FOREIGN COMMERCE UNDER PROFITS; PROTECTION AND FREE TRADE, OR BETWEEN THE
DEVIL AND THE DEEP SEA.
We arrived at the Arlington School some time before the beginning of the
recitation which we were to attend, and the doctor took the opportunity
to introduce me to the teacher. He was extremely interested to learn that
I had attended the morning session, and very desirous to know something
of my impressions. As to the forthcoming recitation, he suggested that if
the members of the class were aware that they had so distinguished an
auditor, it would be likely to embarrass them, and he should therefore
say nothing about my presence until the close of the session, when he
should crave the privilege of presenting his pupils to me personally. He
hoped I would permit this, as it would be for them the event of a
lifetime which their grandchildren would never tire of hearing them
describe. The entrance of the class interrupted our conversation, and the
doctor and myself, having taken our seats in a gallery, where we could
hear and see without being seen, the session at once began.
"This morning," said the teacher, "we confined ourselves for the sake of
clearness to the effects of the profit system upon a nation or community
considered as if it were alone in the world and without relations to
other communities. There is no way in which such outside relations
operated to negative any of the laws of profit which were brought out
this morning, but they did operate to extend the effect of those laws in
many interesting ways, and without some reference to foreign commerce our
review of the profit system would be incomplete.
"In the so-called political economies of our forefathers we read a vast
deal about the advantages to a country of having an international trade.
It was supposed to be one of the great secrets of national prosperity,
and a chief study of the nineteenth-century statesmen seems to have been
to establish and extend foreign commerce.--Now, Paul, will you tell us
the economic theory as to the advantages of foreign commerce?"
"It is based on the fact," said the lad Paul, "that countries differ in
climate, natural resources, and other conditions, so that in some it is
wholly impossible or very difficult to produce certain needful things,
while it is very easy to produce certain other things in greater
abundance than is needed. In former times also there were marked
differences in the grade of civilization and the condition of the arts in
different countries, which still further modified their respective powers
in the production of wealth. This being so, it might obviously be for the
mutual advantage of countries to exchange with one another what they
could produce against what they could not produce at all or only with
difficulty, and not merely thus secure many things which otherwise they
must go without, but also greatly increase the total effectiveness of
their industry by applying it to the sorts of production best fitted to
their conditions. In order, however, that the people of the respective
countries should actually derive this advantage or any advantage from
foreign exchange, it would be necessary that the exchanges should be
carried on in the general interest for the purpose of giving the people
at large the benefit of them, as is done at the present day, when foreign
commerce, like other economic undertakings, is carried on by the
governments of the several countries. But there was, of course, no
national agency to carry on foreign commerce in that day. The foreign
trade, just like the internal processes of production and distribution,
was conducted by the capitalists on the profit system. The result was
that all the benefits of this fair sounding theory of foreign commerce
were either totally nullified or turned into curses, and the
international trade relations of the countries constituted merely a
larger field for illustrating the baneful effects of the profit system
and its power to turn good to evil and 'shut the gates of mercy on
mankind.'"
HOW PROFITS NULLIFIED THE BENEFIT OF COMMERCE.
"Illustrate, please, the operation of the profit system in international
trade."
"Let us suppose," said the boy Paul, "that America could produce grain
and other food stuffs with great cheapness and in greater quantities than
the people needed. Suppose, on the contrary, that England could produce
food stuffs only with difficulty and in small quantities. Suppose,
however, that England, on account of various conditions, could produce
clothing and hardware much more cheaply and abundantly than America. In
such a case it would seem that both countries would be gainers if
Americans exchanged the food stuffs which it was so easy for them to
produce for the clothing and hardware which it was so easy for the
English to produce. The result would appear to promise a clear and equal
gain for both people. But this, of course, is on the supposition that the
exchange should be negotiated by a public agency for the benefit of the
respective populations at large. But when, as in those days, the exchange
was negotiated wholly by private capitalists competing for private
profits at the expense of the communities, the result was totally
different.
