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•and induce foreigners to buy from us rather than from other countries, by a cheapness which we artificially produced, by paying part of the price for them out of our own taxes. This is a stretch beyond the point jet reached by any private tradesman in his competition for business. No shopkeeper, I should think, ever made a practice of bribing customers by selling goods to them at a permanent loss, making it up to himself from other funds in his
The principle of the Mercantile Theory is now given up even by writers and governments who still cling to the restrictive system. Whatever hold that system has over men's minds, independently of the private interests exposed to real or apprehended loss by its abandonment, is derived from fallacies other than the old notion of the benefits of heaping up money in the country. The most -effective of these is the specious plea •of employing our own countrymen and our national industry, instead of feeding and supporting the industry of foreigners. The answer to this, from the principles laid down in former chapters, is evident. Without revert ing to the fundamental theorem discussed in an early part of the present treatise,* respecting the nature and sources of employment for labour, it is sufficient to say, what has usually been said by the advocates of free trade, that the alternative is not between employing cur own people and foreigners, but between employing one class and another of our own people. The imortcd commodity is always paid for, irectly or indirectly, with the produce of our own industry: that industry being, at the same time, rendered more productive, since, with the same labour and outlay, we are enabled to possess ourselves of a greater quantity •of the article. Those who have not well considered the subject are apt to suppose that our exporting an equivalent in our own produce, for the foreign -articles we consume, depends on contingencies—on the consent of foreign
* Supra, pp. 49-55.
countries to make some corresponding relaxation of their own restrictions, or on the question whether those from whom we buy are induced by that circumstance to buy more from us; and that, if these things, or things equivalent to them, do not happen, the payment must be made in money. Now, in the first place, there is nothing more objectionable in a money payment than in payment by any other medium, if the state of the market makes it the most advantageous remittance; and the money itself was first acquired, and would again be replenished, by the export of an equivalent value of our own products. But, in the next place, a very short interval of paying in money would so lower prices as either tc stop a part of the importation, or raise up a foreign demand for our produce, sufficient to pay for the imports. I grant that this disturbance of the equation of international demand would be in some degree to our disadvantage, in the purchase of other imported articles; and that a country which prohibits some foreign commodities, does, caterii paribus, obtain those which it does not prohibit, at a less price than it would otherwise have to pay. To express the same thing in other words; a country which destroys or prevents altogether certain branches of foreign trade, thereby annihilating a general gain to the world, which would be shared in some proportion between itself and othei countries—does, in some circumstances, draw to itself, at the expense of foreigners, a larger share than would else belong to it of the gain arising from that portion of its foreign trade which it suffers to subsist. But even this it can only be enabled to do, if foreigners do not maintain equivalent prohibitions or restrictions against its commodities. In any case, the justice or expediency of destroying one of two gains, in order to engross a rather larger share of the other, docs not require much discussion : the gain, too, which is destroyed, being, in proportion to the magnitude of the transactions, the larger of the two, since it is the one which capital,
Jet to itself, is supposed to seek by preference.
Defeated as a general theory, the Proteclionist doctrine finds support in «omc particular cases, from considerations which, when really in point, involve greater interests than mere saving of labour; the interests of national .subsistence and of national defence. The discussions on the Corn Laws liave familiarized everybody with the plea, that we ought to be independent of foreigners for the food of the people; and the Navigation Laws .were grounded, in theory and profession, on the necessity of keeping up a "nursery of seamen" for the navy. On this last subject I at once admit, that the object is worth the sacrifice; and that a country exposed to invasion by sea, if it cannot otherwise have sufficient ships and sailors of its own to secure the means of manning on an .emergency an adequate fleet, is quite right in obtaining those means, even •at an economical sacrifice in point of cheapness of transport. When the English navigation laws were enacted, the Dutch, from their maritime skill and their low rate of profit at home, were able to carry for other nations, England included, at cheaper rates than those nations could carry for themselves: which placed all other countries at a great comparative disadvantage in obtaining experienced seamen for their ships of war. The Navigation Laws, by which this deficiency was remedied, and at the same timo a blow struck against the maritime power of a nation with which England was then frequently engaged in hostilities, were probably, though .economically disadvantageous, politically expedient. But English ships and sailors can now navigate as cheaply as those of any other country; maintaining at least an equal competition with the other maritime nations even in their own trade. The ends which may once have justified Navigation Laws, require them no longer, and afforded no reason for maintaining this invidious exception to the general rule office trade.
With regard to subsistence, the plea
of the Protectionists has been so often and so triumphantly met, that it requires little notice here. That country is the most steadily as well as the most abundantly supplied with food, which draws its supplies from the largest surface. It is ridiculous to found a general system of policy on so improbable a danger as that of being at war with all the nations of the world at once; or to suppose that, even if inferior at sea, a whole country could be blockaded like a town, or that the growers of food in other countries would not be as anxious not to lose an advantageous market, as we should bo not to be deprived of their corn. On the subject, however, of subsistence, there is one point which deserves more especial consideration. In cases of actual or apprehended scarcity, many countries of Europe are accustomed to stop the exportation of food. Is this, or not, sound policy? There can be no doubt that in the present state ot international morality, a people cannot, any more than an individual, bo blamed for not starving itself to feed others. But if the greatest amount of good to mankind on the whole, were the end aimed at in the maxims of international conduct, such collective churlishness would certainly be condemned by them. Suppose that in ordinary circumstances the trade in food were perfectly free, so that the price in one country could not habitually exceed that in any other by more than the cost of carriage, together with a moderate profit to the importer. A general scarcity ensues, affecting all countries, but in unequal degrees. If the price rose in one country more than in others, it would be a proof that in that country the scarcity was severest, and that by permitting food to go freely thither from any other coun try, it would be spared from a less urgent necessity to relieve a greater. When the interests, therefore, of all countries are considered, free exportation is desirable. To the exporting country considered separately, it may, at least on the particular occasion, be an inconvenience: but taking into account that the country which is now the friver, will in some future season he the receiver, and the one that is benefited by the freednm, I cannot but think that even to the apprehension of food-rioters it might be made apparent, that in such cases they should do to others what they would wish done to themselves.
