The commerce of nations;
Bastable, C. F. (Charles Francis), 1855-1945
fc i \.'' aMgB»ft»»*<tW>Vt!i>O^Wi'JnWTW»'J^MW wWiW*V <i'tf a p^^WfKiB^^aiW)«v^S%v- i^. f? President White Library, .CORNELL University. Cornell University Library arV13438 The commerce ot nations; . 3 1924 031 243 649 olin.anx The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924031243649 SOCIAL QUESTIONS OF TO-DAY Edited by H. de B. Gibbins, M.A. THE COMMERCE OF NATIONS SOCIAL QUESTIONS OF TO-DAY. Edited by H. de B. GJBBINS, M.A. Crown 8vo, 2s. 6d. Messrs. Methuen announce the publication of a series of volumes upon those topics of social, economic and industrial^ in- terest that are at the present moment foremost in the public inind. Each volume of the series will be written by an author who is an acknowledged authority upon the subject with which he deals, and who will treat his question in a thoroughly sympathetic but im- partial manner, with special reference to the historic aspect of the subject, and from the point of view of the Historical School of economics and social science. The following form the earlier Volumes of the Series : — 1. TRADE TmiONISM— NEW AMD OLD. G. Howell, M.P., Author of Tie Conjlicts of Capital and Labour. [Ready. 2. FBOBLESS OF POVERTY : An Inquiry into the Industrial Condition of the Poor. By J. A. HoBSON, M.A. \,Ready. 3. THE 00-OPEBATIVE MOVEMENT TO-DAY. G. J. Holyoake, Author of The History of Co-operation. [Ready. i. MXTTTTAI THRIFT. Rev. J. Feome Wilkinson, M.A., Author of T/ie Friendly Society Movement. {Ready. 5. THE COMMERCE OF NATIONS. C. F. Bastable, LL.D., Professor of Political Economy in the University of Dublin. [Ready. 6. ENGLISH SOCIALISM OF TO-DAY. Hubert Bland, one of the Authors of Fabian Essays. 7. POVERTY AND PAUPERISM. Rev. L. R. Phelps, M.A., Fellow of Oriel College, Oxford. 8. ENGLISH LAND AND ENGLISH MEN. Rev. C. W. Stubbs, M.A., Author of The Labourers and the Land. 9. MODERN LABOUR AND OLD ECONOMIGS. H. de B. Gibbins, M.A. (Editor), Author of The Industrial History of England. 10. CHRISTIAN SOCIALISM IN ENGLAND. Rev. J. Carter, M.A., of Pusey House, Oxford. 11. LAND NATIONALIZATION. Harold Cox, B.A. 18. THE EDUCATION OF THE PEOPLE, J. R. Diggle, M.A., Chairman of the London School Board. 13. CONHNENTAL LABOUR. W. Maxwell. 14. THE ALIEN INVASION. W. H. Wilkins, B.A., Secretary of the Association for Preventing the Immigration of Destitute Aliens. [In tlie Press. 15. WOMEN'S WORK. Lady Dilke and others. THE COMMERCE OF NATIONS iM 1 LLl C. F. BASTABLE, LL.D. Professor of Political Economy in the University of Dublin. Examiner in Political Economy in the University of London, b'c. dy'c. i8, BURY STREET, LONDON, W.C. 1892 [/^// Rights reserved] Richard Clay & Sons, Limited, London & Bungay. PREFACE. This book has been written in the belief that existing commercial policy and the doctrines respecting it are best explained by reference to their history. A method that has been so fruitful in all other directions of social inquiry can hardly be ineffective in this one. Thus — to give instances — the McKinley Act (pp. 77-79) is not properly understood until it is regarded as the latest step in the legislation of a century. The Sugar Bounties (pp. 173-4) take us back to the continental system and the old colonial policy; and a Customs Union of the British Empire presents difficulties only known to those who have studied the effect of the differential duties (p. 206). So it is also with plans for reciprocity. Their strongest refutation lies in the fact that they have been tried and failed (p. 196). In like manner the most effective justification of the English Free Trade system is supplied by the history of its introduc- tion (Chapter VI). What is true of legislation applies equally to theory. Modern Protectionism should be studied in its development in order to see its connexion with ideas and sentiments unsuited for industrial civilization. Only in this way is it possible to understand how so many able and enlightened vi PREFACE. men have adopted a system that is notwithstanding injurious both to social and economical progress. One result of this mode of treatment has been to diminish the amount of space devoted to certain topics that are prominent in most works on the subject. Little is said about the Corn Law struggle, nor is the Free Trade movement regarded as if it began and ended with Cobden. A few years can after all be but one stage — a highly important one it is true — in a movement that must in its entirety occupy centuries. The absence of footnotes has prevented reference being made to the various works used ; but a general acknowledg- ment must here be given to those who have supplied so much of the material necessary for a study of the kind. C. F. BASTABLE. Trinity College, Dublin, November, 189 1. CONTENTS. CHAP. PAGE I. INTRODUCTORY I II. LEADING FEATURES OF INTERNATIONAL COM- MERCE 7  MERCANTILE SYSTEM — TRANSITION TO PROTECTION ... ... 42 VI. THE ENGLISH CUSTOMS SYSTEM, 1815 — 1860... 51  — 1865 82 IX. EUROPEAN TARIFFS (1865 — 1890) — THE PRO- TECTIONIST REACTION 92 X. COLONIAL AND OTHER TARIFFS ... ... I06 XI. THE MODERN PROTECTIONIST THEORY ... 1 17 XH. ECONOMIC ARGUMENTS FOR PROTECTION ... 1 33 XIII. NON-ECONOMIC ARGUMENTS — POLITICAL AND SOCIAL PROTECTION 157 viii CONTENTS. CHAP. PAGE XIV. THE OTHER EXPEDIENTS OF PROTECTION ... 170 XV. THE PRACTICAL OPERATION OF PROTECTION I77 XVI. RECIPROCITY AND RETALIATION ... ... 