probability of perpetual peace on earth are altogether too
rosy: Principles III, ch. 17, 5. This is still truer of
_Buckle_. History of Civilization, I, ch. 4. In the modern
state-system of Europe, there is wont to be in each
generation, a peaceful half and a warlike one, which follow
each other as ebb and flow. I need only mention the
preponderance of peace between 1714 and 1740, between 1763
and 1793, and between 1815 and 1853. It happens frequently
that at the close of the period of peace, intelligent and
noble but unhistorical and therefore short-sighted minds
begin to dream of perpetual peace. Even a man like _Dohm_
(Ueber die bürgerliche Verbesserung der Juden, 227 seq.)
expected, in 1785, that considering the size and quality of
armies, and the mutual knowledge of all countries of one
another, that instead of actually waging war, nations might
send to each other well authenticated statements of the
strength, for instance, of their navies and of the sums
necessary to maintain them for a number of years.]
[Footnote 263-6: The Mongols saw the abandonment of their
nomadic life in so gloomy a light that they seriously
thought of turning all China with its countless human beings
into pasture-land! (_Gibbon_, History of the Roman Empire,
ch. 34.)]
[Footnote 263-7: It is a fact characteristic of the history
of England, that Norman supremacy and afterwards bondage
were wiped out so gradually that contemporary historians
have nothing to say of the transformation. (_Macaulay_,
History of England, ch. 1.) Repeal of the corn laws
_vis-a-vis_ of the most recent industrial advance of the
country.]
[Footnote 263-8: Even _Ricardo_ says that in a highly
civilized country the continual making of savings is by no
means desirable. Carried to an extreme, saving would lead to
the equal poverty of all. (Principles, ch. 5.)]
[Footnote 264-9: The _Beccaria_, Economia publica I, 3, 31,
teaches that the limits of population are to be found at the
point where agriculture cannot be made to yield an
additional increase of products, and where foreign countries
do not offer any more a counter value of their products in
exchange for the manufactured articles and the services to
be furnished them. Similarly, _Büsch_, Geldumlauf III, 7;
otherwise, indeed, V, 15, in which, in opposition to _Adam
Smith_, it is claimed that the work to be performed by one
nation for others has no limits which cannot be exceeded.
_Steuart's_ theory of the limits to the production of every
commercial nation: Principles, I, ch. 18. _Lauderdale_,
Inquiry, ch. 5, 274 ff., says categorically, that all wealth
which is produced by the transformation of raw material
depends on the production of such raw material, and of the
means of subsistence necessary for the support of the labor
employed in such transformation. Excellent investigations by
_Malthus_ in the additions (1817) to the Essay on the
Principles of Population, II, ch. 9-13. Compare _Roscher_
Nationalöcon. des Ackerbaues, § 162. As early a writer as
_Mirabeau_, Philosophie rurale, ch. X, was of opinion that a
country whose industries were on as large a scale as those
of Holland, dispersed its people indeed over the whole
earth, made them independent at home, but almost destroyed
their nationality.]
SECTION CCLXIV.
THE DECLINE OF NATIONS.
That, after a whole nation has reached the zenith of its prosperity, it
is subject to old age and to decline, and cannot avoid them, is in
general, a proposition susceptible neither of proof nor
refutation.[264-1] This uncertainty is practically very useful, for were
it otherwise, mediocre statesmen might become either discouraged or
indifferent. However, we should not assume, as so many do,[264-2]
without proof, the earthly immortality of nations, provided only they
observe a proper diet; nor call the science of the physiology or
medicine of nations a chimera, simply because it confesses that it knows
of no preventive against such old age. It has doubtless been the fate of
many nations to die, that is, not precisely to be destroyed--just as in
the physical world, not a particle of matter is lost--but to see their
former national personality disappear, and themselves continue to exist
only as component parts of some other nation.[264-3] This phenomenon,
indeed, finds its analogon in every thing that is human, but seems to
contradict a law of nature which very widely prevails, viz.: that it is
easier to advance in a certain direction in proportion to the distance
gone over in it already.[264-4]
The problem of decline, however, is solved by the enervating influence
of possession and power, an influence which only a select few among men
can escape. And yet to every external advance there must be a
corresponding advance of the interior man, else there is a fall great in
proportion to the height before attained. The greater number take their
ease once they have attained the object of their ambition. I need only
cite the example of the posterity of those men who have grown rich by
unusual exertion. Success itself generates vanity and a feeling of false
security, the latter especially, inasmuch as that is expected from the
whole community, from the state for instance, from others generally,
which should be the fruits of one's own vigilance and one's own
endeavors. It should not be forgotten that the nation is made up of
individuals.[264-5]
In addition to this there is the striving after the new for the sake of
novelty; a striving promotive of progress in itself, and without which
the full development of the forces of civilization would probably not be
possible. But if the genius of no nation is possessed of infinite
capacities, it must happen, at last, that, in case the best has been
attained, and the demand for novelty continues, men will go over to that
which is worse. Even very great competition has here a dangerous
influence, since it raises the great mass of the incompetent to the
dignity of judges, and endeavors to seduce them by illicit means; in the
arts, for instance, sensuousness is made to take the place of the
feeling of the beautiful.[264-6]
There is, further the process of undeceiving, inseparable from the
prosecution of any ideal purpose. Such ideals have always very much of
human weakness in them. The great crowd of ordinary men follow, as a
rule, their material interests. Only occasionally do they rise to the
height of ideal things; and here we discover the brightest points in
history. Later there comes uniformly a period of disenchantment and of
exhaustion after the debauch is over. When all the ideals accessible to
the nation have been destroyed or outlived, nothing can be done to
awaken the masses from their slumber, or induce them to shake off their
inactivity.
As a rule, the influences which have accelerated a nation's progress and
brought it to the apogee of its social existence end in precipitating
its ruin by their further action. Every direction which humanity takes
has almost always something of evil in it, is limited in its very
nature, and cannot stand its extremest consequences.[264-7] All earthly
existence bears in itself, from the first, the germs of its decay.
However, to calm the feeling of human liberty, we may boldly assert that
there never was a nation remarkable for its religiousness and morality
which declined so long as it preserved these highest of all goods; but
then no nation outlived their possession.
[Footnote 264-1: Even in the case of individuals, that death
is necessary is not susceptible of absolute demonstration;
but no one doubts it, because of the experience so
frequently repeated; an experience, however, which cannot be
had in the same degree in the case of whole nations.]
[Footnote 264-2: Remarkable controversy between _Hume_ and
_Tucker_. The former had charged the latter with holding the
opinion that industry and wealth must necessarily continue
to advance indefinitely; and yet all things had in them the
germs of decay. _Tucker_, on the other hand, remarked that
all he wished to say was that no one could point out where
progress must necessarily cease. All political bodies like
all natural bodies might decay; but it is not necessary that
they should. With good laws and morality they would become
more vigorous with increasing age. A great deal depended
here on the more general distribution of property, on the
assurance that industry would meet with its reward, and on
the removal of the principal defects in the English
electoral system. (Four Tracts, 477 seq. Two Sermons, 30.)
Most political economists are of the same opinion; thus
_McCulloch_, Principles, II, 3. See, however, the last two
sections in _Ferguson_, History of civil Society.]
[Footnote 264-3: We assume that a new nation has arisen,
when, after the disappearance of an earlier and high
civilization, combined with the taking up of new
ethnographic elements, we perceive anew the easily
recognizable symptoms of youthful immaturity.]
[Footnote 264-4: Expressed in the domain of religion in the
words of the Savior: _Matth._, 25, 29. But at the same time
the equally well-known expression in _Luke_, 12, 48, must be
fulfilled. Compare _H. Brocher_, L'Economie monétaire, 1871,
25 ff.]
[Footnote 264-5: Schools of art are generally ruined by
mannerism. Of the two great means of education in art, the
study of nature and the study of classic models, the latter
is the easier, and the former is readily neglected for it.
Then there is the endeavor to flatter the master, which is
most effectually done by imitating his faults; and the fact
that pretending connoisseurs are most cheaply satisfied by
mannerism.]
[Footnote 264-6: There is a peculiar charm, very productive
in itself, attaching to the cultivation of a field which has
been but little cultivated, and which, therefore, has the
advantage of promising something new. On the other hand, the
decline of almost all literatures begins with this, that
writers and readers no longer think out completely the forms
of speech, modes of expression, etc. to which they have
become used, as their original creators did; a great
temptation to have recourse to a more and more spicy
literary style. _J. S. Mill_ considers the stationary state
(Principles, IV, ch. 6) a very pleasant one to contemplate,
but he overlooks the very important fact, that as men are
constituted it uniformly introduces national decline.]
[Footnote 264-7: Great rulers, of whom it is said that they
conquered the world by following out their own ideas to
their ultimate consequences, would most certainly have lost
the world by reason of the same logic if they had continued
it only fifty years longer. What would have become of
Alexander the Great and Charlemagne if they had lived one
generation more?]
SECTION CCLXV.
CONCLUSION.
All the separate nations which have lived side by side, or followed one
another, are embraced under the general name, humanity. Who would deny
the existence of a point, viewed from which humanity might be seen to
constitute one great whole; all the variations and differences in its
life only one great plan, one wonderful sovereign decree of the divine
will, grandly and wonderfully executed by God? Or who is so bold as to
say that he stands on this point himself? Theologians should be the last
to do it, since even the apostle Paul calls God's ways inscrutable. So
long as we do not even know whether we live in one of the first or one
of the last decades of humanity, every system of universal history in
which each nation and period is made to take its place in due
subordination to its superiors, can be only a castle in the air; and it
is a matter of indifference whether the basis of the system is
philosophical, socialistic, or natural-philosophical.[265-1]
The usual error into which the builders of such history fall, is that
they consider the peculiarities of certain stages of civilization, which
may be shown to exist among all nations in the corresponding period of
their history as the national peculiarity of the single people with
whose history they are, for the time being, concerned. They deduce
wonderful consequences, from the premises they laid down, but which our
increasing acquaintance with other nations immediately shows to be
unfounded.
There is, however, a number of facts really peculiar to a people which
make up the national character, and which may give to an observer
endowed with an imaginative mind, an inkling to the special vocation in
the economy of providence of a particular people. That a positive system
can be constructed from the material of such facts, I do not, indeed,
think. But they are at least a safeguard against false systems, against
the improper application of analogies, against the idle, fatalistic
exaggeration of the maxim: "nothing new under the sun!" It had almost
become the fashion to compare our present with the period of decline of
the Greek and Roman republics. Frightful parallel, in which the greatest
and most undoubted differences were frequently overlooked for smaller
and certainly questionable similarities. Is not the abolition of
slavery, which has been accomplished among all the most important
nations of the present, something new and of great import from a moral
and economic point of view?[265-2] Can the national wealth, which
depends on labor and frugality, be in any way compared with that which
was based on plunder? And so, no one can calculate the benefits which
may be reaped by posterity from the mere continuation of the scientific
and especially natural-philosophical results obtained by former
generations. The discovery of the whole earth soon to be completed, and
its probable consequence, the civilization of all nations of any
importance, must remove the danger to which all the civilized nations of
antiquity eventually succumbed, namely, destruction by entirely
barbarous hordes. Nor should the significance of the state-system of
Europe, which might be extended soon enough into a state-system
embracing the world, be under-estimated. Macedonia would not so readily
have subjugated the Hellenes and the Persians if the great powers of the
west, Rome and Carthage, had intervened at the right time. And there,
too, is Christianity, whose means of grace are at hand for every one at
all times, for his complete moral regeneration.
In one word, the usual argument with which the "man of experience" meets
the man of inventive genius, that there never was anything of the like
seen before, may suffice in thousands and thousands of cases; but it
affords no strict proof. It is the province of genius to compel rules to
extend their limits. But science should never forget that self-denial is
necessary to the discovery of truth.[265-3]
[Footnote 265-1: I mean here, especially, the attempt so
frequently made (by _Herder_, for instance) to draw a
parallel between the periods of universal history and the
age at different times of the individual, or with the
seasons. If there were a great many humanities between which
we might institute a comparison, we might accomplish
something with the analogy, but----!]
[Footnote 265-2: However, even such a man as Minister
_Stein_, thinks that a laboriously acquired wealth may
affect a people's morality injuriously. "The striving after
wealth is the striving for the possession of the means of
satisfying chiefly sensuous wants. This striving may
suppress all nobler feelings, whether it find expression in
violence or industry." Contrariwise, it is possible that
some of the noblest of human qualities may be found side by
side with the forcible acquisition of wealth, viz.: courage,
patriotism. (_Pertz_, Leben Steins, II, 466.)]
