What Is Free Trade? Part 2

This argument is constantly recurring in all writings of the protectionist school. It is my intention to make a careful investigation of its merits, and I must begin by soliciting the attention and the patience of the reader. I will first examine into the inequalities which depend upon natural causes, and afterwards into those which are caused by diversity of taxes.

Here, as elsewhere, we find the theorists who favor protection taking part with the producer. Let us consider the case of the unfortunate consumer, who seems to have entirely escaped their attention. They compare the field of protection to the _turf_. But on the turf, the race is at once a _means and an end_. The public has no interest in the struggle, independent of the struggle itself. When your horses are started in the course with the single object of determining which is the best runner, nothing is more natural than that their burdens should be equalized. But if your object were to send an important and critical piece of intelligence, could you without incongruity place obstacles to the speed of that one whose fleetness would secure you the best means of attaining your end? And yet this is your course in relation to industry. You forget the end aimed at, which is the _well-being_ of the community; you set it aside; more, you sacrifice it by a perfect _pet.i.tio principii_.

But we cannot lead our opponents to look at things from our point of view; let us now take theirs: let us examine the question as producers.

I will seek to prove:

1. That equalizing the facilities of production is to attack the foundations of mutual exchange.

2. That it is not true that the labor of one country can be crushed by the compet.i.tion of more favored climates.

3. That, even were this the case, protective duties cannot equalize the facilities of production.

4. That freedom of trade equalizes these conditions as much as possible; and

5. That the countries which are the least favored by nature are those which profit most by mutual exchange.

1. _Equalizing the facilities of production is to attack the foundations of mutual exchange._ The equalizing of the facilities of production, is not only the shackling of certain articles of commerce, but it is the attacking of the system of mutual exchange in its very foundation principle. For this system is based precisely upon the very diversities, or, if the expression be preferred, upon the inequalities of fertility, climate, temperature, capabilities, which the protectionists seek to render null. If New England sends its manufactures to the West, and the West sends corn to New England, it is because these two sections are, from different circ.u.mstances, induced to turn their attention to the production of different articles. Is there any other rule for international exchanges?

Again, to bring against such exchanges the very inequalities of condition which excite and explain them, is to attack them in their very cause of being. The protective system, closely followed up, would bring men to live like snails, in a state of complete isolation. In short, there is not one of its sophisms, which, if carried through by vigorous deductions, would not end in destruction and annihilation.

2. _It is not true that the labor of one country can be crushed by the compet.i.tion of more favored climates._ The statement is not true that the unequal facility of production, between two similar branches of industry, should necessarily cause the destruction of the one which is the least fortunate. On the turf, if one horse gains the prize, the other loses it; but when two horses work to produce any useful article, each produces in proportion to his strength; and because the stronger is the more useful it does not follow that the weaker is good for nothing. Wheat is cultivated in every section of the United States, although there are great differences in the degree of fertility existing among them. If it happens that there be one which does not cultivate it, it is because, even to itself, such cultivation is not useful. a.n.a.logy will show us, that under the influences of an unshackled trade, notwithstanding similar differences, wheat would be produced in every portion of the world; and if any nation were induced to entirely abandon the cultivation of it, this would only be because it would _be her interest_ to otherwise employ her lands, her capital, and her labor. And why does not the fertility of one department paralyze the agriculture of a neighboring and less favored one?

Because the phenomena of political economy have a suppleness, an elasticity, and, so to speak, _a self-levelling power_, which seems to escape the attention of the school of protectionists. They accuse us of being theoretic, but it is themselves who are so to a supreme degree, if the being theoretic consists in building up systems upon the experience of a single fact, instead of profiting by the experience of a series of facts. In the above example, it is the difference in the value of lands which compensates for the difference in their fertility. Your field produces three times as much as mine.

Yes. But it has cost you ten times as much, and therefore I can still compete with you: this is the sole mystery. And observe how the advantage on one point leads to disadvantage on the other. Precisely because your soil is more fruitful it is more dear. It is not _accidentally_ but _necessarily_ that the equilibrium is established, or at least inclines to establish itself: and can it be denied that perfect freedom in exchanges is of all systems the one which favors this tendency?