"The American grain merchant who exported grain to the English would be
impelled, by the competition of other American grain merchants, to put
his price to the English as low as possible, and to do that he would beat
down to the lowest possible figure the American farmer who produced the
grain. And not only must the American merchant sell as low as his
American rivals, but he must also undersell the grain merchants of other
grain-producing countries, such as Russia, Egypt, and India. And now let
us see how much benefit the English people received from the cheap
American grain. We will say that, owing to the foreign food supply, the
cost of living declined one half or a third in England. Here would seem a
great gain surely; but look at the other side of it. The English must pay
for their grain by supplying the Americans with cloth and hardware. The
English manufacturers of these things were rivals just as the American
grain merchants were--each one desirous of capturing as large a part of
the American market as he could. He must therefore, if possible,
undersell his home rivals. Moreover, like the American grain merchant,
the English manufacturer must contend with foreign rivals. Belgium and
Germany made hardware and cloth very cheaply, and the Americans would
exchange their grain for these commodities with the Belgians and the
Germans unless the English sold cheaper. Now, the main element in the
cost of making cloth and hardware was the wages paid for labor. A
pressure was accordingly sure to be brought to bear by every English
manufacturer upon his workmen to compel them to accept lower wages so
that he might undersell his English rivals, and also cut under the German
and Belgian manufacturers, who were trying to get the American trade. Now
can the English workman live on less wages than before? Plainly he can,
for his food supply has been greatly cheapened. Presently, therefore, he
finds his wages forced down by as much as the cheaper food supply has
cheapened his living, and so finds himself just where he was to start
with before the American trade began. And now look again at the American
farmer. He is now getting his imported clothing and tools much cheaper
than before, and consequently the lowest living price at which he can
afford to sell grain is considerably lower than before the English trade
began--lower by so much, in fact, as he has saved on his tools and
clothing. Of this, the grain merchant, of course, took prompt advantage,
for unless he put his grain into the English market lower than other
grain merchants, he would lose his trade, and Russia, Egypt, and India
stood ready to flood England with grain if the Americans could not bid
below them, and then farewell to cheap cloth and tools! So down presently
went the price the American farmer received for his grain, until the
reduction absorbed all that he had gained by the cheaper imported fabrics
and hardware, and he, like his fellow-victim across the sea--the English
iron worker or factory operative--was no better off than he was before
English trade had been suggested.
"But was he as well off? Was either the American or the English worker as
well off as before this interchange of products began, which, if rightly
conducted, would have been so greatly beneficial to both? On the
contrary, both alike were in important ways distinctly worse off. Each
had indeed done badly enough before, but the industrial system on which
they depended, being limited by the national borders, was comparatively
simple and uncomplex, self-sustaining, and liable only to local and
transient disturbances, the effect of which could be to some extent
estimated, possibly remedied. Now, however, the English operatives and
the American farmer had alike become dependent upon the delicate balance
of a complex set of international adjustments liable at any moment to
derangements that might take away their livelihood, without leaving them
even the small satisfaction of understanding what hurt them. The prices
of their labor or their produce were no longer dependent as before upon
established local customs and national standards of living, but had
become subject to determination by the pitiless necessities of a
world-wide competition in which the American farmer and the English
artisan were forced into rivalship with the Indian ryot, the Egyptian
fellah, the half-starved Belgian miner, or the German weaver. In former
ages, before international trade had become general, when one nation was
down another was up, and there was always hope in looking over seas; but
the prospect which the unlimited development of international commerce
upon the profit system was opening to mankind the latter part of the
nineteenth century was that of a world-wide standard of living fixed by
the rate at which life could be supported by the worst-used races.
International trade was already showing itself to be the instrumentality
by which the world-wide plutocracy would soon have established its sway
if the great Revolution had tarried."
"In the case of the supposed reciprocal trade between England and
America, which you have used as an illustration," said the teacher, "you
have assumed that the trade relation was an exchange of commodities on
equal terms. In such a case it appears that the effect of the profit
system was to leave the masses of both countries somewhat worse off than
they would have been without foreign trade, the gain on both the American
and English side inuring wholly to the manufacturing and trading
capitalists. But in fact both countries in a trade relation were not
usually on equal terms. The capitalists of one were often far more
powerful than those of another, and had a stronger or older economic
organization at their service. In that case what was the result?"