[Footnote 265-3: Compare my discourse on the relation of
Political Economy to classic antiquity in the transactions
of the royal Saxon Academy of Sciences, May, 1849; also many
excellent remarks in _Knies_, Polit. Oekonomie. _Chr. J.
Kraus_, has zealously discussed the question whether the
development of humanity turns about eternally in a circle,
or whether it forever advances to a progressively better
future. He strongly advocates the latter view, and on
grounds which appeal both to the head and to the heart.
(Vermischte Schriften, III, 146 ff.; IV, 277 ff.)]
APPENDIX II.
INTERNATIONAL TRADE.
INTERNATIONAL TRADE.
SECTION I.
THE MERCANTILE SYSTEM.
The principal peculiarities of the so-called mercantile system depend on
a five-fold over-estimation: of the density of population, of the
quantity of money, of foreign commerce, of the industries concerned with
the transformation of materials (_Verarbeitungsgewerbe_), and of the
guardianship of the state over private industry.[A2-1-1] All these
tendencies are very intelligible, and almost self-evident, in a
sovereign city-economy (_Stadtwirthschaft_) as opposed to the governed
and worked-out (_ausgebeuteten_) country districts; as they are found
even in the city-republics of later medieval times. But they are also
natural in whole national economies, during that period of youthful and
rapid growth in which the increasing density of population continues
still, for a long time, to be really only a spur and an assistance, and
in which, therefore, there can be no expression of anxiety concerning
over-population; in which the new and rapidly growing division of labor
draws attention particularly to the market-side of all businesses and to
the circulation of goods; in which the progress from trade by barter to
trade by money necessarily makes the volume of money needed even
relatively greater; but especially are they natural in that world-period
in which foreign trade suddenly increased enormously in consequence of
the discovery of the whole earth; when the citizen classes of the people
assumed immense importance as compared with the landed and clerical
aristocracy, and when, in the internal affairs of state absolute
monarchy, and in foreign politics, the system of equilibrium, through
the instrumentality of the great compact-formation of states prevailed.
All these tendencies are most intimately connected with one another. If
precious metal-money be really the essence of national wealth,[A2-1-2] a
people who possess no gold and silver mines themselves;[A2-1-3] for
instance, Italy, France and England, can become richer only through
foreign trade,[A2-1-4] by means of a favorable balance produced by a
preponderance of their exports over their imports; and only inasmuch as
this excess is balanced by a payment in money from foreign parts. And
so, too, in foreign trade, one nation can gain only what another nation
has lost.[A2-1-5] Gain is promoted not only by direct obstacles placed
in the way of the exportation of the precious metals, but still more by
the value-enhancement of the exported commodities, and by the
value-diminution of the imported commodities.[A2-1-6] And as commodities
which have undergone the process of transformation are, on an average,
more valuable than raw materials, the state can best carry out this
policy by import duties, import prohibitions, and export premiums on
manufactured articles, as well as by export duties, export prohibitions
and import premiums on raw materials.[A2-1-7] This is extremely
necessary against those nations who are superior to others in culture,
wealth, the cheapness of labor and capital; and hence the envy of the
mercantilists was directed chiefly against Holland, and after Colbert's
time also against France.[A2-1-8] Such commodities as are not at all
adapted to the nature of a country, because of its climate, for
instance, the nation should produce at least in colonies of its own,
that it might, in this way, emancipate itself from foreign
countries.[A2-1-9] As the clear distinction drawn to-day between money
and capital has asserted itself only since Hume's time, the notion that
prevailed for centuries, that much money, much trade and a large
population mutually conditioned one another, was a very natural
one.[A2-1-10]
The younger and more refined conception of the mercantile system is
distinguished from the coarse Midas-believing one, by two tendencies
especially:
A. By the more thorough consideration of the balance of trade and the
consequent limitation of the traditional supposition, that the excess of
exports over imports would be always made up in cash money.[A2-1-11]
B. By the extension of the field of view, so that not only the direct
but also the indirect and more remote effects of international trade
were taken into consideration.[A2-1-12]
A certain over-estimation of the circulation of goods continued to
characterize even the latest adherents of the mercantile
system.[A2-1-13] Yet the caricature drawn by the tradition of more
recent text-books, of the mercantilists, is true only of the inferior
ones among them.[A2-1-14] The most distinguished of them,
Botero,[A2-1-15] for instance, approximate more closely to the science
of the present day than is usually supposed.
[Footnote A2-1-1: Compare _Roscher_, Geschichte der
Nationalökonomik in Deutschland, I, 228 ff.]
[Footnote A2-1-2: Even the remarkable Florentine pamphlet of
1454 (_Jablonowski's_ prize essay of 1878, app. Beilage, 4)
complains of the decrease of industry principally on account
of the diminution of money caused thereby. "Wealth is
money," says _Ernestine_, essay of 1530, on the coin, and
explains the smaller wealth of the silver-country, Saxony,
as compared with England, France, Burgundy and Lombardy, by
the greater exportation of commodities of these countries,
by means of which they draw the silver of Saxony to
themselves. (_Roscher_, Geschichte, I, 103.) _Bornitz_,
Theorie wie sich der Staat diesen _nervus rerum_ in grösster
Menge verschafft: De Nummis (1608), II, 4, 6, 8. _A. Serra_,
Sulle Cause, che possono far abbondare un Regno di Monete
(1613), places excess of gold and silver and poverty as
diametrical opposites, at the head of his work. _Hörnigk_,
Oesterreich über Alles, wann es nur will (1684), says that
it is "better to give two dollars which remain in the
country for a commodity, than only one dollar which goes out
of the country" (ch. 9). According to _Schröder_, Fürstliche
Schatz- und Rentkammer (1686), the export of commodities is
a blessing only "when we can turn them into silver through
our neighbors." (LXX, 12.) Even _Locke_ held similar views
(Considerations of the Consequences of the Lowering of
Interest, 1691. Further Considerations concerning Raising
the Value of Money, 1698). On _Davenant's_ inconsistency in
this respect, compare _Roscher_, Geschichte der Englischen
Volkswirthschaftslehre, 110 ff. The quantity of money
remaining the same, a country grows neither richer nor
poorer (Christ. Wolff, Vernünftige Gedanken vom
gesellschaftlichen Leben, 1721, § 476). _J. Gee_, Trade and
Navigation of Great Britain considered (1730), bewails the
folly of those to whom "money is a commodity like other
things, and also think themselves never the poorer for what
the nation daily exports," (p. 11). _Justi_, von Manufacturen
und Fabriken (1759 seq.), considers it the principal object
of industry simply to prevent the outflow of money.
Similarly, _Pfeifer_, Polizeiwissenschaft (1779), II, 286.
Even Frederick the Great considered it "true and obvious"
that "a purse out of which money is taken every day, and
into which nothing is put in turn, must soon become empty."
(Oeuvres, VI, 77).]
[Footnote A2-1-3: The thirst for gold which, in the
sixteenth and seventeenth centuries, drove so many emigrants
to the western Eldorado, reminds one, by reason of its
enthusiasm, of the crusades to the Holy Land. The striving
after the making of gold which the emperors Rudolph II.,
Ferdinand III., Leopold I., Frederick I. of Prussia,
Christian IV. of Denmark, Christian II. and Augustus the
Strong of Saxony, Heinrich Julius of Braunschweig, Frederick
of Würtemberg, harbored, and also the Silesian and
Brandenburg princes even during the Hussite war (_Riedel_,
Cod. Dipl. Brandenb., II, 4, 151), was, to a great extent,
misplaced philosophy; men went in search of the _materia
universalissima_, the _spiritus universalis_, from which all
that is receives its _esse et fieri_, the universal elixir,
at once the life-power of man, the universal medicine and
maturing principle of natural bodies. (_Roscher's_ Gesch.,
I, 230.)]
[Footnote A2-1-4: _Schröder_ justifies the little estimation
in which he holds internal commerce by saying that "a
country may indeed grow and become powerful by its means,
but cannot gain in wealth;" just as a dress embroidered with
pearls is not made more costly by taking the pearls from the
cuffs and putting them upon the cape. (F. Schatz- und
Rentkammer, XXIX, 3.) According to the Fredrickian
theorizer, _Philippi_, "internal trade scarcely deserves the
name of commerce." (Vergröss. Staat, 1759, ch. 6.) _Sir J.
Steuart_ still teaches that an isolated state may, indeed,
be happy, but that it can grow rich only through foreign
trade and mining. (Principles, II, ch, 13.) The same
fundamental thought finds expression in the title of _Th.
Mun's_ celebrated book: England's Treasure by Forraign
Trade, or the Balance of our Forraign Trade is the Rule of
our Treasure (1664).]
[Footnote A2-1-5: _Il est claire qu'un pays ne peut gagner,
sans qu'un autre perde, et qu'il ne peut vaincre sans faire
des malheureux_ (_Voltaire_, Dict. phil., art. Patrie). Even
_Verri_ was, in his earlier period, of the opinion: _ogni
vantaggio di una nazione net commercio porta un danno ad un
altra nazione; lo studio del commercio è una vera guerra_
(Opuscoli, 335).]
[Footnote A2-1-6: Even in 1761, the learned _Mably_ could
say: _la défense de transporter les espèces d'or et d'argent
est générale dans tous les états de l'Europe ... il n'y a
point de voie moins sensée_ (Droit public, II, 365).]
[Footnote A2-1-7: The obstacles placed in the way of
importation by governments originated, in great part, from
views entertained on sumptuary legislation; in that of
exportation, from a desire to prevent a scarcity of certain
articles, as may be clearly seen in _Patricius_ (De Inst.
Reipublic., V, 10, I, 8), and even in _Sully_ (Mémoires, XI,
XII, XIII, but especially XII), _Bornitz_, _Besold_, _Klock_
and _v. Seckendorf_. (Compare _Roscher_, Gesch., I, 191,
202, 215, 247.) But the mercantilistic germs show themselves
even in _Hutten_ and _Luther_. (_Roscher_, I, 44, 63.) The
advance made between the police ordinance of the empire of
1530 and that of 1548, is very remarkable in this respect.
The mercantile theory of duties appears very systematically
elaborated even in _J. Bodinus_, De Republica, 1577, VI, 2;
in Germany in _Hörnigk_, Oesterreich über Alles, ch. 9.]
[Footnote A2-1-8: The English jealousy of Holland is
represented especially by _Sir W. Raleigh_ (?), Observations
touching Trade and Commerce with the Hollander and other
nations, 1603, Works, III, 31 ff.; _Sir J. Child_, A new
Discourse of Trade (1690), and _Sir W. Temple_, Observations
upon the U. Provinces (1672). Compare _Roscher_, Z. Gesch.
der englischen V. W. Lehre, p. 31 ff., 125 ff. The English
jealousy of France: _Sam. Fortrey_, England's Interest and
Improvement (1663). _R. Coke_, A Treatise, wherein is
demonstrated that the Church and State of England are in
equal Danger with its Trade (1671), and the anonymous,
Britannia languens (1680). _Per contra_, especially the
work: England's Greatest Happiness, wherein it is
demonstrated that a great Part of our Complaints is
causeless (1677). Here we find chapters with the title: To
export Money our great Advantage; the French Trade a
profitable Trade; Multitudes of Traders a great Advantage.
_Petty_ gave the best solution to the question in dispute,
in his posthumous Political Arithmetic concerning the Value
of Lands, etc. _Hörnigk_ would enlist his service in the
cause of the jealousy against France, immediately after the
disgraceful defeats which Germany in 1680 ff. suffered in
the midst of peace, by Louis XIV. Concerning smaller works
of the same period and in the same direction, see
_Roscher's_ Gesch., I, 299 seq.]
[Footnote A2-1-9: Even _Peter Martyr_ considered the
colonization of countries which yielded the same products as
the mother country of no advantage (Ocean, Dec., VIII, 10).
On Spanish maps the most flourishing portions of America at
present are designated as _tierras de ningun provecho_. And
the English for a long time, ascribed value to their New
England possessions, so far as the mother country was
concerned, only to the extent it was possible to provide the
West Indies from that quarter with corn, meat and wood.
(_Roscher_, Kolonien, p. 262.)]
[Footnote A2-1-10: Compare _Botero_, Ragion di Stato (1591);
_Law_, Money and Trade (1705), p. 19 ff.; and _Verri_,
Opuscoli, pp. 325, 333. Meditazioni (1771), cap. 19.]
