1902 Encyclopedia > Free Trade

Free Trade




FREE TRADE. This expression has been appropriated, in a somewhat technical manner, to denote an unimpeded intercourse between such manufacturing and commercial communities as, having reciprocal interests, are under separate governments, and thereupon have separate financial systems. Thus the term is not applied to the facilities which town and country, labourer and capitalist, have obtained for reciprocal exchange, though these facilities have been acquired only in comparatively recent times. It is not used to describe the commercial intercourse of the three kingdoms, though restraints on the trade between Scotland and Ireland on the one side and England on the other were remitted, long after a political union between the three kingdoms had been effected, very grudgingly and very cautiously. Again, if we speak of free trade in land or free trade in banking, we use the term in a different sense from that in which it has been employed since the time of Adam Smith. But the phrase is technically used to designate such a commercial intercourse between any particular country, its colonies, and foreign countries, as gives the maximum of facilities for reciprocal exchange, and in the least degree attempts to make a fiscal system the means for stimulating and assisting domestic industry by protective enactments.

Free trade in the sense given to it above is advocated on two principal grounds, the one economical, the other political ; and all arguments alleged in favour of it can be brought under one or other of these topics. It is resisted similarly for economical and political reasons,—not, indeed, in contradiction to those which are adduced in its favour, for these are absolutely irrefragable, but on the grounds that the industries of a country ought not to be defined by merely economical reasons, and that there are political interests which will not indeed annul, but must materially modify the universal and undeviating application of the free-trade principle. It will be the object of the present article to give a brief account of the controversy between the advocates of commercial freedom and those of commercial restraint, and to show how events, due to opinions which have long become obsolete, have strengthened the position of those who urge that the restraint of trade is and should be part of the function of Government. It is perhaps necessary, however, to meet an objection at once which might be taken, if it were not anticipated. Every civilized Government rightly and properly undertakes the supervision of contracts,—prohibiting some altogether, regulating others with less or greater strictness, and assuming the right to give an equitable interpretation to all; the application of the principles of equity to contracts being the most important improvement which modern civilization has induced on jurisprudence. Thus the law of civilized nations forbids any contract which would reduce one of the contracting parties to permanent slavery, though it compels the fulfilment of bargains which involve the temporary servitude of one of the parties. Again, it nullifies immoral bargains, thougli it does not profess to follow the consequences which a bargain that is prima facie innocent may have. Again, it subjects some callings to a police, either by exacting, in the case of certain professions, evidence of the individual’s capacity, or by guarding continuously against any abuse which may arise from the exercise of a calling specially open to abuse, as in the case of houses for public entertainment, and the issue of paper money by banks. Furthermore, it subjects even simple contracts to revision,—as, for example, cases in which exorbitant charges are made for loans. In these instances, and in others like them, a Government is only carrying out its primary duty in protecting its people from force or fraud, by controlling the free action of those who may inflict a serious injury on others. To define the extent indeed, to which such interference is necessary or desirable, is one of the hardest questions in what may be called the casuistry of politics. A country may be so over-governed by a watchful administration as to lose, to a greater or less extent, the spirit of enterprise or initiation, and thereby to be weakened in the legitimate rivalry of nations. But, on the other hand, it may be still more seriously weakened by the destruction of credit or confidence,—a result which is very likely to ensue, when fraud is successful and unpunished.

Similarly a Government may control or prohibit intercourse between nations. If individuals have rights at all, one of the most obvious and important of these rights is that of choosing a market for their labour. But a Government would be admittedly justified in prohibiting the emigration of such artisans as are employed in the manufacture of munitions of war to a country with which itself was at war. It does more when it does not allow its harbours to be a refuge or a market for belligerents’ ships, and prevents private individuals from supplying munitions of war to combatants. A fortiori, it would riot allow its subjects to sell such goods to its enemies as might enable those enemies to protract their defence. It is a question whether it is not entitled to prohibit, or at least restrain, the exportation of that over which it is able to exercise a monopoly, though it is very seldom, if indeed it is ever the case, that any country is in so advantageous a position. And, lastly, it is allowed that a Government may make the commercial intercourse of its subjects a matter of bargain with the Government of other countries, though such expedients, from an economical point of view, have been subjected to very adverse criticism. Free trade, then, must be innocuous and not hostile to the general public good.

Between nations, f ree trade represents the well-known principle of the Division of Employments. The advantages which result from the natural or spontaneous division of employments, and the loss which ensues from a forced division of employments, are the commouplaces of economists. But the fact that exactly the same principle rules the distribution of production over such parts of the world as are occupied by industrial agents is not so frequently insisted on. That there are several commodities which a country cannot produce at all, or can only produce under circumstances so disadvantageous as to involve disproportionate expense or loss, is admitted by every Government, however anxious it may be to develop native industry by protective regulations. No European Government, however imperfectly civilized, would attempt to direct its home industries into the production of tea, coffee, and chocolate, or to domesticate elephants for the sake of their ivory, or to breed ostriches for the sake of their plumes, or to maintain a race of wild hogs in order to obtain a due supply of bristles from native sources. But there are in most countries a number of industries the continuity of which Governments have attempted, and still attempt, to promote, by hindering the free entrance of foreign-made articles of the same kind. It will be found that, historically, this practice has had its origin in what is now understood to be a delusion as to the true functions of the currency.

The restraint of production and trade was a policy which ancient civilization never adopted. The great statesman of Athens congratulates his audience on the fact that, thanks to the extended commerce of their country, they are as familiar with the use of foreign products as they are with those of domestic industry, and use them even as freely as tile country of their origin does. The public opinion of Greece was profoundly shocked when, as a measure of political animosity, Athens'excluded a Greek city, Megara, from its market. The oldest public document preserved in the Roman archives was a commercial treaty with Carthage ~(Polybius, xii. 22), in which Roman merchants are indeed restrained from traffic in certain districts, more, we may be certain, from fear of the Carthaginian occupation of Italy than for other reasons, for the treaty expressly exempts traffic from tolls, and prescribes that Carthage shall build no factories in Latium. Nor is there any record of restraint put upon the distribution of the precious metals, except in one oration of Cicero, where the orator, defending his client from a charge of extorting motley from the Asiatic Jews, comments on the public policy of hindering this people from disturbing the money market by sending great remittances of specie to Jerusalem.

Perhaps the explanation of the fact that the civilization of antiquity did not interfere with the process of international eichange is to be found in the prevalence of slavery. Setting aside for a moment the historical origin of 'modern protection, the influence and apparent truth of the mercantile system of which we shall speak immediately, there is a radical difference between ancient and modern civilization,-that in the former slavery was deemed natural, in the latter it has been seen to be mischievous and felt to be detestable. In modern societies, therefore, the free labourer is a factor in the interpretation of economical forces; in ancient ones, he counted for nothing, or next to nothing. To have prohibited free trade in the products of foreign labour at Athens would have been to give advantage to one class of slave-holders in opposition or in contrast to anotherclass of slave-holders, and was not to bethoughtof. To prohibit free trade between England and France, or England and the United States, is, in appearance at least, to assist the home labour of the country which adopts protection against the rivalry of free labour in another country which might undersell its rivals. Protection in ancient times would have been seen to be naked selfishness; in modern times, it niay seem to be a genuine and disinterested patriotism. And it may be observed that, for this and for other reasons, most slave-holding countries have been indifferent to protective regulations, or even unfriendly tothem. This fact is sufficiently illustrated by the contrast of opinion in the northern and southern States of the American Union before the war of secession.

