Jit QJarnell Mnioetaitg Jtliara. N. f . SItbravg Cornell University Library HF 1713.B99 Sophisms of free-trade and popular polit 3 1924 013 908 565 Cornell University Library The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013908565 SOPHISMS OF FREE-TRADE POPULAR POLITICAL ECONOMY EXAMINED. BY A BARRISTER. (sir JOHN BARNABD BTLES, JUDGE OF COUMON PLEAS.) "A nation, whether it consume its own productions, or with them purchase from abroad, can have no more to spend than it produces. Therefore, the supreme policy of every nation is to develop its own producing forces" FIRST AMERICAN, FROM THE NINTH ENGLISH EDITION, AS PUBLISHED BY THE MANCHESTER RECIPROCITY ASSOCIATION. MANCHESTER : JOHN HEYWOOD, 141 , and 143 DEANSGATE. LONDON : SIMPKIN, MARSHALL & CO. I I FHrLASEiiPHiA; HENRY CAREY BAIRD & CO., IDIDDSTBIAL FDBLISOEBS, BOOE8ELLEB8 AND UFORIEBS, 810 Walnut Stbeet. 1881. PREFACE TO THE AMERICAN EDITION. ' Sophisms of Free Teade," now for the first time presented to the American public through the medium of an American edition, is a volume which has long been famous in England, and deserves a widely ex- tended circulation in this country, especially at the present time, when the questions here brought under review are attracting so great a degree of public at- tention. The first English edition appeared in 1849, the ninth in 1870. Almost from the first hour of its appearance it took rank as one of the most acute and vigorous treatises within the entire range of economic literature, and it is not asserting too much to say that it holds that position at this moment. Neither have its arguments been successfully answered. The author, the Hon. Sir John Barnard Byles, Knt. Bachl., is a man who would occupy an eminent position in any country. Born at Stowmarket, Suffolk, 1801, he was called to the bar at the Inner Temple, 1831; went the Norfolk circuit; was appointed re- corder of Buckingham, 1840; serjeant at law, 1843; i IV PREFACE TO THE FIEST EDITION. If any who profess the doctrines of modern English political economy, should condescend to cast their eye on these pages, they will, no doubt, dissent from nearly all that is said on free-trade, population, pauperism, wages and currency. But among political economists,* as well as among their opponents, in England, France, Germany, and America, are to be found those who cherish the true spirit of scientific inquiry. That spirit is a simple devotion to the teuth, whatever it shall turn out to be, and an entire indifference to the results of inquiry, so that they be but TEUB.f Criticism and correction by such are not deprecated — ^they are respect- fully and earnestly invited. The vulgar, however, on both sides are incapable of independent judgment, take their opinions on trust, and mix up abstract and scientific truth with strong party feelings and predilections. They begin to read with a secret but irresistible wish before-hand that a particular doctrine should prove true. The discovery of truth is not given to such a disposition. On com- plex and really disputable subjects, what a man earnestly wishes to be true, he will find true. Reading and enquiry only serve to entrench him in his notions. Whether those notions be truth or error is the result, not of really free and unprejudiced inquiry, but of pre- vious accident. * Mr. Mill is an example. f "To be indifferent ■which of two opinions is true, is the right temper of the mind that preserves it from being imposed on, and disposes it to examine. This is the only direct and safe way to TKTTTH." — Locke. PREFACE TO THE FIEST EDITION. V Au apology is clue from a lawyer who presumes to meddle with subjects out of his own profession. He is, it is said, a man of narrow mind, and necessarily limited information. It is not for him to say (perhaps he could not say) that the imputation is unjust. But, by way of compensation, he has, on a subject of this nature, some advantages over others. That narrow and microscopic vision with which he is charged, does not altogether unfit him for the minute and steady examination of the abstract theories of political economy. He has no in- terest, except in the general welfare ; and living, as a mere lawyer does, retired from the world and general politics, he has a chance of being in a measure exempt from the prejudices of party, and from that fanaticism, which in politics and political economy, as well as in other things, sometimes, like an epidemic seizes the people, high and low. In France, Germany, Holland, and the United States, the general opinion of educated men on these subjects is very different from that which yet reigns here. In- deed, until lately, no Englishman, who should have ventured to dispute the passionate persuasion of the public, could have hoped for a fair and candid hearing. It was necessary to wait. As a brilliant Frenchman once said of fanaticism of a different sort, " II faut attendre que I'air soit purifi^." No one is more conscious of the defects to be found in these pages, than the writer. He is sensible that a more popular tone has been adopted than is perhaps quite appropriate to the severity of such inquiries. But VI PKEFACE TO THE FIEST EDITION. it was necessary. A mere dry dissertation, in the better style of political economists, about yards of cloth and quarters of corn, would never have had even a chance of being read. He trusts, however, that he has not been betrayed into any disrespectful or uncandid lan- guage towards those who think differently, and who are perhaps better informed. Lmdon October 31, 1849. CONTENTS. POSITIONS EXAMINED. CHAPTER I. " Political economy is a science.'''' . . . . 