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go domestic produce in spite of the double cost of carriage, the fact proves that, heavy as that cost may be, the saving in cost of production outweighs it, and the collective labour of the ... 1S - on the whole better remunerated than if the article were produced at home. - Cost of carriage is a natural protecting duty, which free trade has no power to abrogate: and unless America * gained more by obtaining her manu*** factures through the medium of her corn and cotton, than she loses in cost of carriage, the capital employed in roducing corn and cotton in annually increased quantities for the foreign market, would turn to manufactures instead. The natural advantage attending a mode of industry in which there is less cost of carriage to pay, can at most be only a justification for a temporary and merely tentative protection. The expenses of production being always greatest at first, it may happen that the home production, though really the most advantageous, may not become so until after a certain duration of pecuniary loss, which it is not to be expected that private speculators should incur in order that their successors may be benefited by their ruin. I have therefore conceded that in a new country, a temporary protecting duty . sometimes be economically defensible; on condition, however, that it be strictly limited in point of time, and provision be made Xhat during the latter part of its existence it be on a gradually decreasing scale. Such temporary protection is of the same nature as a patent, and should be governed by similar conditions. The remaining argument of Mr. Carey in support of the economic benefits of Protectionism, applies only to countries whose exports consist of agricultural produce. He argues, that by a trade of this description they .# send away their soil; the distant consumers not giving back to the land of the country, as home consumers would do, the fertilizing elements which they abstract from it. This argument deserves attention, on account of the physical truth on which

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it is founded; a truth which has only lately come to be understood, but which is henceforth destined to be a permanent element in the thoughts of statesmen, as it must always have been in the destinies of nations. To the question of Protectionism, however, it is irrelevant. That the immense growth of raw produce in America to be consumed in Europe, is proessively exhausting the soil of the astern, and even of the older Western States, and that both are already far less productive than formerly, is credible in itself, even if no one bore wit.

ness to it. But what I have already

said respecting cost of carriage, is true

also of the cost of manuring. Free trade does not compel America to ex

port corn; she would cease to do so, if it ceased to be to her advantage. As,

then, she would not persist in export.

ing raw produce and importing manu

factures, any longer than the labour

she saved by doing so, exceeded what the carriage cost her; so, when it became necessary for her to replace in

the soil the elements of fertility which

she had sent away, if the saving in

cost of production were more than

equivalent to the cost of carriage and

of manure together, manure would be

imported, and if not, the export of corn

would cease. It is evident that one of

these two things would already have

taken place, if there had not been near

at hand a constant succession of new

soils, not yet exhausted of their fer.

tility, the cultivation of which enables

her, whether judiciously or not, to

postpone the question of manure. As

soon as it no longer answers better to

break up new soils than to manure

the old, America will either become a

regular importer of manure, or will

without protecting duties grow corn

for herself only, and manufacturing for

herself, will make her manure, as

Mr. Carey desires, at home.*


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For these obvious reasons, I hold Mr. Carey's economic arguments for Protectionism to be totally invalid. The economic, however, is far from being the strongest point of his case. American Protectionists often reason extremely ill, but it is an injustice to them to suppose that their Protectionist creed rests upon nothing superior to an economic blunder: many of them have been led to it much more by consideration for the higher interests of humanity, than by purely economic reasons. They, and Mr. Carey at their head, deem it a necessary condition of human improvement that towns should abound; that men should combine their labour, by means of interchange, with near neighbours—with people of pursuits, capacities, and mental cultivation different from their own, sufficiently close at hand for mutual sharpening of wits and enlarging of ideas—rather than with people on the opposite side of the globe. They believe that a nation all engaged in the same, or nearly the same, pursuit —a nation all agricultural—cannot attain a high state of civilization and culture. And for this there is a great foundation of reason. If the difficulty can be overcome, the United States, with their free institutions, their universal schooling, and their omnipresent press, are the people to do it; but whether this is possible or not, is still a problem. So far, however, as it is an object to check the excessive dispersion of the population, Mr. Wakefield has pointed out a better way: to