The control of production and trade in modern Europe is historically due to the development of what Adam Smith called the mercantile system, i.e., the effort of Government to secure as far as possible the largest possible amount of specie within the country whose affairs it administered. It is easy to discover the origin of this policy, To a Government which spends, but does not produce, the possession of treasure is of the greatest utility and service. To an individual who produces and trades, still more to one who trades only, treasure is, as a rule, the least valuable instrument of traffic, as it is an article from which, as it is affected by the least possible variation in value, the least amount of profit can be anticipated by those who deal in it as an article of trade. A trader in the Middle Ages would have readily accepted the doctrine that money was wealth as far as regarded every one but himself; as far as he was concerned, he wished to get rid of his money as soon as he could, in exchange for goods, on which he might secure his profits. The doctrine that the machinery of international trade. supplied the process by which the precious metals were distributed, and that therefore, if trade were to exist, the attempts of Government to restrain the exportation of money were mischievous or nugatory, was argued as early as the middle of the 14th century by Sanuto the Venetianl and by Oresme the bishop of Lisieux, in language as precise as any used by Turgot or Adam Smith. The reasonings, however, by which, protective theories were upheld, the mean and malignant arguments of restraint, as Adam Smith calls them, were always strengthened in England up to thirty years ago, by suggesting the hideous consequences which would come on the nation from a drain of gold. Protection had its origin in the reputed duty of Government towards the currency. Once established, it created artificial interests whose existence was a loss to the whole community, but whose maintenance seemed to be the satisfaction of a contract entered into between the Government and the industry which the Government had called into being or had stimulated.

It will be clear that if any particular industry is of such a character as to be very conveniently carried out by the inhabitants of a particular community or district, if the producer fears no rival in the home market, and still more if lie, dreads no competition in a foreign market, any pro. tection accorded to his industry most be wholly superfluous. IX. 9 5

He might even contemplate an export duty with equanimity, though of course an export duty would be destructive of'bis foreign market if he had real rivals, anti he would generally find that such a duty would not only limit the consumption of his produce, but would call a rivalry into existence. it is equally clear that if a protective duty were imposed on the importation of foreign commodities into a country which has already a marked superiority over other countries in these commodities, the regulation would have no effect in increasing either the profits of the producer or the cost of the article to the consumer,-that, in short, the enactment would be absolutely' nugatory. It will be also plain that, in every country, there are certain commodities which are effectually shielded from foreign rivalry by the cost of carriage, and that such commodities possess the superiori

ity which other products enjoy from the peculiar facilities which a particular country has in manufacturing them. A protective system then is inevitably concerned with such products as are liable to foreign rivalry, and a foreign rivalry can only be defeated at the cost of the consumer. But as the protective regulation can affect prices tit that country only which imposes the regulation, it is obvious that the only person who can be made to bear the in

creased cost which the protective restraint imposes will be the home consumer, If the produce could find a market at home, there would be no need of the assistance; if it cannot subsist at home without a machinery which guarantees the profit of the producer, the domestic consumer is the only person who can be made to contribute the fund from which the profit is made.

The positions stated above receive a significant but complete illustration from the economical history of England, A century ago the English landowners were free traders, the English merchants protectionists. Adam Smith rested all his hopes of a better system on the former class, but despaired of any co-operation from the latter. Twenty years after the Wealth of Natio?js was published, the mercantile and manufacturing classes, with few exceptions, were free traders ; the landowners, with few exceptions, were protectionists. The explanation of the change in sentiment is to be found in the change of interests, Up to the middle of the 18th century England exported considerable quantities of agricultural produce, -sometimes naturally, at other times under the wholly indefensible stimulus of a bounty on exportation. Now it needs very little intelligence to discover that the profits of art exporter, or at any rate the extension of his trade, depend largely on the variety of imports which he can obtain in exchange for his goods, A country which puts no hindrance on imports always deals to the greatest advantage, and the advantage decreases with restraint. If a country refused to admit any import but one, i.e., money, it would sell its exports in the worst possible market, and for the least possible value, receiving in return an article which the machinery of its trade takes the most effectual possible means to depreciate. Hence the landowners of the 18th century, like the agriculturists of the western and southern States of America now, were free-traders, because free trade was their best hope of profit. The manufacturers, on the other hand, were profoundly afraid of foreign rivalry, even the rivalry of the British colonies, even the rivalry of Ireland. Perhaps the most grotesque illustration of this fear was the law which directed under strict penalties that the dead should be buried in woollen, in order to encourage the woollen manufactures.

The change of sentiment was due to the great mechanical industries of the 18th century. The discoveries of Ark wright, of Watt, of Hargreaves, of Crompton, gave England a practical monopoly of textile fabrics, and subsequently of other products nearly as important. No doubt the Berlin and Milan decrees interfered with the Continental trade of England, though it is well known that Napoleon's soldiers were clothed, in spite of these decrees, in the produce of north-eastern and west country looms. But in other parts of the world England bad no rivals, while her supremacy on sea, after the great victory of Trafalgar, guaranteed her traffic. Hence, when the merchant and manufacturer, especially the latter, discovered that protection bad ceased to be an advantage to them, and discovered also, for the reasons given above, that the restraint of imports was a disadvantage to production and exportation, the principles of free trade made rapid progress in the manufacturing districts of EDgland. But on the other band, the very reverse opinion influenced the minds of the landowners. Owing partly to the succession of late harvests, partly to the rapid growth of population consequent upon manufacturing enterprise, partly to the restriction of Continental supply, the result of war, of the great drain which war made on the agricultural population of Europe, and of hindrances put on the import of food, rents and farmers' profits rose with amazing rapidity, and the Corn Law of 1815 was enacted in order to secure, if possible, the permanence of such rents and profits. The partisans of free trade and protection were only by accident allied to the great historical parties of English public life. The struggle for free trade was really one between town and country, as hereafter efforts ir. the same direction will get their advocates from the same classes.

It may be believed that, in England at least, the question of protection to manufactures is finally settled, though there are not wanting persons who advocate reciprocity, co-ordinate taxation on foreign products, retaliatory duties on reputed bounties, and the like. But the traditions of legislation are too firmly fixed, and the benefits of free trade experienced during the past thirty years are so generally admitted, that the advocacy of the exploded theory of protection is looked on as a harmless wbirn which has no chance of popularity. It is not perhaps equally clear that the English people are quite safe against the revival of protection to agriculture under the pretence of sanitary restraint, for that which is the inevitable result of protection to manufacture, the limitation of voluntary consumption, is not so markedly developed from the protection which may be accorded to articles of necessary consumption.

When trade is restrained in those articles of foreign origin which may be produced, though under less advantageous circumstances, at home, and the product is an article in which the use may, to a limited extent only, be economized, the following results ensue:-- Prices rise, and profits rise, of course, at the expense of the consumer ; wages, however, do not rise, for in so far as wages are determined by the competition of employers for services, the tendency is towards a reduction of wages, seeing that the use of the product is not increased but rather stinted. Now, the extra profits which protection accords might be secured to those who are already employed in the particular industry thus favoured only if the producers have a natural rnonopoly in the produce of their calling, as was practically the case with the English landowners during the existence of the corn laws, or if the law restrains other persons from competing against them, as was the case in England with Eastern produce during the contiDuance of the East India Companyls chartered trade. If such an advantage be not accorded, capital makes its way to the favoured industry ; or, to be more accurate, an increasing number of employers compete for the exceptional profit. Such an operation may in some degree raise the rate of wages, though here again, unless the labour be protected by some arrangement, such as apprenticeship, or by the machinery of a strict trade union, the saine cause which attracted the energies of the employer will rapidly, even more rapidly, supply what may be needed in the way of labour. Generally, indeed, the check to such a decline in wages is supplied by trades unions, which are, as the industrial experience of the United States has proved, the inevitable outcome of a protective system in a country where combinations of labour are not prohibited by law. In England up to 1824 they were prohibited.

