capital loaned in foreign countries; 3, the sale of stocks (Eƒfecten) to foreign countries as well as new loans to which the home country makes in foreign parts; 4, remittances from foreign countries to foreigners sojourning in the home country, and money brought with them by travelers and emigrants; 5, inheritances, pensions and extraordinary payments from foreign countries. Then, too, on the debit-side, belong the corresponding counter-items. If we, in this way, take a survey of the whole world, we shall perceive a treble current of the precious metals. The first and most regular goes, in long lines, from mining countries, over to the commercial countries of the world, and distributes the newly acquired gold and silver as commodities according to the wants of the coinage, of manufactures etc. The second oscillates, as it were, in short waves from country to country, in order to adjust the plus or minus for the time being of payment-balances. Lastly, regular sudden currents, with slow subsequent counter-currents, when single economic districts require to make extraordinary drafts or shipments of the precious metals, by reason of bad harvests, war, a disturbed double standard etc.

D. Since international indebtedness has so much increased, precisely the richest nations may have the greatest regular excess of exports over imports; partly because of the great amount of capital etc., which they possess in foreign countries; partly because of the great development of their system of credit in the interior, by means of which they find substitutes for so great a part of the metallic currency.8

Compare Soetbeer in Hirth's Annalen des deutschen Reiches, 1875, p.

731 ff.

8 British Europe had from 1854 to 1863, a yearly surplus amount (Mehrbetrag) of imports of at least 266, and at most 1190 millions of marks, in the average, 764 millions; from 1864 to 1873, of at least 802 millions, and at most 1388 millions, an average of 1104 millions; whereas, on the other hand, Australia, besides its great exportation of gold, exhibits a great excess of exports of commodities over imports. France, too, from 1867 to 1869, had attained to an average surplus importation (Mehreinfuhr) of 211 million marks; which is related to the fact that, according to L. Say, it received about from

SECTION V.

THE ADVANTAGES OF INTERNATIONAL TRADE.

The truth that no exportation is permanently possible without importation, and that, in international trade, also, both sides better their condition, was clear to the Italians in the fifteenth century, and in the sixteenth and seventeenth centuries to the Netherlanders.1

Every nation can, through its instrumentality, for the first time, acquire not only those commodities which nature entirely refuses to it, but such also which it can itself produce only at a great cost. And here it is not so much the absolute costs

600 to 700 million francs a year in interest from foreign countries; and that from 200 to 300 million francs were expended by foreigners etc., traveling in France. Similarly, in the case of governing countries vis-a-vis of their dependencies; whence even the old mercantilists entertained no doubt of the enrichment of the former. Thus France, in 1787 ff., had a yearly importation of 613 million livres, and an exportation of 448 millions, because the colonies sent to France 150 millions more than they drew therefrom. (Chaptal, De l'Industrie, Fr., I, 134.) Hungary, from 1831 to 1840, had a yearly exportation of 46 million florins to Austria, and an importation of only 30 millions. (List, Zollvereinsblatt, 1843, No. 49) Algiers drew from France in 1844 to the amount of 83 mill. n francs, and found a market there for only 8 millions (Moniteur), which no one will consider an enrichment of France. The great preponderance of French exports in 1831, 1848 and 1849, of Austrian, between 1874 and 1876, a sign of diminished purchasing capacity! When England, in March, 1877, imported to the amount of £35,230,000, and exported to the amount of £16,921,000 (against £27,451,000 and £17,739,000 in March, 1876), the Economist sees therein a sign that many outstanding debts were called in.

2

1 M. Sanudo, in Muratori Scriptores, XXII, 950 ff., and the Netherland decree of February 3, 1501, in the Journal des Economistes, XIII, 304. Then, Salmasins, de Usuris (1638), p. 197. Child, Becher and Temple had all made their studies in Holland. Compare, besides, even Plato, De Rep., II, 371. F. S. Mill rightly calls it a remnant of the mercantile system that Adam Smith still saw the principal utility of foreign trade in the market for the home production which is thereby increased. But this utility is to be looked for not so much in what is exported as in what is imported. (Principles, II, ch. 17, 4.)

3

of production as the comparative which are decisive. The country A may be superior to the country B in all kinds of productiveness; but when this superiority for the group of commodities & amounts to only 50 per cent., and for the group y, on the other hand, to 100 per cent., it is to the interest of A, which possesses only a limited quantity of the factors of production, to produce a surplus of the commodities y, and to exchange that surplus against what it wants of x. B, also, would willingly agree to this, even if it were not to get the commodities y entirely as cheap as A might supply them, but still decidedly cheaper than their production would cost in B itself. But, if both parties derive advantage from international trade, there is no necessity whatever that this advantage should be equally great on both sides. As in every struggle over prices, the gain here also is greates: on the side of the nation whose desire to hold fast to their own commodities is farthest

