PRICK SIXPENCE. | POPULAR FALLACIES REGARDING | TRADE AND FOREIGN: DUTIES: “BEING THE _" SOPHISMES ECOWOMIQUES ” ‘4 _ FREDERIC BASTIAT. | ADAPTED TO THE PRESENT TIME | he , BY op. R. PEARCE EDGCUMBE. _ FOURTH EDITION, REVISED. 4 With a New Preface. CASSELL & COMPANY, Limited: att apa PARIS & MELBOURNE. _ 1893. THE UNIVERSITY | OF ILLINOIS LIBRARY Dione B29sEe4 Return this book on or before the Latest Date stamped below. University of Illinois Library LiRnP* L161—H41 - miler 7 ey ise = POPULAR FALLACIES TRADE AND FOREIGN DUTIES: Bene THE, . TY Pat et ibe Liar ss “ SOPHISMES ECONOMIQUES” BREDERICSBASTIAT, Late Member of the Institute of France. ADAPTED TO THE PRESENT//TIME BY pee PLARCH eH DGCUMBE). LID: FOURTH EDITION, REVISED, With a New Preface. y sa Sy} & ef: PASSE EL ss COMPANY, ~-CimMitep: LONDON, PARIS & MELBOURNE, false one requires constant bolstering, and every Regie has ‘bis a ce et Y Ste _ WALKER’S eles pee No 16. So : \1$ Wedricls 29 Jan wn AS he AD ow At Ca aey, q . Lon CS Orne ECONGIES:: CHAPTER ‘I. FREE TRADE AND FAIR TRADE: Propositions of the Fair Trade Mani- festo—Protection to National Labour—One-sided Free Trade— Retaliatory Duties—A Bund with the Colonies—Incomplete Truths —The Broken Window ... ete re ae CHAPTER II. ABUNDANCE AND SCARCITY: Over-production—Flooding our Mar- kets—Man as a Producer and Man as a Consumer—Man as a Solitary Animal—Effect of Exchange on the Interests of Producers —The Fallacy that ‘‘ High Prices make mat Wages ”—Over- - production as a Remedy pad 4 +e ove CAS Dd 8 a i OBSTACLE—OBJEcT : Natural Obstacles—Division of Labour allots each Obstacle to a Different Class of Men-——Physician, &c. ae CHAPTER-LV. EFFORT—RESULT : Effort does not Measure Wealth—Inconsistency of Individuals—Labour does not Constitute Riches CHAPTER V. To EQUALISE THE CONDITIONS OF PRODUCTION: The Present State of Manufactures and of Agriculture—A Handicap Race—The Reason why Countries Exchange Productions—Capitalists Leaving the Country—Commerce in 1842—Agriculture in 1831-—Oranges —Import Duties do not Equalise the Conditions of Production— The Least Favoured Country has most to Gain by Exchange—Im- provementsin Machinery—The Saw—The Plough—Water—Sugar —Coffee—Exchange is the Barter of Equal Amounts of Labour.. 300 GZ aQ) PAGE 12° 18 2c to Lon CONTENTS. PAG? CHAPTER VI. OvuR PRODUCTIONS ARE BURDENED WITH TAXES: Tobacco and Spirits, Fiscal Taxes—Justice and Police—Roads, Bridges, and Schools—Tin— Everybody cannot be Protected—The most Heavily Taxed Country should be the First to Open her Ports—Local and National Taxation of England, Europe, &c. .. CHAPTERTVIE IMPORTS AND Exports; Alarm of Fair Traders—Marching to Ruin —Profit and Loss in Traders’ Account Books—Mr. Smith’s Experi- ence—An Easy Method of Doubling our Capital—Imports and Exports of Bullion and Foreign Bonds—Imports and Exports in 1873—How does Capital ge¢ Abroad ?—Profit on Coal Sent to India in 1880—Import and Export Tables and Indirect Routes .,. CHAPTER WILE PETITION OF THE TALLOW-CHANDLERS, LAMP-MAKERS, &C.: Fogs in London—Birmingham Buckle-makers and Shoe-ties CHAPTERSLA: DIFFERENTIAL AND COUNTERVAILING DutTiEs: The French Hus- bandman and the Belgian and English Woollen Manufacturers— On whom Fall the Duties on Foreign Goods—Salt sent to Russia— Differential Duties in Favour of the Colonies—Such Existed on Sugar in 1845—The advantage to England of offering an Open Market—Foreign Sugar Bounties and Countervailing Duties CHAPTER XS RECIPROCITY : Dulltown and Brisktown, a Fable for Fair Traders ... CHAPTER oa; WILL RETALIATORY DUTIES RAISE THE RATE OF WAGES? : Abundance, not Price, is the Test of Well-being—The Fallacies of High Prices—Wheat at 40s. and at 30s. a Quarter—Wages Depend upon the Demand—The Farmer and his Son—The Result of Pro- ducing Everything at Home—The Fair Trade Manifesto and Adam Smith—Dr. Franklin’s Illustration ... Py a CHAPTER XII, THEORY AND PRACTICE: Superior Wisdom of Foreign Countries— Making Things at Home in order to Employ Labour—Universal Experience against the Practice—Every one is Practically a Sound Economist 33 42 44 49 SI CONTENTS. PAGH CHAPTER XIII. KeEciprRocity AGAIN: Mr. Ecroyd considers that the English Work- man’s Employment is being taken from him—What can a Man Take Out of National Circulation, and What Out of General Circula- tion ?—Sir E. Sullivan would Reduce our Purchases from Foreigners in order to Cause an Increased Employment of National Latour— M. Lecocq’s Boots—The More we Buy the More we Sell—Railways and Electricity—The Juggle of Money—It is a Medium—The Effect of Retaliatory Duties—Their Injury to the Consumer—Yar- mouth Bloaters—The Taxation of so-called Luxuries—Protection in Victoria and Germany—Protection in 1840 ‘fc “oe 5o GHAPTER! XPV. **No sucH THINGS AS FIXED PRINCIPLES: ” There is a Natural Law of Exchanges—The Provisioning of London—‘‘ Exceptions to every Rule’’—This there cannot be in Free Trade ... pe CHAPTER XV. NATIONAL INDEPENDENCE: If we Depend on Foreign Countries for Food, what shall we do in Time of War ?—True Reciprocity— Interest Antagonistic to War—The Bugbear of our Dependence upon Foreigners—Grain Imports in 1809-10o—The Troops of Napoleon, how Clad and Shod—Arguments against Foreign Produce equally Efficacious against Machinery—Most Machinery co-exists with most Employment—A Machine Reducing the Cost of Hats, its Effect ae as et es eee OO CHAPTER XVI. RAw MATERIALS: Better to Import Raw Materials than Manufactured Goods—This Fallacy Wide-spread—The English Market to be Reserved for Natural Labour— Labour alone is the Cause of Value —A Ton of Iron and a Ton of Watch-springs—Duties on Raw Materials might Arouse the Shipping Interest--M. Lecocq Again —It is not more Advantageous to Tax Manufactured Goods than Raw Materials... 4: a es Py eee f| CHAPTER XVII. Merapuors: ‘‘ Invaded” by Foreign Producers—*“ Flooded” with Foreign Goods—‘‘ Inundated” with Foreign Produce.., ae ee) PREFACE TO THE FOURTH EDITION. ELEVEN years have elapsed since the first edition of this little book was published. At that time there was a stirring of the dry bones of Protection in many of the manufacturing districts, caused mainly by the reaction which set in after the artificial stimulus given to trade—by the concentration of the energies of France and Germany upon their great conflict— had died away. At the present time the cry for Protection, changed as to the lips which give utterance to it, but un- changed in its nature and in its principles, comes from the agricultural portion of the community, some of whom would seek, by duties levied on imported produce, to shelter them- selves against bad seasons and low prices, forgetful that the distress in the agricultural districts was far greater during the years immediately preceding the repeal of the Corn Laws than it is to-day. It seems almost useless to endeavour to get the English farmer, who is casting longing eyes in the direction of Pro- tection, to turn his attention to other measures, as being better calculated to give him that relief which he seeks ; for even if it be brought to his notice that the leaders of the Conservative party discountenance any return to protective duties, this carries no conviction to his mind that his hopes are illusory, for, as he not untruly says, the Conservative leaders have changed their opinions with marked rapidity as to free edu- cation and other matters, and why should they not change their views concerning a duty on corn? So, instead of bracing himself to meet altered circumstances by an altered systern of husbandry, entrenched, as it would need to be entrenched, by a strong Agricultural Holdings Act, multitudes of farmers still seek, by hook or by crook, to return to the days of dear corn. In order to render such a programme in any degree palatable to the agricultural labourer, the farmers sweeten it to him, by holding out the specious prospect of higher wages. A il PREFACE. How far this is likely to result from dear bread is best known to those who remember the condition of the agricultural _ labourer in the old days of Protection. His wages were then less than they are now, while the price of almost everything he needed was double or treble what it is to-day. In those “sood old times” life was shorter, disease more rife, and the conveniences and comforts of life fewer and more precarious —for the working man—than they now are. A calculation has been made, showing that the agricultural labourer can buy to-day (thanks to the Liberal party) as much bread, tea, sugar, salt, currants, cocoa, cheese and bacon for 3s. 8d. as he could buy for ros. 2d. fifty years ago. In 1812 and 1813, when wheat was from 45 to £6 a quarter, many of the agricultural labourers were actually standing idle for want of work, as a consequence of those em- ployed doing extra work, in order to earn sufficient wages to keep themselves and their families from want. (See Porter's . “Progress of the Nation,” c. xiv.) Some Protectionists—Mr. Howard Vincent for example—have even gone so far as to assert that a duty on corn would not increase the price of bread, or, at any rate, not to any appreciable amount. And in proof of this, Mr. Vincent recently stated that in Paris the price of bread was lower than in London, France being a country where protective duties are levied upon corn. Upon inquiry, however, it was found that the price of bread in Paris, so far from being even nearly the same as in London, was nearly double the price of English bread; the English 4lb. loaf selling at from 4d. to 5d., while in France the price of a loaf of the same weight, but of very inferior quality, was 8d. In Italy, a country which also has a protective duty on corn, the price of a 4lb. loaf (December, 1892) varied from 7d. in Milan to g$d. in Rome. Turn back to the tales of the dark days of Protection, in the ’30’s and the’40’s—to Dickens’s ‘‘ Old Curiosity Shop ” and Little Nell and her grandfather frightened by the bread-rioters, in the iron-blast districts of Birmingham. There was but one prospect then for the labouring classes—that of a hard struggle for bare subsistence, from the cradle to the grave. The pro- tective tariff, instead of raising, kept down the rate of wages. (See also, “ What Protection does for the Farmer and Labourer,” by I. S. Leadam. Cobden Club.) PREFACE, : Ui In spite of the fall which has taken place in recent years in rents, it is probable that even now as much money is paid away by the farmers in rent as they pay away in labour. A recent parliamentary return shows that on six average farms the amount paid in wages in one year amounted to £2,417, while the amount paid in rent, for the same six farms during the same period, was £3,068. On six other farms, the same return shows that the gross amount paid in wages for one year was £3,548, while the amount paid for rent, rates, taxes, and tithes, in respect of the same -six farms, was £4,661. More- over, it is doubtful whether the fall which has taken place in rents is by any means as considerable as is generally supposed ; for, while rents have fallen, gold—which is the measure of value of rents—has unquestionably risen. And if the estimate be accurate that gold has appreciated 35 per cent. in the last twenty-five years, then a large portion of the fall which has taken place in rents during the same period has been merely a complementary fall, of a nominal rather than of a real character. So far as the English tenant-farmer is individually con: cerned, the enhancement of the price of agricultural produce by duties upon imports, would unquestionably be extremely pleasant ; but equally pleasant would be a bonus paid to him by the State for every quarter of wheat he raised and every head of stock he brought to market. In either case, however, - the community would have to bear the cost of the increased return to the farmer. For, in the first case, all consumers would have to pay more for their food ; and in the alternative, they would have to bear increased taxation, in order to provide the funds requisite for paying bonuses to the agriculturists. For, when an artificial price is paid for bread and meat, the money to pay that extra price can only come out of the pockets of the rest of the community; can indeed be re- garded as hardly other than a form of charitable aid, levied upon the community at large for the benefit, in the first place, of the farmers, who are to be saved thereby from the trouble of readjusting their methods of husbandry ; and in the second place of the landlords, who are