In course of time then, and generally at an early period, the advantage which the protective system accorded to a special industry ceases, by being distributed among a larger number of producers. To this rule there is but one exception, protection accorded to the produce of land. Here, if the commodity produced be one which cannot be dispensed with, and for which no substitute is found, the fact that the supply procurable falls short of the demand may greatly increase the value of the article, and through the farmer’s profits raise rents. But the advantage is soon found to be only partial. In civitized and fully settled countries, agriculture is a complex process, in which success depends upon a just balance being struck between tillage proper and stock-keeping. An excessive price of corn, or rather of wheat, due to the machinery of a protective system, apart from the extraordinary fluctuations in price which it induces on the price of wheat, discourages the use of meat, and even of the inferior kinds of grain ; for it is a law in prices that any notable exaltation in the value of one of the items which contribute to a joint product invariably depresses the value of the other items ; just as it is an equally invariable law in prices that when there is a notable scarcity of any commodity the greatest rise in price always takes place in that form or quality of the article which was cheapest before. Hence there is always a natural remedy, though it is by no means a compensating one to the consumer, for any artificial exaltation in the value of agricultural produce. The principles referred to may be proved by the analysis of facts. Since the repeal of the English corn laws the price of agricultural land has steadily risen ; for though the average price of wheat has fallen, that of other kinds of grain, as is found by the tithe averages, has risen, while meat and dairy produce have much more than doubled in value since the period referred to.

It is chiefly, however, in relation to manufactures that the operation of protective regulations is significant or important, for most countries have abandoned all or nearly all restraint on the importation of food. The employer gets no advantage from the regulation, nor the labourer, and the consumer suffers a loss. But the removal of protection would, in most cases, however great a benefit to the consumer, inflict considerable low on employers and labourers, since they would be subjected to a competition in which it is probable they would be worsted; for it may be concluded that the manufacturer cannot, or believes he cannot, subsist without protection, since he would repudiate it if he saw that it was superfluous. Hence it is exceedingly difficult and invidious to alter a system to which capital and labour have accommodated themselves ; and it may be stated generally that all the arguments by which an existing protection is defended, however plausible and convenient they may be, are mere sophistry, though very often unconscious sophistry; while the prospect that the sudden suspension of protection to manufactures would seriously disturb the relations of employers and labourers, and would very probably lead to a great destruction of property, points to a real difficulty, which the advocates of free trade will always find confronting them. In practical politics, in so far as they are connected with economical subjects, the difficulty is enormous, for the defence of imperilled interests is always more watchful and energetic than attack on them, and can always count on a co-operation and concentration which is far less fully developed in those who criticize or challenge the privilege. There is a well-known passage in Mr Mill’s political economy in which this author conceives it expedient that protection should be given to certain industries in new countries, provided that the country had good natural resources for the successful prosecution of such an industry, and the protection accorded be only temporary. But apart from the fact that new countries never possess a superfluity of capital and labour, and therefore are least of all well advised in directing these elements of wealth into channels where they would be less advantageously employed than they would be in others ; apart from the considerations that all countries have a natural protection in the cost of carriage, and in the comparative ease with which they can interpret demand ; and apart from the fact that good natural advantages for any particular industry are sure to suggest that industry at the very earliest time at which it will be expedient to undertake it,—the circumstances which invariably affect a protected industry render it impossible that Mr Mill’s rule of a temporary protection should be applicable. Who is to determine at what time the protection should be removed? Not the consumer, as represented in the legislature, for he would naturally object to the protection from the beginning, since the regulation inflicted a loss on him, at the very instant that it came into operation. Not the manufacturer, for until the time comes in which he dreads no rivalry, be believes that the regulation is the guarantee of his ordinary profit, and that its removal will expose him to certain loss. The probability that he may come to such a state as to render the protection manifestly superfluous depends on his making some great, sudden, and lasting stride in the efficiency of the industry which he exercises. But protection discourages all kinds of improvement, and indeed it does not appear that the phenomenon of sudden, vast, and permanent progress has ever been witnessed in economical history except during the latter half of the 18th century in England. Not the labourer who is engaged in producing the favoured product, for the wages of labour are adversely affected, in the fall of prices, at an earlier stage than any other object into which gross value is distributed, and are advantageously affected, on the other band, at a later period than that in which any other interest, other than that of manual labour, is benefited. Loaned or floating capital is most easily extricated from a declining trade, and most easily attracted to a growing trade; fixed capital, and such capital as gives efficiency to fixed capital, is attracted less easily, and by parity of reasoning, is less easily accumulated or appropriated ; while the supply of labour is decreased with the greatest loss to the labourer, and increased with the smallest gain.





It may be concluded then that, while Mr Mill has given a doubtful defence for the adoption of a temporary protection, his limits to the protection so accorded will be found to be practically nugatory, and that in fact the adoption of the system will confer the minimum of good, while the abolition or abandonment of it w0ill inflict the maximum of injury. This result then,—the creation of factitious industries, which cannot be assisted by the operations of Government without loss to the consumer, but which cannot be abandoned by Government without ruin real or apparent to the consumers,—is substantially the apology and defence for the protective systems of Continental Europe. For there is nothing which characterizes modern systems of government more than the tenderness which all parties show towards imperilled interests. There is a growing disposition towards treating them as vested,—that is, as equitably entitled to compensation if their continuity is disturbed or even threatened. Of course there must be a limit to this consideration, for no Government has yet ventured on admitting, however democratic may be its institutions, the vested interests of manual labour, or allowed that it should be compensated, if events required that a change be made in legislation which might interfere with the continuity of its wages. But if the project which is in favour with certain schools of socialism in France and Germany, that the state, should assist labour (and of course it could assist only special kinds of labour) with Government subventions, the doctrine of vested interests would assuredly be applied to such assisted callings. It was, perhaps stilt is, a contention with some public men in England that poor-law relief is of the nature of a vested interest to labour, or that it is the indefeasible heritage of the poor.

It has been very fairly shown by Mr Fawcett, in his recently published essay on free trade, that many circumstances assisted towards making the acceptance of this great political change in the United Kingdom,—notwithstanding, the vehement passions which were excited against those who carried on the struggle for the repeal of all taxes on food. Mr Fawcett has not by any means exhausted all the facts which aided the advocates of this change, nor has he enumerated all the motives which influenced those who gradually became reconciled to the change, and who even, from being opponents, were converted into partisans of the movement. For the principles of free trade had been accepted by Lord Liverpool in 1820, and had been cautiously tried by Mr Haskisson in certain directions andwith marked success. In fact, the first modifications of the tariff were agreeable to the landowners and the farmers, were acceptable to the manufacturers and small traders, and were objected to, as similar reforms were objected to in Walpole's time, by the great mercantile houses, who were enabled by their capital to retain almost a monopoly of the wholesale, trade as against less opulent dealers. But even here a significant aw of prices, never indeed formulated, but recognized, effectively enough reconciled the great houses to the remission of taxation on raw materials and on those foreign products against which no home production competed. It is that a remission of taxation, in all consumable articles, and notably in those of extended demand, is followed by arise in the price of the untaxed articles. This law is a constant refutation of the policy which imposes taxes on imports, and operates still more emphatically when taxes on exports are imposed, as they sometimes are by ignorant and needy Governments. Hardly a voice, therefore, was raised against the bold measures which Peel adopted between 1842 and 1846. They could not possibly harm the landowners ; they were a positive boon to the manufacturers and the consumers. So much was this the case that for some time, as has been already stated, the remission of a vast number of small taxes on consumption was made the apology for retaining the income tax.