[Footnote A2-1-11: Thus _Child_, spite of all his esteem for
the discoverers of the balance-problem, calls attention to
cases in which exports suffer so much waste (_Abgang_), or
imports are sold so advantageously, that an apparently
favorable balance made a people poorer, and an apparently
unfavorable one, richer. From the value of the imported
commodities the self-earned freight has to be deducted.
Countries like Ireland, many colonies, etc., have a
preponderance of exportations, because they, by means of the
same, pay a rent to absent capitalists or to landowners. (p.
312 ff.)]
[Footnote A2-1-12: _Mun_ admits that, for instance, the East
Indian trade makes England richer, although it causes the
exportation of much English money. But the exporter of money
who, in exchange for it, brings back reëxportable
commodities, should be compared to the sower. (Ch. 4.)
Similarly, _C. Roberts_, The Treasure of Trafficke (1641),
and even _A. Serra_, III, 2. According to _Child_, the loss
in the East Indian trade is compensated for chiefly by this,
that England obtains there the saltpeter it needs to satisfy
its demand, and that the ships engaged in that trade are
peculiarly well fitted for war. (l. c.) _Saavedra Faxardo_,
for similar reasons, declared the discovery of America to be
a misfortune. (Idea Principis Christiani politici, 1649,
Symb., 68 seq.)]
[Footnote A2-1-13: Thus _Law_, _Dutot_, _Darjes_ and
_Büsch_. Even the violent opponent of the mercantile system,
_Boisguillebert_, could not entirely escape this view.
Compare vol. I, § 96.]
[Footnote A2-1-14: This is true, especially of the
protectionist weekly paper: British Merchant or Commerce
preserved (1713 ff.), in the contest with the weekly Tory
paper edited by _Defoe_: Mercator or Commerce retrieved,
which Charles King systematized and published anew in 1721.
Later _Ulloa_: Noticias Americanas (1772), cap. 12. _Adam
Smith_ also concedes that many of the best writers on
commerce, at the beginning of their books, allow that the
wealth of a country consists not only in gold and silver,
but also in goods of every description; but that further on
they tend more and more to forget this qualification of the
meaning of wealth. (W. of N., IV, ch. 1.) Hence it is that,
in recent text-books, so many are now called adherents and
now opponents of the mercantile system.]
[Footnote A2-1-15: Even _Colbert_ says: nothing is more
precious in a state than the labor of men (Lettres,
Instructions et Mémoires de C. publiés par P. Clement, 1861
ff., II, 105). The great trade with foreign countries and
the small trade in the interior contribute equally to the
welfare of nations. (II, 548.) I would not hesitate to do
away with all privileges, the moment I found that greater or
as great advantages attended their abolition. (II, 694.) His
duty-system of 1664 was a simplification, but also an
important diminution of his earlier chaotic tariff. (II, 787
ff.)]
SECTION II.
REACTION AGAINST THE MERCANTILE SYSTEM.
The reaction against the mercantile theory of the balance of trade,
which reached its height in Adam Smith, was based principally upon the
following considerations:
A. Precious-metal-money is a commodity like all other commodities, and
therefore useful only for certain purposes. It is as little to the
wealth-interest of a people, by means of a continually favorable
balance, to import infinite quantities of the precious metals, as it is
to its power-interest, by means of its commercial policy, to accumulate
infinite stores of powder. The person who possesses other exchangeable
goods will be as well able, in case of need, to obtain gold and silver
therewith as to obtain powder.[A2-2-1] We part with no capital when we
export the precious metals and import other commodities instead; we
simply exchange thereby one form of capital for another.[A2-2-2] The
notion that the gain in trade is coincident with the balance of account
paid in cash, is just as palpably false in the trade among nations as in
trade among private persons.[A2-2-3] It would be a decided hardship to
most men, if they were to receive payment at once in money for all that
they possessed: and the nation is made up of individuals.[A2-2-4] And
even the reasons which make payments in cash more uniformly desirable,
in the case of private persons not engaged in mercantile pursuits, cease
in the case of whole nations.[A2-2-5]
B. But a continual over-balance (_Ueberbilanz_) is not at all possible.
Every relative increase of the amount of money must enhance the price of
commodities, lower the value of money, and thus produce an exportation
of money until a restoration of the level with other countries.[A2-2-6]
The prohibitions of the exportation of money, so often resorted to, can
avail nothing, because the precious metals are among the specifically
most valuable goods; and because it is easier yet to smuggle them out of
a country than to smuggle them into it.[A2-2-7]
C. The signs by which the mercantile system supposed it could estimate
the favorableness of the balance of trade are essentially
deceptive.[A2-2-8] We cannot, for instance, from the course of exchange,
determine whether the payments made by us to foreign countries have been
made for purchases, to absentees, etc., or as loans; and yet, according
to the mercantilists, the latter are as useful to us as the former are
injurious.[A2-2-9] And even the most accurate tariff-record
(_Zollregister_) of the exportation and importation of commodities
affords no guaranty[A2-2-10] that, in many instances, the rendering of
the counter-value may not remain absent, by reason of bankruptcy,
shipwreck, or the emigration of property.[A2-2-11]
D. Every act of exchange is advantageous only because through it a
greater value is received than the one parted with was. (?) Fortunately,
in normal trade, where both parties satisfy a real want, and neither
party is deceived, this is actually the case on both sides.[A2-2-12] In
accordance with all this,[A2-2-13] Baudrillart is of opinion that the
whole theory of the balance of trade no longer exists.
[Footnote A2-2-1: Even _Petty_ and _North_, with their deep
insight into the nature and functions of money, could not
possibly entertain the mercantile theory of the balance of
trade. _Petty_ considers the exportation of money useful,
even when commodities are brought back in exchange for it,
and which are of greater value in the interior than the
exported money. (Quantulumcunque concerning Money, 1682.)
According to _North_, no one is richer simply because he has
his property in the form of gold and silver plate, etc.; he
is even poorer, because he allows his goods to lie in that
shape unproductive. Hence the importation of money is, in
itself, not more advantageous than the importation of logs
of wood; at most, the difference that, in case of excess, it
would be easier to get rid of the money than of the wood, is
of importance. Therefore, a state need never care very
anxiously for its supplies of money. A rich nation will
never suffer from a want of money. (Discourses upon Trade,
1691, pp. 11, 17.) According to _Berkeley_ (Querist, 1735,
pp. 566 ff.), there is no greater error than to measure the
wealth of a nation by its gold and silver. It is to the
interest of a people to keep their money or to send it off
according as its industry is thereby promoted. _Quesnay_
declares it to be impossible that the exports of a country
should be permanently greater than its imports: _tout achat
est vente et toute vente est achat_.
_Adam Smith_ (W. of N., IV, 1) compares the Spanish
discoverers who inquired on every island, first of all, for
gold, to the Mongolians, whom _Rubruquis_ (c. 32) was
obliged to give information to concerning the cattle of
France: "of the two, perhaps the Tartar nation was the
nearest to the truth." Precious-metal-money may be even more
easily dispensed with than most other commodities, since, in
case of necessity, it can, by reason of its greater
transportability be readily obtained from without, and can
also be supplied by exchange and by credit. "Money makes but
a small part of the national capital and always the most
unprofitable part of it.... Money necessarily runs after
goods, but goods do not always or necessarily run after
money." _J. B. Say_ calls the exportation of money more
advantageous than that of other commodities, because the
former is of use, not through its physical qualities, but
only through its value, and the value of the money which
remains behind correspondingly rises by reason of the
exportation. (Traité, I, ch. 17.) Compare especially
_Bastiat_, Maudit Argent, 1849.]
[Footnote A2-2-2: Against _Ganilh_, Théorie de l'Economie
politique, II, 200.]
[Footnote A2-2-3: Even _Mun_ had, in every balance of trade,
distinguished three persons who participated in it; the
merchant might lose when the nation in general gained, and
_vice versa_; the king, with his duties, always gained. (Ch.
7.) The British Merchant (p. 23) maintained even, that when
the merchant himself gains nothing and takes his
back-freight (_Rückfracht_) in money, his country gains the
whole amount thereof.]
[Footnote A2-2-4: "Every individual is continually exerting
himself to find out the most advantageous employment for
whatever capital he can command. It is his own advantage,
indeed, and not that of the society, which he has in view.
But the study of his own advantage, naturally, or rather
necessarily, leads him to prefer that employment which is
most advantageous to the society." (_Ad. Smith_, W. of N.,
IV, ch. 2.)]
[Footnote A2-2-5: For the reason that money, in
international trade, for the most part, loses its character
as money, and appears more as a commodity. Exhaustively in
_Adam Smith_ and _J. B. Say_, l. c. The English state paid,
during the French war of the Revolution, in subsidies to
foreign countries, £44,800,000; and yet, up to the end of
1797, imperial loans and the payments of private individuals
included, not as much as one million in cash went out of the
country. (_Rose_, Brief Examination into the Increase of the
Revenue of Great Britain, 1799.) When France paid the five
milliards to Germany, the plus value of English exportation
to Germany above the English importation thence rose from
274,000,000 (1869) to 478,000,000 (1872), and the increase
in the amount of French from 39,400,000 (1869) to
131,700,000 (1873). The entire German under-balance
(_Unterbilanz_), _Soetbeer_ (loc. cit.) estimates at
878,000,000 of marks.]
[Footnote A2-2-6: Emphasized especially by _David Hume_ who
calls attention to the seeking of its level by water.
(Discourses: On the Balance of Trade.) _J. B. Say_ speaks of
carriages, the increase of which over and above the need of
them must infallibly produce a reëxportation of them.
(Traité, I, ch. 17.)]
[Footnote A2-2-7: With all the severity of its export
prohibitions, Spain, for centuries, served as a medium to
conduct the streams of American silver to the other parts of
Europe. As to how Spain, during the last third of the 18th
century, was overflowed by copper money, see _Campomanes_,
Educación popular, IV, 272.]
[Footnote A2-2-8: _von. Schröder_, F. Schatz- und
Rentkammer, XXVII, has a very ingenuous faith in the rate of
exchange and a tariff-record (_Zollregister_); while _Child_
had a much better insight into the defects of these two
criteria. (Disc. of Trade, p. 312 ff.) Compare _Steuart_,
Principles, III, 2, ch. 2.]
[Footnote A2-2-9: Compare § 199. It was a discovery of
_Locke's_, that borrowing from foreign countries was
advantageous in all those instances in which the inland
borrower earned more than the amount of his interest by
means of the loan. (Considerations, p. 9.)]
[Footnote A2-2-10: _Ségur_, Mémoires, II, 298, tells how the
Russian officers of custom were bribed by English merchants
to represent the Russian imports from England _under_, and
the exports to England _above_ the true value. In addition
to this, smuggling was carried on!]
[Footnote A2-2-11: _J. B. Say_ calculates from the English
tariff-record (_Zollregister_), from the beginning of the
18th century to 1798, an excess of exports over imports of
£347,000,000; and yet the highest estimates of the amount of
money actually in England, according to _Pitt_ and _Price_,
gave only £47,000,000. (Traité, I, IV, 17.) The Russian
lists of exports and imports from 1742 to 1797, show a
favorable balance of 250,000,000 rubles; to which must be
added 88,000,000 rubles taken from the mines during the same
time. But it is notorious that the stores of money
diminished. _Storch_, Gemälde des russischen Reiches, XI,
12.]
[Footnote A2-2-12: Manuel, 310. _F. B. W. Herrmann_ (Münch.
gelehrte Anz. XXV, 540) also declares the whole theory of
the balance of trade wrong. According to _Brauner_, Was sind
Maut und Zollanstalten (1816), 51, it is "a mere fancy."]
[Footnote A2-2-13: Recognized even by _Ch. Davenant_, On the
probable methods of making a People Gainers in the Balance
of Trade (Works, II, p. 11).]
SECTION III.
FURTHER REACTION AGAINST THE MERCANTILE SYSTEM.
Simultaneously with this opposition, the theory of the international
balance of trade underwent important refinements, a new and improved
edition, so to speak, of old Colbertism.[A2-3-1] Each school is wont to
estimate the favorableness of the balance according to the preponderance
of that which they consider the most important element in a nation's
economy. Thus the population-enthusiasts, after the middle of the 18th
century, distinguished the "balance of advantage" from the "merely
numerical:" the former is favorable to the country which, by means of
its exports, employs and feeds the greatest number of men; the latter to
the country with a preponderating importation of money. And they call
the former much more important than the latter.[A2-3-2] The great
advance which this view constitutes over the old system lies chiefly in
two points: that the number and employment of men are evidently, so far
as the whole national economy and national life are concerned, a much
more important element than the quantity of money in a country; and
further, that now, at least, the possibility of a simultaneous profit on
both sides is admitted.[A2-3-3] The best writer in this direction, Jos.
