cent. , in the last decade of last century it dropped to seven per cent. This diminishing rate of increase should not be overlooked ; though it may be the opinion of the ordinary man, who is a little suspicious that statistics lend themselves to the subtlest forms of special pleading, that so long as progress continues, even though it be at a diminished rate, we need not greatly concern ourselves about the principles we have adopted. ii. Is this develop}nent ivhoksome? The magnitude of the development of our export trade is not, however, in itself conclusive ; it is after all only one test of the economic condition of the country— though a very useful test. We may re- member that, as we had occasion to notice, the Mercantile System was admirably successful when tried by the criterion which its founders would have applied ; it had built up the maritime power of England, and afforded an enormous revenue for naval and military purposes. At the same time, when viewed in other aspects, it was condemned. We are therefore called upon to look a little more closely at the scheme of insular Free Trade, and to ask whether this great development is really wholesome ? We are V] IS ONE-SIDED FREE TRADE EXPEDIENT? 105 less concerned with the rapid growth than with the stability of our national wealth. Can the progress which has been taking place go on indefinitely with greater and greater benefit to the nation as a whole? {a) There are two points that deserve conside- ration ; for one thing insular Free Trade, like Mercantilism in its last days', is a one-sided system. It has apparently benefited commerce and manu- factures, but one great side of national economic life has suftered. Since agriculture has not flourished under this scheme of policy, we are forced to recognise that this great economic development has been one- sided ; the country has not prospered all round. In this respect the progress of recent years is less satisfactory than the real, but slow, advance which occurred under the Mercantile System in the eighteenth century. That was an all-round develop- ment, in which interests of every sort participated ; commerce, manufactures, and land were all cared for, stimulated, and benefited- ; but in the last cpiarter of the nineteenth century the loss in one great field of national enterprise and the industries which are connected with it^, must be set against the gain in others, before the general effect on the community as a whole can be satisfactorily estimated. Till 1874 it could hardly have been said that agriculture had failed to share in the general pros- 1 During the period from 1815 to 1845. See above, p. 58. 2 See above, p. 29. 8 See Mr Druce's evideucc (Dl-IG) in lleport of Commiasion on Depression of Trade (1886), xxm. 05. 106 FREE TRADE [CHAP. perity of the Free Trade era ; it appeared as if Cobden's anticipations, as regards the rural districts, had been completely justified, for there had been no ruinous fall in the price of agricultural products. To this result several unforeseen influences had contri- buted ; the Crimean War shut up the sources of Russian supply, and prevented Russian competition from coming into play ; while the American Civil War in 1861 greatly delayed the development of the great wheat-growing regions of the West. Since 1875 the forebodings of the agriculturists — which Cobden dismissed with scorn — have been realised. The state of the case has been excellently summarised by Mr Inglis Palgrave — the only living economist whose work is of such a standard that he has been elected a Fellow of the Royal Society. As a banker of established reputation who was for many years editor of the Economist and subsequently of The Dictionary of Political Economy his knowledge is very wide, and his calculations deserve the most careful consideration. He estimates that during the twenty years from 1883 the landed interest, especially the landlords and tenant-farmers, lost a sum which approximates to £800,000,000'. If the prices of 1874 had been kept up they would have been richer at the present time by nearly the amount of the National Debt. This is a considerable amount for any class to lose, and it is not to be neglected in discussing the wealth of the community as a whole. 1 Eronomic Condition of the f'oiiniru in Kational lteviev\ Nov. 1<)03, p. 402. V] IS ONE-SIDED FREE TRADE EXPEDIENT? 107 The nation can perhaps afford to lose it, and the gain from other sources may serve to recoup this loss and more ; but at least it may be said that the great development of prosperity to which the figures of our export trade testify has been one-sided, since an important factor in the economic life of the country has suffered so much. (b) Again, it must be remembered that this great development has been, not only one-sided, but arti- ficial. Protective legislation is most easily justified economically when it aims at fostering some indus- try for which the country really possesses great advantages, and thus stimulates development along natural lines. The Mercantile System had this character to a very large extent in the eighteenth century ; but the advocates of Free Trade desired a more careful reliance on the guidance of nature. Adam Smith was inclined to condemn any departure from the natural progress of opulence. He held that the legislator ought to take account of the resources of the country, the climate, soil, geographical position and harbours, and build up the economic fabric on this basis. Cobden was even more decided in his view that the very meauing of Free Trade was that it gave free play to nature, and afforded every nation the opportunity of taking advantage of the natural gifts bestowed on different parts of the world. He was anxious that politicians should not interfere with prices, or the natural development be distorted by the demands of particular classes, and the jealousies of different countries. But the lines of 108 FREE TRADE [CHAP. our recent development have ceased to be determined by natural conditions ; the direction of our industry- is controlled, not by our own politicians, but by the statesmen of other countries. The Englishman is no longer master in his own house, but pursues the occupations that his neighbours assign him. We are forced to relinquish certain manufactures for which our country is well adapted, because of the encourage- ments which foreigners give to their own industries, and the discouragements they place on the importation of our wares. We are compelled to devote ourselves, not to those things which we are naturally fitted to do best, but to those trades which they are inclined to leave to us, for the present at all events. It may be, as is alleged, that these are very profitable industries and exceedingly well worth carrying on ; but the development is not natural. In defending our present scheme, the fundamental position of those who advocated Free Trade in the eighteenth century, and of those who carried it through in the nineteenth, must be abandoned. The Cobden Club no longer contend for a natural distribution of industry, but for the maintenance of an unnatural distribution which pays. In 1886, Mr Medley wrote in one of their publications, " that very powerful arguments can be adduced in favour of the view I hold, which is that considering where we stand now, univvjrsal Free Trade, though it would incalculably benefit the world at large, might not be that unmixed national blessing to us which it is presumed by many it would be.... If universal Free Trade prevailed, it is certain that V] IS ONE-SIDED FREE TRADE EXPEDIENT? 109 articles would be manufactured where production could be most cheaply carried on. If so, we have to ask ourselves, Is Great Britain the cheapest place for the production of iron and steel, or of ships, or of cotton goods, or of machinery ?... These considera- tions are quite enough to cast a doubt on the assumption that protective tariffs prevent us from doing a larger trade than we otherwise should do, and to make us think that universal Free Trade might not maintain us in the commanding position we now hold'." As an illustration it may suffice to say that the confectionery trade seems to have been aided by the foreign sugar bounties^, and our ship- building by the dumping of foreign steel and iron^ To whatever extent this is true, the form which our industry takes at present is artificial, and the official advocates of insular Free Trade recognise that this is the case. As a German admirer of our present system put it when defending 'chronic dumping,' — " Whether the greater cheapness comes artificially or naturally does not matter*." This may be so, if we do not wish to look behind quotations of prices at the present hour ; but the natural distribution of industry tliroughout the world is of vast importance, if we are trying to take the stability of industrial prosperity in each country, and the preservation of friendly relations between different communities, into account. 1 G. W. Medley, Pamphlets and Addresses, 181-8. 2 Sir V. H. P. Caillard, Imperial Fiscal liefonn, 8r>. « W. J. Ashley, Tanff Prohlcm, 11-2. ■• H. Dietzel, British Association, F., Standard, 20 Aug., 1904. 110 FREE TRADE [CHAP. iii. The j^robable Effects on National Resources^ personal and physical. Even though there may be a general consensus of opinion as to the character of an existing system, there is not likely to be much unanimity in the anticipations which different people may indulge as to the probable effects of continued development along these lines. Modern society is complex, and the phenomena with which we are concerned are in a constant state of flux ; observation is difficult, and it is not easy to discern the trend of affairs with any precision. The slow and cumulative action of such an influence as a national economic policy is par- ticularly difficult to trace or to gauge. But there are two points which we may endeavour to consider. By common consent' the great resources of any country — on which its material prosperity depends — are twofold ; on the one hand there is the popula- tion, and on the other the physical possessions which may be included in the term land. These are the two factors which are essential to the maintenance and progress of the material welfare of any country. We may try to see how each of them is likely to be affected by insular Free Trade. («) The rapid growth of manufacturing, with no corresponding agricultural progress, might be expected to have serious results upon the population. There 1 Coiiijijue ]I(j1i1)('s, EnijUuli Worl-i, in. 232, and Locke, Civil (lovcrnintul, in ll'vr/cn, iv. §§ iJV, 10, 12. V] IS ONE-SIDED FREE TRADE EXPEDIENT? Ill is not indeed any likelihood, as there might have been in earlier days, that the numbers would decline for want of sufficient produce to maintain them ; there are such facilities for purchasing corn in foreign parts that an ample supply of cheap food has been forthcoming ; while this is the case there is every prospect that the numbers of the population will be at least maintained. Cheap food gives the opportu- nity of an increase of population ; according to the best established of all the generalisations of Economic Science there is a tendency for population to increase up to the limit set by the means of subsistence. The researches of Malthus went to shew that cheap food is in itself a doubtful benefit to a community — the mere rendering of the necessaries of life less expensive may give rise to a redundant population. The cases of the negro population in tropical countries, and of the natives of southern Italy and of Ireland, have all been stock illustrations of the evils which may accrue from the cheapness of food in a country where there is either the lack of will or the lack of oppor- tunity to obtain work. This state of affairs has not been unknown in England. In the time of Elizabeth, and again at the era of the Revolution, there seem to have been a large number of idle members of the body politic, and the difficulty of planting and foster- ing industries so that they might be absorbed in the active life of the community, was a problem with which public authorities and philanthropists alike were always endeavouring to deal. Under modern conditions there is a danger of the recurrence of the 112 FREE TRADE [CHAP, same eviP. The mechanical improvements of the last hundred years have given an increased means of purchasing food, but have in some ways curtailed opportunities for employment, especially in rural districts. In these circumstances the existence of a " submerged population " in our towns, and of serious overcrowding need not be a matter of surprise ; it is exactly what we might expect to happen, and what is likely to continue under the existing conditions of cheap food and inconstant employment. There is also a considerable probability that when the population is redundant, there will be a deteriora- tion in its quality, both physical and moral. It has been a widely spread opinion for generations that the portion of the population which had most stamina was that which was bred and reared in the rural districts, and that the increase of an urban, relatively to a rural, population was in many ways undesirable. According to Mr J. E,. Macculloch this was an evil which was closely connected with the growth of factory industry, and it was one for which he saw no remedy'. He underrated the force of the corrections which have been introduced through the association of skilled workers ; but it would be difficult to shew that the tendency he noted has been inoperative. 