13 CHAPTER II. '* Le^slate on sound principles y . . . . 18 CHAPTER III. '* Let things alone — Laissez faire, laissez aller.^' , 22 CHAPTER IV. " Foreign commodities are always paid for by British commodities. THEREFORE, the purchase of foreign commodities encourages British industry as much as the purchase of British commodities.'''' 27 1* vii VIU CONTENTS. . CHAPTEE V. " Buy in the cheapest market.^' ... 42 CHAPTER VI. " If all countries practised free-trade, all countries ■would be gainers ." 53 CHAPTEE VII. " Protected manufactures are sickly ." ... 65 CHAPTEE VIII. '* Fas trop gouverner — Don't over-govern." . 75 CHAPTEE IX. " What is the good of Colonies ?" . . . 92 CHAPTEE X. " Protection would destroy external trade." . . 106 CHAPTER XI. " The distress of the country is owing to taxes, and the expenditure of government." . . . 114 CONTENTS. IX CHAPTER XII. PAOB " Increase of exports and imports is the index of national prosperity y 120 CHAPTER XIII. '■* All commodities should be rendered as cheap cu possible." 123 CHAPTER XIV. " Free importation is the source of plenty ; protection, of scarcity." 131 CHAPTER XV. ** England has a greater capital than any other country" ....... 134 CHAPTER XVI. " Free-trade for Ireland, and the evils of Ireland will work their own cure." . . . . . 139 CHAPTER XVII. " The currency should vary, as it would vary, if it were entirely metallic." . . . . 154 CHAPTER XVIII. " Higher wages will but increase population. " 1 65 X CONTENTS. CHAPTEE XIX. rAOB " It is preposterous to interfere with a man's manage- ment of his own property." . . . .171 CHAPTEE XX. ' ' Beware of having recourse to inferior soils. " . 177 CHAPTEE XXI. "Don't undertake to employ the able-bodied pauper productively." . . . . .187 CHAPTEE XXII. "Don't attempt to reduce the capital of the national debt. Let the taxes rather fructify in the pockets of the people." ...... 194 CHAPTEE XXIII. " Absenteeism is no evil." ..... 200 CHAPTEE XXIV. "Other nations will follow our example of free- trade." . . 202 CHAPTEE XXV. " A return to the protective policy will never be." . 204 CONTENTS. XI CHAPTER XXVI. PAUK " To raise the wages of labor is to impair the fund out of which wages are paid.^' • . . . 206 CHAPTER XXVII. ' Don't tax the nation for the benefit of a producing class. Take care of the consumer, and let the pro- ducer take care of himself .''' . . . . 221 CHAPTER XXVIII. " Individuals know their own interests, and may and should be left to take care of them in their own way; for the interest of individuals, and the interest of the public, which is but an aggregation of individuals, coincide.'" . . . . 226 CHAPTER XXIX. " England may be made the workshop of the world." 22S CHAPTER XXX. " War and invasion are but dangers of bygone ages." 236 CHAPTER XXXI. " The Navigation Laws were useless and in- jurious." ....... 244 Xii CONTENTS. CHAPTER XXXII. " Labor should be left to flow in its own natural channels." . • 250 CHAPTER XXXIII. " The value of everything must now be settled by universal and unregulated competition." . . 255 CHAPTER XXXIV. " Farming should be- carried on like any other trade" 259 CHAPTER XXXV. " Repeal the Bubble Act." 279 SOPHISMS OF FREE-TRADE AND ! CHAPTER I. '^Political economy is a science.'''' The fallacy seems to lie in using the present tense, instead of the future tense. Political economy will be a science. The political economy of Munn and Gee in 1750 was very different from the political economy of M'CuUoch and Mill * in 1850. But, perhaps, it was not more different than the political economy of M'Cul- loch and Mill now is, from what will be the political economy of 1950. If by a science be meant a collection of truths ascer- tained by experiment, and on which all well-informed men are agreed, then political economy is manifestly not yet a science. If by a science be meant a subject on which some little has gradually become known, but the great body of solid knowledge yet remains to be discovered by experience, observation, and patient thought, then, in- deed, in this lower sense, political economy is a science. * I desire to speak of Mr. Mill with the utmost respect, and the more so because on other recondite subjects, where he thinks himself to hare been in error, he has the candor to say so- 13 14 WHETHER POLITICAL ECONOMY But if political economy claim to be a science at all, she must • abate much of her pretensions, much of her dogmatism, descend to a lower rank, and adopt a more modest and inquiring tone ; she must learn to tolerate doubt, to endure contradiction. If she aspire to learn in the book of experience, she must expect as she turns over the leaves to meet with problems wholly unex- pected, and ultiinate solutions at variance with all pre- conceived notions ; she must make up her mind to see theory after theory supported by great names, and con- fidently propounded, yet after all rebuked and exposed by experiment; she must remember that there are twenty wrong courses of public policy to one right one, and that all the erroneous ones are often tried before the right one can be demonstrated by experience to be right. A slow, painful, humiliating road to knowledge — but the only true one. Other paths may lead to con- jecture or opinion more or less plausible ; this alone to certain and demonstrable knowledge. But what we want is, not to conjecture, but to know ; in the forcible language of the father of experimental philosophy, " baud belle et probabiliter opinari, sed certo et osten- sive scire." What experimental science is there in which the whole truth was discovered at once, or in the course of a few years? Much less are we to suppose that we have been favored with sudden and preternatural illu- mination on a subject so complex and difficult as politi- cal economy. If we would form a just estimate of our modern English notions on this matter, we must look back- wards, look around us, and look forward ; or we shall resemble the rustic, whose history and geography are circumscribed by his own life in his own parish. We must look backwards into times past. When modern political economists are spoken of as BE AT PRESENT A SCIENCE. 