But the case was very different when the taxes on food produced abroad, and in competition with that produced at home, and on sugar imported from other places than the British colonies, were assailed by the logic of the English free-traders. Here it was seen at once that the most powerful interests were imperilled. For very obvious reasons, the landed interest in England has always wielded far more power, political and financial, than any other. During the Middle Ages it controlled the monarchy, deposed kings, altered the succession, till, up to the beginning of the 17th century, the general appellation which Continental nations gave the English was that of "disloyal." The landed gentry and free-holders fought the wars of the Long Parliament, and subverted the monarchy. The Restoration was a compromise between them and the courtiers, and one of the first results of the Restoration was the enactment of stringent provisions against the importation of foreign food. For centuries the policy, the legislation, the finance of England had been defined by the interests, real or supposed, of thd landed gentry, the yeomanry, and the tenant farmers. They were now threatened with a complete reversal of this traditionary policy, and such a reversal seemed to purpose their ruin. Those who lived through this time will easily recall to mind how violent were the passions which the anti-corn-law movement excited; how Whigs of the Melbourne school denounced the free-trade movement as folly ; how such a man as Lord Brougham, who was conceived, ten years or more before, to have carried the reform agitation to the very verge of sedition, now declared, and perhaps with perfect good faith, that the movement in favour of free trade was unconstitutional ; how Sir Robert Peel believed that the opponents of protection were the instigators of a plot against his life ; and how, long after the victory was won, it was a commonplace to accuse the leaders of the movement with the most sinister designs against property. And yet the tax on food was in the last degree invidious. It was avowedly imposed in the interest of the landowners, and with a view to maintaining rents. It was allowed that free trade in the abstract was just, protection in the abstract indefensible. There were of course reasons alleged in favour of protection, analogous to those which are now current in the United States and elsewhere, as to the wisdom of a nation being self-supporting ; as to the disturbance of the exchanges in the presence of bad harvests ; as to the incapacity,of domestic industry to compete against the low-priced labour of semi-barbarous countries; as to the destruction of national industries, and the extinction of the best and most patriotic of English craftsmen. But these alarms were either heedless or interested rhetoric, never put forward by really competent critics. Nearly thirty years ago, Mr Gladstone informed the writer of this article that he never had but one objection to the repeal of the corn law, during the early period of his connexion with Peel’s Government, and that was the fear that he entertained as to the consequences which would ensue to an interest which seemed, and seemed naturally, to be the very centre of English national life. Statesmen may well be excused from venturing on economical changes of a vast and extended character, even though the propriety of the change may be proved to demonstration: for a period of change, however beneficent it may be in ihe end, is almost invariably accompanied by temporary and severe loss.

Already, however, there were far-sighted men who predicted that this loss, if loss did ensue from the change, would be a minimum. They discovered or anticipated this in pursuance of that other fundamental law of prices already hinted at. When the products of any industry are numerous, and all are in demand, such an alteration in the cost of producing one of these products as makes it, from being the most profitable branch of the calling, the least, is followed by an exaltation in the value of the other products. Thus it is constantly the case that the bye-products of a complex industry are found to be the sole source of business profits. Such at least is said to be the fact in the manufacture of gas and soda ash, and it is alleged that even if a substitute be found for gas as a means of lighting, the value of the bye-products in the manufacture is so great, and the use of them so indispensable in the economy of society, that the manufacture would still be necessary and profitable, But there is no illustration of the law which is so exact and invariable as that supplied by agriculture. During the existence of the corn laws, the profits of the farmer and the rents of the landowner were estimated in wheat. It was from the probable decline in the value of wheat that all the sinister predictions as to the future of the landed interest were derived. So entirely did grain, especially wheat, form the measure of agricultural values that ten years before the repeal of the corn laws the commutation of tithes took no account of any other kind of agricultural produce than the three principal cereals, although in that commutation interests, lay and clerical, of not less, in capital value, than 150 millions sterling were involved. Even here, however, the tithe-owner has suffered no loss by the change, for though the price of wheat has fallen, the decline has been more than compensated by the upward movement in the price of barley and oats. Since the repeal of the corn laws, the tithe rent charge has been 2 _ per cent. above par value. Far greater, however, has been the consequence of the change on the price of other agricultural products, especially meat and dairy produce, the value of which has nearly, if not quite, doubled during the last forty years. Now this result was anticipated in a rough manner by the shrewder heads among landowners and occupiers, and therefore reconciled many whose interests might seem to be imperilled to a change which, while it threatened a superficial and temporary loss, might easily determine in a permanent and increasing profit. And finally, the farmers learnt by demonstration and experience that, whoever might gain by restrictions on the trade in food, they did not; and that in some unexplained manner the machinery of a law which seemed to be intended for their profit either turned out to be a loss, or was wholly inadequate to secure the results intended. And yet, though the people were starved, manufacture was unprofitable, foreign trade was declining, and the revenue bad been constantly insufficient for the expenses of government, it needed the catastrophe of the Irish famine in order to give effect to an agitation more prolonged, more costly, and more popular than any which has happened in the history of a civilized nation, to effect a peaceful repeal of laws which did no person whatever any good, which were no advantage whatever to the parties for whose special benefit they were enacted, and which inflicted prodigious losses on the two most important classes in the community, the producer and the consumer.

The history of the movement which led to the repeal of the English corn laws in 1846 has been sketched at somelength, in order to show that if, in a case where the impolicy and the injury of the law was proved to demonstration, it was so arduous a task to effect a change, the difficulty is far greater in those countries where it is not possible to array such formidable forces against the continuance of a protective system. It is easy to show that the law of prices above referred to applies with the same cogency to the collective industries of any country whatever as it does to such industries as necessarily supply varied products, and that any artificial attempt to direct the home and foreign trade of a country into special channels is sure to bring about a factitious exaltation of one set of values, and a factitious depreciation of another set of values. Various Governments in Europe, in the New World, and in the British colonies have striven to start special industries. They will succeed in the at-tempt, however injudicious the attempt may be, if there be a demand for the product which they determine to artificially foster. But from two consequences they cannot escape. The consumer of the produce thus stimulated into an unnatural or premature existence must pay for the policy of the Government in enhanced prices, and the producer of goods must offer more of his goods for sale in order to effect an exchange in that which the Government permits to be imported, but hinders either in kind or quality with a protective tax. But it by no means follows that, when the consequence of this policy is exhibited, when its mischief is demonstrated, when its futility is exposed, nay, even when it is proved that, on pretence of doing a special service to the Government and the people which it is intended to aid, it deliberately gives the maximum of advantage to the foreign exporter, and inflicts the maximum of loss on the domestic consumer, the country which makes tbd discovery will reverse its policy. For, apart from the considerations which have been dwelt on above, the fact, namely, that the revocation of a protective duty which is efficient in raising prices must be followed by a loss to the producer, the existing practice way always be defended by a number of plausible arguments, held, it should be admitted, with perfect good faith by those who promulgate them, however shallow and erroneous they may seem to others, whose passions and interests are not stimulated to defend such a practice. With the same sincerity of conviction the defence may be further supplemented by appeals to an irrelevant patriotism, or by an imputation of sinister motives on the part of assailants, or by a bold assertion that the social condition of other countries differs radically from that of the district in which protection is maintained. And finally, in all political and economical movements, it must be repeated, the forces of defence are far more manageable than those of attack. For, as the defenders are in possession, and the sentiment of civilized societies is always favourable to existing interests, the defence can urge, if not with truth, at least with great effect, that it is dangerous to relinquish what is actual, and under which society has lono, existed, for that which is hypothetical, problematical, experimental; and it can always threaten its assailants with the indefinite danger of the discontent which may come from a great and far-reaching change. Those who remember the history of the free-trade movement in England are well aware that all these expedients were used against the promoters of the movement, though the position which the defence occupied was singularly untenable. But it is certain that ill countries which have adopted protection the defence will be more stubborn, and the struggle more protracted than it was in England more than thirty years ago. And in illustration of this fact, it may be observed that it took all the forces at the disposal of the personal Government of the second French empire, and all the threats of a power which was then at the highest of its reputation for military prowess and domestic control, to impose upon the French manufacturers, even in view of great reciprocal advantages to the most important and natural among the domestic industries of France, the very moderate concessions of the commercial treaty with England. The Government of Napoleon actually went to the length of informing the iron manufacturers of France that they would be held personally responsible for the effects of any discontent that might arise by any act of theirs towards their workmen which might be taken in view of the contemplated changes; and the menace was effectual, because it was not doubted that it would be followed by action, and that this action would be irresistible.

