Af7/ CORNELL UNIVERSITY LIBRARY CORNELL UNIVERSITY LIBRAHY 3 1924 100 531 858 Date Due aMf:S3?? %r-'^'^ JAN J •8jm«* 00 ■^ >^*^ PRINTID IN U, •. A, [Sir NO. iiaii Cornell University Library The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924100531858 ECONOMIC AND FISCAL FACTS AND FALLACIES By SIR GUILFORD MOLESWORTH, K.C.I.E. Author of ' Our Empire under Protection and Free Trade" / POPULAR EDITION LONGMANS, GREEN AND CO., 39, PATERNOSTER ROW, LONDON, E.G. New York, Bombay and Calcutta igio A II rights reserved 'Nine legislators out of ttn, and ninety-nine out of a hundred, when discussing this or that measure, think only of the immediate results to be achieved— do not think at all of the in- direct results.' Herbert Spencer, Principles of Ethics. ' There are two consequences in history— an immediate one, which is at once recognised— and one in the distance, which is not at first perceived. These consequences often contradict each other— the former are the results of our own limited wisdom— the latter, those of the wisdom that endures.* Chateaubriand, Memoirs, ^370/^ PREFACE The primary object in publishing this work is to present, in a more connected form, the views which I have advanced from time to time in various boolcs, pamphlets, speeches, and letters to the public journals, on economic and fiscal questions, during a period extending over more than a quarter of a century. Another object is to expose the manner in which the followers of the ' Manchester School ' of economics have misused and mis- applied the valuable truths of political economy ; to protest against the elevation of their fiscal tenets to a species of religion, the doctrines of which are not even to be questioned ; and to dispute their extravagant claims to infallibility, indicated by such expressions as Free Trade, the International Law of the Almighty (Cobden) ; The economic conditions under which we Uve and move and have our being (Asquith) ; or The eternal truths of the Economic Law (Birrell). Those who question these sacred doctrines are treated with scant courtesy. They are dienounced as ' men of little or no education,' on a parallel with squarers of the circle, or with those who maintain that the earth is flat. Bright has stigmatised them as ' simpletons without memory and logic, beyond the reach of argument.' Their writings are said to be full of economic heresies. Hard unpalatable facts are met by rhetorical flourishes as to what Adam Smith or Cobden has said, or by the dogmatic assertion that ' we must not tamper with that policy under which we have acquired our commer- cial and industrial supremacy.' If facts confront the cherished doctrine, so much the worse for facts. My unpretending booklet, ' Our Empire under Protection and Free Trade,' published in 1902, contained a number of damaging facts which have never been refuted. Instead of refutation it elicited from the Daily News the following lofty but inconclusive criticism : It is difficult to argue with a writer who clings in this way to doc- trines which belong to the dark ages of economic science. We can only recommend the author to devote a little study Do the ' Wealth of Nations ' and to the writings of Frederick Eastiat. In reply I pleaded that I had not only studied those writings, but that, in ' The British Jugernath ' (published twenty-six years ago), I had actually quoted freely from them in support of my opinions. In thirteen different pages of that work I had quoted the ' Wealth of Nations,' and in four pages I had quoted Bastiat. I suggested, moreover, that the Daily News reviewer could scarcely have studied the works he recommended to my notice. Otherwise he could not have overlooked those passages in which Adam Smith prophesied the ruin which has befallen some of our industries if the free importation of foreign manufactures were permitted, and in which he advocated the imposition of counter- vailing import duties for the encouragement of home industries, when foreign nations impose import duties on our produce. vi PREFACE I pointed out that Mill, like Adam Smith, had also advocated countervailing import duties as the only mode in which a country could be saved from loss. The Daily News reviewer could not deny the existence of the passages to which I had referred, but endeavoured to gloss them over as not inconsistent with Free Trade principles. He admitted that ' it is well known that Mr. Mill has occasionally granted more to his opponents than his disciples approve ; but to claim his authority on that ground on behalf of your correspondent's book, which is full of economic heresies, would be absurd.'' Although I have carefully studied the writings of the various schools of economics with reference to the fiscal question, I must disclaim all pretension to pose as an economist, or even as an authority on economics. I have, in this work, carefully avoided the obtrusion of my individual opinions on economic questions, and have left economists to speak for themselves. I submit their evidence to the verdict of the public. The misnomer ' Free Trade ' which is very generally applied to our present fiscal policy, is not the Free Trade of Adam Smith ; neither is it the ' Libre Echange ' of the French economists. It is not Free Exchange in any sense of the word. It is a one-sided arrangement, taxing British rate-payers for the maintenance of our markets, into which the foreign producer is free to enter. Practically it amounts to a bounty for the foreigner, which places our country- men in a disadvantageous position when competing with him. Free Trade principles, so called, are based upon the assumption that import duties, in nearly all important cases, are borne almost ex- clusively by the consumer, and that the taxed commodities will cost more money to the consumer by the full amount of the tax.' These assumptions are absolutely contradicted by experience and by facts, of which I have given numerous examples in the follow- ing pages, but more especially in Chapters XIX, XX, XXI, XXII, and XXVIII. In conclusion, I would venture to strongly press upon my fellow- countrymen the fact that those who so vehemently and confidently insist upon the infallibility of our present fiscal policy, are abso- lutely opposed by the persistent practice and prolonged experience of nearly every civilised nation in the world. Amongst these are the United States, France, and Germany, and over them Englishmen have no right to claim superiority, either intellectual or commercial. Guilford L. Molesworth. The Manor House, Beiley, Kent, September igog. 1 This correspondence, which is a characteristic specimen of the argu. ments of the ' Manchester School,' is given in detail in Appendix No I., and a summary of the principal facts contained in * Our Empire under Protection and Free Trade ' is given in Appendix- II. 2 ' Fiscal Policy of International Trade,' Professor Alfred Marshall, 1908. CONTENTS CHAP. PAGE I. Present State of Economics .... i II. Differences OF Economists ..... 5 III. Revolt from Orthodoxy 9 IV. True Political Economy 12 V. The Mercantile System 13 VI. The Physiocrats and Adam Smith . . 18 VII. Adam Smith and Agriculture .... 21 VIII. Land Nationalisation 26 IX. Adam Smith and Coedenism 27 X. Sismondi, Ricardo, and Mill 30 XI. The Modern German School .... 32 XI I. The American School 34 XIII. The Action of Currency 36 XIV. The Bank Acts OF 1 819 and 1844 ... 38 XV. The Balance of Trade 42 XVI. The Real Object of Free Trade ... 46 XVII. What is Free Trade? 48 XVIII. The Manifesto of the Professors . . 53 XIX. Who Pays the Duty ? 55 XX. Fall of Prices under Import Duties . 58 XXI. The Tin-plate Industry 60 XXII. Examples of Fall in Prices ..... 62 XXIII. The Corn Laws 66 XXIV. Operation of the Corn Laws .... 69 XXV. The Big and Little Loaf 73 XXVI. The ' Hungry Forties ' 76 XXVII. Two Centuries of Wheat Prices . ... 77 XXVIII. Tariffs AND Wheat Prices 80 XXIX. Co.sT OF Living 82 XXX. Wages and Employment ....... 85 XXXI. Taxation • . . . . 89 VIU CONTENTS •HAP. XXXII. XXXIII. XXXIV. XXXV. XXXVI. XXXVII. XXXVIII. XXXIX. XL. XLI. XLII. XLIII. XLIV. XLV. XLVI. XLVII. PAGE The Income-tax . . .' 92 Historical Parallel 99 England under Protection loi England under Free Trade 105 Ireland under Protection and Free Trade 112 Our Colonies. . . . , 121 Colonial Federation 125 Preferential Tariffs 123 Canada under Free Trade and Protection 132 India under Free Trade 137 Germany under Free Trade and Protection 142 France under Protection 146 The United States under Free Trade and Protection 147 Decline of American Shipping .... 154 Prophecies 157 Conclusion 162 Appendix I. 'Daily News' Criticism. . 168 Appendix II. Facts FOft Tariff Reformers 170 Index 174 Opinions of the Press 179 ECONOMIC AND FISCAL FACTS AND FALLACIES CHAPTER I PRESENT STATE OF ECONOMICS Political economy, as at present understood and practised by politicians, has been aptly likened to a game of football with the industrial and commercial prosperity of the country — a game in which those great interests are represented by the ball, the treatment of which receives no consideration whatever. The misuse of political economy recalls to the mind the pathetic cry of Madame Roland : ' O liberty, liberty ! How many crimes are committed in thy name I ' And it suggests the parallel of ' O political economy, how many blunders are committed in thy name 1 ' Political economy, like mathematics, is ' a good servant but a bad master.' It is good as a guide, but bad as an autocrat. Two of the most eminent and practical statesmen in the world, Napoleon and Bismarck, distrusted the despotism of economists. It was a saying of Napoleon that ' if an Empire were made of adamant, the economists would grind it to powder.' He regarded economics as a collection of technical rules and dogmas, devised by ingenious theorists, and men of the closet, assuming to conduct the commercial and practical affairs of the State. Bismarck described the German Free Trade economists as people who pore all day long over books and papers, but who are perfectly unacquainted with practical life. In a speech in the German Reichstag in April, 1879, he said : We refuse to remain the sole dupes of an honourable conviction. Through the widely-opened door of our imports we have become the ' dumping ' place of foreign surplus production, and this, in my opinion, has prevented the continual development of our in- dustry, and the strengthening of our economical conditions. . . . The abstract doctrines of science influence me not at all ; I form my verdict on the teaching of experience. . . . Since we A* 2 ECONOMIC AND FISCAL FACTS lowered our tariffs we have, in my opinion, been a prey to con- sumption. We have been bleeding to death. ... We must now decide what we shall do to infuse fresh blood into the German economical body, to brace it with the power of a regular circula- tion. Can we altogether discount the verdict of these great statesmen? Are they right, or are they wrong? If they are right, does the fault lie with economics, or with the econom^ts, or with both? Certainly the valuable science, or art, of political economy has been discredited and dragged through the mire, and has acquired an unenviable, though undeserved reputation— not so much from the differences and mistakes of its principal exponents, as from the arrogant and overbearing dogmatism of the followers of the various schools or systems of economics, and more particularly of the Ricardo-Mill, or 'Manchester ' school. This has been caused by an undue attachment to systems — ^by an attempt to attain a scientific precision beyond that of which the nature of the subject-matter admits; by a prone- ness to generalise too hastily, and to lay down infallible and universal laws which are subject to perpetual disturbance from causes beyond the sphere of political economy ; and also by a reluctance to submit abstract reasoning to the correction of facts. Such infirmities, as Professor Riclcards has observed, ' have given colour to the impression that political economists care more for systems than for facts, and are conversant with abstractions, rather than with the realities of life." Professor Fawcett has remarked that political economy is more talked about than any other science, and its principles more frequently applied in the discussions of ordinary Ufa, but no science has, perhaps, been more imperfectly understood. There is no science that presents so many difficulties in its practical application as political economy.* Again, Professor Sidgwick rightly says : It is very rarely that the practical economic questions which are presented to the statesman can be unhesitatingly decided by abstract reasoning from elementary principles. For the right solution of them, full and exact knowledge of the facts of the particular case is commonly required, and the difficulty of ascer- ^ Rickfirds' Lectures^ p. 13. " Fawcett, Mantial of PolHipal Economy. PRESENT STATE OF ECONOMICS 3 taining these facts is often such as to prevent the attainment of positive conclusions by any strictly scientific procedure.' Political economy, to use the words of Cliffe Leslie, ' is rvot a body of natural laws in the true sense, or of universal and immutable truths; but an assemblage of speculations and doctrines, which are the result of a particular history, coloured even by the history and character of the chief writers. ' ' It is, according to Mill, not a mere collection of laws by which men are to be governed in the affairs of life, but a collection of truths or laws of abstract science, intended for the information of practical men. Stephen Colwell, the American economist, has said : Those who have attempted to apply these unsettled principles to the actual affairs of nations, have been unsuccessful, both because the principles to be applied were uncertain, and because, even if they were ever so clear, the parties making the attempt had not the requisite practical knowledge to make their applica- tion.* Mill has remarked that : One of the difficulties of modern times — the separation of theory from practice — of the studies of the closet from the outward business of the world — has given a wrong bias to the ideas and feelings both of the student and of the man of business. There is almost always room for a modest doubt as to our practical con- clusions.* Cbssa, the Italian economist, has also warned his disciples : It is needful to hold ourselves aloof equally from the so-called doctrinaires, who refuse the assistance of practice, and from the empiricists who obstinately close their eyes to the light of theory. The pure science gives guiding principles which practice brings into conformity with innumerable varieties of individual cases.' In fact, political economy, even if it be a science (a matter in dispute amongst economists), is not one of the ' exact sciences,' and the application of the inexact laws of economics is fraught with overwhelming difficulties. Even the application of the exact science of mathema- tics to engineering problems is so uncertain as to have given rise to the saying that ' Theory and practice never agree ' ; but this saying involves a fallacy. The apparently para- ' Sidgwick, Political Economy, p. 8. ' Fortnightly Review, Nov, 1870. * Colwell, Pteliminary Review^ * Some Unsettled Questions of Political Economy, p. 156. * Cossa, Guido alio studio dell' economio •politico. 4 ECONOMIC AND FISCAL FACTS doxical results are in reality due to faulty application of the theory, and to the neglect of numerous factors which, although apparently insignificant, may modify, neutralise, or reverse the theoretical tendency, and very seriously affect the results. If this be the case in the application of the exact science to engineering problems, in which the factors involved are probably the characteristics of such well-known materials as iron, steel, timber, &c., a fortiori must the difficulty be increased in the application of the inexact science of economics to social problems, in which the influencing factors are much more recondite, such as human follies, blunders, interests, passions, and greed ; yet, how common it is to find the newly fledged politician, fresh from the crammer's hands, rushing in ' where angels fear to tread,' glibly quoting axioms of political economy, and dogmatically applying them, with unbounded confidence, to the most intricate and com- plex questions — branding as unorthodox all who express opinions adverse to those which he may hold, and accusing them of violating ' the immutable economic law.' Unfortunately this dogmatic pedantry is not confined to one class, but prevails largely, especially amongst the adherents of the Manchester school, who have elevated Free Trade into the position of a revealed religion, inspired by Cobden, whose pet phrase was, ' Free Trade, the Inter- national law of the Almighty '; and even in the present day we have a Cabinet Minister guilty of the folly of alluding to it as ' the eternal truth of the Economic law. ' ' Mr. Asquith says : You can call it a fetish if you like ; you can call anything a fetish ; but with us it is a conviction, not based upon abstract argument, but upon solid experience of the economic conditions under which we live and move and have our being,' • ' In the region of economics they could not do what thev liked There was no eternal truth about the House of Lords- there was no eternal truth about Church Establishment; but there was an eternal truth about the Economic Law. Economic Law cared nothine whatever for Mr. Austen Chamberlain, it did not care a snap of the fingers for Mr. Chaplin or Mr. Bonar Law, and what was more it did not care anything for the declared opinions of the people' of Eng and, even at the polls. If they went wrong, the Economic Law would not be altered; it would remain just the same, even though every man and every woman-if she had a vote-exercised their vote the same way. Economic Law pursued its own course regardless of consequences. —(Speech of Mr. Birrell, March 6, igog.) ^ Imperial Conference Debate, p. 90. CHAPTER II DIFFERENCES OF ECONOMISTS The claim to infallibility or immutability is absurd, when we consider that the leading exponents, even of the same school or system, are not agreed on the first principles of economics — whether it is an art or a science, whether the o priori or a posteriori is the proper mode of determining its laws, whether the inductive or deductive method should be adopted for arriving at the truth; what is the scope of political economy?, what is wealth?, and other disputed points. Steuart defines economy as ' the art of providing for all the wants of a family with prudence and economy.' Professor Sidgwick says that from the time of Adam Smith to that of Senior and Mill, the conception of political economy as an art of national and social production has never been definitely discarded. Senior defines economy, if it be a science, as a science which states the laws regarding the production and distri- bution of wealth ; but, if it be an art, the art which points out the institutions and habits most conducive to the pro- duction of wealth. Bastiat has adopted a species of hybrid philosophy, which attempts to treat art as a science, and to have a deductive art. Ricardo treats political economy as an abstract science, and most of the adherents of the Ricardo-Mill school regard it as a science. Some, like Cossa, separate the pure from the applied science. Adam Smith's method, though com- bining throughout a vein of unsound a priori speculation, was in a large measure inductive.^ Mill asserted that the a priori is not only a legitimate method of philosophical investigation, but that it is the only mode. Ricardo reasoned entirely from principles of nature, and discarded induction, even for the verification of his deduced conclusions. Say, the French economist, has pointed out that Ricardo and McCulloch had fallen into error, and that instead of first observing the nature of things, namely the way in which things really happen, classifying observations, and educing general principles from them, they began by laying ' Cliff* Lealit, 5 6 ECONOMIC AND FISCAL FACTS down abstract generalities, which they called axioms, and which they taught were absolutely self-evident. Mill says : The conclusions of Political Economy are only true in the abstract. That which is true in the abstract is always true in the concrete, with proper allowances. The difficulty of appreciating the disturbing causes constitutes the only uncertainty in political economy. Some contend that the object of political economy is to establish certain general abstract propositions or laws, whilst others insist that it is intended to provide practical rules for the guidance of statesmen and men of business. Whately suggests that the title ' Science of exclianges ' should be substituted for that of ' Wealth of nations.' Many economists contend that exchangeability consti- tutes wealth. Ricardo rejects ' exchangeability,' and adopts labour as the cause and measure of value. Adam Smith speaks of the annual produce of the land and labour of society, as the real wealth of the land. The physiocrats define wealth as the products of the earth which are brought into commerce and exchanged. Mill considers credit a form of wealth; J. B. Say designated rights of action, credit, drafts, copyright, professional skill as forms of wealth. Many economists erroneously attribute to the mercantile system the doctrine that the precious metals are the only form of wealth. De Quesnay defines wealth as that which has value both in use and in exchange. Malthus defines it as ' those natural objects which are necessary, useful, or agreeable to men.' Jevons considers that value depends entirely upon utility. Sismondi contends that the pursuit of wealth or riches should not be the aim of political economy, but rather the well- being of all classes of a community. RosCher defines capital as every product laid by for the purposes of further production. Want of Finality McCuUoch, speaking of economists generally, has said : We believe ourselves to be initiated, and yet we are but upon the threshold. . . . Notwithstanding the pretension so fre- quently put forward by politicians and economists, some of the most interesting portions of the science which they profess are DIFFERENCES OF ECONOMISTS 7 still very imperfectly understood ; and the important art of apply- ing them to the affairs of mankind so as to produce the greatest amount of permanent good, has made but little progress and is hardly advanced beyond infancy.' Again, to quote List : Whilst some boldly declare that the science of political economy is complete, and that there is nothing more to be added, those who read with eyes of philosophers and statesmen maintain that the science has yet to be created. Again Mill says : Political economy, properly so called, has grown up almost from infancy since the time of Adam Smith ; and the philosophy of society, from which practically that eminent thinker never separated his more peculiar theories, though still in a very early stage of progress, has advanced many steps beyond the point at which he left it.^ In fact, political economy in Great Britain for the last three-quarters of a century has been lulled into a sense of false security, and has made no progress. It has ' learned nothing and forgotten nothing.' McCuUoch has observed that the differences which have existed, amongst the most eminent economists, have generated a disposition to distrust its best-established conclusions; and theories of political economy, which once commanded almost universal consent, are overthrown and superseded by new theories. Macleod writes : Nothing can b^ more astonishing than the differences of doctrine, and the antagonism of economists on almost every point in the science, so as to create a widely spread impression that there is no such intelligible science at all as economics.' Senior writes " When we read the most eminent of writers on political economy, we find them chiefly engaged on controversy. Instead of being able to use the words of his fellow-labourers, every economist begins by demolition, and erects an edifice, resting perhaps in a great measure on the same foundation, but differing from all that has preceded it in form and arrangement. Professor Rickards, who succeeded Senior at Oxford, remarked : A considerable misconception exists which repels many from I ' McCuIloch, Princifles of Political Economy, 1849. ' Mill, Political Economy, Preface. • History of Economics, Preface. 8 ECONOMIC AND FISCAL FACTS entering upon the study, and induces many more to regard it witli aversion and contempt.' Sir James Steuart has said : Systems are no more than a chain of contingent consequences, drawn from a few fundamental maxims. Such systems are mere conceits ; they mislead the understanding, and efface the path to truth. An induction is formed, from whence a conclusion called a principle is drawn ; but this is no sooner done than the author extends its influence far beyond the limits of the ideas present to his understanding when he made his deduction. Stephen Colwell remarked : The discordant views of writers, and their want of agreement, early attracted the attention of leading writers, and scarcely a volume or tract appeared on this topic in which some effort was not made to harmonise repugnant positions, or settle the meaning of terms.' List, insisting on the value of the national and historical method, as opposed to the bottomless cosmopolitanism, ' offers a means of placing theory in accord with practice, and makes political economy comprehensible to every educated mind, by which previously, owing to its scholastic bombast, its contradictions, and its utterly false terminology, the sound sense of inankind had been bewildered.' A careful study of the writings of economists, and especially of those of the adherents to the ' Manchester ' school, discloses an absence of practical experience in busi- ness matters, together with the prevalence of much confusion of thought, and a want of clear discrimination. Amongst others may be noted the lack of discrimination (i) Between politics and political economy. (2) Between the acts of statesmen an'd the doctrines of a system. (3) Between the direct and the indirect action of any measure. (4) Between Protection and Prohibition. (5) Between Free Trade and one-sided free import. (6) Between precious metals as money and as a measure of value. (7) Between hoarded money and money in circulation. (8) Between metallic money and money of credit. (9) Between national and international money. (10) Between coins and token money. ^ Rickards' Leciurea. * Prelitninary Essay, DIFFERENCES OF ECONOMISTS 9 (11) Between prices as affected by currency and by production. (12) Between trade depressions from monetary crises and from other causes. (13) Between balance of precious metals, and balance of supply and demand. CHAPTER III revolt from orthodoxv Apparent Finality About the middle of the nineteenth century the science of political economy in Great Britain appeared to have emerged from a state of chaos, doubt, and uncertainty, and to have assumed such a state of finality and certainty that its conclusions were not to be questioned. Two causes appear to have contributed to this result. First, shortly before the adoption of the policy of Free Trade in the forties, an extraordinary tide of prosperity set in throughout the whole of the civilised world, due to numerous inventions and improvements in arts, sciences, and industries, and especially in railways, steam navigation, and telegraphs, which made such rapid progress during the second quarter of the nineteenth century, and culminated in the great gold discoveries of California and Australia during the fifties. Foreign nations shared this prosperity with ourselves, but the credit of it was unfairly claimed as the result of our Free Trade policy; and this idea became so thoroughly ingrained into the British mind, that it was accepted as a satisfying proof of the soundness of that abstract reasoning of political economy by which the expediency of Free Trade had been inferred.^ Secondly, the British public had been so carried away by the brilliant writings, sound logic, and masterly exposition of John Stuart Mill, that they accepted his extraordinary assertion that ' there is nothing in the laws of wealth which remains for the present or any future writer to clear up.' ' It is not surprising,' to use the words of Professor Sidgwick, ' that the younger generation, to whom his treatise ' Sidgwick, Political Economy, p. i. ta Economic and fiscal facts became the chief, if not the sole, source of economic know- ledge, should be equally confident, and that it should become the fashion to point to political economy as unique amongst moral sciences for the clearness and certainty of its method, and the admitted trustworthiness of its conclusions,' and to accept its teachings as infallible and immutable. Revolt from Orthodoxy Towards the end of the third quarter of the nineteenth century, however, serious doubts arose as to the success or wisdom of the Free Trade policy. Practical men of business perceived that the prophecies of its authors had not been fulfilled, that other nations had not only declined to follow our lead, but were making greater relative progress in prosperity; that our agriculture had been ruined; that many of our industries were languishing ; that we were losing that commercial and industrial supremacy which we had gained under a policy of strict protection ; that our capital was being lost — and this tended to shake their faith in the political economy on which that policy had been based. Mill constantly contradicted himself, and is contradicted by economists, not only equally able but more reliable than himself; and his writings have been roughly handled by the 'Third School of Economics,' and also by the modern German school, who repudiate the British orthodox school, and scornfully term it ' Manchesterthum. ' Professor Bonamy Price accused Mill of introducing utter confusion into the topic of wages. Cossa denounced Mill's ' ardent concessions to Socialism, and his narrow, philosophic utilitarianism,' and, referring to Thornton's book on labour, said ' it made a great impression on Mill, and induced him to abandon his theory of the wages fund, which has also been opposed by Lange, by the American economist Walker, and by Brentano." Professor Cairnes, although a great admirer of Mill, is constrained to say : But in spite of the great authority attaching to any doctrine propounded by Mr. Mill, and enhanced as it is, by the general concurrence of economists, I am compelled to dissent from it. It seems to me that the conception of cost which it suggests is radically unsound, confounding things, in their own nature dis- tinct, and even antithetical, and setting in essentially false light the incidents of production and exchange. Further I think it will • Cossa, Guide to the Study of Political Economy, p i8o. REVOLT FROM ORTHODOXY it appear that it leads to practical errors of a serious kind, not merely with regard to value, but also with regard to some other important doctrines of the science.' Professor Cook says : Mill, however, is said to have abandoned the see-saw theory in his latest and yet unpublished essays. ° Macleod, writing on the question of rent, says : This does not exhaust the absurdity of the Ricardo-Mill theory of rent, . . . but in fact Mill himself has completely overthrown his theory of rent.' Mill knew absolutely nothing of mercantile law ; he never had the least knowledge of practical business. Every page of his work is full of the most glaring ignorance and blunders, and there is scarcely a single point in which he does not contradict him- self. . . . The works of Smith, Ricardo, Say and Mill are simple anarchy, and like those of the ' economists ' are not general. They are totally repugnant to the fundamental principles of natural phifosophy, and are not conformable to nature.' Jevons goes so far as to say : The only hope of attaining a true system of economics is to fling aside once and for ever the mazy and preposterous assump- tions of the Ricardian school." And again, with regard to the Ricardo-Mill system, he says : That able but wrong-headed man, David Ricardo, shunted the car of economic science on a wrong line — a line, however, on which it was further urged towards confusion by his equally able and wrong-headed admirer, John Stuart Mill. Such strictures appear to be somewhat too sweeping, but they show the reaction against the claims of the Ricardo-Mill school to infallibility, and Macleod has rightly urged that : If, instead of welcoming inquiry and criticism, the admirers of a great author accept his writings as authoritative, both in their excellencies and their defects, the most serious injury is done to truth. ... In science and philosophy nothing must be held sacred. I protest against deference for any man — whether John Stuart Mill, or Adam Smith, or Aristotle — being allowed to check inquiry. Anyone who has carefully studied the writings of Mill cannot fail to be struck with the manner in which he allows " Cairnes, Some Leading Princi-plea of Political Economy, p. 48, ' Joseph Cook, Labour, * Macleod's Economics, p. 116. * Macleod's History of Economics, pp. 123, 131;. * Theory of Political Economy, Preface, p. xlli. 12 ECONOMIC AND FISCAL FACTS his 'political bias,' and his narrow, philosophical utili- tarianism, to affect his opinion, and warp his better judgrnent; and, when this is the case, he is apt to fall into inconsistencies and illogical reasoning. CHAPTER IV TRUE POLITICAL ECONOMY The foregoing consideration of the uncertain condition of our orthodox economics suggests the question : Where is economic truth to be found? In the ' Mercantile ' or the ' Physiocratic ' schools? In Adam Smith's 'Wealth of Nations '? In Sismondi's writings? In the Third School of Economics? In the modern German or in the American systems ? The answer to such a question must be that there is much truth and much error in all systems, but the greater the claim to dogmatic infallibility, the greater the error; and the greater the reaction from the mistakes and follies of some previous school or system, the greater the probability of fallacy from the tendency to run to a vicious extent into the opposite extreme. The true political economy has yet to be reconstructed, but it must be based on a fusion of existing systems, eliminating that which is bad or extreme, and adopting that which is good, since it must be borne in mind that political economy, whether a science or an art, must necessarily be an imperfect instrument, and consequently one of com- promise. An analogy may be drawn from the organ, which, being an imperfect instrument, if tuned to theoretical unison, pro- duces discord, so that compromise is needed, leaving some of the fifths somewhat flat, and others somewhat sharp, the octaves alone being tuned to perfect unison of theory. Political economy, to be of real value, must avoid all extremes and excesses, whether they be of state interference or of ' laisser faire et laisser passer ' ; whether they be induc- tive or deductive ; whether they be cosmopolitan or national ; whether they be of restricted free import or duties amounting to a prohibition ; whether they be of the doctrinaire or of the empiricist. TRUE POLITICAL ECONOMY 13 Roscher one of the modern German school of economists, thus sums up the object of his work on political economy : Our endeavour has been not to write a practical book, but to train our readers to be practical. To this end we have sought to describe the laws of nature which man cannot control, but, at most, only utilise. We call the attention of the reader to the different points of view, from which every economic fact must be observed, to do justice to every claim. We would like to accustom the reader, when he is examining the most insignificant politico- economic fact, never to lose sight of the whole, not only of political economy, but of National life. We are very strongly of opinion that only he can form a correct judgment, and defend his views against all objections on such questions as to how, where and when, certain liens and charges, monopolies, privileges, services, &c., should be abolished, who fully understands why they were once imposed or introduced. Especially we do not desire to impress a certain number of rules of action on those who have confided themselves to our guidance, after having first demon- strated their excellence. Our highest ambition is to put our readers in a way to discover such rules of direction for themselves, after they have conscientiously weighed all the facts, untrammelled by any earthly authority whatever. It is the nature of extremes to meet. Freedom becomes the excuse for tyranny ; liberty, the handmaid of slavery ; fraternity, the watchword of discord. Despotism masquerades under the garb of democracy; political economy is the cloak of political extravagance. In order to arrive at a right understanding of the actual condition of political economy, it is necessary to review briefly the different systems, and their influence on each other. CHAPTER V THE MERCANTILE SYSTEM The mercantile system was not defined in writing, nor was it a theory devised by authors. It was simply acted upon in practice, until the time of Sir James Steuart, who deduced it from English practice.' By the publication of ' An Enquiry into the Principles of Political Economy ' in 1767, Steuart endeavoured to gather ^ List, p, 271. 