Flürscheim – Free trade or protection

From Michael Flürscheim
 Clue to the Economic Labyrinth

Chapter V – Free Trade or Protection

Favourable Balance Primary Object

This part of the work has been much facilitated by the exposure of the dangerous fallacy contained in the proposition that commodities are paid for with commodities. Payment for importations can be, and often is, made with property titles of different sorts, which have the power in common of conferring the right to claim money tributes from the country or its citizen by whom the titles are signed—tributes going under the names of interest, rent, royalties, profits, dividends, etc. By recognising this we have found that passive balances of trade are slavery chains, which become heavier from year to year through the terrible force of compound interest; unless the passive trade balance is compensated by an active financial balance, as in the case of England, where the trade balance is very passive, and the financial balance very active, in consequence of tribute dues which have arisen during long years of active trade balances. A continuation of uncompensated passive trade balances must in the end as surely ruin a nation as a continued excess of spending over income must ruin an individual. Even an active trade balance, if, as in New Zealand, the financial balance continues passive, may stave off ruin, just as little as an excess of sales over purchases can save a merchant, so long as his profits do not suffice to pay his yearly rent and interest dues and other expenses.

Even nations with active financial but passive trade balances, such as England, would be better off still if their trade balances were active or less passive, in the same way in which individuals, prosper financially by not spending their incomes.

The self-evident conclusion from the foregoing leaves the choice between free trade and protection simply dependent on their prospective influence on the balance of trade.

Narrowing down the Subject

Every other aspect of the question must be relegated to the background. “To be or not to be (free of debt), that is the question,” a question of as ominous import in the case of a nation as of an individual; for debt, payable in a non-obtainable commodity, growing from year to year through interest tribute, is a load with which human ingenuity in vain grapples, which giant labour’s powerful muscles cannot lift.

Such narrowing down to the economic aspect only is not unaccompanied by pain on my part, especially as the process is not limited to this particular division of the great social problem. My readers may well believe me that the ethical side of this problem, and of every single part of it discussed in this book, appeals to me with as much force as to any of them. The great ideal of free trade among nations, the levelling of frontier barriers, free intercourse gradually leading to a reign of universal peace and brotherhood, where men are co-operating on the principle of the golden rule, are dreams gleaming as vividly before my spiritual eyes, are hopes as ardently cherished in my innermost heart as they are in that of a different class of writers, whose works will delight yet unborn generations. I cannot vie with their fertile brush when it paints us the picture of the wonderful palace of humanity’s future. But the most beautiful castle on canvas cannot give us shelter when a storm is brewing; even the humblest but real cottage is preferable. Sawing and fitting timber, hewing rough stones, laying bricks, handling mortar, certainly do not need as rare gifts as those with which great poets are endowed; but for all that, the work of the carpenter, the stonecutter, the bricklayer, and the mason are urgently required. Feeling that the great Architect of the universe has with a purpose apprenticed me to the humbler crafts, I try to do the special work required of me. Whoever expects me to appeal to brotherly love in these pages, to justice and charity; whoever waits for solemn adjuration to bow to the divine command enjoining us to lead a less selfish and mercenary life, will wait in vain. All I want to do in this book of mine is to clearly point out what improvements in our economic system are not only necessary and urgently demanded, but for which of them we are so far prepared that the practical statesman can dare to begin work on them. I want to analyse our errors, and to prove how they can be remedied: by simple legal enactments, or voluntary organisations, without any revolutionary tendency; by a system of gradual evolution appealing even to the most timid of men. Wherever I propose a measure, I do not try to show how it will promote the highest virtues, how it will make a demand on our self-denial and sacrifices; but, on the contrary, I only prove that our enlightened self-interest will thus best be served, and only on the success of this demonstration do I place my expectation of final victory. In a work of this character the theoretical question, whether universal free trade be desirable or not, necessarily must be subordinated to the practical one whether the free opening of its frontier is the best policy for a country to pursue, even if there is no

Certainty of Reciprocity

and this question I most emphatically answer in the negative. Even Old England, for half a century under the spell of Smithism and Cobdenism, begins to perceive that persistence in a free trade policy, independent of any response on the part of other nations, is not always conducive to good results. The changes in the tariff made by her present parliament are mostly made with a view to revenue, and certainly do not show any pronounced tendency towards protectionism; but “Il n’y a que le premier pas qui coute,” and the Rubicon has been passed. It is all very well for the wolf to preach to the sheep that the free right of mutually devouring each other is one of the most sacred adjuncts of free individualism among animals, as long as the case only lies between him and the sheep, for he well knows that, though cases where wolves have devoured sheep have been reported in this world of ours, nobody ever heard of sheep making a meal of wolf-flesh. The case begins to change, however, when a tiger appears on the scene, who occasionally, when he cannot find anything more appetising, indulges in a little wolf-flesh. The right of mutual devouring now begins to be proclaimed somewhat less loudly than before.

As long as England—through the start which her position, her natural resources, and the temporary weakness of her commercial rivals had given her—could undersell the whole world, the gospel of Cobdenism was preached with all the zeal of the convert who wanted to preserve other people from the bad habits out of which she had just emerged, and which (as, we may say in parenthesis) had done her a lot of good. But, unfortunately for her, others, seeing her former success, had chosen to rather profit by the example of her past mode of life through which she had acquired such enormous strength in a time of general debility. They thought that they, too, while yet in a poor state of industrial health, might try the baby food which has so successfully been used by their powerful rival, until they had gained a little more strength, until they had gradually grown out of the sheep’s feeble frame, until strong teeth and claws had made their appearance, so that it almost looked as if the sheep had changed into a ferocious tiger. When the United States and Germany had grown so strong in the nursery Protection that they began to undersell the old giant in his own market, the case began to show quite different features under such unwonted conditions. As J. Buckingham, in The Curse of Cobden, or John Bull v. John Bright, correctly says: “It is hardly to be expected that foreigners, who did not copy England at the time of her prosperity, will do so now in the time of retrogression.”

We shall now investigate the

Arguments on the side of Free Trade.

1. Protection gives a monopoly to the local producer by freeing him from the foreigner’s competition, and thus enables him to extort higher prices from the consumer. A bounty given by the State to the local producer to enable him to bear up against foreign competition would cost the people less than to raise prices through a protective tariff, especially as the middlemen add their profits to the duty, and thus further increase the cost of the goods to the consumer.

Again and again we hear our New Zealand farmers complain against the high prices they have to pay for the products of industry, to the benefit of trades unionists and their employers, while they are unable to obtain a single penny more for their wool and meat. Perhaps better prices might even be realised for their produce if the English consumer were freed from the trammels we put upon the sale of the products with which he pays for our food and raw materials. In the same way, the English manufacturer rebelled against the protection of the farmer by corn laws, which raised the cost of living, and consequently of manufactures.

This is certainly a powerful indictment against protection, and, unless a good defence can be brought forth, an important point has been scored on the side of free trade. Let us now see what the other side has to say in defence.