1 87 XVII. COMMERCIAL FEDERATION — CONCLUSION ... 202  of the most striking features of modern times is the growth of international relations of ever-increasing complexity and influence. Facilities for communication have brought about closer and more constant intercourse between the different countries of the world, leading to many unexpected results. This more intimate connexion is reflected in all the difierent sides of social activity. International law, that two hundred years ago was almost wholly confined to the discussion of war and its effects, now contains a goodly series of chapters treating in detail of the conduct of nations during peace. It draws the bulk of its materials from the large and rapidly-growing body of treaties that regulate such matters, and form so many fresh links between the states that sign them. Literature, Science, and Art have all been similarly affected; their followers are engaged in keenly watching the progress of their favourite pursuits in other countries, and are becoming daily more and more sensitive to any new tendency or movement in the remotest nation. 2 COMMERCE OF NATIONS. But, as might be expected, it is in the sphere of material relations that the increase in international solidarity has been most decisively marked, and can be best followed and appreciated. The barriers that in former ages impeded the free passage of men and of goods from country to country have been — it cannot unfortunately be said removed, but very much diminished; and more particularly during the last fifty years the extraordinary development and improve- ment of transport agencies both by land and sea have gone far towards obliterating the retarding effects of legislative restraints or national prejudices. So little attention is ordinarily paid to the great permanent forces that govern the changes of societies, in comparison with the interest excited by the uncertain action of minor disturbing causes, that it is eminently desirable to emphasize as strongly as possible this continuous increase of international dealings. In spite of temporary checks and drawbacks, the broad fact stands out beyond dispute, that the transfer of human beings from country to country which is known as " migration," as also the similar movement of goods described as "com- merce,'' is not merely expanding, but, if periods sufficiently lengthy for fair comparison are taken, expanding at an accelerated rate. We are happily enabled to form a conception of the extent of this latter movement with a degree of accuracy that is quite impossible in respect to other sides of social life. The growth of peaceful relations between states ; the connexion and reciprocal influences of scientific and literary workers belonging to various nationalities, cannot, it is evident, be included within and comprised by any definite expression that would give a measure of their growth from time to time. The case of commerce is in this respect INTRODUCTORY. 3 different. The elaborate and laboriously-worked-out statis- tics of official departments supply abundant data for a full and careful estimate not simply of the fact of extended trade, but also of its amount. To give a few illustrations which bear out this assertion, we may first take the case of England. A glance at the Board of Trade returns for 1890 shows that the sum in values of imports and exports (re-ex- ports included) for that year was a little under ;^7So,ooo,ooo. These figures may at first surprise by their great amount, but they can be easily understood and compared with similar returns for previous years, and with the estimates of the amount of domestic trade, so as to give an approximately correct idea of the quantity and proportion of national wealth that is concerned and employed in this branch of trade. The foreign commerce of other countries is not on so extensive a scale. Owing partly to the natural advan- tages of situation, and to facilities for obtaining abundant supplies of raw materials, but also partly to the absence of legislative restrictions, the development of British commerce is by far the greatest that has yet been known. Still under far less favourable conditions, both natural and artificial, France has had for the year 1888 general foreign commerce to the amount of almost ^£'380,000,000, while the American Union, whose policy is avowedly restrictive, and which possesses within its own territory most of the staple articles of industry, and is so far relieved from any pressing need for foreign commerce, shows for the year 1888-9 ^ sum of imports and exports of over ;!£'3oo,ooo,ooo. The figures just stated are not less impressive and much more readily comprehended than the most complicated tables giving the quantities and values of each of the innumerable articles that enter into the course of foreign 4 COMMERCE OF NATIONS. trade and swell its total. They prove conclusively that this part of economic activity is one of the most potent of the factors which taken together make up the general industrial movement, and one moreover that cannot be put aside or neglected by any one who desires to form an intelligent idea of the world's advance. It would be no doubt an error to follow the old mercantile belief, and regard the amount of foreign trade as the sole and sufficient measure of national progress. Even for England domestic trade is on the whole much more important ; it is far larger in extent, and it enters more closely into every