1 CoMeu's scheme of providing increased cmploymeut without loweruig tlie price of fond would, if it had been practicable, have done notliinj:; to encourage the growth of a redundant population. Insular Free Trade as it has worked out with supplies of cheaji food, and entire carelessness about the matter of eniploymeut, affords no safeguard agahist " boy and girl marriages," among populations who obtain work casually. ■■* I'reatises and Essai/s (1859), 4.54. V] IS ONE-SIDED FREE TRADE EXPEDIENT? 113 The trend of migration from rural districts to towns has certainly gone on much more rapidly than he expected, for he did not anticipate that agriculture would be exposed to disastrous competition. There are hardly sufficient accurate data available to make it perfectly clear whether the alleged deterioration of the national physique is well founded, and it would pro- bably be impossible to get any evidence as to changes in rural stamina ; but for all that, the tendency may exist even if the numerous activities, both municipal and philanthropic, for improving the conditions in which the poor live and work, have succeeded in counteracting it altogether. It is easy to propound heroic remedies for overcrowding, and to insist that municipalities should provide adequate house accom- modation ; it is still simpler to blame owners or land- owners for the existing state of affairs; but it is difficult to be sure that the one-sided development of our economic life has not tended to aggravate the evil. (b) There is far less difficulty in getting at the facts in regard to the other factor of continued national prosperity, and in seeing how it is faring with our physical resources. So far as the surface of the land is concerned there can be no doubt that the acreage which is under tillage has been greatly reduced during the last thirty years. The area of corn crops in the United Kingdom has shrunk more and more, from 11,54:3,777 acres in 1871-5 to 8,392,863 acres in 1903'. This does not 1 AgriciiJtural Returns (Board of Apricultnre ami Fisheries), 1903, p. 44. c. 8 114 FREE TRADE [CHAP. mean that pasture farming has become more profit- able, and that the tenants find it wiser to devote their attention to stock breeding rather than to husbandry. The grass counties have suffered from a fall in the value of stock, just as the arable counties have from a fall in the value of wheat — though not to the same extent as yet. Nor is it true to suppose that agricultural land is a mere natural gift ; an English farm is a highly complicated product of civilisation, and if it is disused for a time, or badly used, it deteriorates in every way. The machinery becomes valueless, the buildings go out of repair, and the land itself becomes foul. Land lying idle, or land badly cultivated, is the outward symbol of the ruin that has overtaken many districts. The whole industry in all its branches has been very severely hit, and the loss has affected every class connected with the agricultural interest. The landlords are the class who had most to lose, and their loss, in the capitalised value of their greatly reduced rentals, has been enormous. There is a general impression that this is merely the private concern of a class, and does not really imply any injury to the community ; but it is a mistake to suppose that English landlords are mere rent receivers, who obtain an unearned income by merely allowing other people to work their land ; they actively co-operate with their capital in the main- tenance of farming buildings and the improvement of the soil. The impoverishment of the landlord class means that there is much less capital available for working the land of the country effectively, and that V] IS ONE-SIDED FUEE TRADE EXPEDIENT? 115 this great national asset is not being utilised to its fullest extent. The impoverishment of the landlords is having another result, in the increase of absenteeism. Men can no longer afford to reside on their estates, and are forced to let their country houses to wealthy city men who occupy them as occasional holiday resorts. The social evils of such absenteeism do not concern us, when we are applying ourselves to a strictly economic question ; but it is worth while to remember that in earlier days severe measures were taken by the Crown to check the growing non-residence by the country gentry. The economic effects of absenteeism on village life may be very serious, in doing away with a considerable local demand for produce of many kinds, and cutting down the opportunities of employment. It is particularly un- fortunate, too, that at a time when there seems to be the need to introduce more co-operation and organisa- tion in rural districts, those who are from their position most competent to take a lead in the matter should be losing touch with local interests and re- quirements. In the eighteenth century, when agri- culture was remunerative, there were many spirited proprietors who set an example by introducing improvements, and inducing their tenants and neighbours to adopt them. It is not the least serious feature of the present agricultural distress tliat so many proprietors are not only without the capital, but unable to retain the position which is necessary for a pioneer. 8-2 116 FREE TRADE [CHAP. The loss as regards the labouring class has been of a different kind ; many of tliem have been forced to go to towns, and to emigrate, and some have doubt- less become more prosperous personally in their new surroundings than they would have done in the old conditions ; though it is not likely that the change has been for the better in all cases. The diminution of employment in niral districts, with the overcrowding of the towns, is an evil, even if each generation of immigrants succeeds in keeping a relatively high level in their new surroundings. The reduction of the demand for rural labour has had its natural effect in a diminution of supply ; and a consequent rise in the rate of rural wages. This does not appear to have been accompanied by any obvious increase in efhciency, so that there is, generally speaking, a considerably higher expense for labour in connection with agri- cultural production than was formerly the case. Under these circumstances it cannot be said that the position of the tenant-farmer is very satisfactory. He has not to pay nearly such a high rent as fell on him in 1874, but the landlord is less able to co- operate with him in improvement. Prices have fallen, but his labour bill is far higher than it was. Viewing the matter as a whole we may say that under influence of insular Free Trade there has not only been an enormous loss, but tha industry has been so far disorganised that there is great diflficulty in facing the new conditions and trying to make the best of them. Besides its agriculture, another verj-^ valuable V] IS ONE-SIDED FREE TRADE EXPEDIENT? 117 national asset is the mineral wealth of the country ; and this is necessarily being exhausted. The art of tillage consists in getting a large amount of produce every year without exhausting the soil, but the labour of the miner is extractive, and no known art can replace what he takes away. This is sufficiently obvious, and the precise rate of exhaustion is not a point on which it is necessary to spend much time. In so far as our present industrial prosperity depends on native supplies of coal and iron, it rests on an insecure foundation, since these supplies are being used up with greater or less rapidity'. Attention was first directed to the seriousness of the problem in 1865 by the late Professor W. Stanley Jevons". In 1891 I heard a discussion of the subject at the British Association Meeting at Cardiflf, when Mr T. Forster Brown stated that the maximum output would probably be reached in twenty-five years, and con- tinue for another twenty-five years ; and that after that period another element in the commercial position of the nation — a greatly enhanced cost of fuel — would begin to be felt I England has already had experience of the effects of a deficient supply of fuel ; in the seventeenth and eigliteenth centuries the supply of wood for fuel was running low, and a serious stagnation resulted in some of the staple 1 W. J. Ashley, The Tariff Prohl em. 100. ■^ " To allow commerce to proceed until the source of civilisation is weakened and overturned is like killing the goose to get the golden egg." The Coal Question, 31;"). •^ British Association L'ejwrt, 1891, p. 7o(>. 118 FREE TRADE [CHAP. industries. The revenue shewed no elasticity, and there was great difficulty in meeting the annual charges on our debt. It was only by the series of inventions and discoveries, which rendered it possible to substitute coal for wood in the smelting and working of iron, that England was relieved from this depressing influence and enabled to make the enormous advance she did. It is needless to point out that in the present day dear fuel would affect not only the hardware trades, but aU the various indus- tries, textile and others, in which steam power is employed. This national asset is of supreme import- ance, and while it would be absurd to contend that our mineral treasures should be hoarded and not used, it is worth consideration whether we are shewing the sort of good management which would be exercised by a private owner, and forming investments which ade- quately represent in the national capital account the value of the extracted coal'. iv. The Balance of Loss and Gain. This brief survey of the condition of the country, after half-a-century of one-sided Free Trade, seems to shew that the prmd facie case for reconsidering the ' " The energy of fuel is derived from the suu's rays ; coal hoing the store which nature has laid up as a species of capital for us, while wood is our precarious yearly income. Wo are thus at present (1873) very much in the position of a young heir, who has only recently come into his ostatcs, and wlio, not content with tlie income, is rapidly squandering his realized property." Balfour Stewart, Conservation of Energy, 144. V] IS ONE-SIDED FREE TRADE EXPEDIENT? 119 decision taken in 1846 is exceedingly strong. A great development has occurred, but it has been so one-sided and artificial that it can hardly be regarded as healthy ; the opinion of Napoleon and his contemporaries as to the instability of the British Colossus ', is much more nearly true under the regime of insular Free Trade than under the Mercantile System of the eighteenth century. The alleged deterioration of our population and the waste and exhaustion of our physical resources are serious symptoms ; it is difficult to share the com- placent optimism which finds expression in many quarters. In spite of the growth of our export trade, the doubt may well arise whether our industrial prosperity is sound, and whether it can be developed with advantage farther and farther along the existing lines. The doubt becomes more serious when we compare the recent industrial development of this country mth that of some of her neighbours. England is not by any means the only country that has enjoyed a growing trade during the last thirty years ; Germany and America have also prospered in an extraordinary fashion, and while the rate of progress in England is decreasing, the United States are developing their trade with increasing rapidity. The exports from England have grown absolutely, but relatively to the advance made by other countries England has fallen behind in the race. The popular explanation of this state of affairs is not altogether reassuring. It is said that England 1 Cimuiugbain, Growth of English Industry, n. 677. 