As the origin of protective enactments was a desire that a nation should profit by the losses of another nation, and as the extension of this feeling is the primary motive of war, so a permanent or persistent division of international interests, with the object of sustaining or promoting municipal or rather particular interests, is a fruitful source of international difficulties. It is, in fact, what Thucydides, calls, speaking of the caution with which commercial intercourse was carried on in the days which preceded the great Peloponnesian war, an unproclaimed war. Many forms of patriotism, falsely so called, have inflicted grievous and ineffaceable injuries on mankind. The war for empire between the old and new notions of government, which was at the root of the Peloponnesian war, was the ruin of Greek civilization. But each of the combatants appealed to the patriotism of race, and the defence of repugnant institutions. The Thirty Years' War threw back Europe for two centuries,. and left behind it memories, jealousies, policies, the effects. of which are even now dominant in the attitude of the great European powers, and in the forms of European government. Still the Thirty Years' War was a struggle between anarchy and despotism, interminable disunion and forcible unity, and could appeal to some noble passions in the midst of a mass of ignoble aims, to some generous purposes in the confusion of a host of sordid and mean impulses. But wars for the monopoly of trade and production have done nothing but mischief, have not been varied by any worthy purpose, have been, as Adam Smith described them with honest energy and undeniable truth, inean and malignant, Not much better is the temper which carries on a furtive war against the general industry and the general good of mankind under the spurious name of a patriotic protection. But it must be admitted that no tendency of civilized societies is so inveterate, becaust none is defended with more ingenious and more unconscious sophistry, and none appears to be more necessary for the maintenance of existing interests.

Nations accommodate themselves, but with losses which may be easily described, though they cannot perhaps be numerically calculated, to protective restraints on trade. But it is a penalty on having been in the right that any departure from the right into the wrong is more mischievous than it is to remain in the wrong. The people of England are, as far as manufactures and trade are concerned, fairly committed to free trade. The world adzu its that England has prospered under free trade; indeed, it is difficult to deny the fact, and equally difficult to assert that the prosperity which the country has reached has been achieved in spite of free trade. It might be shown that the very circumstances which, thirty years ago or more, were adduced as conditions under which free trade would be ruinous to England have now been alleged in order to explain why it has been exceptionally beneficial. The growth of population has given a practical refutation to the alarms of Malthus, though it has not rebutted and could not rebut the abstract principles on which that theory was founded. The repeal of the corn laws has modified the Ricardian theory of rent, and has reduced it to the explanation of the cause which measures the difference between the rent paid for the same superficial extent in two pieces of ground. The same fact has been a cure for the currency crazes which the old sliding scale used to foster, for the notion that we might be impoverished by a drain of gold, and for the dread that the country would be ruined if the balance value in the imports exceeded that of the exports. A thousand economical fallacies still dominant in the minds of those who are in the darkness of protection have been dissipated in the light of free trade. The English people were, as far as the fundamental principles of social economy were concerned, in the cave of Plato, mistaking shadows for realities, and constrained to get their impression of the shadow from the false mirror of an artificial system. But free trade has put English industry into the daylight, and with the daylight the country has gradually become familiar. More or less violent reconstructions of society, the socialism with which much of civilized Europe is pestered, the paternal theory of government in its most grotesque form under which the American republic attempts to control and distribute the occupation of its free citizens, are to Englishmen as extinct as the animal worship of Egypt, the nature worship of Greece, and the other strange beliefs which have been popular in the infancy of the world and of its knowledge. That English trade and manufactures are open to dangers which may check or diminish theirprosperity must be admitted, but those dangers are of a totally different kind from those which merlace'die progress of such countries as imagine that protection is a safeguard.





The great advantage which free trade has bestowed on English manufacture consists in the fact that it has enabled the producer to interpret accurately the cost of production, and thlerefore to discover the prospect which his industry has of a remunerative market. It is superfluous to protect all industry which is strong enough to assert itself in the rivalry of competition. It is similarly superfluous to protect an industry the products of which, by reason of their bulk and cheapness, are shielded from competition by the costs of carrying the same products from foreign parts, or even from remote districts within the same political system. It may be inferred, therefore, that protection is not demanded except in cases where the industry would be exposed to the dangerous or successful rivalry of the foreign manufacturer, and therefore is carried on under circumstances which, by increasing the cost of production, render the employment of labour and capital on the industry in question a less advantageous outlay than they could be in other objects. If it comes to pass that under favourable circumstances the protected industry can cope with unprotected rivals in a common market, it is clear that the necessity for protection has passed away, and that the existence of the restraint is needless and vexatious. Thus, for example, if it be true that American cotton cloth can successfully compete against Manchester goods in China, or Japan, or Central Africa, it can, a fortiori, compete successfully against Manchester goods in the United States themselves. But it also follows that, if this position be not attained, the existence of the restraint is a constant impediment to its being attained, because the industry, as estimated by the cost at which its product is attained, invariably accommodates itself to the circumstances which naturally or artificially control its production, especially in reference to the amount of capital and labour devoted to it, and the rate of profit which the manufacturer enjoys. There is no reason to believe that in the protected manufactures of Germany, France, and the United States the profit of the manufacturers is greater than is derived from unprotected industries,—that, for example, the French ironmaster or cotton-spinner gains a greater advantage from his calling than the wine-grower does. On the contrary, the loudest complaints of declining trade, and the baneful influence of foreign rivalry, are heard from the industries which have successfully demanded the assistance of protective duties. It is always the case, and it always will be the case, that the opulence and prosperity of a country will depend on the success with which its natural industries are prosecuted, and on the prudence which it shows in hitting the proper time in which other industries may be attempted with a reasonable prospect of remunerative profit. For just as weakly plants and animals are the first to succumb to those climatal or atmospheric conditions which are unfavourable to health and vigour, as in the struggle for existence feeble stocks disappear and wore energetic forms occupy their place, so industries which need artificial support are the first to feel commercial adversity, and the last to recover from it. It is stated, and the statement is not seriously controverted, however much the true interpretation of the facts is disguised or resisted, that during the period of commercial depression which began after 1874 the countries in which the greatest efforts have been made to sustain artificial industries have suffered more than England, which has conceded no such assistance whatever.

