Econlib

The Library

Other Sites

 Front Page arrow Titles (by Subject) arrow ESSAY No. XXXVII. - The Principles of Free Trade

Return to Title Page for The Principles of Free Trade

Search this Title:

Also in the Library:

Subject Area: Economics
Topic: Free Trade

ESSAY No. XXXVII. - Condy Raguet, The Principles of Free Trade [1835]

Edition used:

The Principles of Free Trade illustrated in a series of short and familiar Essays originally published in the Banner of the Constitution, 2nd ed. (Philadelphia, 1840).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


ESSAY No. XXXVII.

may 5, 1830.

The benefits of Free Trade illustrated by the commerce carried on between the states of Maine and Virginia and other Southern states. Robbing Peter of one dollar to pay Paul half-a-dollar, is the real effect of the restrictive system.

IT was stated in the Portland Argus a few weeks ago, that 46,300 bushels of corn had been brought to that port within a short period from the Southern states. This fact illustrates a very important principle connected with the subject of free trade, to which our attention had recently been drawn by an intelligent gentleman from the state of Maine, lately on a visit to this city.

It seems that the soil of the state of Maine is remarkably fertile in the article of potatoes, and not so fertile in the article of corn. It also seems that the soil of Maryland, Virginia and North Carolina are remarkably fertile in the article of corn, and not so fertile in the article of potatoes. The inhabitants therefore of these two districts of country, find it for their interest to carry on a free trade, in these two articles, because the Northern people, by planting potatoes, can get out of their land more corn, than if they planted corn, and because the Southern people can get out of their land more potatoes, by planting corn, than if they planted potatoes. Paradoxical as this may appear, it is nevertheless true; and it is in fact an epitome of the whole system of foreign commerce, which can only be carried on between two nations, each of which has an advantage over the other in the facility of producing some particular commodity or other. Now, whether this advantage consists in difference of soil, climate, industrious habits, skill, lowness of wages, superior abundance of capital, or labour-saving machinery, it is of no sort of consequence. If an advantage exists, it will create commerce. If one does not exist, commerce cannot take place; and where commerce cannot take place, there is no necessity for laws to say that it shall not take place.

Now, suppose that an acre of land in Maine will produce 100 bushels of potatoes, which can be sold for 50 bushels of Southern corn, and suppose that the same acre if planted with corn will produce but 25 bushels; would it not be absurd for any law-makers to start up in Maine, and insist upon it that it was injurious for the people of that state to import Virginia corn, because it encouraged the industry of foreigners and interfered with the domestic production of corn? Would not the corn growers be looked upon as guilty of an impudent interference with the rights of all the corn eaters in Maine, if they should cry out for a protecting duty against Virginia corn? One would suppose so; and yet, strange as it may appear, stranger things than this have been done in our country, and have met the approbation of many who have passed in the world for statesmen. The case in point affords a fine field for illustrating the doctrine of protecting duties, in a way that can be brought down to the apprehension of the simplest farmer, and we shall accordingly avail ourselves of it.

According to the positions here stated, a farmer in Maine can raise on an acre of land only 25 bushels of corn if he plants corn, but he can raise 50 bushels of corn, if he plants potatoes. It is therefore clearly his interest to plant potatoes. But he will not plant all his land with potatoes. He will plant some corn, because as there are, in agriculture, liabilities to bad seasons, which might perchance destroy a crop of potatoes, whilst corn would not be injured, he adopts the sound rule of not putting all his eggs in one basket. And besides all this, he, perhaps, has some land which is better adapted for corn than potatoes; and he knows, at all events, that the demand in Virginia for potatoes is limited, and that the price of corn there must also depend upon the character of the season. Perhaps in some years the crop of corn in Virginia might fail, whilst that of potatoes should succeed, and that the same might happen in Maine, which would put an end to the trade in those two articles.