120 FREE TRADE [CHAP. is an older country ; that America is young ; that therefore the rate of progress in the United States is necessarily greater, and that we should be perfectly satisfied so long as we continue to grow at all. But after all the terms 'young' and 'old' are not very illuminating ; the distinction which is important economically does not lie in the age of a state in years, but in the character of its productions. During the eighteenth century England was a country which exported corn ; this was a commodity the amount of which could not generally speaking be increased, except at an increased rate of expense. Trade which is founded on such products cannot be expanded indefinitely, and an ' old ' and high civilisation cannot expect to carry on such commerce. But with manu- factures the case is different ; an increased amount can be obtained at a diminishing cost of production, except in so far as it is counterbalanced by an in- creasing dearness of food, of fuel, or of materials. Just because England was already manufacturing on a large scale, she had an enormous advantage for increasing her lead ; the same principle must be borne in mind with regard to our shipping. According to Sir A. Swettenliam, "the Singapore region has been developing very largely in the last twenty years, and there has been an enormous increase of trade all round," but in looking at statistics he thinks it will be found that "we were the very first in the field, and we have had all our agencies establislied, and we had a very large amount of shij)]tiiig in our possession ; and other things being equal, certainly ought to have V] IS ONE-SIDED FREE TRADE EXPEDIENT? 121 developed at the same rate as others, if not faster, because being on the spot, and having everything going like clockwork, it would have been easier for us to have increased our trade than for others who were not on the spot. What we find is that the foreigners, or certain foreigners, notably the Germans and Japanese, have increased their trade very much more rapidly and very much more efficiently than we have done\" England could apparently add to her pro- duction more cheaply than other countries working on a smaller scale could add to theirs. When we get rid of the delusive analogies about 'young' and 'old,' we see that, considering the character of English industry, the trade founded upon it can hardly be said to have been really prosperous, since we have lost the lead we once enjoyed in the steel and iron trades, while neither woollen^ nor cotton' can be regarded as flourishing industries. The view of English economic life, which is accepted by some advocates of one-sided Free Trade, is to my mind a further reason for reconsidering the decision which was taken in 1846. It is a counsel of despair. We are told that we are merely helpless— and that anything we may attempt will only make matters worse. We have a large redundant population — * Report of Select Committee on Steamshq) Subsidies, 1902, ix. 312. ^ Minority Report of Royal Commission on Dejiressioti of Trade, 1880, xxiu. ool and 560. * W. A. Abram, Prospective Decline of Lancashire iii Black- ioood, July, 1892, Vol. 152, and Helm in Quarterly Journal of Economics, xvii. May, VMS. 122 FREE TRADE [CHAP. 13,000,000 of people on the margin of starvation — therefore we must have cheap food at all hazards, even at the risk of perpetuating and increasing this class. Our agriculture has decayed, but we cannot help it ; our coal is being exhausted, but there is nothing to be done. There was a time when the principle of laissez-faire was put forward as stating a condition which would enable the enterprising man to use his opportunities for his own greatest advantage and that of the nation ; it has become a mere sub- • terfuge under which carelessness of national interests and indifference to national duty may cloak them- selves. This patient acquiescence in a policy of drift is a serious symptom of decadence, but it is not so deep-seated as to be ineradicable. We have got rid of it in regard to the conditions of labour; the whole system of the factory and mines Acts, and of factory and workshop inspection, is the expression of a definite opinion that regulation and organisation are desirable. We have got rid of laissez-faire in many matters connected with the conditions of life — the sanitary state of towns, and the training of children ; these are matters which ought to be attended to, and not left to drift. We have got rid of laissez-faire in many matters of business, in the control exercised over internal communication by railways, and in the subsidising of shipping com- panies. The policy of drift is only maintained in the sphere where it is most disastrous to the dignity and reputation of the nation — our commercial inter- course with otlier lands and with our own colonies. V] IS ONE-SIDED FREE TRADE EXPEDIENT? 128 We cannot hope to win, or to retain, the respect of our neighbours, or the attachment of English peoples beyond the sea, unless we abandon this decadent lassitude and make an effort to face the difficulties that beset us. They are great, but they will only be fatal if we allow ourselves to be supine. Before all things it is necessary that we should carefully reconsider our position, and see if there is any way in which it can be improved. CHAPTER VI. EXPERT OPINION. Many English citizens who are inclined to think that there is a prima facie case for reconsidering the relative advantages of pursuing the system of one- sided Free Trade and of making some new departure, may yet feel doubtful of their own competence to come to a right decision, either one way or the other. The case is very complex, and there is a mass of plaus- ible statements which it seems impossible for anyone but an expert to sift, so as to form a trustworthy judg- ment. Unfortunately, public confidence in economic experts has been somewhat shaken. During the first half of the nineteenth century they were ready to oifer their guidance with considerable confidence, and educated men were on the whole disposed to accept it. These days have passed away, and there is a disposition in many quarters to resent the very a])pearance of academic pretensions to deliver an authoritative opinion on public affairs'. Still, the 1 Times, If) Aug. ll)U3. (JHAP. Vl] EXPERT OPINION 125 plain man, who sneers at "scholars who be hoodwinkt and brought up within the walks of a Colledge'," may- still be distrustful of his own judgment and inclined to think that deference should be paid to Economic Science after all. But this science does not pose as a master that demands deference ; it ofters itself as a servant, who is ready to give such help as is asked for. As a servant, it is invaluable in assisting the judgment and suggesting a course that may be tried ; but a good servant may sometimes prove to be a very bad master. Despite its many merits, there are good reasons for refusing to look to Economic Science as an authority which can lay down the law about any practical question and settle it offhand. Beginners in the study of Economics are impressed by the acute analysis and forcible reasoning which serve to lay bare the inner grounds of complex human action. They feel the glamour of a study which brings order and system into the social chaos, and they can hardly help being enthusiastic advocates of the claims of the science to speak with authority. It seems to throw such searching light, that the conclusions reached appear to have demonstrative certainty. The more advanced student, however, is not unlikely to feel some hesitation as to whether these pretensions to speak authoritatively are really well founded ; he will have learned that Economics is better fitted to play the part of the solicitors who get up the case on each side, than that of a Court of Appeal delivering judgment. 1 Fenton, Treatise of Usury. 126 FREE TRADE [CHAP. i. Economic Science as a Master. Economic Science owes much of its attractiveness to the manner in which it introduces clearness and accuracy into the rough and ready discussions of ordinary life. The terms which are bandied about in popular discourse can be taken up and treated with precision ; and the confusions of thought, which lurk under vague language, can be exposed by careful analysis'. But in grasping at this advantage — and it is a great advantage — we run the risk of losing touch with actual affairs ; we need to be on our guard against habituating ourselves to think and argue in an unreal world of notions, that are not quite apposite to the conditions of actual life. Adam Smith's main achievement lay in his success in analysing the notion of Value-in-Exchange, and making it, as newly explained, the basis of his whole system of Natural Liberty. Since his time there has been an immense advance in the ace\irate definition of terms ; these are the great landmarks of the progress of Economic Science in its more formal aspects, and they serve as instruments for the better description and classification of complicated phenomena. But the tyro in Economics is in danger of assuming too hastily that the phenomena which bear some name in actual life correspond to the term • On the im])ortance of this formal side of Economic Study see Cunningliam, A Pica for Pure Theory in The Economic Hcvieio, ii. 30. It is a necessary elenxeut in the lucid discussion of economic phonomena. Vl] EXPERT OPINION 127 as he has become accustomed to define it. It was a very great achievement on the part of Ricardo to give us a doctrine of 'rent' as an economic conception, but the actual rents of everyday life are of many kinds and do not all correspond at all closely to the scientific definition. The prejudice against English landlords — as if they were mere receivers of ' economic rent,' and as if their interests were quite distinct from those of the tenant-farmer ' and the labourer — has been due, in no small degree, to a misconception on this point. The payments made to a landlord under the name of rent include the profit on the capital he has sunk in the land, as well as a payment for the advantages which his land possesses over other land which supplies the same markets. The economic term is perfectly clear, but it is a mistake to assume that it applies precisely to the actual phenomena of English agriculture. There is a danger of the same sort of error in regard to economic forces. The science, rightly and necessarily, separates out the desire of material wealth as an important factor in human life ; by isolating it and following out its probable effects systematically' we get the explanation of a large part of human affairs. Only persons of a cynical temperament would be prepared to assert that this account of human life was exhaustive, and that no such motives as political ambition or family feeling were ever operative as 1 On the convergence of these interests see J. S. Nicholson, Tenants' Gain not Landlords' Loss. * Buckle, History of Civilisation, ii. 41*2. 