In countries in which the system of Protection is declining, but not yet wholly given up, such as the United States, a doctrine has come into notice which is a sort of compromise between free trade and restriction, namely, that protection for protection's sake is improper, but that there is nothing objectionable in having as much protection as may incidentally result from a tariff framed solely for revenue. Even in England, regret is sometimes expressed that a "moderate fixed duty" was not preserved on corn, on account of the revenue it would yield. Independently, however, of the general impolicy of taxes on the necessaries of life, this doctrine overlooks the fact, that revenue is received onlv on the quantity imported, but that tlie tax is paid on the entire quantity consumed. J o make the public pay much that the treasury may receive a little, is not an eligible mode of obtaining a revenue. In the case of manufactured articles the doctrine involves a palpable inconsistency. The object of the duty as a means of revenue, is incorsistent with its affording, even incidentally, any protection. It can only operate as protection in so far as it pi events importation; and to whatever degree it prevents importation, it affords no revenue.
The only case in which, on mere principles of political economy, protecting duties can be defensible, is when they are imposed temporarily (especially in a young and rising nation) in hopes of naturalizing a foreign industry, in itself perfectly suitable to the circumstances of the country. The superiority of one country over another in a branch of production, often arises only from having begun it sooner. There may be no inherent advantage on one part, or disadvantage on the othe r, but only a present superiority of
acquired skill and experience. A country which has this skill and experience yet to acquire, may in other respects be better adapted to the production than those which were earlier in the field: and besides, it is a just remark of Mr. Rae, that nothing has a. greater tendency to promote improvements in any branch of production, than its trial under a new set of conditions. But it cannot be expected that individuals should, at their own risk, or rather to their certain loss, introduce a new manufacture, and bear the burthen of carrying it on until the producers have been educated up to the level of those with whom the processes are traditional. A protecting duty, continued for a reasonable time, will sometimes be the least inconvenient mode in which the nation can tax itself for the support of such an experiment. But the protection should be confined to cases in which there is good ground of assurance that the industry which it fosters will after a time be able to dispense with it; nor should the domestic producers ever be allowed to expect that it will be continued to them beyond the time necessary for a fair trial of what they are capable of accomplishing.
The only writer of any reputation as a political economist, who now adheres to the Protectionist doctrine, Mr. H. C. Carey, rests its defence, in sn economic point of view, principally on two reasons. One is, the great saving in cost of carriage, consequent on producing commodities at or very near to the place where they are to be consumed. The whole of the cost of carriage, both on the commodities imported and on those exported in exchange for them, he regards as a direct burthen on the producers, and not, as is obviously the truth, on the consumers. On whomsoever it falls, it is, without doubt, a burthen on tho industry of the world. But it is obvious (and that Mr. Carey does not see it, is one of tn« many siirpris'ng things in his book) that the burthen is only borne for a more than equivalent advantage. If the commodity is bought in a foreign country with 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 country is 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 manufactures through the medium of her corn and cotton, than she loses in cost of carriage, the capital employed in producing 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 may sometimes be economically defensible; on condition, however, that it be strictly limited in point of time, and provision be made that during the latler part of its existence it he 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 actually 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
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 progressively exhausting the soil of the Eastern, and even of the older Western States, and that both are already faf less productive than formerly, is credible in itself, even if no one bore witr ness to it. But what I have already said respecting cost of carriage, is true al o of the cost of manuring. Free trade does not compel America to export corn; she would cease to do so, if it ceased to be to her advantage. As, then, she would not persist in exporting raw produce and importing manufactures, 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 fertility, the cultivation of which enables hur, 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.*
• To this Mr. Carey would reply (indeed, he has already eo replied in advance), that of all commodities, manure is the least susc-ptible of being conveyed to a distance. This is true of sewage, and of stable manure, but not true of the ingredients to whxh those manures owe their etliciency. These, on the contrary, are chiefly substances containing
For these obvious reasons, I hold Mr. Carey's economic arguments for Protectionism tobe 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 mora 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 bo overcome, the United States, with their free institutions, their universal schooling, and their omnipresent press, are the people to do it; but whether this isipossible 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
(Treat fertilizing power 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, muinly concerns the phosphates j 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 suro to bo into any country where the conditions of industry make it worth while to pay the | price. I
modify the existing method of disposing of the unoccupied lands, by raising their price; instead of lowering 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 nocessarv 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 bringing a manufacturing population to the doors of the Western farmer. Boston and Now 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 advantage 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 channels, 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 tho productive powers of the world, and tire mother country does not gain so much as she makes the colony lose. If, therefore, the mother country refuses to acknowledge any reciprocity of obligation, 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 corresponding 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 Frotec