15 if nobody knew anything before them, and as if no- body will discover anything of moment after them, we may be sure that we hear the language of empiri- cism, not of science. " Vixere fortes ante Agamem- nona." There are many writers before Adam Smith, of whom posterity will form an estimate more favor- able than is now entertained. Bacon, Montesquieu, F^n^lon, Petty, Swift, and Voltaire will not hereafter be less esteemed because they did not use the parade of scientific terms, and were not embarrassed by modern and doubtful theories. The need of a political economy, very different from the inert and barren system now in fashion, is but too apparent to any one who looks around him. Modern society presents to the serious observer, as the conse- quences of past and present systems of political economy, practical results by no means flattering. The immense progress of physical science has multiplied a thousand- fold the means of producing wealth. There is in the overflowing and exhaustless bounty of nature, not only enough, but a superfluity for every one of the children of men. Yet some mysterious and invisible but im- passable barrier impedes its distribution, and shuts out the masses from the promised land. Portentous and gigantic social evils, present and approaching, mock the wisdom of the wise. Political economists ! Look at England's boundless wealth and hopeless poverty ; at Ireland's dearest chil- dren escaping for their lives, like Lot from the cities of the plain ! at the periodical alternations of manufactur- ing prosperity and manufacturing depression and star- vation! at the expanse of untilled or half-cultivated lands, spread abroad amidst a starving, idle, and con- gested population ! at your own differences and dis- agreements about rent, population, currency, wages, profits ! at the theories opposed to yours (not only in feshion and in power) in France, Germany, Eussia, and 16 WHETHEE POLITICAL ECONOMY America, but supported by the most original thinkers and greatest writers. Some of these writers have been unjust to you. They affirm that instead of a science, solid and practical, you are but the authors of a litera- ture, unsatisfactory, obscure, presumptuous, and which would be dangerous, were it not eminently tedious.* But we must also look forward with courage and confidence. The imperfect and rudimentary condition of the science of political economy, while it accounts for present evils, is for that very reason the sure ground of hope for the future. It is manifest that we have not yet hit on the true theory. But in the meantime, the tools and implements with which the new and true political economy is destined to work, are beginning to multiply around us. The Steam-engine, Steam-navi- gation, Railways, Mechanical Inventions, the Electric Telegraph, Modern Chemistry, have not appeared for nothing. A science of political economy will yet dawn that shall perform as well as promise — a science that will rain the riches of nature into the laps of the starv- ing poor. Men do not even yet dream of the pros- perity which is in store for all orders of the people. As in other sciences, so in political economy, each ac- cession of knowledge will not only be a step to further, but to greater acquisitions. True and solid knowledge will not only advance, but advance in a continually in- creasing ratio. The world now presents a variety of communities fe,r advanced in civilisation ; the field of experience is enlarged and diversified. But, besides or- dinary experience, there is an artificial experience, which is called experiment. At this moment the anxious and vigilant attention of theoretical and practical men is invited to vast expenments now in progress. It were to be wished that some other community, and not the noble British Empire, had been selected as the vile • M. Thiers. BE "AT PRESENT A SCIENCE, 17 corpus of experiment. We shall suffer much, and what is worse, the innocent will be the suiferers. We shall probably lose a large portion of our possessions. But we shall be wiser. We shall finally adopt the true policy, and after much tribulation enter a better state of things. Is it more correct to say that political economj, i* already a science, or that it will be one ? J 8 THE SPIEIT OP SYSTEM. CHAPTER II. " Legislate on sound principles ^ Which, being interpreted, means, "Stjeeendeu YOURSELF TO THE SPIRIT OP SYSTEM " — " CaREY OUT YOUR THEORIES." The SPIRIT OP SYSTEM, a fertile source of error, fer- tile in most sciences, is peculiarly so in political economy. It is a foe to solid knowledge ; the more insidious and fatal because it usually accompanies superior mental capacity, being very nearly allied to that love and relish of truth which distinguishes minds of a superior order.