128 FREE TRADE [CHAP. modifying influeuces. The tyro is apt to use language which conveys the mistaken impression that such cynicism is an established scientific axiom \ The principles of Economic Science give us a clear state- ment of the manner in which one great force tends to act, but we need to examine the conditions of place and time before we can be sure that conflicting tendencies may be neglected and that this force is operating freely in any society. Economic principles are very clear, but they are not to be altogether trusted as representing the play of forces in actual life. To put it in another way. Before any science can be accepted as an authority, which is entitled to lay down the law for our guidance, two things are necessary ; the student must not only have clear notions, he must also be sure of his facts. The economist's ideas may be perfectly clear, but the competent student knows that he cannot be sure of his facts with the confidence which physicists or chemists are entitled to feel. With the growth and development of society, with the advances of invention and the progress of organisation, the subject-matter of Economic Science is constantly changing ; there is continual flux, and, on the whole, progress ; nothing remains stationary. The phenomena, with which the 1 Cobdeii a])pears to liavo bocii imtler the mistaken impression that this was tlic case, and allowed liimself to take a very low view of his opponents. Ho felt that the advantages of Free Trade were clear ; and he was apt to account for any opposition to his views by asserting that his opponents were swayed by merely interested motives. Vl] EXPERT OPINION 129 chemist deals are different in kind ; the same con- ditions can be produced in a laboratory, the same substance may be analysed over again, the results can be confirmed or corrected. There is the oppor- tunity for recurring observation, and for obtaining well-established data in regard to phenomena that continue unaltered during the whole period of human existence on the globe. In Economics, which studies the phenomena that arise through the changing desires and powers of men in utilising physical conditions, there cannot be any similarly solid basis of knowledge. We cannot get results that hold good for the whole period of the earth's history, or of human life ; the subject-matter has always been changing more or less; and in the age in which we live it is changing with extraordinary rapidity. In Mill's time it was possible to separate the history of the globe into long ages of custom — dark and scientifically inexplicable' — and the age of competi- tion which was coming into being in all progressive countries. But we now see that the conceptions which are most appropriate to one progressive coun- try are inappropriate to others ; the same analysis does not apply to those that are most closely akin. The economic life of the two branches of the Anglo- Saxon race is so distinct that the terms and analysis which are most convenient in dealing with the one 1 Modern Economic Science does not limit its range in this mamier, but endeavours to take account of economic phenomena in comminiities of every type. K. Biicher, Entstchimy dtr Volkswirth- schaft, 8. Cunningham, Plea for Pure Theory in Economic Beview, II. '27. c. 9 130 FREE TRADE [CHAP. are inadequate to a proper comprehension of the other. Professor Jenks rightly observes that "the 'normal price' of economists has been based upon cost of production under a system of competition among small capitalists"; and that under the con- ditions in the sugar industry in America this conception does not apply. " There is no normal level of competitive price based on the cost of production'." The ordinary economic analysis of English industry is inapplicable to American develop- ments. Fifty years ago it seemed possible to take for granted that the conditions which prevailed in England gave us a type which would continue here, and to which other countries would gradually con- form. The classical school of economists were always inclined to assume that the phenomena of their own time were permanent, and to generalise too hastily from the special conditions with which they were themselves familiar. They were as a consequence somewhat ready to assume the attitude of a master, and to lay down the law to public men as to the course which ought to be pursued. On purely doctrinaire grounds, and in opposition to the opinion of practical men in all parts of the country, they did away with the system of technical training by apprenticeship without attempting to provide a substitute; they were satisfied that it would suffice to let every boy learn his business as best he could. We have, as a nation, paid a heavy price for accepting such expert guidance. In a similar fashion, ' The Trust Problem (1901), 141, 142. Vl] EXPERT OPINION 131 and in the same doctrinaire spirit, the principles of colonial preference and of the Navigation Acts were abandoned in the Forties. Vigorous protests against the repealing measure were made at the time. " It was," as Lord Winchelsea said, "carrying out the principle of Free Trade with the most utter reckless- ness that had ever characterised a deliberative or national assembly. We had practical experience of our Navigation Laws. He defied any man to deny that under these laws England had risen above all other nations in the world to a just and proud dominion over the seas. And they were now to abandon this dominion for the adoption of a mere speculative measure of this Free Trade character'." The Government were able to carry their measure, but recent experience makes it clear that the an- ticipations of their critics were not merely wild^ There has been a great advance in every depart- ment of Economic Science during the last fifty years ; and one of the most noticeable marks of ])rogress is 1 12th June, 1849. 3 Hansard, cvi. 20. a Compare Sir E. Giffeii's evidence before the Select Committee on Steamship Subsidies. " Wliat I have said is, in fact, a proposal to revive, in part, the Navigation Laws, which were abohshed, amid great applause, half-a-century ago ; and tlie excuse is the cliauge of circumstances. It has been assumed in some quarters that our experience of the trade of the country since the repealing of the Navigation Laws has proved Adam Smith's apprehensions to be groundless — that we can trust to Free Trade in this matter ; but whether we could do so or not if there were no unfair competition, what we have to face is really a hostile attack on a vital industry of the country in time of peace, carried on, directly or indirectly, not by ordinary competitors but by foreign goverumeuts." ReiJOits (1902), IX. 390. 9—2 132 FREE TRADE [CHAP. that economists are more profoundly conscious of the limitations of their science. The principles of economic science are generalisations which are more or less widely true ; they give us a basis for saying what is probable under certain circumstances. But they never can supply statements that are universally valid in the world of fact ; and therefore they never can tell us what must happen. The economic ' must' is a survival from an earlier phase of the science which has been superseded ; it belongs to the age of the doctrines of the 'wages fund,' and of the 'last hour.' The expert, who at the present day asserts that imports ' must ' be paid for by exports, or that goods ' must ' be paid for with goods is taking a tone he has no right to adopt. It is perfectly clear that on the whole and generally a purchaser ' must ' pay for the goods he receives, or shopkeepers will not continue to supply him ; as an abstract proposition he ' must ' pay for what he receives. There are probably a large number of places in which the state- ment that a man 'must' live within his income is true in fact. It may even be generally true, but it is not true universally ; there are places in which and expedients by which it is possible for a man to live beyond his income for a long series of years. The public are not ready now-a-days to bow to the ipse dixit of the expert, and competent students no longer pose as authorities who can lay down the law for all times and places. Vl] EXPERT OPINION 133 ii. Economic Science as a Servant. While Economic Science cannot lay down general principles which apply to all communities alike in all parts of the world, it can he of great assistance {a) in criticising a course that has been pursued, or {h) in devising the means which may be adopted in any given place and time for securing some particular result. {a) From the time of Lord Burleigh onwards, for a period of two hundred years, the English nation knew very clearly what it wanted. Under all changes of dynasty and circumstances the object of building up national power was kept in view; and Economics, though not yet admitted to the circle of the sciences, proved an excellent servant, and gave admirable suggestions as to the manner in which this aim might be accomplished. Since 1815 there has been a revulsion of feeling. It seemed to the ordi- nary Englishman unnecessary to go on building up additional securities of maritime power at a time when there were no rivals who seemed worth conside- ration. At the same time attention was consciously directed to another object, which had been neglected in the last days of the Mercantile System. R(^bert Owen gave an extraordinary impulse to the philan- thropic movements of his time by setting himself to bring about the harmony of industrial progress and human welfare. The well-being of the masses of the people has become, in the eyes of many, the supreme 134 FREE TRADE [CHAP. object to which national activities should be directed ; and in so far as this is a matter of material conditions — food, shelter, health, and leisure — Economic Science is an excellent help to shew us how far this object has been attained, and in what directions it may be most easily promoted. In order to enquire into our success in attaining this result we naturally fix our attention on the evidence of the consumption of wealth, the amounts of the necessaries and conveniences of life which have been at the command of the community generally. This mode of examining the subject seems, in a democratic age, to be eminently fair. Consumption is a matter in which the whole community are directly interested. When we look at the production of wealth we obviously have to do with distinct interests, and possibly with conflicting interests. Not all the inhabitants of a country are engaged in the production of material wealth, and the welfare of some classes of producers, or some factors in the productive process, may be procured at the expense of other persons and classes. Ample opportunity for consumption, therefore, appears to afford the best test of the welfare of the community generally, and of every individual member severally. For the purpose of the examination of actual and observed phenomena this point of view serves admirably'. In modern times, and especially for the ' Tlie nmtbod must of course be used with discrinnnation; the mere chcapueSH of couimodilicH docs not shew that they have been geiiei'ally available for the laboiu'iug classes, unless the opportunities of employment and power of obtahiing the means of piu'chasing VI] EXPERT OPINION 135 last half century, when masses of accurate data are available, enquiries as to the command possessed by the community in general, and the working classes in particular, over the conveniences and comforts of life can be pursued with considerable accuracy. We have means of measuring the material progress of the community in the recent past that are reliable so far as they go. The question that the public desire to discuss, how- ever, is not merely as to the manner in which things have worked in the past, but rather as to the prospects of their working well in the future ; how far is the welfare of the masses of the community likely to be maintained in the next and subsequent generation ? When we come to gauge the probabilities in the future the case is not easily settled. Account must be taken of the characteristic limitations of Economic Science, as compared with physical science ; since the subject-matter is always changing' the accurate measurement of progress in the past does not give us a sound basis for estimating progress in the future. We need to get as close as we can to actuality in order to make a forecast of events with any high probability. The mechanical view of human life, which Economics assumes for purposes of clear ana- lysis ^ is inappropriate when we are trying to look ahead ; the continued supply of the comforts and food have also been considered. The iiisunicient atteution paid by Professor Thorohl Rogers to this point has gi-eatly affected the value of his elaborate researches. 1 See above, p. 1'29. ^ See above, p. 5. 