ABSOLUTE PRICES.
If we wish to judge between freedom of trade and protection, to
calculate the probable effect of any political phenomenon, we should
notice how far its influence tends to the production of _abundance_ or
_scarcity_, and not simply of _cheapness_ or _dearness_ of price. We
must beware of trusting to absolute prices: it would lead to
inextricable confusion.
Mr. Protectionist, after having established the fact that protection
raises prices, adds:
"The augmentation of price increases the expenses of life, and
consequently the price of labor, and every one finds in the increase
of the price of his produce the same proportion as in the increase of
his expenses. Thus, if everybody pays as consumer, everybody receives
also as producer."
It is evident that it would be easy to reverse the argument, and say:
If everybody receives as producer, everybody must pay as consumer.
Now what does this prove? Nothing whatever, unless it be that
protection _transfers_ riches, uselessly and unjustly. Spoliation does
the same.
Again, to prove that the complicated arrangements of this system give
even simple compensation, it is necessary to adhere to the
"_consequently_" of Mr. Protectionist, and to convince oneself that
the price of labor rises with that of the articles protected. This is
a question of fact. For my own part I do not believe in it, because I
think that the price of labor, like everything else, is governed by
the proportion existing between the supply and the demand. Now I can
perfectly well understand that _restriction_ will diminish the supply
of produce, and consequently raise its price; but I do not as clearly
see that it increases the demand for labor, thereby raising the rate
of wages. This is the less conceivable to me, because the sum of labor
required depends upon the quantity of disposable capital; and
protection, while it may change the direction of capital, and transfer
it from one business to another, cannot increase it one penny.
This question, which is of the highest interest, we will examine
elsewhere. I return to the discussion of _absolute prices_, and
declare that there is no absurdity which cannot be rendered specious
by such reasoning as that which is commonly resorted to by
protectionists.
Imagine an isolated nation possessing a given quantity of cash, and
every year wantonly burning the half of its produce; I will undertake
to prove by the protective theory that this nation will not be the
less rich in consequence of such a procedure. For, the result of the
conflagration must be, that everything would double in price. An
inventory made before this event, would offer exactly the same nominal
value as one made after it. Who, then, would be the loser? If John
buys his cloth dearer, he also sells his corn at a higher price; and
if Peter makes a loss on the purchase of his corn, he gains it back
by the sale of his cloth. Thus "every one finds in the increase of the
price of his produce, the same proportion as in the increase of his
expenses: and thus if everybody pays as consumer, everybody also
receives as producer."
All this is nonsense, and not science.
The simple truth is, that whether men destroy their corn and cloth by
fire, or by use, the effect is the same as regards price, but not as
regards riches, for it is precisely in the enjoyment of the use, that
riches--in other words, comfort, well-being--exist.
Restriction may in the same way, while it lessens the abundance of
things, raise their prices, so as to leave each individual as rich,
_numerically speaking_, as when unembarrassed by it. But because we
put down in an inventory three bushels of corn at $1, or four bushels
at 75 cents, and sum up the nominal value of each inventory at $3,
does it thence follow that they are equally capable of contributing to
the necessities of the community?
To this truthful and common-sense view of the phenomenon of
consumption it will be my continual endeavor to lead the
protectionists; for in this is the end of all my efforts, the solution
of every problem. I must continually repeat to them that restriction,
by impeding commerce, by limiting the division of labor, by forcing it
to combat difficulties of situation and temperature, must in its
results diminish the quantity produced by any fixed quantum of labor.
And what can it benefit us that the smaller quantity produced under
the protective system bears the same _nominal value_ as the greater
quantity produced under the free trade system? Man does not live on
_nominal values_, but on real articles of produce; and the more
abundant these articles are, no matter what price they may bear, the
richer is he.
The following passage occurs in the writings of a French
protectionist:
"If fifteen millions of merchandise sold to foreign nations, be taken
from our ordinary produce, calculated at fifty millions, the
thirty-five millions of merchandise which remain, not being sufficient
for the ordinary demand, will increase in price to the value of fifty
millions. The revenue of the country will thus represent fifteen
millions more in value.... There will then be an increase of fifteen
millions in the riches of the country; precisely the amount of the
importation of money."
This is droll enough! If a country has made in the course of the year
fifty millions of revenue in harvests and merchandise, she need but
sell one-quarter to foreign nations, in order to make herself
one-quarter richer than before! If then she sold the half, she would
increase her riches by one-half; and if the last hair of her wool, the
last grain of her wheat, were to be changed for cash, she would thus
raise her product to one hundred millions, where before it was but
fifty! A singular manner, certainly, of becoming rich. Unlimited price
produced by unlimited scarcity!
To sum up our judgment of the two systems, let us contemplate their
different effects when pushed to the most exaggerated extreme.
According to the protectionist just quoted, the French would be quite
as rich, that is to say, as well provided with everything, if they
had but a thousandth part of their annual produce, because this part
would then be worth a thousand times its natural value! So much for
looking at prices alone.
According to us, the French would be infinitely rich if their annual
produce were infinitely abundant, and consequently bearing no value at
all.