Tucker, is among the great-grand-parents of the Manchester theory of
to-day!
A further advance was made by men who introduced the higher notions of
nationality and of the stages of civilization into the theory of
international trade. Thus, at about the same time, the socialistic J. G.
Fichte, with his shut-in commercial state, and the romantic reactionary,
Ad. Müller, with his organic whole of national economy.[A2-3-4] Finally,
Fr. List,[A2-3-5] with his "National system of Political Economy," and
his severe subordination of the mere "agricultural state" to the
"agricultural, manufacturing and commercial state," acknowledges the
favorableness of the balance in the nation which by means of the
exportation of manufactured articles, the importation of the means of
subsistence and of articles to be manufactured, demonstrates and
promotes its higher stage of civilization.[A2-3-6]
[Footnote A2-3-1: Compare _Mengotti_: Il Colbertismo (prize
essay of the Georgofili at Florence), 1791. If, with _H.
Leo_, we were to designate the whole period from the issue
of the struggles of the Reformation to the preparations of
the French Revolution as the "age of the mercantile system,"
_Colbert_ would be a very appropriate type of it.]
[Footnote A2-3-2: Compare § 254. Here belong _Forbonnais,
Necker, Tucker_ (Important Questions, IV, 11; V, 5; VII, 4;
VIII, 5. Four Tracts, 1774, I, p. 36); _Justi_ in his middle
period (_Roscher_, Gesch. der N. O. in Deutschland, I, 451
ff.); but especially _Sonnenfels_ (politische Abhandlungen,
1777, Nr. 1), who sees the best sign of a favorable balance
in the increase of population. (Grundsätze, II, 333.) When
Austria, for 2,500,000, purchases diamonds _of_ Portugal,
and sells Portugal linen to the amount of 2,000,000, it has
the numerical balance against it, but obtains the "balance
of advantage." (II, 329 seq.) With an admixture of
physiocratism, this doctrine appears in _Cantillon_, Nature
du Commerce, 1755, p. 298 ff.; with an admixture of free
trade, in _Büsch_, Geldumlanf, V, 12.]
[Footnote A2-3-3: _Justi_, Chimäre des Gleichgewichts der
Handlung und Schiffahrt (1759), supposes a gain on both
sides in all commerce between nations. Hence, no nation can
attain to a flourishing trade in any way except it be to the
advantage of those with which it has to do. (p. 14 ff., 43.)
Here, it may be presumed, _Hume's_ Essay, On the Jealousy of
Trade, exercised an influence. _Sonnenfels_ distinguishes,
in foreign trade, five grades of advantage: 1, most
advantageous, when finished commodities are exported and
cash money is imported; 2, when finished commodities are
exchanged for raw materials; 3, finished commodities against
finished commodities; 4, raw material against raw material;
5, raw material against finished commodities. (Grundsätze,
II, 202.)]
[Footnote A2-3-4: It is as necessary that every nation
should constitute a separate commercial body as that it
should be a separate political and juridical body. The
person who asks: why should I not have commodities in all
the perfection in which they are made in foreign countries?
might as well ask: why am I not completely a foreigner?
(_Fichte_, Geschloss. Handelstaat, 1800: Werke, III, 476,
411.) _Ad. Müller_ compares universal freedom of trade to a
universal empire, which will ever remain a chimera.
(Elemente der Staatskunst, 1809, I, 283.)]
[Footnote A2-3-5: _List_ (Werke, II, 31 ff.) had, after
1818, recognized that a _passive_ balance for whole nations
was possible, if they were not able to cover their wants,
supplied from abroad and then consumed, by their income, but
were obliged to make inroads on their national capital.]
[Footnote A2-3-6: _Ch. Ganilh_, who expects a real
enrichment of a nation only from foreign trade (Dictionnaire
de l'E. P., 1826, p. 131), ascribes the most favorable
balance to the nation that exchanges dear labor against
cheap; that is, principally to a nation of tradesmen as
contradistinguished from a nation of agriculturists.
(Theorie de l'E. P., 1822, II, 239 ff.)]
SECTION IV.
PARTIAL TRUTH OF THE MERCANTILE SYSTEM.
But even among the successors of Hume and Smith, a deeper insight into,
so to speak, the physics of money and of international trade must have
led to the recognition of many a truth which the mercantile system had,
indeed, badly formulated, insufficiently proved, but which it had,
nevertheless, an inkling of. And, indeed, how frequently it happens that
the progress of science proceeds from one one-sidedness, through another
opposed but higher one-sidedness, to the all-sidedness which knows no
prejudice!
A. Precious-metal-money is, indeed, a commodity, but of all commodities,
the most current, the most many-sided in its utility, the most
economically energetic, and at the same time of peculiarly great
durability.[A2-4-1] Money-capital, far from being the least useful
portion of a nation's capital, is rather one of its most important
parts; and especially in the higher stages of civilization, where the
division of labor has been most largely developed, is it peculiarly
productive and indispensable.[A2-4-2] Here it is really more likely that
the possessor of commodities may be wanting the wished for money, than
that the possessor of money should be wanting in the wished for
commodities. And, hence, the numerous half mystic expressions of the
magical power of money, which have passed into literature from the
common usage of the people, can be, by no means, considered mere errors.
B. Just as little, can the impossibility of the preponderant importation
of money for a long time, be asserted. Hume's rigid theory of a level,
by no means, exactly corresponds with the reality. The precious metal
which is, indeed, imported, but which does not subsequently enter into
the circulation, need exert no influence whatever on the prices of
commodities in general; and may, therefore, remain permanently in the
country. Think only of the articles made of the precious metals, which
minister to luxury,[A2-4-3] of buried private treasure, of the treasures
of the state, which are idly stored up; as well as of a portion at least
of most cash on hand.[A2-4-4] From the other side, also, the
over-balance or under-balance (_Ueber-oder Unterbilanz_) of a country may
continue, a very long time, when its internal trade with its money-need
is, in the first case, an increasing, and in the last, a decreasing one.
So far, the preponderance of the importation of money may be called a
favorable sign and the preponderance of the exportation of money an
unfavorable one. And the person who thinks that a permanent
preponderance of exports or imports is not at all possible in the way of
commerce, overlooks the possibility of a very extensive national
indebtedness.[A2-4-5]
C. But a distinction should be made between the _balance of payments_
and the _balance of trade_ in the narrower sense of the
expression.[A2-4-6] In the case of the latter, to be complete, it is
necessary to carry to the credit side of the account: 1, The exports of
commodities; 2, the profit made by parties at home by realizing on
(_Realisierung_) the exports in foreign countries; 3, the freight-profit
made by parties at home on exports and imports, as well as in foreign
carrying trade (_Zwischenverkehr_); 4, the sale of inland ships in
foreign countries; 5, premiums and compensation for damage on account of
maritime insurance from foreign countries. On the debit side, on the
other hand, the corresponding items when foreigners have received from
the home country, as in the case of imports, etc. To obtain the general
payment-balance, we have still, in addition, on the credit side: 1, The
profit from home participation in enterprises in foreign countries and
the transfers of capital originating therefrom; 2, the interest and
repayments of money-capital loaned in foreign countries; 3, the sale of
stocks (_Effecten_) 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.[A2-4-7] 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.[A2-4-8]
[Footnote A2-4-1: _Locke_, Civil Government (1691), § 49,
seq., emphasizes this durability of the value-preserving
metallic money, in opposition to the perishable articles of
consumption, as a principal element in the development of
private property and of economic civilization. But even
_Petty_ ascribes to the precious metals a higher quality as
wealth than to any other commodity, for the reason that they
are less perishable, and possess value always and
everywhere. Hence, he esteems foreign trade more highly than
inland trade, and would have those businesses which import
the precious metals protected more than others against
taxation. (Several Essays, 1682, p. 113, 126, 159.) _Adam
Smith_ also recognizes this, at least so far as intermediate
trade is concerned. (W. of N., IV, ch. 6.)]
[Footnote A2-4-2: Even _Rau_, in his additions to _Storch_
(1820), p. 397, concedes the peculiarly charming, vivifying
power, which money possesses to an extent greater than any
other commodity. Well distinguished whether the money-want
of a country is already fully satisfied or not. (Ansichten
der Volkswirthschaft, 1821, p. 157.) _Carey_ exaggerates
when he calls money the cause of the movement in society,
out of which force is produced, what coal is to the
locomotive, or food to the animal body (Principles of Social
Science, ch. XXXII, 5), or the only want of life for which
there is a universal demand. (Ch. XXXIII, 1.) But he rightly
calls it the "instrument of association." Excellent
demonstration, as to how, at the sudden outbreak of a war,
of a revolution, etc., all those who have money on hand,
even when they had previously obtained it while peace still
prevailed, in the form of a loan, are in an infinitely
better position than the owners of the otherwise most useful
commodities. (Ch. XXXVII, 12.) Earlier yet, _P. Kaufmann_
placed the "principal character of money" in this, that it
was "most perfect property (_Vermögen_);" and he calls its
quality as a commodity, philosophically considered, in
question; and judges the balance of trade according to this,
that in commodities, interest-yielding as well as dead
capital is exported, but in money-capital, which is always
gain-engendering. (Untersuchungen im Gebiete der politischen
Oekonomie, 1829, I, 4, 74, 80.)]
[Footnote A2-4-3: In England, _Patterson_ estimates the
regular additional importation (_Mehreinfuhr_) of money at
from four to five millions sterling, of which the greater
part is devoted to purposes of luxury. (Statist. Jrl., 1870,
217.)]
[Footnote A2-4-4: _Fullarton's_ view (Regulation of
Currencies, 1844) suffers from exaggeration. _Knies_, Geld
and Credit, II, 285, very well shows that the "hoards" are
by no means mere idle stores, and that, therefore, their
void produced by the exportation of money must be soon
filled up again. _Adam Smith_, even, may be considered a
predecessor of _Fullarton_. (W. of N., ch. 2, p. 250, Bas.)]
[Footnote A2-4-5: Even _Büsch_ (Werke, XIII, 26) says that
the under-balance (_Unterbilanz_) of the Scotch vis-a-vis of
England was for a long time made up in two ways, by the
marriage of wealthy English heiresses and by Scotch
bankrupts. Thus the troops, who, in the 17th century, were
traded over to France, and in the 18th, to England by German
princes, brought the money, in part, back again, which was
exported by the unfavorable balance. According to _List_,
the exported metals, after they have risen in price with us,
flow back to us again; not, however, as exchangeable
articles, but in the form of a loan, by which it is made
possible for us to dispose of them again, and again to
receive them in this shape. (Werke, II, 37.)]
[Footnote A2-4-6: Thus even _J. Steuart_, Principles, IV, 2,
ch. 8.]
[Footnote A2-4-7: Compare _Soetbeer_ in _Hirth's_ Annalen
des deutschen Reiches, 1875, p. 731 ff.]
[Footnote A2-4-8: 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 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 million 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.]
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.[A2-5-1]
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.[A2-5-2]
And here it is not so much the absolute costs of production as the
comparative which are decisive.[A2-5-3] The country A may be superior to
the country B in all kinds of productiveness; but when this superiority
for the group of commodities _x_ 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_.[A2-5-4] 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 greatest on the
side of the nation whose desire to hold fast to their own commodities is
farthest 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.[A2-5-5] Yet, in
estimating this productiveness, it is necessary to take the whole
national life into consideration.[A2-5-6]
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.[A2-5-7] Therefore, on the
whole, their value in exchange is wont to be lowest among the richest
and most highly cultivated nations.[A2-5-8] Such a relative cheapness of
gold and silver is not only a symptom of economic power, but considering
the preëminent 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.[A2-5-9] 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, or 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;[A2-5-10] and both, all the more as the
revolution in prices enhances the most productive elements of the nation
there, and here the most unproductive.[A2-5-11] Hence, even when it
cannot, in general, be said that one branch of commerce, carried on in a
normal manner, should necessarily remain behind another in economic
productiveness, those which have nothing to fear from a disturbance of
their balance by the measures of foreign states are distinguished by the
greatest security, and those are capable of the greatest growth which
exchange articles to be manufactured (_Fabrikanden_), and the means of
subsistence against ordinary manufactured articles.[A2-5-12] [A2-5-13]
[Footnote A2-5-1: _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.]
[Footnote A2-5-2: _J. 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.)]