great fertilizing Fo in small bulk; substances of which the human body requires but a small quantity, and hence peculiarly susceptible of being imported ; the mineral alkalies and the phosphates. The question, indeed, mainly concerns the phosphates; for of the alkalies, soda is procurable everywhere, while potass, being one of the constituents of granite and the other feldspathic rocks, exists in many subsoils, by whose progressive decomposition it is renewed; a large quantity also being brought down in the deposits of rivers. As for the phosphates, they, in the very convenient form of pulverised bones, are a regular article of commerce, largely imported into England, as they are sure to be into any country where the conditions of industry make it worth while to pay the price,

modify the existing method of dis. posing of the unoccupied lands, by raising their price; instead of lower. ing it, or giving away the land gratuitously, as is largely done since the passing of the Homestead Act. To cut the knot in Mr. Carey's fashion, by Protectionism, it would be necessary that Ohio and Michigan should be protected against Massachusetts as well as against England : for the manufactories of New England, no more than those of the old country, accomplish his desideratum of bring. ing a manufacturing population to the doors of the Western farmer. Boston and New York do not supply the want of local towns to the Western Prairies, any better than Manchester; and it is as difficult to get back the manure from the one place as from the other. There is only one part of the Protectionist scheme which requires any further notice: its policy towards colonies, and foreign dependencies; that of compelling them to trade exclusively with the dominant country. A country which thus secures to itself an extra foreign demand for its commodities, undoubtedly gives itself some advan. tage in the distribution of the general gains of the commercial world. Since, however, it causes the industry and capital of the colony to be diverted from chamnels, which are proved to be the most productive, inasmuch as they are those into which industry and capital spontaneously tend to flow; there is a loss, on the whole, to the productive powers of the world, and the mother country does not gain so much as she makes the colony lose. If, therefore, the mother country refuses to acknowledge any reciprocity of obli

gation, she imposes a tribute on the

colony in an indirect mode, greatly more oppressive and injurious than the direct. But if, with a more equitable spirit, she submits herself to correo: restrictions for the benefit of the colony, the result of the whole transaction is the ridiculous one, that each party loses much, in order that the other may gain a little.

§ 2. Next to the system of Protec. tion, among mischievous interferences with the spontaneous course of industrial transactions, may be noticed certain interferences with contracts. One instance is that of the Usury Laws. These originated in a religious prejudice against receiving , interest on money, derived from that fruitful source of mischief in modern Europe, the attempted adaptation to Christianity of doctrines and precepts drawn from the Jewish law. In Mahomedan nations the receiving of interest is formally interdicted, and rigidly abstained from; and Sismondi has noticed, as one among the causes of the industrial inferiority of the Catholic, compared with the Protestant parts of Europe, that the Catholic church in the Middle Ages gave its sanction to the same prejudice; which subsists, impaired but not destroyed, wherever that religion is acknowledged. Where law or conscientious scruples F. lending at interest, the capital which belongs to persons not in business is lost to |. ductive purposes, or can be applied to them only in peculiar circumstances of ersonal connexion, or by a subterfuge. }. is thus limited to the capital of the undertakers, and to what they can borrow from persons not bound by the same laws or religion as themBelves. In Mussulman countries the bankers and money dealers are either Hindoos, Armenians, or Jews. In more improved countries, legislation no longer discountenances the receipt of an equivalent for money lent; but it has everywhere interfered with the free agency of the lender and borrower, by fixing a legal limit to the rate of interest, and making the receipt of more than the appointed maximum a penal offence. This restriction, though approved by Adam Smith, has reen condemned by all enlightened Persons since the triumphant onslaught znade upon it by Bentham in his “Letters on Usury,” which may still be referred to as the best extant writing on the subject. Legislators may enact and maintain Usury Laws from one of two motives: ideas of public policy, or concern for file interest of the parties in the con

