of American products which he sells in Europe. And let us suppose further that he realizes the same profits on both voyages that A. did. It is evident that the transfer of the principal and the profits of the American merchant is balanced by the transfer of the principal and the profits of the European merchant and there is no "balance of trade." Even before the return voyage of either, as well as afterwards, the sum of the imports was equal to the sum of the exports. Both merchants are richer by the profits they have made, and the inhabitants of both countries are richer, for certain inhabitants of the United States have got what they needed more in exchange for something they needed less and certain inhabitants of Europe have done the same. There has been an economic gain all around and the merchants who managed these exchanges have received their reward for doing so.

MORE ERRONEOUS PROTECTIONIST FIGURING

We will suppose that A. undertakes another venture of the same kind. Again he sends to Europe from the United States a cargo costing him $200,000. But the vessel founders in a gale on the outward voyage and everything is lost. He charges off on his books a loss of $200,000. Along comes the same benighted protectionist antiquary in economics, and, finding on the custom house rec

ords that $200,000 of American products has been exported, with no imports to offset it, he comes to the conclusion that the country has made a gain of $200,000 in exports!

If B. makes the same second experiment with the same result of losing the whole venture, the same sort of European protectionist, examining the custom house records of the country the ship sailed from, would come to the same sapient conclusion as to the gain by B.'s country. But A. and B. know better. They know they have gone through unfortunate experiences and are poorer. Such is the danger that arises from the use of figures without knowing what stands behind them, especially when so used by protectionists who deride free traders as visionary and impractical.

INCREASE OF EXPORTS IS NECESSARILY ATTENDED BY INCREASE OF IMPORTS

Exports are often supposed to be of more importance than imports, and hence the attempts of protectionists to foster our exports and to repress imports (by taxing them through customs duties). This is due to the mistaken notion that commerce benefits one party and injures the other and that, by superior Yankee cunning, with the aid of "protection," we can so arrange our commerce with the rest of the world that Americans will grow richer

by it while all foreigners will grow poorer. It has been bolstered up by that pure fiction of untrained imagination, without regard to facts, that we are becoming poorer if we import more than we export and are growing richer if we export more than we import, measured in terms of money. Only a few years ago even thinking men were alarmed if the results of a year's commerce showed what was called "a balance of trade against us" to be settled by the shipment of gold. If this alleged balance were settled by the shipment of pig iron or copper bars, no one would worry, but when settled by the shipment of gold it was thought that the country was growing poorer-oblivious of the fact that we sent abroad whatever there was more demand for there than here, and must expect to receive in return whatever there was more demand for here than there-prices being the registers of these respective demands. This may be iron or copper or gold or other commodity constituting wealth. Gold, then, is a commodity, like other products of man's labor, and, like other commodities, it flows from any place where it is less needed to any place where it is more needed; and in return some other commodity flows back to replace it from the place where it is less needed to a place where it is more needed, to the benefit of both parties. Commerce is not a onesided transaction, therefore, but a system of exchange carried on with mutual benefit to all.

Exporting is as necesary as importing, importing is as necessary as exporting, one cannot exist without the other, as one increases, so does the other.

CHAPTER III

COMMERCE (CONTINUED)

THE SUM OF THE IMPORTS IS EQUAL TO THE SUM OF THE EXPORTS

VEN if at the end of a year there is apparently

EVE

a balance one way or the other, what of it? There seems to be in popular belief some mysterious virtue attached to the period of time in which the earth revolves around the sun and the supposition that commercial intercourse between the inhabitants of different countries must come out square at the end of that period, known to us as a year. When we say that the sum of the imports is equal to the sum of the exports and that when one increases so does the other, what is meant is that this is a general statement that is true in the long run. They may not balance in any one day, one month, or one year, but in the long run, to vary the form of this statement, the sum of the exports is equal to the sum of the imports. Nor is this statement to be limited in its operation to commerce between the inhabitants of two countries only. If our exports to the inhabitants of country A. are five hundred millions in amount and our exports to country B.