to be relieved thereby from all fears as to any further fall in rents. As the appeal for Protection for the agricultural interest would not receive much support from the public were it laid before A 2 iV PREFACE. them in this naked and repulsive form, the dose is generally presented to them with the attractive gilding of ‘ patriotism.” And the form it takes is, that the home producer needs en- couragement, and that purchases should rather be made from him than from the foreigner, even at some expense to the rest ofthe community. “ Patriotism,” writes Sir E. Sullivan, “recog- nises the paramount responsibility of every Government to look after the interests of its own workers. If the surplus products of the whole world are admitted to our markets duty free, at a price lower than we can produce them, how are we to live?” The proposition Sir E. Sullivan here lays down is to the effect that, by purchasing of the foreigner, we deprive our countrymen of employment, and that such action is unpatriotic. The mere statement that it is desirable to employ the home producer in preference to the foreigner, strikes a sympathetic chord at once, and seems at the first blush to be so entirely fair as to be almost unanswerable. Yet this proposition, simple and reasonable as it appears, contains in it the most monstrous fallacy—indeed, the grect fallacy which permeates the whole protectionist movement. Let us for one moment examine this argument of Sir E. Sullivan’s: By the admission of foreign produce we employ the foreign workman. This is ¢hat which is seen. ‘The employ- ment of the foreign workman causes the investment of capital in foreign manufactures. This.is again that which ts seen. Now, everyone knows that the employment of English work- men and the investment of capital in English manufactures is necessary for the well-being of the community ; but the state- ment that it is desirable to employ English workmen in pre- ference to purchasing of foreign producers is intended to lead people, and does lead people, to believe that by the purchase of foreign goods, and the consequent employment of foreign labour, a corresponding withdrawal of employment from English workmen and manufacturers of necessity follows. 7 zs not seen that for every shilling expended by us upon foreign goods, an equivalent amount must be spent by the foreigner upon English goods. J¢ zs not seen that whether we buy English or foreign goods the effect upon the English labour market is precisely the same, the only difference being that instead of the English labourer being called upon to grow (say) corn, which we buy of the United States, he is employed PREFACE. v to manufacture (say) hardware, which is sent to China to pay for the tea which China sends to the United States. J¢ zs not seen that if we were to refuse to purchase foreign produce under the impression that we were thereby benefiting the English labourer, foreigners would be unable to purchase as many goods of us as formerly, for they would not have the means of paying us. So that the only result of our ‘“‘patriotic” action would be to throw out of employment thousands of workmen at present engaged in manufacturing goods for foreign markets, with the result of uselessly transferring their labour to the manufacture of produce which we now import far cheaper from abroad. J¢ zs mot seen that we purchase foreign produce, and the foreigner purchases English goods, because in each case they are in some way produced under more favourable conditions, and so more cheaply than they can be at home. ‘The shifting of the place of production or \ manufacture would therefore mean an increase in the price. ¢ And an increase in the price always results in a lessened { consumption, and would accordingly, so far from increasing, / actually lessen the demand for English labour. (See especially C. Xxili.) The fallacy that the purchase of foreign goods causes loss of employment to the English labourer owes some of its vitality to the fact that, although all trade is barter, exchange is carried on through the medium of money. It is common enough to hear it said, ““I admit that if we paid for foreign goods with English goods, it would not matter whether we purchased foreign or English goods for our own use, for if we did not employ the English workman to work for ourselves, we should be employing him to manufacture the goods we sent in payment for those we import; but we do not pay for foreign goods with English goods, we pay for foreign goods in money —that is, in gold.” Examine this statement, that we pay in “money,” and see whether it makes any difference. In the first place, zs 2¢ true ? Accurate returns are kept of all the gold imported into, and exported from, England every year, and a comparison of these returns shows that on the average, very considerably more gold is imported into England than is exported. (Seep. 40.) We can only draw one conclusion from this, and that is that England does not pay for foreign goods with money, but with vi PREFACE. English goods—that is, with English labour. In the second place, let us assume that England does pay certain countries for their goods in gold. What then? J¢ zs seen that the foreigner receives gold for his labour instead of the English workman. /¢ ts not seen that in order to procure this gold to pay the foreign workman, English labour has to be em- ployed on various manufactures to be exported to Australia, California, or the Transvaal, in order to obtain the gold. English labour must therefore be employed to an equal amount, whether the produce of this labour be sent in direct exchange for the foreign goods we purchase, or whether we ~ send it to the gold-producing countries in exchange for gold, and then transmit the gold in payment for our foreign _ purchases. If we forbear to purchase foreign goods in order to pur- ( chase goods of English make, we merely transfer employment from one set of English workmen to another, and instead of causing more English labour to be employed, we shall in the aggregate employ rather less in consequence of enhanced prices. All changes in the demand for labour cause hardship to those who are thrown out of employment, but the Fair Traders would wantonly inflict this hardship upon thousands ~ of workmen under the mistaken idea that they were thereby doing a service to English labour. There is no Free Trader, I imagine, who does not deplore quite as much as Sir E. Sullivan does, that English capital should go abroad to be invested by millions, too often in wasteful channels, while agriculture at home is languishing for want of it. But, when we come to consider the remedy for this state of things, we are compelled to part company with Sir E. Sullivan, Mr. James Lowther, and the rest of the pro- tectionists.. We cannot approve of a system which seeks to bolster up one occupation at the expense of the other workers in the community. No. If capital is to be attracted to the land—and undoubtedly the land does need capital-——it must be so brought about, that capital shall flow to the land naturally, and not as a consequence of giving a purely artificial stimulus to farming. Capital will flow quickly enough to the land when > farming is an occupation unshackled and secure. But capital will not flow to the land as long as the tenant’s claim for com- pensation for his improvements lapses by effluxion of time. PREFACE. Vii What would those who deposit money in banks say if, when they came for their money, the bankers maintained that, as they had received their interest regularly for a certain number of years, the depositors ought to consider themselves fully compensated, and were not entitled to any return of their principal? Yet this is, in a large degree, the system on which tenant-farming is carried on in this country. There is no Free Trader who would not heartily welcome legislative se- curity given to tenants, to secure to them the improved value given to the land by their skill and capital. The levying of | duties however, upon foreign produce, for the benefit of agriculture, not at the expense of the foreigner but of the home consumer (see p. 45), is only a system of giving an artificial prosperity to one portion of the community at the cost of the other members of it. There are means in plenty far better adapted to attract capital to the land. And, be it remembered, the application of capital to the land means the application of labour to the land, for capital cannot be applied to land except by means of labour. The newly-arrived colonist in many a distant land can produce in abundance, the moment he sets foot upon the soil, the more simple products of grain and meat; and, with the improved means of communication, brought about by the opening up of far countries by means of railways, and by nae increased carrying capacity of ocean-going ships, such products | are placed upon our markets, in large quantity, with regu- larity, and moderate in price. It is therefore, for the home ‘ farmer to turn his attention rather to the production of foods of slower growth and of a more costly nature; but this is im- possible so long as the law provides no adequate protection to the tenant for his outlay. The existing English law regulating the relationship of landlord and tenant simply puts a premium upon indifferent farming. But it is not the aim of this little book to do more than buoy certain sunken rocks and shoals, and by giving warning of some of the dangers to be avoided, lead only indirectly, as it were, to the true courses to be pursued in trade and agriculture. In the following pages I have been able to reduce ‘the *‘ Sophismes ” of Frédéric Bastiat to nearly half their original size, the present phase of the controversy rendering much that was first written unnecessary. I have given the illustrations Viil PREFACE, an English form, by changing francs to pounds, French names to English, and where they were somewhat out of date I have altered them to suit the present time. The new passages which I have introduced—about a quarter of the whole is new —are included within brackets [ ]. I have made use of the English edition brought out in 1846 by the late Mr. Porter, the well-known author of the ‘“ Progress of the Nation.” EK. R. P. E. SOMERLEIGH COURT, DORCHESTER, february 22nd, 1893. EUPULAR PALLACIES REGARDING TRADE AND FOREIGN. DUTIES. SSS eed CHAPTER I. FREE TRADE—FAIR TRADE. [A LEAGUE has been formed “ for the preservation of our home industries and the protection of our national labour against unfair foreign competition.” The manifesto from which these words are taken goes on to say, ‘‘ The policy of one-sided trade which has so long been maintained in this country is enabling foreigners to gain the monopoly of our markets, to displace British labour, and to deprive British workmen of their pur- chasing power—z.e., of their wages.” The members of this League—who, though they use the word Protection, object to be called ‘ Protectionists,” prefer- ring to be known as “ Fair Traders,”—deny our right to use the words Free Trade as descriptive of the system of trade at present. existing in this country. They say that Free Trade only exists. between us and those countries which impose no taxes upon - our productions—that ours is only a free importation system, a one-sided Free Trade, for foreign countries tax our productions. while we do not tax theirs, and that from this one-sided system we are suffering loss. ‘Isolated Free Trade,” says the mani- festo already mentioned, “ is ruining the country.” The Fair Trade manifesto further says that “ foreign nations do not tax their consumers by taxing British com- modities ;” from which we are meant to infer that if we taxed foreign commodities we should not be taxing the British consumer 10 TRADE FALLACIES. The Fair Trade League, while anxious to protect English labour against unfair foreign competition, declare that they are convinced Free Traders, and that their object is to obtain real Free Trade—viz., the abolition of the taxes levied by foreign countries upon our productions. This accomplished, the League would have no objection to our levying none in return. We are to bring this about by marshalling ourselves under the banner of reciprocity and “holding out threats of retaliatory measures, which, if necessary, are to be strictly enforced.” I do not know whether any one seriously believes that our return to Protection would cause foreign countries to adopt Free Trade. I should have thought that if one country protecting