tendency not to be checked: suppose that each and every new device comes to be adopted in all countries, and used in all with equal effectiveness. Then the ultimate consequences will be different from those that nowadays follow the introduction of improvements. No one country will then possess advantages in manufactures over others; no one will be able to export to another; trade between them in manufactured goods,-if the assumed conditions hold absolutely, will cease. All countries will secure in the same degree the benefit of the universalized inventions.

Such would be the inevitable outcome of complete equalization of the effectiveness of labor. The total income of a community is the product of its industry,-in the last analysis, of its labor. If labor is equally productive everywhere, differences in prosperity will cease. Then there will be no room for comparative advantages based on invention, peculiar effectiveness, better machinery, more skilful organization. The only trade between countries will be that based on unalterable climatic or physical advantages; such trade, for instance, as arises between tropical and temperate regions and between temperate regions having markedly different natural

resources.

This consummation will not be reached for an indefinite period; nay, probably it will never be reached. Certainly it is beyond the range of possibility in any future which we can now foresee. But some approach to it is likely to come in the relations between the more advanced countries. There is a tendency toward equalization in their use of machinery, and so in their general industrial conditions. For the United States especially, the twentieth century will be different from the nineteenth. The period of free land has been virtually passed. That great basis of high material prosperity and of high general wages no longer exists as broadly and strongly as it did during the first century of our national life. The continued maintenance of a prosperity greater than that of England and Germany and France must rest on other causes. Now that fresh land can no longer be resorted to by the expanding population, a higher effectiveness of labor must depend almost exclusively on better implements and higher skill,-on labor better led and better applied. It may be reasonably hoped that the United States will long remain the land of promise, in the van of material progress;

but the degree of difference may be less than it was. This lessening difference will come about, probably, not because the United States will fall back but because other countries will gain on her. Such has been the nature of the changed relation between England and the countries of the Continent during the last generation; and such, to go back earlier,—was the change in the relative positions of Holland and England in the course of the seventeenth and eighteenth centuries. England no longer retains the unmistakable leadership which she had over the Continent during the greater part of the nineteenth century. But she has not retrograded; the countries of the Continent have progressed. Such is likely to be the nature of the coming race between the United States and other advanced countries. And the outcome is one which every friend of humanity must welcome. It means diffused prosperity, economic and social progress.

For an indefinite time, however, differences in general industrial effectiveness will remain. They will obviously remain, so far as they rest upon natural causes,-differences in soil, in mineral wealth, in climate. They will remain also in many manufacturing industries in which physical causes are not decisive. Some countries, the United States among them, we may hope and expect, will use machinery better, will apply labor-saving appliances more freely. The people of the United States will direct their labor with greatest advantage to those industries in which their abilities tell to the utmost. The development of the different industries will unquestionably continue to be affected by the accidents of invention and of progress, by dominant personalities in this country and in that, by the historical development of aptitudes and tastes, by some causes of variations in industrial leadership that seem inscrutable. But a general trend is likely to persist; in the United States labor-saving devices will be adopted more quickly and more widely. . . . In the industries where machinery can be used to most effect, this country will continue to have a comparative advantage.

V

CAIRNES: INTERNATIONAL VALUES1

HE transactions of international trade are of course carried

on through the medium of money-that is to say, of gold and silver; and Ricardo has shown that the effect of the play of international demand is to produce such a distribution of the precious metals, and such a relative scale of prices in commercial countries, as on the whole to cause the trade of each country with all others to be carried on upon the same terms as it would be if conducted by barter. When this state of things is realized, the precious metals (so far as they are employed as a medium of exchange, and not as a staple of commerce) cease to pass from country to country; and international trade is in a condition of equilibrium." The point I desire now to call attention to is the condition of international demand which issues in this result.

The solution commonly given of this problem is that commercial equilibrium is attained when the value of the imports into a country, measured in gold or silver, the universal money of commerce, is equal to the value of the exports from that country. In the language of Mr. Mill, "the produce of a country exchanges for the produce of other countries at such values as are required in order that the whole of her exports may exactly pay for the whole of her imports.'