136 FREE TRADE [CHAP. conveniences of life depends on the satisfactory interworking of production and exchange and con- sumption in society, not on any one stage in the economic process. The amount available for con- sumption cannot be taken as in itself a crucial test ; it is only one symptom among others by which we can judge whether the economic life of the community is in a healthy condition or not. Farther than this, we may see that it is a particularly uninstructive symptom ; consumption is a necessary element in the production of wealth, and in the enjoyment of life ; but consumption is not in itself a good thing. The production of utilities is likely to benefit somebody somehow ; but consumption is not neces- sarily a benefit to anyone ; it may possibly be another name for waste. The worst blunder of the Mercan- tilists in the seventeenth century arose in connection with this very point ; they seemed to hold that by promoting consumption they were bringing about the increase of wealth. On this account the Parliament of England insisted that all Englishmen should be buried in wool, and the Parliament of Scotland that all Scotchmen should be buried in linen ; another Black Death would have stimulated the demand for the staple manufactures of each country enormously ; but increased rapidity of consumption is not a safe index to the growth of national wealth. Statistics of national consumption do not give us any informa- tion as to how the goods have been obtained, or as to whether they are being wisely used or foolishly wasted ; and such information is essential, if we are Vl] EXPERT OPINION 137 to interpret the meaning of increased consumption as a symptom of the healthiness of our economic life. In our present conditions, as a commercial and manufacturing people, the possibilities of continuing to procure food and materials for our consumption depends upon our trade ; a great part of the comforts and conveniences of life which we have been enjoying in such large measure comes from abroad ; and the statistics of our import trade are very well worth our consideration. At first sight they seem to afford ground for complete satisfaction : we are not only able to purchase great quantities of goods from abroad, in spite of all the hostile tariffs, but we are able to procure them on very easy terms. Besides the goods we export to discharge our debts for what we receive, there is an enormous mass of goods over and above which we do not seem to pay for in any tangible form. There is a large and increasing balance of imports over and above our exports. It would be a mistake to suppose that these goods are presented to England by rival traders, eagerly competing for the favour of her custom — as enterprising American shopkeepers will offer you a copy of Robert Elsmere if you are kind enough to purchase two pounds of their English breakfast tea. The excess of imports is payment, not for goods received by foreign countries but for services rendered to them. A large amount of capital has been invested in developing the resources of other lands, and this enables us to obtain considerable payments of interest every year. Besides tliis we 138 FREE TRADE [CHAP. own a very large proportion of the carrying trade of the world. A great deal of international commerce is carried on in English ships ; and the payments for freight and insurance go to swell the mass of imports which reach us annually. There is to many people a satisfaction in being able to say that we are earning the large annual income we receive in the form of imports from foreign countries with compara- tively little manual drudgery of our owai ; but I am not sure that it is a cause for self-gratulation. We can hardly be satisfied to be the remittance-man of the world, while others are pressing on through their activity and enterprise. It is obvious that the continuance of this large mass of imports, and the stability of the material welfare of our population, depends partly on the willingness of foreign countries to continue to pay us for our goods and for our services, and also, on tlie vigour of English economic life and the maintenance of our ability to meet their requirements. We cannot aftbrd to let these faculties become dormant or fall out of use. While a large importation from abroad is essential to our very existence as a community it seems im- probable that foreign countries and our own colonies, with their great and undeveloped resources, will continue to rely indefinitely on English goods, and on the use of English capital and English shipping. If anyone should insist tliat otlier countries were developing so fast that our facilities for purchasing food and materials would be sensibly curtailed within the next five-and-twenty years — with consequent Vl] EXPERT OPINION 139 distress to the consumers of such imported commodi- ties as corn — it would not he easy to prove that he was mistaken. In any case, this is a question of time, sooner or later ; and it is hardly a manly course to be content to let things drift because there will not be much change for the worse ' in our days.' Hezekiah's thanksgiving — in all its unctuousness and all its meanness — that he would himself be spared any actual experience of the miseiy which was coming on his city, finds an echo in Little Englander utterances to-day. If we have any genuine patriotism we shall wish to face the situation, and to make up our minds as to whether the danger is so imminent that we would be wise to take account of it, and guard against it, if we can. It is obvious that foreign nations are no longer dependent upon us for manufactured goods in anything like the degree in which they were fifty years ago. It was possible to anticipate at that time that a great system of international co-operation would be de- veloped ; that England would undertake any manufac- turing that was required by the world at large, and that other peoples would prefer to spend their days in homely and rural occupations. They have abjured the scheme of international co-operation, and entered the field of industrial competition. They are proving themselves successful competitors ; the pre-eminence which England enjoyed in tlie production of pig-iron has been secured by the United States, and England is being beaten by Germany' in tlie contest for the 1 Report on the Tatif Voumissiun, i. 33. 140 FREE TRADE [CHAP, second place. The old-established staple trades of the country are being cut into very seriously indeed. When we look more closely, we may notice that the commodity which other nations are most eager to procure from us is one which in the nature of things we cannot continue indefinitely to supply. Coal is the item in our exports which is steadily increasing every year ; it is becoming an important element in our power of purchasing the supplies we need'. It is clear, however, that not only is this mineral, like other minerals, exhausted by the process of being worked, but the beds of the steam-coal, which is so much in demand, are comparatively small, and our power of meeting this particular form of foreign demand is correspondingly limited. The growth of competition in the shipping trades is also a serious prospect ; there has been a sufficient change of maritime routes to divert much of the trade which formerly centred at the port of London ; inter- course between Germany and the East is no longer 1 "During 1883-92 as compared with 1873-82 our coal ex- ports increasocl by £40,000,000, and our exports other than coal increased Ihy .£101,000,000. But durhig 1S!)3-1'.»()'2 as com- pared with 1883-',)'2 our exports of coal increased by £81,000,000, and our exports other than coal increased by only £28,000,000. I may say liere that oven this small increase of £28,000,000 in our exports other than coal was caused by the increase in our exports of machinery and mill-woik during 1893-1902, an increase of .£36,000,000. So that without this increase in our exports of machinery our exports other than coal and machinery actually de- criiascd by £8,000,000 during 1893-1902 as compared with 1883 — 1892." J. H. Schooling in Journal of Royal Statistical Socicti/, Lxvu. 82. VI] EXPERT OPINION 141 carried on by the Channel and the Cape, but by Italian ports and the Suez CanaP, and there is an increasing amount of direct traffic between America and the Mediterranean. The rate of the growth of foreign shipping does not reveal the full extent of the danger ; a great commercial power is specially liable to suffer irreparably in disturbed political conditions. During the long wars English shipping suffered severely, and high insurance rates were charged because of the risks that had to be run ; the neutral traders were at an enormous advantage. The case might easily recur ; if England were involved in a war, even for a brief period, with some maritime power, the ships of any neutral state would have an enormous advantage in securing increased trade ; and there might be very serious difficulty in attracting commerce back to the old channels when peace was restored'-. So far as our imports depend on the service rendered by this country to foreign traders, there is no great 1 Nasse, Ein Blich auf die Tcommerzielle und industnelle Lage Em/lands in Conrad's Jahrbiicher fiir Nationalokonomie und Statistic. N. F. xn-. 100. * Since the above was ^vi-itten an excellent illustration has been furnished by the following sentences from the Times, 11 Aug., 1904. " The virtual witlub-awal from the Japan service by the P. & 0., Holt, Thomi^son, and other leading English Companies leaves the bulk of the carrying trade to the far East ui the hands of two or three firms of lesser importance. Even these latter are sorely perplexed as to the choice of cargo, and large consigmuents of rails, wire nettuig, and similar goods have been refused within the last few days... German shipping-houses in Antwerp allow themselves more latitude with regard to their freight list, whUe vessels privately chartered, which have little to lose, are also stepping into the breach to the detriment of the British carrying trade." 142 FREE TRADE [CHAP. improbability that they may be able before long to dispense with it. Nor is it quite certain that the income from English savings already invested in foreign countries will continue to be as large as it is at present. Many men who have retired from business find that from one cause or another the return on their savings shrinks, and that they undergo losses which they have no means of making up. Securities which carried a high rate of interest are paid off, and the money can only be re-invested at a reduced rate ; that is a frequent experience among individuals ; and it may easily have its analogue in national history. There is such a wide diffusion of commercial facilities and commercial habits that there are opportunities for forming capital in all parts of the world ; and as the less highly developed countries form their own stock, they will be in a position to pay lower interest to foreign borrowers, and eventually to pay them off altogether. The possession of large funds invested abroad is not a guarantee of continued income ; it is necessary that additional capital should be formed, and should find remunerative investment if this source of income is to be maintained unimpaired. Even though it be true that additional capital is being formed and sent abroad, it is clear that the process cannot be going on very rapidly ; capital goes abroad in the form of exports, and large investment of capital abroad would reduce the excess of imports over exports. On the other hand there have been years when the excess of imports has suddenly Vl] EXPERT OPINION 148 increased; and this indicates that wealth is being- brought home in masses and suggests that at the time we were forced to live upon our capital. In the year 1877, according to well-informed opinion in Liverpool, we saved ourselves from a great financial crisis by a large sacrifice of capital, especially of capital locked up in foreign securities and released at a considerable loss". Two years later similar difficulties occurred; there was a terribly bad harvest in this country, and we imported corn in large quantities from the States, while at the same time large remittances of gold were made to that country". When the excess of imports is suddenly increased owing to a loss of wealth in this country, and the deficiency is made up by realising securities in other countries, it is difficult to shew that we are not at that time and for that year trench- ing on our capital, instead of adding to it^ The evidence which goes to shew that fresh capital is being rapidly formed in England at the present moment is not unimpeachable. This country is becoming more and more the playground of the world. Men who have made their money in the colonies or in America pay long visits here and settle ; the transference of a few millionaires from New York to London may cause a vast difference in the income remitted to this country ; even though 1 Liverpool Daily Post, 10 Jan. 1877. 2 Journal of the Statistical Society, xlui. 105, 107. Similar conditions recurred in 1880. Peez, Zur iviucsten HandehpoHtih, 87. The year 1891 was another year of poor crops, which shewed a sudden increase of the excess of imports. * Fuchs, Die Handelspolitik ErKjlaiuU, p. 17"2. 