Employment the first Question

There is an Irish saying: “In old Ireland you can buy a bushel of potatoes for sixpence, but the difficulty is to get the sixpence.” The question of cheapness or dearth comes next to that of employment. Our example of John the tailor, and Bill the cabinet-maker, has shown us that there are cases where the dearer price is by far the cheaper; because, in consequence of the addition to the price, two producers found employment, and thus became consumers of each other’s goods, the very source of their employment. We have seen that if cheaper coats and cheaper chairs had been imported, neither of the two men could have obtained what he wanted, because he had no money to buy it with; whereas the exclusion of the imported cheap goods enabled both to go to work, and to buy what they needed. The price they paid was immaterial, because, in reality, each paid the other with his labour.

We have also seen that imports do not necessarily bring corresponding exports in their train, for, as a rule, buyers never investigate which country is their own’s best customer, but which goods are cheaper and better. But how does the case of John and Bill, two artisans trading with each other, affect

The Farmer’s Case?

How about the higher prices he is forced to pay for his industrial products? Why should he pay more for his boots and clothing without obtaining more for his wool and meat?

The Case of the American Secessionists

A great grievance, no doubt, and one, which almost brought about the secession of the Southern States of the American Union from the North. It is well known that the peculiar institution of slavery supplied only the ready fire-brand which kindled the war, while the real cause of dissatisfaction with the Union originated in trade grievances. The cotton and sugar planters of the South saw no reason why they should pay the Yankees much higher prices for manufactures than they would have paid to Europeans if the high protective duties imposed in favour of the Northern manufacturers were done away with. It was an extortion to which they would not submit any longer, and the question of the new territories’ right to keep slaves merely ignited the material more than ready for combustion. In one way, however, it was an exceptional position that could not be paralleled anywhere in the world. Nowhere was there such a sharp sectional separation in the same country between two great branches of human industry, between agriculture and manufacture. But even here the last three decades have amply proved that the real and lasting interests of the South were better served by a maintenance of the Union, though only considered from the one-sided vantage point of trade. The opening of the far West, the immense increase of population in the Northern and Western States, ensured a large home market for the cotton and sugar of the South, which can never be closed by foreign interference, and which has gradually assumed an importance not dreamt of in 1860. In 1897, 61 million dollars’ worth of cotton were sold within the country, half as much as the average exports of cotton from 1851 to 1860 amounted to. The time cannot be very far distant when the home trade of the country will be a better customer for the cotton planters than all foreign markets combined had been before the secession war. Here no tariff can shut them out, such as may some day differentiate between American cotton and that raised in the colonies of the industrial States of Europe. No foreign fleet can interfere with the shipment in case of a war. No cheaper produce may take the place of American produce in the way in which German beet sugar closed the market against American cane sugar, so that the whole exportation of the States of all kinds of sugar—glucose and molasses—in June, 1898, amounted only to about five million dollars; when, as far back as 1868, in spite of the disturbances brought about by the war, the export figures of cane sugar alone amounted to sixty million dollars. Now pretty well the whole of the sugar production of almost 300,000 tons is sold within the country. Under secession the North and West would have consumed German beet sugar paid with American products of industry, and the Southern planter would have had to close his sugar mills.

But another phase has come in lately, totally unexpected forty years ago. West Virginia and Alabama’s coal and iron mines have opened a vista of unlimited industrial developments. It is said that almost nowhere in the world can iron be produced under more favourable conditions, and the proximity of the raw material, as well as the milder climate, promise a great future to the Southern cotton manufactures, for which not only the North and West immediately offer a large and paying market—which might have been cut off by a protective tariff if secession had been successful—but the Union has begun to export cotton goods to the amount of 17 million dollars for 1897-98. I leave out of consideration the many other advantages of union, and all the dangers and troubles inseparable from secession, principally the long boundary line watched by custom-house officials, and the standing armies defending each section against the other, as in the South American Republics, with the permanent danger of destructive wars. I have simply shown that even here—where everything spoke in favour of Southern liberation from Northern protectionism—the final result has been a benefit also to the agricultural portion of the entire Union through the industrial development of the North and West.

The Case of New Zealand

But such sectional divisions are not found in our own country, with its relatively large number of industrial cities and towns dispersed over the whole length of the islands. Here the interchange between town and country, between the farm and the factory, is by far more intimate than between the two large sections of the American Republic. Our industrial workers consume a certain portion of the farmer’s product, and certainly the best paying portion; for fruit, vegetables, potatoes, milk, fowls, etc., pay better than wool and wheat. Frozen meat sent to England does not yield as much as fresh meat eaten locally, nor are the same prices realised for exported butter as for the fresh butter sold in the local market. But even assuming that for a time the farmers would save money if the tariff were abolished, because the savings through cheaper prices of imported goods exceed the profits made through the consumption due to local industries, plus the contribution to the public expenses made by the Customs’ revenue—would such abolition be a wise policy in view of the near future? It is generally recognised that no nation can prosper through exclusively developing her agricultural resources, leaving the industrial domain uncultivated. Poland has exhibited the fate of such a nation. Her selfish rural aristocracy found it paid better to ship their produce to foreign markets and to buy with it foreign manufactures, instead of—by temporary sacrifices—nursing a home industry which supported a free middle class, whose sturdy arms would have been better able than the miserable serfs to defend her in the days of danger; whose intelligence would have preserved her from the decadence which made her Government a by-word in the whole world. Just as a father, instead of spending his substance, puts something aside for his progeny, and so for his own future, so a nation nursing industries provides for the day to come. Only in this way, only through a mixed population, through the intellectual, physical, and commercial intercourse of country and town can we obtain that full development of a nation’s resources without which she is bound to remain behind in the struggle of life.

Utilisation of Natural Resources rendered possible

Mighty rivers descend from the mountains to the sea, and nobody makes use of their immense power to turn millions of busy wheels in the humming hives of industry. The coal which could set into motion millions of horse powers; the iron which could take the thousands of shapes that man’s inventive spirit is capable of giving it, which is ready to serve in the rail on which the fast locomotive winds its way from one end of the country to the other; in the bridges that span chasms and rivers; in the wires keeping the farmer’s cattle from roaming about; in the shape of engines with the power of millions of men, or of machines performing the most delicate work in industry’s domain—these and other treasures remain unused in the bowels of the earth. Of all the metals—leaving trifling exploitations out of account—the yellow fetish. Gold, alone is dug and washed out, because it alone need not fear underselling in a market whose master it has become by bad human laws. It alone needs no protection against a ruinous competition in the world’s trade, as all other goods are pressing forward offering themselves in exchange for it, each trying to tread down the other in the wild race for the scarce substance.

Development of a Higher Humanity

The soil cannot bring forth its best crop: highly, cultivated men and women, where it is devoted merely to an extensive system of agriculture, or to cattle and sheep-raising—the occupation of the savage after he emerged out of the hunting and root-eating stage. A country like New Zealand, as a mere sheep and cattle station, a dairy farm and wheat field, would not feed as many thousands of inhabitants as it can hundreds of thousands where agriculture and industry cooperate, each forcing on the other to a higher stage of development.