14 ECONOMIC AND FISCAL FACTS up the floating threads of various opinions prevalent amongst those who have been termed adherents of the Mercantile School of Economics. It was a -work of great merit, modest and moderate in its views, and its value has been recognised by modern economists. Professor Sidgwick says of Steuart : Had he but seen through the fallacies of the mercantile school, he would have been deservedly regarded as the father of English political economy. His system was decidedly altruistic, and involved the paternal care of the State. It was national in its tendency, as opposed to the ' universal ' system, and it laid stress on the balance of supply and demand. He has defined the object of political economy to be, first, to adapt the different operations of economics to the special manners, habits, and customs of the people; and afterwards to model these circumstances so as to be able to introduce a new set of more useful institutions. He assumes the importance of manufactures, and their influence on agriculture, commerce, and navigation, and he dwells on the need of granting privileges for establishing manufactures.' Economy, as defined by him, is ' the art of providing for all the wants of a family with prudence and frugality. What economy is to a family, political economy is to a State; but the statesman is not master to establish what form of economy he pleases.' Adam Smith also uses a similar parallel : ' What is prudence in the conduct of every private family, can scarce be folly in a great kingdom ' ; but he overlooks the fact that no sensible father of a family would tolerate his doc- trine of ' laisser faire et laisser passer, ' and leave his family without any restraints on their greed, selfishness, evil passions, or follies. Stephen Colwell, the American economist, writes : Whatever the errors and absurdities of the mercantile system, as practised by the statesmen of England, during the past two centuries, they bear no comparison with the errors and absurdities which the future historian of political economy will find in the theory, now in vogue, as developed by authors and professors of political economy. Both of these systems exaggerate the im- portance of commerce, and make it a direct agent in the produc- ' Sidgwick, p. IS. THE MERCANTILE SYSTEM 15 tion of wealth. They forget that commerce is the handmaid of Industry. The mercantile system has this advantage over the modern school, that it employs commercial restrictions as a mode of protecting and stimulating industry ; whilst the latter asks no favour for man or for industry. It simply demands Free Trade, and expects all other blessings to flow from the operation of merchants unrestrained in trade, free to do whatever the spirit of gain may dictate.* Under the broad principles of the mercantile system, involving- the paternal care of the State, we attained our great commercial and industrial supremacy, but under the ' laisser faire et laisser passer ' policy of the Ricardo-Mill school we have lost it. The mercantile system has been unfairly prejudiced, in the eyes of political economists, by ascribing to it absurd doctrines respecting the valuation of the precious metals, and the balance of trade. This has not only given a false impression of the system, but has also induced exponents of other systems to rush into the opposite extreme to a vicious extent. Fallacies Attributed to the Mercantile System Professor Sidgwick, who is perhaps the most modest, moderate, and able of modern British economists, has remarked : A whole series of economic writers since Adam Smith's time have attributed to the advocates of the mercantile system the absurd delusion that wealth consists solely of precious metals. It is only due to our ancestors to say that the charge, in the broad way in which it is ordinarily stated, is a manifest exaggeration of a polemical inference of Adam Smith.' The writer who has had the greatest influence in promulgating this false impression is John Stuart Mill, who wrote : While this system prevailed it was assumed, either expressly or tacitly, in the whole policy of nations, that wealth consisted solely of money or the precious metals, which when not already in the state of money are capable of being directly converted into it. According to the doctrines then prevalent whatever tended to heap up money or bullion in a country added to its wealth. What- , ever sent the precious metals out of a country impoverished it.' This inaccuracy has evidently arisen from a confusion in Mill's mind between money hoarded, and money in circu- lation. * Col well, Preliminary Essay. ' Sidgwick, Pol. Econ., p. i6. 8 Mill's Political Economy, p. 9. i6 ECONOMIC AND FISCAL FACTS Sir James Steuart absolutely contradicts this absurd delusion in the following words : The quantity of coin in any country is no sufficient rule for judging the state of foreign trade, because money may be acquired and expended by operations nowise mercantile. ... In short, a nation may resemble a trading man who may be iftimensely rich with very little specie in his possession.' Paper money is but a species of credit, no more than a measure by which credit is reckoned. Credit is the basis of all contracts between men. Steuart also speaks of ' symbolical money,' in the shape of ' bank notes, transfer in bank stock, amounts, bonds, mortgages, alienation of domain,' &c. Again he says : Money, of what I call of account, is no more than an arbitrary scale of equal parts, invented for measuring the respective value of things vendible. Friedrich List has stated that : The Mercantile system has been falsely reproached for con- sidering the precious metals the sole constituents of wealth : and he pointed out that ' this objection cannot be truly alleged of Colbert's administration, or of the British Mer- cantile school.'" Cliffe Leslie has shown that : It is a modern error to ascribe to the Mercantile school the notion that money is the only wealth. What that school really taught was that money was, in Locke's words, the most solid and substantial part of the movable wealth of a country ; that it had more extensive utility than any other kind of wealth, on account of its universal exchangeability, abroad as well as at home, and that a considerable stock of precious metals in the Treasury of the State or within its reach was requisite as a pro- vision for foreign wars." Other writers of the Mercantile school have repudiated the doctrine. Berkley contended that there is no greater error than to measure the wealth of a nation by its gold and silver. Sir W. Petty also considers the export of money useful ; and Sir Dudley North described money as a com- modity of the sarrie nature as other commodities; its quantity varying with commercial conditions. When it is scarce » Steuart, Principles of Pol Econ., Bk. ii. cap, xxi, * List, iii. ig. " Cli£Ee Leslie, Fortnightly Review, July 1875. THE MERCANTILE SYSTEM 17 prices fall; and when abundant they rise; and he thought it a mistake to impose duties on the export of money.' Agam Roscher of the modern German school writes : The caricature of the Mercantilists, drawn by the tradition of more recent text-books, is only of the inferior among them. The most distinguished of them. Bolero for instance, approximate more closely to the science of the present day than is usually supposed.' Cossa says : The conclusion at which the supporters of this [the mercantile] system arrived, and which they stated more or less explicitly, was that the economic well-being of a State is in proportion to the quantity of money which circulates in it. . . . From the principle stated above, it followed as a logical con- sequence, that the fundamental canon of political economy should be to preserve and to increase, as far as possible, the quantity of money actually in circulation. The historical investigations of certain writers of merit have shown that these were the ideas in which the mercantilists agreed. With some rare exceptions they did not profess the strange error attributed to them, that wealth consists of money and of money alone. Many centuries before, this absurdity had received an allegoric confutation in the fable of King Midas, and a scientific confutation in Aristotle's ' Politics.' There is another incorrect statement which has been made by later critics. They say that these writers are distinguished from the theorists of antiquity, and from the physiocrats of the eighteenth century, by the small esteem they entertained for agricultural industry, which they thought should be neglected in comparison with manufactures and com- merce. On the contrary, we find in the writings of the sixteenth and seventeenth centuries many passages showing the opposite opinion.' The Balance of Trade With regard to the absurd doctrine ascribed to the Mer- cantile school, that a balance of trade must always be made up by cash balance, Sir James Steuart remarked : What we mean by a balance of trade is not bringing the fluid [specie or bullion] to a level ; but either accumulating or raising it, in some countries by means of national industry and frugality, which is the right balance ; or depressing it in others by national luxury and dissipation, which is the wrong one.* . . . Hitherto the question has only been about the balance of movable wealth, but the introduction of this, together with a taste for superfluity, has the effect of melting down solid property Into what 1 Cossa, p. 131. ^^^\''^ ^ * _— — - ■ ^ Roscher, ii. p. 398. _>^^% ' ^^.-.'"^ .,1 ^ iz ' Cossa's Study of Political Economy, cap jlK?' p.'"u<^C.'^''^ * Steuart, cap. xxix. ' v^ . r / ?B HQV.WO i8 ECONOMIC AND FISCAL FACTS symbolical money.' The balance of work and demand promotes the foreign and domestic interests of a nation equally, the first by advancing her power and superiority abroad, the last by keeping everyone employed. It is necessary to keep the price of articles of export at a standard proportioned to the possibility of furnishing it ; neither higher in times of demand, or low in times of diminution.' Again, speaking of the balance of trade, he says : The more circulation of wealth there is in a country, the more this object becomes important. If the balance of supply and demand be disturbed, either the industrious starve each other, or a part of their work lies on hand, or their profits rise and con- solidate, or part of the demand made is not answered by them.' CHAPTER VI the physiocrats and adam smith The Physiocrats The Physlocratic school first acquired a systematic form in France under de Quesnay, whose works -were collected in 1758 under the title of ' Physiography or the Government most advantageous to mankind.' De Quesnay may be said to be the first who conceived the idea of universal Free Trade extended to all mankind. The physiocrats' doctrine was based on a society com- posed of individuals, all having the same natural rights under a ' Social Contract,' on the principles enunciated in the ' Contrat Social ' of Jean Jacques Rousseau. They declared that the soil alone yields a net income; consequently agriculture is the only source of wealth. All taxes were to be imposed on land; and manufacturers, being an unpro- ductive class, were to have no protection from the State. They held that commerce only transfers wealth; and that the exertions of the manufacturer, merchant, and professional man, though useful, are sterile. They considered that those labours only are truly productive which add to the quantity of materials useful to men, and that wealth consists of the excess of agricultural products beyond their cost of pro- duction. Individualism and complete freedom of trade was assumed to be the basis on which wealth and progress depend. State interference was to be deprecated, and the * Bk. ii. cap. xxvi. ' Steuart, p. 494, ' Hid. p. 4go. See also chap, iv„ 'The Balance of Trade' THE PHYSIOCRATS AND ADAM SMITH 19 statesman who attempted to promote manufactures to increase shipping, to encourage external trade, and protect it by naval power, was an enemy to progress. The doctrine of laisser faire et laisser passer was all important. The Physiocratic school never exerted any influence out- side France; and it would have passed away had it not been rescued from oblivion by the able writings of Adam Smith. Adam Smith Adam Smith has been generally considered to have been the father of political economy, and Jean Baptiste Say, his exponent, has declared that before Smith there was no political economy; but there can be no doubt that the political discourses of Hume (of the Mercantile school) were evidently of greater use to him than any other book that had appeared prior to his lectures. Much of his work has been based on the ideas and principles of the physiocrats, especially that of Free Trade, and the doctrine of laisser faire et laisser passer. In fact, it has been said that the Physiocratic school has disappeared, because all that was valuable in it was absorbed by Adam Smith, who has added much of his own that is extremely useful. There can be no doubt about his abilities as a writer, nor of the great value of his work ; but it is to be regretted that his prejudices against the supposed fallacies of the mercantile system should have led him into the opposite extreme. A blending of that which was good in both systems, and avoidance of that which was faulty, would have rendered his work still more valuable. It is, moreover, tainted by the revolutionary doctrines of Jean Jacques Rousseau. Adam Smith's great work, ' An Enquiry into the Nature and Causes of the Wealth of Nations,' still carries great weight with the professors of orthodox British economy of the Ricardo-Mill school, who consider his opinions infallible, and brand as heretics those who would depart a hair's breadth from their letter. List says that before Adam Smith there was only one system. His labours have rendered possible the construction of a science of political economy. He has furnished for that purpose more material than those who have preceded or succeeded him.' ' List, p. 2S0. 20 ECONOMIC AND FISCAL FACTS His notions are such as might be propounded if there were no nations, no national interests, no wars, no national passions. J. B. Say has described his work as ' an unmethodical assemblage of the soundest principles of political economy, supported by highly luminous illustrations of highly in- genious researches in statistics, blended with instructive reflections. It is not, however, a complete treatise of either science, but an irregular mass of curious and original speculations ' ; and Louis Say thinks that although Adam Smith contributed much to the science of the advancement of wealth of nations, yet his false theory and his vicious nomenclature have given rise to all the difficulties at present experienced.' It is manifestly unfair to Adam Smith that his followers should insist on the infallibility of his conclusions, which have been based upon a state of society and upon conditions which have been entirely revolutionised since his time. For example, in dealing with the limitation of the labour market, he argues from the difficulties of transport that ' a broad wheeled waggon, attended by two men, and drawn by eight horses, in about six weelcs' time carries and brings back between London and Edinburgh near four tons weight of goods ' ^ — rather a contrast to the present , state of transport by railway. Again he advocates the free import of corn, on the ground that the difficulties of transport would be so great that the quantity imported would be so small that the farmer would have nothing to fear from the freest importation. Unfortunately for his conclusions, the invention of rail- ways, steam navigation, and harvesting by machinery have overcome the difficulties of transport, and have enabled the foreign importer to pour in two thousand times the amount which Adam Smith had named as the maximum that could possibly be imported. It is no fault of Adam Smith that he should have failed to foresee the revolution in the con- ditions of transport, from inventions which did not exist, and which were not even dreamed of in his day; but it is a fault in his followers to insist upon the immutability of conclusions which have been based on assumptions that have been entirely vitiated by the progress of civilisation. ' Etudes SUT la Richesse des Nations, Preface. ■ Wealth of Nations, Bk. i. cap. iii. THE PHYSIOCRATS AND ADAM SMITH 21 It must also be remembered that, in Adam Smith's time, manufactures were comparatively few and of small im- portance and agriculture was the mainstay of Great Britain. ' Adam Smith,' says Colwell, ' was a College professor, and so have been most of the writers of his day. The life of a professor may be favourable to intellectual study, but it is certainly not an adequate preparation for statesmanship. The great reputation of Smith has made economists in general to range themselves under his wing ; and from that position many have not hesitated to cut, carve, and apply the caustic, until there is scarcely a passage in the whole work which some one of his friends has not detached from his sj'stem, and branded as wrong and absurd.'' Mill spealcs of the ' Wealth of Nations ' as 'in many parts obsolete, and in all imperfect." This, however, appears to be a strong assertion, which does not malce suflficient allowance for the altered conditions of society. With all its imperfections it will be handed down to posterity, and appreciated as a most valuable contribution to economics, so long as it is not regarded as a fetish, the sanctity of which is not to be questioned; and so long as proper allowance is made for the changes in conditions that existed in its author's day. CHAPTER VII ADAM SMITH AND AGRICULTURE Adam Smith held a very different view, from that which has become the fashion in England, of the value of agri- cultural interests, and the place of the landlord with regard to those interests. As his views of the subject are not so generally known as they deserve to be, it may be useful to quote a few of them : 1. The neglect of cultivation and improvement, the fall in the real price of any part of the rude produce of the land . . . tend to lower the real rent of land, to reduce the real wealth of the landlord, to diminish his power of purchasing either the labour, or the produce of the labour of the people. 2. The whole annual produce of the land and labour of every country constitutes a revenue to three different orders of people — to ' Colwell, Preliminary Essay. • Mill, Political Economy, Preface. 22 ECONOMIC AND FISCAL FACTS ist. Those who live by rent. 2nd. Those who live by wages. 3rd. Those who live by profit. The interest of the first of these three great orders is strictly and inseparably connected with the general interests of the society. Whatever either promotes or obstructs the one, necessarily promotes or obstructs the other. 3. The interest of this third order has not the same connection, with the general interest of the society, as that of the other two. Merchants and master-manufacturers are, in this order, the two classes of people who commonly employ the largest capitals. 4. The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to he adopted till after having been long and carefully examined, not only with the most scrupu- lous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public ; who have generally an interest to deceive, and even to oppress, the public, and who, accordingly, have on many occasions both deceived and oppressed it.' If England, as a nation, had paid attention to these warnings of Adam Smith, she would have escaped the difficulties in which she now finds herself involved. If she had recognised the truth that the interests of the landlord are ' inseparably connected with the general interests of society ' — if she had not listened to the specious arguments of the third order (master-manufacturers like Bright and Cobden), who, as Adam Smith says, have an interest to ' deceive and oppress the public ' — we should not now have to mourn the ruin of agriculture in Great Britain and Ireland. Adam Smith, instead of holding up the landlords to opprobrium, fully recognised their value to the com- munity; and, speaking of the order of merchants and manufacturers, he says : Their superiority over the country gentleman is not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest, than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up his own interest, and that of the public, from a very simple but honest conviction that their interest, and not his, was the interest of the public' Whatever may have been the ostensible object of the ' Wealth of Nations, Bk. i. cap. xi. » Ibid. ADAM SMITH AND AGRICULTURE 23 Anti-Corn Law League, or of many of its well-meaning dupes, the mainspring of its action was political. It was actuated by a desire to strike a blow at landed interests. There has been a persistent effort during the past century for party purposes to destroy the agricultural interests of Great Britain, and to ruin the influence of the landowners. The attempt has been only too successful, and has culminated in the mischievous Budget of 1909. Landlords have been vilified, unjust burdens have been laid upon land, the sanctity of property in land denied ; and iniquitous land Acts have been passed. John Bright made no secret of his animosity to land- owners, whom he has described as ' squanderers and absorbers of natfonal wealth.' Speaking in London on December 19, 1848, he exulted in the fact that : The contemned class of manufacturers and traders has assumed a very different position, and the great proprietors of the soil now find that there are other men and interests to be consulted in this Kingdom, besides those of whom they have taken such great care, through the legislation which they have controlled. That Adam Smith laid great stress upon the importance of agriculture, and upon the inseparable interest of agri- cultural and manufacturing industries, may be seen by the following passages from the ' Wealth of Nations ' : The greatest and most important branch of the commerce of every nation is that which is carried on between the inhabitants of the town and those of the country . . . whatever tends to diminish in any country the number of artificers and manufac- turers, tends to diminish the home market, — the most important of all markets for the rude produce of the land, — and thereby still further to discourage agriculture.i That he considered agriculture of far greater importance than manufacture, or than foreign or carrying trade, is shown by the following opinions deduced from his writings : The object of political economy is to increase the wealth and power of a nation. The riches and power of a country are in proportion to its produce. Industries or the produce of the land and labour are the real wealth of the country. Agriculture is the most advantageous employment of capital. » Wealth of Nation), Bk. I, cap, il. 24 ECONOMIC AND FISCAL FACTS No equal capital puts into motion a greater quantity of productive labour than that of the farmer. No equal quantity of productive labour employed in manufactures can ever occasion so great a reproduction. Cultivated land is more advantageous than pasture. Capital employed on foreign trade is less advantageously employed for society than on home trade. Carrying trade is less advantageous than either foreign or home trade. The neglect of cultivation and improvement of land tends to reduce the real wealth of the landlord, and to diminish his power of purchasing either the produce or the labour of the people. Capital employed in the carrying trade is altogether with- drawn from supporting the productive labour of a country to support that of some foreign countries.' It is evident therefore that Adam Smith places such great value upon agriculture, and so little on foreign or carrying trade, that he would have been the first to have opposed our present fiscal policy if he could have anticipated that it would have involved the ruin of agriculture. The evidence given before the Royal Commission of 1897, on the Depression of Agriculture, shows that the best feeling existed between landlords and tenants. They were strongly opposed to any interference, or any tribunal to fix or regulate rents. There was a general feeling that rents should be determined by the supply and demand, and that they could best make their own bargains.^ The following article from an American newspaper will give some idea of the state of agriculture in Great Britain about the year 1885, nearly forty years after the repeal of the Corn Laws : British Agricultural Depression. It was announced a day or two ago that a Texan cattle-dealer had contracted to deliver to a firm of London butchers 3000 frozen carcases of beef at Galveston, for shipment to the English metropolis, every fortnight, at the price of six cents a pound. This, it is intimated, is but the beginning of an extensive trade in frozen meats between this country and England. The news will not be welcome to the British farmer. He has already suffered enough from the frozen meat trade with New Zealand, Australia, and the Argentine Republic — the opening up of a new and exten- > See Wealth of 'Nations, Bk. ii. cap. v. • RefoTt of the Royal Commission on Agriculture in 1897, p. 113. ADAM SMITH AND AGRICULTURE 25 sive source of supply, which will no doubt be followed by the estab- lishment of a similar commerce with Mexico, which will further reduce the price of English-fed beef. The farmer is also being driven out of the wheat market by the Indian, the Russian and the American. The prices of all kinds of agricultural produce are declining. ' American competition,' we are told by so con- servative an authority as the London Times, ' has at last ruined the skilled and indefatigable dairy farmers of Cheshire — prices having fallen 15 to 20 shillings (British) per hundredweight (112 pounds) — bringing down the market to figures at which it will not be remunerative to continue the business. . . . The farmers are dismayed at the outlook. ... If dairying goes, every resource of our agricultural classes will collapse.' The same journal adds : ' In the butter trade also it appears that the price of first quality for July was 87 shillings per hundredweight, whereas the average for ten years ago that month was 106 shillings.' The price of all kinds of cattle has decreased from 30 to 40 per cent. Sheep are sold at about half the price they fetched ten years ago. The Mark Lane Express of September 28, speaking of the Wilton fair, one of the principal for sheep in the South of England, says : ' Trade was wretchedly dull ; lambs had to be sold for three or four shillings less money. For cattle there was scarcely any trade, and few sales were effected. All kinds of cereals have declined about 25 per cent.' The Spectator says that agriculture is, if not profitless, the least profitable business that a resident of England can pursue. A writer in the Times says that peasant pro- prietors purchasing now at eighteen years' rental cannot make more than 2 per cent, on their investment. The Rev. George Brooks, a Congregationalist clergyman, writing in the Pall Mall Gazette, says : ' The present condition of Scottish agriculture may be described in one word — ruined.' . . . The Rev. Mr. Brooks, already quoted, says, describing the condition of Had- dingtonshire (called sometimes the garden of Scotland) : ' Farms by the score are degenerating through neglect into their original wild state. In one part of the country it is possible to go ten miles, as the crow flies, without finding a farmer. . . . The shop- keepers are being ruined with the farmers.' Another writer says there are some good Scotch landlords who let farms which brought them $5000 twenty years ago for $3000 now. The London World refers to a Lanarkshire nobleman who last year ' with a rent-roll of $350,000 has received only $20,000 net ! ' Dulecp Singh, the Indian notability, has 13,000 acres of the 17,000 acres which he owns in Suffolk ' on his hands.' He speculated on farming a portion himself, and the speculation proved disastrous.' * Chicago Tribune, Nov. 4, 1885. CHAPTER VIII LAND NATIONALISATION Those who advocate the nationalisation of land under a system of small holdings, as a remedy for the present evils from which agriculture suffers, little realise the difficulty of farming profitably under our system of unlimited free import, nor can they see that such a course would in reality aggravate the evils it proposes to remedy. It is beyond the scope of this work to argue either for, or against, the advantages of a system of peasant proprietors; but it may be remarked that, even though such a system might be suited to the sober, thrifty population of some parts of the Continent, it may not be equally adapted to the improvident lower classes of Ireland and England, and that there may be something in the common-sense view taken by M. Lavergne that ' eultivation spontaneously finds out the organisation that suits it best.' In Great Britain, and in Ireland especially, landlordism seems best suited to the improvident character of agricul- turalists, because it provides capital to improve property in times of prosperity, and to help the tenants to tide over their difficulties in bad seasons ; moreover there can be no doubt that under the stress of foreign competition farming is not remunerative, unless on a large scale and with the aid of the latest improvements in agricultural machinery, which require capital. But, be this as it may, peasant proprietorship has proved to be a failure in Ireland, and is rapidly becoming extinct. In England the success of it may be gathered from the fol- lowing description by Mr. Bear, a well-known authority on agricultural matters : The yeomen and small tenant farmers, men of little capital, have almost disappeared, and the process of improving them off the face of the agricultural world is still progressing to the bitter end. Homestead after homestead has been deserted, and farm has been added to farm : a very unpleasing result of the inexorable principle — the survival of the fittest — by means of which even the cultivators of the soil are selected ; but a result which not the laws of nature but the bungling arrangements of human legis- lators have rendered inevitable.' » FoTtnis^ttly Review, Sept. 1873. 26 LAND NATIONALISATION 27 The Royal Commission on Agriculture estimated the loss caused by the ruin of agriculture at ;^i, 000, 000,000, and Palgrave in 1905 estimated it at ;^i, 700,000, 000. Writers on this subject state that under peasant proprietor- ship labour was so ill-directed that it required six men to provide food for ten, and the consolidation of holdings was recommended by all practical men. Even Mr. Hyndman, the well-known Socialist, said : Peasant proprietorship is being brought forward as a remedy for the ills of this country. On this point, looking across the Channel, and seeing the condition of the French and other peasant proprietors all over Europe, we are thoroughly of one mind that no benefit whatever can accrue by such extension of private property. The only possible way of a return to the land is by placing agriculturalists in a position of equality, in competi- tion with the foreign agriculturalists, by a moderate and well-considered system of import duties on foreign agricul- tural produce. CHAPTER IX ADAM SMITH AND COBDENISM, Senior complains that : The ' Wealth of Nations ' contains scarcely a definition. Most of the French writers— and indeed some of our own — have not only neglected definitions, but have expressly reprobated their use ; and the English work which has attracted the most attention during the present century — Mr. Ricardo's 'Principles of Political Economy ' — is deformed by the use of words so unexplained, and yet so remote from ordinary usage, and from that of the writers on the same subject, and frequently so inconsistent, as to perplex every reader, and not infrequently to have misled the eminent writer himself.* It is, therefore, not surprising that some members of the Manchester school should have failed to discriminate between moderate import duties and 'restraints.' In the chapters devoted to the advocacy of Free Trade, the whole argument is based on freedom from ' restraints,' which are defined by him to be restraining either by 'monopolies,' by 'absolute prohibitions,' or by high 'duties » Senior, Pel, Econ., p. j. 28 ECONOMIC AND FISCAL FACTS that amount to a prohibition.' There is not a word in the chapter to indicate that the Free Trade he advocates involves the removal of all import duties. A careful study of the chapter, in which Adam Smith approved of the free import of corn, clearly proves this. For he prophesied the ruin which has befallen our manufacturers, if the import of foreign manufactured goods were permitted; and even his approval of the free import of corn rested upon an assumption which experience has proved to be absolutely false. This chapter' deals with 'restraints.' The first portion of it is devoted to an argument against ' monopolies, absolute prohibitions, or high duties amounting to a prohibition.* There is not a word in it which favours the free importation of manufactured articles, nor is the argument adverse to moderate duties. After a discussion of monopolies, &c., Adam Smith proceeds to show that, owing to the difficulties of transport, the import of agricultural produce was not exposed to the same danger as that of manufactured articles, which ' of the finer kind especially are more easily trans- ported from one country to another than corn or cattle.' Then he proceeds : In manufactures a very small advantage wiH enable foreigners to undersell our own workmen, even in the Home Market. It will require a very great one to enable them to do so in the rude produce of the soil. If the free importation of foreign manufac- tures were permitted several of the twine manufactures would probably suffer and some of them perhaps go to ruin altogether, ;jnd a considerable part of the stock and industry, at present em- ployed in them, would be forced to find out some other employment. /!»( the freest importation of the rude produce of the soil could have no such effect upon the agriculture of tJie country.' He then proceeds to explain the reason of this as follows : If the importation of foreign cattle, for example, were made ever so free, so few could be imported that the grazing trade of Great Britain could be but little affected by it. Then he goes on to dilate upon the difficulties and expen.se of transport ; and takos up the question of the import of salted provisions as follows : The freest importation of salt provisions, in the same manner could have as little effect upon the interests of the graziers of Great Britain as that of live cattle. . . , 1 Bk. iv. cap. li, ' fiid. ADAM SMITH AND COBDENISM 29 Then he discusses the question of the free import of corn : Even the free importation of foreign corn could very little affect the interests of the farmers of Great Britain. Corn is a much more bulky commodity than butcher's meat. A pound »f wheat at id. is as dear as a pound of butcher's meat at ^d. The small quantity of foreign corn imported, even in times of the greatest scarcity, may satisfy our farmers that they can have nothing to fear from the freest importation. The average quantity imported, one year with another, amounts only, according to the very well- informed author of ' Tracts on the Corn Trade,' to 23,728 quarters of all kinds of grain, and does not exceed the five-hun- dredth and seventy-one part of the annual consumption. Then he dwells upon the compensatory action of a bounty on the export of corn, and adds : If there were no bounty, as less corn would be exported, so it is probable that, one year with another, less would be imported than at present. It is evident, therefore, that the free import of corn was advocated by Adam Smith on the false assumption that the annual average import would not exceed 23,728 quarters (about 100,000 cwt.) under the freest import; whereas the actual import of corn and flour now exceeds 200,000,000 cwt., or 2000 times the amount which he thought would ' very little affect the farming interest.' He is opposed to the Cobdenite policy, for he advocates retaliatory taxation thus : The case in which it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestic industry, is when some tax is imposed at home upon the produce of the latter. In this case it seems reasonable that an equal tax should be imposed upon the like produce of the former. . . . The case in which it may sometimes be a matter of deliberation how far it is proper to continue the free importation of certain foreign goods is when some foreign nation restrains by high duties or prohibitions the importation of some of our manufactures into their country.' Mill also advises a similar policy : The only mode in which a country can save itself from being a loser by the revenue duties imposed by other countries on its commodities is to impose corresponding revenue duties on theirs.* And though Adam Smith disapproved of the Navigation ' Wealth of Nations, Bfc, iv., cap. ii. = John Stuart Mill, Princifles of Political Economy, Bk. v. cap. iv. 30 ECONOMIC AND FISCAL FACTS Laws, as a violation of the principles of Free Trade, he was forced to admit that ' they are as wise, however, as if they had all been dictated by the most deliberate wisdom. ... As defence however is of much more importance than opulence, the Act of Navigation is perhaps the wisest of all the com- mercial regulations of England." CHAPTER X SISMONDI, RICARDO, AND MILL SiSMONDI SlsMONDl, historian and economist, was at first a decided follower of Adam Smith, and, in 1802, he published his work ' De la Richesse commerciale '; but he found that a greater authority than Adam Smith has told us that ' he that maketh haste to be rich shall not be innocent,' and in his historical research he became convinced that the pursuit of riches had not been followed by the greatest welfare to all classes, and should not, therefore, be considered the great aim and end of political economy. He termed the school of Adam Smith ' Chrematists ' {from oxpwthtt^s a money-maker or money- grubber), and he urged that the proper aim of political economy was that by which the general happiness and welfare of all classes can be secured. He thought that the ruinous pursuit of riches had degraded political economy into the position of a handmaid to greed; that increased production is not necessarily a sign of increased national welfare, but the real measure of national welfare is to be found in the means of comfortable livelihood, which industry affords to all the classes of the community. He traces from the lessons of history the causes of the decay of nations — how a nation that has surrendered its rule to the commercial classes cannot fail to incur ruin in the long run, if that rule be continued; for it is to the interest of these classes to import largely, and to favour the intro- duction of foreign produce, although the result must be to depress and ultimately extinguish home industries. The home market will be destroyed, the agricultural population (the mainstay of the nation) must gradually be ruined, and, amidst a constant increase of exports and imports, and growth (Bf commercial wealth, the nation would be destroyed. 