* The spirit of system consists in a tendency to reduce all phenomena to a few general rules, and to find a greater degree of order, symmetry, and simplicity in the natural, moral, or political world than really exists, or can exist. Instead of expanding the mind to the rich and endless * History shews that it is not the learned only ■whom the spirit of system fascinates and misleads : it is sometimes an epidemic passion, or fever, maddening all ranks down to the very popu- lace. Eepublican government has the charm of simplicity. The English and French nations have accordingly been seized, each in their turn, with a fanaticism for it. Straightway the blessings of prescriptive and stable government were sacrificed, and blood poured out like water, for an impracticable political theory. So, a few years ago, England was fascinated witli the specious and simple theory of free-trade. Tlie agricultural interest, the colonies, the shipping interest, the whole kingdom of. Ireland were dust in the balance ; the manufacturing towns, who were the most clamorous for the change, little dreaming that tliey would be the first and greatest sufferers. The enthusiasm is be- ginning to evaporate, and men will soon marvel how they ever came to be under its Influence. THE SPIEIT OF SYSTEM. 19 variety and subtilty * of nature or art, it would contract that variety to the narrow limits of the human under- standing. It finds ready a<3ceptance with all men ; for it flatters both the pride and the indolence of human . nature. It is much easier to comprehend and apply a few general rules than to understand the complicated structure and regulations of human society. Any man may -make a parade of knowledge by dogmatising about imaginary general principles, but to master facts, details, and the results of experience, is a long, toilsome, and humbling occupation. Men are not often undeceived who worship a few general principles, however erroneous. When a man has grown grey in the honest assertion of doctrines which he believed to be right, has spent in the endeavor to disseminate them his best years, depends on them for his reputation and self-approval, what a cruel fate to be undeceived — to discover that they are not only errone- ous, but mischievous ! Besides there is no longer vigor of mind left to straighten the erroneous bent of early life. Accordingly, we find that erroneous general prin- ciples last for a generation ; that to expect an inveterate theorist to abandon his theories is as reasonable as to expect him to slay his children. The seed of truth must be sown in the fresh and grateful soil of a new generation. Lord Baconf warns us of this tendency of the human *Subtilitas naturae snbtilitatem sensfts et intellectfts multis partibus superat. — Nov. Org. \ The following observations of Professor Playfair seem espe- cially to deserve the attention of political economists : " The idols of the tribe, or of the race, are causes of error founded on human nature in general, or on principles common to all mankind. ' The mind,' Lord Bacon observes, 'is not like a plain mirror which reflects the image of things exactly as they are : it is like a mirror of uneven surface, which combines its own figure with the figures of the object it represents.' " Among the idols of this class we may reckon the propensity which there is in all men to find in nature a greater degree of 20 THE SPIEIT OF SYSTEM. mind to expect a greater degree of order, regularity, and conformity with general rules than really exists.* He calls it, in his poetical but most appropriate language, an idol, and charges mankind in general, and philoso- phers especially, with gross idolatry at its shrine. Without saying of modern political economy, as of the city of old, that it is wholly given to idolatry, it may, without any breach of charity, be doubted, whether the worship of idols is anywhere more prevalent, or the sac- rifices more costly. Reader ! will you accompany me on a pilgrimage to the shrines ? Let us essay to visit them, not on the one hand as blind devotees, nor on the other as reckless order, simplicity, and regularity, than is actually indicated by observation. Thus, as soon as men perceived the orbits of the planets to return into themselves, they immediately supposed them to be perfect circles, and the motion in those circles to be uniform ; and to these hypotheses, so rashly and gratuitously assumed, the astronomers and mathematicians of all antiquity labored incessantly to reconcile their observations. " The propensity which Bacon has here characterised so well, is the same that has been, since his time, known by the name of the spii'it of system. The prediction that the sources of error would return, and were likely to infest science in its most flour- ishing condition, has been fully verified, with respect to this illu- sion, in the case of sciences which had no existence at the time when . Bacon wrote. When it was ascertained by observation that a considerable part of the earth's surface consists of mine- rals disposed in horizontal strata, it was immediately concluded that the whole exterior crust of the earth is composed, or has been composed, of such strata continued all round without in- terruption ; and on this, as on a certain and general fact, entire theories of the earth have been constructed. "There is no greater enemy which science has to struggle with than this propensity of the mind ; and it is a struggle from which science is never Ukely to be entirely relieved — because, unfortunately, the illusion is founded on the same principle from which our love of knowledge takes its rise." * * Intellectus humanus ex propiietate sAa facile supponit majo- rem ordinem et aequalitatem in rebus quam invenit. Et cum mulla sint in natura monodica, et plena impai-itatis, tamen affin- git parallela, et correspondentia, et relativa, quse non sunt.