I have cited an agricultural example; I might as easily have taken one from any trade. There are tailors at Barnegat, but that does not prevent tailors from being in New York also, although the latter have to pay a much higher rent, as well as higher price for furniture, workmen, and food. But their customers are sufficiently numerous not only to reestablish the balance, but also to make it lean on their side.

When, therefore, the question is about equalizing the advantages of labor, it would be well to consider whether the natural freedom of exchange is not the best umpire.

This self-levelling faculty of political phenomena is so important, and at the same time so well calculated to cause us to admire the providential wisdom which presides over the equalizing government of society, that I must ask permission a little longer to turn to it the attention of the reader.

The protectionists say, Such a nation has the advantage over us, in being able to procure cheaply, coal, iron, machinery, capital; it is impossible for us to compete with it.

We must examine this proposition under other aspects. For the present, I stop at the question, whether, when an advantage and a disadvantage are placed in juxtaposition, they do not bear in themselves, the former a descending, the latter an ascending power, which must end by placing them in a just equilibrium?

Let us suppose the countries A and B. A has every advantage over B; you thence conclude that labor will be concentrated upon A, while B must be abandoned. A, you say, sells much more than it buys; B buys much more than it sells. I might dispute this, but I will meet you upon your own ground.

In the hypothesis, labor being in great demand in A, soon rises in value; while labor, iron, coal, lands, food, capital, all being little sought after in B, soon fall in price.

Again: A being always selling and B always buying, cash pa.s.ses from B to A. It is abundant in A, very scarce in B.

But where there is abundance of cash, it follows that in all purchases a large proportion of it will be needed. Then in A, _real dearness_, which proceeds from a very active demand, is added to _nominal dearness_, the consequence of a superabundance of the precious metals.

Scarcity of money implies that little is necessary for each purchase.

Then in B, a _nominal cheapness_ is combined with _real cheapness_.

Under these circ.u.mstances, industry will have the strongest possible motives for deserting A to establish itself in B.

Now, to return to what would be the true course of things. As the progress of such events is always gradual, industry from its nature being opposed to sudden transits, let us suppose that, without waiting the extreme point, it will have gradually divided itself between A and B, according to the laws of supply and demand; that is to say, according to the laws of justice and usefulness.

_I do not advance an empty hypothesis when I say, that were it possible that industry should concentrate itself upon a single point, there must, from its nature, arise spontaneously, and in its midst_, AN IRRESISTIBLE POWER OF DECENTRALIZATION.

We will quote the words of a manufacturer to the Chamber of Commerce at Manchester (the figures brought into his demonstration being suppressed):

"Formerly we exported goods; this exportation gave way to that of thread for the manufacture of goods; later, instead of thread, we exported machinery for the making of thread; then capital for the construction of machinery; and lastly, workmen and talent, which are the source of capital. All these elements of labor have, one after the other, transferred themselves to other points, where their profits were increased, and where the means of subsistence being less difficult to obtain, life is maintained at less cost. There are at present to be seen in Prussia, Austria, Saxony, Switzerland, and Italy, immense manufacturing establishments, founded entirely by English capital, worked by English labor, and directed by English talent."

We may here perceive that Nature, with more wisdom and foresight than the narrow and rigid system of the protectionists can suppose, does not permit the concentration of labor, and the monopoly of advantages, from which they draw their arguments as from an absolute and irremediable fact. It has, by means as simple as they are infallible, provided for dispersion, diffusion, mutual dependence, and simultaneous progress; all of which, your restrictive laws paralyze as much as is in their power, by their tendency towards the isolation of nations. By this means they render much more decided the differences existing in the conditions of production; they check the self-levelling power of industry, prevent fusion of interests, neutralize the counterpoise, and fence in each nation within its own peculiar advantages and disadvantages.