1 Wealth of Nations, Bk. iv. cap. ii. SISMONDI, RICARDO, AND MILL 31 This view of Sismondi, written as a warning and hand- writing on the wall nearly a hundred years ago, is being fulfilled in Great Britain in the present day.^ Sismondi further went on to show how the ruin of Rome and Greece was due to causes similar to those from which Great Britain now suffers — the great increase of direct taxation, the purchasing of food abroad, the destruction of agriculture, unbounded luxury side by side with abject poverty, abundant wealth coupled with destitution. RiCARDO Ricardo, a shrewd, successful stockbroker of Jewish origin, published his work ' On the Principles of Political Economy and Taxation ' in 1817. It was professedly based on the principles inculcated by Adam Smith, and his clear, incisive writing and attractive logic gained for him many admirers and followers, who were carried away by the daring and brilliancy of his deduc- tions; but his arbitrary and absolute assumptions, his false and inaccurate logic, his confusion of ideas, and his erroneous application of unsound opinions and economic truths, render him dangerous as a leader of thought. Bentham, on reading his work, wrote to Ricardo, telling him that it was all founded on a confusion of cost and value ; Senior denounced him as the most unsound writer who ever attained philosophical eminence; and Malthus prophesied that the main part of the Ricardian scheme would not stand. Probably his work would have sunk into oblivion had it not found an able expositor in the person of J. S. Mill, who, as Cliffe Leslie remarked, ' so qualified and amended the doctrines of Ricardo that the latter could scarcely have recognised them. ' Macleod writes : The whole structure of Ricardo's work is laid in ruins because it is contrary to facts, to experience, and to the fundamental laws of natural philosophy. His work, however, found great favour amongst the manufacturing classes, as affording them support in their antagonism to the landowners. John Stuart Mill No writer on economics has exercised so great an influence on contemporary thought as Mill. Equally brilliant with ^ See chap, xxxiii. 32 ECONOMIC AND FISCAL FACTS Ricardo, but more logical, he exercised such a sway over his followers that it appeared as if the truths of the science were permanently settled and not to be questioned. He derived much of his inspiration from Jean Baptiste Say, the eminent French economist, with whom he lived for some time in Paris when a young man. His ' Principles of Political Economy,' published in 1848, were intended to be similar in object and conception to those of Adam Smith, as expressed in the 'Wealth of Nations,' but adapted to the more extended and improved ideas" of the age ; and although differing in many resfjects from that work, the book is full of valuable matter. Together with the ' Wealth of Nations ' it may be said to form the basis of the text-books and teaching of the orthodox school of British economics (the Ricardo-Mill system), which has degenerated into the ' Manchester ' school. Mill was a powerful writer, a profound logician and philosopher, but not a practical statesman. He knew nothing of mercantile law, and was subject to mistakes,' but he was modest and always open to correction. Cossa speaks of his ' narrow philosophic utilitarianism ' and ' his ardent concessions to socialism, more apparent than real,'" but those who differ most from his conclusions and his application of abstract truths must admit the immense value of his contributions to the study of economics, and it is to be regretted that his followers have in many cases prejudiced his doctrines and arguments, and impaired their utility by pushing their application to extreme limits, and by insisting on their applicability to all circumstances, irrespective of modifying conditions. CHAFPER XI THE MODERN GERMAN SCHOOL Friedrich List is unquestionably the father of the modern German school of economics, which is certainly gaining ground, and has found the most distinguished disciples in Germany. List advocated the national and historical method as opposed to the cosmopolitan policy of Adam Smith, which 1 Macleod's History of Political Economy, p. 123, * Cossa'a Political Economy, p. 179. THE MODERN GERMAN SCHOOL 33 although it has been adopted in Great Britain for more than sixty years, has failed to commend itself in practice to any other civilised nation of importance; and even in England is becoming more and more discredited by practical men of business. List was originally a believer in the popular theory of Free Trade; but the favourable effects of Napoleon's conti- nental system, and the destructive results of its abolition, seemed to him so directly contrary to what he had pre- viously observed, that in endeavouring to ascertain the cause of that contradiction, the idea occurred to him that the theory might be quite true, but only in case all nations would reciprocally follow the principles of Free Trade. This led him to consider the nature of nationality, and he perceived that the popular theory look no notice of nations, but only of the entire human race on the one hand, and single individuals on the other.^ He was led to see that it was necessary to discriminate between political and cosmopolitical economy ; between the theory of values and the theory of productive powers ; between manufacturing and agricultural power. He urged, as most important, the co-operation of material and productive powers ; that agriculture and manu- facture mutually depend upon one another, and the closer the agriculturalist and manufacturer are placed together, the less they are liable to interference in the exchange of their products. He saw that the prosperity of nations was not, as Say believes, in proportion to their amassed wealth, but in pro- portion to the development of their powers of production," and he agreed with Alexander Hamilton, that a nation is able by protective import duties to build up manufacturing industries which would produce the domestic article as cheaply, or more cheaply, than the imported article. He considered that the arguments of Adam Smith and J. B. Say depended on the assumption of universal peace and universal association, and he believed an economic theory to be untenable upon such a hypothesis. He insists that nation intervenes between man and mankind ; that each nation has its own language, literature, history, habits, laws, and institutions, its distinct territory and personality, with all the rights and duties involved. He protests against * List, Political Economy, x.txix-xl. " Ibid. p. 117. B * 34 ECONOMIC AND FISCAL FACTS abstract theory which ignores nationalities and national interests. He does not pretend to have furnished the world with a panacea, but his system offers a mode of reconciling theory with practice and renders political economy acces- sible to every cultivate/l mind.* Roscher has developed the historical method originated by List. His fundamental aims are to represent what nations have thought and written, what they have striven for, what they have attained, and why they have attained it; he strives to show that a nation is not merely the mass of individuals now living, and that the observation of con- temporary facts only is insufficient. Lessons must be learned from the past, and especially from those taught by the development or decay of ancient nations. He thinks that the principal task of the economist is to show how, out of that which was once reasonable and beneficial, the unwise and inexpedient has often gradually arisen. CHAPTER XII THE AMERICAN SCHOOL The American school of political economy was founded by Alexander Hamilton, the greatest statesman of the United .States of America, and was afterwards influenced by List, Carey, Stephen Col well, and other able economists. Hamilton held the opinion that the Free Trade policy of Adam Smith was only possible in practice if adopted by all nations. He laid much stress upon the development of manufacturing industries, and urged a system of moderate protective imports. He expressed the opinion that home competition would prevent anything approaching to monopoly, and that, with the development of domestic manufacture, the home product would be cheaper than the foreign article, for which it would be the substitute. There can be no dtjubt that Carey was greatly influenced by the views of Hamilton and List, and in 1859 he published his ' Principles of Social Science.' He exposed many of the .sources of confusion manifest in the writings of some of the adherents and exponents of the Ricardo-Mlll School, especiallv on the question of exchange and value. He held that wealth t Professor Matile, Preface to I-isj. THE AMERICAN SCHOOL 35 increases in proportion to social progress, whilst exchange value diminishes, and that the value of an article is not fixed by its cost of production in the past, but by the cost necessary for its production under the existing conditions of improve- ment due to increased knowledge and science. He held that the Ricardo-Mill theory of rent was a speculative fancy, contradicted by all experience, and that the interests of capital and labour were inseparable; that the producer and consumer should be in close connexion, and that the products of a country should not be exported to foreign countries in exchange for their products, ' thus serving to enrich, as by manure, a foreign soil.' He was a strong advocate for giving priority to the home market; and though originally, like List, the supporter of Free Trade policy, he became an ardent advocate for moderate protection, as the co-ordinating power which must intervene to prevent private advantage from working public mischief. The attitude of the American school of economics towards fiscal policy may perhaps be gathered from the words of the Republican manifesto of 1906 : The true American policy taxes foreign products, and encourages home industries. It puts the burden of revenue on foreign goods. It secures the American market for American producers. It upholds the American standard of wages for the American working-man. The Democratic manifesto also proclaims that ' in the United States, as elsev/here, protection protects labour.' The value attached to the home market by American economists is indicated by the following quotations : A bushel of corn is worth as much in Illinois or Iowa, as in the neighbourhood of Paris or of London. The sole reason why it sells for only a fourth or fifth as much is that tha farmer is burdened with the cost of sending it to market. Bring the market to him by opening the great coal and ore deposits of Indiana, Illinois, Missouri and Michigan, and then not only will he be relieved of the necessity for looking to distant markets, but it will be impossible for him to supply them because the price at home will be on a level with that abroad.' With what reason, and with what justice does one say that an impost or tax on imported iron or nail-s, cloth or cutlery, creates a monopoly? A great many of our countrymen were previously employed in making these articles. In what sense is a monopoly accorded to any or the whole of them together? Do we not know that not only will each of them sell as his own 1 C^rejr, Principlss of Social Science,. 36 ECONOMIC AND FISCAL FACTS interest prompts, and increase his product so fast and so far as he can do so with profit, but that anyone else who will, may embark in the business whenever he shall see fit.* The purchasing power of a people, who have duly mingled manufactures with agriculture, is tenfold that of a purely agricul- tural community. They purchase of each other. . . . The strength and wealth of a country should be measured by the quantity and value of its own productions which it consumes, and not by what it sends abroad.' Is it natural that any nation should keep its farms in one Continent and its workshops in another? Is it natural that cotton on its way from the grower to the weaver should go half-way round the globe and back again? Is it natural that a large part of the race should be employed in carrying bulky articles — raw materials, and coarse goods, — from some countries to others in the same climate, and of the same general capacity ? Is it natural that a country with millions of tons of iron on the surface of her soil and square miles of coal not far below it should send thousands of miles for railroad iron? Protection is the natural resistance to an unnatural state of things." CHAPTER XIII THE ACTION OF CURRENCY It is not difficult to understand how economists came to ascribe to the mercantile system the absurd doctrine that the precious metals are the only source of wealth. If we except Mill, Jevons, Macleod, Sidgwick, Foxwell, and a few others, it may be said that the modern British economists, as a class, possess no practical experience in the complex questions of currency. They have found that a certain line of action has been talien in the past with regard to precious metals, but they have not grasped the reasons for such action. They have failed to discriminate between money as merchandise and money as a measure of value, to distinguish between hoarding and bank reserves, or to understand the effects of a contraction or an expansion in the supply of currency. > Horace Greeley Essays on Political Economy, 1869. s Stephen ^Colwell, Report to the Secrefary to the Treasury, 1866. * Robert E. Thompson, Social Science, p. 271. THE ACTION OF CURRENCY 37 Professor Bonamy Price has described the chaos regarding money in the minds of modern economists as follows : It may almost be said that every man contradicts every other man about money ; what it is, and what it is not ; what it can do, and what it cannot do. In no other subject which occupies the thoughts of men does anything approaching the same disorder exist. It is quite possible that some individuals may have held the absurd doctrines ascribed to the mercantile system and that politicians and ministers of the past may have acted foolishly ; but probably in the majority of cases of apparently abnormal action with regard to the precious metals, such action may have been dictated by sound reason, such as either an avoidance of a depletion of bank reserves, or of a drain of specie from the country, or of a monetary crisis, or a panic, or by the resumption of specie payment, or from the need of metallic money for war purposes. It must be borne in mind that metallic money measured by itself cannot vary in value; but, as merchandise, it will appreciate or depreciate like other merchandise, or, in other words, its purchasing power will vary with a plentiful or a scanty supply. Mill says : That an increase in the quantity of money raises prices, and a diminution lowers them, is the most elementary proposition in the theory of currency ; and without it we should have no key to any of the others.' Alexander Baring, the eminent financier, in commenting on the difficulties caused by a contraction of the currency in 1819, remarked : An alteration in the value of currency is what few, even the wisest, generally perceive. They talk of an alteration in the price of bread, and provisions, never reflecting that the alteration is not in the value of those articles, but in that of the currency in which they are paid. ' Everyone,' as Alison has remarked, ' can understand and appre- ciate the difference of the big and the little loaf, of cheap or dear bread ; but very few can be brought to understand, or take any lasting interest in, the far more important influence of a plentiful or contracted currency on prices, or the connection between free trade in the lending of money and the danger to the borrowers from its establishment. In the next place, on this very account, the whole monetary system is one which is never selected as a cheval de bataille by the democratic leaders. As it does not afford the means of arousing the masses, it is not one to tempt individual ambition. ' " ' J. S. Mill, Political Economy. ^ Autobio grafhy of Sir A. Alison, vol. ii. p. 304. 38 Economic and fiscal facts That species of hoarding which impoverishes a country has been graphically described in the following extract from the Report of the United States Congressional Silver Com- mission, as the consequence of a contraction of currency caused by tRe demonetisation of silver : The peculiar effect of a contraction in the volume of currency is to give profit to the owner of unemployed money through the appreciation of its purchasing power by the mere lapse of time. Falling prices rob labour of its employment, and precipitate a conflict between it and capital. Money is withdrawn from circula- tion, and hoarded in consequence of falling prices, neither paying wages nor serving to exchange the fruits of industry, nor perform- ing the true functions of money. As Moreton Frewen has justly remarked : People of little education are accounting for low price on the hypothesis of over-production ; but it is hardly necessary to point out that, while over-production in any particular trade is frequent, and quidcly adjusts itself, general over-production is impossible. . . . As gold gets scarce, it seems to get cheaper ; that is, the bank r-ate falls ; but this is not a mark of the real cheapness of abundance ; it is only a symptom that, because trade and enter- prise are collapsing, no one can profitably employ capital, and therefore money is a mere drug. It is a sign, not of excessive supply, but of absence of demand ; similarly, it is often stated that gold cannot be dear, because the bank reserves of gold arc increasing ; but this, too, is not necessarily a sign of abundance : it merely shows that the conditions of trade are such that, because the currency is contracting, gold is lying idle in the reserves.' CHAPTER XIV THE BANK ACTS OF 1819 AND 1844 The Act of i8ig In T819 the Bank Restriction Act for the resumption of ^iircin payment by the Bank of England was passed; and with it began a series of embarrassments — national, social, financinl, and political — which have imprinted lasting effects on the fortunes of Great Britain. The directors of the Bank of England protested against the passing of this Act, urging that the sudden resumption of specie payment was utterly impracticable, and would be entirely inefficient, if not ruinous. They also stated that they » Moreton Frewen, 'Gold Scarcity,' Nineteenth Century, Oct. 1S85. THE BANK ACTS OF 1819 AND 1844 39 felt tliey had no right whatever to invest themselves with tRe responsibility of countenancing a measure in which the whole community is so deeply involved, and possibly compromise the universal interests of the Empire in all the relations of agriculture, manufactures, commerce, and revenue, by a seeming acquiescence or declared approbation, on the part of the directors of the Bank of England.' The bankers and merchants of the City of London also sent a petition to the House of Commons, expressing the opinion that the measures in contemplation, with reference to the resumption of cash payments by the Bank, would, ' in their opinion, result in a forced, precipitate, and highly injurious contraction of the currency,' which would ' tend greatly to increase the pressure of the taxes, to lower the value of all landed and commercial property, seriously to affect and erfibarrass both public and private credit, to embarrass and reduce all the operations of agriculture, manu- factures, and commerce, and to throw out of employment a great proportion of the industrious and labouring classes of the community. ' ' Notwithstanding these strong remonstrances the Bill was passed requiring the Bank of England to resume at no distant period cash payment, thereby rendering the currency dependent on the retention of gold, the very thing which under the circumstances of the country could not be retained. The circulation of the country rested entirely on that of the Bank of England. The predictions of the merchants and bankers of London were soon fulfilled. The disaster, thus predicted, has been described in Alison's ' History ' as follows : — The effects of this extraordinary piece of legislation were soon apparent. The industry of the nation was speedily congealed, as a flowing stream is by the severity of an Arctic winter. The alarm became universal — as widespread as confidence and activity had recently been. The country bankers, who had advanced largely on the stocks of goods imported, refused to continue their support to their customers, and they were forced to bring their stock into the market. Prices, in consequence, fell rapidly — that of cotton, in particular, sank in three months to half its former level. . . . The effects of this sudden and prodigious contrac- |tion of the currency were soon apparent, and they rendered the next three years a period of ceaseless distress and suffering in the British ^ ParL Debates, xl. 6oi. ^ Alison's Continuation, I. 368- 40 ECONOMIC AND FISCAL FACTS Islands. . . . The effect upon prices was not less immediate or appalling. They sunk in general within six months to half their former amount, and remained at that low level for the next three years. . . . Distress was universal in the latter months of 1819, and that distrust and discouragement was felt in all branches of industry, which is at once the forerunner and the cause of disaster.' So little was the vital importance of the subject understood, that, on the expiration of the Bank Restriction Act in 1833, it was renewed with some modifications, but without any serious opposition. The charter was renewed for twenty- one years, with power to break it off in ten years. Bank of England notes were to be made legal tender everywhere, except at the Bank itself and at branch banks.' Again Alison, commenting on the results of this Act, wrote : On, however, the tetnpest came, and fearful was its violence. With the steady ' contraction of the currency ' by the Bank of England which began in July 1836, prices fell during the whole of the ensuing winter, and in the spring of 1837 the panic was universal. Many bankruptcies took place, though fewer in Glas- gow than might have been expected from the severity of the pres- sure, owing to the amount of solid wealth which had been made in the preceding five years. But as prices of all sorts of manu- factured produce had sunk nearly a half, the manufacturers were under the necessity of lowering wages; and this soon induced strikes in nearly all the branches of skilled industry. The crisis of 1825 was due to a drain of gold to South America in consequence of the revolution. In December 1820 the bullion in the Bank of England had fallen to ;^i, 024,000, whilst the notes in circulation amounted to ;£^25,7o9,ooo. The result of this was that a number of private banks failed, and narrowly escaped bankruptcy. It was only the accidental discovery of an old box full of notes that enabled the Bank of England to stave off ruin, by the hazardous experiment of an enormous issue of paper, when there was no specie to sustain it; but the Funds fell from 96 to 76, and other securities were reduced to half their former value. The Act of 1844 The Bank Charter Act of 1844 ^'^s passed to prevent, as far as possible, the recurrence of such crises as those which had previously caused distress. • .Alison's History of Europe, Continuation, vol. ii. p. 358. ' Ttid. V. p. 196. THE BANK ACTS OF 1819 AND 1844 41 Notes amounting to ;£i4,ooo,ooo were to be issued on securities, and the remainder exclusively on the foundation of bullion. No new bank was to issue notes, but all existing banks might issue notes on condition that they should not exceed their present issue. The Bank of England was bound to buy all the gold brought in, at a trifle below the price then current. The limit on securities was ;^9,ooo,ooo in private banks, and ;^i4,ooo,ooo in the Bank of England. The total issue of notes was fixed at about ;^3 1,000,000, or little more than half of what it had been at the close of the war, namely ;£58, 771,000. This measure forced the Bank of England to purchase all gold that might be offered ; and if there should be any drain of gold from foreign wars or deficiency of harvest, the Bank would be forced to issue a corresponding amount of notes; and if bullion were drained away by any cause the necessary result would be a violent contraction of the currency and a destruction of credit. The whole currency, whether based on security or bullion, was convertible at the pleasure of the holder. The credit of every person in the kingdom would thus depend solely on the retention of gold by the Bank of England. The Bank Act has on several occasions been either suspended or on the verge of suspension ; and in 1858 Mr. Gladstone stated in the House of Commons : The Act cannot stand as it is. I cannot consent that the law shall be suspended at intervals to meet these constantly recur- ring crises : the Bank Act damaged in 1847 was utterly shattered in 1857. During the seven years, 1883-go, the Bank of France only changed its rate of discount seven times, whilst the Bank of England changed it sixty-two times, the variation in France amounting to 2 per cent., whilst those in England have amounted to 4 per cent. Mr. Goschen, in the House of Commons, in April 1893, said : I feel a kind of shame that on the occasion of two or three millions of gold being taken from this country to Brazil, or any other country, it should immediately have the effect of causing a monetary alarm throughout the country. Then came the Baring failure, and our weakness was shown by having to call France to our aid. The currency of France has weathered, without difficulty, storms to which the Baring failure was mere child's play; for example, the Franco-Prussian war, the Communist struggle, the war 42 ECONOMIC AND FISCAL FACTS indemnity, and the failures of the Panama Canal, of the Societe des M^taux, and of tiie Comptoir d'Escompte. In contrast to this, Mr. Goschen at Leeds, expressing his opinion on the gravity of the situation from the Baring failure, and the inadequacy of our gold reserves, said : You risked the supremacy of English credit, the transfer of the business of this country to other European countries. I can- not exaggerate the immediate danger to which this country was exposed. . . . You have escaped from a catastrophe which would have affected every town, every industry — to use a common phrase, you have escaped by the skin of your teeth. CHAPTER XV THE BALANCE OF TRADE The excess of our imports over exports (usually termed Balance of Trade) has increased under our Free Trade policy to an alarming extent. In 1856, or ten years after the adoption of our Free Trade policy, the adverse balance was, in round numbers, about ;^33,ooo,ooo. In 1866 it amounted to ;:£J56,ooo,ooo ; in 1876 to ;^ii8,ooo,ooo; in 1886 to ;^8i,ooo,ooo; in 1896 to ;^i45,ooo,ooo; in 1906 to ;^i47,ooo,ooo; and in 1907 to ;^i27,ooo,ooo. Of course, the difference in the values of exports and imports does not accurately represent the actual difference between expenditure and production ; some allowance must be made for freights and other contingencies, but the adverse balance is so enormous that it is impossible to arrive at any other conclusion than that we are, as a nation, spending far more than we produce. One ugly feature of the case is, that our bill for imported food, drink, and tobacco — all consumable articles — amounts to ;,£^247,ooo,ooo, or more than one-third of our total imports. In 1880, Stephen Bourne, a well-known statistician and an unswerving Free Trader, wrote : Even now when these words are being written the trade returns which are being published show the increase of an adverse balance, and that the food imports very nearly swallow up the whole value of the produce of manufactures we export.' These facts destroy the cherished doctrines of Free Traders, namely, that we are prosperous under our Free ' Stephen Bourne, Trade, Fofulation, and Food, 1880. THE BALANCE OF TRADE 4,1 Trade policy, and that our imports are always paid for by a coiTesponding value of exports. Many opponents of Fiscal Reform have therefore attempted, but failed, to explain them away. The most notable of these attempts was made by Mr. (now Sir Robert) Giffen in a paper read at a meeting of the Royal Statistical Society, April, 1882, in which he endeavoured to establish a theory of invisible exports, but his paper was very roughly handled in discussion, his theory of invisible exports completely demolished, the assumptions by which it was supported were refuted, his estimates of freight were shown by practical shipowners to be greatly exaggerated. Mr. David Maclver, for example, said : The large profits, which those who understand the business some- times succeed in making, tempt others into the field, the per- formance of whose vessels certainly does not yield a profit of 12 J per cent., but In too many instances no profit at all. Mr. Giffen takes about 12,} per cent, as the all-round profit of shipowning ; but I have no hesitation in saying that if he puts it at half that sum, he would be very considerably over the mark. Mr. Glover, another shipowner, said that Mr. Giffen exaggerated the value of freight as a matter of international exchangeable value. In the face of such skilled testimony, Mr. Giffen was constrained to admit that the figures on which he relied were absolutely incorrect. Stephen Bourne, in discussion, pointed out the remarkable fact that of late years the balance of trade had fluctuated from time to time, but ' whenever we heard our trade was good, then it was found that our excess of imports was diminishing.' It only requires the extreme instance of the United States to prove the absurdity of the contention that imports are paid for by exports. In 1907 our imports from the United States amounted to 3£'i33. 683,631 Our exports to 58,052,574 Showing an excess of imports 75)631,057 Our net exports of bullion and specie to ... ... S>738,S03 Making a total adverse balance of 81,369,559 It is a manifest absurdity to suppose that, on an export of ■;^58,ooo,ooo to the United States, the freight and other contingencies should amount to anything like ;^8i, 000,000.' ' Supposing that our whole trade with the United States was done in British owned ships, which is far from being the case, the freight charges would not amount to a small fraction of ;£8i, 000,000. 44 ECONOMIC AND FISCAL FACTS It has been urged that if it were true that such an enormous and continuous unbalanced expenditure existed, Great Britain must have been ruined long ago, but yet its wealth, as shown by the income tax, has increased. The explanation is simple. We have been living to a great extent on the interest of those investments which we have made in foreign countries at the time when we were prospering and building up our trade and commerce, and before we had lost our industrial and commercial superiority. These invest- ments have been estimated at about ;£i, 250, 000,000. Our great leakage of capital has been proved in evidence given before the different Royal Commissions on the depression of trade, industries, and agriculture of 1879, 1895, and 1903, and we have known that since then there has been an enormous transfer of Bonds and other securities from England to foreign parts. In 1S70 the greater part of the American Debt was held in England, whereas in 1881 only 10 per cent, of it was held in the whole of Europe. It is notorious that during the last few years capital has been leaving England. Sir Joseph Lawrence, in a pamphlet on the depreciation of British securities, has computed from the figures in the report of the Inland Revenue Commissioners, that the increase in the investments abroad of British capital for the year 1906 alone amounted to ;^is6,ooo,ooo. This has been corroborated independently by Lord Rothschild, who, in an interview published in the Daily News of October 9, 1907, computed the increase at ;^i5o,ooo,ooo. The condition of Great Britain in this respect is somewhat on a parallel with that of a man who, from the profits of a prosperous business, has been enabled to make large invest- ments, but who keeps no account either of the receipts from his investments, or from the profit or loss in his business; one who gauges his wealth by his bank balance, and who now employs an incompetent manager to carry on his business. It is quite conceivable that his apparent wealth, as represented by his balance at the bank, may increase largely whilst he himself is on the high road to ruin. A few figures will serve to illustrate this. Assuming the initial amount of his investments is ;ig'ioo,ooo, bearing interest at 5 per cent., and that from mismanagement it diminishes at the rate of ;^io,ooo a year, that his business is carried on at a loss of ;^i,ooo a year, and THE BALANCE OF TRADE 45 that his domestic expenditure amounts to ;£i,ooo a year. The following- figures, based on these data, show that in six years his Bank balance has more tlian quadrupled, although his capital has diminished by 60 per cent. After the sixth year his bank balance decreases, and finally disappears in the thirteenth year, and his capital is exhausted in the tenth year. Year. Capital. Interest on Capital 5 percent. Expenses and Losses. Payments into Bank. Bank Balance. £ £ £ £ £ — 100,000 2,000 1st 90,000 4,500 2,000 2,500 4,500 2nd 80,000 4,000 2,000 2,000 6,500 3rd 70,000 3.500 2,000 1,500 8,000 4th 60,000 3,000 2,000 1,000 9,000 5th 50,000 2,500 2,000 500 9.500 6th 40,000 2,000 2,000 ml 9,500 7th 30,000 1,500 2,000 — 500 9,000 8th 20,000 1,000 2,000 ^1,000 8,000 9th 10,000 500 2,000 — 1,500 6,500 10th nil nil 2,000 — 2,000 4,500 nth j» )) 2,000 — 2,000 2,500 1 2th t> »» 2,000 — 2,000 500 Now we know that influences similar to those indicated above have been in active operation in Great Britain. As a nation we keep no account of our investments abroad, or of profits and losses of our industries. The Board of Trade Returns throw no light upon these points. We gauge our apparent wealth by the extravagance and luxury that prevail, and the bettered condition of the people. The enormous leakage of our capital cannot be denied ; and it is notorious that many of our industries have been carried on at a loss. We have entrusted the management of our affairs to one who, when the great loss of our capital was brought to his notice, had the effrontery to say that it was a benefit to the country. Our expenditure has been lavish, our Imperial taxation for the last twenty years has increased by 75 per cent., and our local taxation has more than doubled, and is increasing at a rate that threatens ruin if it is not checked. The figures given above indicate that, under the conditions assumed, th« apparent wealth increases up to a 46 ECONOMIC AND FISCAL FACTS culminating point, after which it decreases slowly at first, and then rapidly. Whether we have reached or passed that culminating point, it is impossible to say. Our National accounts give no information, but the violent contrast between wealth and poverty, and the great increase of unemployment, throw a lurid light on the subject. The condition of Great Britain appears to be rapidly approaching that of Greece and Rome during the period immediately preceding the decline and fall of those nations. Finlay describes the condition of Greece about that time as follows : The rural districts in the eighth century were reduced to a state of desolation, and the towns were flourishing in wealth. Agricul- ture was at the lowest ebb, and trade in a prosperous condition.' Sismondi also says : It was at this very time, when industry was declining, that the towns of the provinces arrived at their highest degree of opulence. Adrian excited the emulation of their rich citizens, and he extended to the furthest extremities of the Empire, the luxury .of monuments and decorations. . . .' CHAPTER XVI THE RE.