But it is not only in the fact that the producer is able in an atmosphere of free action to interpret the prospects of his own market best, and to solve most readily the problem as to what is the relation between cost of production and possible profit, that the value of free-trade principles is discerned. The same principles which in England have been happily recognized as fundamental have indirectly done more to soften the differences between employer and labourer than anything else. No civilized country has had more reason to fear the consequences of hostility between capital and labour than England has. For nearly five centuries the legislature of this country strove to regulate the rate of wages in the interest of employers. To the numberless and severe statutes of labourers, which began with 1350 and were continued in full force up to 1825, when they were relaxed rather than repealed, we owe the English poor law in the first place and the trade union in the second. It was natural, when the English Government had been attempting for so long a time to keep down wages by law, and looked with so much hostility on any organization among the working classes which seemed likely to better their lot, that when the severity of these laws was relaxed the labourers should eagerly adopt the machinery from the use of which they had been so long debarred. But deplorable as has been the combat between labour and capital, and blameworthy as many acts have been on both sides, no one who has given any attention to the subject can fail of noticing that the aims of the trade unions are simple and intelligible, that the representatives of these combinations court debate, criticism, and sympathy from the public to which they appeal, and that the struggle is carried on with increasing mildness and forbearance, The English unions do not aim at reconstructing society, nor demand subventions from the state as a means by which they may resist the power of the capitalist, nor adopt those projects which give from time to time such trouble to Continental Governments. The fact is, the English parliament has withdrawn all artificial aids from the capitalist, and the workman is content to stand on the same level with his employer as far as the state is concerned. But where, as in other parts of the civilized world, the state, for some reason or the other, has determined on fostering the existence of an industry which cannot exist without state help, or does not think it can, the workman is sure to attempt, with what success he can, either to appropriate a part of the extraordinary profit which the Government, in the early stages of its action, accords to the capitalist, or to demand that an analogous benefit should be conferred on him by the operation of law. The protective system of Continental Europe is the source and the strength of European socialism, and is responsible for its fallacies and its excesses. Those Englishmen who lived through and watched the simultaneous energies of the Chartist movement and the free-trade agitation bad abundant opportunities for inferring what turned out to be the fact, that the success of the latter movement would be a deathblow to the former project. When at the outbreak of the civil war in the United States a rigidly protective tariff was imposed on the Union in lieu of a more moderate system, those who had busied themselves with the phenomena of production and the social relations of economical forces were able to predict that, apart from the more obvious evils which erisue from a false step in the political economy of a nation, the attitude of labour towards capital would be aggressive, distrustful, and menacing, and that the mischief, when once generated, would be growing and permanent. Government in England interferes very little with the action of individuals, but this is possible because Government in England abstains as much as possible from meddling with those relations which can be made to adjust themselves. In England the adage of Mr J. S. Mill, that "the best remedy for the evils of liberty is more liberty," may be a wise generalization, but when the liberty of labour is curtailed, it is not quite so clear that a Government can with safety to itself dispense with that control from which English social life is happily free.

The adoption of protectionist principles in civilized and industrial communities is undoubtedly an injury to such other communities as have adopted free-trade principles, because it curtails their market, and induces an uncertainty as to whether the produce of their labour will find a sale. This mischief is exaggerated when the prohibitory or protecting tax is a variable amount. Thus during the existence of the English corn laws the foreign agriculturist was unable to foresee whether the demand for his produce in England, under the pressure of scarcity, would be admissible for him at remunerative rates, and he was consequently deterred from anticipating this demand. If indeed the demand did arise, his gains might be enormous, provided he had it in his power to satisfy the demand. For example, at one time the sliding scale was fixed so high that foreign corn was admitted duty free only when the market prices in England marked 84s. a quarter. If such a price were reached, and the importer was in possession of a considerable stock, which he bad been able to store in bond at 35s., he could instantly take advantage of the situation, and greatly to his own advantage. It is true that such an occasional contingency did not compensate for the general insecurity of his industry, and the risk which he ran in waiting on a market into which he might never be able to enter. Hence the repeal of the English corn laws has given a very powerful stimulaut to agricultural industry over the whole world.

Fixed duties do not operate so disastrously on foreign trade, even when the fixed duty is levied on such products as vary in quantity, and therefore in price, with the seasons. For in the vast majority of products values conform generally to the cost of production, and even in those which, like food, are determined also by the relations of demand and supply the wider the area is from which they are derived, the less are they liable to variation in supply, the element of demand being nearly a uniform quantity. Still it must be remembered that all duties on imports check consumption, and, by implication, discourage production. The proof of this is seen in the fact that the reduction of any duty on an article in general demand is always followed by a rise in price, which continues till supply corresponds to the new demand. If therefore duties levied for the purposes of revenue have this effect, then, afortiori, duties designedly imposed for the sake of protection will have a similar effect. If the protective enactment has any force at all, it must diminish the market of the country against which it is levelled. It may not be wholly effective, but it must have some effect, Thus, when under the Berlin and Milan decrees the first Napoleon strove to expel all British manufactures, and all the produce of the British colonies, from such parts of Europe as he could control, it is unquestionable that these decrees were a hindrance to British commerce, though to a considerable extent English manufacturers were able to elude them.

Still the country which adopts ftee trade has a great advantage in trade over such countries as adopt protection even in its commercial intercourse with them. There is no country which wishes to curtail the export of its raw materials, in the production of which it has natural advantages, and of course it is equally willing to export its protected manufactures. Now it is plain that it would prefer to deal with a country which, unlike itself, imposes the least possible restraint on importation, and that the most advantageous market would be that in which no restraint at all was put. In order to use this market then, it will be content to offer its goods on the most favourable terms, and tinder the conditions of the strictest competition. It knows that a country which adopts free trade is best able to interpret its own demands, and its own power to satisfy the demand of other countries. Hence a free-trade country is a national entrepôt, in which foreign goods are procurable at the lowest rates. In addition, as has been stated before, the country which puts no artificial restraint on its power of general purchase has always a great advantage in all commercial transactions over a country restraint on itself.

Free trade then, as understood in England, means such a liberty of production and exchange as is unfettered by any of the restraints which have been imposed, in order that special industries may be artificially stimulated, by the machinery of a fiscal system. But there are other uses of the term which may be touched on, and in particular the application of it to labour and land. It was stated at the commencement of this article that Governments, in pursuance of their standing duty, that of protecting the weak against the strong, may and should put limits on free action as regards labour, and it is alleged that the expression free trade in land is a misnomer. We shall attempt, in concluding this article, to give a brief explanation of the historical and other circumstances which have brought about the present state of things in England, and to define the economical conditions under which the relations of labour to production, and land to agriculture, are capable of an economical estimate.