against another country could have led to this result, the number of countries at present levying protective duties would surely have | been sufficient to effect it without adding one more to the number. The League further proposes that there should be a con- federation of the mother country and the colonies, for the purpose of carrying out within the empire the principles of absolute Free Trade. Many other propositions are made in the manifesto of the League, but these are sufficient for our present purpose. The aim of this little treatise is to show that every one of these propositions involves a fallacy—that is to say, involves and conceals assumptions on matters of fact which are entirely erroneous. Every person must be considered in two lights—as .a_ producer and as a consumer. ‘The Fair Traders consider only the producer. I intend to prove that the levying of taxes upon imports, which the Fair Traders propose, would not lead to the employment of one single additional labourer or work- man, nor would it raise the wages of labour one penny, while it would cause an increase in the cost of articles of consump- tion. As every one, without exception, is a consumer, it would _ be injurious to all.. The strength of the Fair Trade movement is due partly, no doubt, to selfish interest, but it rests mostly upon error— upon incomplete truths. Let me illustrate what I mean. It is common enough to hear it said of the extravagance of a spendthrift that ‘‘it is all good for trade.” Such reot has this fallacy taken, that Mandeville has enunciated the paradox that “ private vices are public benefits.” The strength of this THE BROKEN WINDOW. Ij fallacy lies in its setting forth an incomplete truth; the good is visible to the external eye, the evil can only be perceived by the mind. |] The clumsy son of your excellent grocer breaks the large pane of glass in his father’s shop. One of the spectators con- soles the unfortunate grocer by saying “It is an ill-wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?” This contains an entire theory. It costs 45 to repair the _ damage, and you therefore say it brings £5 to the glazier’s trade—it encourages that trade to that amount. I grant it: you reason justly. The glazier comes, repairs the window, rubs his hands, and blesses the careless son. All this is that which ZS Seen. Lt is not seen that as our shopkeeper has spent £5 upon one thing he cannot spend it upon another. J¢ zs not seen that if he had not the window to replace he would have purchased some clothes, or books, or furniture, or taken his family for an outing, or invested the money in his trade. The window is broken, and the glazier’s trade is en- couraged: ¢hat is seen. Had the window not been broken, the tailor’s trade (or some other) would have been encouraged to the amount of 45: this is that which ts not seen. The sum total, then, of industry zz general, of national labour, is not atfected whether windows are broken or not ; but how about the grocer? He has spent £5 upon the window, and has no more for his money than he had before; only he is poorer by £5. Had the window not been broken, he would have had the enjoyment of some more clothes or ‘something y else, and the window too. Now, as the grocer is part of society, we must come to the conclusion that in making an estimate of its labours and enjoyments it has lost the value of the broken window. [We shall presently see that if we adopt the retaliatory — measures recommended by the Fair Traders, we shall simply transfer a certain amount of labour from the tailor or the bookseller to the glazier ; the community, as represented by the grocer, being the poorer by that amount. | 12 TRADE FALLACIES. CHAPTER aut. SCARCITY V. ABUNDANCE. Wuicu is better—abundance or scarcity ? “¢ What!” you will exclaim, “how can this be made a ques- tion? Is it possible to maintain that scarcity is the foundation of the well-being of men?” Yes, this has been maintained ; it is maintained every day, and I do not hesitate to say that the theery of scarcity is extremely popular. It is advanced in conversation, in newspapers, in books, in Parliament; and although the assertion may appear extravagant, it is neverthe- less true that political economy will have fulfilled its task when it shall have caused the simple proposition—that riches consist in the abundance of things—to be universally accepted. But recently the cry was, “We are suffering from over- production.” Therefore abundance is dreaded. We now hear every day, ‘The foreigner is flooding our markets with his goods.” Therefore we fear abundance. Have not some said, “ Let bread be dear, and agricultural depression will disappear”? But bread can only be dear because it is scarce, therefore these men extol scarcity. How does it happen that abundance appears to be dreaded, and scarcity to be desired? I intend to trace this illusion to its source. It is seen that a man becomes rich in proportion as he draws a greater profit from his work—that is to say, according as he sells at a higher price. He sells at a higher price, in proportion to the rarity—the scarcity—of the kind of product which is the object of his industry. Hence it is concluded that, with regard to him at least, scarcity enriches him. Apply- ing successively this reasoning to all manufacturers and produ- cers, the theory of scarcity is deduced. Hence we pass to the application ; and, in order to favour all classes of producers, dearness is to be artificially excited, the scarcity of everything is to be brought about by prohibition and restriction. The same reasoning may be pursued in the case of abundance. It is observed that when any particular produce abounds, it is sold at a low price ; then the producer gains less. SCARCITY V. ABUNDANCE, 13 If all producers are in the same situation, they are all miserable ; it is then abundance which ruins society. Accordingly, men seek by legislation to oppose abundance. This fallacy obtains all its force from being applied, not to all producers generally, but now to this branch of industry, now to that. The syllogism is not false, but incomplete. Whatever there may be which is ¢vwe in a syllogism is always and necessarily present to the mind. On the other hand, zy- completeness is a negative quality, there are absent da/a essential to the argument, it is very possible, and even very easy, to hold of no account. Man produces in order to consume. He is, at the same time, a producer and a consumer. The reasoning which I have just established considers him only as a producer. Con- sider him as a consumer, and we arrive at an opposite conclu- sion. Might it not in truth be said :— The cheaper he buys the richer is the consumer. Things are bought cheap in proportion to their abundance; then abundance enriches him: and this reasoning extended to all consumers would conduct to the ¢heory of abundance ! It is the imperfectly comprehended notion of exchange which produces these illusions. Sellers desire a dear market, buyers a cheap market. If man were a solitary animal, if he worked exclusively for himself, if he consumed directly the fruit of his own labour—in a word, if he did not exchange, then the theory of scarcity would never have been introduced into the world. It would be too evident that abundance would be advantageous to him, in whatever way it might come to him; whether it were the result of his industry, of ingenious tools, of powerful machinery which he might have invented, or whether he owed it to the fertility of the soil, to the liberality of nature, or even to a mysterious zzvaston of productions which the waves might have brought from other parts and abandoned to his use on the shore. The solitary man, in order to insure a demand for his own labour, would never dream of breaking the instruments which spared it, of neutralising the fertility of the soil, of restoring to the sea the goods which it had borne to him. He would easily comprehend that labour is not an end, but a means ; that it would be absurd to reject the end for fear of injuring the means. He would comprehend that ¢he economy of labour is another name for progress. iA TRADE FALLACIES, But exchange confuses our view of this simple truth. In civilised life, with the separation of occupations which it brings about, the production and consumption of an article are not combined in the same individual. Each is therefore induced to see in his own labour no longer a means but an end. Exchange creates relatively to each article two opposing interests—that of the producer and that of the consumer. Let us take a producer of any description; what is his interest? It consists in these two things: 1st, That the smallest possible number of persons should occupy themselves in the same business as himself; znd, That the greatest possible number should seek for the produce of this kind of labour—competition limited and sale unlimited. What is the interest of the consumer? A large supply and a small demand. One of these two interests must necessarily coincide with the social or general interest, and the other be contrary to it. But which of these should legislation favour as being the expression of the public good, if indeed it ought to favour either? In order to arrive at this knowledge, it is sufficient to inquire what would happen if the Legislature were to seek to. realise the secret desires of manufacturers and producers. In the character of producers, it must be allowed that each of us has anti-social wishes. Are we wool growers? Should we ~ be grieved if there were a murrain affecting all the sheep in the world except ours? TZzhzs zs the theory of scarcity. Are we proprietors of iron-works? We should desire that there was no other iron in the market than that which we brought there, however much the public might be in want of it; and precisely because this want was so urgently felt and so im- perfectly satisfied, we should receive a high price for our own iron. This 7s, again, the theory of scarcity. Are we farmers? We say let bread be dear—that ‘is to say, scarce—and the agriculturist will flourish. Zhzs zs still the theory of scarcity. Do we manufacture silk goods? We desire to sell them at the most advantageous price for us. We would willingly con- sent to the prohibition of all rival manufactures; and if we dare not attempt its realisation, nor even publicly express a wish to do so, we still would endeavour to bring it about by indirect means; for example, by excluding foreign silks, in ‘“HIGH PRICES MAKE HIGH WAGES.” 15 order to diminish the guantity in the market, and so produce a. scarcity. {Are we workmen? We desire the highest price for our labour, and the Fair Traders say, “ Restrict the importation of cheap foreign goods and you will raise wages, for high prices. enable: the employers to pay high wages.” TZhzs zs still the theory of scarcity. If the manufacturer gets higher prices, he will receive a larger sum of money for a given quantity of goods: ¢hzs ts seen. But when goods are dearer not so many are sold, and when fewer goods are sold not so many workmen are employed, and when fewer workmen are employed some must be thrown out of work, and when men are thrown out of work the struggle to obtain employment causes wages to fall. This is that which ts not seen. On the other hand, when prices fall more goods are purchased, and when more goods are pur- chased more workmen are employed, and when there is a demand for workmen wages rise. ‘This is, again, hat which is not seen. . Instead of saying that “high prices make high wages” we should rather say that “flow prices make high wages,” for low prices cause a demand for labour, and a demand for labour makes wages rise. This fallacy about “high prices making high wages” is frequently in the mouths of Fair Traders, who. make use of it when endeavouring to prove that the cruel *“‘ sweating system” is an offspring of Free Trade. So far is this from the truth, that, as we have seen, Free Trade ensures. better wages because of the increased demand for labour which it causes. It is not Free Trade, but the so-called Fair Trade system, which, by raising prices, would reduce the demand for labour and so reduce the rate of wages. It should, however, be borne in mind, that although Free Trade ensures a larger demand for labour than any system of Fair Trade or Protection, nevertheless Free Trade cannot ensure the regular employment of wz/imzted numbers at good wages. Free Trade will provide a larger market for labour than any system of Fair Trade or Protection, yet