^L OBJECT OF FREE TRADE List believed that Free Trade might with advantage be adopted by a nation which has arrived at a high state of progress and wealth, such as that which England enjoyed at the time of the publication of his ' National System of Political Economy,' in 1841 ; and he noted the impossibility of nations competing with her under absolute internatioxial Free Trade. There can be no doubt that, if Great Britain had adopted Free Trade policy and all other nations had followed her example, her continued progress and prosperity would have been assured, for she would then have maintained the monopoly of her manufactures in all the markets of the world. In one of fhe early debates in the House of Lords on the 1 Finlay, p. 544. » Sismondi, Chuie 4e I'Emfire Romaine, \. jg. THE REAL OBJECT OF FREE TRADE 47 subject of Free Tradfe, Lord Goderich, afterwards Lord Ripon and father of the late Marquis of Ripon, said : Other nations knew, as well as the Noble Lords opposite and those who acted with him, that what we meant by Free Trade was nothing more nor less than, by means of the great advantage we enjoyed, to get the monopoly of all these markets ■for our manufactures, and to prevent them one and all from ever becoming manufacturing nations. The policy that France acted upon was that of encouraging its • native manufactures ; and it was a wise policy, because, if it were freely to admit our manufactures, it would speedily be reduced to an agricultural nation, and therefore a poor nation, as all must be that depend exclusively upon agri- culture. Albert Leffingwell, an intelligent American, wrote in the same strain regarding the United States : If, during the last fifty years, America had permitted a system of unrestricted trade with all the world, she would never have reached the development of her manufactures which has rendered her independent, but would to-day be little more than a huge agri- cultural colony, exchanging the produce of her fields for the manufactures and fabrics of Europe. Under a system of Pro- tection America has been able to develop her boundless resources — to encourage the growth of her manufacturing indiustries, until to-day she is not only independent, and able to supply her owij needs, but she exports to foreign nations, and has begun to compete with England for the trade of the world.' Unfortunately for the success of the somewhat selfish policy of Great Britain, other nations took the bait offered by us, but were not foolish enough to swallow the hook. They accepted the offer of free import into our markets, but refused admission into theirs ; and the large purchases oi those articles which we might have produced at home went, to use Carey's expression, ' to enrich as by manure the foreign soil' and to furnish them with the means of competing successfully with us even in our own home markets. Evidently the object of Free Trade, as expounded by Lord Goderich, has been the key of our policy in the past; to prevent foreign nations from, developing their manufactures. Often have we pursued that policy, which the United States has lately adopted towards us, of dumping low-priced surplus products into Great Britain to destroy our manufacturing industries. 'How frequently,' Roscher says, 'it has * Cgntem-porary Review, Jujy iSSfl. 48 ECONOMIC AND FISCAL FACTS happened that England by keeping down her prices for a time has strangled foreign rivals." In 1815 Brougham said : It was well worth our while to incur loss in the exportation of English manufactures in order to stifle in the cradle the foreign manufactures. In 1846, when the United States were endeavouring to develop the manufacture of iron rails, the price under the tariff was $50 a ton ; but when the tariff was foolishly removed, the British manufacturers swamped the market of the United States with rails at I40 per ton; and then, having ruined the struggling industry, raised the price to $75. Considering that the object of making the offer of Free Trade to the world was to prevent all other countries from becoming manufacturing nations, the magnanimity claimed by Cobden for tliis offer, is not very apparent. John Hayes, of Cambridge, Mass., U.S.A., said : England stands forth not so much as the great exemplar, but as the great propagandist of Free Trade. To engraft this policy upon other nations is the paramount idea of British statesmanship. It governs all her diplomacy, is never lost sight of in her legislation, and is avowed by all her Ministers. All English literature is tinged by the political philosophy inspired by this idea. Her press reiterates day by day its platitudes concerning the unselfishness of British commerce, not to affect opinion in England, which is always fixed in the direction of interest, but to create opinion outside of England. . . . No influence which can contribute to the spread of this religion is despised, no accessible organ which can affect opinion abroad remains unsubsidised." The Cobden Club, which has been the great propagandist of this religion, in contributing to the spread of Free Trade doctrines, includes a large majority of foreigners whose interest it is to keep our markets open to their imports, and who for interested motives are naturally desirous to maintain our Free Trade policy. CHAPTER XVII WHAT IS FREE TRADE? The Professors of Economics, who signed the Manifesto in favour of Free Trade in 1903, were requested, by a large 1 Roscher, vol. ii. p. 437. " Stebbins' Manual, p. i6a. WHAT IS FREE TRADE? 49 number of influential gentlemen, to explain definitely ' What is Free Trade? ' Of these fourteen professors, thirteen either vouchsafed no reply, or gave vague answers, or referred in general terms to their own writings or to those of others. The only one who gave a definite reply has stated that Free Trade, in the only passage in the Manifesto in which the word occurred, is ' the policy pursued by this country with regard to foreign trade for the last sixty years.' Now this policy has been that of one-sided and unlimited free import of those articles which compete with our indus- tries, and the taxation of those which do not compete with them — a policy which bears about the same resemblance to the Free Trade of Adam Smith as a scarecrow bears to a human being. It is a simple parody of it. It has already been shown (in Chapter IX) that the Free Trade of Adam Smith involved the removal of restraints, but was not opposed to a system of moderate import duties. In fact he was opposed to the free import of manufactured goods; and he only advocated the free import of corn on the mistaken assumption that the difficulties and cost of trans- port would act as a natural protection, and prevent its import in such large quantities as to injure the farming interests. There can be no doubt that his Free Trade was not in- consistent with moderate import duties. The Free Trade proposed by Sir Robert Peel was : To remove all prohibitions, and reduce all duties of a prohibitory character to a moderate scale. To reduce import duties on raw materials imported for manufacture to 5 per cent. To reduce import duties on partly manufactured articles to 12 per cent. To reduce import duties on wholly manufactured articles to 20 per cent. This accords with the ideal Free Trade of Bastiat, the great admirer and exponent of Cobden in France : I desire to see public opinion led to sanction a law conceived nearly in these terms : — Articles of primary necessity to pay a duty ad valorem of five per cent. ; articles of convenience ten per cent. ; articles of luxury fifteen to twenty per cent.' Mr. Huskisson also spoke of his hope to see accomplished 'Free Trade in corn, under a proper and due protection." ^ Sofhiimes Economiques, F. Bastiat, 1849. ' Huskisson'3 Speeches, ii. 387. so ECONOMIC AND FISCAL FACTS McCuUoch took this very sensible view of the character of Free Trade : It is frequently said that Customs duties, though advantageous in some respects, are inconsistent with, and opposed to the grand principle of Free Trade, and should therefore be unconditionally rejected ; but a cuckoo cry of this sort deserves little attention. Freedom consists in the absence of whatever is partial, oppressive or unjust. Trade is quite as free, when there are duties on exports and imports, as when there are none provided. These duties are moderate and press equally on all parties and involve no preference. All fair and free competition of horses in a race is not affected by all being made to carry the same weight. . . . List says : A good system of Protection does not imply any monopoly in the manufactures of a country ; it only furnishes a guarantee against losses to those who devote their capital, their talent, and their exertions, to new branches of indtistry. There is no monopoly, because internal competition comes in the place of foreign competition, and every individual has the privilege of taking his share in the advantages offered by the country to its citizens. Even Adam Smith, though disapproving of monopolies and prohibitions, admitted that by such means a manufac- ture may sometimes be acquired sooner than it could have been otherwise; and after a time may be made at home as cheap, or cheaper than, in the foreign country. J. B. Say contested this, but Ricardo corrected him by asking : How can they permanently support fhe market price of foreign goods above the natural price, when every one of their fellow citizens is free to enter into the trade? Say had the candour to admit the correction in the following words : Ricardo is right in disputing my position ; in fact, when a Government prohibits foreign products, the profits made in the interior upon its production do not rise above the common rate of profits. McCuUoch also says : The advantage derived from a monopoly is really very incon- siderable. Competition being always free amongst the home pro- ducers, the exclusion of any particular species of foreign manu- factured goods cannot elevate the profits of those who produce similar articles at home above the common level. It has never been contended that businesses deepest entrenched behind ramparts WHAT IS FREE TRADE? 51 of prohibitions and restrictions have greater advantages than those which are exposed to the freest competition. Although Adam Smith considered that Free Trade was right in the abstract, he was evidently aware of its im- practicability, for he wrote : To expect that freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it.' It may be perhaps laid down as a general axiom — subject of course to modifying influences — that when an article is ' one of home production, i.e., one that is, or can be, produced at home — a moderate tariff stimulates production and docs not raise the price — the duty being paid by the foreign pro- 1 ducer or his agent. But when an article is not of home production, such as tea, coffee, cocoa, tobacco, wines, &c., the burden of the tariff increases the price, and the tax falls upon the consumer. Now the practical effect of our present fiscal policy is that we admit free of duty those articles which compete with our industries, and tax those which do not. We remit that tax which should be paid by the foreigner, whilst we exact that which falls on our own subjects. Mr. Deakin said, at the Imperial Conference of 1907 : What is called a ' tax ' on food would be more appropriately referred to as a ' duty ' ; and in our experience a duty is not of necessity a tax ; it need not raise prices. We have illustrations within our own country, in which we have imposed duties of a definitely protectionist character, which have not had the effect of raising prices in our community. Every argument of the Free Trader is based upon the misuse, not upon the proper use, of Protection. Every so-called triumphant exposure of the evils of Protection has been simply an exposure of the evils caused by Protection carried beyond its legitimate limits, the evils of a prohibitive, as distinguished from a protective, policy. Free Trade advocates appear to be unable to discriminate between the use and the misuse of a principle. In their abhorrence of the misuse, they would sweep it away altogether. They are as unreasonable as the individual who, discovering that excessive food will cause indigestion, should insist that no food whatever ought to be taken. The application of the principles of economics is often full of difficulty, and the 1 Bk. iv. chap, ii. 52 ECONOMIC AND FISCAL FACTS dogmatist makes serious mistakes in applying them. For example, it is often contended that ' It is unjust to tax all for the benefit of one class ' — with this every sensible man will agree ; but when it is urged that ' therefore protection in any shape is wrong,' the application of the pure principle is erroneous, and the Tariff Reformer may fairly contend that it is just and expedient to tax all for the benefit of all, holding as he does that employment both of Home and Colonial labour, and the development of Home and Colonial produce and industries, is for the benefit of the community at large; and consequently that Protection if carried out only to the extent necessary to secure this, and no further, is just and expedient. All extremes are bad, whether they be of unlimited competition or of absence of all competition. Unlimited competition defeats its own purpose by crushing out weaker industries, diminishing the supply, causing monopolies, and often enabling the successful competitor to raise prices as soon as the rival industry has been ex- tinguished. There seems to be little doubt that the political economist of the future will hold up Great Britain as a warning and an example of ruin caused by the misapplication of the principles of political economy. The common argument of the opponent of Tariff Reform that Protection 'blunts invention,' 'destroys the stimulus to action,' or ' injures the quality of manufacture,' is demolished by experience, and by the stern logic of facts. No one in his senses can say that such has been the effect of Protection in the United States. A few quotations from the utterances of some of our fellow-countrymen, at the time the development of manu- factures in the United States was beginning to tell on our market, will serve to show the falsity of such arguments. The edged-tool trade is well sustained, and we hear less of the effect of American competition. That this competition is severe, however, is a fact that cannot be ignored. The ascendancy of the Protectionist party in the States continues to act most favourably for the manufacturing interests there, and it is no wonder that under such benignant auspices the enterprise in this direction is swelling to colossal proportions.* Sheffield cutlery and tools had been previously pre-eminent in the world, but now the United States have surpassed* us in quality, in ingenuity, and in fitness of design. 1 Ryland's Trade Circular, March 4, 1871. WHAT IS FREE TRADE? 53 A leading manufacturer expressed himself startled and alarmed at what he saw at the Paris Exhibition, as the proofs of succe-iaful rivalry on the part of the Americans in branches of his own trade.' Manufactures have been created and fostered by a system of protection, which, through enhanced prices paid by the consumer, must have been very costly to the nation, but of the result of which there is reason to be proud, since it has made them to be, to a great extent, independent of other nations for their supply.' The worsted manufacture of the United States is of compara- tively recent origin, but it has made very rapid progress during the past ten or twelve years, the high tariff having greatly stimu- lated its development." America is not only supplying her own country with goods but exporting her manufactures to such an extent that she has become a very powerful rival to England.* There is no time to be lost, if we mean to hold our own in the hardware trade.' For years Sheffield has supplied not only our own country, but nearly the whole world. The monopoly remains with us no longer. It would be foolish not to recognise the fact that at Philadelphia Great Britain was in the face of a powerful rival in manufacture.' CHAPTER XVIII THE MANIFESTO OF THE PROFESSORS When Mr. Chamberlain rudely awakened British economists from their slumbers by his famous speech at Birmingham, ^on May 15, 1903, there was a great outcry. The sacred doctrine of Free Trade was so assured that even an inquiry into our fiscal policy was not to be entertained for a moment. Fourteen professors of economics rushed into the breach to prejudice public opinion and stifle inquiry by a manifesto. Professor Foxwell, however, courageously declined to join them. The very basis of their- manifesto rests on the false assumption that the incidence of import duties, in nearly all important cases, falls almost exclusively on the consumer, and that the taxed commodities will cost more to the con- sumer by the full amount of the tax. These assumptions 1 Lecture at the Colonial Institution, November 1878. ' Report on the Philadelphia Exhibition by P. Graham, Vice-President of the Society of Arts. 3 Report on the Philadelphia Exhibition by Mr. Mitchell, member of the Bradford Chamber of Commerce. * Mr. Mundella, November 1874. * Mr. Anderson's Report on the Philadelphia Exhibition. * B. McHardy. C 54 ECONOMIC AND FISCAL FACTS have been repeated by Professor Marshall in his ' Memo- randum on the Fiscal Policy of International Trading,' but the framer of that document appears to have a dim idea that facts do not altogether support these assumptions, so he has qualified it by the proviso ' unless the effect of the import duty is overborne by other causes operating at the same time in the other direction.' Such causes, however, are so numerous as to form the rule and not the exception. For it has been proved in experience, by a vast array of facts, that the assumptions of the professors are not fulfilled in a very large majority of cases owing to the fact that the indirect action of import duties sets in motion causes which operate in the reverse direction of the abstract tendency. Admitting that, in the abstract, import duties tend to an increase of prices, yet, as Macleod has justly pointed out, there may be other circumstances which may aggravate, neutralise, or overpower and seemingly reverse the general theory. The great mistake made by the professors is that they have failed to recognise the fact that import duties, in their indirect action, may and do bring into play forces which entirely change the conditions of the problem. In their application of the theory they have neglected important factors which seriously affect the results. B.istiat, the French economist, discriminating between a bad and a good economist, says : The one takes account of the visible effects, the other takes account both of the effects which are seen, and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favourable the ultimate consequences are fatal, and the con-- verse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, whilst the true economist pursues 4 great good to come, at the risk of a small -present evil.' The professors appear to have fallen into the error against which Bastiat has warned his readers. They have not taken into account the effects which it is necessary to foresee. It their theory had been supplemented by experience or if they had been students of history, they might have seen that in a large majority of cases the import duties are paid by the foreign importer or his agent, and do not fall upon ' Eaiffi on PolilUal Economy, F. Bastiat, p. 43. THE MANIFESTO OF THE PROFESSORS 55 the consumer; and also that the price of the article taxed, instead of rising, often actually falls under the imposition of a duty. An explanation of the causes of this apparent paradox, as well as numerous instances illustrating it, is given in the following chapters. CHAPTER XIX WHO PAYS THE DUTY? The late Mr. A. Williamson, a shrewd practical man of business, being convinced from actual experience as a mer- chant both in Calcutta and in Glasgow of the falsity of the Cobdenite assumption that the import duty falls upon the consumer, challenged the Cobden Club to make this a test question ; and when the challenge was declined, he issued a circular to a large number of the principal exporters in this country. He sent to the author the following account of his proceedings and the result of his circular : ' Who pays the Duty? ' The Consumer or the Foreign Producer? ' The Cobden Club maintains that all duties, of whatso- ever kind, are paid by the consumer. When I aslced it to give instances in the cases of such commodities as a country can internally produce, where the duty had been added to market prices, the only reply I received was — A duty of say 5s. on foreign corn would increase by 5.?. the price of the foreign corn in the British market. The price of British corn in our market would thereby rise to the extent of 5s. The increase in both cases would come out of the pockets of the consumers. The 55. on foreign corn would go into the Imperial Exchequers. The 55. on British corn would go into the poclcets of the agriculturists at first, and ultimately into the pockets of the landlord. ' As mere dogmatic assertion was not what I had asked for in order to settle once and for all a question of such far- reaching importa'nce to British industries I challenged it to issue a short circular to our chief exporters asking them what had been their experience. This challenge it declined on the ground that — 56 ECONOMIC AND FISCAL FACTS The Cobden Club has no authority to put any such question as is suggested ; it is quite open to you to do so yourself, if you deem fit. ' I thereupon submitted the following question to a large number of exporting houses in London, Birmingham, Man- chester, Oldham, Stocliport, Salford, Coventry, Macclesfield, Huddersfield, Congleton, Walsall, Edinburgh, Glasgow, Src— In your experience when a foreign country has imposed, or added to, a duty on an import, which had to encounter the com- petition of a home product, have you obtained in the markets of that country an advance in price, to recoup you for the duty, or increase in the duty, you had to pay? with the result that I obtained 530 replies in the negative and only one from an American cycle exporter in the affirma- tive, evidently meant as a joke, as he appended the remark : ' You Britishers are the biggest fools in the world ; why don't you put on tariffs? ' The following is a list of the industries with the number of replies received from each — ' Cotton 103, Silk 31, Woollen g, Carpets 5, Iron and Steel 58, Brass 30, Gold, Silver, and Electro-plate 34, Hard- ware 26, Gunmakers 16, Cycles 34, Engineers 18, Glass 7, India-rubber 4, Leather 5, Brewers 11, Merchants 30, miscel- laneous 114 — total S31. ' In the face of such conclusive evidence as this how can the Cobden Club still contend that there never was a duty that was not, by its amount, added to the market price? Fortunately recent revelations as to the curious constitution of the club show it is no longer the power for mischief it has been in the past. From a list of its members supplied by its secretary at the end of last year we find it now consists of— 242 foreigners, honorary members, domiciled abroad. 59 honorary members, many of them foreigners domiciled in England. 174 members. ' A. Williamson. ' Bramling House, near Dover, ' 29th July, 1903.' The above proves conclusively that the burden has been borne, not by the consumer, but by the foreign producer or his agent. Again, the manager of the Barrow Steel Company stated in evidence before the Royal Commission on the Depression WHO PAYS THE DUTY? 57 of Trade that his company paid ;£i6o,ooo duty to the United States in one year, 1884. Mr. Porter, a correspondent of the New York Tribune, wrote in a letter from Bradford, that the general opinion of the Bradford manufacturers was that the tariff duties came more largely out of the producer than the consumer, and that one of the most prominent of them had said : The truth is, the higher the foreign tariff, the lower we must make our goods. We are obliged to sell our goods in France for the same price as we did before they enacted their higher tariff ; and the Bradford manufacturer is paying the duty, not the French consumer of the goods. I know from practical experience what I am talking about.' Bismarck, in a confidential circular to the Prussian Ambassadors, the year before the adoption of the present protective policy of Germany in 1879, clearly defined his opinion regarding the actual payer of the import duty : By the fact that foreign countries always show the greatest Concern, if another country desires to increase its duties, it can be seen that such Customs duties are, to a very large extent, borne by the foreign producer, and not by the consumer. If the home consumer should really have to bear the weight of increased duties, such an increase would leave the foreign producer indifferent. Under a system of protective tariff, the Empire will therefore derive part of its income from foreign countries." Dexter Hawkins, a well-known New York lawyer, has stated that, when attending a meeting of the hardware trade at Sheffield, an eminent manufacturer told him that the English manufacturer was paying at least one-half of the tariff on all goods he exported to America, and that they must break down the tariff at whatever cost, or it would build up American rivals to the extent at least of supplying entirely their own home market ; and then England would have to pay the whole tariff, or lose the market. Hawkins also mentioned that another English manufacturer, lobbying at Washington against the United States tariff, confessed to a Free Trade Congressman that the Protective duties in the long run came almost wholly out of the foreign producer, adding : If they only came out of the domestic consumer, the foreign manufacturer would not care a button about the tariff laws. 1 Stebbins' Manual, p. 491. ■ Modern Germany, J. Ellis Barker. CHAPTER XX FALL OF PRICES UNDER IMPORT DUTIES In a very large number of cases the imposition of import duties has been followed by a fall of prices, numerous examples of which are given in the following chapters. To shallow thinkers such a result appears impossible, but a little consideration will serve to explain the apparent paradox. 1. Before the import duty comes into force, there is a rush on the part of the foreign producer, or his agent, to send in as much produce as possible so as to escape the duty. This naturally has a tendency to depress prices, and the fall is rendered permanent by development and competition in the home market. 2. The home manufacturers, being protected from whole- sale dumping of surplus goods, are in a position to carry on their industry on a more satisfactory foot- ing than before. 3. The foreign producer must sell his surplus produce, and the import duty is generally borne by him. 4. The revenue brought in from the import duties — if the import duty be general and not partial — saves direct taxation, and the home producer is thus enabled to produce at lower rates than when heavily taxed. 5. A foreign monopoly which has maintained high prices is often killed by an import duty. The philosophy of the whole matter has been explained by that great American statesman, Alexander Hamilton, in his famous report of 1791, as Secretary of the Treasury : But, though it were true that the immediate and certain effect of a tariff was an increase of price, it is universally true that the contrary is the ultimate effect, with every successful manufacture. When a domestic manufacture has attained to perfection, and has engaged in the prosecution of it a competent number of persons,, it can be afforded, and accordingly seldom or never fails, to be sold cheaper, in process of time, than the foreign article for which it is a substitute. The internal competition which takes place soon does away with everything like monopoly, and by degrees reduces the price of the article to the minimum of a reasonable S8 FALL OF PRICES UNDER IMPORT DUTIES 59 profit on the capital employed. This accords with the reason of the thing, and with experience. The following explanation has also been given by Albert Leffingwell, an intelligent American, in an article published in the Contemporary Review of July 1880 : We all recognise that a protective tariff forces us to pay, for many articles, slightly more than they would probably cost us under a system of Free Trade. We know, too, that, at present, our manufactured products, whether of metal, cotton, or wool, ' cost us, in general, more to make at home than they would cost us if imported freely from abroad. We know we are not buying in the ' cheapest market,' but we believe that, on the whole, it is best to impose upon ourselves the voluntary tax for the great end, not of enriching monopolists, but of promoting the best interests of the nation. We hope one day to become, not only the greatest of agricultural peoples, but the chief manufacturing nation of the world. To expect the sympathy of English statesmen or manu- facturers with this aim is idle ; but they may at least understand its existence, and credit the people that holds it with common- sense. The average American is neither a knave nor a fool ; to fanciful theories, whose value is but problematical, he prefers the solid assurance of experience and fact. Again, David Syme, of Australian experience, writes : When a duty is imposed on a foreign commodity, which the importing country has facilities for producing at home, in ordinary cases the duty falls, in the first instance, on the consumer, but when the duty has the effect of increasing competition, the tendency is to a reduction in price, and therefore to the ultimate benefit of the consumers. As the duty equalises the conditions of production between the local and foreign producers, it enables an entirely rTew class of competitors to enter the field, namely, the local producers ; and as the circle of competition becomes extended, the rivalry among producers becomes keener, and prices become lower ; for competition invariably leads to this when it is genuine, and not a monopoly in disguise, as is often the case. ... If the revenue from duty fail altogether, owing to the local article taking the place of the imported, and duty-paying commodity, a threefold benefit will be secured. The consumer will gain by a reduction in the price of commodities ; the public will gain by increased employ- ment of labour and capital ; and, lastly, the State will gain by increased revenue from the additional number of revenue-producing population, supported by the new industry.' An excellent illustration in confirmation of the above has been afforded by the development of the tin-plate industry jp the Uiiited States of America. } fortnightly Review, April 1873. CHAPTER XXI THE TIN-PLATE INDUSTRY It is a fundamental axiom of Free Traders that a policy of Protection must entail ruin to the industries of that country which may adopt it. When the McKinley Bill was passed, Lord Goschen hoped that ' the Americans would see that they had made a great mistake in passing it,' and Sir Lyon Playfair said : If the Americans are right in principle, and if they be successful in practice, the whole policy of the United Kingdom is founded on a gigantic error, and must lead to our ruin as a commercial nation. The measure on which Mr. McKinley laid the greatest stress, in putting forward his Bill, was the development of the tin-plate industry. In reply to his opponents he said : They insist that we cannot make tin-plates : so they said about plate-glass, and cutlery, and pottery. Before the passing of the McKinley Bill, there was an import duty of one cent per lb. on tin-plates ; but this was insufficient to keep the Welsh manufacturers' combine from swamping the struggling industry in the United States. In 189 1 (the year of the McKinley Act) the Welsh Tin-plate Association had raised the price of tin-plates from a'g c. to 3"5 c. per lb., with the duty added. The import duty, there- fore, was increased to 2*2 c. ; and this, according to the theory of Free Traders, ought to have raised the price to 4*7 c. ; but, on the contrary, the price fell to 2''g c. in 1894, and thereafter it fell steadily, year by year, until, in 1898, it touched the low price of 2'2 c. per lb. The great development of the canning trade and the consequent demand, however, caused a rise in the price of tin-plates, and this tendency was increased by the great coal strike, and also by a strike of the tin-plate operatives, who obtained a substantial increase of wages; so that in 1898 the price rose to 3*2 c, but it has since fallen to 2'8 c. in 1906, as against 3*5 c. in 1891. In the ten years succeeding 1891, the yearly import of foreign plates to the United States fell from 327,000 to 52,000 tons, whilst the domestic production increased from 1000 to 400,000 tons. 60 THE TIN-PLATE INDUSTRY 6i The United States census of 1900 shows an increase of 104 per cent, in tlie number of fruit and vegetable canning establishments in ten years; 73 per cent, increase of wages in the industry ; loi per cent, increase in the cost of fruit and vegetables canned; and 89 per cent, increase in the value of the completed product. Now, to sum up the results : (i) The tin-plate industry has been successfully developed, and the Welsh monopoly destroyed. (2) Capital has been largely attracted to the United States. (3) Revenue has been increased by the import duty. (4) Increased employment has been afforded. (5) Wages of the tin-plate operatives increased. (6) Cost of tin-plates considerably reduced. (7) A saving of nearly $2,000,000 yearly, compared with the cost when the consumer was dependent on foreign supplies. (8) The payment which formerly went to the foreigner for tin-plates, now circulates, through the wage-earners, amongst retail traders, and gives additional employment to industries allied to the tin-plate industry, such as chemical works, iron works, mining, &c. (9) The canning establishments have increased. (10) More employment has been afforded in canning. (11') More fruit and vegetables have been canned. (12) An export trade of tin-plates has sprung up in the United States. McKinley estimated that if the tin-plates consumed were made in the United States, it would give employment to 23,000 men, but the benefit would not stop there; the additional labour in mining the coal and ores, the lead, the tin, the lumber for boxes, and the sulphuric acid, would furnish labour to 50,000 workmen, and bring support to 100,000 people. A rebate of 99 per cent, of the import duty is allowed on the re-export of tin-plates in a manufactured form. This has proved to be the salvation of the Welsh tin-plate in- dustry, as much of its export is returned by oil companies, in the shape of cans filled with oil. Other produce is in like manner exported from the United States in cans on which the rebate is allowed. CilAPlER XXll EXAMPLES OF FALL IN PRICES The following cases afford a few instances proving that the imfiosition of a tariff does not necessarily raise the price. M. Thiers, in his speech of January 22, 1870, sta-ted that a tariff on linen and cotton thread had reduced the price of a kilogramme of linen thread from 7 to 3J francs, and that the price of cotton thread had been reduced in greater pro- portion. In introducing the tariff M. Thiers said : It is urged that all the protection accorded to industries consti- tute monopolies ; and, to enrich a few monopolies, we burden the whole country. It is true there is a monopoly, but it is not in France — it is in England. I say this little monopoly which you accord to French industry destroys the monopoly of foreign industry. Under the high protective tariff in the United States between the years i860 and 1883, cotton hosiery was reduced to nearly one-half the prices of i860. In 1867 a protection duty was imposed on wool. In 1872 there were in the United States 143 looms pro- ducing 1,500,000 yards of Brussels tapestry. In 1880 there were 1070 looms producing 16,950,000 yards. The price fell from $2'3o in 1872, to $i'5o in 1880, and to 93 c. in 1890. Mr. Wycoff, United States Census agent, stated that the average decline in the value of silli goods was not less than 25 per cent., probably as much as 30 per cent, in fifteen years. Salt under a tariff fell in price from 5i'8o in 1866, to 74 c. in 18S2. Mr. T. Dudley, formerly United States Consul at Liver- pool, gave the following rates of fall under the protective tariff between 1861 and 1883 : Cotton goods, 25 per cent., woollen goods, carpets, &c., 25 per cent., silk 35 per cent, to 40 per cent., crockery 37 per cent. In i860 the duty on crockery was 24 per cent. ; the tariff imposed a duty of 40 per cent., which was afterwards raised to 55 per cent, ad valorem; and now many kinds of crockery are sold in the United States at lower rates than in England.' The manufacture of steel rails in the United States commenced in 1867; at that date steel rails cost $150 per 1 Our Empire under Protection and Free Trade, pp. 85-94. 62 EXAMPLES OF FALL IN PRICES 63 ton. The duty was changed to $28 per ton, and in 1872 the price had fallen to $112. In 1874 it fell to $49, in 1876 to S39, and in 1885 to J27. Sir Lyon Playfair has endeavoured to account for the great fall in the price of steel rails, by attributing it to improvements in manufacture; but although this mig,ht account for some slight reduction, the Bessemer process, and other great improvements in the manufacture of steel rails, were in full operation long before the date of the McKinley Tariff; and Sir Lowthian Bell, the great authority on iron manufacture, has said : I do not mean to say that considerable economies in the manu- facture of steel rails have not been introduced in recent years, by the use of more powerful machinery, &c. , but not of a character to affect the price of iron, which, as I have already observed, was the chief factor in regulating the markets. It was the want of demand which caused the fall in the price of iron and steel, added to by the increase of make in foreign countries. Instances of, a similar character to the above might be multiplied to an indefinite extent. It is evident that in all these cases the ta.\ has not fallen upon the consumer, but on the foreign producer. The taxed article has, in many cases, been reduced in price, whilst at the same time the State has received large additions to its revenue from the tariff. The report of the committee authorised by the Senate to investigate the result of the McKinley Act has stated that in twenty-eight months the retail prices of 214 articles of common consumption declined 64 per cent., and that wages advanced 75 per cent. The following is a list of prices of fifty-six articles in common use in the United States at five different periods — 1857, 1889, 1890 (the year of the McKinley Act), 1891, and 1906. The prices in 1857 were practically the same as those in i860 (the year before the passing of the MoriU Protective Act). The prices of 1857, 1889, 1890, and i8gi were given in the American Economist of October 2, 189 1, and they show that the fall of prices was immediate affer thei passing of the McKinley Act; and the prices rn 1906) laid before 1*e House of RispresentatJve's of the U.S.A., May 21, 1908, by the Hbn. Joseph Fordney, show that, the fall has been permanent. ECONOMIC AND FISCAL FACTS Articles. i8S7- Oct. 1889. Oct. 1890. Sept. 1891. 