Increase of Land Values

Where ten pounds was the highest selling price and ten shillings the utmost rent obtainable for an acre of land used only by sheep, large sums are in vain offered for the single square foot of the industrious city. Where a crushing taxation could not pay for the most necessary means of communication to bring the farmer’s produce to market, so that money had to be borrowed abroad, the mere rental of the land could provide amply for all the needs of the State, though she undertakes tasks which the simple cattle-raiser never dreamt of. If the farmer wants to prepare such a future for himself and his children, he must cease nagging at the few pounds more paid for his fencing-wire, clothing and furniture. The account will be amply made good some day or other. At the close of the chapter I shall illustrate the relative position of the farmer and the manufacturer by transferring the case to the simple relations of Robinson’s island. Here I only add a quotation from R, E. Thompson’s Political Economy: “It (protection) promotes association between members of the same nation by producing variety in their employments; while free trade between more and less advanced nations always has resulted in the destruction of association among the people of the less advanced, and in their reduction to monotony of occupation.”


There is another important point of view, however, from which the nursing of local industries recommends itself. Importation is all very well as long as peace reigns, as long as the communications are not interrupted; but woe to the nation which, in conflict, cannot obtain certain necessaries of life, because she cannot produce them at such a short notice, while those from whom she used to buy them cannot supply them for the time—an unfortunate and unworthy position, pardonable in a child, but not where a self-dependent man is concerned. It is true this danger is not so great in countries like ours, which grow their own food, and which can manage to exist for some time without the importation of certain manufactures, as where the people have to depend on other nations for their daily bread.

The Case of Britain

Certainly Britannia still rules the waves; but will she always do it? A single invention, the armour-plating of warships, reduced the world’s wooden fortresses to worthless playthings—as the Merrimac proved to the United States’ fleet in the waters of the Chesapeake—and in the next naval war a per feet submarine boat may in the same manner supply the proof that all our floating colossi are at the mercy of a few invisible dwarfs, surreptitiously creeping under their immense bellies to blow them out of existence, just as a pigmy may kill a giant. What then? Who will feed England’s millions when cheap American wheat will have driven out of cultivation the last acre of the remaining 24% of English soil yet under tillage, and when foreign granaries are kept from bringing in their welcome loads by hostile armaments?

England’s landed Aristocracy, with Its rentraising Corn Tolls,

in a time of poor means of communication, when no competition of foreign wheat threatened to throw English fields out of cultivation, has been justly punished by the complete downfall of their system. Even in our time, all who realise the wrong of private land ownership must find it hard to contemplate the rise in rental values which is sure to follow any attempt to restrain the importation of corn. Of course, land restoration would entirely do away with this difficulty by giving back to the people in the shape of the State’s rental income what they pay on account of corn duties; but in the meantime, if landlords have to be enriched, let England enrich her own rather than those of America, since in that way most of the money will be spent in the country, paying its taxes and supporting its producers. It has become a question of serious concern to England whether the present freedom of importation is to continue unchecked. None of the powerful arguments brought forth in Cobden’s time applies to a period when, at the price of imported wheat, the cultivation of the cereal is frequently unprofitable, even on land given rent free.

The dear Loaf ?

It has been calculated that the mere saving which municipal or co-operative bakeries would produce by eliminating the wasteful little concerns would more than balance the addition to cost incurred by a corn toll big enough to exclude foreign importations. D. Till, the owner of a flour mill and a bakery in Bruck a. d. Muhr, Austria, has written a number of pamphlets advocating the municipalisation of bread production. From one of them, Die Umwandlung des Getreides in Brod, The Transformation of Corn into Bread (Graz, 1894), I take that the new system he advocates, besides giving a healthier bread, free from the danger of contagion due to the diseases of the workers at present employed in unhealthy dens, under the most unhygienic conditions, could save 9 florins in cost of production for every 100 kilo of flour baked into bread. This gives a saving of £7 10s. per ton of flour. As 82 kilo of flour correspond to 100 kilo of wheat—leaving the value of the bran out of sight altogether— we find that a duty of £63s. per ton could be paid on wheat without increasing the present price of bread. The price of wheat, therefore, could be almost trebled without raising that of bread, if we make up the difference by improved methods of production and distribution for the finished article.

Quite apart from the important consideration of a food supply in the case of war, I feel certain that England has not been well inspired in adhering to

Cobden’s Policy of 1846 under the totally changed Conditions of 1900.

Under the protective policy of the United States, the disproportion between England’s export to that country and its imports from there has been growing continually in favour of the United States. The exports have only grown from 17 million pounds in 1854 to 21 millions in, 1807-98, while the imports from the United States have gradually increased from 30 millions in 1854—falling as low as 18 millions in 1864 because of the locked-up cotton and sugar from the South—to 106 trillions in 1897-98. I feel certain that England’s strict adherence to the principles of 1846 is mostly responsible for this almost seven-fold increase of her passive balance in her trade with the Union. If England had adopted the protective policy of the principal continental nations of Europe, if she had raised the duties on American corn in the same proportion in which the United States raised their tariffs on English goods, these tariffs would never have come into action, or would soon have been reconsidered. England is America’s best customer, and the American farmer’s vote would have settled American exclusiveness very rapidly.

America, through her protective policy, made herself more and more independent of British importations. Why should not Britain follow the lead of Germany and France, and try to make herself independent of American importations? It is true that England has yearly interest and rent dues abroad which are paid in importations; or rather, strictly speaking, it is not England ^which has these dues, but a number of prosperous English men and women, who indirectly spend their money in the countries where their income comes from by having its produce imported. This may be only fair, but does not in the least benefit the poor English worker, who is only too anxious to produce these good things for them by his own labour, and who, in consequence of this foreign importation for which no English goods are exchanged, is without employment. The Forum of June, 1901, contains an article by John P. Young:

“An American View of the British Industrial Situation

in which, among other interesting data, the following facts are given: The consumption of raw silk in Great Britain rose from £2,400,000 in 1823 to; £10,750,000 in 1857. The value of silk fabrics in the latter year amounted to £21,500,000. In 1898, the result of free trade was shown in a falling off of raw silk importation to £2,138,912, an importation of silk goods to the amount of about £16,000,000—minus re-exports—against an exportation of £2,400,000. “It (the British silk industry) was needlessly sacrificed, to a theory,” says Young.

In the United States, protection of an infant industry has brought about the magnificent result that from importing every single particle of silk goods the astounding fact has evolved that the United States’ silk textiles manufacture now is in excess of the manufactures of France, and that every portion of it is consumed in the country. It is true the prices are higher than in England, but what does that matter if people are thus employed who could find no other work? Their immigration has benefited the country far more than the trifling addition to price can have done harm. The large amount of this production, which is consumed by the working classes, shows a state of well-being quite in accordance with the theory that the possession of a paying home market ensures a better living to the masses, in spite of higher prices, than lack of employment accompanied by and caused through cheap prices. “Potatoes only cost sixpence a bushel, but the difficulty is to get the sixpence.”

It has been argued that

Bounties are preferable to Protective Duties,

because the latter act as indirect taxes which fall proportionately heavier on the poor than on the rich, especially as the additions of importers and other middlemen largely raise the original cost. I concede that there may be cases where a bounty for a time would be preferable to a duty on imports, as, for instance, where certain domestic manufactures are as yet too insignificant to render a raising of the price advisable for the sake of finding employment for a few men. It would sometimes pay better to feed such men at the expense of the community than to raise the price of the goods they produce to an amount far exceeding the wages they earn. As a rule, however, protective duties will prove more beneficial than bounties; because the

Duties, or part of them, are often paid by the Foreign Importer, whereas bounties are always at the charge of the domestic tax payer.

