Front Page Titles (by Subject) BOOK VI: MR. CHAMBERLAIN'S PROGRAMME - The Comedy of Protection
The Online Library of Liberty
A project of Liberty Fund, Inc.
BOOK VI: MR. CHAMBERLAIN’S PROGRAMME - Yves Guyot, The Comedy of Protection 
The Comedy of Protection, trans. M.A. Hamilton (London: Hodder and Stoughton, 1906).
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.
The text is in the public domain.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
MR. CHAMBERLAIN’S PROGRAMME
THE PROTECTIONIST TRADITION IN ENGLAND
Adam Smith’s pessimistic forecast—No Free Traders without exception—Influence of the economic reaction abroad—Fair Trade—Commission on trade depression—Two reports—Optimism of the Cobden Club—Made in Germany—Protectionist campaigns—Memoranda of the Board of Trade—Colonial Conference of 1902.
Mr. Chamberlain’s programme may now be spoken of as an historical phenomenon belonging to the past: no one now believes in its success except M. Méline, and he thought he had invented Colbertism. But Colbertism is old, commercial freedom young. Thus Adam Smith, when he published the “Wealth of Nations” in 1776, says: “To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but, what is much more unconquerable, the private interests of many individuals, irresistibly oppose it. . . . The member of Parliament who supports every proposal for strengthening this monopoly is sure to acquire not only the reputation of understanding trade, but great popularity and influence, with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more, if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.”
This, is indeed, the psychology of Protection, but Adam Smith did less than justice to his countrymen. They had not only adopted Free Trade principles in 1846; they now regarded them as indisputable as the rule of three. Gladstone said wittily, “All Englishmen without exception are Free Traders, but they are not all Free Traders without exception.” Protectionists were already putting forward pretexts to try the ground, for the economic reaction which appeared in Germany in 1879 under Bismarck, and in France in 1877, showed itself in England after 1880 in the expression “Fair Trade,” and in the growth of a movement strong enough to cause the appointment of a Commission into the causes of trade depression. There were two reports: that of the majority was for Free Trade, the minority report recommended a 10 per cent. duty on manufactures and on such articles of food as could be produced by India and the other colonies. A small number of landowners, as a tribute to tradition rather than from conviction, continued to protest against Free Trade. In 1896 the Cobden Club celebrated its jubilee: its principal members did not trouble to conceal their contempt for continental Free Traders, and the sense of security inspired by their own indisputable success. Nevertheless, a certain member of Parliament, Mr. Howard Vincent, got an Act passed, obliging all goods to carry a mark of origin—German goods being stamped, “Made in Germany.” Under this title Mr. E. E. Williams, a Fabian, published a book showing that many small objects of everyday use were made in Germany. Out of his surprise box he produced the German bogey, and many grown-up children retain their childish fear of the bogey; it is a necessary part of their scheme of existence.
A series of articles appeared in the Contemporary Review by E. J. Dillon and an anonymous writer called Ogniben, in 1901 and 1902, bearing the burden “of the cry.” “Our agriculture is going down, that of France and Germany is going up; our industry is going down, that of Germany and the States is going up”; and weeping over the decline of the carrying trade. To maintain the impartial character of the Review, however, the Editor asked me to reply to these articles, which I did in July, 1902, replying at the same time to a book on “Protection,” written by a German called Byng, who owned English factories. The sententious arrogance of its arguments was based on the theory of the Balance of Trade, and collapsed when it was touched.
In 1901 the Board of Trade commissioned Sir Alfred Bateman to issue a Memorandum on the Comparative Statistics on Population, Industry, and Commerce in the United Kingdom and some leading foreign countries. The American having succeeded the German bogey in 1902, a fresh Memorandum was issued for the United States. As early as 1896 Mr. Chamberlain had proposed an Imperial Customs Union: on June 30, 1902, the Colonial Premiers took part in a Colonial Conference, where Mr. Chamberlain declared that he wished to establish Free Trade within the Empire, while recognising the special needs of new countries; and he drew attention to Canada’s offer of preferential treatment to English goods.