1906. $ $ $ S Axe ... 1-49 0-95 092 0-88 0-90 Binding Twine, lb. o-i4i 0-14, o-ll — Blankets, pair 6^3J 4"23 3-09: 3-70 3-70 Blue Shirting, yard .. 0-I7J O-IIj o-ii 0-09J 0-09 Boots 476 3-27 3-07 2-78J 2-56 Calico, yard 0-I4* I -301 o-o7i o-o6i 0-06 o-o6 Carpets, yard ... 077I o-72i o-66§ 0-50 Cotton Gloves o-34i 0-24I 0-22t o-i9i 0-20 Cotton Hosiery 0-47 0-2S| o-254 ozo| 0-25 Cotton Knit Goods ... 0-98 O-52J 0-46^ 0-414 0-40 Cotton Thread spool ... 0-09 J 0-05 o-04| 0-04J 0-05 Crowbar, lb o'ni 0-07 o-o6| o-o6j 0-06 Drawing Chains, pair... i-28i 0-71 o-65i 0-584 0-58 File 0*42 0-27; 0-24 o-joj 0-20 Fork, 3-tined 0-991 o56f 0-52J 0-46^ 0-46 Flannel, yard 070 o-39i o-37i 0-34I o'34 Fruit Cans, per doz. .. . 3 '00 072 065 0-544 o-6d Gingham, yard 0-22-I o-io| I -621 o-ioj o-o8i 0-09 Hand Saw 2"43i 0-S3 1-39 1-39 Hoe 0-85 0-48* 0-43 0-374 0-37 Hemp Rope, lb. 0'2I 0-14 0-14I o-n| o-ii Linen, yard 0-83 o-48i 047 0-42J 0-42 Mowing Machine Nails, Wire, lb. 112-15 56-98 52-60 47 10 45-00 — 0-05 o-o4§ o-o3f 0-03 Nails, Iron, lb o-oSi 0-03J 0-034 003 Oilcloth, yard ._ 0-84 0-38 o-35i 0-31 0-31 Overalls I -201 0-83! o-79i 0-70I 0-71 Pearl Buttons, doz. 0"22i o-ii| o-ni 0-131 0-14 Pins, Paper O'llJ o-o6| o-o6i 0-05I 006 Plough Z0'I2| 14-374 13-93! 12-90 12-00 Rake, Horse 41-25 22-561 2 1 -241 19-401 19-41 Reaper and Binder 247-85 142-36 129-85 115-95 1 16-00 Rubber Boots 4-83^ 3-ioi 3-00 2 -731 2-74 Salt, lb. 2-30 1-75 1-65 1-38 1-38 Shoes 5-84 3-45 3-15 3-06 3-50 Sheetmg, yard 0-12I o-o8 0-073 o-o6| 0-06 Shovel 1-47 o-97| o-93i o-8oi 0-80 Spade 1-444 0-96 J o-95i 0-84 0-84 Starch, lb 0-135 0-09I 0-09 J 0-994 o-to Straw Hat, good 1-75 1-28 1-25 I -10 i-io Straw Hat, common . . . 0-44 0-31 0-28 0-23J 0-23 0-05 Sugar, lb., granulated... o-igj 0-oof 0-09 J 0-054 Sugar, lb., brown 0-164 o-oSJ o-oS 0-044 0-04 Sugar Bowl o-6i 0-38I 0-374 0-32J 0-32 Scythe ... 1-22 0-85J 0-744 o-68i 0-6S EXAMPLES OF FALL IN PRICES 6S Articles. 1857. Oct. 1889. Oct. 1890. Sept. 1891. 1906. $ s $ $ $ Tin Dipper 0-25 0-I2i o-ni o-ioj e'lo Tin Milk Pail .„ 075* 0-461 o'43i o"39l o"39 Tin Milk Pan 0-37^ c-i8j o-i7i 0-15^ 0-15 Ticking, yard o'3Si 0-20 o-i82 0-I7 0-17 Waggon 130-00 95-00 90-00 75-00 75-00 Washboard o'4i 0-244 0-24 0-22t 0'22 Washtub 1-20 o-7oi 0-65 0-65 0-65 Wheelbarrow 2-23 I -65 1-60 1-40 1-40 Wooden Pails 0-45 0-244 0-22 0-20^ 0-20 Woollen Clothing 24 '00 16-75 14-50 14-25 10-00 From an official estimate prepared for the use of the Senate of the United States it appears that : The price of barley, protected in 1890, has declined 30 per cent., giving additional employment to 40,000 persons. The price of beet sugar, protected in 1897, declined 20 per cent., giving additional employment to 5000 persons. The price of carpets, protected in 1861, fell 10 per cent., with additional employment to 6600 persons. The price of lace curtains, protected in 1897, fell 10 per cent., giving additional employment to 3000 persons. The price of gypsum, protected in 1897, fell 33 per cent., giving additional employment to 3700 persons. The price of wire nails, protected in 1883, fell 25 per cent., with increased employment to 8000 persons. The price of steel rails, protected in 1870, fell 80 per cent., with increased employment to 18,000 persons. The price of watches, protected in 1870, fell 10 per cent, to 50 per cent., with increased employment to 1880 persons. The price of silk, protected in 1861, fell from 5 per cent. to 25 per cent., with increased employment to 77,000 persons. Wages paid to operatives employed in the manufacture of silk have risen from $297,000 in 1850 to $25,276,000 in 1905. The number of operatives employed in silk manufacture in Great Britain has diminished from 130.723 in 185 1 to 39.03s in 1901- Examples of the fall in the price of wheat under import duties have also been given in Chapter XXVIII. CHAPTER XXIIl THE CORN LAWS The aims, objects, and working of the Corn Laws appear to have been entirely misunderstood, especially during the agitation which preceded their repeal in 1846. The distress and depression of trade, which were really due to financial crises, have been erroneously attributed to their action, and the highest prices which wheat has ever reached have been under Free Import. The aim of the Corn Laws was to diminish our dependence on foreign supplies, to prevent the ruin of our agricultural industry, and, at the same time, to throw upon the shoulders of the foreign producer a fair share of the taxation of the country into which he might import his surplus produce. It has been generally assumed that the object of the Corn Laws has been to keep up the price of corn ; if so, they have signally failed in that object. That the Corn Laws could not keep the price up to the limit of allowed importation has been amply proved by the fact that although the Act of 1815 imposed a limitation of Sos. per quarter, the price fell, until in 182 1 it was as low as 56^. ; again, the Act of 1822 fixed the limit at 70s., but the price fell in 183s to 39X. 4^., and the average price of wheat in the last three years of the Corn Laws (the ' Hungry Forties ') was lower than the average of the thirty years succeeding the repeal. Equally impossible is it that Free Import should keep down the prices, as has been shown by the fact that, after repealing the Corn Laws in 1765, the price of wheat rose from an average of 33X. 3d. to 48^. 4^. in the eight years succeeding the repeal. It is also shown by the excessive prices during the war with France under Free Import, and also in the time of the Crimean War under absolute Free Trade in 1855, the price of wheat was higher than it had been at any time under the Corn Laws since the year 1818. Whatever may have been the object of some of those who advocated the maintenance of the Corn Laws, there can be no doubt that the object of the Select Committees of 1813 and 1814, upon whose recommendation the Corn Laws were reimposed. Was to lessen that dependence on foreign 66 THE CORN LAWS 67 supplies which had been the cause of the excessive prices that prevailed in the first quarter of the nineteenth century. The report of 1813 is extremely interesting. It commences by stating that foreign corn to the value of ;^S8,634,13S had been imported in the last twenty years, and the average price for the last four years had been 105s. si. During this period not only was the import of wheat free, but sums amounting to >J2, 826,497 had been paid for bounties on the import of foreign corn. The report goes on to say : So great a degree of dependence on foreign countries for sufficient supply of food, and so great an advance in the price of wheat, as is hereby proved, require the interposition of Parliament without further delay. . . . Under this impression, and with a view of ascertaining what measures it would become your Com- mittee to propose, as best calculated to induce our own people to raise a sufficient supply for themselves, from their own soil, and at the same time to reduce the prices of corn, they have examined into the means which the United Kingdom possesses of growing more corn and into those laws which from time to time have been made for regulating the corn trade. Then follows the result of this examination, which is summed up as follows : Upon the whole it appears to your Committee to be a fair and practical inference to draw from this inquiry into the means which these countries [Great Britain and Ireland] possess of growing an additional quantity of corn, that they are able to .produce as much more corn, in addition to that which they already grow, as could relieve them from the necessity of continuing in any degree dependent for supplies on foreign countries. Next the Committee takes a general review of the laws for regulating the Corn Trade, and sums up as follows : This review of the Corn Laws shows that so long as a systeai of restraining importation, and encouraging exportation, was pursued. Great Britain not only supplied herself, but exported r\ considerable quantity of corn, and also that the prices were steady and moderate . . . that since the system was abandoned, that is from 1765 to the present time. Great Britain has not only net supplied itself, but has imported vast quantities from foreign countries, and also that the price has been progressively advancing from an average of 33s. 3d. the quarter of wheat for sixty-eight years under the old system to an average of 83^. iid. for the last nine years under the new system. . . . For many years previous to the establishment of this system [the Continental system which put an end to the commercial intercourse of those nations on which Great Britain had become dependent for corn supplies] 68 ECONOMIC AND FISCAL FACTS the trade in grain between this country and the Continent was virtually a Free Trade ; the laws for regulating and restraining it being wholly inoperative in consequence of the high prices. But none of those advantages were the result which those who advocate the principle of Free Trade assumed to belong to it ; for the imports of grain, as well as the price of it, went on gradually increasing. The recommendation of the Committee runs as follows : In respect to the proper remedy to be applied, considerable light is thrown upon the subject by the strong coincidence of plenty and low prices, with a system of restricted importation, and of scanty supply and high prices with the contrary system. This forcibly points out the expediency of recurring to the principles of those laws which were so beneficial in practice, from the time of their commencement in 1670, till their abandonment in 1765. The Committee of 1814 endorsed the views of the Com- mittee of 1813 in the following terms : They are convinced that a reliance on foreign importation to a large amount, is neither salutary nor safe for this country to look to as a permanent system ; and that many of the sacrifices and privations to which the people have been obliged to submit during the late long and arduous contest, would have been materially alleviated if their means of subsistence had been less dependent on foreign growth. Lord Derby, in a speech in the House of Lords in May 1846, clearly defined the objects of the Corn Laws : The object of this, and of every other Corn Law, is, I take it to be, to place this country in a state of virtual independence of foreign countries for its supply of food. If your lordships will forgive me for referring to it, I will quote a passage from a letter from Mr. Huskisson, which puts the whole question, in a few words, in the clearest light. . . . We have forgotten the circumstances of that time, but generally we seem not to remember, in dealing with this question, the evil which, prior to 1815, this country was subjected to from its dependence for its supply of corn from foreign countries. The extract from Mr. Huskisson 's letter runs as follows: Let the bread we eat be the produce of corn grown amongst ourselves, and I for one care not how cheap it is, the cheaper the better. It is cheap now, because it is altogether owing to a sufficiency of corn of our own growing, but, in order to ensure a continuance of that cheapness, and that sufficiency, we must ensure to our own growers that protection against foreign imports which has produced this blessing, and by which alone they can be per- manently maintained. The history of the last 170 years clearly THE CORN LAWS 69 proves on the one hand the cheapness, produced by foreign imports, is a sure forerunner of scarcity, and on the other hand a steady home supply is the only safe foundation of steady and moderate prices. In 1827 and 1828 Mr. Huskisson maintained the doctrine be held in 1815, that England ought not to depend too largely or too frequently on other countries for its supply of corn ; that nothing could be more dangerous to this country than a reliance on foreign corn, and that he desired the restwation of the Corn Law to what it was in 1773.^ It is true that three years afterwards, in consequence of a monetary crisis, which depressed our trade and industries and threw a large proportion of the worliing classes out of employment, Mr. Huskisson had to declare that he could not uphold the Corn Laws in the present state of the country, for it was necessary to give all the relief possible to con- sumers who had little or no money to purchase not only bread but all other articles such as meat, the consumption of which he said had diminished by one-third in Birmingham. The crisis had nothing whatever to do with the Corn Laws. It was simply a monetary crisis arising from those causes wliich will be described under the head of the 'Hungry Forties.' (See Chapter XXVI.) CHAPTER XXIV OPERATION OF THE CORN LAWS The Committee of 1814 recommended that ' while protecting British agriculture, Parliament should, consistently with this first object, afford the greatest facility and inducement for the import of foreign corn whenever from adverse seasons the stock of our own growth should be found inadequate to the consumption of the United Kingdom.' This provision is of course needed to give the proper elasticity to any system of Corn Laws. It had always been in force under such an arrangement, and, to use the words of the Committee of 1813, under such an arrangement ' prices were steady and moderate.' The Cobden Club, in order to discredit the Corn Laws, has brought forward an array of Acts which appears formid- 1 Huskissoo's Speeches, vol. iii. p. 174. 70 ECONOMIC AND FISCAL FACTS able at first sight. It is not so, however, when it is con- sidered that this array extends over a period of nearly 200 years, that it averages only one Act in about one and a half years, and that probably one emergency may entail several Acts ; for separate needs are met by separate Acts. For example, one emergency may possibly require the following Acts : (i) An Act to ascertain the price of corn. (2) An Act to permit importation at low rates. (3) An Act to restrain exportation. (4) An Act to repeal No. 2 when the emergency is ended. (5) An Act to repeal No. 3 when the emergency is ended. (6) An Act to authorise the King to permit changes in exportation and importation. (7) An Act to allow flour to be substituted for wheat. So that it is quite possible to have six or seven Acts for one emergency. With regard to the statement of the Committee of 1813 that the trade in grain was virtually a Free Trade; the laws for regulating and restraining it being wholly inoperative in consequence of the high prices, the Cobden Club has endeavoured to discredit it by the argument that during the fourteen years following 1873 the yearly price was only above 48s. in four of those years, so that, ' during the greater part of this period, the heavy protective duties were fully operative.' An examination of the annual average reports shows this argument to be absolutely incorrect, for the prices were so high or so close to the margin of Free Import as to amount virtually, though not nominally, to Free Import, and for this reason the Committee used the word 'virtually.' Not only did the Corn Laws of 1773 fail to protect the British fanner from the enormous influx of foreign corn, but the import, under those inoperative laws, was actually far larger than even under unrestricted free import after the Corn Laws had been repealed. Before the repeal of the Corn Laws in 1765, the import of foreign wheat was insignificant; but, as soon as the floodgates of unlimited free import were opened, the rush was so great that the attempt to stem it by inadequate Corn Laws entirely failed. This is evident from the following table, which has been compiled from ' Parliamentary Debates,' Volume XXVII : OPERATION OF THE CORN LAWS 71 Annual Average of Imports of Foreign Wheat and Flour AT Different Periods. Period. Average Annual Import. Quarters. 1755-64 17155-73 1774-83 1784-93 1794-1803 1S04-12 14.954 100,707 205,242 "\ 1S9.042 f 655.324 c 508,403 J Under Corn I-aws. Com Laws repealed. Inoperative Corn Laws. It is evident, therefore, that the Corn Laws were in- operative, in those years, and that they failed to restrain the f5ood of foreign wheat. Not only in the fourteen years but also in the forty years succeeding 1773 there was virtual free trade in corn, and not only was the imported corn absolutely free during the greater part of this period, but sums amounting to ^£'2, 826, 947 were paid for bounties on the import of foreign corn ; and yet, under this free import, wheat rose to 126^. 6d. — a famine price which the advocates of Free Trade have unfairly ascribed to the protection afforded by the Corn Laws. Although it cannot be doubted that the high prices that prevailed during the French wars were due to the free import of wheat, and the consequent dependence of Great Britain on foreign supplies, it is by no means the intention of this work to ascribe all the changes of prices which have taken place entirely to the influence of the Corn Laws, or to their repeal. Other influences have been at work, and the price of wheat, as has already been stated, is regulated by the laws of supply and demand, by the general conditions of exchange, currency and production, by facilities of trans- port, by improvement in agricultural processes, and by harvesting and other machinery. Even Mill has admitted : So rapid has been the extension of improved processes of agri- culture, that the average price of corn had become decidedly lower, even before the Repeal of the Corn Laws.* Neither is it the intention of this work to show that the ^ Mill, Political Ecotiojny, I. ziii. 72 ECONOMIC AND FISCAL FACTS Corn Laws were perfect in their action, or that they were judiciously worlied so as to give them proper elasticity ; for it does not appear that Mr. Huskisson availed himself of the provisions stipulated by the Committee of 1814 (as a necessary condition of administering the Corn Laws), that every possible facility should be given by Parliament to the import of foreign corn in times of scarcity of the home crops. The only valid complaint that can be made against the Corn Laws is, not that they kept up the price of wheat — for in that respect they failed signally — but that, adminis- tered as they were without the requisite elasticity, and in connexion with our faulty currency legislation, the price of wheat was unsteady and uncertain to an extent that was injurious to agriculturists and to those connected with them in trade. But whatever may have been the defects or difficulties entailed by the Corn Laws, they sink into insignificance when compared with the mischief that has been done by the policy of free import, which has ruined our agriculture and exposed us to the danger of a food famine in case of war. When the repeal of the Corn Laws was urged in 1S41 McCuUoch advised the imposition of an import duty of e,s. to ys. per quarter, which he said would cover the excess of taxation on land. If his advice had been followed it would have placed us on more level terms with the foreign pro- ducer. In proposing the import duty of 5^- per quarter, McCuUoch remarked that ' any one who will compare the amount of poor rate, county rates, and such like burdens paid by the land, with that paid by other sorts of property, will be satisfied that the former is charged far beyond its fair proportion.' Since that time those rates and taxes have increased enormously. Cobden, and other advocates of Free Trade, however, contended that there was no danger to the farming interests from the repeal of the Corn Laws, because the cost of transport, of so bulky an article as wheat, constituted a ' natural protection.' McCuUoch, in a pamphlet published in 1841,' stated that the cost of importing wheat from Dantzic, including freight and all charges for lightering, landing, insurance, waste, &c., would exceed 135. per quarter, but Mr. Wilson put it at i8s.' » P. i6, 3rd ed. * Wilson's Tract on the Corn Laws, p. 68. OPERATION OF THE CORN LAWS 73 This natural protection, however, has now completely vanished. Steam navigation, and improved machinery for loading and discharging grain, have very greatly reduced the cost, wastage, and other charges, so that the total freight and charges of all kinds, from Dantzic to our ports, have now fallen to about 3s. per quarter, which is less than the cost of bringing wheat by railway from the Midland counties to London. Even from the Black Sea, and from the Atlantic ports of the United States, the freight and charges on wheat have now been reduced to about ^. 3d. per quarter. CHAPTER XXV THE BIG AND LITTLE LOAF One fiction which has greatly influenced the maintenance of our Free Trade policy, by deluding ignorant electors, is the sham of ' the big and little loaf.' This has been usually accompanied by the representation of two loaves, one very large and the other very small, carried on poles in election times. The intention of this has been to lead the uneducated masses to believe that they represent the relative size of the taxed and the untaxed loaf. The Daily News has encouraged this delusion by issuing a poster of which the annexed is a photograph. A careful measurement of the loaves on this poster proves the relative proportions of the two loaves represented to be as 100 to 700, whereas the actual proportion (even assuming that the import duty proposed by Mr. Chamberlain would not be paid by the foreigner) would be as 100 to 104. The dotted lines round the ' Zollverein loaf ' have been added by the author of this work to the poster, to show the true proportion of the ' Zollverein loaf ' to the Free Trade loaf. The inaccurate character of this poster was pointed out to the editor of the Daily News, and he was challenged to disprove the accuracy of the contention that it was unfair, and that if he could not do so he should withdraw the poster, which was misleading the working classes. The editor, in reply, intimated that humour is on the side of the ' Free Traders ' ; and as it had been admitted 74 ECONOMIC AND FISCAL FACTS that the size of the loaf would be reduced by 4 per cent., ' our poster represents this fact in a way that everybody can see it with his own eyes.' To this it was replied that if it be humour to exaggerate that which should be 4 per cent, into 600 per cent., and to parade this inaccuracy before the eyes of the ignorant masses, to endeavour to persuade them that this would be the result of Mr. Chamberlain's proposal, then Tariff Reformers might be thankful that the humour was all on the side of the Free Traders. Certainly, if the Daily News had accurately represented the true proportion of the two loaves, nobody could have ' seen the difference with his own eyes.' In fact, a fortnight later, Mr. Chamberlain demolished the value of the poster by producing two loaves made in the proper proportion, and challenging his audience to say which was taxed and which untaxed. A fair representation of the relative sizes is shown in the accompanying diagram, deduced from careful calcula- tions and accurately drawn to scale. The black line at the top of the taxed loaf shows the actual difference between the loaves, even supposing that the import duty were not paid by the foreigner or his agent. For facility of calculation, a square quartern loaf has been assumed, retail price 6d., and wheat at 29s. a quarter. The cost of wheat in the loaf has been separated from that of those other items which make up the total price. These items are : (a) The cost of grinding. (b) The miller's profit. (c) The middleman's profit, (i) The cost of baking, (e) The baker's profit. (/) The cost of distribution. None of these items vary with changes in the price of wheat. In order to test the divergence from the standard weight that existed in actual practice, ten half-quartern threepenny loaves were purchased in Newcastle from ten different shops and weighed. Of these ten loaves two were 6J per cent, below full weight of 2 lbs., one was 9J, five were 12 J, one was 16J, and one was 21 per cent, below full weight. Com- pared with these variations, the small percentage of 4 per cent, suggested by Mr. Chamberlain is insignificant. THE BIG AND LITTLE LOAF 7S THE "DAILY NEWS" POSTER Which wiiiifoa have? Free Trade Loaf Zollvereim Loaf S^LOBYALL HeVvSAriEMTj KKOK Rai w>.y B°°ics talis DIAGRAM SHOWING THE RELATIVE SIZE OF THE TAXED AND UNTAXED LOAF :^Av:-:.;-.yS'>;:!<:v:^,>-;-.S;;: LABOUR & PROFIT 76 ECONOMIC AND FISCAL FACTS In only five, of the thirty years succeeding the repeal of the Corn Laws, has the average price of the household loaf been lower than it was in 1845 (the year before the repeal) ; the price of a quartern loaf was then y^d. At a meeting of the Liverpool Association of Master Bakers in July 1909, the Chairman stated that, in Ormskirk, the bakers were getting 6d. and yd. for a loaf weighing 3 J lbs. — a price equivalent to nearly yd. and 8d, for the quartern loaf. CHAPTER XXVI THE ' HUNGRY FORTIES ' The distress in the early forties, which imparted such strength to the Anti-Corn Law agitation, and induced Sir Robert Peel to consent to the repeal of the Corn Laws, had nothing to do with those Laws, for bread was cheaper than it had been. It was not a bread famine, but a money famine. It was not caused by dear bread, but by want of money to purchase it. The price of bread, during the years 1841-5 inclusive, was lower than it had been during the century up to that date, with the exception of 1834-5; and the year before the repeal of the Corn Laws it was lower than during twenty-four out of the thirty years succeeding the repeal. In 1855 and 1856, under absolute Free Trade, the price of bread was higher than it had been at any time under the Corn Laws since their introduction in 1815. In 1867 the price of the 4-lb. household loaf in London was 2|d. higher than the price in 1845, the year before the repeal of the Corn Laws. The real cause of the distress has been described in Alison's 'History of Europe.' Briefly, it was caused by the action of the President of the United States, who required all purchases of public land, and all payments to Government, to be made in specie. This caused a drain on the gold reserves of the Bank of England, which only escaped insolvency by borrowing ;i^2,ooo,ooo in gold from the principal bankers of Paris. The Bank of England, in self-defence, was forced into measures which contracted the currency, thus setting up a monetary crisis which caused bankruptcies and a general depression of all industries. This was, of course, followed by want of employment, reduction of wages, and distress. It was due to our faulty Bank THE ' HtNGRY FORTIES ' 77 Acts, by which the whole currency of the Bank of England was made dependent on the retention of gold. Under this system gold could only be retained by strangling industries, by starving the country, and by lowering the prices of every species of industry.' Sir Robert Peel, wealcly yielding to the pressure of political agitation based on a false assumption, was driven to repeal the Corn Laws. Crises of a similar character have occurred, causing depression and distress, which have been wrongly ascribed to the action of the Corn Laws, and notably in the case which has been previously mentioned, when Mr. Huslcisson found a difficulty in upholding the Corn Laws in 1830. A similar crisis also occurred under our Free Trade policy in the case of the Baring failure. CHAPTER XXVII TWO CENTURIES OF WHEAT PRICES The accompanying diagram gives the average price of wheat during the eighteenth and nineteenth centuries, under different conditions of Corn Laws. It shows : ist. — That from 1700 to 1765, under stringent Corn Laws, the price of wheat was maintained low and steady, at an average of 33^. ^d. per quarter, in spite of the severe struggles in which England was then engaged — notably the rebellion and civil war of 1745, the Continental war of 1748, and the seven years' war of 1756-63. 2nd. — In 1765 these Corn Laws were repealed. The importation of wheat was absolutely free from 1765 to 1773, and for the greater portion of the period from 1773 to 1815 the laws for restraining the importation of wheat were wholly inoperative, and subsequently even bounties amount- ing, in 1796-1803, to nearly ;£'3, 000,000 were paid on foreign imports of corn. The dependence of England on foreign sup- plies had become so great that the price of wheat advanced, and when war put a stop to the foreign supplies it rose to famine rates. In 1812 it was as high as 1265. 6d. per quarter. 3rd. — In 1814 matters had become so serious that it was necessary to re-enact stringent Corn Laws, under which the > See chaps, xlil. and xlv. 78 ECONOMIC AND FISCAL FACTS price of wheat fell from 1025. 6d., the average of the five years 1810 to 1814, to 50-t. qd. for the three years, 1843-5, preceding their repeal. 4th. — In 1846 the Corn Laws were repealed ; and although the improved processes of agriculture, the inven- tions of science, the immense extension of railways and steam navigation, largely reduced the cost of producing wheat and bringing it to market, yet the average price of wheat for the thirty years 1846-75 was actually 2S. 2d. per quarter higher than that of the three years preceding the repeal of the Corn Laws. The price of wheat fell to 26s. 1 id. SHILLINGS — ro o WA ? WITH QUARTER _ VI 00 O 0000 — N, OJ •0000 SHILLINGS P WAR WITH SPANISH SLCCE ^ERlCAfl REBELLION S i ON ly/Mm FRANCb &■ SPAIN TR/ NCI, MP' IRT iSlON OF CORN Ur_WITH FRANCE 'huncry forties'" crimean war cn ft re n It CS9 1 w o !o o QUARTER en 't J"» O -t n m o > H c z o m X ■D 71 O -t m o O z TWO CENTURIES OF WHEAT PHICES 79 in 1900, but our dependence on foreign wheat is so great that, should we embark on a war against strong maritime Powers, the price of wheat would probably rise to famine rates, as in 1812. The danger of dependence on foreign supplies has been shown by the fact that during the Crimean war, even though we had complete command of the seas, the average price of wheat under Free Trade rose to 74s. 8d. per quarter, which was the highest price touched since 1818. The price of wheat has again ?isen to ^2s. gd. (July 1909), and is higher than it was in 1835 under the Corn Laws. // it were true that the duties on corn were paid by the consumers, it would inevitably follow that, on their removal, the price must fall by that amount; but, far from this, we find that, for the twenty-five years following their abolition, the price averaged 52s. 8d., or 2S. ^d. higher than during 1843-5, inclusive, when subject to a duty of 20s. per quarter! And why was this? Our farmers, protected by the duties, had increased their yearly wheat productions from fourteen million in 1815, to twenty-two million quarters in the early forties;^ while from 1852 to 1876 it only averaged, per annum, 13,286,852 quarters, in the face of a rapidly increas- ing population — a reduction of 8,713,146, which, our colonies and foreign countries being only in part able to replace, left a shorter supply available for consumption. This naturally led to an advance in price; incontestably proving that so far from the corn duties having raised the price of bread, it would, had they never existed, have been dearer. The loss of revenue had thereafter to be made up by direct taxation, which, instead of being paid by the foreigner, was wholly levied from our own people. As a question of fact, the price per quarter of wheat had never been so high since 1818 as it was in 1855, during the Crimean war. Though we had then absolute command of the sea, it rose to 745. 8i. per quarter. With our home production reduced to six and a half million against fourteen million quarters in 1855, and our own population so much increased, one shudders to think, were we at war with a great naval Power, where its price would now be. It is only when the duty is prohibitive, or nearly so, that it affects the price of wheat, which is generally determined by the prices prevailing in the various markets of the world. » See Sir Robert Peel's speech in House of Commons, Annual Regiattr, 1843, p. 38- 80 ECONOMIC AND FISCAL FACTS Table Showing how the Corn Duties were Paid by the Importers, not by the Consumers (A. Williamson) Average Years. Duties Charged. Market Prices. 1816-22 Not pennitted to be imported when the price was under 80s. 68s. I Id. 1823-28 Limit reduced to 70J. 59^. ii(^. 1829-42 34J-. 8d., when the price was 51J. and under, falling IS. for every is. it rose 54i. lid. (In 1834 the price was n6s. 2d. ; in 1835 39i. 4fif. ; in 1836, 48^. 