Our modern system of manufacturing is remunerative only if large quantities are produced, and if work goes on at full time.

Saving by Increase of Turnover

Let us assume that a special machine, which does the work of a dozen workers employed on inferior machines, costs £1,000, and is worked by one single hand. Now let us figure cost of production with such a machine, worked continuously in three shifts of 8 hours each, or by one hand working only 8 of the 24 hours. Interest and depreciation (not through wear and tear only, but mostly through the certainty that before the machine is ten years in use an improved model comes in which forces the manufacturer to discard the old one) are the same in either case, at 15% =£150 a year. Nor are general expenses notably higher, whether a machine is used during 8 or 24 hours; for not a single manager, book-keeper, salesman, messenger, etc., is added to the staff for the extra work. The interest on the building amounts to the same, whether the factory works full or half, and the motive power does not cost correspondingly more. In the case of water power, the extra work costs practically nothing, as the water runs away unused wherever it is not fully employed, without any notable saving in its cost for the working hours. In my own factory, it would many a day have cost me much less to run night and day than to rest at night in hard winters, when standing still caused the turbines to freeze, while the motion kept the ice from forming. Let us in this way put down the quota of general expenses falling on the machine, which cannot be saved by working less time, at another £150 a year. The raw material used on the machine per 8 hours’ work amounts to £1; special expenses and the wages of a man for one shift, 10 shillings. In this case the cost of the finished article, if only 8 hours a-day are worked, figures up to £750 for one year’s production per machine. The manufacturer adds 20% profit, and sells at £900.

Now let us figure on the supposition that three shifts are kept at work during the 24 hours, so that three-fold the quantity is produced during the year. Cost of unchanging items: machine and general expenses is £300 as before; while wages, materials, and special expenses have to be trebled = £1,350. Adding the £300, we obtain £1,650 as the cost of the total quantity; or one-third =£550 as the cost of the same quantity which before has cost £750. By now adding 20%, the product can be sold for £660, which before could not be supplied at less than £900, and yet the total of yearly profits per machine has risen to £330 from £150—has more than doubled. Now, let us suppose that full employment for the machines is only possible if a certain foreign market can be kept open, which, up to that time, had freely admitted the article, but which now puts on a protective duty of 30%. Let us further suppose that one-third of the output had been shipped to that foreign country, while two-thirds were sold in the domestic market, and that the price of £900 has been maintained, the manufacturer pocketing the entire extra profit made through the cheapening of cost in consequence of working day and night. Before the duty he cleared in this way £1,050 per machine and year; but now he can only compete in the foreign country if he pays the duty out of his own pocket. Leaving aside what he might gain by under-declaration, he would have to sacrifice £270 of his profits; which would leave him only £780 per year and machine. If he gave up the export he would only clear £600, as by working only 16 hours a-day cost is £1,200 per day and machine. Thus, in spite of paying out of his pocket as much as 30% duty on his selling price, he made £180 more per year and machine than if he had given up the exportation of his surplus. If, to kill competition in the foreign market, he chooses to forego this extra profit made through the exported goods, he can sell in the foreign market for £642 less 30% duty = £450 net, what before the duty has been sold at£900. This means he can sell at half price, and still make the same yearly profit on each machine as if he only worked for the domestic market.

J. Buckingham says, in The Curse of Cobden (p. 13): “Every tyro in business is aware that the cost of producing the extra quantity is insignificant as compared with the cost of the original or smaller production. For instance, newspapers can be sold at a penny to leave a large profit; but if you limit the markets, and reduce the sale sufficiently, probably a selling price of five shillings would entail loss.” When Mr. Young says: “They (the Americans) learned the bitter lesson that the surplus, when dumped on the domestic market, fixes the price without reference to the cost of product”—meaning the surplus of the foreign manufacturer—he does not know how low-down this price can be fixed, and still keep within cost limits, merely by permitting production on a larger scale and consequently cheaper cost.

Sellings with Loss to kill Competition

But it pays even to go below these limits if necessary, and Young quotes the teachings of a noted British statesman as far back as 1815 to prove England’s familiarity with a practice so often used by the American Trusts against domestic or foreign competitors: “Lord Brougham, in 1815, urged that it would be worth the while of British manufacturers and merchants to incur loss upon the first exportation, in order, by the glut, to stifle in the cradle those rising manufacturers in the United States which the war has forced into existence contrary to the natural course of things.”

List, in speaking of the time when, after the downthrow of Napoleon, the continental system came to an end, says: “In the year 1814 alone, 21,654,000 thalers’ (31/4 million pounds) worth of English cotton goods were imported into Germany. The English goods went off at ruinous prices; but what mattered temporary losses when a permanent market was to be gained and a practical monopoly could be founded—a policy which England then employed neither for the first nor for the last time. The German industry, which just began to recover from the war times, could not stand this competition, ‘and,’ as Weber says, ‘many still sound remainders of the former German industries, which had not succumbed to the influence of twenty years’ destructive wars, thus decayed at this time.’ ”

Few who are not in business have a conception to what an extent this policy is carried out in our days; and even if no “stifling in the cradle to bring about the natural course of things” (the monopoly of the importer) is practiced, anyhow a market is kept open which otherwise would be closed. As Young says; “The opinion of J. Stephen Jeans in Engineering, that the effect of organisation is ‘to make the home business so profitable that manufacturers can afford, if necessary, to lose on export orders,’ and thereby build up trade, and keep the manufacturing establishments and their working men full employed, is now accepted by a great majority of those who control affairs in the United States and Germany.” We now come to another free trade argument:

2. Protection handicaps Foreign Trade

Protective duties on imported goods handicap the producers of the protective country in their foreign trade by increasing the cost of goods. Again the foreign soup tureen and the neglect of the domestic one; again the total disregard of the immense latent purchasing power of the home market, and the unreliability of foreign trade. Young very correctly points out how


has become the order of the day, and this is true even of states generally looked at as good dumping-grounds for the surplus production of the industrial nations. One after another of the countries looked at as merely agricultural begins to nurse industries of its own; one of them, the United States, has even become the most powerful rival of the manufacturing countries. The idea of becoming

The World’s Workshop

is all very well; but two are necessary for a marriage, and a workshop cannot exist without customers. Cobden’s world’s workshop loses one customer after another, and, what is much worse, finds its own domestic market invaded from all sides. It is interesting to run through England’s imports to find how manufactures which formerly used to be its own specialty—iron and steel manufactures, for instance—are imported into her market by Germany[1] and America, through the blind adoration of a theory which must ruin the wealthiest nation if followed by her alone. Instead of more and more becoming the dumping-ground of others’ surplus, England ought to save for herself her own market. Were she to use at home and in her colonies half the money yearly spent by her on the conquest or protection of foreign trade, she would foster a more important and profitable commerce than all her foreign trade ever has yielded to her.