part of national life — a state- ment that is still more unreservedly true of countries like the United States. The decline of foreign commerce may conceivably be accompanied by a more than counterbalancing expansion of internal trade ; but this case so rarely occurs that it hardly requires notice as a practical limitation of the proposition that the enlargement of international exchanges is an indication, and in itself a part of economic improvement, and that in the long run there is a connexion between the smaller movement and the larger one of which it fonns a part. To explain the working of this part of the economic system, and to form a judgment as to the policy applicable to it, is the object before us. For the end in view, it is necessary to consider the principles or rather conditions on which international in common with all commerce is based, and more particularly the modifications that its special characteristics make requisite in the use of the laws of exchange for the purpose of interpretation. By adopting this course, a great many of the erroneous conceptions that interfere with the acquisition of a proper knowledge of the matter will be indirectly removed, and the groundwork of many fallacious arguments will be destroyed without the need INTRODUCTORY. 5 of much formal refutation. The commercial policy actually pursued by nations will then claim attention, both in its historical development and its present position in the leading countries of the world. This review of former and existing state policy in respect to foreign trade will lead directly to a comparison of the methods pursued, and an estimate of their comparative efficacy in promoting national welfare ; and in this connexion the various erroneous or incomplete theories that have influenced state action will be examined and criticized. Before commencing the inquiry thus outlined, a prelimi- nary difficulty may be removed. Without attempting to enter on the subtleties of the subject, for which there is no place, it is desirable to state expressly what is meant by international commerce. Our answer to that question is as follows : — All commerce comes under the head of inter- national which is carried on between persons resident in different political entities or units, even though — as in the case of England and India — they may stand in the relation of ruler and subject. This use of the term is at once simple and convenient; it accords closely enough with popular phraseology as well as with the more technical application made by official statisticians, who always separate such trade from domestic transactions, for which reason its special investigation is peculiarly suitable. Another reason in its favour is found in the fact that it is to this division of commerce that state interference on economic grounds has been almost exclusively directed. It follows that for the practical object of considering the effects of different lines of policy, there is a great advantage in confining our attention to a well-recognized area within which the agencies under examination have been chiefly employed. 6 COMMERCE OF NATIONS. The commerce of nations when regarded in the way just suggested, is evidently liable to shrink or expand in proportion to the junction or division of political units. That is, in other words, its amount will in great measure depend on the number and distribution of the nations in the world. Thus, to give instances, the creation of Italian unity changed so much foreign into domestic trade ; and if the formation of the German Empire had not a like effect, it was due to the fact that commercial unity had there been attained at an earlier date through the ZoUverein, or Customs-union. The separation of Holland and Belgium is an opposite instance, since by it there was an increase of foreign at the expense of domestic commerce. These particular cases, however, have hardly any effect on the general movement. Whatever transfers may take place between the fields of home and foreign trade, the general facts and operating tendencies remain substantially unaltered ; and for purposes of comparison a sufficiently correct allow- ance can be made with regard to the few changes that occur within the periods to be compared. CHAPTER II. LEADING FEATURES OF INTERNATIONAL COMMERCE, At first sight it would appear that domestic or internal trade was by far the earliest, and that foreign commerce came in as a later addition, the result of more advanced economic development ; and if the statement is limited to commerce as it exists at present, and to the actual division of home and foreign trade, it is certainly correct. But in another and wider sense of the term it is possible to maintain the seeming paradox that the first exchanges were international (or rather intertribal). Recent investigations of the early history of law and institutions, such as those of Sir H. Maine and De Coulanges, tend to establish that the unit of primitive communities was the family, rather than the individual who occupies that position in modern times. The elaborate formalities of ancient law were suited to such a conception, and resemble the modes of commercial intercourse that are now retained only between states. The primitive kinds of contract are particularly interesting in this respect, since one of the most important of contracts — sale — is closely bound up with conveyance, the legal form of the fact of exchange whose economical