6^., when the duty was 34J. 8d.) 1843-45 20t. when the price was 51s. and under ; falling IS. for every is. it rose 50s. S Wealth of Nations, IV., ii. CANADA : FREE TRADE AND PROTECTION 137 would be inevitable. The intrigues in the States are beginning. I am convinced that n^riters here are already bribed to embarrass Chamberlain. CHAPTER XLI INDIA UNDER FREE TRADE India presents the strange spectacle of a country formerly rich, prosperous, and in a manner highly civilised, of which the native industries are now decadent, being crushed out under the stress of modern civilisation and progress. Of India's vast population of 300,000,000 souls about 60 per cent, are supported by agriculture. This leaves a large residue available for other industrial purposes. But the arts and crafts for which India has been so justly celebrated, whether metallurgic or textile, whether cutlery, glass, pottery, silks, carpets, or other industries, are either dead or dying. Throughout the country may be found old slag-heaps testify- ing to the former prosperity of native iron and steel industries, the splendid native iron being now superseded by cheap worthless metal of foreign manufacture. Everywhere may be seen evidence of flourishing industries in the past — in the huge 40-ton brass gun of Bijapur, in the great iron column of the Kutub, in the magnificent inlaid marble, in the fretwork and carving of the tombs, palaces, and mosques ; it may also be seen in the glass, pottery, shawls, cairpets, and silks in the treasuries of many of the Rajahs, and also in the ruins of indigo factories. Yet all writers admit that India is on the whole a very poor country. The mass of the population enjoy a scanty subsistence. India, the land of the pagoda tree 1 India, the mine of wealth ! India, the wonder and admira- tion of Marco Polo and travellers in former times I India in poverty 1 Midas starving amid heaps of gold does not afford a greater paradox, yet here we have India starving Midas-like in the midst of untold wealth. For India has untold wealth — wonderful natural resources, both agri- cultural, mineral, and industrial, but they are to a great extent dormant. It has coal of an excellent quality. The coal fields, so far as they have been explored, cover an area of 35,000 square miles, and are estimated to contain 20,000,000,000 tons of coal. In some parts the supply of iron ore is on a scale of unparalleled magnitude, whole hills 138 ECONOMIC AND FISCAL FACTS and ranges of it being of the purest variety. It has chrome iron capable of making the finest Damascus blades, manganiferous ore, splendid hematites in profusion ; it has gold, silver, antimony, manganese, tin, copper, plumbago, lime, kaolin, gypsum, precious stones, asbestos, soft wheat equal to the finest Australian, hard wheat equal to the finest Kabanka. It has food grains of all kinds, oil seeds, tobacco, tea, coffee, cocoa, sugar, spices, lac, dyes, cotton, jute, hemp, flax, coir, fibres of every description, in fact, products too numerous to mention. There are available millions of potential horse-power, in the form of water flowing from the mountain ranges, capable of being converted into electrical energy at generating stations near the hills, and conveyed with slight loss of power to centres, even at great distances, where it can be utilised for industrial purposes. Its inhabitants are frugal, thrifty, industrious, capable of great physical exertion, docile, easily taught, skilful in any work requiring delicate manipulation ; labour is absurdly cheap, and the soil for the most part wonderfully productive. There is plenty of capital in India. The amount of wealth now hoarded in the country has been estimated by Lord Curzon to be about ;^S5o,ooo,ooo ; but neither this, nor British capital, will flow to a market in which its operations are checked and the struggling industries swamped by unrestricted foreign competition. British capital for the most part has been attracted by guarantees from Government. Some of the manufactures of India, under British capital, and especially those of cotton and jute, have increased, but it has been uphill work, and the development of these industries falls very far short of the magnificent potentialities of the Empire. It is not at all commensurate with the advantages that have been gained by the Public Works policy of railway extension and irrigation works, which has enabled the State to relieve some of that deadweight of taxation which burdens the agriculturists. The first Indian Industrial Congress, which was held at Benares at the commencement of 1906, was an important movement, and has drawn prominent attention to the economic problem of the poverty of India and the neglect of India's vast resources and potentialities. Under the presidency of Mr. Dutt twenty-two papers have been contributed by educated native gentlemen and fourteen papers by influential Englishmen well versed in INDIA UNDER FREE TRADE 139 Indian matters. These papers teem with valuable and highly practical suggestions and recommendations, and the Government of India has welcomed the ' awakening of interest in this very important question, which was evident in the discussion at the recent Industrial Conference at Benares.' Space will not admit of anything like a full description of the details of these suggestions. But the more important of them may be briefly summed up as follows : (i) To forward the ' Swadeshi ' movement, which aims at the employment of indigenous, in preference to foreign manufactures. (2) To establish co-operative grain banks, urban banks on the co-operative principle, or co-operative credit societies. (3) To improve the agricultural status by the regulation of the land revenue, by relieving the indebtedness of the ryots, by making advances for the purchase of seed, and by the establishment of State experimental farms. (4) To develop India's resources from within, pursuing the policy indicated by Lord Curzon in the creation of a Board of Agriculture, a Board of Scientific Advice, a Com- mercial and Industrial Bureau. To institute a chemical and physical laboratory, industrial schools, technical guilds, scholarships, and apprenticeships for workshop training. (5) To relieve the deadweight of taxation by raising revenue from moderate import duties, which will also protect Indian industries from being swamped by unlimited foreign competition. (6) To foster intercolonial and international trade by the exchange of mutual concessions and preferential treatment of the Colonies and Mother Country. (7) To establish State industries for the utilisation of native produce, and to obtain the best expert assistance in working such industries. (8) To give greater facilities for obtaining concessions, and for the acquirement of mining and other industrial rights; to remit royalties in the early stages of struggling industries, and to put a stop to the interminable delays to which the acquirement of such concessions is often subjected. (9) To pursue that policy of railway extension and irriga- tion works which has been eminently successful in increasing State revenues and reducing taxation, and to promote trade by the adoption of the lowest practicable railway rates. I40 ECONOMIC AND FISCAL FACTS (lo) To govern India in the interest of India alone, and to resist the interference of the Home Government in any attempt to sacrifice Indian interests to the exigencies of English party politics. Mr. Dutt, in a very able presidential speech at the opening of the Conference, has accounted for the industrial decline of India by the fact that other competitors got the start, and that India has been unfairly handicapped in the race; that she has been persistently sacrificed to English policy, and that Indian industries have been discouraged instead of encouraged ; the export of Indian manufactures has been repressed by prohibitive duties, and the import of English manufactures into India facilitated by the levy of almost nominal duties. He complained that the fiscal legislation of India is oftener controlled by Lancashire than by India ; that Lord Lytton's Government was compelled to repeal the import duties on cotton goods, against the advice and vote of every member of Council but two; and, when the duties were reimposed, Lord Elgin's Government was compelled to impose an excise duty on the mill-produce of India to conciliate Lancashire, and he added : I know no act in modern fiscal legislation more unwise and hurtful to an infant industry than the imposition of an excise tax, unknown in any civilised country ; and I know of nothing more humiliating to the Government of a great Empire like India than the correspondence you will find recorded in the Parliamentary Blue Books leading to these fiscal changes. . . . We have to run the race with the triple disadvantage of want of capital, want of modern training, and want of control over our own fiscal legisla- tion. . . . We will not consent to see our country made a land of raw produce, or a dumping ground for the produce of other nations. ... I do not believe that a country can pros- per by agriculture alone, any more than a country can prosper by manufactures alone. The two must thrive, side by side, to give employment to the population of a country. In India there is a magnificent opening for fresh markets, which if properly fostered would render England independent of foreign trade; and there can be no doubt that if the cotton industry of India had been fostered, instead of being repressed by a short-sighted policy, the quantity of cotton grown in India would have increased enormously, its quality would have improved, and Lancashire would not now have been dependent on the speculations of unprincipled rings in the United States for the supply of cotton. INDIA UNDER FREE TRADE 141 In these days, when certain foolish members of Parliament think it a fine thing to incite the natives of India to disaffec- tion, and endanger the lives of our fellow-countrymen in India, it is refreshing to read the opinion of Vambery, the celebrated traveller. He wrote to Nawab Abdul Letif Bahadur, an influential native of Bengal, as follows : I am not an Englishman, and I do not ignore the shortcom- ings of English rule in India ; but I have seen much of the world, both in Europe and Asia, and studied the matter carefully ; and I can assure you that England is far in advance of the rest of Europe in point of justice, liberality, and fair dealing, with all entrusted to her care. On another occasion Vambery wrote : England has indeed done great things for India, and Bis- marck was right when he said : ' If England were to lose Shake- speare, Milton, and all her literary heroes, that which she has done for India is sufficient to establish for ever her merit in the world of culture.' ' Those who glibly prate about ' India for Indians ' show their crass ignorance of what India is, and who are the Indians. What is India? India is a vast aggregation of different countries, having different races, religions, customs, manners, and languages. There are forty-seven different languages in common use in India, besides numerous minor dialects. Who are the Indians? Are they the Marathas, the Moguls, the Tamils, the Bengalis, the Panjabis, the Sikhs, the Assamese, the Karens, the Shans, the Burmese, the Telegus, the Canarese, the Nagas, the Bhils, the Gurkhas, the Santals, the Rajputs, the Biluchis, or any of the other races too numerous to mention, who form a part of the population of India? It would be far less ridiculous to raise the cry of ' Europe for the Europeans,' for there is, in Europe, far less diversity of races, religions, and customs, than in India. There are in India, moreover, a large number of native States, ruled by native princes, more or less under the influence of British rule. The history of India, before our occupation of it, reveals one continued series of internecine wars, invasions, wholesale massacres of men, women, and children, destruction of * Siory of my Struggles, Arminius Vambery, p. 490. 142 ECONOMIC AND FISCAL FACTS cities, anarchy, and ruin, which would certainly be repeated if our restraining influence were withdrawn. If India were given over to the native rule, the warlike races would soon sweep away those feeble and effeminate Bengalis who are stirring up sedition against us. India has been rescued from this state of chaos, and has been consolidated into an Empire, in which, to use the words of Sir Edgar Vincent : Throughout the whole of this vast continent no sword can be unsheathed without our sanction. We have knitted together wrecks of ancient kingdoms with the railway and telegraph. In every city we have opened schools and hospitals, and a native press is springing up in all the great centres of population. Enor- mous tracts of land have been redeemed from desert by our irriga- tion. Under our rule population flourishes and increases. Lord Curzon has paid the following just tribute to our British administration in India : Look behind it and you will find a sense of responsibility and devotion to duty, a love of the country and sympathy with the people, developed to a degree that is without parallel in the his- tory of any other country. The Government of India is the purest administration in the world, and forms a brilliant contrast to the Parliamentary administration of Great Britain, which day by day grows more corrupt, in which statesmanship has degenerated into sordid vote-catching, and bribery in its worst form— the bribery of one class with the money plundered from another. CHAPTER XLII GERMANY UNDER FREE TRADE AND PROTECTION In 1879, when Germany adopted her present system of Protective policy, Bismarck, in introducing it in the German Reichstag, said : We refuse to remain the sole dupes of an honourable conviction. Through the widely opened door of our imports we have become the ' dumping ' place of foreign surplus production, and it is this, in my opinion, that has prevented the continued development of our industry, and the strengthening of our economic conditions. Let us close our doors awhile, and secure for German workers the German market, which hitherto the foreigner has exploited with GERMANY : FREE TRADE AND PROTECTION 143 our connivance. The abstract doctrines of science influence me not at all ; I form my verdict on the teachings of experience. I see that the Protectionist countries are prospering and that the countries which practfse Free Trade are decaying. Even mighty England, which, like a champion wrestler, stepped forward and said 'Who will fight with me? I am ready for all!' is gradually returning to Protection, and will in a few years' time revert to it altogether, in order to save for herself at least the English market. Since we lowered our tariffs we have, in my opinion, been a prey to consuDiption. We have been bleeding to death. The process was delayed for some years by the French millions. We must now decide what we shall do to infuse fresh blood into the German economic body, to brace it with the power of a regular circula- tion ; but, in arriving at our decision, let us liberate our minds from the influence of party feeling. Instead of the ruin which, according to Cobdenite doctrines, ought to have overtaken Germany after the adoption of her Protective policy in 1879, her progress and prosperity have been marvellous, as shown by the following statistics of the Board of Trade : 1879. 1906. Tonnage of mercantile steamships... 196,343 2,096,947 Customs duties levied ;£S,736,ooo ;£^3i,347,ooo Value of imports of merchandise (special) ;£i88,67o,ooo ;5394,4io,ooo Value of exports of merchandise (special) ^£138, 785,000 ;^3i2,6si,ooo Coal production (tons) 42,025,700 137,117,000 Iron ore production (tons) 5,859,400 26,734,600 Total mining production (tons) ... 61,568,200 229,146,100 Before the adoption of our present fiscal policy in the forties, the trade and industries of Great Britain were in a far more developed condition than those of Germany and the United States; consequently a relative comparison is not altogether conclusive; but the progress in Germany and in the United States has been altogether out of proportion to their initial and final development, and in the protected countries has not only been relatively but actually greater. Both Germany and the United States have surpassed us in the production of iron, which is a most important factor in the development of nearly all other industries.^ German Black Bread and Horseflesh The great progress and prosperity that Germany has enjoyed under her Protective policy is so contrary to the ' See chap. zxzY. 144 ECONOMIC AND FISCAL FACTS theory of Free Traders, that every attempt possible has been made to discredit it by the use of ' terminological inexactitudes,' and assertions have been made to the effect that the German workman is in a pitiable plight, in rags, feeding on black bread, dog's flesh, and horseflesh, miserably paid, and living in a wretched hovel. The fiction of ' black bread ' and horseflesh is about on a par with that of the ' Big and Little Loaf,' the black or rye bread of Germany being, like the brown bread of England, preferred by many to the wheaten loaf. Mr. Moreing of Gainsborough, being convinced of the falsehood of these statements, arranged for a deputation of workmen, the members of which should be elected by the workmen themselves, to visit Germany, so as to be able to ascertain for themselves the actual condition of German workmen. The report of these delegates shows that, in regard to food, work, hours, and mode of life, the German workman is not the miserable, badly-fed person he is supposed to be in England. The delegates found that he was well housed, well cared for, well educated, that he paid no more for his bread, cofTee, sugar, clothing, and boots than we do in England, but his tastes are more simple, and he is contented with a lower scale of living. They found that he is nearly equal in working capacity to an English workman, and better off with respect to provision for old age. The delegates felt bound to state that, under the policy followed by the Imperial Government since 1878, Germany has made progress, by leaps and bounds, in industrial pros- perity; and that the working classes are in the enjoyment of a vastly larger share of the comforts of life than their parents could have dreamt of hoping in their generation. With regard to the ' black bread ' they reported : Some English newspapers have of late been giving very mis- leading figures about the price of bread in Germany. We have seen, and eaten, the German rye bread at every town we visited. We have everywhere been told by the German working man that he prefers rye bread to wheaten bread, and that he would not, at any price, give up his rye bread for the best wheaten bread that we eat in England. Whatever prejudices may be entertained against rye bread, it is impossible to gainsay the fact that it is both nourishing and sustaining. The price of a loaf of German rye bread, weighing four English pounds, would cost, according to our inquiries in the towns we have visited, from 3jd. to 4jd. . . . GERMANY: FREE TRADE AND PROTECTION 145 A Gainsborough 41b. wheaten loaf costs ^id., so that the Berlin working man's loaf is a trifle cheaper. The Birmingham brassworkers' delegates to Germany also reported : We saw no case of underfed, poorly-clad, or untidy children, either in the streets or in the schools. The effect of the military training is seen in the people .... There is not the physi- cally deteriorated, untrained, unminded loolc about the people. No men, women or children are to be seen in the streets or in the works in an unminded condition. . . . We considered some articles of food decidedly dearer than in England, but for some reason the working people were unmistakably better nourished . There are anomalies here which we do not attempt to account for ; but in the fact of the people being better nourished than in England, and enjoying a higher social life, it would appear that cheap food is not the only important consideration in a nation's welfare. The delegates of the textile operatives from the woollen manufacturing districts of Yorkshire, who visited Germany in November 1908, reported : Twenty-four hours sufficed to remove many of our preconceived notions about the German workers. We had been led to regard them as an ill-paid, ill-fed, ill-housed and hard-worked race. . . . We were astonished to find them so well-conditioned and so well- circumstanced. With regard to the ' black bread ' they said : The staple food of the German nation is rye bread, which is rather darlcer than our brown bread. Rich and poor eat it ; and whilst the quality varies— as our white bread varies — any doubt as to its nutritive qualities is dispelled by the well-nourished appear- ance even of the humblest section of the working classes. They reported that, in some cases, the weavers are paid 123 per cent, more, for the worii they do, than the weavers receive in the best faptories of the Yorlishire woollen districts. The cost of living was not much greater than in England. Meat was dearer, but poultry, hares, rabbits, fuel, and vegetables were abundant and very cheap. Boots and clothing were no dearer than in England. Rent was not on a basis that admitted a fair comparison, as so many of the workmen lived in flats ; but, taking ' establishment charges ' (rent, rates and taxes, fuel and lighting), there was a saving of about eighteenpence a week in the household of the poor in Germany. The workmen pay an income-tax; but rates are less than half English rates and taxes. 146 ECONOMIC AND FISCAL FACTS The Prussian Minister of Finance, in a debate in the German Reichstag on November 23, 1908, said : We have to thank the Bismarckian Protective tariff for the great progress of the last ten years. If we had not got the high revenue from the Protective tariff, the want of revenue would be much greater to-day. . . . He also pointed out that the direct taxation in Germany was 26s., and indirect 22^. 6d. per head, or a total of 494. ; as against 57s. direct, and 38^. indirect, or a total of 954'. in England. CHAPTER XLIII FRANCE UNDER PROTECTION France has never been wholly a Free Trade country, but she has, at times, lowered her tariffs. The benefits of the latest Protective policy, adopted in 1892, have been demon- strated in a. striking manner by M. Pichon, who on June 16, 1909, in the course of a debate in the French Chamber, reviewed the results of the Protective policy of 1892. He declared emphatically that the tariff of 1892 had been bene- ficial to France, and had not greatly increased the cost of living. The wholesale price of wheat, he said, had diminished as much as 14 per cent., while that of meat had diminished by 5 per cent. In England, a Free Trade country, the price of wheat had decreased by only 8 per cent., while the price of meat, instead of decreasing, had actually increased by 2 per cent. So far as the price of bread was concerned, the average in France during the last ten years had been lower than at any time between 1870 and 1890. ' Thus,' said M. Pichon emphatically, ' it cannot be said that the tax on wheat has increased the price of bread, for the cost has actually diminished.' (Notwithstanding the high import duty of J2S. 6d.) Wages, he declared, have increased by 10 per cent, since 1892. The Protective tariff had indeed been of general benefit to the country. He gave figures to show that : The capital in savings banks had increased. The product of the succession duties had increased. The turnover of the banks had increased. FRANCE UNDER PROTECTION 147 The imports of gold had exceeded the exports between 1892 and 1907, by ;£i6o,ooo,ooo. The public fortune had increased from ;^7, 560,000,000 to ;^8,ooo, 000,000 — a rise of ;^440,ooo,ooo. ' Even in Great Britain, a Free Trade country,' continued M. Pichon, ' means have been found to protect agriculture by the invoking of divers pretexts for suppressing our exports of green fodder and cattle.' To quote the words of M. Thiers : France has her consumers within herself. . . . England, on the contrary, has an artificial existence. She depends upon the doings of the United States, upon the doings of her own Colonies, which already oppose her with hostile tariffs. May not the day come when her immense production will find no purchasers? This little island, in the words of Fox, embraces the world. . . . Such was the situation of Holland in the seventeenth century, which had realised the prodigy almost as marvellous. What was needed to make Holland, which gave laws to France, descend from this lofty position? It only needed fifty years. It only needed a Navigation Act in England and a Colbert in France. God forbid that I should predict for England such a destiny ; but I repeat it, her existence which depends on consumers which she seeks every- where outside herself is less solid than that of France which has her consumers within her own bosom.' CHAPTER XLIV THE UNITED STATES UNDER FREE TRADE AND PROTECTiON The dogmatic assertion of the French economist, Frederic Bastiat, that ' without Free Trade no country can prosper,' has been practically endorsed by a g;reat majority of the supporters of the present fiscal policy. And yet a study of the history of the United States not only contradicts this asser- tion, but proves that those periods during which, under the influence of economic charlatans, the United States have relaxed their policy of Protection, have been marked by depression of trade and distress; whilst the periods of strict Protection have been marked by activity of trade and prosperity. The Union of the States was effected in 1788, and in 1789 the policy of Protective duties was affirmed. Between 1789 ' Speech of M. Thiers, in tiie Corps L^giilatif, Paris, Jan. at, 1S70. 148 ECONOMIC AND FISCAL FACTS. and 1822 additional Acts were passed, increasing the rates of duty. The country enjoyed remarkable prosperity during that period, and Washington, in his Message of 179S, said, ' Our agriculture, commerce, and manufactures are prosper- ing beyond former example, with burdens so light as scarcely to be perceived.' In 1801 Jefferson congratulated Congress on the revenue derived from tariff duties, and suggested that they might safely dispense with all internal taxes; and in 1807 he was able to advise Congress of a heavy surplus of 14 million dollars in the revenue. In 1812 the existing duties were doubled, and 10 per cent, was added to the duty on all imported articles. Under this policy the United States made wonderful progress in the development of their industries, and, in spite of their three years' war with Britain, were richer at the close of the war than before. In 1816 the Free Trade policy prevailed, and Mr. Clay, Speaker of the House in 1823-4, said : The general distress which pervades the whole country is forced upon us by numerous facts of the most incontestable character. It is most painful for me to dwell upon the gloom of this picture, but I have exaggerated nothing ; perfect fidelity to the original would have authorised me to throw on deeper and darker hues. Horace Greeley has recorded his personal recollections as follows : At the close of the war with Great Britain, the manufacturing industries of the United States found themselves suddenly exposed to a determined and relentless foreign competition. Great Britain had pushed her fabrics into almost every corner of the world. Of some of these, great stocks had nevertheless accumulated, out of fashion, and only saleable far below cost. These were thrown upon the market in a perfect deluge ; what cost $4.44 to make in England being sold in Boston, duty and charges paid, for $3.33. The tariff of 1816 was meant as a barrier against this inundation, but proved inadequate, except on coarse cottons and a few other rude products. Our manufactories went down like grain before the mower ; our agriculture and the wages of labour speedily followed. In New England, I judge that fully one-fourth of the property went through the Sheriff's mill, and the prostration was scarcely less general elsewhere. In New York the principal merchants united in a memorial to Congress to save our commerce, as well as our manufacturers from utter ruin, by increasing the tariff, and prohibiting the sale at auction of imported fabrics. In 1824 Protective duties were again imposed, and the UNITED STATES : FREE TRADE & PROTECTION 149 prosperity which followed the imposition of these tariffs encouraged the Legislature to increase them in 1828. Mr. Clay, in a speech in the United States Senate in 1832, said : If I were to select any term of seven years, since the adoption of the present Constitution, which exhibited a scene of the most widespread dismay and desolation, it would be exactly that term of seven years which immediately preceded the establishment of the tariff of 1824. If the term of seven years were to be selected of the greatest prosperity which this people have enjoyed since the estab- lishment of their present Constitution, it will be exactly that period which immediately followed the passage of the tariff of 1824. The results of the Protective Tariff of 1824 have been described in the Chicago Commercial Advertiser as follows : Our first tariff, worthy of the name of Protection, was that of 1824. For a number of years previous to that date the condition of the whole country was deplorable. The American markets were flooded with foreign merchandise ; home manufacturers were everywhere over- mastered by ruinous competition from abroad. Employment was scarce, and wages ridiculously low ; an embarrassed condition was the common lot. So soon as the tariff of 1824 went into operation, the whole aspect and course of affairs was changed, activity took the place of sluggishness, capital sought investment, labour came into demand, wages advanced, mills were opened, furnaces built, shops multiplied', business revived in all its departments, revenue flowed copiously into the coffers of the Government, the debts created by two expensive wars were entirely paid off. Such a series of general prosperity had never before been seen by our people. More stringent Protection was provided by the Act of 1828, and affairs still more rapidly improved. President Jackson said in his annual message of December 4, 1832 : ' Our country presents, on every side, marks of prosperity and happiness, unequalled perhaps in any other portion of the world.' In 1833 an Act reducing the duties was followed by a period of disaster, and it was during this period that Friedrich List, the Father of the ' Modern German School of Economics,' wrote: It is impossible for the United States, if they persevere in their actual commercial system, to maintain tolerable order in their national economy ; there is no effective remedy but a return to the doctrine of protecting their industries. The Compromise tariff of 1833 involved gradual reduction year by year; the lowest point being reached in 1837. The effects of it have been described thus : Under this legislation, industry and trade soon declined, foreign goods poured like an inundation into our market. Less than ISO ECONOMIC AND FISCAL FACTS three and a half years brought the panic and collapse of 1837. Affairs went from bad to worse, the Government became im- poverished, with the people ; its resources sank so low that President Tyler could not, at one time, obtain payment of his salary, and had to resort to brokers for loans. The Protective tariff of 1842 again produced an extra- ordinary revival of trade and industry; and President Polk, in his annual message, December 8, 1846, said : Labour in all its branches is receiving ample reward ; while education, science and the arts are rapidly enlarging the means of social happiness. The progress of our country, in her career of greatness, not only in the vast extension of our territorial limits, and in the rapid increase of our population, but in resources and wealth and in the happy condition of our people, is without an example in the history of nations. The Chicago Commercial Advertiser has thus described the results of the next change of policy : When these glowing words were published the Free Trade tariff of 1846 had been in operation only eight days. Although the move- ment was slower than in 1833, the decadence went on steadily. Our Presidents ceased to congratulate the country on its prosperity, yet a further reduction took place in 1857, followed in a few months by the panic of that year. Revenue declined, wages went down, employment at any pay was hard to find; just before the rebellion the Government was borrowing to pay its ordinary expenses in times of peace. The mischievous effects of the Free Trade tariff of 1846 were obscured for a time by the great progress throughout the civilised world in scientific invention, railways, telegraphs, steam navigation, gold discoveries and other events that occurred at this period. These imparted a fictitious prestige to Free Trade in Britain for results unfairly claimed as its work. The reaction, however, soon came, for, in 1857, Mr. Buchanan said : With unsurpassed wealth in all the elements of national wealth, our manufactures are suspended, our public works are retarded, and private enterprise of different kinds is abandoned. Thousands of useful labourers are thrown out of employment and reduced to want. In 1861 the Morill Protective tariff was introduced, and, despite the outburst of the Civil war and all the evils that accompanied it, including the industrial paralysis of the eleven seceded States, the country was enabled to sustain itself, to revive and to increase its manufacturing industries in an extraordinary manner. In 1890 the McKinley tariff UNITED STATES : FREE TRADE & PROTECTION 151 was enacted. It was simply a variation of that policy of Pro- tection which, commencing with the Morill tariff, has been pursued with eminent success. It was a very carefully con- sidered Act, embracing a stringent policy of Protection for those industries which required development. Our British Free Traders prophesied utter ruin to the United States from its adoption, but it has been a complete success. The report of the committee authorised by the Senate to investigate the result of the McKinley Act has stated that in twenty-eight months the retail prices of 214 articles of common consumption declined 64 per cent., and that wages advanced 75 per cent. In November 1892, however, Cleveland, a Free Trade Presi- dent, was elected, and this gave a check to the prosperity in anticipation of the Wilson-Gorman Compromise Act, which was passed in 1894. McKinley was, however, re-elected in i8g6, and in 1897 the Dingley Protective tariff came into effect, with, as a result, unprecedented prosperity; but in 1907 a tariff concession was given to Germany, allowing the United States to be flooded with German undervalued goods, although Mr. Wilbur Wakeman, former Appraiser of Customs at New York, had denounced the proposed concession as likely to ' have a very depressing, if not serious, effect on many industries.' There was a general impression amongst business men that President Roosevelt and Secretary Root had been led into a trap. The ' concession ' came into effect in July 1907, and was followed by great distress and a mone- tary panic, and towards the end of 1907, although the United States were importing vast quantities of Germnri goods, a large number of operatives were unemployed, and also on short employment. The United States Secretary of State has now given notice of his intention to abrogate all foreign trade agree- ments, including the mischievous German agreement. With reference to this agreement the American Economist writes : Urgently and persistently our Government was warned against the consequences of so ill-advised a proceeding. Its certainty of a grave injury to American labour and industry was pointed out over and over again. . . . All that was predicted for the bad side of the bargain came true, to the heavy loss of domestic industries, which were under-sold and driven out of the market by the lower tariff duties that were involved in the under-valuation privileges granted to foreigners. Their abrogation is cause for congratulation among all good Americans.* ' Amtrir/im Ff/irtntttist, Msv -, t-^ng IS2 ECONOMIC AND FISCAL FACTS Carey, the American economist, sums up the results of Protection and Free Trade in the United States as follows : Protection, as established in British Free Trade, as 1813, 1828, 1S42, gave, as that established in 1817, 1834, of 1861 is giving : 1846, and 1857, bequeathed to its successor : Great demand for labour. Labour everywhere seeking to be employed. Wages high and money Wages low and money high, cheap. Public and private reveniHes Public and private revenues large. small and decreasing. Immigration great and Immigration declining, steadily increasing. Public and private property Public and private bank- great beyond all previous pre- ruptcy nearly universal, cedent. Growing national, inde- Growing national depend- pendence. ence. The United States revised tariff of 1909 imposes, in all cases, tariffs of at least the difference in the cost of articles manufactured abroad and at home. Allowance is also made for a reasonable profit on, home production. It is estimated that the new schedule provides for increases on fifteen per cent, of imported merchandise, and for reductions on ten per cent. ; but these reductions are only made in cases where American trade is beyond rivalry from abroad. Sir Lyon Playfair, a doughty - champion of the Cobden Club, referring in 1891 to the McKinley Act, said : If the Americans be right in principle, and if they be successful in practice, the whole policy of the United Kingdom is founded on a gigantic error, and must lead to our ruin as a commercial nation. Sir Lyon was perfectly right. The McKinley Act has been successful in practice, beyond all anticipation, as proved by the following figures showing the progress made in the first ten years succeeding the passing of the McKinley Act of 1890. i8go I goo Favourable balance of trade... $13,840,945 $21,471; STS Export of manufactures 151,102,376 432',284',366 „ „ agriculture 629,820,808 835,912,952 ,, „ domestic merchandise... 845,293,000 1,370,403,922 ,, ,, iron and steel manufac- '"■■ss 25,512,008 121,858,344 UNITED STATES: FREE TRADE & PROTECTION 153 The Defender, an American journal, dealing with these figures, says : Since 1896 our exports of manufactures have almost doubled in addition to supplying the enormously increased demand at home. The great gains have been made in iron and steel, copper, and agricultural implements, though gain is shown in almost every line of industry. Instead of our manufactures forming one-sixth of our total exports they now form one-third. It is this great increase in the export of manufactured goods that, added to our agricultural export, gives us a favourable balance of trade. . . . It must not be forgotten that this wonderful increase in export of manufactures has been in competition with Great Britain and Continental Europe. We have not only maintained our wage-scale, but in every industry have increased wages from 10 to 25 per cent.' Pauper Labour of Europe Professor Cairnes has stated that the United States with her high rate of wages cannot compete with the pauper labour of Europe. He says : They cannot do so and at the same time secure the American rate of return on their work. . . . It is as if a skilled artisan should complain that he could not compete with the hedger and ditcher. Let him only be content with the hedger and ditcher's rate of pay and there will be nothing to prevent him from entering the lists even against this rival. . . . The end here proposed by American enterprise is, it must be owned, unattainable under Free Trade, for Free Trade is content to turn natural laws to the best account ; it does not seek to transcend them. But, though unattainable under Free Trade, Protectionists assure us that the thing may be done by means of their system." Experience has shown that Professor Cairnes is hopelessly wrong. Wages in the United States are nearly double those of the pauper labour of Great Britain, and yet the United States competes successfully with us, in many cases in our own market. Since the passing of the McKinley Act the value of exports from the United States to Great Britain has increased from ;^9i,4Si,ooo to ;£i33,683,ooo, or an in- crease of about ;^42, 000,000 under the Protective tariff — the stringent Dingley Protective tariff — respecting which the Ahterican Economist writes : It has been denounced as a narrow, prohibitive measure, but the Custom-house receipts give the lie to any such story. If it had discouraged importation to an unwholesome or oppressive degree it would have failed to meet the revenue test. ■ Tie Defender, New York, August igoo. * Cairnes, Some Leading Princifles of Political Economy, p. 38?. IS4 ECONOMIC AND FISCAL FACTS Then after showing that, in spite of the speculative and industrial reaction in 1904, the revenue from duty collected increased from ;^2g,ooo,ooo in 1898 to nearly ;^66,ooo,ooo in 1907, the article continues : The law has, therefore, been one, which, while it protected and promoted American Industry, was magnificently effective from the revenue standpoint. Proof that it is unnecessary to sacrifice the Protective policy, in order to assure sufficient revenue, could not be more complete, nor would this Customs revenue have been so ample if the Dingley Law Protectionism were as hide-hound as some of its Free Trade critics have professed to believe.' CHAPTER XLV DECLINE OF AMERICAN SHIPPING A FAVOURITE argument of the opponents of Fiscal Reform is found in the assertion that ' England owes her maritime supremacy to her policy of Free Trade, and that the decline of American shipping is due to the policy of Protection.' Those who make such an assertion must be ignorant of the following facts : 1. Britain gained her maritime supremacy under a policy of stringent protection. 2. Under a Protective policy, the marine of the United States grew and prospered so greatly that it became a formidable rival to that of England. 3. The foreign shipping trade of the United States is not protected, and its decline is due to the abandonment of Protection. 4. As regards its shipping, the policy of Great Britain is far more protective than that of the United States. To deal with these points in detail : I. England owes its maritime supremacy to the Naviga- tion Laws, which destroyed the supremacy of the Dutch — protective laws, which as an act of defence Adam Smith designates : Perhaps the wisest of alt the commercial regulations of Eng- land. ... as wise as if they had been dictated by the most deliberate wisdom." ' American Econamisi, April 23, 1909. ' Wealth of Nations, IV. ii. DECLINE OF AMERICAN SHIPPING 155 Cossa, the Italian economist, also allows that : At certain times, and under certain conditions. Protection has given notable advantages to industrial organisation and progress. Colbert's system and Cromwell's Navigation Act contributed not a little to the economic greatness of France and England.' 