144 FREE TRADE [CHAP. the capital has all been formed, and the employment it gives is all opened up, on the other side of the world. For after all it is on the active elements in economic life — labour and enterprise — that continued prosperity depends. Statistics of consumption tell us little or nothing, unless we can supplement them by information as to the opportunities and terms of employment : how far is the wealth which comes here to be consumed used for the production of more wealth ? It must be admitted that there is little sign of enlarged fields for the employment of English labour being opened up ; the demand abroad for English staple commodities is not increasing. Trade is not reacting on home-industry, as it did in the Fifties and Sixties to give it a stimulus. Under the circumstances it cannot be said that the welfare of our large population is at all secure. (b) The economic expert, who desires to serve the State, need not confine himself to discharging the ungrateful task of a critic. There is ample room for his assistance in connection with every department of national activity. Economic study in its modern form does not exclude any tribe or community from its scope ; and as it ohus strives to co-ordinate such varied information, it can give us valuable suggestions as to almost any situation in actual life\ There is nothing new under the sun ; the requirements of human beings are common to all ages, and the modes 1 Cuiiningbam, Plea for the Stiidy of Economic History in Economic lieview, ix. 70. Vl] EXPERT OPINION 145 of supplying wants which served in the past may sometimes be adapted to meet new conditions. Man is a rational animal, and experience acquired in other times or ages may be applied, with more or less modification, in the larger communities which enjoy in the twentieth century such largely extended powers over nature. The economic expert may be rightly appealed to for practical suggestions, as to the means by which any community may utilise its resources, so as to obtain the most of the thing it wants. The object in view may be political or social — military power, scientific progress, diffused education. In each case the assistance of the expert may be called in, to estimate the expense which must be incurred for the end in view. If military power — on the scale on which it is desired — involves compulsory military service on the part of all citizens, the expense of diverting them from industrial pursuits during the periods of military training, as well as the actual cost of the maintenance of the army, must be estimated. On the other hand, the indirect benefits to economic life, which are sometimes said to arise from military training and discipline, as well as the public security which the army may ensure, though more remote results, must not be overlooked. In such cases it is the function of the expert to shew how the burden of increased military organisation may be most con- veniently borne. Again, the object in view may be economic — the development of the resources of the country and the stimulating the vigour and enterprise of its c. 10 146 FREE TRADE [CHAP. inhabitants. It is possible that if there were a perfectly free flow of labour and capital to all parts of the world there might never be either the occasion or opportunity to take active measures to foster industry and commerce. But in the world as we know it that is not the case ; some countries are sparsely inhabited and do not attract many settlers, or they are peopled by races who have little aptitude for the forms of enterprise for which the area is physically well adapted. There is much that can be done by active measures to hasten the slow process by which labour and capital find their way to new regions, and thus to start industries much more early than would otherwise be possible. Even though a considerable outlay may be necessary, success in establishing one branch of a really suitable industry will probably react favourably on the whole economic condition of the community. Another problem on which the advice of the economic expert may be sought with advantage is that of minimising the social evils of some necessary transition. In modern times there is very little stability about any business ; the progress of invention and discovery is making constant differences in the arts ; trade has its ups and downs, and there are changes in the localisation of industry which leave many persons stranded. The misery which accrued from the substitution of machine spinning of wool for hand work was doubtless alleviated by the expedient of granting allowances from wages; but it is to be noticed that one method of interference is likely Vl] EXPERT OPINION 147 to be more prejudicial than others. Had it been possible to organise fresh forms of employment, rather than to provide money doles, the benefit would have been equally great, but more indirect and less pauperising. In the same way it appears that the effort to stimulate industry by keeping prices high and the rate of profits good — as may be done by tariffs — is less wholesome than the indirect stimulus which arises from opening up new markets and thus increasing the demand. The modern economic expert is likely to follow the example of modern medical practice, and to rely less on occasional doses of powerful drugs than on the restorative powers of nature. The system of Natural Liberty is the one which Adam Smith recommended as most likely to cure occasional mischief without any possible injury to the constitution. iii. State Regulation. It is of course perfectly true that ill-judged interference by the State with industry and trade is mischievous'. Men like Mr Bumble, who think that "the law is a hass" and that all legislatures are corrupt, are inclined to maintain the thesis that any interference is necessarily wrong. But after all, there is no choice in the matter ; the different sides of life are so closely interconnected that political and social 1 The oncouragement given by the mother country to the Canadians to develop the hunber trade, and exploit natural pro- ductions rather than develop tillage, was a case in point. Sliortt, Imimial F referential Trade, '25. 10—2 148 FREE TKADE [CHAP. requirements necessitate some interference, much or little ; the question is as to its quality, good or bad. It is idle to suppose that we have succeeded in realising a condition in which the State does not inter- fere with the course of trade. There are numerous subsidies to shipping firms, partly for public con- venience and the maintenance of a rapid mail service, and partly with a view to military exigencies. The duties on foreign spirits and beer appear to be inconsistent with thoroughgoing Free Trade' ; the interests of sobriety, and the desirability of levying countervailing duties so as to give fair play to producers at home, have been taken into account as well as considerations of revenue. Special restrictions on the manner in which the retailing of alcoholic liquors is carried on have given rise to special legislation in the interest of the holders of public- house property. By making the principle of non- interference, in an exaggerated form, the forefront of our economic scheme, we have given an excuse for riddling it with exceptions. The whole thing is a sham ; each threatened interest endeavours to make out a case for enjoying exceptional treatment ; and protection is being gradually introduced in its worst, because its least considered forms. The best remedy for the mischief which accrues from haphazard inter- ference witli trade is to be found iu taking constant and habitual care of it on well-considered principles". 1 Fuch.s, l)it Hdiiilclxjxihtik Ewjlandu, 17, 47. - Compare Adam Smith's coiitiast between the legislator who is guided by priiieiples niid tlu^ insidious iiiiimnl who follows the momeTitary flnctuntinna of utfairs. Cuniiinghiim, liichard Cuhden and Adam limith, ii. Vl] EXPERT OPINION 149 The fear that if attention were habitually given to the regulation of trade there would be a seriously increased danger of corruption appears to be illusory ; it rests, like the doctrine of the deadening effects of protection on enterprise, on a mere theory of human nature, and not on observed fact. There is no necessary connection between State-management of trade and corruption ; under the Long Parliament and Council of State, when laissez-faire principles were generally adopted, corruption of every kind was rampant. Cromwell shewed his strength in getting rid of the worst offenders, and he reversed their policy and re-established the East India Company on a joint- stock basis, and other exclusive companies to carry on a well-ordered trade. A more modern illustration is offered by the United States ; the triumph of the Free Ti'ade party is the recognised era of the begin- nings of the systematic lowering of the standard of political life : the cry of " The spoils to the Victors " was raised in 1831 after the election of Jackson to the Presidency. Carelessness is not necessarily favour- able either to prosperity or to virtue. There is indeed a wide-spread superstition that if things are only left alone they are sure to work out in the best possible way and to the greatest happiness of the greatest number. Reliance on unrestricted individual competition — the war of all with all — as the essential condition of improvement appears to derive some support from the Darwinian doctrine of the survival of the fittest. But physical nature and human society are so far di.stinct spheres that 150 FREE TRADE [CHAP. VI we cannot argue directly from one to the other. Individual competition is only a beneficent force when the conditions under which it acts are carefully controlled ; the legal system of the country exists for the very purpose of putting do^vn methods of indi- vidual competition, which can be branded as dishonest and injurious to the public. The malign effects, so far as the welfare of any one community is concerned, of reckless competition may be seen in the waste of natural resources, both as regards forests and fish- eries, in the degradation of the labourers' standard of life during the first quarter of the nineteenth century, and at times in the deterioration of the quality of wares. All these phenomena are likely to recur when "things are in the saddle and ride mankind." After all, man has enough intelligence to be capable of accumulating a body of knowledge as to the best way of utilising physical resources to his permanent advantages; collective wisdom is not unattainable. It is possible to organise human activity so that the best results shall be obtained from the soil without exhausting it ; it is possible to take active measures for improving the population, both physically and mentally. Steady and persistent effort may accom- plish much even in the oldest country, and among races suffering from centuries of oppression. The work of England for the regeneration of Egypt may serve to remind us how much may be accom- plished, not by letting things drift, but by taking pains. CHAPTER yil. AN IMPERIAL SYSTEM. i. LooVing backward. It is obvious enough that there are serious grounds for dissatisfaction with our present scheme of one- sided Free Trade. It is artificial ; it tends to foster a redundant population ; it has not created mutual interdependence among nations, but has instead rendered England economically dependent on foreign countries which are no longer withm the sphere of her industrial influence. Still, it may be asked, are these faults in our present scheme, however grave they may be, reasons for going back to a bad system which we had discarded ? Certainly not. N obody wishes to go back to the old scheme ; we aim at constructing a new system with the help of experience we have acquired not only under the Mercantile regime, but under that of one-sided Free Trade. The proposal to work for the better organisation of the economic life of the Britisli Empire as a whole assumes a very different political basis from that of the Mercantile System which was finally swept away in 152 FREE TRADE [CHAP. the Forties. The old system was built up on a national basis — England or Great Britain ; it deliberately sub- ordinated the interests of Englishmen in other regions to those of the mother country, and especially to the maintenance of the revenue of the mother country ; under Free Trade, our economic policy has continued to be insular; the United Kingdom is a "small State." The Imperial system will regard the mother country as only a part, though at present the most prominent part, of a Greater Britain, and will endeavour to see that every portion of the Empire shall be enabled to use its opportunities of rapid progress aloug the lines which are marked out for it by its physical resources and situation. We shall thus have a natural, not an artificial system. This conception of the solidarity of interests between the various members of one body, on which the new proposal depends, is entirely inconsistent with that balancing of British and co- lonial interests which was the cause of so much mutual jealousy and irritation in