As the policy of ancient states did not attempt to control trade in the interest of their own citizens, so it did not hinder the individual in the prosecution of any industry. There is no evidence that the professions were practised by persons specially licensed for that purpose, and it is certain that the craftsmen of antiquity were not compelled to pass through a period of apprenticeship before they could follow their calling. In modern times, however, the practice of licensing the members of certain professions, and of exacting a period of servitude in all crafts and trades, under the name of apprenticeship, has been nearly universal. Up to comparatively recent times the same legal instrument was employed as a preliminary to the study of law and physic as was demanded from the trader and the artisan. The origin of the custom, which was assailed on principle by Adam Smith, is to be found in the history of the charters which were obtained by towns. These charters were purchaged from sovereigns or such lay and spiritual proprietors as possessed towns in fee. The privileges which such instruments conferred were considerable and valuable, were eagerly sought after and guarded with jealousy. Among the most important of these in England was the right of assuring after a short uninterrupted residence within a walled town, the franchise of a free man to the resident serf. It was therefore expedient, and in order to avoid arousing any suspicion that the franchises of the town were abused, that some significant limit should be put on the acquisition of these privileges by individuals. Hence, at a very early period, guilds were established in chartered towns; enrolment in some guild became a necessary prelude to sharing the franchises of the town; and apprenticeship was made the condition under which persons could ordinarily enter the guild and practise the craft or trade. There is reason to believe that the customs of these trading companies put it into tile power of those who administered the affairs of these companies to exercise a large and arbitrary control over all the members of the guild. The practice of apprenticeship began, in all likelihood, at an early date, but the earliest instruments which the writer has seen are of the 15th century. It is only, of course, by accident that any have been preserved, since they had only a temporary and personal interest. In course of time the legislature exacted the condition of apprenticeship from all artisans and traders, notably by the 6th of Elizabeth, for during along period it was the policy of the English parliament to put every possible hindrance on the migration of the agricultural labourer to the towns, and the most successful expedient by which this migration could be checked was that of imposing the servitude of apprenticeship on every one besides the agricultural labourer. A custom then, which commenced with tile interest which the trading company had in its chartered monopoly, and which closely resembled the machinery of the regulated companies for foreign trade, was strengthened and finally enforced by the parliament itself. In course of time the legislature abandoned its ancient policy, except in so far as it exacted from certain professions the equivalent of apprenticeship, on the ground that by so doing it protected the public against incompetence and fraud. The retention of apprenticeship in certain kinds of manual labour is due to the action of trade unions, voluntary associations which occupy a somewhat similar position to the guild companies of the Middle Ages, and which exercise an influence over a far larger number of persons than are formally contained in the association. The object of apprenticeship in handicrafts is to maintain a high rate of wages by stinting the number of persons who are engaged in the occupation. Hence, and for the same reason, artisans object to the importation of foreign labour, especially in such callings as are protected by apprenticeship. On no other ground, at least, would it be consistent to acquiesce in the importation of the products of labour and, by free trade in food, of what may be called the raw material of labour, and to object to the free circulation of labour itself.

It is a question of merely speculative interest to ask whether a Government does wisely in restraining the practice of certain callings to those who have been certified to have passed through a preparatory training for the calling. It is only a little over sixty years since it put the restraint on medical practice, and the limits which have similarly been imposed on the legal profession originated in the recognition of certain persons only in certain courts of law. But there is no theoretical defence for the privilege accorded to such certified persons, except it be that by these means the public is protected from the danger of employing incompetent practitioners. The police which the legislature exercises over unlicensed persons must not be supposed to be in the interests of those who are permitted to practice, but in that of those who employ professional services. There is, however, a tendency towards increasing the area over which this police is exercised, and latterly some public teachers, for example, who are employed in primary schools are made liable to the obligation of satisfying some public, authority as to their competence for the work which they undertake. On the other hand, there are writers who argue that all such restraints are mischievous, not only because they control the choice of occupation, and are, therefore, invasions of natural and innocent liberty, but because they do not and cannot supply any proof of practical ability on the part of those who are certified, and because they weaken the habit of caution and prudence which all persons should possess as far as possible ip selecting those in whom they may place their confidence. Why, it may be asked, they say, should a lawyer be certified to'carry on his calling on the ground that the trust reposed in him makes it expedient that the law should exercise a control over this calling, and a similar restraint be not extended over bankers, whose relations to their customers are even more delicate and confidential than those of lawyers?

Again, there are callings in which no restraint is put on the choice of the calling, but an energetic control is exercised over the practice of the calling, a control which sometimes extends so far as to prohibit some practices which are historically connected with the calling. Thus, since 1814, no new English bank is allowed to issue and circulate notes payable to bearer, such a note being virtually a cheque payable at sight, and drawn by the banker on his own assets. The motive for putting this disability on bankers was to prevent the undue extension of a paper currency. But even though it may be doubted whether such a result was effected, or even that there was danger of such a result, the restraint on free action can be defended on the ground that the acceptance of such a note puts a risk on the holder to which he should not be subject, and that the refusal to accept such notes: suggests a suspicion that the issuing parties are of doubtful solvency. Again, there are certain callings over which a police is exercised in the interests of the revenue, as on those persons who are engaged in the manufacture of excisable articles. There can be no doubt that such a supervision is a hindrance to trade, and some persons who advocate direct taxation have alleged, as one of the strongest arguments in favour of their theory, that the abandonment of all excise and customs regulations would make England a free port for the whole world, would greatly extend its commerce and its manufacturing energy, and widen its markets. And lastly, there are certain callings which are permitted, but watched and controlled in the interests of morality. Of these the most notable is the occupancy of houses where intoxicating liquors are sold, and of other places of public entertainment. Few persons doubt that an efficient and incessant, supervision should be exercised over these places, though they differ widely as to the extent and character of the control, and the agencies by which the control should be put into operation. The regulation of public houses is the oldest form of domestic police over occupations in England, for it can be traced back to the manorial inspection which was general after the Conquest, even if it did not exist in the Anglo-Saxon village. English law, therefore, exercises a control or restraint of trade over industries which are laudable, or innocent, or legal, because it is found, or is thought to be found, that they may be abused to serious public inconvenience or mischief. Some amusing illustrations of the extent to which the privilege of unlimited issue of bankers’ paper may be abused are afforded in the history of what was called "wild-cat banking" in the Western States of the American Union. It is remarkable that the United States, which have adopted, and to a great extent with evident sincerity, extreme views in favour of the policy of protection against foreign rivals, have also permitted from time to time, and with scarcely any check, extreme licence in the conduct of business within the limits of the Union itself.

With the exception of these and analogous instances,when the safety and morals of the public justify, to a larger or smaller extent, the supervision of the state over the free choice of industry,—the concession of that free trade in labour which puts the minimum of hindrance on the field of employment and the character of employment which the producer selects is quite as important to the wellbeing of state as the concession of a free agency to its capital and a free market for its products. For as all wealth is the produce of labour, and as the efficiency of labour is the first and last condition of national progress, as the efficiency of labour is primarily brought about by the division of employments, and as the division of employments knows no limit as long as the market of products is extended, so it is of the highest interest to the efficiency of labour that the field of its operations should be as open and free as possible. But here it is to the purpose to observe that the natural distribution of labour very often masks the effect of a misebievous economical system. There is no country in wbich this fact has been so systematically ignored as in the American Union. In the United States, economists who have steadily maintained, with the best arguments at their disposal, that the growth and progress of their country have been assisted by the adoption of a protective system, have omitted, in all their estimates of what constitutes the material progress of the Union, the fact that, in whatever other directions they have regulated industry and commerce on a protectionist basis, they have always, and to an extent that no other country has done, accepted and insisted on free trade in labour. They have not only welcomed all comers,—some little irritation at Irish labour, and a more serious objection to Chinese immigration excepted,—but they have imposed no tariff on the importation of labour, nor even contemplated such an extension of protection to American industry. It would not, however, be difficult to show that, on the grounds ordinarily taken by American statesmen and publicists, they would be consistent in denouncing the immigration of aliens. They have, however, with a happy inconsistency, not only not taken this step, but they have wisely and advantageously insisted that the Old World notion of indefeasible allegiance shall be relaxed, at least on behalf of those who have made the United States their home. Here they have been free traders without stint. And it has been fortunate for America that they have not extended such prohibitions to alien humanity as they have to the products of that labour which alien humanity has offered them for sale. For several years the United States received about 200,000 emigrants annually from the Old World. It is a moderate estimate that each of these persons represented an outlay of at least £150 in his bringing up, or in other words that, had he been born in the United States, he would have cost at least as much as this sum to bring him into that state of efficiency which he carries to his new home. The Old World has therefore been bestowing a voluntary tribute of £30,000,000 annually on the United States, a contribution which is quite sufficient to balance the mischievous effects of economical fallacies, though it is possible that these fallacies may be so disastrous as to neutralize the value of this branch of American imports, or even to check the importation altogether. Not, indeed, that the effects of unwise economical action are easily or rapidly discovered. The present advantage of restraint for the benefit of the producer is obvious; the consumer is left out of sight, and is commonly unconscious of the process which is narrowing his powers. At last, when the consequences do come, sophistry and selfinterest are both active in assigning the facts to other causes than those which are really dominant, and in resenting and resisting all change.