a large market may be overstocked as surely as a small market, though not so quickly. If early marriages and a reckless increase of the population continue unabated, without due regard to the demand for labour, there is no cure for the evil of low wages. But that Fair Traders, who by a system of restriction would necessarily curtail the demand for labour, should lay the blame % a 36 TRADE FALLACIES, of low wages and the sweating system upon Free Trade, which, on the contrary, has done so much to increase the demand for labour and widen the labour market for the labourer, is a grievous imposition. Yet the popular fallacy that ‘high prices make high wages” enables such misleading statements to gain currency for a time. | We could thus pass under review every branch of industry, and should always find that producers, in so far as they are such, have anti-social views. It follows thence, that if the secret wishes of each producer were realised, the world would rapidly retrograde towards barbarism. The sail would pro- scribe steam, the oar would proscribe the sail, the railway would have to cede the right of transit to the cart, this again to the horse, and the horse to the pedlar. But if we proceed to consider the immediate interest of the consumer, we shall find that it is in perfect harmony with the general interest—with what the well-being of the human race demands. When the buyer presents himself in the market, he desires to find it abundantly provided. That the seasons may be propitious to the gathering in of agricultural produce; that inventions more and more admirable may place within his reach a greater number of articles of necessity and of comfort ; that time and labour may be saved; that distances may vanish ; that the spirit of peace and of justice may allow a diminution in the weight of taxes ; that barriers of every kind may fall—in all this the interest of the consumer runs parallel with the public interest. He can push his secret wishes to the very extreme, without his wishes ceasing to be philanthropic. I supposed just now a Legislature composed of manu- facturers and producers, of which each member would frame as a law his secret wish in the character of producer; and I said that a code emanating from this assembly would be sys. tematised monopoly—the theory of scarcity put in practice. In the same way, a chamber where each would consult -his own interest as consumer would end by systematising liberty, the abolition of all restrictive measures, the overturning of all artificial barriers ; in a word, by the realisation of the theory of abundance. It follows thence: That to consult exclusively the immediate interest of pro- duction, is to consult an anti-social interest. . OVER-PRODUCTION. 17 That to consult exclusively the immediate interest of consumption, is to consult the general interest. As a radical antagonism exists between the seller and the buyer, the producers seek so to frame. the laws (which should be at least neutral) as to make them take the part of the seller against the buyer, of the producer against the consumer—cf dearness against cheapness, of scarcity against abundance. Now I ask, would the prople be better nourished under such laws, because there was /ess bread, meat, and sugar in the country? Would they be better clothed because there was less wool, linen, and cloth? But it is said, if the foreigner zandatcs us with his produce, he will carry away all our money. We shall see later on if this be so. [Before the Fair Traders brought forward their proposals for retaliatory duties, ‘‘ over-production” was pointed to as the especial cause of the prevailing commercial depression. A diminution of production was popular as a remedy with both masters and men. It is plausible, but short-sighted. The natural remedy for a too limited market is extension, by cheapening the article produced ; the artificial remedy is to render it dearer. A lower price extends old markets, and opens new. Every idle day, every holiday, means non-creation of wealth, and every article produced is wanted to exchange. If the cotton spinners are right in reducing production, the col- lier is right in producing less coal, the farmer in producing less food, and so on. Every producer will have created less ex- changeable wealth, will get more for the ove thing he sells, and give more for the ¢wenty he buys. To the workman this is especially injurious, for whereas the capitalist can store up his capital, the labourer cannot store up his labour ; if he does not sell it day by day it is lost. But the theory of “over-production”—one form of the theory of scarcity—has now been dropped, to give place to another form of the same theory—viz., restrictions on the importations of foreign produce. | to 18 TRADE FALLACIES. CHAPTER III. OBSTACLE—OBJECT. MAN is, by nature, entirely destitute of appliances. Between his state of destitution and the satisfying of his wants there exists a multitude of obstacles, which it is the object of labour to sur- mount. It is curious to investigate how and why these obstacles to his well-being have themselves become in his eyes the cawse of his well-being. I require to transport myself a thousand miles. But between the points of departure and arrival, mountains, sea, rivers, morasses, forests—in a word, obstacles interpose ; and to vanquish these obstacles I must use many efforts, or, what is the same thing, I must cause others to use many efforts, and for these I must pay them. It is clear with regard to this case that I should have been in a better condition if these obstacles had not existed. In the journey through life, man requires to assimilate to himself a prodigious quantity of nourishment, to guard himself against the inclemencies of the seasons, and to pre- serve himself against and relieve himself from a crowd of evils. Hunger, thirst, sickness, heat, cold, are so many obstacles set up on his path. In a state of isolation he must combat them all by hunting, fishing, farming, spinning, weaving, building; and it is clear that it would be better for him that these obstacles existed in a less degree, and-still better if they did not exist at all. In society he does not attack personally each of these many obstacles, but others do it for him; and in return he removes one of the obstacles by which his fellow-creatures are surrounded. It is clear also that, considering things in the mass, it is much better for men taken together—for society—that the obstacles be as weak and also as few as possible. But if we investigate the views of men as they have been modified by exchange, it will soon be perceived how they have happened to confound wants with wealth, and the obstacle with the object. } The separation of occupations causes each man, instead of striving on his own account with all the obstacles which sur- round him, to combat only with one; to combat it, not for THE DIVISION OF LABOUR. 19 himself alone, but for the benefit of his fellow men, who in their turn render him a similar service. But it results from this that each man sees the immediate cause of his riches in the obstacle which he has made it his profession to combat upon account of others. The greater this obstacle, the more disposed his fellow men are to remunerate him for having vanquished it; that is to say, the more disposed are they to labour to remove, for his benefit, those obstacles which inconvenience and trouble him. A physician, for example, does not occupy himself in baking his bread, in constructing his instruments, in weaving or making up his clothes. Others do these things for him, and in return he combats the maladies which afflict his patients. The more numerous, intense, and frequent these maladies are, the more willing others are—the more they are forced, indeed -—to work for his personal advantage. In this point of view, illness—that is to say, a general obstacle to the well- being of men—promotes the well-being of an individual. All producers, in what concerns them, reason in the same_ manner. The shipowner draws his profits from the ob- stacle called dzstance; the farmer from that which is called Aunger ; the manufacturer of stuffs from that called cold; the instructor lives upon zgvorance; the physician, as we have said, upon the maladies of men. It is thus quite true that each pro- fession has an immediate interest in the continuation, and even in the aggravation, of the special obstacle which forms the object of its exertions. Seeing this, theorists who base their system upon these individual opinions arrive at the following conclusions: They \ say, what we require is wealth ; labour is wealth. To multiply obstacles is to give an incitement to industry. If we prevent the bringing of sugar from where it is cheaply produced, we create an obstacle to our procuring it. A certain number of our citizens will set themselves to contend against this obstacle, and will thereby make their fortunes. Here, it will be said, are certain men who want casks for their beer. It is an obstacle ; and here are certain other men who employ themselves in removing this obstacle by making casks. Suppose an ingenious machine is invented, which cuts down the oak, squares it, divides it into a number of staves, puts them together, and transforms them into beer barrels. The obstacle is very much diminished, and with it the fortune of the coopers. B 2 20 TRADE FALLACIES. Maintain them both by a law. Prohibit the machine. Toil ther —the primeval curse of man—is a blessing. In order to penetrate to the bottom of this fallacy, it is sufficient to say that human labour is not an evzd but a means. It is never left without employment. If one obstacle fails, it will attack another, and humanity is freed from two obstacles by the same amount of labour which would have destroyed but one only. If the art of the coopers ever became useless, their labour would take another direction. But from what fund, it may be asked, would they be remunerated ? Precisely from that which remunerates them now; for when a mass of labour becomes disposable through the removal of an obstacle, @ corve- sponding amount of remuneration becomes disposable also. CHAPTER IV. EFFORT—RESULT. We have just seen that between the arising of our wants and their being satisfied obstacles are interposed. By the efiorts of industry we surmount these obstacles. But by what is our well-being, our wealth, measured? Is it by the result of effort, or by the effort itself? There must always exist a relation between the effort employed and the result obtained. Does progress consist in the relative increase of ‘‘ effort” or of the “ result” of effort ? , According to the first system, wealth increases in propor- tion to the increase of the “result” of effort as compared _with the “effort” by which the result is obtained, and absolute perfection consists in the infinite separation of the two terms —that is to say, result infinite, effort none. According to the second system, the “ effort ” constitutes and measures wealth. We progress when we increase the effort as compared with the result. The first system naturally welcomes everything which tends to diminish work and to increase its results : powerful machines, which add to the efficiency of man’s labour; exchange, which allows of our deriving the greatest benefit from natural agents distributed in divers degrees upon the surface of the globe; THE INCONSISTENCY OF INDIVIDUALS. 