Applied to New Zealand

If this applies to England, the world’s workshop of Cobden’s projection, how much more to our islands at a distance of 15,000miles from Europe, whose first consideration must be independence of markets which a war might temporarily close against them, and which, at the best, are available only under a system of the most frightful economic waste. To us more than to England apply the closing words of Young:

“In conclusion, if anyone thinks it strange that an American protectionist should advise Great Britain to pursue a course, the adoption of which would make it difficult, if not impossible, to market much of the surplus of the manufactured products of the United States, let him bear in mind that the members of the economic school to which the writer belongs firmly believe that the best results can be derived only from a system which reduces waste to a minimum. The greatest of all waste, in the opinion of modern protectionists, is that involved in unnecessary external trading; therefore they view with equanimity every improvement which tends to bring worker and consumer closer together. To manufacture in Great Britain the things consumed by the British people will have that result: hence they look with favour on a policy which they are assured would bring it about.”

If Young sees a “possibility of increasing domestic production to the extent of over a billion annually” in a country which marches in the vanguard of industry, how much more a policy which brings this about should appeal to a poor apprentice nation like ours! Moreover, a rational protective tariff makes a distinction between goods entering into the production of other goods, and those which have no influence on our productive facilities. A duty on kid gloves, or on objects of art, for instance, in no way increases the cost of living of our workers. We in New Zealand are fortunate in this respect, for—excepting a few specialities of the tropics—all raw materials and food stuffs could readily be produced in this country as cheaply or more cheaply than anywhere else if we set about the work. Certainly it is mere folly to buy British or American rails and wires when, at Parapara, we have some of the best iron ores in the world, besides Taranaki’s wonderful iron sand—both of easy access, and quite proximate to coal and lime. Why should we import clothing from other lands when the wool to make it has first to go there at great cost? Why should we not rather attract the men and women who make this clothing in the transmarine markets? They will then consume amongst us more of our food stuffs than we can now sell to them in their distant homes, besides many other goods; and no foreign competitor could lower the prices of the wool and produce we thus dispose of.

Another argument often given by free traders is that

3. Protection does not raise Wages.

This objection is valid only if it can be proved that free trade does raise wages, which proof is not supplied. In fact, the question what share of the proceeds goes to the employer and what share to the wage-worker lies altogether on another field. In the chapter on “Capitalism,” I shall sum up the results of these investigations, and we shall then be able to see more clearly what changes in our existing system are needed to do justice to the claims of labour. Neither protection nor free trade will be found among these changes, or protection only in so far as a nation can legislate against her domestic capitalism, while she has no peaceable remedy against that of other nations except shutting her doors against them. Nor would the fact that protection cannot raise wages any more detract from its merits than the argument against shoes that they cannot be used as food affects their claim to be a useful part of human attire. The question is not whether protection can raise wages, but whether it will permit wages to be paid at all, whether it brings employment where free trade would take it away. So far I have shown that such may be the case. However, we may safely assume that abundance of employment enables the workers to compel higher wages than are obtainable where the blackleg’s hunger defeats the striker’s energy and perseverance. Where two employers compete for one worker, wages have a better chance of rising than where two workers look out for one employer.

Free Trade Statistics

4. Statistics are brought forth to prove that free trade brings prosperity where a protective policy had the contrary effect. We at the Antipodes are in the habit of thus seeing New South Wales trotted out against Victoria. I shall not attempt to investigate how far the superior natural resources of New South Wales may be the real cause of her more rapid advance, and whether or not protection had anything to do with Victoria’s slower progress. Nor do I wish to emphasise the words: “Figures do not lie, but liars write figures.” But that we may duly estimate the value of this kind of evidence, let us examine the illustration most frequently employed by free traders, by which they claim to fortify their position beyond all arguments: the statistics showing the wonderful prosperity England has enjoyed since Cobden gained his great victory of 1846.

A certain man suffered severely from gout. Some quack told him to change his walking-stick, because oak was pernicious and ash was salutary in the case of his disease. He changed his walking-stick. About the same time he renounced alcohol, gave up his sedentary habits, took to mountaineering amid the ozone of the upper Alps, and otherwise reformed his mode of life. His gout entirely left him, and ever afterwards he expatiated on the wonderful cure effected by his ashen walking-stick.

Likewise, a flea jumped from a heavily-laden waggon that was stuck in the mud. The horses gave an extra pull at the moment, and the waggon was extricated. To this day the flea proudly tells everybody that his generous help moved the waggon out of the mud. I am afraid too much of this post hoc ergo propter hoc reasoning has been indulged in by economists and statesmen.

Free Traders forget Railroads, Steam Engines, etc.

The change from a protective to a free trade policy has not been the only distinguishing feature of the period in question. It was not exactly the opening of the railroad era; but it marked the time at which railroad construction began to attain unexpected dimensions. Tooke and Newmarch tell us that in 1848 and 1849 alone, 300,000 men were employed on British railroads, gaining bread for 1 million persons. As only 45,000 were permanently employed in running the trains, making repairs, etc., about a quarter of a million men found work through railroad construction; who, from 1846, the year of Cobden’s victory, to 1855, inclusive, put into operation 4,985 miles; whereas the total of the whole preceding period had only reached 2,536 miles; so that these ten years had brought the total of miles in operation from 2,536 to 7,521. The capital invested had risen from 65 millions to 240 millions. In the United States, the increase had been from 3,000 miles in 1843 to 24,000 in 1855; and as probably the bulk of the rails came from the United Kingdom, her iron works must have given employment to many thousand additional men. About the same period saw the introduction and rapid extension of telegraphy. The development of steam navigation, and of steam power as a factory motor, surpassed the wildest dreams of the most sanguine.

Here we certainly have some factors of prosperity worth mentioning; but for all that, they supply no positive proof that the immense development of Great Britain’s commerce was not produced principally by free trade, just as we have no positive proof that our gouty patient was not cured by the change of walking-stick. If, however, a number of gouty patients became entirely cured after adopting the regime of our friend, although adhering to their oaken sticks, the case against remedy, by change of sticks would be decidedly strengthened. An analogous proof regarding the respective influence of free trade and the other factors concerned in the development of British commerce should similarly affect our conclusions. If the progress of the United Kingdom in the latter half of the nineteenth century has been extraordinary, that of a number of other countries during the same period has been prodigious, considering the immense start enjoyed by the northern islands. When we consider the havoc played by revolutions on destructive wars, and add thereto the handicap against them of Britain’s powerful commerce, we are forced to acknowledge that the progress of Germany, Russia, France, Belgium, and the United States within the given period has been relatively greater yet than that of their insular rival.

The fabulous development of Germany is too well known to require any commentary; so I pass on to Russia.

In a recent consular report on Poland it is stated: “In Poland, at the beginning of this century, the only town of any size was Warsaw, with a population of about 50,000; and whereas even in 1877 there were only 15 towns with a population of over 10,000, there are now 32 such towns, whilst the population of Warsaw is over 700,000, and that of Lodz—the manufacturing centre of Russia for textiles—400,000. At the beginning of the century Poland was inhabited by a population of 2,700,000, over 90 per cent, of whom were steeped in ignorance and practically in a state of slavery, being bound to the land they lived on, and obliged to give their labour to the owner thereof. At the end of the century there is a population of nearly 10,000,000, of whom all are free, and over 4,000,000 of whom own over three acres of land, whilst nearly 3,000,000 dwell in towns. In every village and in every factory employing over 1,000 hands there is a school; in Warsaw there are 757 educational establishments, with 47,818 pupils. Great attention is given to primary schools, of which there are over 3,000 in Poland. The production of the country, which was at the beginning of the century in a state of ruin, is now over £80,000,000. Then there were no roads or railways laid down; now there are 4,325 miles of macadamised road and 1,625 miles of railway.” This has all been accomplished in “despotic” Russia under protection.