3. _Even were the labor of one country crushed by the compet.i.tion of more favored climates (which is denied), protective duties cannot equalize the facilities of production._ To say that by a protective law the conditions of production are equalized, is to disguise an error under false terms. It is not true that an import duty equalizes the conditions of production. These remain after the imposition of the duty just as they were before. The most that law can do is to equalize the _conditions of sale_. If it should be said that I am playing upon words, I retort the accusation upon my adversaries. It is for them to prove that _production_ and _sale_ are synonymous terms, which if they cannot do, I have a right to accuse them, if not of playing upon words, at least of confounding them.

Let me be permitted to exemplify my idea.

Suppose that several New York speculators should determine to devote themselves to the production of oranges. They know that the oranges of Portugal can be sold in New York at one cent each, whilst on account of the boxes, hot-houses, &c., which are necessary to ward against the severity of our climate, it is impossible to raise them at less than a dollar apiece. They accordingly demand a duty of ninety-nine cents upon Portugal oranges. With the help of this duty, say they, the _conditions of production_ will be equalized. Congress, yielding as usual to this argument, imposes a duty of ninety-nine cents on each foreign orange.

Now I say that the _relative conditions of production_ are in no wise changed. The law can take nothing from the heat of the sun in Lisbon, nor from the severity of the frosts in New York. Oranges continuing to mature themselves _naturally_ on the banks of the Tagus, and artificially upon those of the Hudson, must continue to require for their production much more labor on the latter than the former. The law can only equalize the _conditions of sale_. It is evident that while the Portuguese sell their oranges here at a dollar apiece, the ninety-nine cents which go to pay the tax are taken from the American consumer. Now look at the whimsicality of the result. Upon each Portuguese orange, the country loses nothing; for the ninety-nine cents which the consumer pays to satisfy the impost tax, enter into the treasury. There is improper distribution; but no loss. But upon each American orange consumed, there will be about ninety-nine cents lost; for while the buyer very certainly loses them, the seller just as certainly does not gain them; for, even according to the hypothesis, he will receive only the price of production, I will leave it to the protectionists to draw their conclusion.

4. _But freedom of trade equalizes these conditions as much as is possible._ I have laid some stress upon this distinction between the conditions of production and those of sale, which perhaps the prohibitionists may consider as paradoxical, because it leads me on to what they will consider as a still stranger paradox. This is: If you really wish to equalize the facilities of production, leave trade free.

This may surprise the protectionists; but let me entreat them to listen, if it be only through curiosity, to the end of my argument. It shall not be long. I will now take it up where we left off.

If we suppose for the moment, that the common and daily profits of each American amount to one dollar, it will indisputably follow that to produce an orange by _direct_ labor in America, one day's work, or its equivalent, will be requisite; whilst to produce the cost of a Portuguese orange, only one-hundredth of this day's labor is required; which means simply this, that the sun does at Lisbon what labor does at New York. Now is it not evident, that if I can produce an orange, or, what is the same thing, the means of buying it, with one-hundredth of a day's labor, I am placed exactly in the same condition as the Portuguese producer himself, excepting the expense of the transportation? It therefore follows that freedom of commerce equalizes the conditions of production direct or indirect, as much as it is possible to equalize them; for it leaves but the one inevitable difference, that of transportation.

I will add that free trade equalizes also the facilities for attaining enjoyments, comforts, and general consumption; the last, an object which is, it would seem, quite forgotten, and which is nevertheless all-important; since, in fine, consumption is the main object of all our industrial efforts. Thanks to freedom of trade, we would enjoy here the results of the Portuguese sun, as well as Portugal itself; and the inhabitants of New York would have in their reach, as well as those of London, and with the same facilities, the advantages which nature has in a mineralogical point of view conferred upon Cornwall.

5. _Countries least favored by nature (countries not yet cleared of forests, for example) are those which profit most by mutual exchange._ The protectionists may suppose me in a paradoxical humor, for I go further still. I say, and I sincerely believe, that if any two countries are placed in unequal circ.u.mstances as to advantages of production, _the one of the two which is the less favored by nature, will gain more by freedom of commerce_. To prove this, I will be obliged to turn somewhat aside from the form of reasoning which belongs to this work. I will do so, however; first, because the question in discussion turns upon this point; and again, because it will give me the opportunity of exhibiting a law of political economy of the highest importance, and which, well understood, seems to me to be destined to lead back to this science all those sects which, in our days, are seeking in the land of chimeras that social harmony which they have been unable to discover in nature. I speak of the law of consumption, which the majority of political economists may well be reproached with having too much neglected.