2I intelligence which makes discoveries ; experience which veri- fies ; competition which stimulates, &c. Logically, also, it follows that, to fulfil the conditions of the second system, everything which has the effect of increasing work and diminishing its result must be desired—prohibitions, privileges, monopolies, abolition of machinery, sterility, &c. It is well to remark, that the wmversal practice of men is always directed by the principle of the first doctrine. A man has never been seen, and never will be seen—be he farmer, manufacturer, merchant, artisan, soldier, author, or sevanf—who does not concentrate all the powers of his mind upon the effort to make better, to make more quickly, to make more economically—in a word, ¢o make more with less. The opposite doctrine is in use by theorists, who never- theless, in what concerns themselves personally, act as everybody else does, and endeavour to obtain from labour the greatest possible sum of useful effects. ‘There is always this contra- diction when we set out on a false principle. Its results are in practice so absurd and so mischievous, that we are forced to check ourselves. ‘The punishment follows too soon upon the error, and exposes it at once. But in matters of speculative industry, such as these theorists reason upon, a false principle may be followed a long time before they are warned of its falseness by the complicated consequences to which it leads ; and when at length these consequences are revealed, they act according to the opposite principle, contradict themselves, and seek to justify their change of front by asserting that in political economy there is no absolute principle. Let us, then, see if these two opposite principles do not reign by turns. The farmer who desires a tax on foreign wheat lends al! his efforts to this double end. As a farmer, his aim is to save labour and produce wheat as cheaply as possible, for the cheaper his product the greater is the remuneration he receives. When he prefers a good plough to a bad one, improves his land, and calls to his aid all the processes which science and experience have revealed to him, he has, and he can have, but one object—fo diminish the effort as compared with the result, We have not, indeed, any other means of recognising the skill of the cultivator and the perfection of a process but by ascertaining what these have retrenched from the effort and added to the result ; and as all the farmers in the world act upon this principle, we may say that the whole human race, without doubt for its own advantage, endeavours to obtain everything, \ uf = pw ~ YQ al } | gee 3 QS 22 TRADE FALLACIES. whether it be bread or any other production, as cheap as *\) possible, that is to say, with the least amount of labour. N Fa This tendency once admitted, should indicate to us in what manner we ought to second industry ; for it is absurd 'to say that the laws of men ought to operate in an opposite ‘direction to the laws—for we may call such tendency a law— of Providence. But when the farmer, as a politician and a voter, says, “I comprehend nothing of the theory of cheapness ; I prefer rather to see bread dearer and work more abundant ;” it is very evi- dent that the principle of the farmer as a politician and a voter is diametrically opposed to that of the farmer as a farmer. ‘To be consistent with himself, he should vote against all restriction ; or he should carry out on his farm the principle that he follows out at the ballot box. We should then see him sowing his seed on the most barren land, for he would succeed thus in working much to obtain little. Restriction has for its avowed end, and for its recognised effect, to increase labour. It has also for its avowed end, and for its recognised effect, to promote dearness, which is nothing else than the scarcity of products—/abour infinite, produce nothing. _ One often hears it said that “labour constitutes the riches ‘fof a people.” This is true if it mean that the results of labour constitute the riches of the people; but not true if it mean (as it does) that the intensity of labour is the measure of the riches. Put restrictive duties, it is said, upon foreign produce, double the work for a_ specified article, and you double the riches; thence riches are measured not by the result but by the intensity of labour. Accordingly, if a country is in a critical situation, it is because she has produced too much, her labour has been too fruitful; her people too well fed, too well clothed, too well provided with everything ; too rapid production has outstripped their desires. An end must then be put to this scourge, and in order to do this they must be forced by restrictions to work more and to produce less. We ought to desire that human intelligence should grow weak and become extinguished ; for as long as it exists, it will incessantly strive to augment the ratio of the end to the means, and of the product to the work ; for it is therein, precisely and exclusively, that intelligence consists. THE FAIR TRADE HANDICAP, 23 CHAPTER V. Tarss2+4 TO EQUALISE THE CONDITIONS OF PRODUCTION. { We have been assured by the ex-Lord Chancellor (Lord Hals- bury) that ‘“‘ever since the English ports have been open free to other people, while theirs have been closed to us, the manu- factures of the country have declined.” * As to agricultural pro- duce, Mr. Ecroyd says that ‘“‘ we must remove the food-growing trade from the United States by a small differential duty.” Many others tell us that “‘we ought to put a tax upon foreign produce equal to the difference in cost between an article made by us and a similar article made by foreigners—that this is to insure free competition, for free competition cannot exist except there be equality of conditions and of cost.” ] When a handicap race is to be run, the weight that each ot the horses has to carry is proportioned to his power, and thus the conditions are equalised. Applying this idea to com- merce, the Fair Traders think it most desirable that the conditions of production should be equalised. As this argument constantly recurs, I propose to examine it with care, and in doing so I entreat the attention and the patience of the reader. I will first consider the inequalities which depend upon natural causes, and afterwards those which arise out of divers conditions of taxation. Here, as elsewhere, we again find that the theorists who favour retaliatory duties take only the point of view of the pro- ducers; while we advocate the cause of the unhappy consumers, of whom they absolutely refuse to take any account. They com- pare the field of industry to a handicap race, forgetting that in a handicap the race is at the same time ¢he means and the end. The public takes no interest in the contest beyond the contest itself. But when you start your horses for the sole evzd of know- ing which is the best racer, you do not weight them differently. If you have for your ‘object the speedy arrival at the goal of important and pressing news, would you, without incon- sistency, create obstacles against those horses which offered you the best conditions for speed? This is, however, what * At Launceston, Oct. 27, 1881. Western Morning News. 24 TRADE FALLACIES. you would do in regard to industry. You forget the result sought for, which is ze//-bezng—which is not increased by placing obstacles in the way of its attainment. But since we cannot bring our adversaries to our point of view, let us place ourselves in theirs, and examine the question with regard to production. I shall seek to establish : 1st. That to bring to the same level the conditions of labour is to attack exchange in its principle. and. That it is not true that the labour of a country may be destroyed by the competition of more favoured countries. 3rd. That were this even correct, retaliatory duties would not equalise the conditions of production. 4th. That Free Trade brings these conditions as much as possible to the same level. 5th. Lastly, That the least favoured countries gain. the most by exchanges. 1st. To bring the conditions of labour to the same level, not only deranges markets, but attacks exchange in its principle ; for all commerce is founded precisely on that diversity, or, if it be preferred, upon those inequalities of fertility, of aptitude, of climate, of temperature, which you would efface. If Devonshire sends cider to Kent, and Kent hops to Devonshire, it is because these two counties are placed in different conditions of production. Is there, then, another law for international exchanges ? and. It is not true, 2” fact, that the inequality of conditions between two similar branches of industry necessarily involves the destruction of that which is the least advantageously cir- cumstanced. On the turf, when one of the horses gains the prize the others lose it ; but when two horses work for the produc- tion of what is useful, each produces in proportion to its power, and though the strongest does the most service, it does not follow that the weaker does no good at all. Wheat is grown in all the counties of England, though there are enor- mous differences of fertility in them ; and if by chance there is one which does not cultivate it, the reason is because its culti- vation is not found profitable there. In the same manner, analogy would teach us that, under the system of Free Trade, wheat would be grown in all the kingdoms of Europe, and if there were oné which renounced its growth it would be because, pursuing 7s oz interest, it would have found how to make a EQUALISING THE CONDITIONS OF PRODUCTION. 25 better use of its land, of its capital, and of its labour power. And why does not the fertility of one country paralyse the agriculture of a neighbouring but less favoured country? Be- cause, though your field produces three times more than mine, it has cost you ten times more, therefore I can still compete with you. Thisis all the mystery. And remark, that superiority in some respects leads to inferiority in others. It is precisely because your soil is more fertile that it is dearer: in this manner it is not accidentally but necessarily that an equilibrium, or a tendency to it, is established; and can any one deny that Free Trade is the system which favours this tendency most P I have given as an example a branch of agriculture, but I could equally well have furnished an example in another branch of industry. ‘There are tailors at Newcastle, but that does not prevent there being tailors in London, though the latter pay much more for their rent, furniture, journeymen, and living. But they have also a different class of customers,-and_ that suffices not only to re-establish the balance but even to make it fall favourably on their side. | When, then, we speak of equalising the conditions of labour, we must at least examine whether Free Trade does not do that which we are urged to seek from arbitrary measures. There are two countries, A and B. A possesses all kinds of advantages over B. You, my Fair Trade opponent, immediately conclude that labour is concentrated in A, and that B is power- less, and can do nothing. A, you say, sells much more than it buys ; B buys more than it sells. I should be able to contest this point, perhaps, but I will meet you on your own ground. By the hypothesis, labour is in great demand in A, and in consequence it soon rises in price. Iron, coal, land, provisions, capital, are in great demand; and they soon rise in price. During this time labour, iron, coal, land, provisions—all are quite neglected in B, and soon everything there falls in price. This is not all. A always selling, B always buying, money passes from B into A. It abounds in A—it is scarce in B. But abundance of money is the same as saying that it requires much to buy all other things. Then in A, to the real dearness which arises from a very active demand, there is added a nominal dearness consequent on the extra proportion of the precious metals. 