"The overwhelming competition of the capitalists of the stronger country
crushed out the enterprises of the capitalists of the weaker country, the
people of which consequently became wholly dependent upon the foreign
capitalists for many productions which otherwise would have been produced
at home to the profit of home capitalists, and in proportion as the
capitalists of the dependent country were thus rendered economically
incapable of resistance the capitalists of the stronger country regulated
at their pleasure the terms of trade. The American colonies, in 1776,
were driven to revolt against England by the oppression resulting from
such a relation. The object of founding colonies, which was one of the
main ends of seventeenth, eighteenth, and nineteenth century
statesmanship, was to bring new communities into this relation of
economic vassalage to the home capitalists, who, having beggared the home
market by their profit, saw no prospect of making more except by
fastening their suckers upon outside communities. Great Britain, whose
capitalists were strongest of all, was naturally the leader in this
policy, and the main end of her wars and her diplomacy for many centuries
before the great Revolution was to obtain such colonies, and to secure
from weaker nations trade concessions and openings--peaceably if
possible, at the mouth of the cannon if necessary."
"How about the condition of the masses in a country thus reduced to
commercial vassalage to the capitalists of another country? Was it
necessarily worse than the condition of the masses of the superior
country?"
"That did not follow at all. We must constantly keep in mind that the
interests of the capitalists and of the people were not identical. The
prosperity of the capitalists of a country by no means implied prosperity
on the part of the population, nor the reverse. If the masses of the
dependent country had not been exploited by foreign capitalists, they
would have been by domestic capitalists. Both they and the working masses
of the superior country were equally the tools and slaves of the
capitalists, who did not treat workingmen any better on account of being
their fellow countrymen than if they had been foreigners. It was the
capitalists of the dependent country rather than the masses who suffered
by the suppression of independent business enterprises."
BETWEEN THE DEVIL AND THE DEEP SEA.
"That will do, Paul.--We will now ask some information from you, Helen,
as to a point which Paul's last words have suggested. During the
eighteenth and nineteenth centuries a bitter controversy raged among our
ancestors between two parties in opinion and politics, calling
themselves, respectively, the Protectionists and the Free Traders, the
former of whom held that it was well to shut out the competition of
foreign capitalists in the market of a country by a tariff upon imports,
while the latter held that no impediment should be allowed to the
entirely free course of trade. What have you to say as to the merits of
this controversy?"
"Merely," replied the girl called Helen, "that the difference between the
two policies, so far as it affected the people at large, reduced itself
to the question whether they preferred being fleeced by home or foreign
capitalists. Free trade was the cry of the capitalists who felt
themselves able to crush those of rival nations if allowed the
opportunity to compete with them. Protection was the cry of the
capitalists who felt themselves weaker than those of other nations, and
feared that their enterprises would be crushed and their profits taken
away if free competition were allowed. The Free Traders were like a man
who, seeing his antagonist is no match for him, boldly calls for a free
fight and no favor, while the Protectionist was the man who, seeing
himself overmatched, called for the police. The Free Trader held that the
natural, God-given right of the capitalist to shear the people anywhere
he found them was superior to considerations of race, nationality, or
boundary lines. The Protectionist, on the contrary, maintained the
patriotic right of the capitalist to the exclusive shearing of his own
fellow-countrymen without interference of foreign capitalists. As to the
mass of the people, the nation at large, it was, as Paul has just said, a
matter of indifference whether they were fleeced by the capitalists of
their own country under protection or the capitalists of foreign
countries under free trade. The literature of the controversy between
Protectionists and Free Traders makes this very clear. Whatever else the
Protectionists failed to prove, they were able to demonstrate that the
condition of the people in free-trade countries was quite as bad as
anywhere else, and, on the other hand, the Free Traders were equally
conclusive in the proofs they presented that the people in protected
countries, other things being equal, were no better off than those in
free-trade lands. The question of Protection or Free Trade interested the
capitalists only. For the people, it was the choice between the devil and
the deep sea."