But the wiseacres of Maine, we will suppose, take it into their heads, as the wiseacres of England have done, that it is better for the people to eat dear bread than cheap bread, and for this purpose, they lay a protecting duty upon foreign corn of twenty per cent. The effect of this duty would be to raise the price of corn twenty per cent. This would be an injury to all the eaters of corn, inasmuch as it would have the effect of compelling them to work six days to procure the quantity of corn that they could before procure by working five days; in other words, it would oblige people to pay for five bushels of corn, the same price they used to pay for six. This would no doubt be a benefit to the corn growers, and exactly the same sort of benefit that would be enjoyed by a hatter, if a law were enacted to compel every man to pay him six dollars for a hat which another hatter would furnish for five. The scheme would thus appear to be, at best, nothing but robbing “Peter to pay Paul,” by which the community would lose out of one pocket what they gained in the other. But it would be worse than this, it would be robbing Peter of a dollar, and only paying Paul half-a-dollar; and it is from the demonstrable character of this proposition that the folly of protective laws can be pointed out.

If the high duty system were a mere shifting of property from one man’s pocket to another, it would be harmless as regards its influence upon the general prosperity, in the same manner that the wealth of the community is not in any manner affected by a highwayman’s appropriating to himself another man’s purse. But the misfortune is, that in the transfer alluded to, there is a positive loss. The real price which is paid for every commodity, is human labour. The rich, who do not work, but who live upon the interest of money, and the rents of houses and lands, do not perceive this truth: but the farmer, the merchant, the seaman, the manufacturer, the mechanic, and all others who gain their living by the sweat of their brow, understand it perfectly well; and they all know that it would be better for them to procure any article they may want by working for it one day, than by working for it two days. Now if the price of a day’s work is one dollar, and the price of a barrel of flour is five dollars, it is the same thing, whether we say that a barrel of flour is worth five dollars, or is worth five days’ labour. But inasmuch as a day’s labour may be applied to so many different things, and inasmuch as it does not convey any definite and accurate idea, it is more convenient that the value of a thing should be expressed in money, than in days’ labour. Still, when a man hears that a thing costs so much money, he should always remember that this money represents a certain quantity of labour.

If the price of corn be raised twenty per cent., the effect, as we have stated above, is to compel the consumers of corn to work six days in order to procure the quantity which before could be procured with five days’ labour, and, consequently, the effect of any measure which should bring about such a rise artificially, would be precisely the same thing as if a law should be passed to compel people to turn grindstones one day out of six, when there were no tools to be ground. It is, in other words, as regards the consumers, an entire annihilation of the value of the one-sixth part of their labour. Now, unless it can be made to appear, that five days’ labour of the corn growers in Maine, by the operation of the protective system, shall produce as much corn as six days’ labour before produced, the whole community, considered as one family, would have been losers by the operation. But what is the fact? The land is no more fertile than before. An acre will produce no more corn than before. A day’s work in ploughing, sowing and harrowing, will produce no more bushels than before, and consequently the loss of the produce of one day in six, sustained by the consumers of corn, not being made up by the corn growers, the society, considered as a whole, (which is the only mode in which such a question is to be regarded,) are losers precisely to that extent. If examined closely, it will be found that such a law as the one we have supposed to be adopted in the state of Maine, would be nothing more nor less, than a law declaring that the consumers of corn should labour one day out of every six, without any equivalent whatever, for the sole and exclusive benefit of the corn growers; and that the united labour of the corn growers and the potatoe growers, would not produce in the aggregate within twenty per cent. as much corn and potatoes, as were produced by them before the restriction.

The case we have here stated, is a perfect illustration of the restrictive system, as applied to any other species of industry. Whether it be adopted in the form of corn laws, or laws protecting the cultivation of sugar from cane or beets, or the manufacture of salt, iron, glass, woollen and cotton goods, it is in essence the same. The effect of it is, to make the aggregate products of the labour of the whole community less than they would be if the government would confine itself to its proper sphere; that is—“restrain men from injuring one another, and leave them otherwise free to regulate their own pursuits of industry and improvement.”