26 TRADE FALLACIES. Scarcity of money signifies that there may be very little expended in each purchase. Then in B nominal cheapness is combined with real cheapness. Under these circumstances, industry will have all sorts of motives, of motives, if I may so say, carried to the fourth power, to desert A and establish itself in B. But to return to the region of reality: we must say that it will not have waited for this moment, as these sudden dis- placements are repugnant to the nature of industry, and that, from the beginning, under a system of Free Trade, it would be progressively divided and distributed between A and B, accord- ing to the laws of supply and demand—that is to say, according to the laws of justice and utility. : And when I say that if it were possible that industry could be concentrated on one point, there would rise within itself, and by its own movement, an irresistible power of decentralisa- tion, 1 do not put forth an empty hypothesis. [Let us listen to what the manifesto of the Fair Traders says: ‘ Capitalists are closing their works in England, and are leaving the country to erect new works in Protectionist coun- tries.” Again, “The free importation of products of labour manufactured abroad is diminishing the home demand to such an extent that capitalists are beginning to close their works in this country and to erect similar works abroad, where their capital is protected from unfair competition.” Now listen to what a manufacturer said in the Chamber of Commerce in Manchester, in 1842, when Protection ruled (I suppress the figures on which he rested his demonstration) :—‘“‘ Formerly we exported cotton stuffs ; this exportation has given place to that of yarn, which is the material for making the stuffs ; after- wards to that of machines, which are the instruments of pro- duction of the yarn ; later still, to that of capital, with which we constructed our machines ; and lastly, to that of our workmen, and of our industrial genius, which are the sources of our capital. All these elements of labour have been, the one after the other, exercised wherever it was found that most advantage could be madg of them, where living is less dear, life more easy ; and immense manufactories founded by English capital, carried on by English workmen, and directed by English engineers, may be seen in the present day in Prussia, in Austria, in Saxony, in Switzerland, and in Italy.” The manifesto says nothing about agricultural depression ; I PROTECTED AGRICULTURE IN 10 Is 27 presume because it was considered patent to all. But let us hear a farmer’s petition, drawn up in 1831, when Protection was doing its utmost for agriculture: “ We, the gentry, magis- trates, clergy, freeholders and occupiers of land in the district of the once opulent vale of ‘Taunton, most humbly represent to your Honourable House that the cruel distress throughout the district in which we reside has arrived at an unparalleled height, and is daily increasing to an alarming extent, with a progressive decline in the value of all productions of the earth, accompanied by an overwhelming burden of taxation such as was never endured by any country, and has swallowed up the capital of the farmer, and brought the greater proportion of independent yeomen to the brink of ruin, which, without the most speedy relief, must terminate in the annihilation of this most excellent and invaluable body of men.” You see that nature, or rather Providence, more ingenious, more wise, more foreseeing, than your narrow and rigid theorist imagines, has not willed this concentration of labour, this monopoly of every superiority, about which you argue as an absolute and irremediable fact. It has provided, by means as simple as infallible, the prevention of this by dispersion, diffu- sion, association, simultaneous progress—everything which your restrictive laws would paralyse as much as possible: for their tendency in isolating people is to render the diversity of their conditions much more marked, to prevent the process of level- ling, to hinder their fusion, to neutralise the counterpoise, and to shut up the people in their respective superiority or inferiority. 3rd. In the third place, to say that by a retaliatory duty the conditions of production are equalised, is to use an incorrect expression which conveys error. It is not true that an import duty equalises the conditions of production. ‘These remain after the duty the same as they were before. What the duty equalises, at most, are the conditions of sale. It may, perhaps, be said that I play upon words; but I throw back the accusa- tion upon my adversaries. It is for them to prove that produc- tion and sale are synonymous, without which proof I havea right to reproach them, if not for playing upon words, at least for confounding them. Let me be allowed to make this }oint clear by an example. Assume that the idea came into the head of some Cornish speculators to devote themselves to the production of oranges. They know that the oranges of Portugal can be sold in London 28 TRADE FALLACIES, for one penny each, while they, on account of the conservya- tories, &c., which will be necessary for their growth and pre- servation, on account of the cold, which is often adverse to their culture, would not be able to charge less than a shilling per orange as a remunerative price. ‘They therefore require that the oranges of Portugal may be charged with a duty of eleven- pence. - By means of this duty the conditions of production, say they, will be equalised. Well, I say that the conditions of production are not in any way changed. The law has not made Lisbon colder nor Cornwall hotter. The orange will continue to be naturally ripened in Portugal and a7tificzally in Cornwall ; that is to say, its growth will require much more human labour in the one country than in the other. That which will be equalised are the conditions of sale. ‘The Portuguese will have to sell their oranges for a shilling each, elevenpence of which will go to pay the duty. Evidently this tax will be paid by the English consumer ; and observe the whimsicality of the result. Upon each Portuguese orange consumed, the country will lose nothing, for the extra elevenpence paid for it by the consumer will go into the Treasury. There will be a displacement, but no loss. But upon each English orange consumed there will be elevenpence loss, or nearly so; for the buyer will lose that amount most certainly, and the seller will also as certainly not gain it, since, from the hypothesis, he will only obtain for the orange a remunerative price. I leave to the Fair Traders the task of drawing the conclusion. : 4th. If I have insisted upon this distinction between the conditions of production and the conditions of sale—a distinc- tion which the Fair Traders will, without doubt, find para- doxical—I have done so to lead up to another statement, that after equalising ¢he conditions of production, exchange would not be really free. I must be permitted to follow my argument to the end: I will not be long. Will you consent to assume for a moment that the average rate of wages of daily labour in England is three shillings per. man. It will incontestably follow that to. produce arectly an orange in England, ‘will cost one-third of a day’s labour, or its equivalent, while to produce the value of a Portuguese orange will cost only one thirty-sixth of a day’s labour, which is saying, in other words, that the sun does in Lisbon what labour does in Cornwall. But is it not evident that if I can THE LEAST FAVOURED COUNTRY. 29 produce an orange, or, what comes to the same thing, if I can buy an orange, with a thirty-sixth of a day’s work, I am placed relatively to this production exactly under the same conditions as the Portuguese producer himself, deducting the cost of transit, which ought, of course, to be at my charge? It then is certain that Free Trade equalises the conditions of produc- tion, directly or indirectly, as much as they are capable of being equalised, since it leaves no other existing inequality but the inevitable difference of the cost of transport. I add that Free Trade equalises all the conditions of en- joyments, of comforts, and of consumption ; this, which we never take into consideration, 1s, however, the essential part, since definitely consumption is the final aim of all our industrial efforts. With freedom of exchange, we are able to enjoy the fruits of the Portuguese sun equally with the Portuguese himself. 5th. This might suffice, but I will go further. I assert, and with full conviction, that if two countries find themselves placed in conditions of unequal production, that of the two, the one which ts the least favoured by nature has the most to gain trom freedom of exchange. Really the whole question rests upon this point, and in elucidating it I shall have an opportunity of expounding an economic law of the highest importance, which, if well com- _prehended, seems to be destined to bring over all those who in our day are seeking, by what they designate as Fair Trade, to promote commercial prosperity. I mean the law of con- sumption, which the greater part of the Fair Traders may, perhaps, be reproached for having too much neglected. Consumption is the end, the final object to which all economic phenomena converge, and it is, consequently, in consumption that their definitive solution is to be found. All circumstances which favour production are welcomed by the producer, for the immediate effect is to enable him to demand a greater remuneration for himself; all circumstances which are adverse to production distress the producer, for the immediate effect is to limit his employment, and consequently his remuneration. . When a workman is able to improve the manipulation of his particular branch of industry, the zwmediale advantage is reaped by himself. This is necessary, in order to induce him to turn his attention to the subject; and it is just, because his effort should have its recompense. 30 TRADE FALLACIES, How does a new discovery operate? A man discovers a new mechanical process. Af first he is enriched and others following the same pursuit are impoverished. But the discovery becomes known; others imitate him. Their profits are at first considerable. They gain much, but they gain less than the inventor, for competition is awakened and begins its work. The price is lowered. ‘Their profits in turn diminish in proportion as the period from the time of the first discovery lengthens—that is to say, in pro- portion as imitation becomes less meritorious. The new industry soon arrives at its normal state ; in other words, the remuneration is regulated by the general rate of profits. But how does this show itself? By the cheapness of the article produced. And for whose benefit? For the benefit of the consumer, z.¢., of society generally. The producers who thence- forward have no particular and exclusive merit, receive no longer an exclusive remuneration. As consumers, they with- out doubt participate in the advantages which the invention has conferred on the community. But this is all. Inasmuch as they are producers, they have fallen again under the ordinary conditions common to all the producers in the country. Society pays them for their work, but no longer for the utility of the invention. That has become the common and free heritage of the whole of the human race. This is true of all the instruments of labour, from the nail © and the hammer, to the locomotive engine and the electric telegraph. Society enjoys all through the abundance of con- sumption, and ezjoys zt gratuitously, because their effect is to diminish the price of articles, and all that part of the price which has been annihilated, which represents the work of the inventor in the production, evidently renders the pro- duction in that degree gratuitous. ‘The only thing remaining to be paid for is the manual labour. I send for a workman, he comes with his saw, I pay him three shillings per day, and he saws for me twenty-five planks. If the saw-had not been invented he would not perhaps have fashioned one, and I should not the less have paid him for his day’s work. ‘The usefulness of the saw is then a gratuitous gift to me; it is a portion of the heritage which I have received zz common with other men from the intelligence of our ancestors. I have two labourers in my field; the one holds the handle of the plough, the other the handle of the spade. The THE PRICE OF LABOUR. 31 result of their work is very different, but the price of the day’s labour of each is the same, because remuneration is not in proportion to the utility of the product of labour, but to the effort—to the labour required. I entreat the patience of the reader a little further, and beg / him to believe that I have not lost sight of my subject—corm- ' mercial freedom. But he must allow me to recapitulate the conclusion at which I have arrived. Remuneration is not measured by the utility of the works which the producer brings to market, but by the cost of his labour.