CHAPTER I: PROTECTIONIST POSTULATES

A nation ought—

• I.
  • i. To be self-sufficient.
  • ii. To keep out foreign goods by a rise in duties.
  • iii.
    • (α) Always to buy at home rather than abroad, even where the commodities are inferior and more expensive.
    • (β) To prevent money from going out of the country, so as to give it to workmen at home rather than to the foreigner, and thus avoid enriching its neighbours. (Colbert and Méline.)
• II. To develop the wealth of the country by encouraging production through Protection given to home industries against the more advanced industries of other countries. (List.) [301]
• III. To abolish the conflict of interests at home, and by assuring work to the workmen to defend the interests of the majority when the Government is based on a wide electoral franchise.
• IV. Foreign trade is not carried on between individuals, but between nations. (List.)

CHAPTER II: ECONOMIC REALITIES

• I.
  • 1. Every protective tariff means increased taxation. A country’s wealth cannot be increased by increased taxation. (W. Smart.)

  • 2. A protective tariff ought to bring in as little as possible to the Treasury, since its object is to prevent the importation of goods.

    It ought to bring in as much as possible to those who produce the protected goods.

  • 3. The effect of a protective duty on any commodity is to raise the price, not only of the amount imported, but of the whole quantity sold in the country; it is a private tax placed upon consumers for the benefit of producers.
  • 4. A protective duty increases the price at which the protected article can be purchased, and diminishes the purchasing power of the buyer to the same extent.
  • 5. Customs duties are not Revenue duties unless they are only imposed on goods which are not produced in the country (as is the case in England).
• II.

  • 1. Protection may encourage the establishment of new firms, but it cannot cause an increase in consumption; therefore, since the object of every industry is to sell at a profit, Protection cannot cause industrial development.

    It may cause the factitious development of particular industries at the expense of capital as a whole.

  • 2. A country’s industrial development is not due to Protection, but to an increase in wealth and a higher standard of comfort. Protection delays or checks it.
  • 3. Every hindrance to exchange involves a diminution of profits.
  • 4. When a nation can freely choose the market in which it will buy its goods, and has only to add the cost of transport to the price it pays, it can buy everything that it needs at the lowest possible cost. England has thus acquired a monopoly of cheapness.
  • 5. In a country which can get everything at the lowest possible price and at the lowest cost of transport, the share of raw material and plant in cost of production is reduced to a minimum, and a proportionately larger share remains over for wages and profits. Free Trade means high wages.
• III.
  • 1. Protection creates two wages—real and nominal; the difference between them is absorbed by Protection.

  • 2. “Protection to national labour” means that every wages earner, in buying the things he needs, has to pay according to the duty 20, 30, 60, sometimes even 100 per cent. more of the produce of his labour than the normal price fixed by the free play of supply and demand.

    While he is earning the money that goes to pay for the increase in cost of living effected by Protection, he is not working for himself nor for his family, but in order to pay a private tax which goes to increase or assure the rent of the capitalist landowners and a few great manufacturers.

  • 3.
    • (α) In France those industries in which labour contributes most to the value of the finished product are dependent on the protective duties acquired by the industries that supply them with raw materials, industries representing a far smaller number of workmen, concentrated in a few big firms.
    • (β) With the exception of the linen and cotton spinners and a few metal factories, all the industries in France are interested in having Free Trade, in a low cost of living for themselves and their employés, and in getting a supply of the materials which they transform in a free market.
    • (γ) Protection in France, by subjecting some industries to the importunity of the protected industries, has made them dependent; and it has thus checked the development of healthy for the sake of sickly industries.
    • (δ) Protection in France can only be of use to 5 per cent. of the population—one person in twenty; in the United States to 2 per cent.—one person in fifty. (Atkinson.)
    • (ε) Protection is always oligarchic: established at the expense of all for the benefit of a privileged minority.
• IV.
  • 1. The burden of agricultural Protection is the more felt that in France the food of the people shows a deficiency of 30 per cent. in cereal and 50 per cent. in animal matter on the standard ration of the soldier in time of peace.
  • 2. Agricultural Protection can only be of advantage to the great landowners.
  • 3. The cost of food is higher in France than in England or the United States.
  • 4. The world’s production of corn and meat falls much below Atwater’s standard of consumption.
  • 5. The increase of population in Europe during the last seventy years has been so great that without imports of corn and meat from other continents there would be a dearth.
  • 6. The British Colonies and possessions cannot supply the United Kingdom’s demand for food.
  • 7. The great majority of workers who stand in most need of a generous diet are insufficiently fed.
  • 8. The relative diminution in the consumption of meat in most great French towns proves the evil results of the Customs duties, which raise its price 21/2d. per lb.
• V.
  • 1.
    • (α) In the countries where the civilisation is fluid, Protection will fix things as they are.
    • (β) Every attempt to protect existing advantages against changes in production or competition at home, from machinery, or from abroad, is bound to end in atrophy or ruin.
  • 2. Even the apparent prosperity of a protected industry is gained at the expense of the rest of the nation and maintained by a loss of capital.
  • 3. Traders of one nation buy from producers of another, not to give but to gain an advantage.
  • 4. One nation buys from another for its own profit.