2. Under the protective policy of discriminating duties in favour of their shipping, the United States early in the nine- teenth century acquired a magnificent marine, with a tonnage nearly equal to that of Great Britain, thus becoming a serious rival to our commerce. In 1825 Senator Webster, speaking of the United States Marine, said : We have a commerce which leaves no sea uTiexplocpd ; navies which take no law from superior force. The Times, in May 1827, wrote : Our commercial monopoly exists no longer. We have closed our Western Indies against America, from feelings of commercial rivalry. Its active seamen have already engrossed an- important branch of our carrying trade to the East Indies. Her starred flag is now conspicuous on every sea, and will soon defy our thunder. 3. In 1828 the United States passed an Act which with- drew all protection from their foreign shipping trade, opening their ports to the ships of all nations, thus abandoning the policy which had been so successful. Only the coasting trade of the United States now enjoys the advantage of pro- tection. From that date the percentage of United States carriage of foreign trade steadily declined, from 88 per cent. in 1828 to 66J in i860. Then came the Civil War to give the finishing stroke. The percentage had fallen in 1870 to 35^ per cent. ; and in 1900 to loj per cent. The Civil War forced the shipping to seek protection under a neutral flag; and it has been estimated that vessels representing about 2,500,000 tons were transferred to foreign flags, principally British. Mr. McKinley urged the necessity of a return to a Protective policy in the following words : We must encourage our merchant marine. We must have more ships. They must be manned by, and owned by Americans. . . . The policy of discriminating duties in favour of our shipping which prevailed in the early years of our history should be again promptly adopted by Congress and vigorously supported • Guide ti the Study of Political Economy, p. U4. iS6 ECONOMIC AND FISCAL FACTS until our prestige and supremacy on the seas are fully attained. A new protective Shipping Bill has been prepared. 4. Although the Navigation Laws of England were abolished in 1849, her shipping laws were revised in 1854, with a decidedly Protective tendency. Taxes were abolished, fees reduced, restrictions removed, and drawbacks allowed on ships' supplies. In addition to this, the enormous sub- sidies paid for mail contracts, the Naval Reserve subvention policy, and the protection given to vessels sailing under the British flag afford immense advantages to our shipping. Moreover, Lloyd's regulations, British insurance discrimi- nating against foreign ships, and our tonnage rules, all tell against American shipping. The annual subsidies and pay- ments for postal services by the British Government in 1906 amounted to ;£'i, 248,000, as compared with ;^268,ooo paid for similar services by the Government of the United States. The payment of subsidies to shipping companies is contrary to the constitution of the United States, and in 1880 the fifth resolution of the Republican platform insisted that ' further subsidies to private persons or corporations must cease.' It is evident therefore that the decline of American shipping has not been caused by Protection, but by exclusion from that Protective policy under which the home industries of the United States have made such marvellous progress. While Great Britain lost between 1870 and 1880 13 per cent, of her trade, the United States gained 22 per cent. ; and if the United States would give the same encouragement to her mer- chant marine and her steamship lines as is given by other nations, this commerce on the seas, under the American flag, would in- crease and multiply. When the United States will expend from her Treasury from five to six millions a year, as do France and Great Britain to maintain their steamship lines, our ships will plough every sea in successful competition with the ships of the world.' During the thirty years ended 1846, under a policy of strict Protection, the tonnage of British shipping increased from 1,413,725 to 4,310,539.=' This naturally suggests the question : If the decline of American shipping was caused by Protection, how is it that the shipping of Great Britain made such a prodigious increase under the same policy? Why did not its shipping * Speech of McKinley, May 1S90. • Progresi of Nations, Porter, p. 400, sod ed. DECLINE OF AMERICAN SHIPPING IS7 decline under conditions similar to those which caused the decline of the American shipping? CHAPTER XLVI PROPHECIES The fulfilment of the prophecies made by the advocates of our present fiscal policy to induce its adoption has not been of such a character as to inspire confidence in that policy. Prophecy Fulfilment I speak my unfeigned con- viction when I say I believe that there is no interest in the country that would re- ceive so much benefit from the repeal of the Corn Laws as the farm tenant interest in this country.* I believe when the future historian comes to write the history of agriculture he will have to state ' in such and such a year there was a stringent Corn Law passed for the protection of agri- culture ; from that time agriculture slumbered in Eng- land, and it was not until by the aid of the Anti-Corn Law League the Corn Law was utterly abolished that agri- culture sprung up into the full vigour of existence in England to become what it is now — like the manufactures, un- rivalled in the world." The Americans are a very cautious, far-seeing people. And everyone who knows them knows that they would never have tolerated their Protective tariff, if we had > Cobdea, 1844. The evidence given before the Royal Commission of 1879 on the depression of agriculture shows that a very large majority of tenant far- mers have been ruined. The true historian will have to record : In 1846 the British public, misled by the specious argu- ments of Cobden, adopted the policy of so-called Free Trade, but agriculture gradually de- clined ; millions of acres went out of cultivation, land became foul and badly farmed, tenant farmers were ruined and emigrated to Protection- ist countries, landowners sold their land at ruinous prices find invested the residue in foreign lands ; never was ruin more complete. After receiving the agri- cultural products of America for sixty-three years, we find the Americans as strong Pro- tectionists as ever. 1 Ibid. i.=;8 ECONOMIC AND FISCAL FACTS met their advanpes by receiv- ing thr;ir agricultural pro- ducts in exchange for our manufacturing products.^ You have no more right to doubt that the sun will rise in the heavens than to doubt that in ten years from the time when England inaugu- rates the glorious era of commercial freedom every civilised country will be Free Trade to the backbone." I believe if you abolish the Corn Laws and adopt Free Trade in its simplicity, there will not be a tariff in Europe that will not be changed to follow your example.' Sixty-three years have elapsed since we adopted the policy of Free Trade, and we find the following in the American Economist of April 23, 1909 : Movements towards higher tariffs are going on the world over, according to informa- tion coming from the State Department. France is con- sidering a Bill which largely increases her tariff rates. The agitation for Taritt Reform in Great Britain shows evidence of increasing strength. In a number of bye-elections recently, the Government candidates were defeated, and members elected who favoured tariff duties. Germany put a tariff in force not long ago that largely increased rates. Italy and other countries have moved in the same direction. Sweden has now appointed a com- mission to revise the tariff in that country, which it is proposed to put into effect in 1910. Japan is anxiously awaiting the expiration of certain treaties in order that she may increase her tariff. Australia has taken that course, and in every direction the movement is in favour of greater protection to home industries. In reply to the protests against the adoption of Free 1 Cobden, 1844. ' Hid, 1846. Ibid. PROPHECIES 159 Trade policy in 1846 its advo- cates contended that : (a) Not an acre of land would go out of cultivation. (a) More than three million acres of corn and green crops have gone out of cultivation between 1871 and 1907. (b) On the contrary we have an enormous adverse balance of trade amounting in our dealings with the United States to more than ;{J'8i, 000,000. (c) This has vanished. In many cases the cost of trans, port from the Continent is less than the transport by rail from many parts of our country to London. Freight and charges from Dantzic have now fallen to 3Jf. a quarter, and from the Atlantic Ports of the United States they have fallen to 4s. 3(i. a quarter. Railway freight and charges from the Midland Counties to London is about 4x. a quarter. The opponents of Free Trade appear to have been endowed with far greater foresight than their adversaries. The following remarkable prediction was published in the Agricultural and Industrial Magazine of 1834, twelve years before the repeal of the Corn Laws : In those days when England should have reached the measure of her greatness, verily the hour of her tribulation shall be at hand. The nation shall be delivered up for sport and experiment to loan jobbers and political economists. Our too luxuriant manufactures and commerce shall be trimmed down to a sound and wholesale standard by the removal of all Protective duties, which will afford matter of gain and derision to other nations ; while bankruptcy, desolation, misery, and despair shall hourly in- (b) Every sovereign's worth of imports would be repaid by the yield of an equal value of exports. (c) Sufficient natural pro- tection would be given to our agriculture by the cost of freight and charges on imports. In 1841 McCuUoch stated that the cost of freight and other charges for the trans- port of wheat from Dantzic to England was 13s. per quarter. i6o ECONOMIC AND FISCAL FACTS crease at home. ... It shall be said in the great Council that it would be desirable to render the nation dependent on foreign harvests for food ; and astonishing nonsense shall be talked touching Free Trade and the theory of exchanges. Then shall be felt the saying of a great king, that if he had a province to punish he would deliver it up to the rule of political philosophy. . . . But after some time longer the eyes of the people shall be opened, they shall grow weary of suffering in hopeless silence ; other rulers will arise who will revert to the maxims of common- sense ; they will decide that it is preferable to have the people con- tent, occupied, and thriving under the old system, to starvation, idleness and outrage under the new-fangled philosophy. . . , The nation shall rejoice in renovated strength but the philosophers shall mourn over their lost occupation, and the overthrow of 'sound general principles." The author of this prediction appears to have been endowed with more insight and common-sense than our politicians in the present so-called age of progress. The first part of the prediction has been fulfilled to the letter; and it is to be hoped that the accomplishment of the latter part will be consummated before it is too late to remedy the mischief and avert the danger which mena ces us. The following extract from the Bucks Herald of June 26, 1847, shows that Disraeli was a better prophet than Cobden : Mr. Disraeli described Free Trade as a ' revolution of Parlia- ment,' and, he proceeded, ' we must see the experiment fairly tried. You are,' he said to the electors, ' in the position of a man who has made an improvident marriage. You have become united to Free Trade, and nothing can divorce you except you can prove that the cfiarmer has been false. . . . You have be- come united to a false duenna, and you must take the conse- quences ; and the consequences, I venture to predict, will be that the House of Commons, after fair, full, and ample trial of this great measure, will be driven to repeat it from absolute necessity, though at the termination of much national suffering ; but then Ihat suffering will be compensated for by the bitterness and pro- fundity of national penitence.' Prophecy Fulfilment Those who opposed the introduction of the new policy in the forties con- tended : * The copies of the Agricultural and Industrial Ma^azlng for 1834-35- 36, in the British Museum, are bound up in one volume, and appear ia the catalogue under the date 1835-1836. PROPHECIES 161 (a) That it would throw land out of cultivation. (6) That it would make us dependent on foreign supplies. (o) More than three million acres have been thrown out of cultivation. (6) Our dependence was so great that at the time of the Crimean War, the price of wheat rose to 74^. M., although we had complete command of the seas. (c) Our direct taxation has increased to an extent that threatens absolute ruin. (d) Not only have other nations declined to join us, but they exclude our produc- tions with heavy tariffs. (c) That freeing the im- port duties would involve heavy direct taxation on our people. (i) That there was no security, or even probability that other nations would join us in free exchange of pro- ductions. Hudson, the 'Railway King,' during the discussion on the repeal of the Corn Laws on February 17, 1846, expressed his conviction that the effect of the measure would be to throw large tracts of land out of cultivation, and that we should lose the best of all our customers — the Home customers — that it would withdraw capital from the land, and he continued : I believe that the effect of this measure will fie to paralyse the Industry of the country. This is really a labourers' question. It comes down after all to the poor labourer, whether a manu- facturing operative or an agricultural labourer. Why not cheapen to him his tea and his coffee, before you call upon him in this way, and thus tax his industry and his exertion? Why not give him a boon along with that, if he must in the end pay the tax ; for it is absurd to suppose that the effect of this alteration must not fall upon the labourer. Fall upon him it will, fall upon him it must. It must now be added, in fulfilment of this prophecy, ' fallen upon' him it has.' CHAPTER XLVII CONCLUSION A CAREFUL consideration of the foregoing chapters points to the following conclusions. The science or art of economics, although it is yet in its infancy, contains much that is valuable, especially arriongst the writings of Adam Smith ; but its progress has been re- tarded owing to the dogmatic misapplication of its doctrines by many of its disciples, who seem to ' have learnt nothing and to have forgotten nothing.' It has also been prejudiced by a reaction against doctrines that have been erroneously ascribed to the Mercantile system, and by a too close adherence to abstract principles. It has suffered from antagonism, and a want of amalgamation of the principles of the various systems or schools of economics, all of which are more or less faulty in some respects, though valuable in others. In applying economics to the tariff question Great Britain has been singularly unfortunate. Some of the exponents of the orthodox British school have overlooked many important factors, and have ignored the great revolution that has occurred in the conditions of trade, commerce, and industries, since Adam Smith formed his conclusions. They have exhibited much confusion of ideas, and have neglected the teaching of history and experience. They have clung too slavishly to the letter, rather than to the spirit of the principal writers, and have endeavoured to mould facts to fit their doctrines, instead of employing facts to reigulate and modify theory. They have elevated Free Trade almost to a religion, which is not even to be questioned under any conditions. They have failed to discriminate between Protection and Prohibition, between moderate duties and restraints on trade, between Free Trade and unlimited free import. They have based their conclusions on two cardinal errors : first, that the burden of an import duty must fall upon the consumer; and second, that a tariff must increase the cost of the article taxed, both of which assumptions have been proved by experience and history to be absolutely false. In the majority of cases experience has proved that the import duty, if moderate and of a competitive character, is paid by the foreign producer or by his agent, not by the consumer; and that it does not increase the cost of the article taxied. On the contrary, numerous instances have 162 CONCLUSION 163 been given in which the imposition of an import duty has been followed by a fall in price owing to the stimulus given to home production, and also to the destruction of foreign monopolies and other causes. This reduction of price has not been temporary, but permanent. A review of the different schools or systems of economics has shown that the Free Trade of the Manchester school is not the Free Trade of Adam Smith — the recognised apostle of Free Trade — but a travesty of it. It is opposed to the spirit of his writings, in which he foretold the ruin which has actually befallen our industries, if the free import of manufactured goods were permitted. It is also opposed to his advocacy of countervailing taxation of articles taxed by the foreigner. Our policy is condemned by the modern German econo- mists, who scornfully term it ' Manchesterthum,' and also by American economists. It is also absolutely opposed to the principles inculcated by Adam Smith, who laid great stress upon the importance of agriculture and the home t-rade, and would never have countenanced the ruin of agriculture which our policy has involved, or the sacrifice of home to foreign trade. Under our policy Our trade has entirely changed its character, and become one of buying and selling instead of production ; one which, instead of employing our labour and developing our industries, employs foreign labour and develops foreign industries. It has been shown that the agitation, by which the adop- tion of our present Free Trade policy has been carried, was political in its origin and actuated by party feeling. It was a struggle by the manufacturing classes to destroy the influence of the agricultural classes and the landowners, in which the manufacturers were only too successful. It has also been shown that the objects and working of the Corn Laws have been generally misunderstood and misrepresented. Under these laws the price of wheat had been kept steady and moderate, until they were repealed in 1765 ; then the price of wheat rose, and the dependence upon foreign supplies became so great that when war broke out wheat rose to famine rates, and those enormous prices which have been falsely attributed to the Corn Laws prevailed actually under the free import of wheat. i64 ECONOMIC AND FISCAL FACTS The Select Committee of 1813 attributed these high prices to the undue dependence on foreign supplies, and recom- mended a return to those Corn Laws under which the price of corn had remained steady and moderate until their repeal in 1765. The Corn Laws were therefore re-enacted, and the price of wheat fell and was almost at its lowest just before the repeal of the Corn Laws in 1846. The distress of the ' Hungry Forties,' which was used, as a powerful lever, to force on Free Trade, had no con- nexion whatever with the Corn Laws, for wheat was then almost at the lowest price that had been touched during the whole of the first three quarters of the nineteenth century (1800-1875), whether under free import or under the Corn Laws. The distress was entirely due to a monetary crisis caused by our faulty Bank Act, which depressed trades and industries and threw many of the working classes out of employment. It was a money famine, not a bread famine. The absurd fictions of the ' Big and Little Loaf,' ' taxing the poor man's food,' ' German black bread and horseflesh,' and other dishonest election tricks, on a par with the ' terminological inexactitude ' of the ' Chinese slavery,' have been exposed. Free Trade has not given the cheap loaf; wages ha:ve not increased so much in England as in the protected States. Formerly they were much lower in Germany than in England ; now they are, in many cases, as high, if not higher. In the United States wages are, as a rule, double those prevailing in England, the standard of living is much higher, and the actual cost of the necessaries of life little more. Our taxation has been shown to be on a false basis. The substitution of direct for indir-ect taxation has indirectly borne heavily upon the working classes. Our countrymen have had to bear much of that burden of taxation which was formerly paid by the foreigner. Excessive taxation of capital falls principally on the employers of labour, and must be met from the industries of those employers, and consequently by the working classes, either in reduction of wages or shortage of empldyinent. The income-tax is above all other taxes the most unjust, unequal, and mischievous. It has a pernicious effect upon our industries. It taxes heavily the employers of labour. It is the resource of an incompetent or unscrupulous Minister CONCLUSION 165 for raising revenue, and it encourages political extravagance. It is a burden for 'which there is absolutely no necessity, and it should be replaced by indirect taxation. Financially there should be no difficulty in abolishing it, and substitut- ing indirect instead of direct taxation, more especially by taxing heavily articles of luxury, so that the burden of taxation might fall more upon the wealthy classes. A graduated income-tax is one which has been condemned in the United States, and disallowed as contrary to the Consti- tution of that country and a violation of the liberty of the subject. History affords a striking parallel between the condition of Rome in the period preceding its decay, and that of Britain in the present time; both depending upon foreign supplies for their food; their agriculture ruined; their stalwart rural population disappearing; their artisans wretched and physi- cally deteriorating; taxation increasing to an intolerable extent; both countries in apparent splendour, wealth, and luxury, with extended empire in all parts of the world, but with a deadly canker at the heart. A review of the fiscal conditions of various countries has shown that the adoption of a policy of free import, or even a near approach to it, has been attended with disastrous results. Great Britain Great Britain, under a policy of stringent Protection, gained her enormous wealth and power, and became the capitalist country of the world. Under that policy she attained her industrial and commercial supremacy : she had the monopoly of manufacturing industries ; she became inde- pendent of foreign countries for her supply of food, and held all the markets of the world. Since she has abandoned her Protective policy, she has lost that position. Other nations are passing her; she has become dependent on the foreigner for her food supply; her agriculture is ruined, many of her industries have practically disappeared, others are struggling hard for existence. Her capital is vanishing, her population crying out for employment; distress and pauperism are increasing, and Socialism is rampant. Although her trade has increased in volume, in common with the increase of wealth amongst all civilised nations, it h^s been parried on at a minimum of profit, if not at a loss, i66 ECONOMIC AND FISCAL FACTS Ireland In Ireland we find that under a Protective policy trade and industries were steadily increasing. She became pros- perous, loyal, and contented ; her population increased ; she had a ready market in England for her agricultural produce; but that market was transferred, by the adoption of free import, to the foreigner, and her own home market was invaded. The tide of prosperity turned; her progress ceased, her population diminished to one-half of what it was. The flower of her population emigrated to lands which, under a Protective policy, afford ample remuneration to labour, thus leaving Ireland impoverished, discontented, disloyal, and in a state of anarchy. Instead of recognising the true cause of the ruin of Ireland, our Government had recourse to mis- chievous Land Acts, which only intensified the evil. Canada In Canada we find that, under a Free Trade policy, indus- tries were slaughtered by the United States, and progress was impossible, until she adopted a Protective policy, under which her progress has been phenomenal. India India possesses enormous potential, but undeveloped wealth, agricultural, mineral, and industrial ; she has vast coal fields and deposits of iron ore of the purest description, but her development has been sacrificed to the fetish of Free Trade. She has been made the dumping ground for the produce of other nations, and the Government of India has been forced by the Imperial Government, not only to repeal duties on cotton goods, but also to impose an excise duty on the mill produce of India, in order to conciliate Lancashire. The want of development of her industries is a disgrace to our Parliamentary legislation. Germany Under a policy of lowered tariffs Germany had been bleeding to death. Through her widely-opened door she had become the dumping ground of foreign surplus ;, but since the adoption of a Protective policy by Bismarck in 1879, she has enjoyed great prosperity, her industries have developed enormously, as may be inferred from the fact that her production of iron, which was formerly less than one- CONCLUSION 167 third thfit of Great Britain, now exceeds it. Wages have risen, and the condition of the working classes has been much improved. France Although France has never adopted an absolute Free Trade policy, she has of late strengthened her Protective policy, with the happiest results. The change has been marked by prosperity in every branch of industry. The United States of America Those periods during which the United States have relaxed their Protective policy have been marked by un- employment, low wages, dear money, decreasing public and private revenues, almost universal public and private bank- ruptcy; whilst the periods of strict Protection have been marked by great demand for labour, high wages, cheap money, and general prosperity. The decline of American shipping, which has been ascribed to the action of Protec- tion, has, in fact, been due to the want of that Protection which is so beneficial to the home trade of the United States, but from which the foreign shipping trade of the United States has been excluded. The foregoing summary of the state of various countries , under different fiscal conditions, proves the error of the Cobdenite doctrine that a country cannot prosper under Protection. Those States which have suffered under a Protective policy should, according to that doctrine, have been ruined ; but, on the contrary, they are prospering exceedingly; whilst we, under a Free Trade policy, are fast losing our industrial and commercial superiority. Mr. Carnegie, in a speech at St. Andrews in 1902, stated that the United States, under a policy of strict Pro- tection, had taken the foremost place in wealth, production, and exports ; that Germany was rapidly overtaking us, and that before long Russia would press us hardly. The only alternative that he could suggest to save us from absolute ruin, was that Britain could be submerged as a member in a consolidation of European nations under a ZoUverein. The utter failure of the promises and predictions by which the people of Great Britain were induced to adopt our present fiscal policy, is a strong argument against its con- tinuance. A patient trial, extending over more than sixty years, has proved it to be a complete failure in eyery respect, APPENDIX I DAILY NEWS CRITICISM Sir Guilford Molesworth on Free Trade To the Editor of the Daily News. Sir, — In your review of my unpretending booklet, ' Our Empire under Protection and Free Trade,' you say : It is difficult to argue with a writer who clings in this way to doctrines which belong to the dark ages of economic science. We can only re- commend the author to devote a little study to the ' Wealth of Nations ' and to the writings of Frederick Bastiat. I may state that I have not only studied those works, but have quoted freely from them in support of my arguments in the ' British Jugernath,' which I published ig years ago. Referring to the second edition of that work, I find quotations from Adam Smith's 'Wealth of Nations' (at pages g, lo, ii, 21, 24, 43, 46, SI. 52. S3. S4. 55. and 57), and from Bastiat (at pages 23, 58, 59, and 76), the quotation at 23 showing how Bastiat has misled his followers by false predictions. Modern economists, and especially the later school of German economists, look upon the Manchester School of Economics as belonging to the dark ages, and scornfully repudiate it as ' Man- chesterthura ' and ' Smithianismus. ' I fear that your reviewer has not studied the books he recom- mends to my notice ; otherwise he would never have ignored the fol- lowing sentences, which occur in Adam Smith's ' Wealth of Nations,' and which to a great extent support the views I have advocated. If the free importation of foreign manufactures w.ere permitted, several of the home manufactures' would probably suffer, and some of them perhaps go to ruin altogether.— Wealth hf Nations, Book IV. Can. 11. It will generally be advantageous to lay some burden on the foreigner, for the encouragement *>f domestic industry, when some tax is imposed at home upon the produce of the latter. In this case it seems reasonable that an equal tax should be imposed upon the like produce of the former. . . . It may sometimes be a matter of deliberation how far it is proper to continue the free importation of foreign goods when some foreign nation restricts by high duties or prohibitions importation of some of our manu- factures into their country. — Wealth of Nations, Book IV. Cap 2. I would recommend to your reviewer's notice the following quotations from Mill : The only mode by which a country can save itself from being a loser by the revenue duties imposed by other countries on its com- modities is to impose corresponding revenue duties on theirs.— Principles of Political Economy, by John Stuart Mili, Book IV. Yours &c. Guilford L. Molesworth. The Manor House, Bexley, July 2nd, 1902. Reply [Our reviewer, who has seen the above letter, says : ' Free Traders are not concerned to deny that the sudden adoption of Free Trade by a country so given up to an artificial system as Great Britain was in Adam ^Smith's time would probably have entailed disagreeable consequences upon those who were then basking in the sunshine of a protective system at the expense of 168 APPENDIX I I6g their fellow countrymen. Neither do they deny that when a tax is imposed upon some home product it is reasonable that an equal tax should be laid upon a like product imported from abroad, and vice versa. On the contrary, their chief objection to Sir Micliael Hicks-Beach's corn tax is based upon this very doctrine. The passage which. Sir Guilford Molesworth quotes from Mill's "Prin- ciples of Political Economy " does not occur in " Book IV," as he says, but in Chapter IV of Book V (Section 6). If the reader will turn to it he will find that it is accompanied by limitations which render it practically valueless for the purposes of the advocates of Protection. It is well known that Mr. Mill has occasionally granted more to his opponents than his disciples approve but to claim his authority on that ground on behalf of your corres- pondent's book, which is full of economic heresies, would be absurd. '] Rejoinder To the Editor of the Daily News. Sir, — With reference to the remarks of your reviewer on my letter which was published in your issue of yesterday, permit me to point out that the ruin of some of our manufactures, which Adam Smith predicted as the probable result of the free import of foreign manufactures, was by no means ' sudden.' It was very gradual, and was only complete after we had for years been ' basking in the sunshine ' (to use your reviewer's words) of Free Trade. The reason why that ruin was gradual has been fully explained in my booklet. It is true that Adam Smith did not include our agricultural industry in the same category with our manufactures, but that was upon a false assumption ; for, as he has explained : Even the free import of foreign corn could very little affect the interest of the farmers of Great Britain. . . . The average quantity imported in one year with another amounts only ... to 23,728 quarters of all sorts of grain. ... So it is probable that one year with another, less would be imported than at present. (Book IV. c. 11.) Now the actual import in the year 1900, in round numbers, amounted to 42,000,000 quarters. Can any unprejudiced man doubt that Adam Smith would have predicted the ruin which has unfortunately fallen upon our agriculture, if he could have had any conception that the actual import could be nearly 1800 times as much as that on which he based his conclusion, that the free import of so small a quantity would ' very little affect the farming interest ' ? With regard to Adam Smith's opinion, that It will generally be advantageous to lay some burden on the foreigner for the encouragement of domestic industry when some tax is imposed on the home produce, your reviewer infers that this is inapplicable to corn because there is no direct tax upon it, but he forgets that the English grower is burdened with taxation of the most crushing character, which the foreign grower evades. Your reviewer is mistaken in stating that Mill's advocacy of the imposition of revenue duties corresponding to those of other I70 ECONOMIC AND FISCAL FACTS countries ' is accompanied by limitations whicli render it practically valueless for the purposes of the advocates of Protection.' The only limitation is this : — Only it must take care that those duties be not so high as to exceed all that remains of the advantage of trade, and put an end to importation altogether. Surely this limitation does not render it valueless to the advocate of Protection — it is exactly what he would desire. To advocate protection is not to advocate prohibition; and the object of Pro- tection is not to prevent imports, but to placp the industries of a country on a fair footing with those of other countries. I fear that my booklet must plead guilty to the reviewer's charge of being full of ' economic heresies,' but my faith is not of the stalwart character of the Free Trader's — that faith which has been defined by a Sunday School girl as : ' Faith is believing that which we know to be untrue.' GuiL FORD L. MOLESWORTH. The Manor House, Bexley, Kent. July 8th, 1902. APPENDIX II FACTS FOR TARIFF REFORMERS A Summary of the Principal Facts in ' Our Empire UNDER Protection and Free Trade,* Published as Leaflet No. 133 of the Tariff Reform League By Sir Guilford Molesworth, K.C.I.E. 1. Extremes are injurious. 2. Unlimited free import is one extreme, prohibitive tariffs the other, moderate tariffs the practical mean. 3. It is a fallacy to suppose that a tariff must necessarily raise the price of the article taxed. 4. When an article is, or can be, produced at home, a tariff, if it be not prohibitive, stimulates production, promotes internal competition, prevents a permanent increase of prices, and in many cases eventually decreases the cost to the consumers. 5. When, however, an article is not of home production, such as tea, coffee, cocoa, tobacco, wines, &c., the tariff naturally increases the price. 6. A tariff on a competing import is frequently paid by the joreign producer, and does not fall on the consumer. 7. Experience has shown that the imposition of a tariff is frequently followed by a fall in the price of the article taxed. 8. It sometimes happens even that the anticipation of a tariff causes a fall in the price. 9. The imposition of a tariff frequently kills a foreign monopoly, or enables a new industry to arise. 10. Unrestricted foreign competition often prevents the establish- ment of a new home industry, or crushes out an existing one. 11. Even when a tariff raises prices, it adds to the revenue and saves other taxation. APPENDIX II 171 12. Direct taxation of capital and profits is a burden on our industries, and reacts on the working classes by reduction of wages and employment. 13. Industries burdened by direct taxatjon are at a disadvantage in competition with those foreign industries which do not share that burden. 14. Indirect taxation (derived from tariffs) need be no burden if the duties are low, and levied on foreign articles which compete with similar articles produced in this country. 15. The term Free Trade as explained by economists, means the free exchange of commodities between nations, which England has never had, and has no prospect of having. 16. We have no free import for our productions into any country, not even into our self-governing Colonies. 17. We have thrown away our bargaining power with foreign countries by abolishing our tariffs on competing products, and have handicapped our trading relations with our Colonies. 18. We admit, free of duty, those articles which compete with our industries, but tax those which do not compete. 19. We impose taxation in a form which must fall solely on our own people, but remit it when any portion of such taxation is likely to fall on the foreigner using our markets. 20. The ' big and little loaf ' of Free Trade is only a delusive electioneering fiction, and the cry of seeking to ' tax the poor man's loaf ' an absurdity, since the loaf produced at home is already taxed to the hilt. 21. The influence of the price of wheat on the price of bread is generally exaggerated, no account being taken of the fact that the retail price of the loaf includes many more items than the wheat itself, namely, the labour employed in the milling, the baking, and the distribution, besides the profits of the middlemen and employees at each stage, the rent of premises, and so forth, which do not vary with the price of wheat. 22. Our dependence on foreign nations for wheat supplies tends in war time to raise prices' to famine rates. During the Crimean War the price of wheat was higher under free imports than it had been under the Corn Laws since 1818, the average price for the year 1855 being 74s. 8d. per quarter. 