* I have taken my examples mainly from human inventions. Let us now refer more especially to natural advantages. In all production nature and man co-operate. But the useful part which nature performs is always gratuitous; only that part which is due to human labour forms the object of exchange, and consequently of remuneration. This remuneration no doubt varies very much, by reason of the intensity of the labour, the skill, the promptitude, and the aptitude of the workmen, of the need for it at the time, of the tetuporary absence of rivalry, and other circumstances. But it is not the less true in principle that the part produced by the co- operation of natural forces, since it belongs to all, does not in any degree enter into the price of the product. We do not pay for the light of the sun, because nature gives it. We pay for that of electricity, of gas, of tallow, of oil, of wax, because in these cases there is human labour to be remunerated ; and we must remark, that it is entirely the work and not its utility to which remuneration is proportioned, so that it may very well happen that one of these illuminating powers, though much more intense than another, may, however, cost less. It would be sufficient for this result that the same quantity of human labour could furnish more of this product than of the other. ; When a Water Company supplies my house with water, if I were to pay for it with regard to the absolute utility of the water, my fortune would not suffice. But I pay on account of the trouble which the company has taken in bringing it. The water is not really the subject of our bargain, but the labour * It is true that labour does not receive a uniform remuneration. There are different kinds of labour, more or less intense, dangerous, skilful, &c. Competition establishes in each case a current price, and it is of this variable price that I speak, 32 TRADE FALLACIES. required for obtaining the water. . Tropical countries are very favourable to the production of sugar and coffee. ‘This is the same as saying that nature does the greater part of the work, and leaves little to be done by manual labour. But then, who reaps the advantages of this liberality of nature? Not those countries—for competition obliges them toreceive only remunera- tion for the manual labour—but mankind in general; for the result of this liberality is cheagxuess, and cheapness belongs to all the world. Thus the bounties of nature, as well as improve- ments made in the processes of production, are, or are con- stantly tending to become, under the law of competition, the common and gvatuifous patrimony of consumers, of the mass of mankind. The countries which do not possess these advantages have, therefore, everything to gain by exchanging with those which do possess them, because exchange is made between ¢he amounts of labour and labour, the portion of usefulness derived from nature which these works include being deducted. And they are evidently the most favoured countries which have incor- porated in a given amount of human labour the most of these natural advantages. Their products, representing less labour, are less highly paid for; in other terms, they are cheaper, and if. all the liberality of nature rescives itself into cheapness, evidently it is not the country producing, but the country consuming, which reaps the benefit of it. A is a favoured country, B is a country less favoured by nature. Exchange is the barter of va/we, and the value being reduced by competition to represent labour, exchange is the barter of equal amounts of labour. What nature has done for the productions exchanged is given in one shape or another gratuitously, and over and above the purchase value. Hence it follows strictly, that to exchange with countries most favoured by nature is most advantageous ; and that whereas countries which levy duties upon foreign produce benefit by this gra- tuitous assistance of nature less the amount of the duties they levy, countries which have free ports benefit by the full value of it. FISCAL TAXES, 33 CHAP TI: 2Vi. CUR PRODUCTIONS ARE BURDENED WITH RATES AND TAXES. THAT our productions are burdened with rates and taxes, is a part of the same fallacy. You demand that foreign productions should be taxed, in order to neutralise the effects of the rates and taxes which press heavily on our home pro- ductions. The question still is, how to equalise the conditions of production. We need only say one word on this head, which is, that the rate or tax is an artificial obstacle, which has exactly the same result as a natural obstacle—that of forcing a rise in price. If this rise arrives at such a point that there is more loss in producing some article of value than in obtaining it from abroad, by applying our industry to the production of other things to exchange for it, private interest will soon learn to choose the lesser of two evils. I might, therefore, send the reader back to the preceding demonstration; but the fallacy which I have here to combat recurs so often in the dolorous lamentations of the ‘‘ Fair Trade” school, that it well deserves a special discussion. If you speak of those few taxes which are laid on certain \)” (4 productions for merely fiscal (z.e. Revenue) purposes, I am ready to admit that it is reasonable to subject foreign produce to them. For example: it would be absurd to take off the duty from tobacco or foreign spirits. ‘Tobacco is not produced in this country, and the tax protects no one. On spirits manufactured _in England we levy a tax (Excise) equivalent to the duty on foreign spirits. Here again the tax protects no one. ‘These are circumstances under which I admit of a duty, not protective but fiscal, being placed on foreign productions.* But to assert that a country should, because she is subjected * The Fair Trade manifesto quotes with approval the following words from Mr. Mill :—‘‘A country cannot be expected to renounce the power ot taxing foreigners, unless foreigners will in return practice towards itself the same forbearance. The only mode in 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.” I would point out that by revenue duties Mr. Mill means duties levied not for protective, but for fiscal purposes—duties which, if levied upon foreign goods, would also be levied upon the same articles produced at home. Cc 34 TRADE FALLACIES. to heavier rates and taxes than neighbouring nations, protect herself by her tariff from the competition of her rivals, is a fallacy, which I intend to assail. The State may make a good or a bad use of its taxes. It makes a good use when it renders services to the public equivalent in value to what the public gives; it makes a bad use of them -vhen it expends this value without giving any- thing in return, In the first case, to say that taxes place the country that pays them in a more unfavourable condition for production than that which is free from them, is a fallacy. We pay £,6,500,000, it is true, for justice and police; but we have justice and police, the security which they afford us, the time they save us; and it is very probable that production is neither easier nor more active among people, if there be any such, where each takes the law into his own hands. I grant that we pay several millions in local rates for roads, bridges, and schools; but then we possess these roads, these bridges, and these schools, and unless it should be asserted that their cost is a wasteful expenditure, nobody can say that they render us inferior to those people who have none. [Taxes well employed, far from injuring, help the meaus of production.) Abolish, if you can, those taxes (if there be any) which are unproductive; but it is the strangest way that can be imagined of neutralising their effects to add other taxes. If we are taxed needlessly already, surely that is the strongest reason why we should not tax ourselves still more ? There is no doubt that a retaliatory duty is a tax which, directed against a foreign product, really falls upon the home consumer (p. 28); and as the consumer is the tax-payer, is it endurable to address him in these terms: ‘ Because the rates and taxes are heavy, we are going to put on more’”’? Protection might, without changing its nature or results, take the form of a direct tax, levied by the State upon all, and distributed by it in indemnifying premiums to the privi- leged branches of industry. Let us assume that foreign tin can be sold in our market at £50 a ton and no lower, and English tin at £60 a ton as the lowest price. 3 Under this hypothesis there will be two ways for the State to insure the home market to the home producer. TWO METHODS OF PROTECTION. 35 The first would be to place a duty of #12 a ton upon foreign tin. It is clear that it would thus be excluded, since it could not be sold for less than 4 62—viz., £50 for the remu- nerative price, and £12 for the tax ; and at this price it would be shut out from the market by English tin, which we have assumed to be at £60. In this case, the buyer, the consumer, will have paid all the cost of Protection. The State might also levy a tax upon the public, and ch Be ate distribute it in bounties * to the tin smelters at the rate of £12 / a ton. The protective result would be the same. Foreign tin would be equally excluded ; for our tin smelters would sell at £48, which, with the £12 bounty, would give them a remunerative price of £60; and with tin in the market at 4,48, the foreigner could not sell his at 450. I can only see one point of difference between these two systems. The principle is the same, the result is the same ; only in the one case the protective duty is paid by the consumers of the article, in the other by the tax-payers. I confess frankly my predilection for the second system. It appears to me more just, more economical, and more straightforward—more just, because, if society wishes to give a largess to some of its members, all should contribute towards it ; more economical, because it would save much expense in collecting, and would do away with many impediments ; more straightforward, because the public would see the operation clearly, and know what it was being made to do. But if the protective system had taken this form, would it not be rather laughable to hear people say, ‘‘ We pay heavy taxes for the army, the navy, for justice, public works, the debt, &c.—it exceeds £90,000,000 ; and for this very reason it is desirable that the State should take another ten millions from us, to assist those poor iron companies which are unable to pay any dividends, those unfortunate nbbon makers at Coventry, those useful cotton spinners at Preston”? If it be narrowly looked at, you may be assured that this is what the fallacy I am combating leads to. Your efforts will be in vain ; you cannot gzve money to some without taking it from others. If you mean absolutely to impoverish the con- tributor, well and good ; but, it is like mockery to say to him, “T am taking still more from you, to compensate for what I have already taken.” * See as to foreign bounty-fed sugar, post p. 48. C2 % ,¥ 36 TRADE FALLACIES. You take advantage of England’s being heavily burdened vith rates and taxes to deduce from it that you must protect such or such branches of industry. But we have to pay these taxes in spite of your duties. If, then, the representative of a branch of industry were to come before you, and say, “I am made to join in the payment of taxes ; that raises the cost price of my productions, and I ask for a retaliatory duty to raise also the selling price ;” what else does he ask but that his part of the taxes should fall upon the rest of the community? His purpose is to recover, by the enhanced price of his productions, the amount of his share of taxation. Now, the whole of the taxes being paid into the Treasury, and the mass of the people being subject to this rise in price, they pay both their own share of the tax and also that of this branch of industry. But you say, ‘“ We will protect everybody.” In the first place, such a thing is impossible ; and even were it Dossible, of what advantage would it be? “I will pay for you, you shall pay for me, but anyhow the tax must be paid.” . It is a mere illusion. You pay taxes and rates in order to have an army, a navy, judges, roads, &c., and afterwards you wish to free from its share of taxation first one branch of industry, then a second, then a third, always distributing the burden among the mass of the people ; but you do nothing except create interminable complications, without any other re- sult than the existence of these complications. Prove to me that the rise of price, owing to retaliatory duties, would fall upon the foreigner, and I might see something valid in your argument. But if it is true that the English public paid taxes before the retaliatory duties were imposed, and that subsequent to the imposition of the duties it pays at once the retaliatory duties and the taxes, I do not see what is gained by it. But I go further. I say that the more heavily taxed we are, the more eager we ought to be to open our ports to the foreigner who may be less burdened than ourselves. { . ‘And why? ‘To lay upon him a greater part of our burden, ‘for it cannot be too often repeated that it is an axiom in poli- / tical economy that taxes upon imports fall upon the consumer. (But, I may ask, and the question comes in appropriately now, is it altogether true that England, as compared with other countries, is heavily burdened with rates and taxes? 