Of the resolutions finally arrived at, the first recognised the stimulus given by preferential tariffs to commercial relations; and though the second declared that the adoption of a general Free Trade system between the mother country and the oversea colonies was impracticable, the third affirmed the desirability of the granting of substantial advantages to British goods in the Colonial tariffs, while in the fourth the Colonial Ministers respectfully demanded from His Majesty’s Government favourable treatment of colonial manufactures.
The details of this movement had been little followed in England. Two speeches made on May 16, 1903, by Mr. Balfour and Mr. Chamberlain came as a thunderbolt.
MR. CHAMBERLAIN’S PROGRAMME
Mr. Balfour merely suggested that England might have recourse to a policy of Retaliation; Mr. Chamberlain went much further. It is not necessary to go into the details of the policy which he unfolded in Glasgow on October 6, 1903, and Greenock on October 7th—it is too well known. Its main proposals may be briefly summarised under three heads:—
(1) Duties on foreign foodstuffs also produced at home or in the colonies, which should raise the price by the full amount of the duty.
(2) Colonies, following the example of Canada, to grant preferential duties on English manufactures.
(3) A 10 per cent. tax on foreign manufactures, to give employment to British workmen.
MR. CHAMBERLAIN’S STATEMENTS AND THE CUSTOMS HOUSE RETURNS
I. English Trade—II. Cotton—III. Wool—IV. Profits in the Steel and Iron Trade.
All Mr. Chamberlain’s arguments are based on the Balance of Trade. In the Glasgow speech he described the growth of imports—which had risen from 63 millions in 1892 to 149 millions in 1902, an increase of 86 millions—as a national danger.
As a matter of fact, figures prove the continuous development of English trade.
and the last period, 1900-04, exceeds all the others. But, say the Protectionists, the increase in foreign trade is an increase in imports, and these twentieth-century politicians believe with Colbert that imports spell ruin.
Thus between the first and last period imports have increased 84 per cent., exports 60 per cent.
The significance of figures depends upon what they represent.
From the first group, five millions must be subtracted for tobacco: thus, while 75 per cent. of the imports are food and raw materials, 81 per cent. of the exports are manufactured goods, to which postal parcels may be added. The partisans of the Balance of Commerce evidently find that their countrymen eat too much: that is why Mr. Chamberlain is anxious to put a tax on food.
Comparing the imports of textile raw material with the exports of textile manufactures, we find:—
Thus the value of the exports of textile manufactures is £35,000,000, or 43·7 per cent. above the value of the raw materials, a figure which is far from representing the difference in value between the materials and the manufactures, since the forty-one million inhabitants of the United Kingdom keep part for their own use. Between 1886 and 1905 there is an increase of £229,000,000 in the consumption of raw cotton; but had there been no increase, had there even been a diminution in the consumption of raw cotton, that would not prove that the cotton industry was therefore on the verge of that abyss which Mr. Chamberlain describes. Since 1874 the speed of the spindles has continually augmented, and thus produces finer and finer thread, requiring less and less raw material in proportion to the length produced. In England the consumption of cotton is 33 to 34 lbs. per spindle to 65 abroad.
In June, 1905, the Imperial Tariff Committee, got up by Mr. Chamberlain to prove his case for Protection, published a report on cotton; a few days before it appeared Mr. Chamberlain said at St. Helens, “Cotton is stationary”; its report gives statistics to the contrary. In 1892-94 cotton exports rose to £65,400,000; in 1903 to £73,300,000; in 1904 to £83,900,000, an increase of 28 per cent.