— Nov. Org.. THE SPIEIT OF SYSTEM. 21 scoffers and iconoclasts, but as unprejudiced and candid inquirers. As in all such cases, we shall be overwhelmed with obloquy. Our understanding and our motives will both be called in question. If we should be tempted to recriminate we will endeavor to resist the temp- tation. 22 LET THINGS ALONE. CHAPTER III. " Let things alone — Laissez faire, laissez passer^ One of the most common and invincible fallacies is this — ^that things are good by nature and spoiled by art. So said Rousseau of man as an individual; so many still say of human society. It is a common error; most young men fiiU into it, and are only undeceived by bitter experience. It is invincible, for, having its root deep in human nature, it springs again with every fresh generation. But it is nevertheless an error. Everything may be improved by culture. Nothing is so natural as art. The indigenous sloes and crabs and weeds of England, when cultivated and improved in orchards, and gar- dens, are plums and apples and flowers. Man without artificial culture, without intellectual, moral, religious education, is a stupid, sensual, ferocious, and disgust- ing savage. Such is natural, uncultivated man, not as poets paint him, or philosophers imagine him, but as travellers actually see him. The same human creature, subjected to early culture, instructed, disciplined, Chris- tianised, is but a little lower than the angels. Nor is artificial regulation less necessary to man in the aggregate than to man individually. Life, personal liberty and inviolability, family, property, reputation, are guarded by laws, complex and artificial, in proportion to the advanced stage of society. Personal injuries, if not entirely prevented, are nearly extirpated, by an artificial system of penal sanctions, and further diminished in number and intensity by the compensation which in LET THIJJGh ALOITE. 23 most cases the injured party is entitled to exact from the aggressor. The jealous and despotic supervision' and enforcement of the marriage contract by the state * is the artificial source of the endearing and humanising relationships of father and child, brother and sister, of family duties, family education, family restraints. With- draw the interference of the law, leave things alone, and families no longer exist, society relapses into barbarism. The institution of property, the spring of all industry/ and improvement, leans entirely on an artificial system of laws, civil and criminal, defining its limits, protect- ing its enjoyment, and securing its peaceable and cer- tain transmission. The vulgar eye, surveying the surface and admiring the achievements of modern society, penetrates not to its anatomy — to its secret but complex mechanism. Much that is due to art is attributed to nature. But a still deeper and steadier insight into the con- stitution of society will disclose not only artificial politi- cal arrangements, but commercial and fiscal ones, tend- ing to the virtue, the happiness, the wealth, the power, the grandeur, and the duration of states. The possi- bility of such artificial regulations is agreeable to analogy and confi)rmable to experience. But both analogy and experience forbid the expectation, that in- crease of wealth and its feir and equitable distribution, by the fiiU, various, and permanent employment of the people, will flow from the Id-cdone system. On the contrary, there is too much reason to apprehend that the natural course of things will here, as elsewhere, be a vicious one ; that the sum of national wealth will not increase, as it might be made to increase ; that its dis- tribution will be imperfect ; that land will be but half cultivated; that employment will be precarious and wages scanty ; that the bulk of the people will not be * Unhappily relaxed since these observations were written. 24 LET THINGS ALONE. clothed, fed, and housed as they ought to be and might be. Let us incline ourselves before the teachings of history. ! What triumphs has the let-alone system to show since the world began? On the other hand, history ' is foil of the marvellous achievements of industry I forced into artificial channels by the foresight and ■ power of wise governments. Ancient and modern history each presents examples of an artificial direction of industry, not only assailing and subduing the apparently invincible infecundity of the soil, but compelling it ever after to feed successive generations, and sustain the power of mighty king- doms. What was Egypt by nature ? — a sterile and moving sand. It has been well observed that its noble river, full of black mud, too filthy to slake the thirst or wash the person, was once of little use, except to the rats, the insects, and the hideous reptiles. Immense labors at length achieved a dominion over ■ it. Canals, reservoirs, and multiform contrivances for irrigation, led it at length to every door — the minis- tier of health, cleanliness, and fertility. Now there was, and ever since has been, com in Egypt. Ever since, in spite of bad government urider the Pharaohs, the Persians, the Ptolemys, the Romans, the Caliphs, the Mamelukes, and the Pachas, it has been the land of plenty. What would Egypt have been all this ' while, if, three thousand years ago, our modern theo- I ries had been in fashion there ? The cry of our wise men would have been, " Don't attempt to force labor and capital into artificial chan- nels, and at such an expense to bring into cultivation sterile lands. Buy at a cheaper rate from your neigh- bors, the Arabs, the Numidians, the Carthaginians, the LET THINGS ALONE. 