bearings we have been considering. Without accepting all the details of any theory of the 8 COMMERCE OF NATIONS. ancient contract of sale or barter, it may be confidently held that it was hedged round with complex formalities, most of them indicating that the process was one that affected the community and required its sanction as a condition of validity. This can only be explained by reference to the comparatively small number of exchanges, which were not necessary within any group, "as there property was held in common," and only took place between "house communities" or "tribes." Thus, if the conception of international trade may be so widened as to include all dealings between groups or bodies, or between members of different groups, we may say with truth that it is the oldest and most primitive kind of trade. The interest of this result is not purely historical ; if it were so we might here safely neglect it. It has, however, a practical value, as it shows the long-continued working of conditions that are still potent in determining the course of foreign trade, and it to some extent throws light on the real source of much legislative regulation whose origin is now completely forgotten, but which has been produced by the old sentiment of tribal jealousy. The barter that takes place between savage groups has often been referred to as giving a simple type of exchange ; it may here be employed to illustrate the special features of international trade. When division of labour has been developed, and when trade and industry have been specialized in many forms, with numerous producers of each, competition tends to bring about some proportion between the reward of the workers in each department. The terms of exchange, or when money is introduced the prices of goods, are fixed by the sacrifices involved in their production ; or, to use the technical term familiar to economists, the value of such goods INTERNATIONAL COMMERCE. 9 depends, in the long fun, on their " cost of production." International trade, even in its highest existing forms, does not exhibit this feature. With respect to early societies or modern savages, the extreme difficulty, indeed impossibility, of transferring members of one group to another for the sake of any economic advantage is obvious ; what is not so clear is, that all through the growth of nations the same difficulty has presented itself, though not, perhaps, in so extreme a shape. Within a nation or group it is possible to move labour and capital from one employment to another, if not with the perfect ease and absence of friction that economists have too lightly assumed, yet with substantial effect on the relative rate of remuneration and the values of commodities. The passage of these industrial factors from country to country is not so readily accomplished. Great advances have indeed been made in recent years in this direction, and the international movement of capital has now attained vast proportions. Powerful obstacles however remain ; the hindrances of distance, difference of language, customs lines, and social and legal arrangements have by no means lost their effect. The similar movement of capital is chiefly in the form of loans, which give rise to a new kind of international relation, viz. that of indebtedness. On the whole the old general- ization still holds good, which declares that the trade of nations does not conform to the law of cost of production ; but, as we have seen is the case with regard to primitive exchange, depends on the comparative needs and supplies 10 COMMERCE OF NATIONS. of the trading countries, or, to use another technical ex- pression, on "the conditions of comparative cost." This latter proposition must be fully understood in order to follow the working of commerce between nations. It is often imagined that if the industrial powers of one country are inferior to those of another in all respects, that the former will, so the phrase goes, be undersold by its rival in respect to everything that it produces, and have to abandon all industrial pursuits. Such is, however, not by any means the case. A reference to the analogy of exchange between tribal groups or individuals will indicate where the error lies. What is carried on between such bodies is exchange, which involves the giving and receiving of com- modities on each side. The cause of exchange is found in the differences of the comparative estimates formed respecting the commodities that are the objects of trade. For a nation or country this comparative estimate depends on the difficulties of supply, /. e. speaking generally, on the cost of production ; though in special instances they may be the outcome of scarcity, and no further supply may be obtainable at any cost. In any case the rule of comparative cost includes and explains by far the largest part of foreign commerce, and so far from being a strained or unnatural application of theory, is in reality only the form that the general condition of exchange between separate persons or distinct groups assumes when applied to countries whose system of internal exchanges is regulated by cost of production. The use of the doctrine of comparative cost in throwing light on the course and extent of international commerce is great. For it is on the existence of differences between costs when compared in the trading countries that the INTERNATIONAL COMMERCE. il possibility of any trade taking place depends. Where