The Free Trade League in Manchester replied to the report of the Tariff Commission on the Cotton Industry. The answer was given in the clearest and most precise form by Mr. S. J. Chapman, Professor of Political Economy at Manchester University, but it was in no sense the work of pure theorists: the men in whose name it was published were for the most part engaged in the cotton trade, men whose object was profit. Had Mr. Chamberlain held out a profit to them they would have accepted it; that they do not enthusiastically accept his presents proves them of little value. Like prudent men they waited to examine his promises before swallowing them greedily. They did not despise economic truth any more than a merchant, anxious to discover his real position, despises accounts; and they were not to be frightened by a few figures such as the diminution in the export of cotton yarn at the end of 1901. In 1901 it fell from 233,000,000 lbs. to 170,000,000; in 1902 to 166,000,000, in 1903 to 151,000,000, and in 1904 to 164,000,000. What a decline! cry the Protectionists, thinking only of the Balance of Trade, as usual. But the question is, Does this decline indicate a decline in the industry? It does not; since there is an increase in the number of looms. All that it does mean is this: in the last few years the price of raw cotton has been very high, rising to 6·03d. per lb. in 1903, and 61/2d. in 1904, an increase which, naturally affecting the price of cotton yarn, has reduced foreign demand. Cotton yarn has become much finer, and thus export can no longer be measured by relative weight but rather by length. The reply to the report estimates the increase in the value of the export of cotton, with respect to quality and fineness, at 7·33 per cent. The export of sewing cotton has increased from 11,600,000 lbs. in 1876-80 to 24,300,000, in the proportion of 100 to 210, but since the cotton has grown increasingly fine weight alone does not give an exact measure of the export. Were the cotton industry declining the number of looms would not have increased.
The Tariff Commission assumes the increase for 1904 to be more than 3,000,000 looms. At this moment 30 new factories are in course of construction, adding 10 per cent. to Lancashire’s productive power. Including these, the increase since 1885 must be some 10,000,000 looms, or 100 factories with 100,000 looms each, representing a capital of about £12,500,000. Moreover, the power of machinery has been continually on the increase for the last 30 years; it is probably twice what it was 25 years ago: assuming it to be only in the proportion of 3 to 2, production must have increased about 40 per cent.
There is an increase in the number of power looms:—
The number of hands has diminished:—
but examining the details of this diminution we find it has mainly taken place in the employment of children below 15 and adults below 20 years of age. Adult labour both of men and women has increased:
The result, then, of the Tariff Commission’s Report on cotton is an approximate increase of 100-146 from 1876-80 to 1904.
Those, however, who are anxious to revenge themselves on English Free Trade by proving that England has been ruined by it hasten to say, “The cotton industry has advanced more rapidly in other countries than in England.” The Tariff Commission, Mr. Chamberlain’s Tariff Commission, says in its report: “The witnesses and manufacturers examined are of opinion that the progress of the industry in England has been equal or greater than that in other countries; with whatever nation it is compared the evidence is unanimous. In spite of the lowering of the hours of labour weekly piecework wages have maintained their level, thanks to the development and increased output of machinery. The Commissioners are of opinion that, apart from industry and transport, England’s commercial organisation is superior to that of foreign countries. Although they may possess particular advantages, when everything is taken into account there remains a balance in favour of English industry.”
Thus the Commission’s Report refutes Mr. Chamberlain’s allegations. The Commissioners, however, having been appointed by him, felt that they must be faithful to their trust; they therefore added the following caution: “The witnesses, however, deposed that both with regard to the organisation and output of the cotton industry, foreign nations are catching up Great Britain and even passing it in certain respects.” The United States, they said, will soon absorb the total cotton harvest; but according to Mr. Young’s reports and that of the Moseley Commission the output of American workmen is not equal to the English, even when the comparison is confined to the North. As for France, the output of labour is so much smaller, that, on an equal production, low wages are compensated for by very large employment of labour. Without Protection, France would continue to export the artistic commodities in whose production she excels.
In Germany wages are lower and hours longer; they enjoy the advantage of cheapness and of national skill in bleaching, dyeing, and printing. After this admission the report adds that they enjoy no superiority in methods of procuring and administering capital; that, while their commercial travellers are remarkable for their enterprise and energy, their methods are rather dubious—they allow extended credit and enter on tricky operations. The Free Trade League considers that the Tariff Commission has greatly overestimated the importance of German industry; its output is lower and not so highly specialised as the English. Wages in Germany are two-fifths and in France two-thirds of the United Kingdom standard; they are higher in the United States, but they have not risen so much in the last twenty years as they have in England. Hours of labour are shorter in England than in America, France, and Germany.