8 Compare v. Mangoldt, Grundriss der V. W. L., 185 ff. By the English, the discovery of this truth is attributed to Ricardo, Principles, ch. 7. Compare the further development in F. Mill, Elements (1821), III, 4, 13 seq.; Torrens, The Budget (1844) and F. S. Mill, Essays on some unsettled Principles of Political Economy (1844), No. 1, and Principles, III, ch. 18 ff. But even Facob, Grundsätze der Polizeigesetzgebung (1809, p. 546 ff.), was acquainted with the truth that generally both sides gained, but the one party, possibly more than the other. According to Lotz, Revision (1811), I, 161, the gain and loss of each party rises and falls in proportion to the difference between the degrees of value which each party, so far as he is himself concerned, attaches to the goods given and the goods received. And even Cantillon, Nature du Commerce (1155), p. 226, 369 ff., had a presentiment of the reason why countries having a low value in exchange of money can continue notwithstanding to sell in foreign countries. And so, too, Hume, Essays (1752), On Interest, who, without looking through the spectacles of the mercantile system, perceived that countries with a flourishing trade must necessarily draw much gold and silver to themselves. Recently, Cairnes has shown by practical examples that Australia imports Irish butter and Norwegian wood, and the Barbadians meat and flour from New York, although both might themselves produce such articles cheaper. (Essays etc., 1873. Leading Principles, 1874, p. 379.)

4 Thus a Kaulbach might more expertly ornament his own door and window frames than an ordinary room-painter, but does not do so, because he can employ his time to better advantage.

from being outweighed by the want of the foreign commodity, and which, at the same time, employs most productively the equivalent received in imports in exchange for its exports.5 Yet, in estimating this productiveness, it is necessary to take the whole national life into consideration.6

The international distribution of the precious metals is subject to the same law. These, also, are procured most cheaply by the nation which, directly or indirectly (by the production of counter values wished for by the whole world), employs the most productive economic activity upon them, and at the same time (it may be by especially well developed credit), is in the least urgent need of them. Therefore, on the whole, their value in exchange is wont to be lowest among the richest

Even Law, Money and Trade, p. 31, was of opinion, that when a nation consumes its imports which are greater than its exports, it grows poorer, not in consequence of the importation, but of the consumption. Quesnay calls attention to the plus on moins de profit qui résulte des marchandises mêmes que l'on a vendues et de celles que l'on a achetées. Souvent la perte est pour la nation qui reçoit un surplus en argent, et cette perte se trouve an préjudice de la distribution et de réproduction des revenus. (Max. génér., 24.)

• Rau distinguishes principally whether importation brings articles of luxury or means of acquisition (Erwerbstamm) into the country. (Ansichten der V. W., 163.) Similarly, de Cazeaux, Elements d' Economie privée et publique (1825), p. 188 ff. Schmitthenner, Zwölf Bücher vom Staate (1839), I, 497. "A favorable balance of trade does not make a people richer because they receive the metals for other values, but because they produce and sell more than they purchase and consume; the result of which naturally is that the difference must consist in values capable of being capitalized." Kaufmann draws a distinction according as the imported goods come into the country in the form of dead or interest-bearing capital. He illustrates his view by the case of a peasant who sells his seed-corn in order to purchase a finer hat with the proceeds. (Untersuchungen, I, 96, 81 seq.)

International trade makes imported commodities cheaper and exported commodities dearer, but the aggregate of consumers gain more in the former case than they lose in the latter, because they now enjoy the blessings of the international division of labor. But, even with this general enrichment, single classes of the people, and even the majority, may have to suffer; as, for instance, when in the exchange of corn against iron, the cheapening of the iron profits the people less than the consequent dearness of corn injures them. (Fawcett, Manual, 391.)

and most highly cultivated nations. Such a relative cheapness of gold and silver is not only a symptom of economic power, but considering the preeminent energy of these very commodities, at the same time, a means to procure most foreign commodities with a smaller expenditure of one's own forces." Hence, a great change in the distribution, hitherto usual, of the precious metals, produced, possibly, by great advances made in production here, or by an increase in consumption there, by means of commercial prohibitions etc., may be just as advantageous to the country which receives more as hurtful for the country which pays more; 10 and both, all the more as the

or

8 "Gold and silver are by the competition of commerce distributed in such proportions amongst the different countries of the world as to accommodate themselves to the natural traffic which would take place if no such metals existed and the trade between countries were purely a trade of barter." (Ricardo, Principles, ch. 7.) In most direct opposition to the mercantile system, he represents the distribution of the precious metals to be not the cause but the effect of national wealth. A nation rapidly growing in wealth will obtain and keep a larger quota of the general supply of gold and silver. (The high Price of Bullion, 1810.) On the other hand, it depends on the one-sided abstraction with which Ricardo loves to pursue certain assumptions, that every exportation of money is made to signify a peculiar cheapness of money, and vice versa. (Opposed by Malthus, Edinb. Rev., Febr., 1811.) Carey's frequently repeated assertion, that gold and silver always flow towards those markets where they are cheapest (Principles of S. Science, I, 150, and passim), confounds cause and effect.

Compare § 126, and even Kaufmann, Untersuchungen, I, 75 seq.

10 Let us suppose that, hitherto, the English had supplied their demand for wine from France, and paid therefor in commodities made of steel; and that now France prohibits the importation of the latter and requires gold instead. If the English take this gold out of their own circulation, the value in exchange of the gold which remains to them rises; the prices of all commodities fall, state debts and private debts become more oppressive etc. If, to avoid this, they send their steel wares, which France has rejected, to California, to obtain gold there in exchange, they find that California has as much of steel wares as it requires, and that it can be induced to extend its consumption of them only by a corresponding lowering of their price. But if, on the other hand, the gold which has flowed towards France has produced a rise in the price of commodities, and a decrease in the exportation of commodities; and has then flowed out of the country, to Germany for instance; England may in consequence be placed in a position to effect its payments for