the proportional costs are the same, there is no motive for exchange, and it is by the amount of their difference that the benefit, and therefore to a great degree the volume, of the transactions will be settled. To get a clearer perception of the real bearings of this essential condition for foreign trade let us take an actual case. What is the cause of the commerce carried on between England and the American Union, and why do certain articles form part of that commerce while others do not? Why, e.g., should not England send the wheat of its southern counties to America in exchange for the iron of Pennsylvania and the cotton goods of Massachusetts? The only explanation open is the action of the principle of comparative cost. The cost of American wheat as compared with iron in that country is lower than the cost of British wheat compared with the cost of British iron. Over the whole field of trade similar conditions operate, and it is thus that the actual ingredients of the reciprocal trade of two countries are arranged. The action of comparative cost, using that expression with the liberal interpretation that we have put on it, as including cases of absolute limitation, is however hindered in its work- ing. It is not, as has sometimes been said, the " sufficient condition " of foreign trade. Comparative costs of certain commodities may differ, and even differ greatly, in two countries, and yet those commodities may not be exchanged. The impelling force of all exchange is the economic motive of self-interest, and it may well happen that though the differences between the costs and therefore the values of the commodities under consideration would leave a surplus of advantage, yet the difficulties to be overcome in effecting 12 COMMERCE OF NATIONS. the transfers would impose a still greater cost, and more than neutralize the gain. This kind of hindrance is present in the earliest exchanges. If tribes are divided from each other by long distances, by rivers or mountain ranges, the chances of trade are diminished, and each group is more closely confined to its own resources. What is true of primitive trade is equally applicable to the widely-developed commerce of the present age. The obstacles to transport of commodities, whether natural or artificial, are even now a considerable check to international dealings in some classes of goods. In former days they practically confined foreign trade to dealings in luxuries, since none but very rare and valuable articles could bear the heavy cost of transport and the high profit which was needed as an insurance against risk. By degrees, as we saw, the expense and danger of trade have been reduced, with the result of ever increasing the list of goods that are exchanged between nations, and therefore, in Cobden's happy phrase, " widening the circle of exchanges." Recent developments in the commerce of nations supply many illustrations ; it is as much to cheaper carriage as to cheaper silver that we owe the Indian wheat trade. The American and Australian exports of meat are also in point, as is too the English export of coal that has now reached such large proportions. The German iron export may be added to the above cases ; but even the smaller industries give abundant examples — e.g., the recent increase of English fruit imports. The general principle is moreover too plain to require any lengthy elucidation or support by evidence. That the reduction of impediments will increase foreign trade is as true as that the lowering of the tolls for crossing a bridge will generally add to the traffic that passes over it. INTERNATIONAL COMMERCE. 13 Another agency also tends to prevent the exchange of goods between countries even where their comparative costs are not the same. Thoretical writers on political economy have often shown an unfortunate disposition to regard foreign trade as if it were in each case confined to two countries, though they would of course reject such a belief if explicitly stated. The oversight is not, however, confined to them. In popular discussion, from which all pretence of theorizing is supposed to be excluded, the same fault frequently appears. Any measure affecting trade with par- ticular countries is estimated as if its effects were confined to such trade, and no allowance is made for the reactions that will be produced on other branches of foreign commerce. Neither in theory nor in practical questions is such an omission justifiable. Modern commerce is not confined to exchanges between any two countries, no matter how powerful or wealthy ; it is rather a system of connected markets, each of which is the seat of a smaller system. To return once more to the often-used analogy of primitive tribes or scattered settlers, we see that as the separate groups, tribes, or families become connected in the larger system of internal trade ; as the settlers on a western border state come after a time to deal in the town which furnishes the traders' centre or market of their district, so do the various indepen- dent countries of the world form by degrees what we may call a world-market, though it has no single locality that can be looked on as its centre. The growth of foreign com- merce has made this so plain that it can hardly escape any observer's notice ; but a less evident fact is that it has been gradually forming during the course of European history, and has not yet reached its limit. During the later middle ages