"Let us have a concrete illustration." said the teacher. "Take the case
of England. She was beyond comparison the country of all others in the
nineteenth century which had most foreign trade and commanded most
foreign markets. If a large volume of foreign trade under conditions
practically dictated by its capitalists was under the profit system a
source of national prosperity to a country, we should expect to see the
mass of the British people at the end of the nineteenth century enjoying
an altogether extraordinary felicity and general welfare as compared with
that of other peoples or any former people, for never before did a nation
develop so vast a foreign commerce. What were the facts?"
"It was common," replied the girl, "for our ancestors in the vague and
foggy way in which they used the terms 'nation' and 'national' to speak
of Great Britain as rich. But it was only her capitalists, some scores of
thousands of individuals among some forty million people, who were rich.
These indeed had incredible accumulations, but the remainder of the forty
millions--the whole people, in fact, save an infinitesimal fraction--were
sunk in poverty. It is said that England had a larger and more hopeless
pauper problem than any other civilized nation. The condition of her
working masses was not only more wretched than that of many contemporary
people, but was worse, as proved by the most careful economic
comparisons, than it had been in the fifteenth century, before foreign
trade was thought of. People do not emigrate from a land where they are
well off, but the British people, driven out by want, had found the
frozen Canadas and the torrid zone more hospitable than their native
land. As an illustration of the fact that the welfare of the working
masses was in no way improved when the capitalists of a country commanded
foreign markets, it is interesting to note the fact that the British
emigrant was able to make a better living in English colonies whose
markets were wholly dominated by English capitalists than he had been at
home as the employee of those capitalists. We shall remember also that
Malthus, with his doctrine that it was the best thing that could happen
to a workingman not to be born, was an Englishman, and based his
conclusions very logically upon his observation of the conditions of life
for the masses in that country which had been more successful than any
other in any age in monopolizing the foreign markets of the world by its
commerce.
"Or," the lad went on, "take Belgium, that old Flemish land of merchants,
where foreign trade had been longer and more steadily used than in any
other European country. In the latter part of the nineteenth century the
mass of the Belgian people, the hardest-worked population in the world,
was said to have been, as a rule, without adequate food--to be
undergoing, in short, a process of slow starvation. They, like the people
of England and the people of Germany, are proved, by statistical
calculations upon the subject that have come down to us, to have been
economically very much better off during the fifteenth and early part of
the sixteenth century, when foreign trade was hardly known, than they
were in the nineteenth. There was a possibility before foreign trade for
profit began that a population might obtain some share of the richness of
a bountiful land just from the lack of any outlet for it. But with the
beginning of foreign commerce, under the profit system, that possibility
vanished. Thenceforth everything good or desirable, above what might
serve for the barest subsistence of labor, was systematically and
exhaustively gathered up by the capitalists, to be exchanged in foreign
lands for gold and gems, silks, velvets, and ostrich plumes for the rich.
As Goldsmith had it:
"Around the world each needful product flies
For all the luxuries the world supplies."
"To what has the struggle of the nations for foreign markets in the
nineteenth century been aptly compared?"
"To a contest between galleys manned by slaves, whose owners were racing
for a prize."
"In such a race, which crew was likely to fare worse, that of the winning
or the losing galley?"
"That of the winning galley, by all means," replied the girl, "for the
supposition is that, other conditions being equal, it was the more sorely
scourged."
"Just so," said the teacher, "and on the same principle, when the
capitalists of two countries contended for the supplying of a foreign
market it was the workers subject to the successful group of capitalists
who were most to be pitied, for, other conditions being equal, they were
likely to be those whose wages had been cut lowest and whose general
condition was most degraded."
"But tell us," said the teacher, "were there not instances of a general
poverty in countries having no foreign trade as great as prevailed in the
countries you have mentioned?"
"Dear me, yes!" replied the girl. "I have not meant to convey any
impression that because the tender mercies of the foreign capitalists
were cruel, those of the domestic capitalist were any less so. The
comparison is merely between the operation of the profit system on a
larger or smaller scale. So long as the profit system was retained, it
would be all one in the end, whether you built a wall around a country
and left the people to be exploited exclusively by home capitalists, or
threw the wall down and let in the foreigners."