Baxter tells us that from 1842-60 the exports and imports of England rose 254, those of France 169, and those of Belgium 272 per cent.; but even this great progress is put into the shade by the United States of America, whose outside trade increased 305 per cent, within that period. Since then it has been quite prodigious, having led to a considerable active balance even in manufactures. None of the countries here mentioned had followed a regular free trade policy, and their greatest advance falls into the period when they were most protectionist.

It certainly was so with the United States. R. E. Thompson goes through the history of his country, and proves how it flourished under protection and suffered under relative free trade. How the Dallas tariff, which lasted till 1857, inflicted injuries upon nearly all industries, preventing the influx of capital. “To compensate for this we were to have an unlimited market for bread stuffs, since England had repealed her corn laws. The more we bought of her, the more we must sell her; as ‘commodities are paid for with commodities.’ The commodity with which we chiefly paid her was gold.” The tariff of 1857, reduced by 25%, drove capital from production into speculation, as the tariff before 1842 had done. It is notorious how rapid the country’s advance has been since under the M’Kinley and Dingley tariffs, until at last her balance of trade has become active even in manufactures.

If protectionists pointed to these facts as a confirmation of their policy, they might have more justification than their antagonists; the field under observation being much more extensive, and other conditions more at variance. However, definite conclusions could as little be drawn from such facts, independent of better evidence, as could judgment be given for the ash sticks even if all the cured patients had used them. But at least I think we are justified in decidedly rejecting the testimony that British prosperity is due to free trade.

5. Protection enables Domestic Producers to combine

for the purpose of fleecing the consumer. Trusts will be treated in the chapter on “Socialism,” and it will be shown that their principal foundation is the monopolization of natural opportunities and the means of transportation. Certainly protection enables them to defeat foreign interference, but their international organisation has already begun, and under free trade would certainly gain vaster dimensions, so that the consumer would not profit to a large extent. But whether under free trade or under protection, unless natural opportunities and the means of transportation are monopolized, the consumer has much more powerful means of combination than the producer. The wonderful success of the co-operative movement in distribution (see Chapter IX.) has proved that the consumer who cooperates to produce the things he needs meets with much less difficulty than the producer who co-operates without an assured market. If the co-operating consumer were really determined to defeat combinations of producers, his victory would be certain and easy, provided always that he can command the use of natural opportunities and the means of transportation. If once co-operators will remain faithful to their store, never mind what inducements outsiders may offer, the dodge through which trusts defeat outside competition will be powerless. Systematic underselling at prices below cost until the competitor is ruined, and then adding extra profit to prices so as to make up richly for the temporary sacrifice, is the recognised mode of appropriating other people’s business. But such tactics are of no avail where the store can reckon absolutely on its customers, whatever the allurements elsewhere. In supporting their own store co-operators put money into their pockets; for any temporary saving effected through buying the goods of a competitor is soon counterbalanced by higher prices when the rival has been driven out of the market. In Chapter IX. we shall see that the two million British co-operators following such a policy—rendered easier to them by the issue of a co-operative currency, which would also in other ways increase their power— could gradually possess their own farms, mines, quarries, forests, etc., at home and in the colonies, the raw materials of which they would work up in their own factories. Thus they could provide all their necessaries of life, producing all they consume, and consuming all they produce; and no trust or other combination could in the least interfere, provided that the means of transportation were secure from monopolization by capitalistic combinations. Under common land ownership the case would be simpler still. Anyhow,

Exploitation by a Home Syndicate is preferable to that by a Foreign One,

since the latter depletes the country of money. It may be that our New Zealand candle trust exacts a higher price than it ought to, but at least it consumes New Zealand tallow, and its workers and employees spend their money within the land; while, if we once open our frontiers, the American candle trust would soon kill our own industry altogether by underselling for a time until its purpose was served. “My father chastised you with whips; I will chastise you with scorpions” would be the result. Higher prices and good cash demanded in return, cash spent in America, would soon show us how wise our free trade policy had proved.

Take kerosene. Is it quite certain that the higher price which a protection of the local industry might force on us for a time would cost us as much as a possible future rise of prices dictated by the American monopolists once they are freed from any local competition, prices paid with money not locally spent?

6. If Free Trade is beneficial Nationally, why not Internationally?

If protective boundaries are of advantage between two States, why should they not be equally beneficent between sections of the same country; and if, on the other side, it is acknowledged that free trade between sections of the same country is good, if Alabama and the New England States find it to their mutual advantage to have no customs barriers between them, why should such barriers be more profitable between England and the United States?

We might, after the fashion of the proverbial Scotchman, answer these questions by another: If a man and a woman find it advantageous to throw together their earthly possessions, to earn and spend their sustenance in common, why should not a few millions of men and women do the same to their common benefit? Whatever the future of humanity may yet bring in this direction, we all know full well that the time of living in communism has not yet arrived for nations. We also know that, though men all over the world ought to live like brethren, they do not. The amiable philanthropists enrolled in our peace societies resemble those other cheerful enthusiasts who talk of abolishing the competitive system, who preach the fatherhood of God and the brotherhood of man, allowing their beatified visions of better days to hide from them the absolute absence of any practical foundation for their air-castles, as far as the immediate future is concerned.

When there will be just as little possibility of a war between England and the United States as there is of one between Ohio and Pennsylvania, when the two nations will be under the same central government, guaranteeing equal justice, the same currency and land laws, as well as the absolute certainty that no impediment of any sort can ever come between the free intercourse of their respective citizens, then it will be time to ask the questions opening this paragraph. Even as it is, the possibility exists that protection of Alabama against Massachusetts, Pennsylvania, or New York might be beneficial to the workers and employers of the State. Alabama might thereby be enabled to keep men employed at home who now go to the Eastern and Western States to find work; but the advantages connected with the present state of things are so great that any possible one-sided profit which separation might give to the Southern State is far over-balanced. So even the most inveterate protectionist must hesitate to decide where the advantages reaped through protection are weighed in the scale with the benefits due to federation. United Australia was created by the overwhelming majority of the people in spite of the prevalence of the protective spirit.