[Footnote A2-5-3: 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 _J. Mill_, Elements (1821), III, 4,
13 seq.; _Torrens_, The Budget (1844) and _J. S. Mill_,
Essays on some unsettled Principles of Political Economy
(1844), No. 1, and Principles, III, ch. 18 ff. But even
_Jacob_, 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.)]
[Footnote A2-5-4: 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.]
[Footnote A2-5-5: 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 au préjudice de la distribution et de réproduction
des revenus_. (Max. génér., 24.)]
[Footnote A2-5-6: _Rau_ distinguishes principally whether
importation brings articles of luxury or means of
acquisition (_Erwerbstamm_) into the country. (Ansichten der
V. W., 163.) Similarly, _de Cazcaux_, Eléments 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.)]
[Footnote A2-5-7: 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.)]
[Footnote A2-5-8: "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.]
[Footnote A2-5-9: Compare § 126, and even _Kaufmann_,
Untersuchungen, I, 75 seq.]
[Footnote A2-5-10: 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 French wine with
the gold which its manufactured articles have been exchanged
against in Germany. But all this always supposes that the
prices of commodities have fallen in England and risen in
other countries; that is, a changed and, so far as England
is concerned, an unfavorable distribution of the precious
metals--which is found in connection with a relatively
decreased productiveness of English labor. The English cost
of production may yet continue to be covered,
notwithstanding; but, when it has been diminished by a
lowering of wages, interest, etc., the national wealth
suffers in consequence. Compare _Torrens_, Budget, p. 50
ff., who precisely on this bases the greater security of
trade between the mother country and its colonies; and which
also found expression in the Peel reform plan of 1842 ff.
_Adam Smith_ approximated to this view when he ascribed a
more favorable balance to the country which paid for its
imports with its own instead of with foreign products. (W.
of N., IV, ch. 3-2, p. 329, Bas.)]
[Footnote A2-5-11: Compare § 141. Strongly emphasized by
_List_, Werke II, 31, 36 seq. 48, 137.]
[Footnote A2-5-12: _Torrens_ imagines an English
manufacturer who employs raw material = 100 quarters of corn
and manufactured wares = 100 bales of cloth (the quarter of
corn and the bale of cloth supposed to be of equal value)
and whose product = 240 bales in value; and compares him
with an American agriculturist who, by means of the same
outlay of capital, harvests 240 quarters of corn. The trade
between them restores to each not only his outlay, with
twenty per cent. profit, but puts them in a position to
repeat their production on a larger scale. Only the quantity
of fertile land can put a limit to this growth; for corn and
cloth help produce each other, and the cheapness of the one
promotes the cheapness of the other, which can not, by any
means, be said, for instance, of the exchange between
vanilla and satin. (Budget, p. 268 ff.) Compare _Roscher_,
Colonien, p. 277 ff.]
[Footnote A2-5-13: The important controversy concerning
absenteeism may be answered in accordance with the
principles laid down in this chapter. The mercantile system
considered the rent sent to absentee landlords or
capitalists as a tribute paid to foreign countries; but
certainly improperly, as such rent is only the fruit of
their property which the owners might have consumed in their
own country, without giving any one a particle of it.
Besides, these rents are not sent in cash to foreign
countries, but in the form of those commodities to the
exportation of which the country is peculiarly well adapted.
Let us suppose, for instance, that the Irish absentees had
all left the country at once. The tradesmen, personal
servants, etc., to whom they had hitherto furnished
employment would be greatly embarrassed to find a market for
their services, etc., but the producers of linen and meat
would have largely increased their exports, because an
entirely new demand for their products would have arisen
through the farmers of the absentees. The reverse would
necessarily happen if all absentees were suddenly called
home. Absenteeism which has lasted a long time injures no
one economically. Many, recently, laud it even, because it
permits every nation to devote their energies to the
branches of production for which they are best qualified:
Paris, for instance, to theatrical and luxury wares. The
savings made by the English absentees on the continent,
where things are cheaper, turn eventually to the advantage
of England. (Thus, even _Petty_: Political Anatomy of
Ireland, p. 81 ff. _Foster_, On the Principle of Commercial
Exchanges between Great Britain and Ireland, 1804, p. 76 ff.
Edinb. Rev., 1827. _F. B. Hermann_, Staatswirthschaftl.
Untersuchungen, 355, 363 ff. _Per contra_, especially,
Discourse of Trade and Coyn, 1697, p. 99. _M. Prior_, List
of the Absenters of Ireland, 1730. _A. Young_; Tour in
Ireland, 1780. _Sir J. Sinclair_, Hist. of the Public
Revenue, 1804, III, 192 seq. _Lady Morgan_, On Absenteeism,
1825.) An aversion for absenteeism plays a chief part in all
Carey's writings. Thus, even in his Rate of Wages, 45 ff.
On medieval complaints concerning the absenteeism of
monasteries: _Bodmann_, Rheingauische Alterthümer, 751. From
a higher point of view, it cannot, indeed, be ignored that
absenteeism, largely developed, cripples the organic whole
of national life. The most highly cultured and influential
classes become estranged from their country, the great mass
remaining behind coarser, economic production more
one-sided, and all social contrasts more sharply defined.
Disturbances in Rome, when Diocletian removed his residence
from there; the decline of the Netherlands, very much
promoted by the discontent which Philip II.'s departure for
Spain produced. It was estimated, however, in 1697, that the
English absentees caused a gain to France of £200,000 per
annum. (Discourse of Trade, p. 93.) It is said that about
1833, 80,000 Englishmen traveled on the continent, and
consumed £12,000,000 there. (_Rau._) According to
_Brückner_, the Russians who travel in foreign countries
take 20,000,000 rubles a year out of the country with them.
(_Hildebrand's_ Jahrb., 1863, 59.) That the countries which
receive these travelers receive no very great benefit from
them, see in _J. B. Say_, Cours pratique. In Paris, there
were, even in 1797, so many strangers who so enhanced the
rents paid for _maisons garnies_ that their expulsion was
proposed. (_A. Schmidt_, Pariser Zustände, III, 78.)]
SECTION VI.
INTERNATIONAL COMMERCIAL TREATIES.
All international commercial treaties have this object in common: to
moderate the impediments to trade which arise from the differences and
even from the enmities of states. According to time and character, they
fall into three groups:
A. _Medieval_, where a barbarous state for the first time promises
foreign merchants in general legal security, without which regular trade
is unthinkable. Such treaties, where their provisions are not a matter
of course, must be certainly considered as a salutary advance; and they
may, under certain circumstances, be necessary even to-day.[A2-6-1]
B. _Mercantilistic_ treaties, which close, perhaps, even a bloody
commercial war carried on against a rival,[A2-6-2] or which by a closer
connection with a state, whose rivalry is not so much feared, are
intended to moderate the worst consequences of a general
seclusion.[A2-6-3] Consistently carried out, and without any regard for
consequences, the mercantile system really means a war of each state
against all others, and it is no mere accident that after the cessation
of the wars of religion (1648) and before the beginning of the war of
the French revolution (1792), commercial wars occupy the foreground.
Such economic alliances as are entered into in these treaties generally
unite states which, by reason of the very different nature of their land
and their different national culture, are adapted to production of very
different kinds, and which, at the same time, have a common political
interest.[A2-6-4] Each party here agrees with the other to give a
preference to its subjects in trade, to not exceed certain maxima of
duties, etc.[A2-6-5]
The art of the negotiator was employed to overreach the other
contractant in relation to the balance of trade.[A2-6-6] It was
considered a special matter of congratulation to induce a less highly
developed nation to abandon the traditional means employed to
artificially elevate its industries. Hence it is, that such friendly
treaties frequently contained the germs of the bitterest enmity.[A2-6-7]
A popular remnant of this second group has been noticeable even in
recent times, when in diplomatic negotiations concerning the reciprocal
modification of duties, it was considered an overreaching and even as an
outrage, in case one state made more "concessions" than it
received:[A2-6-8] evidently, a confusion of the producers of the
industry in question with the whole nation.
C. _Free-trade_ treaties, intended to pave the way to the general
freedom of trade.[A2-6-9] Two provisions especially are characteristic
here: putting the subjects of the other party on an equal footing with
those of the home country in what relates to the ship-duties,
etc.;[A2-6-10] and the promise that the products of the other party, as
regards import duties, shall be treated like those of the most favored
nation.[A2-6-11] [A2-6-12] Whether this preparation for the universal
freedom of trade is better made through the medium of an international
treaty or of national legislation cannot be answered generally.[A2-6-13]
Besides, in our day, the preference of one foreign nation would be
easily evaded through the perfection of the modern means of
communication.
[Footnote A2-6-1: The treaty of commerce between England and
Morocco, of the 9th of December, 1856, specially covenants
that the countrymen of a debtor shall not be held
responsible for debts in the creation of which they had no
part; that between England and Mexico, in 1826, guaranties,
among other things, that prices shall be freely determined
between buyers and sellers (art. 8), freedom from compulsory
loans, and from forced conscription for military duty (10),
the exercise of one's religion, and the inviolability of
graves (13); things which were not yet matters of course in
Mexico! Similar agreements between Spain and England in
1667; between Spain and Holland in 1648 and 1713; and even
in 1786, between England and France. Commercial treaties of
this kind are found very early and very frequently among the
ancients. Compare the Arcadian-Ægean in _Pausan_, VIII, 5,
5, which strongly recalls the Russo-English trade over
Archangel; further, Corp. Inscr. Gr., II, No. 1793, 2053 b
and c, 2056, 2447 b, 2675-78, 3523. That in the suburbs of
Jerusalem, from Solomon to Josias, places where Astarte etc.
was worshipped, were maintained unhindered, depends, it is
said, on commercial treaties with the Phoenicians,
Moabites, Ammonites. (_Movers_, Phönikier, III, 1, 121 ff.,
206 seq.)]
[Footnote A2-6-2: The two commercial treaties between Rome
and Carthage, 348 and 306 before Christ (_Polyb._, III, 22
ff.), are a clear proof that, in the interval, the
mercantile superiority of Carthage had increased. While the
Romans in 348 had still the right, under certain
limitations, to carry on trade in Sardinia and Africa, it
was in 306 entirely denied them.]
[Footnote A2-6-3: As guild-privileges make annual fairs
(_Jahrmärkte_) and governmental fixed prices necessary.]
[Footnote A2-6-4: Commercial treaty of the Venetians with
the Latin empire in Constantinople, of the Genoese with the
Greek after its restoration; in which, for instance, it was
promised to the former, that no citizen of a state at war
with Venice, should be permitted to sojourn in the Byzantine
empire; to the latter, that they alone of all foreigners
should enjoy freedom from taxation, and, with the Pisans,
navigate the Black Sea. As long as the Dutch were the
hereditary foes of Spain, they were much favored in France.
Commercial treaty of 1596, putting them on an equal footing
with the French; and which, considering their superiority at
the time, was necessarily of greater advantage to them than
to the French. _Colbert's_ step to destroy this
preponderance is coincident with the changed foreign policy.
(Richesse de Hollande, I, 127.) In the peace of Nijmegen,
again (art. 6 seq.), France tried to separate the Dutch from
their allies by the restoration of their former rights. In
the Spanish war of succession, France entered into a treaty
with the arch-duke, Charles, that a common commission should
fix the duties on English commodities, transfer the trade
with America to an English-Spanish company, but that the
French should be excluded therefrom. (_Ranke_, Franz.
Gesch., IV, 257.)]
[Footnote A2-6-5: The king of Bosporos had the rights of
citizenship in Athens, and enjoyed that of freedom from
taxation of his property there. In consideration of this,
the Athenians were released from his corn export duties of
1/30. (_Isocr._, Trapez., § 71. _Demosth._, Lept., p. 476
ff.) Commercial treaty of Justinian with Ethiopia: the
latter was to afford aid against the Persians, in return for
which Byzantium promised to supply its requirement of silk
no longer from Persia, but from Ethiopia. Commercial treaty
between Florence and England, 1490: England promised to
permit all the wool destined for Italy, except a small
quantity intended for Venice only, to go over Pisa, and as a
rule, not through foreigners. Florence, on the other hand,
was to receive English wool only through English ships.
(_Rymer_, Foedera, XII, 390 seq. Decima dei Fiorentini, II,
288 ff.)]
[Footnote A2-6-6: The difficulties of such negotiations
described by an experienced politician (probably _Eden_):
Historical and Political Remarks on the Tariff of the French
Treaty, 1787.]