the past. We may frankly recognise the principle which Huskisson laid down, "that whatever tends to increase the prosperity of the colonies cannot fail in the long run to advance in an ecpial degree the general interests of the parent state'." We hope to create a strong and prosperous Empire, but we cannot take a single step in this direction till we shake off the trammels of insular Free Trade. We cannot hope to evoke much response from the colonies, until we shew that we are prepared to act in our own interests ; we ^ f^peecJies, ii. 314. VIl] AN IMPERIAL SYSTEM 153 must assume such a position that we shall be free to bargain with foreign Powers by treaty, and if necessary to retaliate upon them, before the colonies can feel that their interests are safe in our hands. We must be free to grant preferences to the colonies on supplies of food and raw produce. If we take this bold line, we run some risk of temporary loss; but we may hope to re-establish English influence in the world, on a more natural, and therefore a firmer basis than ever. The f am 'die souche, which has given the guarantee of continued well-being in many communities', is a type which may be repro- duced in modern world politics. Tlie multiplicity and variety of our colonies and dependencies are not a source of weakness. "Blessed is the nation that hath her quiver full of them. She shall not be ashamed to speak with her enemies in the gate." The principle on which the old methods of regu- lation depended was that of authority ; a new organi- sation can only be built up by the co-operation of free peoples. From this point of view we may see that Pitt's proposal for granting greater economic freedom to the colonies was premature : it might have been a positive hindrance to their political de- velopment. Even Huskisson's statesmanlike scheme of preferences gave occasion for disastrous meddling with the internal aifairs of the plantations by the Colonial Office' ; it was only when his scheme was 1 "Stahle a son Foyer, alliant la Traditiou et la Nouveant^.' Le Play, Les Otivriets Eziropeens, i. 457. * Davidson, Commercial Federation, G, 19. 154 FREE TRADE [CHAP. brushed away by Peel, and the colonies were cut adrift economically so that we might pursue the Free Trade policy unhindered, that the need for granting them responsible government came to be seriously considered. However much we may now regret that Huskisson's system of preference was not developed rather than destroyed, we can see that the clean sweep which was made of the colonial and navigation system leaves the field free, not for mere adaptation, but for reconstruction on lines that are obviously new. Co-operation between the mother country and the colonies may be of vast advantage, for each has much to give to the other. Eugland has had long practice in the art of self-government, and fosters a high sense of public duty ; the colonies have in- finite possibilities of development in the future ; it were idle to weigh one element against the other, or say which is more essential to the continued pros- perity of the Empire, but each part can contribute much to the common weal. Those who are really in earnest about this matter will not be satisfied with mere talk about Imperial sentiment and Colonial loyalty. Sentimental attach- ments may be very warm, but they are not to be depended on by themselves : a com])aratively small cause of irritation will lead to a rupture. The mere sentiment will become more reliable if it is strengthened by ties of mutual interest'' Cobden 1 " The gvcator reliability of ties of interest is brought out in the liistory of theuiiiiicntioii of fTermaiiy. The growth of theEmi)ire out of the Zollvereiii has proved that a cash nexus is the safest VIl] AN IMPERIAL SYSTEM 155 was right in thinking that he could transfuse the forms of democratic government in England with real life by arousing the citizens to a sense of their interests. Imperial sentiment is to be highly prized, but it will not enable us to dispense with organisa- tion ; a beginning has been made with efforts at Imperial co-operation for purposes of defence ; and Imperial co-operation for economic purposes is hardly of secondary importance. In both cases an advisory council, in which all the colonies should be able to make their voice heard, would be able to recommend lines of action which the various responsible Govern- ments might wisely carry into effect. On whatever lines the political life of the Empire shall be fashioned, the economic life must be similarly organised, so that the two sides may be adapted to each other. When we realise how much the various parts of the Empire can do for one another, the desire to secure co-opera- tion for mutual advantage as a permanent thing will find expression naturally in attempts at Imperial economic organisation. Eighty years ago Mr E. G. Wakefield pointed out how well suited England and the colonies were to supplement one another. England had a large popu- road to political unity. Austria, the natural and historic leader of German-speaking jieoples, despised all such sordid bonds, and trusted to sentiment, to diploniiicy, and to the remembrance of past head- ship. Prussia, with far-seeing patience, and at the cost of many pecuniary sacrifices and the frequent subordination of her un- mediate interests, built up the system which joined the scattered and hostile Gennan Stales through a customs union into that Empire which had seemed the most impossible of di'eams." J. Parker Smith in Broad Vicios, May, 1904. 156 FREE TRADE [CHAP. lation, and great accumulations of capital ; while the colonies had vast expanses of land : the three main factors in production were amply available in one or the others We have yet to learn how to make the most of these resources. In the years that have elapsed since his time there has been a constant stream of immigration from our shores ; numbers of excellent labourers and artisans have gone abroad, but there has been no sufficient attention to the desir- ability of retaining them under the English flag, and utilising their energies to develop the resources of the Empire. In a similar way, English capital has been invested in all parts of the world ; it has been used to open up communications and plant manufactures in foreign countries, and thus to build up the military and industrial power of our rivals, when it might have been employed more advantageously to the common weal, in developing parts of our own Empire. England has been lacking in ordinary prudence in thus neglecting to do what lay to hand for the economic prosperity of the colonies ; but it is not too late to take a new line for the future. The dis- tribution of the population of the Empire, to those areas where it can be most suitably employed, may be systematically undertaken. The colonies are rightly unwilling to be a dumping ground for the dregs of European cities^ ; but it may not be impossible to 1 Wakefield, Art of Colonisation, 91. 2 " III the younger colonies of theEni])iro population is essential, and if increased from British stock the self-RON crning colonies will still further strengthen nnd huttress our great Empire. In F.i'itish in- Vll] AN IMPERIAL SYSTEM 1.57 divert the stream of desirable adult emigrants to our own colonies, or to provide for the nurturing and transshipment of children, who may grow up under more healthy surroundings than they enjoy in our towns. The colonies are as yet insufficiently supplied with capital ; they are endeavouring to attract it to the development of their industries by protective tariffs, which are intended to secure a higher rate of profit for the investor. Particular English traders may find themselves injured by colonial tariffs, but the policy, which the colonists are adopting, opens up a field for English investors who desire a higher rate of interest than they can obtain from secured invest- ments in municipal bonds. Colonial protection is not detrimental to English capital which is seeking re- munerative employment anywhere under the English flag. Frank recognition of the independence of the colonies is not inconsistent with the encouragement of conscious co-operation. In so far as the colonies and the mother country can work together for mutual advantage, ties of interest will grow up to strengthen, but not to take the place of common sentiment. The same principle of mutual helpfulness which Cobden recommended to the world as a whole, may be use- fully applied, so far as circumstances allow, within the area of the British Empire. terests it is clearly vuidesirable that the colonies shoald become popu- lated by the iuferior surplus of pcojiles of older and alien countries. To prevent such a disaster is worthy of our best thou<,'hts and most strenuous efforts." Mr Seddou in the Daihi E.rpress, 22 Aug. 1904. 158 FREE TRADE [cHAP. ii. Cosmopolitan Competition. In attempting to devise a new scheme of economic policy much may be learned from Cobden's failure to bring about universal free intercourse. The reason of his disappointment is not far to seek ; we must endeavour to keep clear of the barrier which first checked and then repelled the advancing Free Trade movement. Implicitly and from the first the doctrine had been cosmopolitan ; it " took no account of nations, but simply of the entire human race on one hand, or of single individuals on the other'." In so far as it was brought into practice in the nineteenth century foreign countries were placed on the defen- sive ; they felt that they were being crowded out of their due place in the world by British aggression. That this aggression took place at the instance of a peace-at-any-price party, who were accustomed to declaim against extensions of English military power and prestige, did not render it less offensive. The Manchester men, with all their professions of peace, were the cause of irritating other nations into retalia- tion. Foreign statesmen saw that English capital and enterprise would flow past them to develop distant lands and establish British influence on a secure foun- dation throughout the whole globe. " Asia, Africa, and Australia would be civilized by England, and covered with new states modelled after the English fashion. 1 List, National Sjjstem of Political Economij, p. xxvi. ; and Fucbs, 01). cit., p. 4. VIl] AN IMPERIAL SYSTEM 159 In time a world of English states would be formed under the presidency of the mother state, in which the European continental nations would be lost as un- important, unproductive races. By this arrangement it would fall to the lot of France, together with Spain and Portugal, to supply this English world with the choicest wines, and to drink the bad ones herself ; at most France might retain the manufacture of a little millinery. Germany would scarcely have more to supply this English world with than children's toys, wooden clocks and philological writings, and some- times also an auxiliary corps who might sacrifice themselves to pine away in the deserts of Asia or Africa, for the sake of extending the manufacturing and commercial supremacy, the literature and language of England. It would not require many centuries before people in this English world would think and speak of the Germans and French in the same tone as we speak at present of the Asiatic nations. True political science, however, regards such a result of universal Free Trade as a very unnatural one ; it will argue that had universal Free Trade been introduced at the time of the Hanseatic League, the German nationality instead of the English would have secured an advance in commerce and manufacture over all other countries'." There need be no wonder that Cobden and his contemporaries were glad to dispense with the colonies, since care for them was an obstacle to the scheme wliich offered good prospects of anglicising the whole globe. 