The first is, that a great deal of voice and ink is wasted, by freetrade tariff economists, in the demonstration that the price of some crude or partly finished intermediate material, which man cannot wear or use without further change, is dearer in this country than in other countries, when the matter is of no economic importance to the people at large, individually speaking. Thus, an orator may spend an hour or so, in demonstrating that certain grades of wool are dearer, at a particular date, by a few cents a pound, and that the quoted price of steel rails is higher here than in England, although no individual wears, eats, or uses either raw wool, or steel rails directly, but only the things they produce by further destruction or change. All the time, over one-half of his audience are probably wearing ready-made coats from that same grade of wool, which they bought cheaper than the same coats are sold for at retail in England with free wool, and, when they go from his lecture, probably one-fourth of the audience will ride further and cheaper over those same protected steel rails than they could in England with rails free of duty. Upon such arguments, which do not even touch upon the individual interests of the masses of the people, the opponent of protection usually thrives.

Another conclusion drawn from our review of the subject is, that the effort to convince manufacturers that they would prosper better on "free raw materials" is founded on a double fallacy. First, it is not true, as assumed, that the manufacturer can make a cent more continuous and certain profit, when all his active competitors can get free raw materials as soon and as cheaply as he does, and secondly, it is not true that he will necessarily sell more goods by the trifle of cheapness he may attain thereby, in the intermediate product he turns out to be further finished or changed for individual use, because he will have disturbed the protective methods of manufacture, which succeed him on his product before its sale to the ultimate consumer, and thus have interposed a greater waste or expense between himself and the ultimate consumer, than any economy in materials he has effected. When we add to this the people he will have thrown out of employment, or cut down the wages of, or both, in those domestic industries which now produce his raw materials, and who spend liberally out of their wages for his goods, we at once see that he is literally "burning his candle at both ends" without getting any permanent advantage to himself. These people, who produce these raw materials, are in number three to one who produce the finished

products. When three out of every four of our people consent to submit to different legislative treatment of their pursuits, their wages and their home market in our economic system from that of the onefourth, when they voluntarily consent to place themselves in industrial vassalage to an aristocracy of capital and labor of the one-fourth who produce finished products under legal protection, which is denied to them and their pursuits, then the dream of the advocate of free raw materials will be realized, and not before. When that will be, every man can judge for himself, but it would be safe to predict that it will not be in this day and generation.

CHAPTER IX.

CONCERNING MARKETS.

"This is a question of markets and not of maxims."-President Harrison.

FIFTY years ago steam and machinery had only fairly begun to supplant with their products the similar products of hand labor in the markets of the world. In addition, they created an enlarged market for their own products, first, by reason of their rapid increase as productive agents, and secondly, by the fact that the products of manual industry were scarce and dear, while the products of steam and machinery were more plentiful and cheaper.

To the political economist of those days the markets of the world seemed to be illimitable, and absolute cheapening of products by modern agencies appeared to be the "open sesame," by which production could for all time command new markets adequate to its powers. The plummet line of the imagination of these economists. found no bottom" to limit the consuming capacity of mankind, and they scouted those who even ventured to doubt on this point as unnecessary prophets of evil.

Fifty years of experience in the development of the producing powers of steam and machinery have taught the practical business. men of the world a new truth. This truth is, that the improved powers of steam, machinery, and electricity, or, in other words, modern agencies of production and distribution of commodities, now possessed by the world at large, have overtaken the capacity of the markets of the world at large, to consume their products, and that the development of the capacity of these modern agencies of production, under constant invention and improvement, is faster than the development of the capacity of the accessible markets of the world to consume their products.

Absolute cheapness of product is no longer the touchstone of profitable production. Increase of consumption of commodities by the world at large is no longer the barometer which indicates good dividends and good wages in the producing countries which supply those commodities to the world at large. Why? Simply because they no longer indicate, as they once did, that the expansion of the consuming capacity of the open markets of the world is keeping ahead of the expansion of the capacity of production of those modern agencies: steam, machinery, and electricity.

Economic theories must accordingly be reformed, and those which appeared to be all-sufficient for mankind fifty years ago must be laid aside as unsuited to modern industrial development, unless they can furnish us with new maxims fitted to cope with the new emergency. The Manchester school of economists will disappear in the commercial disaster that has overtaken Manchester, unless they can drag Manchester out of the depths of commercial depression which she now experiences. The British school of freetrade economists will go to the wall, unless they can rescue British wages and British returns on capital from the debasement which they now experience. This school has tried for the past fifteen years, in vain, to suggest some remedy for British labor and capital.

But it may be attempted to be denied that the world's agencies of production have overtaken and now keep in advance of the world's capacity of consumption of their products, and such markets as those of the United States and Russia, may be pointed out as examples to the contrary. Or we may have put before us glowing pictures of the growing importance of South American markets, and of the illimitable districts of Africa yet to be opened up to the world as new markets for commodities produced.

It is a sufficient answer to all these arguments to say that markets like those of the United States and Russia are not fair examples of the markets of the world, because they are reserved to the competition of our own producing agencies under the economic system, protection, and it is a further sufficient answer to pictures of the illimitable resources of South America and Africa, to reply that economic "castles in Spain" which are built on the hope of present markets, for the appliances of civilization, among tribes of roving nomads, or naked savages, do not meet the emergency.

1

What we propose to prove is, that the present capacity of the world's producing agencies is in advance, and increases in advance of the open markets of the world to consume their products. For this purpose, we will refer first to the Reports of the Royal Commission on Depression of Trade and Industry, which accumulated a fund of evidence on this subject never equalled, and which is the best accessible authority. This report states that the events of 1870-71 resulted in a "serious disturbance of the commerce of the world," and that in previous periods "the conditions of the trade and industry of the country [Great Britain] differed too widely from those which now affect it to make any comparison between them useful." The Commission, therefore, selected three leading internal trades, viz., iron and steel, coal, textile industries, and, in addition, agriculture, as fairly "typical industries," illustrating the trade of the country at large, upon which to arrive at general conclusions.

As to iron, the Commission states that "concurrently with the increase of productive power [of all nations] the consumption of iron in recent years has fallen off," and that a "decline in price has taken place, and there does not appear to have been any decrease in the cost of production which would to any extent counterbalance so great a fall."2

As to the coal trade, the Commission states that there appears to have been the same increase of production in the coal producing countries of the world, and that "the depression in the coal trade may be attributed to the fact that the development of our trade has been at a greater rate than the expansion of the industries we supply." As to textile industries the conclusion of the Commission is, that concurrently with the increase in the number and ability of our competitors our markets for textile products have been stricted." "

re

As to agriculture, the Commission says that "the serious effect which the great depression in the agricultural industry has produced" is brought about by "the extreme lowering of prices" due to "the extension of American farming," so that the cultivation of "much of

1 Final Rep. Royal Commission, par. 4.

Ibid., par. 19.

3 Ibid., par. 20.