23. The price of wheat is governed by the fiiictuations in the world's prices, and such fluctuations in prices are determined by the re- lation of the world's supply of wheat to the world's demand for wheat. 24. A tariff does not, as a rule, raise the price of wheat, provided that the duty be a low one ; but the present prohibitive duty of 12s. 2d. per quarter in France, when the outside price is only 275. or 28s., necessarily raises the price when the French harvest is scanty. 25. The repeal of the Corn Laws in 1765 was followed by a rise in the price of wheat from 33*. S^- (the average of ten years preceding the repeal) to 50s. $d. for the average of the ten years succeeding their repeal. 172 ECONOMIC AND FISCAL FACTS 26. During the French War (period 1809-13, prior to the enactment of the 1815 Corn Laws) the average price of wheat rose to 107s. under free iniport. 27. After the enactment of the Corn Laws of 1815 the average price fell gradually, so that in the three years 1843-45 preceding the repeal of the Corn Laws the average price was $os. gd. per quarter. 28. The average price of wheat for the three years preceding the repeal of the Corn Laws in 1846 was slightly lower than the average of thirty j'ears succeeding their repeal. 29. The present low price of wheat is mainly consequent upon the diminished cost of transport by steamers and railways and improved processes of agriculture, but should we be engaged in war with strong maritime powers, there would be the utmost risk of famine prices. 30. The distress in 1840-42, which gave rise to the anti-Corn Law agitation, was not due to dear bread, but to a temporary monetary crisis caused by a sudden drain of gold into the United States. 31. The average price of wheat for the three years preceding the repeal in 1S46 was almost the lowest that had been touched during the half-century 1800-50. 32. The re-imposition of the registration corn duty in 1902 did not raise the price of wheat; but after the remission of the tax in 1903 the price of wheat and flour rose, 33. We enjoyed extraordinary prosperity and acquired our com- mercial and Industrial superiority, as well as our position as the capitalist nation of the world, under a policy of strict Protection. 34. We are losing these advantages under the so-called policy of Free Trade. 35. In the United States the periods of protective tariffs have uniformly been marked with prosperity, and the periods following their several repeals have been marked by depression and distress. 36. The prosperity which we enjoyed in the fifties, although unfairly claimed as the work of Free Trade, was due to other causes, namely gold discoveries, inventions, and science, steam navi- gation, railways, &c., which have been shared by foreign nations. 37. Having laid the foundations of our industrial prosperity under Protection, and having thereby secured the command of the world's markets, we were not merely the first, but for many years the only country able to utilise these new forces that then came into play. 38. For more than twenty years fortuitous events, such as the Crimean War in the fifties, civil war in the United States, and Continental disturbances in Europe in the sixties and early seventies, retarded the progress of foreign nations. 39. As soon as foreign Protectionist nations were able to avail themselves of the new industrial conditions, they success- fully competed with us even in our own markets, and our country is flooded with the productions of the very nations which we for- merly supplied. 40. Since that time our agriculture, silk, sugar-refining, and APPENDIX !1 173 other important industries have been seriously injured, while others have struggled hard for existence. 41. Our Colonies are also becoming more and more Protec- tionist, and are flourishing under that policy, andi Canada and our South African possessions are able to give the Mother Country preferential treatment, and, to their honour, do so as yet without reciprocity on our part. 42. Many of our best workmen have emigrated to the United States, where they obtain higher remuneration for their labour. 43. The capital recklessly expended by us in purchasing abroad that which might have been produced at home has armed Protec- tionist nations with the sinews of war in competing with us. 44. Instead of fostering our own industries and providing em- ployment for our working classes, we purchased from foreign countries in 1906 produce to the value of :^466,ooo,ooo, much of which we could well have produced ourselves or in our Colonies. The value of our exports to those nations in return was only ;^330,ooo,oo9, of which only ;^i98,ooo,ooo were ' articles wholly or mainly manufactured ' of British production. 45. Canada is being driven into making treaties with foreign coun- tries by our refusal to respond to her advances for reciprocal trade. 46. We are constantly raising our direct taxes while the United States lower theirs. 47. The cost of food and of the necessaries of life is not less in England than in Protectionist countries. 48. The wages in Protectionist America are, in the majority of cases, nearly double those prevailing in our Free Trade country. 49. The prophecies which induced our people to adopt Free Trade have proved to be false. 50. The predictions of ruin to those countries which have adopted Protection have altogether failed. 51. The volume of our foreign commerce is no criterion of the prosperity of our industries. 52. The yearly excess of our imports over our exports shows that we are consu/ming more than we produce; we are living, to a great extent, on the interest of that capital which we have gained in former days of prosperity. 53. We have of late years been parting largely with our foreign securities in payment to Protectionist nations. 54. Much of our import consists of food which is absolutely consumed. Much of our export consists of our national assets of eoal and mineral wealth which cannot be replaced. 55. Since the passing of the McKinley Bill in 1891, which the Free Trade apologises prophesied would ruin the United States, the industries of that country haVe developed ty leaps and bounds. 56. The ' special ' exports of the United States increased by ;^i4g,ooo,ooo, or 90 per cent., in the five years 1902-06 as com- pared with the five years 1880-84, while Iho'-.e of the United Kingdom increased in the same period by only ;/J76, 000,000, or 32 per cent. INDEX AsANDoNM&Nt of Colonies, 128 Absurdity of * Free Trade throughout the Empire/ 123 Acreage, decrease of, lop, 110, 114 Act, McKinley, 60, 63, 150 Navigation, 147, 155 Action of currency, 36 Acts, Bank, 33 Irish Land, iig Adam Smith, 5, 6, rp and agriculture, 21 and Cobdenism, 27 and Physiocrats, 18 criticism of, 21 on countervailing import duties, 29 on import of corn, 20, 29 on Navigation Laws, 29 on ruin of manufactures under free import, 28, 163 on Utopian character of Free Trade, S» . . . Administration, British, in India, 142 corrupt parliamentary, 142 of Corn Laws, 71 Africa, South, Constitution of, 125 Agricultural depression, 24, 26, log Bright on, 107 Agricultural Magazine, prediction in, 159 Agricultural ruin of Ireland, 115, 116 Agriculture, Adam Smith and, 21 decay of, in Italy, 99 importance of, 23 improved processes of, 71 Aim of the Corn Laws, 66, 67 Aliens, 121 Alison, Sir A., on Bank Acts. 39 on gold discoveries, 117 on ' Hungry Forties,* 76 on Income Tax, 95 on prices, 3S on progress ^ and prosperity '■ under Protection, 102 America. See United States. American Economist on Dingley Tariff, 154 on German Agreement, 151 on Protection, 154. 158 American School, the, 34 Anti-Corn Law^ League, object of , 22 Anti-patriotic bias, r28 Applied economics. 3 Asquith on Free Trade, 4. 131 on Canadian preferential tariffs, 131 Assets, our mineral, 108. 17-* Australia, effects of tariffs in, 81 Constitution of, 125 Balance of trade, 17, 45 Bank Acts, 38 Goschen on, 4a renewal of, 40 Bank reserves, 36 drain bf, 77 Baring failure, 41 Bastiat, 5. 54. 168 ideal Free Trade of, 49 on the unforeseen, 54 Bear on agricultural ruin, 26 Belgium, wages in, 86 wheat prices in, 81 Benares Industrial Conference, 138 Bejitham on Ricardo, 31 Berkley on money as wealth, 16 Bias, anti-patriotic, 128 Big and little loaf. 73. 100. 171 Birrell on the 'Economic Law,' 4 Bismarck ots economists, t on effect of tariffs, S7» >43 on incidence of import duties, 57 Blaine's conspiracy, 134 Board of Trade, 108 Btilero, 16 Bonamy Price on Mill, 10 on money, 37 Bounties on corn, 67 Bourne on balance of trade, 4a Bradford woollen trade, 108 Bread, German black, 14^, 145 price of, 76 price of, in France, 146 Brentano, 10 Bribery, Parliamentary, 14a Bright, John, 23 animosity of, to landlords, 23 on depression of woollen trade, 107 Britain, ruin of, 31 selfish policy of, 48 wages in, 86 Britain, Greater, 128 British administration in India, 141 Empire, consolidation of, 122 * British Jugernath,' i68 Brougham, Lord, on stifling foreign manufactures, 48 Burrows on anti-patriotic bias, 128 Butt on the Encumbered Estates Act, 119 Butter, importation of, no Cairnes on Mill, 10 on American wages, 153 Californian gold discoveries, 117 Campagna, decay of, 99 Canada, annexation intrigues in, 134 condition of^ 166 Constitution of, 122 under Free Trade and Pro- tection, 132 Capital, leakage of, 44, 113 taxation of, 89, 97 Cardinal Manning on depression of trade, 107 Carey, 34, 35 on effect of Protection, 152 Carnegie on progress of nations, 167 Cattle, free importation of, 28 decrease in number of, 108 Caucus, 123 Challenge to Cobden Club, 55 Chamberlain. Birm-ingham speech, ,53 on disruption of the Empire, 136 on taxed and untaxed loaf, 74 Cheese, importation of, no Chjematists, 30 Clay on trade depression, 148, 149 Cliffe, Leslie. 3, 5, 16 Coal in India, 137 trade depression, 108 Coasting trade Of the United Staters, 155 Cobden, on prosperity in the forties, 104 prophecies of, 157 Cobden Club, challenged, $$ constitution of, 48, 56 criticisms by, 69 Cobdenism, Adam Smith and, 27 CoIbert*!5 system, 16, 147, 155 Colonial Conference, 124, 129 131 Federation, 125 policj^ oi the future, 123 system, 121 Colonies, self-governing. 124 174 INDEX Cotwell on Adam Smith, ai on discordant views, 8 on the Mercantile System, 14 Commission, Royal, 100, 106, 108 Competition, industrial, 52 unequal, itg Conference, Colonial 124, 129, 131 Conspiracy in Canada. 134 Consumer and producer, sSt 57, i6a Contract, violation of rights of, 113 Contraction of currency, 37 ' Contrat Social,' 18 Cook on Mill, II Corn, bounties on, 67 duties not paid by consumer, 79 prices, 67, 70, 77 proposed duty^ on, 72 Corn Laws, elasticity of, 6g object of, 66 operation of, 69 re-enactment of, 77 repeal of, 72, 78 report of Select Committee on, 67 Cossa on doctrinaires and empiricists, 3 on Mill's concessions to Socialism, 10 on Navigation Laws» 155 Cost of bread. 76 of livings 82, 145 Cotton thread, fall in price of, 62 manufacture in India, 138 Countervailing duties, 29, 163 Currency, action of, 36 expansion and contraction of, 37, 117, 118 influencing prices, 71 Curzon, Lord, on British administra- tion, 142 on Indian capital, 138 on Indian policy, 139 Daily News criticism, 168 poster, 74 Deakin on import duties, 51, 130 Decline of American shipping, 154 Decrease of acreage, 108, 110 in Ireland, 114 Defender on progress in the U.S.A., 153 Definition of faith, 170 of Free Trade, 48 want of, 27 Definitions of different economists., $ Delegates to Germany, 144, 145 tD United Spates, 87 Demand and supply, 17 influences prices, 71, 80 Democratic Manifesto, 35 Dependence on foreign supplies, 66, 99 DepTessioUi general, 116 of agriculture, 24, 106 of cottpn trade, 107 De Queshay, 6^ 18 Diagram bi big and little loaf, 75 of wheat prices. 78 Differences of etonotnists, 5 Difficulties of political economy, 2, 3 Dingley Tarip. 153 Disaffection in India, 140, 141 Discoveries, gold, 117 Discrimination, want of, 8 Disintegration of the Empire, 124 Distress in the ' Hungry Forties,' 76 in Ireland, 113 relieved by gpld_ discoveries, 117 Dogmatism, economic, 2, 4 Drainage, neglect of, 99 Pumping, 58 175 Duties borne by foreign producer. 58 fall of prices under, 58 incidence of, 51 who pays? $$ Dutt on excise, 139 Economic heresies, 170 pedantry, go, 97 Economics, applieation of definition of, 49 difficulties of, a professors of, 48, 53 science or art of, 5 Economists^ differences of, s dogmatism of, 4 Economy, definition of, 14 Effect of import duties, 58 Elasticity of Corn Laws, 69 Emigration, lai, 173 , Irish, IIS Empire, consolidation of, 123 Employers of labour, taxation of, 8g Employment, 88 afforded by Protection, 6s in Ireland, 114 Encumbered Estates Act, iig Essex, ruin of agriculture in, gg Everett, M.P., on gold discoveries, 118 on yeoman farmers, log Exchange influences price of wheat, 80 Exports and imports, balance erf, 43 Exports,, invisible, 43 Irish, 114 Extravagance, political, ga, 95 Failure of Corn Laws to keep up prices, 66 of Free Trade to keep down prices, 66 Faith, definition of, 170 Fall of prices under import duties, 58, 170 of carpets, &c., 63 of ootton and linen thread, 62 of crockery, 62 of miscellaneous articles, 63 Fawcett on differences of economists, 9 on claims of Free Traders, no Federation, Colonial, 126 of the Empire, 123, 124 Finality, apparent, 9 want of, 6 Finlay on ruin of Greece, 46 Flax, Irish export of, 114 Food imports, 114 prices steady and moderate under Corn Laws, 67 supply, dependence on foreign, 66, . 99, iDo, 101, 171 Foreign investtments, 44, 173 Foreigner, taxatian, gj, 97, 171 ' Forties,' the ' Hungry,* 76 Foxwell on taxation, 8g France, cos.t of living in, 83 condition of, 167 - under Protection. 146 wages in, 86 wheat prices in, 82 Free Trade accepted without in- quiry, 103 and free import, 8, 28, 49 evil effects delayed, 105 exaggerations, no impracticable, 51 not free exchange, 171 real object of, 46 reciprocal, 33 47 in, Sj 176 INDEX Free Trade througKout the Empire, 123 travesty of. 163 what is it? 48 Freight, 43 of corn, 73 Frewen on gold scarcity, 38 Fulfilment of prophecies, 157, 159 German black bread, 144 prosperity, under Protection, 143 school of economics, 32 Germany, comparative progress in, 112 condition of, 166 cost of living in, 83, 145 effects of tariffs in, 81 production of pig- iron in, in under Free Trade and Protection, 14a wages in, 86 Gibbon, * Decline and Fall of the Roman Empire,' loi on food supply, loi Giffen on agricultural losses, 106 on balance of trade, 42 on rents, izo on taxing luxuries. 97 Gladstone on the Bank Act, 41 on Income Tax, gS on wages, 85 pedantic legislation of, 90 Glover on freight, 43 Goderich, Lord, on Free Trade, Gold discoveries, result of, 117 reserves, drain of, 41, 76 scarcity, 38 Great Britain, condition of, 104 cost of articles commonly used cost of food, 82 cost of living, 82 Greece, ruin of, 46, loi Greeley, Horace, on the home market, 35 on trade depression, 148 Griffin, Sir L., on sedition, 127 Griffiths, Sir S., on preferential tariffs, i2g Hauilton, Alexander, on Protection, 34 Hayes on Free Trade policy, Herbert Spencer on taxation, Historical parallel, 99, 165 system of economics, 32 Hoarding, 8, 38 Home competition, 51, 58 interference with Indiaj market, 35 supply of corn. 68 trade, 107 Hume, Adam Smith inspired by, 19 on the best form of taxation, 90 ' Hungry Forties,' 69. 76, 82 Huskisson on Corn Laws, 68. 77 on a free trade under Protection, 34 on Irish wheat supply, 113 HuskiS^n's ' Adiministration of Corn Laws,* 72 Hyndman on peasant proprietorship, 27 Ideal Free Trade of Peel and Bastiat, 45 Imperial Federation, 124 organisation, 124 Import duties, incidence of, 51, 55. 91, 162 Imports and exports, balance of, 42 Impossibility of 'Free Trade through- out the Empire.' 123 Impracticability of Free Trade, 51 Zppidence of import duties, 51 48 140 Income Tax, 92 abolition of. gi, 97 Alison on, 95 Colonial, 98 Gladstone's denunciation of, 96 incidence on working classes, 94 in the United States, 95 India, a dumping ground, 140 capital in, 138 ' for the Indians,' 141 ignorance of, 141 poverty of, 137 resources of, 137 Vamb^ry on, 141 Indirect action of duties, 51, 171 Industrial Congress, 138 supremacy, 101, 172 Industries, coal and iron, 108 Indian, 137 Injustice of Income Tax, 92, 93 Intrigues of United States, 134, 135 Inventions, effects of, 20, 102 Investments abroad, 44 Ireland, anarchy in, 113 decrease in population of, 115 distress in, 117 effect of gold disjsoveries on, 117 emigration from, 121 exports of. 114, 115 increase in population, 113 industries of, 115 Land Acts for. 119 land available in, 115 potato blight in, 116 under Free Trade, 112 wheat supply of, 113 Iron industries, loss in, 108 Iron, production of, in Irrigation in India, 113 Italy, effects of tariffs in, 81 Jefferson on prosperous trade, 148 Jevons on the Ricardo-Mill system, 11 on value, 6 Labour, employers of, 89, 92 Laisser faire, 12, 14, 15, 18, 124 Land Acts, 23, 112, up Land, diminished value of, 108 nationalisation of, 26 out of cultivation, 161 owners, ruin of, 23 Landlords, 22, 24, 26, 120 Laurier, Sir W., on Canadian finance, 134 Lavergne, 26 Lawrence, Sir Joseph, loss of capital, 44 Laws, Navigation, 30, 147, 155 Leakage of capital, 44, 113, 173 Lecky on the American Constitution, 96 on landlords, 120 on taxititfn, 89 Leffingwell oji prote'ctivfe policy, 47, 59 Levasseur 6n cost of living, 85 Linen, expbrt of Irish, 114 thread, fall in price of, 62 List» 7, 8^ 16, Ip, 32 on monopolies, 50 on policy of Great Britain, loi on policy of United Ei'ates, 149 Little Englandism. 127 Littleness of English politics, 123 Living, cost of. 82 Loaf, 'big and little/ 73, 100 Chapiberlain's taxed and untaxed, 74 divergence in weight of the, 74 Low prices, 38 Lowe's economic pedantry, 97 Luxuries, taxation of, go, gi, 93, INDEX 1 03 146 McCaktht on landloida. lao McCultoch on custom duties^ 50 on duties on coroj 7a on economics, 6 on monopolies. 50 Macdonald* Sir J., on reciprocity, 134 Maclvor on freight, 43 McKinley Act, 60, 63 UcKinley on American shipping, 155 on tin-plate industries, 60 Macleod on capital and la>bour, 94 on dififerences of economists, 7 on Ricardo-Mill system, 11, 31. on disturbing influences, 54 Ualthus on wealth, 6 on Ricardo, 31 Manchester School, dogmatism of, 4 ' Uanchesterthum,' 163. 168 Manifesto of the professors, 48, 53 Republican, 35 Manufactures developed by Protection^ in Adam Smith's time, ai Indian, 140 ruined by free import, a8 Margarine, importation of, no Market, Colonial, lafi Home, 35 Indian, 140 Meat, price of in England and France, Mercantile system, 13 fallacies attributed to the, 15, 17 Mercara on the cotton industry, 107 Merim6e on English politics, 123 Michelet on agricultural ruin, 100 on ruin of Greece, loi Mill, 3, 7, 10, 31, 30 31 on countervailing duties, 29, 168, 169 on improved processes of agricul- ture, 71 on Income Tax, ga Mineral wealth of India, 137 Mineral assets, 173 Mischievous effects of the Income Tax, 92 Modern German School, the, la Molinari on rent in Ireland, 115 Monetary crisis, 40, 69 Money, confusion about, 8, 37, export of, 16 the source of wealth, 15, 17 Monopoly, 28, 50 killed by import duties, 58 the aim of Free Trade, 46 Thiers on, 62 Montgr6dien on British progress, 104 Napoleon on economists, 1 National economics, 33 Nationalisation of land, 26 Natural protection, 72, ISO Navigation Act. 29. 147, 155 Neglect of our Colonies, 128 North, Sir Dudley, 16 Object of Free Trade, 46 of the Corn Laws, 66 Old age, provision for, 144 Orders, the three great, 21 Ore. production of iron, iia Organisation, Imperial, 124 Orthodoxy, revolt from, g Palgravb on agricultural losses, 97 Parallel, historical, 99 Party influence in trade, 46 Pauperism, 107, 116, 165 Peasant proprietorship. 26 Pedantic legislation, 90 Pedantry, economic, 97 177 Feel, ideal Free Trade of, 49 yielding to political agitationi 77 Petition against Bank Act, 33 against Free Trade. 117 Petty, Sir W., on the export of money, 16 Physiocrats and Adam Smith. iS Pichon on the protective policy of France, 146 Playfair on the fall of prices, 63 on the McKinley Act, Co, 153 Policy of Great Britain, loa Imperial, 133 selftsh, 47 Political economy, a good servant, t an imperfect instrument, 12 different schools of, 12, 13 difficulties of, 3 extremes of, 13 true, la unfairly discredited, a Politics, littleness of English, 123 Poor, indirect action of taxes on the, Sg, 171 provision for the aged, 144 Population, decrease of Irish, 115 Indian, 137 Potato blight in Ireland, 115 Predictions, 157, 161 Preferential tariffs, 138 Present state of economics, 1 Price, Bonamy, on money, 37 Prices, fall of. under import duties, 58, 60, 6a high under Free Trade, 79 not determined by duties, 81 steady and moderate under Pro- tection, 67 two centuries of wheat, 77 wheat, during the Crimean War, 79 Pringle's report on agriculture, 99 Producer and consumer, 50, 54, 57, 163 Professors' Manifesto, 48, 53 Progress, comparative, iia in economic science, 7 Prohibition confused with Protection, 8, 27, 38 Prophecies, 157. 167 Prosperity in the forties disputed, 104 Protection, American economists on, 3S, 3*5 arguments against, 5a increase of, 157 manufactures created by, 53 misuse of, 51 natural, 73 not prohibition, 133 return to, recommended, 110 from American ship- Protective policy of Great Britain, loa Protests against Bank Act, 38 against Free Trade, 117 QUESNAY, De. 618 Races of India, 141 Rack renting, 115, 119 Railways, effect of, 103 in India, 138 Rebate on re-exports, 6z Reciprocal Free Trade, 33 Registration of corn, 97, 17a Reichstag, Bismarck's speech In, 9| 14a Religions of India. 141 Rent diminution, 95, 109 Rent in Ireland, iif, iso withdrawn ping, iss I7S INDEX Republican Manifesto, 35 Reserves, bank, 36, 43 Restraints, 27 Revenue from taxing luxuries, 91 Revolt from orthodoxy, 9 Ricardo, 5, 6, 30, 31 Ricardo-Mill school, 2, 11 Rickards on systems, 2, 7 Right of contract, violation of, 113 Ritchie's economic pedantry, 97 Roland, Madame, on liberty, i Roman Empire, decay of, 31, 46 Root, Senator, on panada, 134 Roscher on economics, 6, 13, 17, 34 Royal Commissions, 100, 106, loS Ruin of Britain, Rome, and Greece, 31, 46, lOI Say, Jean Baptiste, 5, 20, 32. 33 Louis, 20 School of economics, American, 34 mercantile, 13 modern German, 32 physiocratic. 18 Ricardo-Mill, 32 third, 10 Scotland, pauperism in, 116 Sedition, Griffin on, 127 In India, 141 Seeley on expansion of England, 121 on abandonment of Colonies, 12S Select Committee on corn trade, 66 Senior, 5, 7, 27 on unnecessary taxes, 97 Separation, policy of, 123 Shipping, American, 154 British, 103, iS5, ^S^ Sidgwick, 2, 5. i4» »S on taxation, 89 Silk trade depression. 107 Sismondi, 30, 46, loi Smith, Adam, 19. See also Adam Smith Goldwin, disloyalty of, 134 Samuel, on cotton trade de- pression, 107 • Smithianismus,' 168 Spencer, Herbert, on anti-patriotic bias, 127 on taxation, 89 Spirit, export of Irish, m Statistics of Board of Trade, 108 Steuart, Sir James, 8, i-^, 16 on balance of trade. 17 Subsidies on shipping, 156 Suffolk, depression in, 109 Sullivan on Land Acts, 119 on landlords, 120 Supply, dependence on foreign, 66, 6g, 161, 164 Supply and demand, 71, 80, 171 ' Swadeshi * movement,' 139 Symc, D., on the effect of duties, 59 Tacitus on food supply, 100 Tariff ' compromise,' 149 Tariff, Dingley. iS3 effect of, 58. 59. 80 prohibitory, 82 Morill, 150 Tax, Income, 92, 164 Taxation, 89, 164 direct and indirect, 171 increasing, i73 , _ , , in Germany and England, 146 ruinous, 161 , , „ working classes Suffer by heavy. 89 Theory and practice, 3 Thiers on monopolies, 6a on the decay of England, 147 Thompson on social science, 36 Thornton, 10 Tin-plate industry, 60 Trade, balance of, 17, 4a Board of, toS changed character of British, 163 preferential, 130 state of, in the forties, 104, 105 Transport, effect of changes in, ao, 73, 103, IS9 Treaties, inequitable, 126 True Political Economy, 12 Tupper, Sir Charles, on Canada, 132, 133 on wheat supply, 126 Turgot on taxation, 93 Two centuries of wheat prices, 77 United States, Advance of wages under Protection, 63, 150. 152 comparative progress in, 112 costof articles in common use in, 84 cost of living, 82, 84 Constitution of, 96 distress under Free Trade in, 148, 15a German agreement with, 150, 151 manufacturing industries, 52 outstripping Great Britain, 123, 167 production of iron in, iii prosperity under Protection in, 147. 153 shippings ^ iSS taxation in, 95, 148 under Free Trade and Protection, 147 wages in, 85, 86, 87, 148, 150, 153 Universal Free Trade, 33 Unnecessary taxation, 97 Vambery on India, 141 Vincent, Sir Edgar, on India, 143 Violation of right of contract, 113 Von Treitschke on food supply, loo Vote-catching, 133, 142 Wages, advance of, under Protection, 63, ISO, 152 and employment, 85 effect of gold discoveries on, 117 Gladstone on, 85 increased, 60, 86 in Germany, 86 tin-plate workers', 60 Wealth, definitions of, s money as, 16 of India, 137 taxation of, 89, 90 * Wealth of Nations,' 19, 27 Weavers' Committee report, 114 Welsh tin-plate industry, 60 Wheat acreage, decrease of, 108, 110 Irish, 114 Wheat, Canadian, 126 causes influencing the price of, 71 duties in England, 79 export of Irish, 115 prices and tariffs, 79. 80, 163, 171 prices in France and England, 82, 146 supply. Home, no supply, Irish, 113 Tupper on Canadian, 197 Who pays the duty? 55 Williamson, A., 55, 80 Woollen trade depression, Brighton, 107 Working classes, provision for, 144 suffer by taxation of capital, 89 Yeomen, plight of, 99, 109 ! ZOLLVEHEIN loaf,* 73 ECONOMIC AND FISCAL FACTS AND FALLACIES By Sir Guilford Molesworth, K.C.I.E., Author of 'Our Empire under Protection and Free Trade.' Longmans, Green and Co., 39, Paternoster Row, London, E.G., New York, Bombay and Calcutta. OPINIONS OF THE PRESS. " The strong case for the Unionist is undoubtedly Tariff Reform, the necessity for which was never more completely appreciated than it is at the present moment. Fortunately, just pat to the point comes a bevy of books on the fiscal problem, written in a clear and cogent style, which should be able to convince any fair- minded waverer, who reads them honestly, of the force of the argument for change to which they give expression. By far the best of the list is the able work of Sir Guilford Molesworth, K.C.LE., which forms a compendium of all the authorities on the subject, is most erudite in argument, and most clear in the exposi- tion of facts. This book will lead to a better understanding of the problem at issue than any other published work, and to the hesitating voter our advice would be : ' Buy it and all doubt will cease.' "-^Manchester Courier. " In the present crisis, when the British Government is striving desperately, by heavy inroads upon private capital, to avert that national insolvency which headlong expenditure has rendered so imminent, it would hardly be possible for a thoughtful person to spend three shillings and sixpence more profitably than in the purchase of Sir Guilford Molesworth's ' Economic and Fiscal Facts and Fallacies.' In perfectly temperate and unemotional language the author arraigns, one by one, the Cobdenite dogmas upon inter- national trade, confronts them with facts establishing their mis- leading character, and explains the dangerous position into which blind acceptance of them has brought the industries and trade of the United Kingdom. Take, for example, the commonest and most plausible objection against import duties, whether the object be for revenue or protection — namely, that they would raise prices against the consumer. Sir Suilford disposes of this fallacy by extracts from official returns showing the effect of the McKinley tariff of 1891 upon prices in the United States. The committee appointed by tlie American Senate to inquire into the matter reported that in twenty-eight months the retail prices of 214 articles of common consumption had declined 64 per cent., while wages had risen 75 per cent. This, of course, was owing to the stimulus given by a protective duty to native production. . . . Sir Guilford Molesworth has performed a truly patriotic service in preparing this little volume, which ought to find its way into every village reading-room in the realm before the General Election." — Pall Mall Gazette. " Sir Guilford Molesworth is among the most vigorous of Tariff Reform advocates. For something like a quarter of a century he has been studying and writing on economic subjects, and has made himself intimately acquainted with the works of the leading ex- 179 i8o OPINIONS OF THE PRESS ponents of orthodox and unorthodox views. In his new book he gathers together the results of his reading and thinking so as to provide a veritable treasury of arguments against our present fiscal system. As for the contention that import duties fall wholly on the consumer, Sir G. Molesworth cites cases in which the imposi- tion or increase of a duty has actually been followed by a lowering of prices. The reason is that in practice new factors of production and competition arise which ' theory ' had left out of account. The author puts the matter in a few lucid sentences. When a duty first comes in force the rush of foreign producers to get in their goods depresses prices, and the fall is made per- manent by development and competition in the home market. ' The home manufacturers, being protected from wholesale dumping of surplus goods, are in a position to carry on their industry on a more satisfactory footing than before. The foreign producer must sell his surplus produce, and the import duty is generally borne by him. The revenue brought in from the import duties — if the import duty be general and not partial — saves direct taxation, and the home producer is thus enabled to produce at lower rates than when heavily taxed.' Of course, all these factors may not operate together ; but one or other of them will — to the undoing of the theory that a duty always means dearer living. . . . We have quoted only a few sample passages from a book which is packed with facts and reasonings which Cobdenites will find it hard to gainsay." — Bristol Times. " Sir G. Molesworth 's book is a well-furnished store of facts and arguments on tariff questions. He shows how the followers of the Manchester school have misused and misapplied the truths of political economy, and puts on a basis of logic and common sense the claim of tariff reformers that the fiscal policy of this country calls for revision in the interests of the whole community. He contends that Free Trade as applied to our present fiscal policy is a misnomer. ' It is not the Free Trade of Adam Smith, neither is it the "Libre Echange" of the French economists. It is not free exchange in any sense of the word. It is a one- sided arrangement, taxing British ratepayers for the maintenance of our markets, into which the foreign producer is free to enter. Practically it amounts to a bounty for the foreigner, which places our countrymen in a disadvantageous position when competing with him." — Nottingham Guardiam. " Sir Guilford Molesworth needs no introduction to Tariff Reformers as one of the ablest among the pioneers of the move- ment, and one of its most ardent present-day champions. His latest work, which has just made its timely appearance, bearing the above title, will be welcomed by all who are acquainted with his mastery of facts and figures, and his clear and convincing reasoning. The book contains a great wealth of valuable facts relating to almost every subject bearing on the fiscal question. Amongst the subjects dealt with in its Instructive pages are agri- culture, land nationalisation, Cobdenism, the action of currency, OPINIONS OF tHfi fR£SS i8i tariffs, corn laws, taxation, wages, employment, the cost of living, preference, and Imperial Federation. It exposes the fallacies of the ' Manchester School,' and shows how its disciples misuse the truths of political economy. It demolishes the fiction of the ' big and little loaf,' the bogey of the ' Hungry Forties,' and the Cobdenite doctrine that all imports of goods are paid for by exports of goods. It refutes the false claim of Free Trade to have created the commercial and industrial supremacy of Great Britain, and disputes the ground upon which the 14 Professors of Economies based their manifesto. This book, notwithstanding its somewhat formidable title, is written in a popular and attractive style, with a total absence of anything approaching pedantry, and will be found interesting even by those who look upon political economy as a ' dismal science.' " Tariff Reiorm League Monthly Notes. " Sir Guilford Molesworth gives us a work which contains a searching criticism of the Free Trade theory, and deserves the attention of Tariff Reformers. It is written in a clear attractive style, and will be found to contain much of permanent value. Sir Guilford Molesworth vigorously attacks the Free Trade assertion that all import duties are paid by the consumer. ... A par- ticularly telling document produced by Sir Guilford in this contro- versy is a comparison of prices in the United States before and after the McKinley Tariff. This shows that prices were not raised, but actually lowered by the high import duties ; and those who talk nonsense about the ' hungry forties,' are admirably answered by his comparison with the cost of the principal articles of food consumed in a week by a working-class family in 1844 and 1909, the cost being 12s. 4d. under Protection and 155. under Free Trade." — Daily Mail. " Those who are acquainted with the works of Sir Guilford Molesworth on the Tariff question, and his readers are many, are aware of the solid, practical and valuable nature of his writings. The above-mentioned volume which he has just issued reviews the tenets of the various schools of political economy. It exposes the extrava- gant claims to infallibility of the Manchester School. It proves conclusively that the ' Free Trade ' of that School is not the ' Free Trade' referred to by Adam Smith, nor is it the 'Libre Echange ' of French economists. . . . The ' terminological in- exactitude ' of the ' hungry forties ' has been refuted, and the whole book is replete with valuable statistics and arguments for the advocate of Tariff Reform, and ought to be widely circulated and carefully perused. ... He adduces facts in rich variety, which completely demolish the absurd economic doctrines of the Manchester School. The book is a rich treasury of good things. We hope that it will enjoy the very extensive circulation that it so well deserves." — British and Tariff Reform Journal. " A refutation of the Manchester School." — Pall Mall Gazette. " Full of good sense, shewing that Free Traders ' have clung too slavishly to the letter rather than to the spirit of the old writers.' " — St. James's Gazette, i82 OPINIONS OF THE PRESS " Sir Guilford Molesworth has tor more than a quarter of a century attacked Free Trade in books, pamphlets, letters to news- papers, and speeches, and he here presents his views in connected form." — Times. " The object of the book is ' to expose the manner in which the followers of the " Manchester School " of economics have misused and misapplied the valuable truths of political economy and to protest against the elevation of their fiscal tenets to a species of religion.' " — Morning Post. " The principles which animate British Free Traders to-day are based on assumptions which are absolutely contradicted by experi- ence and by fact, as is conclusively proved by numerous examples given in this interesting book. Sir Guilford- Molesworth's style is clear, his examples are apt, and his arguments are convincing. ' Economic and Fiscal Facts and Fallacies ' is a very useful con- tribution to the literature of this great subject." — Referee. " Sir Guilford Molesworth has already made some notable con- tributions to the literature of this controversy. His new book sums up and restates the older ones in a concise, pointed, and well-stocked volume that cannot but prove serviceable, not only to partisans interested to find arguments against the Manchester School, but also to anyone who wished to understand how it is that in substance the older political economy may mislead when its principles are applied to an industrial civilisation." — Scotsman. " The writer of this clever and stimulating book falls foul of the Manchester School of political economists, who have misused and misapplied valuable truths, and elevated their fallacies into dogmas. Sir Guilford Molesworth carries the war into the enemy's camp. He shows that the modern free traders have mis- used and misunderstood their authorities. . . Sir Guilford states experience has proved that an import duty, if moderate and of a competitive character, is paid by the foreign producer, or by his agent, not by the consumer, and that it does not increase the cost of the artfcle taxed. This conclusion the author clearly demonstrates, and his appeal to experience is much more convinc- ing than all the abstract theories of the so-called Free Trade School." — Newcastle Journal. " The author of this remarkable book is to be congratulated on the well-arranged facts and convincing manner in which he points out the fallacy of the tenets of so-called Free Traders of the Man- chester School. Many of the arguments are fresh, and it is decidedly helpful to have the opinions, for and against, as expressed by political economists of all shades and nationality, placed before one in such a concise manner. The facts, too, are well authenti- cated. The book is thoroughly interesting, and will well repay the thoughtful study of all, for all must be interested in this vital question ; but I will go further and say it will make an admirable text book for the workers in the cause of Tarjff Reform and Pro- tection, — with such facts as are to be found in this book, a worker for fiscal reform would fight with additional confidence being fully armed." — West Kent Advertiser. ;.\ : ■■