25 Syrians, the Sicilians. As for your means of purchase, let them take care of themselves. Laissez faire, kdssez aller ; in other words, remain as you are." Ancient Egypt's parallel and antitype is modern Holland. In Holland, below the level of the sea, and the sur- face of adjacent rivers and canals, have been created by human art, fat pastures teeming with flocks and herds, rich artificial garden land, nourishing the industrious and thriving population of innumerable cities, towns, and villages. The very coast is an artificial fortifica- tion against the ocean, the ancient and natural monarch of the country. Here he is defied by leagues of artifi- cial sea banks, — there by miles of granite masonry. Rivers and canals are made to run many feet above the level of the country. Armies of indefatigable wind- mills are perpetually pumping afld draining. Amster- dam and Rotterdam, populous, opulent, and splendid cities, rest but on piles driven into the mud. This concentration of native industry and art on the most unpromising of soils, resulted not only in agricultural, but commercial prosperity. The seventeenth century saw Holland the greatest of maritime and commercial powers, under the most enlightened of governments. When religious bigotry disgraced and depopulated alike Catholic France and Protestant England, Holland became the sanctuary of religious liberty. From Holland Eng- lish Purita,ns set sail for North America, and founded a yet greater state, where the same industrial maxims prevail, and as everywhere else, with the same results. From Holland came the power which sustained in England itself, not only civil liberty and the Reforma- tion, but a highly artificial commercial policy, enduring for a hundred and fifty years, and leading to the grand- est consequences. At this day, therefore, even we our- selves, and our children beyond the Atlantic, are debt- OBS to what would now be deemed to be the unscien- 26 liET THINGS ALONE. tific and misdirected industry of the Seven United Pro- vinces. Compare this artificial legislation in ancient Egypt, and modern Holland, with the let-alone system in Ire- land — the most fertile country under heaven. Well may a living French writer and statesman of incontestable ability and experience, for he has been Prime Minister of France, M. Thiers, exclaim of the let-alone system (that system which would always and everywhere leave labor and capital to their own course), in stronger language than literary courtesy will justify us in using, that it is " a system of indifference, inac- tion, impotence, and folly." But, in truth, the natural course of commercial affairs uninfluenced by legislation is impossible. You must have a revenue; you must have customs and excise duties. Your fiscal I'egulations may destroy or may create — will decisively harm or help a hundred sorts of industry. Will the least harm and the most good surely spring from the least possible care? It has been well observed that you might as well say, " Shoot without taking aim, and you will be sure to hit the mark." HOME AND FOEEIGN TRADE. 27 CHAPTER IV. " Foreign commodities are always paid for by British com- modities. THEREFORE, the purchase of foreign commodities encourages British industry as much as the purchase of British commodities ^ * Unhappily the first proposition is untrue, as we now too well know. Nevertheless, let us here assume the premises to be true ; yet the conclusion does not follow. Supposing every foreign commodity imported to be paid for in British commodities, it may still be for the interest of the nation to buy British commodities in preference to foreign. In other words, home trade is more advantageous than foreign trade. On this text, hear the apostle of free-trade himself, Adam Smith: — "The capital which is employed in purchasing in one part of the country in order to sell in another the produce of the industry of that country, generally replaces by such operation two distinct capitals that had both been employed in the agriculture or manufacture of that country, and thereby enables them to continue that employment. . . . . . When both, are the produce of domestic industry, it necessarily replaces, by every such operation, two distinct capitals, which had both been employed in supporting productive labor, and thereby enables them to continue that support. The * See M'CuUoch's Principles of Political Economy, p. 152. 