[Footnote A2-6-7: The Methuen treaty (1703) was considered
an English master-piece, because Portugal had actually
exported a great deal of Brazilian gold to England. _Pombal_
said, in 1759: "Through unexampled stupidity, we permit
ourselves to be clothed, etc. England robs us every year, by
its industry, of the products of our mines.... A severe
prohibition of the exportation of gold from Portugal might
overthrow England." (_Schäfer_, Portug. Gesch., V, 494 ff.)
And yet the treaty only says that Portugal withdraws its
prohibition of English woolen wares, and restores the former
duties (15 per cent.), while England continues to permit
Portuguese wine to pay a duty 1/3 less than French wines!
Singular doctrine of _Adam Smith_ (W. of N., IV, ch. 6), and
still more of _McCulloch_ (Comm. Dict., v. Commercial
Treaties), that this commercial treaty was unfavorable to
England and very favorable to Portugal, although, in fact,
later a duty of only about 3 per cent. was imposed here on
English commodities. (_Büsch_, Werke, II, 62.) The
English-French commercial treaty of 1786 introduces in the
place of the former prohibition, duties of 10, 12 and 15 per
cent. for a number of industrial products. The French soon
came to believe that they had been taken advantage of here.
_A. Young_ found the desire very general in the north of
France, to get rid of the Eden treaty even through a war.
(Travels in France, I, 73.) Many of the _cahiers_ of the
third estate demand that no treaty of commerce should be
entered into without previous consultation with the
industries interested. (Acad. des Sc. morales et polit.,
1865, III, 214.) But in England, also, bitter complaints of
the opposition, to which Pitt replied, that commercial
treaties between agricultural and industrial countries
result to the advantage of the latter, independent of the
fact that England obtained a new market of 24,000,000, and
France of only 8,000,000 persons. Compare the extracts in
_Lauderdale_, Inquiry, App., 14. Forcade: Revue des deux
Mondes, 1843.]
[Footnote A2-6-8: Urged very largely in southern Germany
against the Prussian-French commercial treaty of 1862. But
is it really an "advantage" for France to have in the
interior more toiling (_Plackereien_) for inlanders as well
as for foreigners? Or that its consumers must pay high taxes
to the producers of certain wares?]
[Footnote A2-6-9: Seldom in antiquity. Compare, however,
Inscr. Gr., II, No. 256, and the reciprocal granting of the
rights of citizenship of Athens and Rhodes. (_Livy_, XXXI,
15.) Among the moderns, Flanders followed free-trade
principles similar to those followed later by Holland, at
the beginning of the fourteenth century; for instance, it
refused to gratify France by breaking off its trade with
Scotland. (_Rymer_, Foedera, II, 388.) Florence, in 1490,
promised the English, that in all treaties to be entered
into with others, it would permit it to enter. In the
French-Florentine commercial treaty of 1494, it is
stipulated with the Florentines that their ships _Gallica
esse intelligantur_ and their merchants _tanquam veri et
naturales Galli_ etc. (Decima, II, 308.) Swedish treaty with
Stralsund, 1574, that every privilege granted to a Baltic
city should also be, of itself, to the advantage of
Stralsund. Mutual equal treatment of subjects promised
between Portugal and England, 1642; Portugal and Holland,
1661; mutual treatment on the basis of the most favored
nation: between England and Portugal, 1642; Holland and
Spain, in the peace of Utrecht; Spain and Portugal, 1713;
Spain and Tuscany, 1731; England and Russia, 1734. But how
far such principles were removed from the beginning of the
eighteenth century is shown by the speech from the throne of
the 28th of January, 1727, of George I., in which the
Austro-Spanish treaty of 1725, that placed the subjects of
Austria in the colonial empire of Spain on an equal footing
with the English and Dutch, is described as a violation of
the dearest interests of England, and in which it is said
that England must defend its own unquestionable right
against the covenant entered into to violate public faith
and the most solemn treaties; that it might be that Spain
thought of subjecting England once more to the popish
pretender. Even in 1713, it was one of the principal points
in controversy between the Tories and Whigs, whether, in a
commercial treaty with France, the latter should be accorded
the rights of the most favored nations. Compare _Daniel
Defoe_, A Plan of the English Commerce, and _per contra_,
The British Merchant.]
[Footnote A2-6-10: English treaties with Prussia, 1824; the
Hanse cities, 1825; with Sweden, 1826; France, 1826 (England
removed the limitations still retained without compensation,
in 1839); Naples, 1845; Sardinia, Holland and Belgium, 1851.
Prussian treaties with Russia, 1825; Naples, 1847; Holland,
1851. French with Bolivia, 1834; Holland, 1846 (in which
reciprocity is extended even to the navigation of rivers);
Denmark, 1842; Venezuela, Equador and Sardinia, 1843; Russia
and Chili, 1846; Belgium, 1849; and Portugal, 1853.]
[Footnote A2-6-11: Marking an epoch in this respect are the
treaties of the United States with Holland (Oct. 8, 1782),
Sweden (April 3, 1783), Frederick the Great (Sept. 10,
1785), and England (Oct. 28, 1795); recently that entered
into by Napoleon III. with England in 1860, and with the
Zollverein in 1862.]
[Footnote A2-6-12: The expression "most favored" is not
always strictly construed. Thus, for instance, France
granted the right of coast-sailing proper (_cabotage_) only
to Spain. States frequently promise only: _s'appliquer
réciproquement toute faveur en matière de commerce et de
navigation qu'ils accorderaient à un autre état gratuitement
ou avec compensation_.]
[Footnote A2-6-13: Napoleon III. had a preference for
commercial treaties, because these, as acts of foreign
politics, lay in the plenitude of his imperial power (art. 6
of the constitution of 1852; senatus consultum of Dec. 23,
1852), while in legislation, his free trade tendencies were
limited by popular representation. And so also Prussia, by
its commercial treaty with him (1862), was actually freed
from the hindrances which the free veto of the
Zollverein-conferences would have opposed to its reform.
Opposition to the treaty-form because too binding.
(_Chaptal_, De l'Industrie Française, II, 242 ff.) The
free-trade party lauds it precisely on this account. See the
report of the Leipzig Chamber of Commerce for 1874-75, p.
41.]
APPENDIX III.
THE INDUSTRIAL PROTECTIVE SYSTEM AND INTERNATIONAL FREE TRADE.
THE INDUSTRIAL PROTECTIVE SYSTEM AND INTERNATIONAL FREE TRADE.
SECTION I.
PROXIMATE ECONOMIC EFFECTS OF THE INDUSTRIAL PROTECTIVE SYSTEM.
That the principal measures which the mercantile system recommended,
artificially to increase a nation's wealth, could not produce the
immediate effects expected of them, has been shown, especially from the
natural history of money. Their proximate economic consequences
necessarily consisted in this, that they diverted the existing
productive forces of the nation from their places of application
(_Verwendungsplätzen_) hitherto, to others which the government thought
more advantageous.
A. If home producers are in a condition to offer their commodities as
good and as cheap as foreigners, all protection of the former by import
duties, or even by prohibitions, is superfluous. The home producer has,
as a rule, not only the advantage of the smaller cost of freight to the
place of consumption,[A3-1-1] but that of being earlier informed,
because of his proximity to consumers, of a change in their
tastes.[A3-1-2] If, indeed, foreigners could supply us better and
cheaper, and if they are kept from supplying our market only by
artificial means, the state compels our consumers to a sacrifice of
enjoyment;[A3-1-3] and such a sacrifice as is not fully compensated for
by the profit made by the favored producers in any manner. The latter
are generally soon compelled by home competition to arrange their prices
in accordance with the rate of profit usual in the country. If they had
no "protection" they would simply employ their productive forces in
other branches of production; and in those in which they were equal or
even superior to foreign competitors. By means of the products thus
obtained, the people might then get in exchange all those commodities
from foreign countries, the production of which it is, according to the
laws of the division of labor, better to leave to foreign
countries.[A3-1-4] Since one nation can lastingly pay another nation
only with its own products, any limitation of imports must, under
otherwise equal circumstances, be attended by a corresponding limitation
of exports.[A3-1-5] Directly, therefore, these hindrances to importation
produce no increase, but only a change in the direction (_Umlenkung_) of
the national forces of capital and labor; an increase, only in case that
foreign producers are thereby caused to transfer their productive forces
within our limits;[A3-1-6] which may certainly be considered the
greatest triumph of the protective system. Hence it is absurd when an
equal extension of "protection" to all the branches of a nation's
economy is demanded, as it is so frequently, in the name of justice.
There is here no real protection whatever, analogous, for instance, to
the protection afforded by the judge, but a favor which can be accorded
to no one without injuring some one else.[A3-1-7]
[Footnote A3-1-1: It is of course different in the working
(_Verarbeitung_) of foreign raw material. Much also depends
on the situation of the industrial provinces. For instance,
manufactured articles can reach the interior of Spain and
the Western states of the American Union only after they
have passed the industrial coast-regions of both countries.
In Russia, on the other hand, the center is the principal
industrial region; and hence the coast may be actually
nearer to foreign than to home manufacturers. Similarly, in
France, at least for iron and coal. Compare _Adam Smith_, W.
of N., II, p. 279 Bas.]
[Footnote A3-1-2: People would, however, have to calculate
on the foolish luxury which despises the home product
because "it came from no great distance." World-supremacy of
Paris fashions! A manufacturer of excellent German
_Schaumwein_ (foaming wine) complained to me, in 1861, that,
after suffering heavy losses, he was compelled by his
customers to adopt French labels. Here, a wise prince may
have a favorable influence by his example. Louis XIV.
himself insisted, when his mother died, that the court
should use only French articles of mourning. _Gee_, Trade
and Navigation, p. 46. Augustus I., of Saxony, always wore
home cloth. (_Weisse_, Museum für Sächsische Geschichte, II,
2, 109.) Similar requirements by the prince of Orange (1749)
of all officials: Richesse de Hollande, II, 317. Dutch
executioners were dressed in calico. (Discourse of Trade,
Coyn, etc., 1697.) American popular stipulations not to wear
foreign articles of luxury. (_Ebeling_, Geschichte und
Erdbeschreibung, II, 481.) Rhode Island tailors placed the
working wages for home stuffs much lower than for foreign.
(II, 149.)]
[Footnote A3-1-3: _Prince Smith_ calls protective duties
scarcity-duties (_Theuerungszölle_). Because of this
increased dearness of the "protected" commodities, consumers
can no longer pay for as many other home commodities. If the
industry was previously in existence, the protective duty
imposed is wont to enhance the price, not only of the
foreign commodity, but also of the home commodity.]
[Footnote A3-1-4: If, for instance, the English had never
had a protective tariff on silk, nor the French a protective
tariff on iron, the former would probably get all the silk
commodities they want from France and pay for them in iron
ware. In this way, both nations would be well off in what
concerns the relation between the cost of production and the
satisfaction of wants. _Say_ calls protective duties a fight
against nature, in which we take pains to refuse a part of
the gifts which nature offers us. He leaves himself open to
the charge of exaggeration, however, when he compares a
nation that wants to produce everything itself to a
shoemaker who wanted to be tailor, carpenter, to build
houses and cultivate a farm also. Although no nation is
all-sided, yet every nation is a great deal more-sided than
an individual.]
[Footnote A3-1-5: Whoever keeps a people from purchasing in
the cheapest market, thereby prevents their selling in the
dearest. (_McCulloch._) It was no mere desire of revenge
that induced Holland, in the 17th century, to threaten the
Poles, in case the enhancement of their duties continued in
Danzig and Pillau, they would supply their corn-want from
Russia, (_Boxhorn_, Varii Tractat. polit., p. 240.) Thus the
tariff-measures adopted by France against the German cattle
trade and the Swedish iron trade promoted the growth of the
Crefeld silk manufacture, and lessened the exportation of
French wine to Sweden. When, in 1809, England heavily taxed
Norwegian wood, in favor of Canada, the Norwegians began,
instead of purchasing English manufactured articles, to
supply themselves from Hamburg, Altona and France. (_Blom_,
Norwegen, I, 257.)]
[Footnote A3-1-6: _Fr. List_ assumed altogether too
unconditionally such an effect from import duties to be the
rule. The more developed the self-confidence of a nation is,
the more vigorous the life of its industries, the more
many-sided the commerce of its people; the less disposed are
its industrial classes to give up their home and carry their
market with them. But, for instance, Swiss labor and, still
more, Swiss capital have been induced by the tariff-systems
of the great neighboring countries to settle in Mühlhausen,
Baden and Voralberg, or at least to establish branch houses
in these places. Similarly, Neumark cloth makers were
induced to emigrate to Russia, and Nürnberg industrial
workmen to Austria (_Roth_, Geschichte des Nürnbergen
Handels, II, 170) etc. Compare _Burkhardt_, c. Basel, I, 74;
_Böhmert_, Arbeiterverhältnisse der Schweiz, I, 16 seq.; II,
17.]