Countries under the Protectionist régime incur expenses which prevent their competing effectively with Great Britain. The following tables only include yarn, the raw material of the textile trade; but the argument can be extended. Drawn up and verified by experts, they can be taken as exact.
Fixed charges for a factory of the same type, employing 262,000 looms, in different countries:—
To equalise the charge wages in each country must be as follows:—
If the same total were spent on wages in a factory of this type in England, France, Germany, and the United States—leaving out of account the much larger number of workmen and supplementary machines in France and Germany—there would be an annual surcharge of £13,000 in France, more than £15,000 in Germany, and £22,000 in the United States. The higher total of hours and the lower total of wages in France and Germany do not outweigh this surcharge. The total wage bill is often as high as that in England because a greater number of workmen have to be paid to attain the same result. The witnesses heard by the Tariff Commission confirmed these estimates. One of them, showing the influence of Protection on the cost of production in protected countries, said of the United States: “As long as they maintain their tariffs, and specially the 45 per cent. duty on machinery, they cannot compete with us abroad.”
The export of cotton from the principal Western nations has increased 38 per cent. between 1891-5 and 1901-2; of the total Great Britain claims 62·5 per cent., Germany comes next with 12 per cent. European competition is confined to fancy and new-fashioned goods; that of the United States to coarse or very fine cottons. The population of the neutral countries is so great and their consumption of cotton so small that there is room for a great increase in the export of yarns and textiles.
Turning now to the cotton yarn kept for home consumption we find:—
From 1884-1904 the number of cotton-spinning companies rose from 60 to 90; over the whole period, fifteen years, show a gross profit of £2,689,000, six years a gross loss of £266,786; the net profit, then, for the whole industry is £2,423,000, or £116,000 a year. An industry in this condition is not ruined.
Wool, according to Mr. Chamberlain, is doomed.
The consumption of raw material shows an increase:—
i.e., an increase of £131,000,000.
A diminution in the export of wool would prove not the decline of the industry, but an increase in home consumption of woollen goods; such an increase disturbs the calculations of those who believe in the Balance of Commerce, and they, therefore, refuse to take it into account. Their countrymen must never buy, never consume, only sell to the foreigner; they are condemned to asceticism while all the useful or pleasing products of their country are despatched across the frontier.
A country’s exports are only a part of its activity; the United States absorb their whole output of iron and steel. Profits on industrial enterprise are an element; there is depression when they fall like card houses, but as long as dividends are paid, reserves increased, depreciation written off, and large amounts of capital ready for disposal, there is no danger.
Profits in the Iron and Steel Trade.
The Economist of May 26, 1905, gives the following statistics showing the position of 12 iron and steel factories in 1903-4 and 1904-5:—
The dividends vary for different firms. Bolckow, Vaughan, & Co. have given 5 per cent. for the last 4 years, and the profits for the year ending June 30, 1905, are £213,000, of which £56,000 goes in increased plant. Guest, Keen, & Nettlefolds gained a net profit of £337,000 on the year ending June, 1905, and on the preceding year £333,000, and since its establishment it has paid 10 per cent. dividends.
Such an industry is not ruined. Germany itself recognised the supreme position of the English steel and iron industries, when, in the three years Rail Syndicate, concluded in 1904 between England, Germany, Belgium, and France, the following share assignment was made on a total of 1,300,000 marks.
EXPORT OF MANUFACTURES
I. Proportion to total export for the six great nations—II. Mr. Chamberlain’s pessimistic prophecies and the facts.
A great many foreigners, and even a considerable number of English people, seem to believe that the magnitude of England’s exports is due to coal; and pessimists say that the export of coal enriches the present at the expense of the future by exhausting natural resources; some go so far as to urge that its export should be prevented by raising the export duty 1s. a ton, since the use of English coal by foreign merchant service and factories helps them to compete against the English merchant service and English factories. A comparison of three tables shows how baseless such apprehensions are. The average export of coal, coke, and other fuel was £30,000,000 between 1900 and 1904; the total export, £289,000,000; and the export of manufactures, £232,000,000. Therefore, for every £100-worth of coal exported, England exports £773-worth of manufactured stuff—a total of £1,000.