3 f 50 TRADE FALLACIES. After the lapse of several centuries, intelligence having made great progress, Brisktown became sufficiently enlightened to see that these reciprocal obstacles were only reciprocal annoy- ances. She sent a diplomatist to Dulltown, whose speech, stript of its official phraseology, was as follows :— ‘We constructed a road, and now we put hindrances on this same road. This is absurd ; we had better have left things as they were; we should not then have had to pay for making a road, and then for the impediments which we have placed there. I have come to propose to you, in the name of Brisk- town, not that we should at once remove the obstacles which we have mutually opposed to each other—to do so would be acting on principle, and we despise principle as much as you do—but to lessen some few of these obstacles, taking care to balance equally our respective sacrifices in so doing.” Thus spoke the diplomatist. Dulltown asked time for reflection. She consulted her manufacturers and agriculturists by turns. At last, at the end of several years, she bear that the negotiations were broken off. After this news, the inhabitants of Brisktown held a council. An old man (who had been always suspected of having been secretly bought by Dulltown) rose and said,— “The obstacles created by Dulltown injure our sales ; it is a misfortune: those which we have created ourselves injure our purchases ; this is another misfortune. We can do nothing in the first case, but the second depends upon ourselves. Let us relieve ourselves from the one, although we cannot be quit of both. Let us abolish our preventive service, without requiring Dulltown to do the same. At some future day she will doubtless know her own interests better.” Another councillor, a practical man, free from principles, who had thriven on the experience of his ancestors, ex- claimed, ‘Do not let us listen to this dreamer, this theorist, this innovator, this economist. We should be ruined if the hindrances on the road between Dulltown and Brisktown were not equalised and balanced. ‘There would be more difficulty in going than in coming; in exporting than in importing. Relatively to Dulltown, we should labour under the same disadvantages as Liverpool, Bristol, Hull, Glasgow, London, Newcastle, Hamburg, and New Orleans, when compared with the towns placed at the sources of the Mersey, the Severn, the Ouse, the Clyde, the Thames, the Tyne, the Elbe and the RETALIATORY DUTIES CAUSE WAGES TO FALL. SI Mississippi; for it is more difficult to ascend rivers than to descend them. (A voice: ‘Towns at the mouths of rivers always flourish most.’) It is impossible. (The same voice: ‘It is so.’) Well then, they have prospered zt opposition to all rules.” So conclusive a reason made the assembly waver. The orator settled their convictions by speaking of national inde- pendence, national. honour, national dignity, and national industry, of the inundation of foreign produce, of taxes, and of ruinous competition—in short, he carried the vote for the continuance of the obstacles; and, if you are curious, I can still take you to certain countries where you may see with your own eyes the road-maker and the officer of the fre- ventive service working together on the best of terms, by order of the same legislative assembly, and at the expense of the same tax-payer—the one to clear the road, the other to put im. pediments upon it. CHAPTER XI. WILL RETALIATORY DUTIES RAISE THE RATE OF WAGES ? WouLp you rightly appreciate the effect of retaliatory duties ? Then examine their influence upon the abundance or scarcity of things, and not upon ¢he rise or fall of prices. Wave no con- fidence in prices, for this would lead you into an inextricable labyrinth, You are asked to levy duties on foreign produce because it would enhance the price of home productions :— ‘“‘High prices increase the expense of living, and, con- sequently, the price of Jabour, and each regains in the increased price of his produce the increased amount of his expenses. Thus, if all pay as consumers, all receive as producers.” It is evident that we can reverse the argument, and say :— “‘ Tf all receive as producers, all pay as consumers.” Now, what does this prove? Nothing, except that Pro- tection displaces capital uselessly and unjustly, and so does spoliation. . Again, in order to admit that this vast apparatus succeeds in providing compensation to the labourer, we must hold to the word “consequently,” and believe that the price of D 2 52 TRADE FALLACIES. labour rises with the price of protected produce. This is not the case; because the price of labour, as of everything else, is governed by the relation between supply and demand. I can well understand that restriction would diminish the supply of food and clothing, and consequently raise the price, but I do not so clearly see how it would increase the demand for labour, or, in other words, raise the rate of wages. More- over I the less believe it because the demand for labour depends on the amount of disposable capital. Now, Protec- tion may displace capital, may divert it from one industry to another, but cannot increase it to the amount of a farthing. This is a question of the highest interest, and I shall return to its consideration elsewhere. I go back to prices. Suppose that an isolated nation, possessing a certain quantity of coin, chose to burn half its produce every year; I can prove, according to the theory stated above, that that country will not be less rich. : Indeed, in consequence of this burning, everything will be doubled in price, and the valuation made before and after the disaster will show the same nominal amount. But then, who will have lost? If John buys his cloth dearer, he also sells his wheat dearer, and if Peter loses on his purchase of wheat he will retrieve his losses by the sale of his cloth. ‘“‘ Each regains in the enhanced price of his produce the increased amount of his expenditure, and if all pay as consumers, all receive as — producers.” All this is mystification, and not science. The truth, reduced to its most simple expression, stands. thus: whether men destroy a quantity of cloth or wheat by fire or by use, the effect is the same as Zo price, but not as ¢o capital, for wealth or prosperity consists in having things for use. In like manner, restriction, in diminishing the abundance of things, may raise the price, so that each person may be, if you please, as rich as before in regard to money. Write, however, | in an inventory, three quarters of wheat at 4os., or Six at 205.; the sum of both will be £6, but will the respective quantities equally supply the wants of the consumer ? I shall not cease to bring back the Fair Trader to the sub- ject as it affects consumers, for the object of all exertion, and the solution of all economic problems, meet in them. I shall ask him again and again—Is it not true that restrictions, by preventing exchanges, by limiting the division of labour, and NOMINAL VALUES. 53 forcing it to be applied in overcoming the difficulties of situa- tion and temperature, end in diminishing the quantity produced by any determinate amount of exertion? And of what advan- tare is it, if the less quantity, produced under the retaliatory system, has the same nominal value as the greater quantity, , produced under the system of Free Trade? Man does not live on nominal values, but on real productions ; and the more }} there are of these productions, no matter at what price, the richer he is. If you would judge between the two doctrines, put them to the test of exaggeration. According to the one doctrine, the English people would be quite as rich—that is to say, quite as well provided with every- thing—with the tenth part of their annual productions, because they would then become ten times more valuable. According to our doctrine, the English people would be infinitely rich, if their annual. productions were infinitely abundant, and consequently without any money value. Again, it is true that retaliatory duties, which, as all confess, raise the price of things, and thus injure the workman, com- pensate him by a proportionate rise in his wages? On what depends the rate of wages ? When two workmen run after one master, wages fall ; when ? two masters run aftef one workman, they rise. Allow me, for the sake of brevity, to make use of the phrase which, although perhaps less clear, is more scientific :— “The rate of wages depends on the relative proportions of the supply of and demand for labour.” But on what does the supply depend ? On the number of workmen in the market; and upon this element retaliatory duties can have no influence. On what does the demand depend P On the amount of disposable national capital. But under a system of retaliatory duties the law says, ‘“ You shall no longer receive such or such from the foreigner; it must be produced at home.” Does that increase capital? Not in the least. It diverts it from one channel to another, but does not increase it by a farthing. It does not increase the demand for labour. Such or such a manufactory is shown with pride. Has the capital by which it was established and is carried on fallen from the moon? No, it has been necessarily abstracted from 54 TRADE FALLACIES, that employed in agriculture, navigation, or other occupa- tions. I might descant much further on this subject, but I will now endeavour to make my meaning intelligible by an illustra- tion. A farmer had a farm of 200 acres, which he valued at £6,000. As is the case with all farms, this farm was better adapted to produce certain articles of consumption than others. It was mainly a dairy farm—that is to say, it had rich pastures suitable for cattle—but a portion of it was also suitable for growing wheat and barley. It might, therefore, be called a mixed farm. But a smail portion of the corn, meat, butter, milk, and cheese which the farm produced sufficed to support the farmer and his family, and he sold the surplus in order to buy beer, clothes, &c. The whole of his capital was distributed each year, in the form of wages, in the payment of tradesmen, and to the workmen in the neighbour- hood ; this capital was returned to him by the sale of produce, and, in fact, it increased from year to year, and the farmer, knowing well that unemployed capital gives no return, im- provea the condition of the working .classes by means of his annual profits, which he used in improving his agricultural implements and in erecting improved buildings on his farm. He even placed some residue in the bank of the neighbouring town ; but here it did not remain idle in the strong-box, but was lent to ship-owners and to originators of useful works, so that it ended by being converted into wages. In course of time the farmer died, and his son succeeded to his possessions. ‘It must be confessed,” said he, ‘that my father has been in error all his life. He bought beer from the brewer ; he bought clothes from the draper and the tailor; he paid tribute to the miller for grinding his corn, and to the tallow-chandler for his candles, while our servants could have brewed, could have ground our wheat, and could have made candles from the fat of the beasts. Moreover, he could have grown flax, and our servants would have woven it; he could have kept sheep, and our servants would have manufactured the wool into garments for ouruse. He wasted his substance in giving to strangers wages which he could have easily distri- buted at home.” Confident in his reasonings, he rearranged his farm. He divided it into many portions. In one he kept sheep. To THE UNWISE SON. 55 feed them he grew turnips, and laid down part of his corn- land in pasture. He grew flax, he put up a mill, he pur- chased a loom, &c., &c. He thus provided for all the wants of his family, and made himself independent. He withdrew nothing from general circulation ; but neither did he add any- thing to it. Did he become richer? No; for the soil was not fitted for the cultivation of flax, it was not well suited for the breeding and rearing of sheep, and, in fact, the family was not so well supplied as when the father provided for them by means of exchange. As for the workmen, there was no more work for them to do than there had been formerly; there were certainly five times as many different things to be done, but then they were each employed but a fifth of their former time upon them. They made candles, but they grew less wheat ; clothes were no longer bought, but, again, there was no spare butter, meat, milk, or cheese for sale. Besides, the farmer could not expend more than his capital in wages, and his capital, far from being increased by this new mode of cultivation, diminished gradually.