No doubt the same result will follow when once the question of a federated Greater Britain enters into practical politics. The objection against New Zealand’s joining the Australian Commonwealth lies more on the political field than on the commercial. So were the arguments which I personally put in the foreground when I had the honour of giving my testimony before the commission appointed by our New Zealand Government. I see greater hopes of carrying fundamental social, and political reforms in a small community of only 800,000 souls than in an extended commonwealth with a sixfold population, which will, however, be easily converted by practical success on a small scale. This is proved by the example of Switzerland. The referendum, for instance, was first tried in the cantons Baselland and Zurich in the sixties. Since then it has gradually conquered one canton after another, until finally the Federation has adopted it. Proportional vote is making similar advance, and so are other reforms. The most urgent progress we need; that from an antiquated to a rational currency could not be carried in New Zealand under federation unless we succeeded in gaining sufficient votes in the other Australasian States, for currency legislation is reserved to the Commonwealth; whereas we have a reasonable hope of success in our own little community long before the question is likely to enter the domain of practical Australian politics. So soon, however, as we demonstrate the greatly increased prosperity capable of being accomplished by this reform, our laws will be copied on the other side of the Tasman Sea. If there were no other reason against federation, all progressive men in this country ought resolutely to hold apart from any movement in its favour.

7. Protection forces Hot-house Plants,

while free trade makes every country produce what it is best adapted for.

I have already met this argument when I discussed Adam Smith’s illustration of hot-house wine culture in Scotland, when I showed that there may be conditions where the most expensive way of producing an article at home may be cheaper in the end than buying abroad. If otherwise unemployed labour is set in motion it is better to produce by its means than to feed it in poor-houses. But this is not the only answer to the enemies of hot-house culture. Hot-houses are, in colder countries, a necessary adjunct of plant and animal production. Many plants have first to gain a certain strength before they can be transplanted into the open air, and the stable is the hot-house without which many domestic animals could not survive in certain climates, and without which the young especially would have no chance at all. Free trade has been compared to a wind blowing out a small fire while it fans a strong one.

America’s iron and steel industry which dominates the world now once was a hot-house plant. Protection enabled it to live in 1867, when the American manufacturer obtained $120.12 per ton. He would have been ruined if the absence of protection had forced him to compete with English steel rails, which at that period were sold at $65770 a ton. In May, 1901, the American price was $28, while the English article was quoted at $29.22. Not bad for a hot-house product!

8. The Waste of Protection

through its costly custom houses has also been put forth as an argument; but so long as there is any tariff at all in force, the expenses are not greater under a protective than under a revenue tariff. It has been justly pointed out that even England has to pay as much in custom-house expenses as other countries, though she levies only a duty on correspondingly few articles, and it is not likely that she will easily renounce her income from imported tobacco and alcoholic drinks.

Protection not always best

I have thus tried to answer the current free trade arguments, and yet I am not a downright protectionist. For me the problem is simply how a nation can obtain the most favorable balance of trade which is possibly obtainable in the intercourse with other nations. This may appear a very selfish and one-sided policy, but so is that of any business man in trading, which even the most ardent humanitarian sees himself forced to follow if he wants to avoid bankruptcy. His brotherly feeling must not keep him from trying to sell larger bills than he buys, unless he is a capitalist who can make up passive balances from his savings; otherwise the business will some day be ended for him.

In which way a better balance is reached is another question. I willingly acknowledge that it need not always be by a protective policy. It is very questionable, for instance, whether Germany would not have done better in opposing Bismarck’s protective policy of 1879, for it resulted in a general raising of the foreign custom-house wails all around her own borders. Shooting is a very pleasant pastime if the others do not shoot back. In the latter case, the man who began the shooting may be the loser by the operation. Germany may have lost more in the final balance through a prevented exportation than it profited by keeping out imports. Even in this case, however, it is impossible to speak with any amount of certainty, because the neighbours might have initiated a protective policy without waiting for the precedence of Germany, thus making the impeding of importations, after all, the best policy. Anyhow, I cannot see why England should not find it more advantageous to give up her one-sided free trade policy and adopt reciprocity. Her customers could certainly not object to it, for the fact that England for such a long time allowed her market to be made the dumping-ground for the surplus production of all nations offers no reason why she should be expected to do so for ever. A change of her present one-sided free trade policy would render an

Imperial Zollverein

(Custom union, free trade within the empire) possible. Under present conditions, I hold even Canada’s action in giving preferential duties to English goods to have been premature. Preference for preference ought to be the colonial policy. As long as colonial frozen meat, butter, cheese, and wool have to compete in the London market on equal terms with the importations of Argentina, Denmark, Russia,[2] etc., there is no reason why the colonies should treat English manufactures differently from German or American ones. The federation of Greater Britain, or a mere Imperial Zollverein, will remain dreams of optimists until England has got over the Cobden fever, from which all the cold showers applied by other nations have not as yet been able to restore her. The sine quâ non condition on which the colonies could permit the free entry of British goods would have to be

 An Imperial Protective Tariff

which prevents outsiders from cutting colonial produce. It might be argued that, though the shutting out of Argentinian wool, or handicapping it with a custom duty, might benefit our colonial farmers, the free admittance of English manufactures would ruin our domestic industries—if we left out of sight an important element of the problem.

The Position of the Colonies

This is the higher price paid by England for her raw materials in consequence of the protective duties put upon them to the benefit of the colonies. The position of her manufacturers would entirely change thereby. Instead of remaining at home—like spiders in the quiet nets into which all the farmer flies of the whole world hasten, squeezing each other to facilitate the sucking process of the wily spinners—these manufacturers must look to the colonies for their supply. The same process will result with which the United States are gradually becoming familiar: manufacturers bound to certain sources of supply move their factories nearer to the raw material. As New England cotton manufacturers already begin to move into the cotton -producing regions, so the Yorkshire woollen mills will—partly—come to Australasia, where not only the raw material is found near the factory, thus saving the ocean freight, but where the workers can find their food stuffs cheaper, and where they can erect homes on land not yet brought up to ruinous prices by the land speculator. The further advantage of nearer markets, of which no outside competition can deprive them, adds another important element of success. The textile factories will bring the engine and machine works in their train; and these will be followed by the iron and steel producer, who finds a cheap and convenient raw material ready to his hands. Just as the Iowa manufacturer can compete with his New England colleague, so our New Zealand manufacturer will, under a custom union, gradually be able to work alongside of his English competitor. There may be transient losses to established factories in the beginning, but the general effect on the trade of the country will be such as to amply compensate for such temporary drawbacks.

Reciprocity required

Free trade and peace are wonderful blessings, but only where they are not one-sided attainments. As we have to arm as long as our neighbours threaten us with their blunderbusses, so we have to protect our own markets as long as others shut us out from theirs. Wherever reciprocity can be obtained, the blessings resulting from the arrangement must in the end overbalance any possible drawbacks. I fight the free trader as little as I attack the non-resistance fanatic. The only condition to my forbearance is the certainty of mutuality. When they preach free trade towards nations who exclude us from their markets while they make ours the dumping-ground of their surplus produce; when I am told to lay down my arms in the presence of parties who take aim at me with their rifles, I pay no attention to the men who give such advice. The only extenuating circumstance allowable to our Cobden fanatics is their delusion in regard to the fundamental principle on which their theories are built, with the criticism of which I had to open my discussion of international trade relations: the principle that commodities are always paid for with commodities. With this delusion falls the very key-stone of their building.

Henry George’s Robinson Parable

Though I have furnished sufficient proof as to the absolute fallacy of the theory and the superiority of mercantilism over Smithism, I may as well conclude this chapter by meeting on his own field a great genius who unfortunately fell into the Smithian trap, a field on which he shows special power: I shall give my version of a parable invented by Henry George to ridicule protectionist fallacies.