Turning now to the proportion borne by the export of manufactures in England to that of other great nations—
Russia only exports 5 per cent. of manufactures, Holland less than 3 per cent. Thus the proportion borne by manufactured goods to total export in the United Kingdom exceeds that of Germany by 15 per cent., that of France by 25 per cent., and that of America by more than 50 per cent.; thus adding one more argument to those already given in the examination of protected and tributary industries to prove to any impartial mind that the Chamberlainists’ attempt to discover in the English export statistics any argument for a change in our fiscal system is very foolhardy, when England stands far above Germany, France, and the United States in absolute and relative exportation of manufactured goods.
In the last column English ships amounting to some 5 or 6 millions per annum are included.
The Protectionists have made great use of the argument from percentages. The increase in exports has certainly been greater in the United States than in the United Kingdom; and when one is added to one the result is 100 per cent. Very fine results can be deduced, as Mr. Chamberlain has shown, especially when he starts his German figures before 1890, that is, before the Free Towns came into the Zollverein.
The result of the German protective tariff has thus been to reduce the relative proportion of imports of manufactures to the total import rather more than 4 per cent. below that of the United Kingdom. M. Méline has succeeded in reducing it 7 per cent. for France—a wonderful result.
It must not be forgotten that England is the richest country in the world; its people are fond of luxury and comfort, and buy what they want whereever they find it. Yet the greater part of the manufactures which they buy are implements; structural iron and steel account for £8,000,000 (Mr. Arthur Chamberlain, a weldless tube manufacturer, said that Swedish steel bars were necessary in his trade); plates of copper and other metals, £20,000,000; implements, £4,000,000; machinery, £4,000,000; cotton (for the most part representing payment for debts, or raw materials), £6,000,000; more or less finished woollen goods, £12,000,000; leather and boots and shoes, £11,000,000. This last item makes the Chamberlainists furious; yet many of their countrymen are ill shod.
Mr. Chamberlain has never had a chance. He declared that England was ruined; her trade and industry in a galloping consumption; if imports were increasing, exports were diminishing. The foreign trade returns for 1903 gave him the lie in the most striking manner; the total had never been so high; it was £903,353,641—£26,000,000 above the record years 1900 and 1902. It represented £24 19s. per head; whereas, even in the annus mirabilis 1873, when prices were much higher, it was only £21 4s. Comparing this total with those of the other six great nations, and subtracting £25,000,000 to allow for the fact that their returns are for 1902, not 1903, we find that the English total compared with Germany, the highest of them, is as 170 to 100.
At Greenock Mr. Chamberlain said, “Sugar is gone: silk is gone: iron is threatened: wool is threatened: cotton will go. How long are you going to stand it? At the present moment these industries, and the working men who depend upon them, are like sheep in a field. One by one they allow themselves to be led to slaughter, and there is no combination, no apparent prevision of what is in store for the rest of them.”
First: “Sugar is gone.”
“Silk is gone.”
“Iron is threatened.”
“Wool is threatened.”
“Cotton will go.”
And this in spite of the 1904 cotton crisis, which deprived Lancashire of its raw material.
At Newcastle Mr. Chamberlain mourned over the disappearance of glass and earthenware.
The importation of raw materials is a sign of a country’s industrial activity.
These are not signs of ruin, and if they were Mr. Chamberlain has never shown how taxes on foreign foodstuffs and manufactures will assist the expansion of British foreign trade.
I. Wheat—II. Free Trade and cheapness—III. Animal food—IV. Price of meat—V. The Free Breakfast Table—VI. Meat ration in the United Kingdom—VII. Agrarian policy—Back to the land—VIII. The profit of the few at the expense of the many—IX. Fiscal Reform and Colonial Markets—X. Profits to landlords—XI. Conclusions.