1 John Elliot Cairnes, Some Principles of Political Economy (1874), Part III, chap. iii.

2 The equilibrium of commerce may, accordingly, be defined for all countries, not being themselves producers of the precious metals, as that state of trade which results in maintaining the real exchanges, one year with another, at par. Where it happens, however, that a country produces gold or silver for export, a premium on the exchange is, in this case, the normal state of things. During the last twenty years the commercial equilibrium has been extensively disturbed in most countries-the necessary consequence of the large additions now being made to our stock of money.

Now, as a matter of fact, it very rarely happens that the whole exports of a country, even if we take an average of many years, exactly pay for the whole of its imports; nor can it be truly said that there is any tendency in the dealings of nations toward this result. The evidence of this is to be found in any statistical table showing the exports and imports of different countries. An examination of such a table will show that there are countries which constantly, and as a normal state of things, import largely in excess of their exportations, while there are others of which the exports as regularly exceed the imports. In other cases, again, the imports will be found for a time to have exceeded the exports, after which the relation is inverted, and the exports begin to outstrip the imports. With such facts before us we can not easily admit that an equalization of imports and exports is the necessary condition of a staple trade; and this being so, we have to consider what that condition is.

To elucidate this, a better example can not be found than the external trade of the United Kingdom. I take it as set forth in the Statistical Abstract for the years between 1856 and 1870 inclusive. During the whole of this time the imports remained constantly and largely in excess of the exports. At the commencement of the period the exports stood at, in round numbers, £115,000,000, the imports at £172,000,000; the imports thus exceeding the exports by the amount of £57,000,000 sterling. At the end, that is to say in the year 1870, the exports were £199,000,000, while the imports reached £303,000,000, showing a difference in favor of imports of £104,000,000; and the returns of the intervening years exhibit a constant predominance on the same side, and nearly in the same proportion. The question arises, How has this large excess of imports been paid for? The answer is, to a small extent it has been paid for in services, principally in the services of our mercantile marine, performing as it does a large proportion of the carrying trade of the world, but, in the main, it has not been paid for at all. It came to us from foreign nations, as all our imports have come, in the ordinary course of trade, but the proceeds on sale have never been returned in any form to those from whom the goods came: they were applied instead to the discharge of debts owing to us-debts, however, incurred on account of transactions wholly apart from our export trade. In point of fact, what has happened has been this: Great

Britain has for a long time occupied the position of a lender of capital to other nations; she has invested her capital freely in her own colonies; she has lent money to many countries for industrial undertakings, and has been a large purchaser of foreign stocks. On all these accounts foreign nations, including under this term our own colonies, have become her debtors, and, in discharge of their obligations accruing in the form of profits, interest, and dividends on stock, are compelled to send her, year by year, value to a large extent for which no payment in return is required. Here we find the explanation of the large normal excess of our imports over our exports. But an examination of the facts will further evince that this excess is, in the case of Great Britain, the indispensable condition of commercial equilibrium; that under any other circumstances the present relation of prices between her and foreign countries, or, what amounts to the same thing, the present proportion in which they exchange their products, could not be maintained. This will be evident if we consider what would be the consequence of an equality of value being established between British imports and exports, the financial relations of the country with the rest of the world being such as they are. Foreign nations would have to pay us, as now, for what we export, and for this, bills drawn against the goods they send us, that is, our imports, would exactly suffice. But they owe us besides, say a hundred millions, on account of dividends, interest, and other obligations. How are they to discharge this latter liability? It is evident they could do so only in one way, namely, by sending us gold to the value of the amount in question. An extensive influx of gold from foreign countries to Great Britain would thus set in, and-so long as the state of international prices, and therefore of international demand, remained at the point which had produced the equality of imports and exports -would continue. It is plain, however, that international prices and demand could not long remain steady under the circumstances supposed. The large and continued influx of gold into England would necessarily be attended by a rise of prices here, and a fall in foreign countries; and this would quickly lead to a change in the demand of England and of foreign countries for their respective products. England, in possession of enlarged monetary resources, and finding prices falling abroad, would extend her demand for