tract; in this case, of one party only, the borrower. As a matter of policy, the notion may possibly be, that it is for the general good that interest should be low. It is however a misapprehension of the causes which influence commercial transactions, to suppose that the rate of interest is really made lower by law, than it would be made by the spontaneous play of supply and demand. If the competition of borrowers, left unrestrained, would raise the rate of interest to six per cent, this proves that at five there would be a greater demand for loans, than there is capital in the market to supply. If the law in these circumstances permits no interest beyond five per cent, there will be some lenders, who not choosing to disobey the law, and not being in a condition to employ their capital otherwise, will content themselves with the legal rate: but others, finding that in a season of pressing demand, more may be made of their capital by other means than they are permitted to make by lending it, will not lend it at all; and the loanable capital, already too small for the demand, will be still further diminished. Of the disappointed candidates there will be many at such periods, who must have their necessities supplied at any price, and these will ...}. find a third section of lenders, who will not be averse to join in a violation of the law, either by circuitous transactions partaking of the nature of fraud, or by relying on the honour of the borrower. The extra expense of the roundabout mode of proceeding, and an equivalent for the risk of non-payment and of legal penalties, must be paid by the borrower, over and above the extra interest which would have been required of him by the general state of the market. The laws which were intended to lower the price paid by him for pecuniary accommodation, end thus in greatly increasing it. These laws have also a directly demoralizing tendency. Knowing the difficulty of detecting an illegal pecuniary transaction between two persons, in which no third person is involved, sq long as it is the interest of both to keep the secret, legislators have adopted the expedient of tempting the borrower to become the informer, by making the annulment of the debt a part of the penalty for the offence; thus rewarding men for obtaining the property of others by false promises, and then not only refusing payment, but invoking legal penalties on those who have helped them in their need. The moral sense of mankind very rightly infamizes those who resist an otherwise just claim on the ground of usury, and tolerates such a plea only when resorted to as the best legal defence available against an attempt really considered as partaking of fraud or extortion. But this very severity of public opinion renders the enforcement of the laws so difficult, and the infliction of the penalties so rare, that when it does occur it merely victimizes an individual, and has no effect on general practice. In so far as the motive of the restriction may be supposed to be, not public policy, but regard for the interest of the borrower, it would be difficult to point out any case in which such tenderness on the legislator's part is more misplaced. A person of sane mind, and of the age at which persons are legally competent to conduct their own concerns, must be presumed to be a sufficient guardian of his pecuniary interests. . ]f he may sell an estate, or grant a release, or assign away all his property, without control from the law, it seems very unnecessary that the only bargain which he cannot make without its intermeddling, should be a loan of money. The law seems to presume that the money-lender, dealing with necessitous persons, can take ad. vantage of their necessities, and exact conditions limited only by his own pleasure. It might be so if there were only one money-lender within reach. But when there is the whole monied capital of a wealthy community to resort to, no borrower is placed under any disadvantage in the market merely by tos urgency of his need. If he cannot borrow at the interest paid by other people, it must be because he cannot give such good security: and