  • 5. Profit is the object of all industry and trade.

    An industry sells abroad in order to get more than it gives, otherwise it loses.

    Therefore imports should exceed exports.

  • 6. In all rich countries with the exception of the United States imports exceed exports in spite of all the efforts of Protectionists, Cartels, and export bounties.
• VI.
  • 1. Protection leads first to over-production, and then to stoppage. Thus organises crises.
  • 2. A protective tariff cannot keep out necessaries but by raising the price of all similar goods on the market, and of all the goods into which they enter, it constitutes a surcharge on all production, and therefore on all exportation.
  • 3. Protection cannot increase normal exportation: a rise in the export of protected goods means the payment of debts: to clear off the stock it is sold abroad at a loss. It is a case of bankruptcy.
  • 4. Export bounties reduce the industry dependent on them to bankruptcy in the sense in which article 585, paragraph 3, of the Commercial Code says, “A bankrupt has made purchases which he has to sell at below cost price.
  • 5.
    • (α) “National Economy” subordinates German industries to the foreigner and makes him presents.
    • (β) “German National Economy” not only favours foreign labour by Cartels and export bounties, which give him certain commodities at a lower price than they are sold to the home consumer, but it provokes competition which invades the home market.
• VII.
  • 1. In a free state of industry the producer is more dependent on the consumer than the consumer on the producer.
  • 2. In an industry which has been made a monopoly by Protection, trusts, and Cartels the consumer is the bondslave of the producer.

  • 3. Market price is the barometer of economics. Prices indicate the state of the market, abundance or dearth.

    Protection attempts to stereotype prices, Cartels falsify them: their prices are always either above or below the true price.

  • 4.
    • (α) The market for any commodity depends on three factors—intensity of demand, absence of equivalent substitutes, and abundance of exchangeable articles.
    • (β) A large supply of commodities where there is a corresponding demand proves not superabundance, but the absence of substitutes owing either to cost of production or such natural obstacles as distance, or artificial ones such as protective and revenue preventives of exchange.
  • 5.
    • (α) All the efforts of Protectionists result in the diminution of demand, the multiplication of equivalents, and the reduction of articles of exchange.
    • (β) Protection resorts to an artificial stimulus to raise the level of production, while they check its expansion, and say there is over-production.
    • (γ) There is no exchange of commodities without circulation.
    • (δ) Free circulation is the only effective method of preventing over-supply.
    • (ε) Not the desire, but the power to purchase is lacking to all the people who long to be rich.
  • 6.
    • (α) Free Trade is an aspect of the freedom of labour.
    • (β) It is the duty of the State to maintain freedom. (Molinari.)
    • (γ) Taxes are only due to the State. (Molinari.)
    • (δ) Free trade is the territorial division of labour. (Torrens.)
    • (ε) The motive force in economics is free competition. (Quesnay.)
    • (ζ) The traders of other nations are the people for us to trade with. (Quesnay.)
    • (η) A nation without Customs absorbs the world without respect of frontiers. (Cairnes.)
    • (θ) Free trade spells expansion and increase of population.
    • (ι) England’s extraordinary economic progress is due to the fact that since 1846, when steam power began to be of predominant importance, her fiscal system has been in harmony with modern machinery of production and transportation.
• VIII.
  • 1. List was wrong. Foreign trade is not carried on between nations, but between individuals.
  • 2. Comparison of imports and exports does not show a nation’s relations to others: it often leads to the fallacy of the Balance of Trade.
  • 3.
    • (α) Whenever goods are sent from one country to another a debt is incurred.
    • (β) A country’s imports must be balanced against its exports to the rest of the world.
    • (γ) Freightage and exchange variations must be taken into account.
    • (δ) Payment for exports is not made directly by imports to the exporting country, but through other countries with whom commercial relations exist.
    • (ε) Debts are bought and sold, cancelled by reciprocal exchange or liquidated through other groups of nations. The only balance that need be regarded is that between a country’s total exports and total imports—the equation of indebtedness.
  • 4. The Balance of Trade must be replaced by an analysis of the Economic Balance, which comprises the reciprocal exchange of (1) men, (2) merchandise, (3) gold, (4) shares and bonds, credit instruments, &c.
  • 5. The Economic Balance of a given nation at a given time comprises all the payments and promises to pay made and received by it.
  • 6. In considering the Economic Balance of any nation, its assets consist of the excess of its imports of goods and precious metals, the interest on invested capital at home and abroad, and the whole of its credit.
  • 7. It is much to be desired that every Government should follow the example of Austria-Hungary in establishing an Economic Balance.
• IX.
  • 1. In the good old days kings would give their favourites monopolies at the public expense: nowadays Parliament gives a producer, by means of protection or bounties, the right of collecting taxes for his private profit.
  • 2. Protection in any country puts political in the place of economic competition: industries are protected not because they are important, but because their representatives are influential. Its effect is to sap political life: the general good is subordinated to coalitions of vested interests.
  • 3. Commercial treaties are useful because, by binding nations together, they preserve them, for a time, from protection, and give stability to their industry and commerce; and while they last they safeguard the Government against Protectionist tyranny.