1 List, oi>. cii., lao. 160 FREE TRADE [CHAP. Cobden is not the only professed peace-maker who has found that the measures by which he intended to allay jealousy have aggi-avated and intensified the difference. He had hoped that, as a result of free intercourse, all the countries of the world would agree to co-operate for the common good ; but he did not introduce national co-operation ; he only widened the range of individual competition, until it became a danger to national life. The ZoUverein and the protective system in the United States were definitely intended to check the deadening influence which English industry and commerce were exercising upon our neighbours. The tariffs were devised in accordance with the principles of List, who held that " in order to allow freedom of trade to operate naturally, the less advanced nations must first be raised by artificial measures to that stage of cultivation to which the English nation has been artificially elevated'." He believed in reciprocal Free Trade ; that is in intercourse between such communities as would each gain in their social and economic life from such free communication. He did not approve of Free Trade in the sense of allowing an economically strong country to crush others that were, at the time, economically weak. It would perhaps be unjust to say that this was what Cobden and his followers desired to do, but certainly other countries felt that this was what English Free Trade tended to do. In the light of that experience we cannot even desire that there should be such a rigid system of Free Trade within the Empire, as 1 List, op. cit., 131. VIl] AN IMPERIAL SYSTEM 161 would bring a deadeniug influence to bear on the advance of the colonies. The malign effects of cosmopolitan competition are beginning to shew themselves in another way; since we find that racial struggles are breaking out more bitterly in the industrial world. The standard of comfort of the white man and the black is not the same ; unfettered competition between individuals of different races tends to the degradation of the stand- ard of comfort which is characteristic of the higher civilisation. It is on tliis account that the AustraHan colonies and the United States are so eager to protect themselves against the immigration of the yellow races ; and the outbreak of anti-Semitic crusades in other countries can be traced in part to a similar feeling. So far as our staple industries are concerned, the danger of race-competition cannot be met by checking the incursion of undesirables. During the last fifty years the status and standard of comfort of tlie English labourers have improved immensely ; it almost seems as if we had been ei]gagek, 130. c. 11 162 FREE TRADE [CHAP. The combined efforts of their own associations and of factory legislation have raised the standard of comfort of the Lancashire factory operatives to a very high plane. But it is doubtful if this can be maintained in the face of cosmopolitan competition. Lancashire has not merely to hold her own against the skill in organisation and the intense application of Germans, and of operatives in Massachusetts, but against the factories in South Carolina^ where 'mean whites' are employed. The conditions of work to which the hands are forced to submit seem to be as bad as any- thing that occurred in the unregulated mills of the early nineteenth century^; and the standard of comfort of people who are habituated to a warm climate is much lower than that which obtains in Lancashire. There is a danger that the position of the labourer in civilised countries will be seriously injured, if the Englishman is not careful to protect himself against the malign results of cosmopolitan competition. The sense of the danger which lurks in cosmopo- litan competition may help to give us a new sense of Imperial duty. While the white man is prudent to protect himself, he is equally bound to see that the less vigorous and aggressive races do not suffer through the new conditions which follow as the circle of commerce expands. As new countries are opened up, and drawn within the sphere of international commerce, they offer a field for the organisation of 1 Hebn, Survey of Cotton Industry iii Quarterly Journal of Economics, xvii. 4'28. a B. and M. van Vorst, The Womaa ]VJio Toils, 281. VIl] AN IMPERIAL SYSTEM 163 industry on modern methods by capitalists. It may be rural labour on plantations, or extractive labour in mines, or industrial in factories ; but when we remember that there was need for the regulation of the conditions of white labour under capitalist employers in English factories and mines, we may see that there is even greater danger of the oppression of coloured labour by European capitalists in tropical lands. It is the privilege of the white man to protect himself, and it is his duty to see that native races and imported coolies are not exploited by their employers'. The labour problems in the different parts of the Empire can never be satisfactorily solved unless measures can be taken to check the competition of the black man with the white ; and this involves the assignment of certain occupations to each, if both are to live side by side in the same territory. It has been the mark of English rule in all parts of the world that the Government has endeavoured to pre- serve the culture and traditions of native races, and to give them the opportunity of making the most of themselves. Cosmopolitan competition allows each country to exert a deleterious influence on its neigh- bours ; the strong to depress the weak, and the poor to drag down others to their own level. It is the task of Imperial administration to endeavour to give fair play to all these various elements, so that the best qualities of each race may be brought into play. 1 Alleyne Ireland, Tropical Civilisation, 164. 164 FREE TRADE [CHAP. iii. The result of the swvey. The course which has been run by the Free Trade movement, during the nineteenth century, is clearly marked. We have traced the progress which it made, not only in England, but in commercial countries generally until about 1870, and the decline which has taken place since that decade. The doctrine, which was set forth with so much confidence, has been tested by the logic of events; it has been discarded by the countries that are growing most rapidly in wealth and power. Yet for all that the principles of Free Trade remain unshaken ; we may still keep to the opinion that Free Trade is economi- cally advantageous to the world as a whole, and to consumers individually at any given moment. The benefits it offers are much to be desired, but only in so far as they are compatible with the development of civilised life in all parts of the globe, and do not tend to the depression or disintegration of inde- pendent political communities. The real, though incidental, disadvantages which accrued through the advance of Free Trade are well worth taking into account ; for they help us to understand the cir- cumstances in which Free Trade principles can be beneficially applied. Cobdeu was an enthusiast for unconditional Free Trade ; he thought that if free intercourse were adopted it would make suitable social and political conditions for itself and bring about Universal Peace. But he mistook cause for effect', 1 List, op. cit., 126. VIl] AN IMPERIAL SYSTEM 165 or rather he failed to realise that the result he looked for could be best obtained, not by the stroke of a pen, but by the gradual interaction of economic forces and of political and social factors which he was inclined to disparage. Under changed circumstances the old issues have disappeared, and the lines of cleavage which were drawn in 1846 no longer 'exist. Protectionists of the old type, who wished to retain in its main features the system under which English maritime supremacy was built up, have passed away, with the abolition of the scheme they prized so highly. We may all claim to be Free Traders in principle. The name has ceased to be really distinctive ; the issues that lie before us are questions as to the conditions under which these principles may be wisely put into practice. At a time when Scotland is so intent on events that occurred in the Forties, and is debating the question, Which is the genuine Free Church ? we may perhaps put our enquiry in a similar form and ask, Who are the genuine Free Traders ? But it is not easy to give a precise definition of orthodoxy ; for, when we consider the matter, we see that there always have been, and are, two sorts of Free Traders — the doctrinaire and the opportunist. The doctrinaires have not been very numerous in the sphere of practical politics ; they are sufficiently represented by the author of the London Merchants' Petition', and Sir Robert PeeP. They are familiar figures among the bystanders who criticise public ' See above, p. 39. ^ See above, p. 51. 166 FREE TRADE [CHAP. affairs ; they seem to regard Economic Science as a master^ which lays down rules that should be followed to their logical issues ; they appear to be content to live in a world of thought, clear and convincing, but illusory. In this attachment to their principles, they are prepared to abandon all the incidental advantages which Cobden prized so highly. They cannot deny that the world has turned against them ; that England has ceased to be a leader which other nations are ready to copy ; and that international antagonisms, and racial jealousies, have been the offspring of cosmo- politan competition. They see that there is no immediate hope of enlarging the circle of exchange, or increasing employment, by any step we can take; and that the economic benefits at which Cobden aimed cannot be increasingly obtained by his method. They profess to be content with the fact that for the present we are able to procure cheap food, and to manufacture at low prices — an ideal of economic welfare which Cobden explicitly repudiated ^ But side by side with these doctrinaires, there has also been a long succession of eminent Free Traders who were ojyportunists, since they accepted Free Trade as a principle to be adopted as far as they found it to be expedient under the circumstances ; but they claimed the right to judge of the circum- stances for themselves. Huskisson was an oppor- tunist ; he was " not anxious to give effect to new principles when circumstances do not call for their application " ; he felt " how much in the vast and 1 See above, p. 126. 2 ggg above, p. 60. VIl] AN IMPERIAL SYSTEM 167 complicated interests of this country all general theories, however incontrovertible in the abstract, require to be weighed with a calm circumspection, to be directed by a temperate discretion, and to be adapted to all the existing relations of society with a careful hand, and a due regard to the establishments and institutions which have grown up under those relations ^" Cobden parted company with the doc- trinaires when he negociated the Treaty with France ; he did not take his stand upon the principle of free intercourse when he saw that he could increase the area within which it was practised. Gladstone was another opportunist ; yet these men are surely to be reckoned as genuine Free Traders. Whatever we may choose to call ourselves, or submit to be called at the present time, we shall be well advised to follow the method pursued by these leaders, and set ourselves to think out carefully what course promises best under existing circumstances. Free Trade is not an absolute ideal, to be pursued by all people under all conditions. It is not even a sign of goodwill which the people of advanced com- munities can hold out to the inhabitants of less developed countries; since it involves a "war of all against all." Representative institutions are an excellent thing, but they cannot be safely intro- duced in any State, without regard to the social environment; and the case of Free Trade is similar. There are large areas in Germany, Russia, and America, each under the same political control, in 1 speeches, ii. 305. 168 FREE TRADE [CHAP. VII which free intercourse obtains. We should desist from the attempt to apply the doctrine directly to all parts of our Empire, and be content if we can so increase the volume and range of commerce between the countries under tbe British flag, that each may prosper in itself and play an increasingly important part in the life of the whole. The economic organi- sation of the Empire is needed, not only to introduce a greater measure of free intercourse within its bounds, but to be a bulwark against the evils of cosmopolitan competition. A great Empire, thus built up, need not exercise either a political or an industrial tyranny over its neighbours, but may help to serve as a foundation on which the Peace of the World can rest securely. At all events, by intro- ducing some economic order into the Empire we may hope to secure a steadily increasing circle of exchange, and to find a practical answer to a new form of Cobden's question, In the face of cosmopolitan com- petition, how can English " wages be kept up, unless there be constantly increasing markets found for the employment of labour ' " ? 1 Morley, Life of Cohden, i. 141. CAMBRIDOB : PaiNTBD BT J. AND C. F. CLAT, AT THE DNIVBBSIT; FBB33. ,.j/^s . :!v^v->> v-^^-^*-'^ UC SOUTHERN REGIONAL LIBRARY FACILITY AA 001 120 460 9