the Italian cities ; in the seventeeth century the Dutch ; at 14 COMMERCE OF NATIONS. present England ; at a future time the United States, or perhaps Australasia, may claim to be the nearest approach to the central point or localization of this world-market. But however this may be, the most important result for the present is, that as in the national or district market there is competition between the producers and the consumers of the various wares, so is there a like competition between the several producing and between the several consuming countries in the market of the world. The former kind of competition tends to lower the value of articles, the latter to raise it. Thus, to show the working of this state of things in fact, the competition of India, Russia, the United States, and Australia tends to lower the world value of wheat ; that of India and China has a like influence on tea ; while the com- petition of England, France, and Germany (though very feeble as regards the two latter) has an opposite effect on wheat; and England, Russia, the United States, and Australia, by their competition for the supply of the tea-producing countries, raise its value. Without adding any further in- stances, it is apparent that the mere fact of difference in the comparative cost of wheat and iron in England and the United States will not suffice to establish an exchange of those com- modities, for India may offer wheat to England on still more favourable terms, and Germany may prove a cheaper source for the iron needed by the Union. But there can be no question that the existence of each source of supply will affect the other, and that impediments apart there will be a movement towards a common world value for both wheat and iron. This competition of different countries, which is such a rapidly-growing factor in the commerce of nations, has a profound effect on its character and conditions. It has, as we shall see, important practical bearings on questions of INTERNATIONAL COMMERCE. iS commercial policy, but for the moment it is chiefly interest- ing as marking the final step in the process of evolution by which the single and rare exchanges of savage tribes or families, which we found to be the rudimentary form of foreign trade, have passed into a world-wide system of commerce. advantage. A mere general assertion of the benefits reaped through commerce is not sufficient, since in fact it is composed of distinct elements that need to be carefully indicated. The first of these particular or special gains is the supply of previously unattainable goods. The earliest commerce was directed to this object. The trader brought oriental products to the countries entirely destitute of them, and manufactures to uncivilized tribes, taking back the peculiar products of each country. Modern commerce also deals largely in such objects. A cursory examination of the articles that enter into the world's trade will establish the fact. The modem breakfast-table would be otherwise impossible, and what is true of the most civilized nations is equally true of the rudest ones. But a second result of international trade is perhaps even more advantageous. As domestic exchange enables division of employments to be carried out with an accompanying increase of production and immense gain to the community, so does the system of trade between countries allow each to develop its special aptitudes, and thereby to add in a greater degree to the wealth of the world. The territorial division of industry under which goods are pro- duced, not only by the fittest men but in the fittest places, is an outcome of international trade, and one greatly for the material advantage of all countries. International division of labour confers a further benefit. At first it is probable that the division between individual producers was due to special qualities on the part of the workers who, so to speak, differ- entiated themselves from their fellows ; afterwards it is found that even .were all men alike, there is a profit in assigning a special vocation to each, owing to the increased skill that practice gives. In a less degree the phenomenon repeats it- self in the case of nations. The concentration of labour and INTERNATIONAL COMMERCE. 17 capita], the superior organization of industry that is the result of directing a large part of the national production to a single object, yields a much greater return, and thereby gives a larger contribution to the total wealth of nations. It is the territorial division of labour that has placed the English cotton industry in its present position, or at least it was one of the conditions essential to its attaining that point. For a thorough understanding of the general influence and effects that the commerce of nations is likely to produce, it is indispensable to realize clearly its connexion with the fundamental condition of division of labour and consequent specialization of employments. Unless we bring ourselves to perceive that the movement towards an increase of trade relations between nations is parallel to, and accounted for in the same way as, the growth of domestic trade, and on the whole confers the same benefits, we are likely to be mistaken both in our interpretation of the facts of foreign commerce and in our judgments on matters of commercial policy. Instances of errors produced in this way will often be met when examining legislation on the subject. As yet but one side of