28 HOME AND FOREIGN TEADE. capital which sends Scotch manufactures to London, and brings back English manufactures and corn to Edin- burgh, necessarily replaces, by every such operation, bm British capitals, which had both been employed in the agriculture or manufactures of Qreat Britain. "The capital employed in purchasing foreign goods for home consumption, when this purchase is made with the produce of domestic industry, replaces, too, by every such operation, two distinct capitals, but one of them only is employed in supporting domestic industry. The cap- ital whidi sends British goods, to Portugal, and brings back Portuguese goods to Great Britain, replaces by every such operation only one British capital. The other is a Portuguese one. Though the returns, therefore, of the foreign trade of consumption should be as quick as those of the home trade, the capital employed in it will give but ONE-HALF THE ENCOURAGEMENT TO THE INDUSTRY OR PRODUCTIVE LABOR OF THE COUNTRY. . . . " A capital, therefore, employed in the home trade, will sometimes, make twelve operations, or be sent out and returned twelve times, before a capital employed in the Foreign trade of consumption has made one. If THE CAPITALS ARE EQUAL, THEREFORE, THE ONE WILL GIVE FOUR-AND-TWENTY TIMES MORE ENCOUR- AGEMENT AND SUPPORT TO THE INDUSTRY OF THE COUNTRY THAN THE OTHER." * What does Adam Smith mean by the expression — "replace capital?" It is an expression not to be passed over in haste, but well deserving to be attentively con- sidered and analysed. He means, that the whole value of a commodity is spent in its production, and yet reappears in the shape of the new product. That in its production there is an expenditure not of the profit merely, but of the entire value,'\ and that the whole of that expenditure not only * Adam Smith's Wealth of Nations, book ii. chap. 5. ■ t Say asserts the same thing, as we shall presently see. HOME AND FOREIGN TRADE. 29 maintains landlords, tenants, tradesmen and workpeople, but furnishes an effective demand and market for other productions. He means that the clear gain, the spendable revenue, the net income of the producing naiion, is increased by the amount of the entire value of the domestic product, and that the nation is so much the richer; for while producing, it spends the entire gross value, and, nevertheless, after it has produced, it yet has the entire gross value left in another shape. He then goes on and says, that if with British com- modities you purchase British commodities, you replace two British capitals ; but if with British commodities you purchase foreign commodities you replace only one British capital.* That is to say, you might have had the entire gross value of tioo industries to spend, and thereby also to create and sustain markets ; but you are content to have the value and the market of one industry only. These observations of Adam Smith, though demon- strably true, derive additional weight from the quarter from which they come. They are the admissions of the founder of the existing school of political economists, on a point of vital importance, so vital that it affects the entire theory of free-tra^e. At the risk, therefore, of being charged with prolixity and repetition, I venture to invite the candid and serious attention of the reader to a further consideration of this problem. The entire price or gross value of every home-made article constitutes net gain, net revenue,f net income * Say maintains the same position. " Le commerce intSrienr est le plus avantageux. Les envois etles retours de ce commerce sont necessairement les produits du pays. Il pbovoqub unb DOUBLE PRODUCTION." Liv. 1. chap. 9, vol. 2, p. 6, 4th edition. f Say concurs in this view. See 'PraiU d^Economie Politique, liv. ii.'chap. 5, vol. 3, p. 69, 4th edition. He analyses the price of a watch, and shows how the whole of it is distributed as net 30 HOME AND FOEEION TEADE. to British subjects. Not a portion of the value, but the whole value, is resolvable into net gain, income, or revenue maintaining British families, and creating or sustaining British markets. Purchase British articles with British articles, and you create two such aggregate values, and two such markets for British industry. Change your policy — ^purchase foreign articles with British articles, and you now create only one value for your own benefit instead of creating two, and only one market for British industry instead of two. You lose by the change of policy the power of spending the entire value of one industry which you might have hady as well as the other, and you lose a market for British industry to the full extent of the expenditure of that superseded industry. A small difference in price may cause the loss, but will not compensate the nation for that loss. For example, suppose England can produce an article for .£100, and can import it for £99. By importing it instead of producing it, she gains £1 ; but, though she pay for it with her own manufactures, she loses (not, indeed, by the exchange itself, but by the collapse of the suspended industry) £100 of wealth which she might have had to spend by creating the value at home; that is to say, on the balance, she loses £99 which she might have had in addition, by producing both commo-r dities at home. income or revenue among those who have contributed to its pro- duction. He then observes, " C'est de cette maniere que la valeur entiere des produits se distribue dans la soci^te. Je di» leur valeur toutb bntiekk." He then gives another illustra- tion, by tracing the distribution of the value of cloth, and adds, " On ne peut concevoir aucunb poktion de la valeur de ce drapj qui n'ait servi h payer UN bevend. Sa valeur toute entiere y a et^ employte." And subjoins in a note, "Mtoe la portion de cette valeur qui a servi au r§tabliasement du capital du fabrlcant. II a us6 ses metiers par supposition. II les a fait reparer par un m^canicien : le prix de cette reparation fait partie du revenu du m^canicien." HOME AND FOREIGN TRADE. 