” Let us take a community which we must perforce consider as a whole—that country with a population of one, which the genius of Defoe has made familiar not only to English readers but to the people of all European tongues.

“Robinson Crusoe, we will suppose, is still living alone on his island. Let us suppose an American protectionist is the first to break his solitude with the long-yearned-for music of human speech. Crusoe’s delight we can well imagine. But now that he has been there so long he does not care to leave, the less since his visitor tells him that the island, having now been discovered, will often be visited by passing ships. Let us suppose that after having heard Crusoe’s story, seen his island, enjoying such hospitality as he could offer, told him in return of the wonderful changes in the great world, and left him books and papers, our protectionist prepares to depart, but before going seeks to offer some kindly warning of the danger Crusoe will be exposed to from the ‘deluge of cheap goods’ that passing ships will seek to exchange for fruit and goats. Imagine him to tell Crusoe just what protectionists tell larger communities, and to warn him that, unless he takes measures to make it difficult to bring these goods ashore, his industry will be entirely ruined. ‘In fact,’ we may imagine the protectionist to say, ‘so cheaply can all the things you require be produced abroad that unless you make it hard to land them I do not see how you will be able to employ your own industry at all.’

” ‘Will they give me all these things?’ Robinson Crusoe would naturally exclaim. ‘Do you mean that I shall get all these things for nothing, and have no work at all to do? That will suit me completely. I shall rest and read and go fishing for the fun of it. I am not anxious to work if without work I can get the things I want.’

” ‘No, I don’t quite mean that,’ the protectionist would be forced to explain. ‘They will not give you such things for nothing. They will, of course, want something in return. But they will bring you so much, and will take away so little, that your imports will vastly exceed your exports, and it will soon be difficult for you to find employment for your labour.’

” ‘But I don’t want to find employment for my labour,’ Crusoe would naturally reply. ‘I did not spend months in digging out my canoe, and weeks in tanning and sewing these goatskins, because I wanted employment for my labour, but because I wanted the things. If I can get what I want with less labour, so much the better, and the more I get and the less I give in the trade you tell me I am to carry on—or, as you phrase it, the more my imports exceed my exports—the easier I can live and the richer I shall be. I am not afraid of being overwhelmed with goods. The more they bring the better it will suit me.’

“And so the two might part, for it is certain that no matter how long our protectionist talked, the notion that his industry would be ruined by getting things with less labour than before would never frighten Crusoe.”

Of course, if the importers took from Robinson goods which abounded on his island, and which could be supplied by him with much less labour than that entailed by the goods which the others gave him in exchange, his astonishment at the protectionist theories put before him would have been justified. Such a trade would have meant reciprocity; and only extreme protectionists can object to free trade under such conditions. Nor would it have made the least difference what time elapsed before the importers took Robinson’s produce in payment. In fact, the longer they tarried the better for Robinson, who could let his wealth breed additional wealth in the meantime. But let us suppose that the strangers’ bill was higher than the value of the produce which they accepted from Robinson in exchange, so that Robinson had to run into debt, and that 5% interest was demanded for this debt, Robinson giving as security a mortgage on his island. And let us further suppose that year after year elapsed, and no favourable balance of trade enabled Robinson to pay his debt, his further bills against the importers not exceeding the amount of the new bills of goods they sold him. The debt remained, the interest on it accumulating all the time, with the frightful velocity of compound interest; until one day a sheriff comes along who, as Robinson cannot pay his debt, sells his island over his head. As the proceeds are not sufficient to pay for the debt, all the other belongings of the poor man are also sold, and he is set adrift in the world, penniless, unless the new owners of his island consent to retain him as a labourer or as their tenant, who has to work hard from morning till night to pay his rent and to eke out a meagre living. No more imports are offered now, but most of Robinson’sproduce is taken away for rent. Was it really Robinson’s best policy, under such conditions, to buy the cheap goods offered to him? Was it not better to produce them by his own labour, though applied under much more unfavourable conditions, and to refuse the importers’ goods at any cost so long as he could not pay for them with his own produce, but had to run into debt? Anything was better than to become the interest serf and finally the rent slave of the strangers. Fair trade, but not unconditional free trade, was the only not right-down suicidal policy open to Robinson, and as his supposititious case corresponds with the realities of individual and national trade, the illustration proves the very reverse of what was intended. Fair trade is a certainty where the interest poison does not come into the way. Where it does, however, counter-poison Protection, and even Prohibition of importation, may be found a good remedy.

The Parable modernised

Let me bring the state of things on Robinson’s island a little nearer to the reality of every-day life. Let us suppose that Robinson had made a speciality of the raising of food stuffs and the production of raw materials; while an artisan, Jones, who had immigrated produced furniture, clothing, and other manufactures required by himself and Robinson. The two exchanged with each other, each fixing money prices for his goods which remunerated him well for his labour, as they enabled him to obtain all he needed of the other’s produce. Now an importer lands, and offers all goods manufactured by Jones at one-half the price he charges. Robinson at once ceases to give his orders to Jones and transfers them to the importer; for why should he pay more for his goods than he can get them at in the cheapest market? Jones, being out of work through the loss of Robinson’s custom, emigrates. After a little time the importer wants his bill paid. Robinson says that he has no money, and that his former customer, Jones, always accepted produce in exchange; he could only settle his bill with produce. The importer agrees; but freights are high, and competition in this kind of produce in the distant markets is very sharp, which forces him to offer one-quarter of the priceonly which Jones had paid. Robinson cannot help himself, as he needs the goods of the importer, Jones having left; so that he either has to go without goods which have become a necessity to him, or has to make them in a much more primitive way with much more labour.

He thus finds that he pays twice as many bales of wool, bushels of wheat, tons of coal, as he had to supply to Jones for the same manufactures. He has some bad seasons, and he runs into debt with the importer, who takes a mortgage on the island, which increases through compound interest, until finally the island is sold, and Robinson becomes the rack-rented tenant, or (at last) the labourer of the new owner. After his death, in some poor-house, the island is turned into a deer park by the rich proprietor.


[1] The Curse of Cobden, or John Bull v. John Bright, by J. Buckingham, and the well-known book, Made in Germany, by E. E. Williams, show clearly how unreciprocated free trade has become unfair trade for the doctrinarian country. Buckingham says: “Free trade is a misnomer; it ought to be Free Buying,”

[2] I copy the following letter addressed to the Daily Mail of London by one of its correspondents in the spring of 1901, to illustrate the existing state of things. I think we may safely say that no other country on this globe, besides Great Britain, follows such a planless commercial policy.

“The export of Russian butter to England in 1900 amounted to over £2,000,000, and for the current year the minister for finance estimates it at nearly £4,500,000. Why this enormous increase? Is Russian butter so vastly superior? Or is John Bull still asleep? Are we to buy and eat Russian butter, and thus help to increase the prosperity of that country? I would suggest that the British public ask for and demand colonial butter, ‘pure cremery butter,’ New Zealand produce, etc., etc. We should thus be strengthening the bonds of loyalty and affection between the old mother country and those colonies who so willingly sent their best treasures into the Transvaal for the glory of England.”