the picture has been presented ; the advantages that fresh exchanges and increased division of labour bestow on society have been a favourite theme of economists, who in many cases have dwelt with peculiar satisfaction on the working of private interest for the general good. There is much justification for the course. The play of the economic organization steadily becoming ever more and more intricate attracted the admirer of scientific law in social matters. The immense gains to all concerned seemed the more valuable as they were obtained without any ill- judged interference on the part of the state, furnishing at i8 COMMERCE OF NATIONS. once an illustration and a vindication of the working of laissez faire. This mode of treatment, though tempting, had nevertheless its dangers ; if one school persistently devoted its efforts to a glorification of the results of increased ex- change either internal or foreign, it was but a question of time for an opposing one to come forward which would seek to depreciate those gains and magnify any observable faults. The task of contradiction was taken up in regard to internal trade by the socialists, while the protectionists discharged a like function for foreign trade. One of the main links be- tween these seemingly different sections is their position on the point before us. Without at present entering into the details of a controversy that will be better discussed later on, it is in place to note the portion of truth contained in the criticism of international division of labour. There can be little doubt that the more elaborate the machinery of trade the easier it is to put it out of gear. In the simple cases in which we found the origin of foreign trade a temporary disturbance did not so much matter. Each small society was in essentials self-sufficing. The intermediate stages of growth show, if not the same independence, at least consider- able capacity for meeting all wants, if it should be necessary, from the national resources. The modern state is quite differently situated. It require a violent effort of imagina- tion to conceive the condition of a modern European country completely isolated from all other countries. Revolutionary France never reached this condition ; but its position and its losses, taken together with the fact that foreign commerce has vastly expanded during the present century, will give a slight measure of the evils that complete interruption to trade would cause. It would therefore seem that the out- break of war might seriously affect a community that had INTERNATIONAL COMMERCE. 19 formed the habit of drawing its supplies from other countries. There is a further and perhaps on the whole a greater difficulty. The adjustment of supply and demand is always a problem that tries the skill of producers and dealers, but in regard to international commerce the task is peculiarly arduous. The regulation of supply for distant markets, the attempt to estimate what may be expected from other countries, the effect of the cross relations of the many trading nations, are all questions that, if they had to be determined by calculation, might at once be surrendered as hopeless. In spite of the wonderful acuteness which has been developed in traders through experience, mistakes often occur, and the consequence is sometimes the disastrous event known as a commercial crisis. Now if the growth of international trade has estabHshed these relations, it is evi- dent that any loss so produced must be placed to its account. Another drawback to division of labour has been fre- quently urged against the form of it in which we are specially interested. The individual workman, by being limited to a single employment, is weakened in his general powers. Some simple manual operation repeated incessantly for several hours of the working day does not afford sufficient scope for the exercise of the faculties required from the citizen of a free community. There is an admitted necessity for remedying this evil by the aid of education and political training. Precisely the same evil results, it is urged, follow from unrestricted foreign trade. The nation given up to a single industry, or set of industries, may indeed, economically speaking, gain, but only at the expense of the qualities that contribute rriost efficiently to a vigorous national life. The best mode of dealing with such difficulties is not to ignore them or treat them with contempt ; it is 20 COMMERCE OF NATIONS. rather to assign them their proper place in relation to the theory and policy of commerce. International, like all division of employments, has certain drawbacks which in striking a balance of the sum of gain should be carefully estimated. On the whole it appears that the benefits exceed by far the losses in either case. Just as no one seriously proposes to go back to the ruder systems of industrial or- ganization because labourers are often out of employment, or some men suffer from the undue monotony of their work, so there is no valid ground for opposing the development of international commerce on account of possible wars, occasional commercial crises, or such an unhappy and one-sided form of industry as formerly prevailed in the southern states of the American Union. All these cases suggest not limitation, but further expansion and better organization of the system of exchanges, by which their evil effects will be diminished, and it may be hoped finally disappear. 