[Footnote A3-1-7: Compare _Alby_ in the Revue des deux
Mondes, Oct., 1869, and, _per contra_, Cairnes, Principles,
p. 458. The misfortunes of war or internal disquiet have
frequently driven away the best labor-forces of an old
industrial state, and thus powerfully promoted a young
protective system in the neighborhood. Reception of
Byzantine silk-weavers in Venice, during the crusade to
Constantinople, of Flemish wool-weavers in England, under
Edward III. (_Rymer_, Foedera, III, 1, 23) and Elizabeth; of
Huguenot industrial workmen under the great elector, etc.
The growth of the Zurich silk industry by the settlement
there of expelled Protestants from Locarno.
England, indeed, had, up to 1849, protective duties both for
industry and agriculture. But the protective duties were of
no real importance, except in the case of the latter,
because the greater part of England's industrial products
were superior to foreign competition without the help of
protective duties. Something similar is true of most duties
on raw material in the United States.]
SECTION II.
EFFECT OF EXPORT DUTIES, etc., ON RAW MATERIAL.--EXPORT PREMIUMS.
B. Export duties on raw material, and prohibitions of the exportation of
raw material, lower the price of such articles, by preventing the
competition of foreign buyers.[A3-2-1] To this loss of the producers of
raw material, there is, in the long run, no corresponding gain to the
manufacturers. Rather will there be, when freedom of competition
prevails at home, an increased flow of the forces of production to the
favored branch, because of its rate of profit, which is greater than
that usual in the country, and a corresponding flow from the injured
branch, until such time as the level of profit usual in the country is
restored.[A3-2-2] Hence here, also, the final result is only a change of
the direction, not a direct increase of the productive forces.[A3-2-3]
C. In the case of export-premiums, it is necessary to distinguish
between the mere refunding back of the taxes which have been paid on the
assumption of a home consumption which has not taken place (drawbacks),
and the actual making of donations because of the exportation of goods
(bounties). The former produces no result except to maintain the
possibility of a production which would otherwise have been prevented by
the tax. The latter, on the contrary, compels all those who are subject
to taxation to make a donation to one particular class of persons
engaged in industry.[A3-2-4] Moreover, all consumers are compelled to
pay a higher price for the commodity to the extent that the market
price, inclusive of the premium to be obtained abroad, is higher than
the home market price hitherto usual. But, as the cost of production has
not increased, this profit of the producers, which is greater than that
usual in the country, must induce other productive forces to enter into
the favored branch; so that here, also, the lasting result is not a
higher rate of profit of the individuals engaged in the industry, but an
extension of the industry itself. Foreign countries chiefly reap the
greatest advantage from this course, since they obtain the commodities
at gift-prices.[A3-2-5] The premiums paid, not for exportation, but for
the production of a commodity, have a meaning akin to this.[A3-2-6]
Either the industry could not maintain itself without premiums, in which
case the state encourages a losing production,--and the more there is
produced the greater is the loss to the national economy;--or the
industry might exist without the payment of premiums, and then the newly
increased profit would lead to an extension of the industry. Exportation
would follow, and all the effects of export-premiums appear.[A3-2-7]
[Footnote A3-2-1: Rags in Silesia dearer than in Bohemia by
the full amount of the Austrian export duties (Gutachten
über die Erneuerung der Handelsverträge; 1876, p. 9). When
the English export-prohibitions were extended to Scotland,
the price of Scotch wool fell about 50 per cent. (_A.
Smith_, W. of N., IV, ch. 8.) In the case of foreign raw
material, the reëxportation of which is prevented, the
object of such prohibitions may be largely frustrated. When
England, to promote its dyeing industries, left the
importation of colors entirely free, but allowed their
exportation only under heavy duties (8 George I., c. 15),
the importers provided the market always with somewhat less
than the amount required, and thus raised the price.]
[Footnote A3-2-2: Export hindrances have been continued
longest in favor of manufacturing industries
(_Verarbeitungsindustrie_), in the case of such commodities
as are not intentionally produced, such as rags, ashes,
etc., but which are collected only as the remains of some
other kind of production or consumption. "Negative
production," according to _Stilling_, Grundsätze der
Staatswirthschaft, 803, because it is desirable to produce
as little as possible of such raw material. But the dearer
rags, for instance, are, the more carefully are they
collected.]
[Footnote A3-2-3: When the French prohibition of the
exportation of hemp was extended to Alsace, its production
decreased from 60,000 to 40,000 cwt. (_Schwerz_,
Landwirthschaft des Nieder-Elsasses, 378 ff.) Frederick the
Great soon carried his prohibition of the exportation of raw
wool to such an extent as to prohibit the exportation even
of unshorn sheep, and to punish the dropping of a sheepfold
by a fine of 1,000 ducats. (Preuss. Gesch. Friedrichs III.,
42.) Here, also, belong prohibitions relating to the
exportation of corn, which force considerable capital, etc.
into industry. The prohibition of the exportation of corn in
England, and the permitting of the exportation of cattle,
wool, etc., was one of the principal causes why there were
so many complaints at the time of the turning of land used
for tillage into pasturage-land. When, in 1666, the
exportation of Irish cattle to England was prohibited, it
produced, at the outset, great need in Ireland, but
afterwards a flourishing condition of Irish industry.
(_Hume_, History of England, ch. 64.)]
[Footnote A3-2-4: The effect must be very much the same when
the right of buying up all the raw material of a certain
district is granted to one factory exclusively. The elector,
Augustus of Saxony, did this frequently. Compare _Falke_,
Gesch. des Kurf., A. v. S., 190-212, 345.]
[Footnote A3-2-5: As to how, by means of German drawbacks
(_Rückzölle_) it is possible for beet-sugar to be offered at
a cheaper rate in Brazil than home cane-sugar, see
_Wappäus_, Brazilien, 1830. The French export-premiums for
sugar amounted, in 1856, to over 8,000,000 francs. Frenchmen
subject to taxation were obliged to pay this amount, and
thus add to the already increasing price which they had to
pay for that article. (Journ. des Econom., Juill., 1857.) In
England, in 1742, the export-premiums for linen were
defrayed by enhanced entry-duties on cambrics. (15 and 16
George II., c. 29.)]
[Footnote A3-2-6: As to how English export-premiums
sometimes made English commodities cheaper in Germany than
in England, see _Büsch_, Werke, XIII, 82. There are, indeed,
gifts which may ruin the receiver of them, as, for instance,
when one gets his rival intoxicated at his expense before
the decisive solicitation. _Timeo Danaos et dona ferentes_
(cited by Fox and Burke against the Eden treaty: _Hansard_,
Parl. History, 1787, Jan. p. 402, 488).]
[Footnote A3-2-7: It is said that Maria Theresa paid
1,500,000 florins a year for this purpose. (_Sonnenfels_,
Grundsätze, II, p. 179.) England, between 1806 and 1813,
altogether, £6,512,170. _Colquhoun_, Wohlstand, Macht, etc.,
Tieck's translation, I, 251.]
SECTION III.
THE FREE-TRADE SCHOOL.
From what has been said, we may understand why the so-called free-trade
school, with its atomistic over-valuation of the individual and the
moment, rejects all those measures of the industrial protective
system.[A3-3-1] As such measures really injure the oppressed portions of
the people more than they help the favored classes, their introduction,
it is said, uniformly depends on this, that single classes of producers
understand their private interests better than others, and are better
organized than other producers and especially better than consumers, to
take care of their interests.[A3-3-2] Adam Smith approves import
hindrances for the purpose of artificially promoting an industry only in
two cases:
A. When military safety demands it. Hence he calls the English
navigation act, that great prohibitive and protective law intended to
advance the merchant marine, the wisest perhaps of all English
commercial regulations, although he clearly saw that it compelled
England to sell her own commodities cheaper and buy foreign commodities
dearer.[A3-3-3]
B. When the import duty is no more than sufficient to balance the tax
imposed on the corresponding home product. Smith rightly remarks that a
universally heavier taxation by the home country, but which affected all
branches of its production equally, operated like diminished natural
fertility, and hence does not make any equalizing tax for foreign trade
necessary.
The person who has only a modest opinion of the power of his own reason,
and therefore a just one of the reason of other men and other times,
will not believe that a system like the industrial protective system
which the greatest theorizers and practitioners favored for centuries,
and which governed all highly developed countries in certain periods of
their national life, proceeded entirely from error and deception. It
really served, in its own time, a great and regularly occurring want;
and the error consisted only in this, that, partly through improper
generalization by doctrinarians and partly by the avarice of the
privileged classes and the inertia of statesmen, the conditioned and
transitory was looked upon as something absolute.[A3-3-4]
[Footnote A3-3-1: _P. de la Court_, in his freedom of trade,
has in view not the interest of consumers--and least of all
of the whole world--but the interest of the commercial
class. Compare Tüb. Ztschr., 1862, p. 273. Similarly,
_Child_, Discourse of Trade, 1690; whereas _D. North_,
Discourses upon Trade (1690), may be called a free-trader in
the sense in which the expression is used to-day. No nation
has yet grown rich by state-measures; but peace, thrift and
freedom, and nothing else, procure wealth. (Postscr.)
_Davenant_ also zealously opposes the craving of a people to
produce everything themselves, to want only to sell, etc. He
considered very few laws on commerce a sign of a flourishing
condition of trade. (Works, I, 99, 104 ff.; V, 379 ff., 387
seq.) _Fénélon's_ antipathy for import and export duties in
Telémaque, a part of his general opposition to the _siècle
de Louis XIV_. The view of the Physiocrates (_La police du
commerce interiéur et extérieur la plus sure, la plus
exacte, la plus profitable à la nation et à l'état consiste
dans la pleine liberté de la concurrence_: _Quesnay_,
Maximes générales, No. 25) is directly connected with their
deepest fundamental notions of _produit net_ and _impôt
unique_. _Turgot_ vindicates the interests of workmen
against protective duties, for whom no compensation is
possible, where one industry gains by its being favored in
the same way that it loses when another is favored. (Sur la
Marque de Fer, I, p. 376 ff., Daire.) "Those who cry so
loudly for protective duties are partly thoughtless persons
who wish to avoid the consequences of bad speculations, and
in part shrewd persons who would like to earn during the
first years a rate of profit higher than that usual in the
country." (_Rossi._) _Bastiat_ ridicules the advocates of a
protective tariff by the petition of the lamplighters, lamp
manufacturers, etc., that to advance their industry, and
indirectly almost all others, the mighty foreign competition
of the sun might be removed from all houses. (Sophismes
écon., ch. 7.) To him, the protective system is precisely
the system of want; freedom of trade, the system of
superabundance. Political economy would have fulfilled its
practical calling, if, by means of universal freedom of
trade, it had done away with all that is left of that system
which excludes foreign commodities because they are cheap,
that is, because they include _une grande proportion
d'utilité gratuite_. (Harmonies, p. 174, 306.) _Cobden's_
pet expression: "Free trade, the international law of the
Almighty!" (Polit. Writings, II, 110.) _K. S. Zachariä_
calls the protective system a step introductory to communism
(Staatsw. Abh., 100), because it nearly always leads to
over-population and _List's_ system, a politico-economical
absurdity. (Vierzig Bücher vom Staate, VII, pp. 23, 92.)]
[Footnote A3-3-2: Among the many frequently wonderful
speeches by which persons engaged in industry are wont to
support their motion for protective duties, etc., the
following are particularly characteristic. The long struggle
of English manufactures against the East Indian Company,
since the later portion of the seventeenth century. Compare
_Pollexfen_, England and East India inconsistent in their
Manufactures (1697), against which _Davenant_, at the
solicitation of the company, wrote his Essay on the E. I.
Trade (1697). Prohibition of East Indian commodities, 11 and
12 Will. III., ch. 10. The struggle did not stop until the
middle of the eighteenth century, when India was outflanked
by English machines. When Pitt, in 1785, labored for the
abolition of the tariff-barriers against Ireland, English
manufacturers, and among others Robert Peel, declared that
they would be forced in consequence to transfer a part of
their manufactories to Ireland! (_McCulloch_, Literature of
Political Economy, p. 55.) _Say_ tells of a proposition made
by the hat-makers of Marseilles to prohibit foreign straw
hats (1. c).]