31 Nor can it be said that what the producer loses the consumer gains. The producer loses ^£100, the con- sumer gains £1. The nation, moreover, loses the markets which that superseded industry supported. Let us examine a little more in detail the position, that the entire price or gross value of every home-made commodity constitutes net national gain or revenue, — net income to British subjects, such revenue as a man may spend with his tradesmen, and maintain his family upon, and yet the nation grow no poorer.* Take a quarter of English wheat. Suppose the price to be 50s. The whole of this 50s. is resolvable into net income. A portion, say 5s., goes as rent to the English landlord, and is to him net income, which he may spend with his tradesmen in maintaining his family. Next 30s. go for wages. Those wages are the net income of the English laborer. Then 10s. go for rates, tithe, rent-charge, and taxes. The first contribute to the net income of the poor ; the second to the net income of the English clergyman, or impropriator; the third to the net income of the government. Then 2s. 6d. go for implements of husbandry, the whole of which 2s. 6d. is also, as we shall presently see, resolvable into net income to some person or other. The residue, being 2s. 6d., we will suppose is the net profit of the farmer, and would be net income to him, but that half of it, viz. Is. 3d., goes as interest to a friend who has lent him money. This last Is. 3d. is, however, net income — not, indeed, of the farmer, but of his creditor. Trace home, with stubborn attention, every penny of the price, and you * The attention of the leader is particularly invited to this part of the inquiry. He will observe that the expression '■'net income " comprehends the spendable revenue of the whole community, from whatever source derived. The net profits of trade are but a part, and a very small part, of the net income of the nation. The wages of the laborer are his net income. The rent of the landlord, and the interest of the mortgagee, are also net income. 2* 32 HOME AND POEEIGN TRADE. will find that every penny at last assumes the shape of net income. The whole 50s., therefore^ it is manifest, is an addition to the net spendable income of the coun- try. The whole 50s. answers two purposes : first, it maintains the ultimate recipients and their families; and, secondly, by means of their expenditure it creates a home market to the extent of the entire gross value or price of the quarter of wheat. But is the sum of 2s. 6d., which we have just sup- posed to be spent for agricultural implements, also resolvable into net income or revenue? It is ! And though we should be still more guilty of repetition, let us patiently inquire how. 'Suppose the 2s. 6d. spent for a spade. It may be that the money is laid out with the retail ironmonger in the next market- town. . Sixpence, we will suppose, is the ironmonger's profit. A second sixpence is the cost of a wooden handle. That second sixpence is expended in this way : — One-fourth of it, or three halfpence, goes as rent to the owner of the copse from which the rough wood comes; threepence goes as wages to the laborers who cut or fashion the wood ; and the remaining three halfpence goes as profit to the dealer in wooden spade handles. One shilling out of the 2s. 6d., the entire price of the spade, is thus traced back, and found to be net income. The remainder of the price of the spade, viz. Is. 6d., goes for the iron part of it, and has been paid by the retail dealer in spades to the wholesale dealer in the iron part of spades. Part of this Is. 6d. is the retail dealer's profit, part goes to the manufacturer. The manufacturer's portion, when analysed, is again resolved into his profit — his payments for implements or ma- chinery (also resolvable into net income) — his rent — • and the cost price of the iron. The cost price of iron is, lastly, paid to the iron-master, and by him distributed to himself as profit, to his workmen as wages, to his landlord as rent. HOME AND FOREIGN TRADE. 33 The whole price and value of the spade is thus net gain or income to some person or other, available/ like all the rest of the price of a quarter of English wheat, first, to the maintenance of British families, next, through their expenditure, to the creation or mainte- nance of British markets for cotton, linen, woollen, and hardware, bread, beef, beer, tea, soap, candles, buildings, and furniture. Take any article you please, agricultural or manufac- tured, patiently analyse the ultimate distribution of its price, and you will find that the whole gross value de- notes the creation of so much wealth in the nation in which it is entirely produced, enabling that nation to spend* and enjoy an equivalent to that whole gross value, without being the poorer for the consumption, and conferring on that nation the further advantage of a home market, equivalent to that expenditure. To express the same truth in a formula, intelligible and familiar to political economists, the whole gross price of any article is ultimately resolvable into rent, profit, or wages: rent, profit, and wages are respec- tively national net income, and create markets where they are spent. Now, suppose a nation which had produced both the exchanged values at home, or, to use Adam Smith's expression, had replaced two domestic capitals, should alter its policy, and should thenceforth import one of those values from abroad, giving for it the other value as before (which we will suppose the foreign nation * La valeur toute eniUre des produits sert de cette maniere k payer les gaiua des productenrs. Ce h'bst pas lb pboduit ni