competition will limit the extra de. mand to a fair equivalent for the risk of his proving insolvent. Though the law intends favour to the borrower, it is to him above all that injustice is, in this case, done by it. What can be more unjust than that a person who cannot give perfectly good security, should be prevented from borrowing of persons who are willing to lend money to him, by their not being permitted to receive the rate of interest which would be a just equivalent for their risk * . Through the mistaken kindness of the law, he must either go without the money which is perhaps necessary to save him from much greater losses, or be driven to expedients of a far more ruinous description, which the law either has not found it possible, or has not happened, to interdict. Adam Smith rather hastily exE. the opinion, that only two inds of persons, “prodigals and projectors,” could require to borrow money at more than the market rate of interest. He should have included all persons who are in any pecuniary difficulties, however temporary their necessities may be. It may happen to any person in business, to be disapointed of the resources on which he ad calculated for meeting some engagement, the non-fulfilment of which on a fixed day would be bankruptcy. In periods of commercial diffieulty, this is the condition of many prosperous mercantile firms, who become competitors for the small amount of disposable capital which, in a time of general distrust, the owners are willing to part with. Under the English usury laws, now happily abolished, the limitations i. by those laws were felt as a most serious aggravation of every commercial crisis. Merchants who could have obtained the aid they required at an interest of seven or eight per cent for short periods, were j to give 20 or 30 per cent, or to resort to forced sales of goods at a still greater loss, Experience having obtruded these evils on the notice of Parliament, the sort of compromise took place, of which English legislation affords so many instances, and which helps to make our laws and policy the mass of inconsistency that they are. The law was reformed as a person reforms a tight shoe, who cuts a hole in it where it inches hardest, and continues to wear it. Retaining the erroneous principle as a general rule, Parliament allowed an exception in the case in which the ractical mischief was most flagrant. *: left the usury laws unrepealed, but exempted bills of exchange, of not more than three months' date, from their operation. Some years afterwards the laws were repealed in regard to all other contracts, but left in force as to all those which relate to land. Not a particle of reason could be given for making this extraordinary distinction; but the “agricultural mind” was of opinion that the interest on mortgages, though it hardly ever came up to the permitted point, would come up to a still higher point; and the usury laws were maintained that the landlords might, as they thought, be enabled to borrow below the market rate, as the corn-laws were kept up that the same class might be able to sell corn above the market rate. The modesty of the pretension was quite worthy of the intelligence which could think that the end aimed at was in any way forwarded by the means used. With regard to the “prodigals and projectors” spoken of by Adam Smith; no law can prevent a prodigal from ruining himself, unless it lays him or his property under actual restraint, according to the unjustifiable practice of the Roman Law and some of the Continental systems founded on it. The chly effect of usury laws upon a prodigal, is to make his ruin rather more expeditious, by driving him to a disreputable class of money-dealers, and rendering the conditions more onerous by the extra risk created by the law. As for projectors, a term, in its unfavourable sense, rather unfairly applied to every person who has a project; such laws may put a veto upon the prosecution of the most promising enterprise, when planned, as it generally is, by a person who does not ossess capital adequate to its successul completion. Many of the greatest P.E.

improvements were at first looke shyly on by capitalists, and had to wai long before they found one sufficiently adventurous to be the first in a new path: many years elapsed before Ste. phenson could convince even the en: terprising mercantile public of Liver. pool and Manchester, of the advantago of substituting railways for turnpike. roads; and plans on which great labour and large sums have been expended with little visible result, (the epoch in their progress when predictions of failure are most rife,) may be indefinitely suspended, or altogether dropped, and the outlay all lost, if, when the original funds are exhausted, the law will not allow more to be raised on the terms on which people are willing to expose it to the chances of an enter. prise not yet secure of success.

§ 3. Loans are not the only kind of contract, of which governments have thought themselves qualified to regulate the conditions better than the persons interested. . There is scarcely any commodity which they have not, at some place or time, endeavoured to make either dearer or cheaper than it would be if left to itself. The most plausible case for artificially cheapening a commodity, is that of food The desirableness of the object is in this case undeniable. But since the average price of food, like that of other things, conforms to the cost of production with the addition of the usual profit; if this price is not expected by the farmer, he will, unless compelled by law, produce no more than he requires for his own consumption: and the law therefore, if absolutely determined to have food cheaper, must substitute, for the ordinary motives to cultivation, a system of penalties. If it shrinks from doing this, it has no resource but that of taxing the whole nation, to give a bounty or premium to the grower or importer of corn, thus giving everybody cheap bread at the expense of all: in reality a largess to those who do not pay taxes, at the expense of those who do; one of the forms of a practice essentially bad, that of converting the working * into

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