[Footnote A3-3-3: W. of N., IV, ch. 2. According to _Roger
Coke_, England's Improvement (1675), ship-building in
England became dearer in a few years by about one-third, on
account of the navigation act; and the wages of sailors
advanced to such an extent that England lost its Russian and
Greenland trade almost entirely, and the Dutch obtained the
control of it. This _J. Child_, Discourse of Trade, admits,
but still calls the navigation act the _magna charta
maritima_. Similarly, _Davenant_, Works, I, 397. Here the
relation of the cost to the immediate product can as little
decide as it can against the exercise of troops or the
construction of forts. _Adam Smith_ allows the same reasons
to apply to export premiums for sail-cloth and gunpowder
(IV, ch. 5). Recently, however, _Bülau_
(Staatswirthschaftlehre, 339; Staat und Industrie, 220
seq.;) has argued against all these exceptions of Adam
Smith.]
[Footnote A3-3-4: _Schleiermacher_ (Christ. Sitte, 476)
calls the polemics which can see nothing but error in a
refuted theory, immoral.]
SECTION IV.
FURTHER EDUCATIONAL EFFECTS OF THE INDUSTRIAL PROTECTIVE SYSTEM.
The sacrifices which the protective system directly imposes on the
national wealth consist in products, fewer of which with an equal
straining (_Anstrengung_) of the productive forces of the country, are
produced and enjoyed, than free trade would procure. But it is possible
by its means to build up (_bilden_) new productive forces, to awaken
slumbering ones from their sleep, which, in the long run, may be of much
greater value than those sacrifices. Who would say that the cheapest
education is always the most advantageous?[A3-4-1] Only by the
development of industry also, does the nation's economy become
mature.[A3-4-2] The merely agricultural state can attain neither to the
same population nor the same energy of capital, to say nothing of the
same skillfulness of labor, as the mixed agricultural and industrial
state; nor can it employ its natural forces so completely to
advantage.[A3-4-3] How many beds of coal, waterfalls, hours of
leisure,[A3-4-4] and how much aptitude for the arts of industry, can be
turned to scarcely any account in a merely agricultural state? If,
therefore, the protective system could materially promote a national
industry, or if it made such industry possible, for the first time, the
sacrifice connected therewith, in the beginning, should be considered
like the sacrifice of seed made by the sower;[A3-4-5] but this can be
justified only on the three following conditions: that the seed is
capable of germination; that the soil be fertile and properly
cultivated, and the season favorable.[A3-4-6] [A3-4-7]
[Footnote A3-4-1: _List_, Nationales System der polit.
Oekonomie, kap. 12, contrasts two owners of estates, each of
whom has five sons, and can save 1,000 thalers a year. The
one brings his sons up as tillers of the ground (_Bauern_ =
peasants) and puts his savings out at interest. The other,
on the contrary, has two of his sons educated as _rational_
(_rationelle_) agriculturists, and the others as intelligent
industrial workers, and at a cost which prevents the
possibility of his accumulating any more capital. Which of
the two has cared better for the standing, wealth, etc. of
his posterity; the adherent of the "theory of exchangeable
values" or the adherent of the doctrine of "the productive
forces?"]
[Footnote A3-4-2: The rent of the land of Gr. Botton, in
Lancashire, was estimated in 1692 at £169 per annum; in
1841, at £93,916. (_H. Ashworth._)]
[Footnote A3-4-3: The pottery district of Staffordshire was
formerly considered very unfertile. It was industry that
first showed how the rich and varied beds of clay at the
surface, and the wealth of coal under them, could be fully
utilized.]
[Footnote A3-4-4: Blind free-traders always like to assume
that every man capable of working always busies himself;
whereas idleness frequently excuses the wasting of its time,
by the plea that a remunerative market of the possible new
products is improbable, or at least uncertain. Compare _J.
Möser_, P. Ph., I, 4. _Kröncke_, Steuerwesen (1804), 324,
328 seq., and even the first German reviewers of Adam Smith
in _Roscher_, Gesch. der N. Oek. in Deutschland, II, 599.]
[Footnote A3-4-5: _List_ calls attention to the case of the
stenographic apprentice who writes more slowly for a time
than he was wont to formerly.]
[Footnote A3-4-6: Let us suppose that a country had hitherto
produced $10,000,000 worth of corn, and that of this amount
it had sent $1,000,000 worth into foreign countries as a
counter-value for foreign manufactured articles. It now, by
means of a protective tariff, establishes home manufactures,
through the instrumentality of which a coal bed or water
fall is turned to account. The workmen in the manufactories
henceforth consume what was formerly exported. Of course
such a change is not effected without loss; but this loss
ceases as soon as the home industry becomes the equal of the
foreign industry which was crowded out. And then the forces
which have been made useful in the meantime appear as clear
gain. _List_ not unfrequently called special attention to
the fact that a consumption of 70,000 persons engaged in
home industries means as much to German agriculture as all
that it exported to England from 1833 to 1836.
(Zollvereinsblatt, 1843, No. 5.)]
[Footnote A3-4-7: _Adam Smith's_ free-trade doctrine has
always been contradicted in Germany. Even in 1777, his first
great reviewer, _Feder_, says that many foreign commodities
can be dispensed with without damage; and that industries
which indemnify the undertakers of them only after a time
but which are then very useful to the community in general,
would not be begun always without special favor shown them.
(_Roscher_, Geschichte der National Oekonomie, II, p. 599.)
_Kröncke_, Steuerwesen, 324 ff., speaks of attempts towards
the education of industries by taxation-favors: "If of ten,
only one succeeds, even that is to be considered a great
gain." But modern protectionists base themselves chiefly on
their interest in the independence of the country, precisely
as the free-traders do on that of individual freedom. _Ad.
Müller_, with his organic way of comprehending things,
opposes the assumption of a merely mercantile world-market,
in which all the merchants engaged in foreign trade
constitute a species of republic. (_Quesnay._) He also
rejects on national grounds the universal freedom of trade
as well as the universal empire akin to it; although as a
means of opposing it, he suggests not so much a protective
tariff as the intellectual cultivation of nationality in
general. (Elemente der Staatskunst, 1809, II, 290, III, 215,
II, 240, 258.) According to _Sörgel_ (Memorial an den
Kurfürst v. Sachsen, 1801,) commercial constraint
(_Handelszwang_), by means of export and import duties, is
useful in the childhood of manufactures, afterwards
injurious, because the powerful incentive to perfection is
wanting where no competition is to be feared (67). _P.
Kaufmann_, the opponent of Smith's balance-theory, demands
moderate protection against the otherwise irresistible
advantages to already developed industrial nations.
(Untersuchungen, 1829, I, 98 ff.) The principal advocate in
this direction is _Fr. List_, with a great deal of sense for
the historical, but with little historical erudition; and
after the manner of an intelligent journalist, he reproaches
the free-trade school with baseless cosmopolitanism, deadly
materialism, and disorganizing individualism. He
distinguishes in the development of nations five different
stages: hunter-life, shepherd-life, agriculture, the
agricultural-manufacturing period, the
agricultural-manufacturing-commercial period; and he demands
that the state should lend its assistance in the transition
from the third to the fourth stage, in the nursing or
planting of manufacturing forces in connection, throughout,
with the enfeebling of feudalism and bureaucracy, the
increase of the middle class, with the power of public
opinion, especially of the press, the strengthening of the
national consciousness from within and without. Compare
_Roscher's_ review in the Gött. gelehrten A. 1842, No. 118
ff. As to how List resembles, and differs from Ad. Müller,
see _Roscher_, Gesch. der N. O., II, 975 ff.; _von Thünen's_
independent defense of a protective tariff; Isolirter Staat,
II, 2, 81, 92 ff., 98; Leben, p. 255 seq. The socialist
_Marlo_ (Weltökonomie, I, ch. 9, 10) distinguishes common
products (_Gemeinprodukte_) which may be obtained equally
well in every properly developed country, and peculiar
products (_Sonderprodukte_), like coffee, wine, etc. With
respect to the former, he agrees with List; in regard to the
latter, with Smith. A protective tariff exerts a constraint
on consumers, compelling them to abridge their enjoyments
somewhat, and to employ these now in the procuring of
instruments of production, in the exercise of skill needed
in production and the accumulation of capital. At the same
time foreigners should be kept from utilizing home natural
forces, and where possible, home manufactures should be
helped to utilize foreign natural forces. _Marlo_, indeed,
assumes, as one-sidedly as the followers of Smith do the
contrary, that without the tariff the workmen in question
would not be employed at all; but he is right in this, that
the most fruitful employment of the forces of labor, and the
keeping of them most completely busy, mutually replace each
other. In France, even _Ferrier_, Du Gouvernement considéré
dans ses Rapports avec le Commerce (1808), had defended the
Napoleonic continental system. See _Ganilh_, the French
List, Theorie de l'Economie politique (1822), who grades the
branches of a nation's economy in a way the reverse of Adam
Smith, and finds the protective system necessary for the
less developed nations, to the end that they may not be
confined to the most disadvantageous employments of capital
(II, p. 192 ff.). Especially is a greater population made
possible in this way (248 ff.). Similarly, _Suzanne_,
Principes de l'E. polit., 1826. Further, _H. Richelot_,
List's translator. _M. Chevalier_, who recommends free trade
for France in our day so strongly, approves the system of
Cromwell and Colbert for their own time, and for a long time
afterwards (Examen du Système commercial, 1851, ch. 7): a
view which _Périn_ says is now shared by "all serious
writers." (Richesse dans les Sociétés Chrétiennes, 1861, I,
p. 510.) _Demesnil-Marigny_, Les libres Échangistes et les
Protectionistes conciliés (1860), bases his protective
system on this, chiefly, that it may greatly enhance the
money-value of a nation's resources to the detriment of
other nations, especially by the transformation of
agricultural labor, estimated in money, into the much more
productive labor of industry. The value in use of all the
national resources is doubtless greatest where full freedom
of trade obtains. In Russia, _Cancrin_ demands that every
nation should be to some extent independent in respect to
all the chief wants to the production of which it has at
least a middle (_mittlere_) opportunity; especially as all
civilization, even the higher development of agriculture,
must proceed from the cities. (Weltreichthum, 1821, 109 ff.
Oekonomie der menschlichen Gesellschaften, 1845, 10, 235 ff.)
America's most distinguished protectionist is _Hamilton_,
Report on the Subject of Manufactures presented to the House
of Representatives, December 5, 1791. _Jefferson's_ saying,
that the industry should settle by the side of agriculture,
leads us to _Carey_, who repeats the same idea with wearying
unwearisomeness; at first for the reason that the "machine
of exchange" should not be allowed to become too costly; but
afterwards rather from the Liebig endeavor to prevent the
exhaustion of the soil. He describes, indeed, how the East
Indian producer and consumer of cotton are united with one
another by a pontoon bridge which leads over England.
(Principles of Social Science, I, 378.) A good soil and good
harbors are the greatest misfortune for a country like
Carolina if free trade prevails, because it is turned into
an agricultural country (I, 373). The people who, after the
manner of the Irish, gradually export their soil, will end
by exporting themselves. _Carey_ would force colonies to
demean themselves like old countries from the first. If corn
be worth 25 cents in Iowa, and in Liverpool $1, for which 20
ells of calico are brought back, the Iowa farmer receives of
this quantity about 4 ells. Hence it would be no injury to
him were he to supply his want of cotton from a neighbor who
produced it at a cost four times as great as the Englishmen.
Analogies drawn from natural history, as, for instance, that
every organism, the lower it is in the scale of existence,
the greater is the homogeneity of its several parts; also a
deep aversion for centralization, and hatred of England,
coöperate in _Carey's_ recommendation of the protective
system, often called in the United States the "American
system," in opposition to the "British," advocated by
Webster against Calhoun and Clay against Jackson. _John
Stuart Mill_, Principles, V, ch. 10, 1, allows a protective
tariff temporarily, "in hopes of naturalizing a foreign
industry in itself perfectly suitable to the circumstances
of the country." Peel's colleague, G. Smythe, said, in 1847,
at Canterbury, that as an American (citizen of a young
country) or as a Frenchman (citizen of an old country with
its industry undeveloped), he would be a protectionist.
(Colton, Public Economy, p. 81.) Even _Huskisson_ admitted,
in 1826, that England in the seventeenth century had been
very much advanced by its protective system; and that he
would continue to vote even now for its maintenance, if
there were no reprisals to fear.]
SECTION V.
PROTECTION AS A POLICY.