When it is said that the principles of free trade should be applied to land, it is meant that a natural object, the products of which are of supreme necessity to mankind, is not rendered accessible to purchasers, or not rendered so profitable to occupiers as the interest of the public requires. Land in populous countries is, relative to the community, very limited in amount, and as it is the locus standi of all industries, its distribution, as is alleged, should not be so restrained as to induce a restraint on the efficiency of industry. No economist worthy of the name has ever disputed the sacredness of private property. To do so would be to undermine the very foundations of his science. No economist, even though he may be betrayed into heresies as to the nature and extent of free exchange, has ever doubted that within certain geographical limits the fullest freedom of innocent production and trade should be accorded. No American protectionist has yet argued that it is expedient, in order to develop at the earliest period the possible manufactures of the Western States, that these States should be allowed to restrain by prohibitive duties the cotton and hardware of New England. All discussions, therefore about free trade in any commodity, and among others in land, must presuppose that property should be respected, and exchange should be free. If the so-called economist denies the name of property to that which must be secured to its owner, in order that industry may be exercised in the best possible way, be has abandoned the principles of his science. And if, on the other hand, it be insinuated that, while he is seeking to point out the manner in which industry may be most productive, he is assailing the ownership of that kind of property on which all industry is exercised, the criticism is invidious and unfair. It needs no proof that the success of industry and the material progress of society cannot be expected, except under the guarantee of private property in land, as well as in its products. And furthermore, there is no reason for objecting on economical grounds to the process by which the distribution of land in England is restrained, unless it can be shown that the existing system is a check to industry, or a hindrance to supply, or an impediment to the effective development of agricultural skill.

It cannot be denied that, if the claim to free trade in land is intended to imply that, under existing circumstances, a very small portion of that which would be distributed by sale is brought into the market, the fact corresponds with the statement. The custom of primogeniture directly tends towards the restraint of distribution, and the power of settlement acts more energetically in the same direction. Nor can any one doubt that there are circumstances under which the custom and the power operate disadvantageously. When the owner of land is virtually bankrupt, it would clearly be far better if the estate which he cannot improve were in the hands of those who can improve it, for the misuse of a necessary industrial instrument has worse effects on the economy of society than the ill use of the products of industry. The one is the same as inducing artificial barrenness on a portion of that which is limited in amount and is of supreme utility, and the other is the waste of that which is practically unlimited, and which can be supplemented from other sources. Again, the ill use of land is a total loss ; but the prodigality of one who squanders the produce of labour is only a partial waste, for much of the wealth which seems to be expended on the pleasures and follies of individuals is really transferred to those who are capable of making a better use of it than its original possessor does. Hence, when land is in the hands of bankrupt proprietors to such an extent as seriously to hinder its adequate occupancy, it has not been thought a violation of the rights of property to dispossess the bankrupt owner by a compulsory sale, and to put a new and more competent proprietor in his place. Such a step was taken, and with very satisfactory results, in Ireland, and there is reason to believe that similar powers might on many occasions be exercised with advantage in England. In a minor degree charges on land are a hindrance to its adequate improvement, for the means of the proprietor of a burdened estate are diminished, while if the land were in other hands its resources would be developed. Analogous to these inconveniences are tne costs of conveyance, and the demand of superfluous guarantees of title.

But the phrase "free trade in land" has been obscured by its connexion with another aspect of the relations between the owner of land and its adequate cultivation, the interpretation, namely, which divers disputants give to the freedom which accompanies contracts for the occupancy of land. In England, as is well known, the owner and the occupant of land are, unlike the case in most other countries, almost universally different persons. Such a difference began very early in English society, that is, towards the latter end of the 14th century, and has no doubt become more marked by the peculiar customs which affect the ownership of land in England. Now it is alleged that under existing circumstances no true freedom of contract exists on the part of the occupant,—that the power which custom has given to the owner, and which law has strengthened, is so great that the occupier is virtually helpless; that the legitimate progress of agriculture is checked; and that a supply which skill could make almost indefinite, and which might be made to satisfy the wants of the population, is wholly inadequate for the purpose, the deficiency being wastefully supplemented from foreign importations. For it is asserted that one of the contracting parties has it in his power, by the extent of his resources, to reduce the other party to the most disadvantageous terms of a precarious occupancy, and that, though the occupant may be blamed for submitting to such terms, or at least be held responsible for the bargain which he has voluntarily made, the public is interested to a very serious extent in a better and freer relation between owner and occupier. And it is further urged that freedom of contract is not to be limited to the moment in which the bargain is struck, but must in continuous relations be so continuously present that neither of the contracting parties should be able to inflict a permanent loss on the other,—or, in other words, that contracts cannot be called free unless they are constantly liable to an equitable revision. The controversy has been carried on in England and Scotland in the form of an attack in the latter kingdom on the local law of hypothec, in the former, and to a less extent in the latter, under the claim of compensation for unexhausted improvements. As yet no legislation of a practical character has been the result of a controversy in which some intelligent tenant farmers on the one hand, and principally on the other the duke of Argyll, have been the disputants.

It is probable that on the whole successful agriculture, that is, the production of the largest quantity in value f rom the soil at the least cost, has made more progress in the United Kingdom than in any other country. This has been especially the case with stock breeding, the pre-eminence of the United Kingdom being marked and admitted in this department of agriculture. But this fact itself, as the occupier is less within the power of the owner as a stock-breeder than he is as a mere cultivator, seems to suggest that the relations of the two parties need a better understanding than they have yet received, or that their contracts will at some time or the other require the interpretation of law. The difficulties, however, of any question as to the limits and control of freedom in the contracts entered into between the subjects or citizens of the same Government are great and nice. There is but little difficulty in showing that the best interests of the whole human ace are consulted when the fullest freedom is given to the exchange of products, however much the process is hindered by passion or self-interest, and however great may bi the practical hindrances in the way of a principle which few men have the hardihood to deny in the abstract. But there are serious difficulties in interpreting the relations in which capitalist and labourer, owner and occupier, stand to each other, and in deciding how the just rights of property may be harmonized with the just claims, of industry, and the paramount consideration of the public good. (J. E. T. R.)



The above article was written by James Edwin Thorold Rogers, M.A.; Tooke Professor of Statistics and Economic Science at King's College, London; Drummond Professor of Political Economy in the University of Doxford, 1862-67 and 1888-90; author of History of Agriculture and Prices, The Economic Interpretation of History, and other works on political economy.




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