Consumption is the _end_, the final cause of all the phenomena of political economy, and, consequently, in it is found their final solution.

No effect, whether favorable or unfavorable, can be vested permanently in the producer. His advantages and disadvantages, derived from his relations to nature and to society, both pa.s.s gradually from him; and by an almost insensible tendency are absorbed and fused into the community at large--the community considered as consumers. This is an admirable law, alike in its cause and its effects; and he who shall succeed in making it well understood, will have a right to say, "I have not, in my pa.s.sage through the world, forgotten to pay my tribute to society."

Every circ.u.mstance which favors the work of production is of course hailed with joy by the producer, for its _immediate effect_ is to enable him to render greater services to the community, and to exact from it a greater remuneration. Every circ.u.mstance which injures production, must equally be the source of uneasiness to him; for its _immediate effect_ is to diminish his services, and consequently his remuneration. This is a fortunate and necessary law of nature. The immediate good or evil of favorable or unfavorable circ.u.mstances must fall upon the producer, in order to influence him invisibly to seek the one and to avoid the other.

Again: when an inventor succeeds in his labor-saving machine, the _immediate_ benefit of this success is received by him. This again is necessary, to determine him to devote his attention to it. It is also just; because it is just that an effort crowned with success should bring its own reward.

But these effects, good and bad, although permanent in themselves, are not so as regards the producer. If they had been so, a principle of progressive and consequently infinite inequality would have been introduced among men. This good, and this evil, both therefore pa.s.s on, to become absorbed in the general destinies of humanity.

How does this come about? I will try to make it understood by some examples.

Let us go back to the thirteenth century. Men who gave themselves up to the business of copying, received for this service _a remuneration regulated by the general rate of the profits_. Among them is found one, who seeks and finds the means of rapidly multiplying copies of the same work. He invents printing. The first effect of this is, that the individual is enriched, while many more are impoverished. At the first view, wonderful as the discovery is, one hesitates in deciding whether it is not more injurious than useful. It seems to have introduced into the world, as I said above, an element of infinite inequality. Guttenberg makes large profits by this invention, and perfects the invention by the profits, until all other copyists are ruined. As for the public--the consumer--it gains but little, for Guttenberg takes care to lower the price of books only just so much as is necessary to undersell all rivals.

But the great Mind which put harmony into the movements of celestial bodies, could also give it to the internal mechanism of society. We will see the advantages of this invention escaping from the individual, to become for ever the common patrimony of mankind.

The process finally becomes known. Guttenberg is no longer alone in his art; others imitate him. Their profits are at first considerable.

They are recompensed for being the first who made the effort to imitate the processes of the newly-invented art. This again was necessary, in order that they might be induced to the effort, and thus forward the great and final result to which we approach. They gain largely; but they gain less than the inventor, for _compet.i.tion_ has commenced its work. The price of books now continually decreases. The gains of the imitators diminish in proportion as the invention becomes older; and in the same proportion imitation becomes less meritorious.

Soon the new object of industry attains its normal condition; in other words, the remuneration of printers is no longer an exception to the general rules of remuneration, and, like that of copyists formerly, it is only regulated _by the general rate of profits_. Here then the producer, as such, holds only the old position. The discovery, however, has been made; the saving of time, labor, effort, for a fixed result, for a certain number of volumes, is realized. But in what is this manifested? In the cheap price of books. For the good of whom?

For the good of the consumer--of society--of humanity. Printers, having no longer any peculiar merit, receive no longer a peculiar remuneration. As men--as consumers--they no doubt partic.i.p.ate in the advantages which the invention confers upon the community; but that is all. As printers, as producers, they are placed upon the ordinary footing of all other producers. Society pays them for their labor, and not for the usefulness of the invention. _That_ has become a gratuitous benefit, a common heritage to mankind.

The wisdom and beauty of these laws strike me with admiration and reverence.