The memorandum drawn up by Sir Alfred Bateman, at the request of Mr. Chamberlain and his friends, gives three very instructive tables:—
These tables show a constant diminution in the proportion borne by home-grown wheat to our food supply. The only way to reverse this state of things would be to impose such a heavy tax on foreign corn that those who bought it would have to reduce their consumption about four-fifths.
Between 1898 and 1902 the United States were the chief source of our food supply. Mr. Chamberlain and his friends denounced this invasion by American corn, and demanded that the English market should be reserved for Canadian wheat. But since 1904, almost the day after Mr. Chamberlain and the other agrarians were thundering against the American Peril, the imports from the States fell from 60 to 15 per cent. of the whole. In 1904 the United Kingdom imported 118,000,000 cwt. of foodstuffs, of which the U.S.A. were only responsible for 18,500,000; their place was taken by India with 25,500,000 cwt.; Russia with 23,700,000, and Argentina with 21,800,000.
The following table, drawn up by Major Craigie, showing the various sources of English food supply during the last five years, proves the advantage which a country possesses when it can go to the world market for its provisions, and is not exposed to the variations of local harvests.
Sir Howard Vincent, the incarnation of all Protectionist prejudices, saw how large an area Canada occupies on the map, and on June 23, 1905, he said at the Imperial Industries Club, “Canada could produce 5 million quarters of wheat; it has 20 million acres of virgin soil capable of producing 25 bushels of wheat per acre.”
But as matter of fact, no more land is devoted to growing wheat in Canada than in the United Kingdom:—
It is not enough to have vast territories suitable for wheat-growing; to work them an adequate supply of men and capital is needed. The immense area of Canada produced in 1902, a year when the harvest was good, 9,875,000 imperial quarters; the little British Isles in the same year 7,285,000 quarters only 26 per cent. less.
Free Trade and Cheapness.
The opponents of the Cobden Club, in spite of all their efforts to prove that its optimism has not always been justified, have not been able to fasten upon the promise that Free Trade would abolish bad harvests or charm away spring frosts, droughts, excessive rains, and other meteorological accidents, against which, as Galiani puts it, the farmer stakes his all. But Free Trade has allowed the English to buy foodstuff in any market and get it cheaper than any other nation in the world.
According to the Report on Agricultural Returns the price of wheat in 1839, 1840, 1841, was more than 8s. a bushel. In 1846 the Corn Laws were repealed; in the famine year which followed wheat rose 8s. and 8s. 6d.; how high would it have risen if the Corn Laws had not been repealed? In 1848 it fell to 6s. 33/4d., in 1849 5s. 61/4d., 1850 5s. 01/4d., 1851 4s. 93/4d., 1852 5s. 1d.; rising again during the war with Russia—at that time the great centre of the wheat supply—only to fall immediately afterwards to 5s. 61/4d.; and except for one year, 1867, it never rose again to 8s. In 1894-5 it fell to below 3s., and since then has varied between 3s. and 4s. a bushel. The Returns give a table showing the monthly prices of home-grown and imported wheat in England, compared with the prices in France, where it pays a duty of 2s. 10d. per cwt., and Belgium, where it is admitted free.
In 1904 in England the price of a quartern loaf was:—
This is white bread made of the best flour.
Mr. Chamberlain, however, calls the cry of dear bread “an imposture,” the Times “an appeal to ignorant prejudice.” M. Méline used the same sort of language in 1887 when he taxed wheat but not bread; afterwards seeing that there is a relation between the price of a product and that of its raw material, he put a duty on bread equal to that on wheat.
Mr. Ritchie replied to those who said that the duty of 3d. per cwt. on wheat which he had repealed, did not affect consumers, by saying, “It is very extraordinary that two and a half millions can be collected without any one’s feeling it; it is a political economy that I cannot comprehend.”
England practically imports none of her live stock from Europe.
The contribution of the different Colonies is as follows:—
Of the different foreign countries as follows:—
That is to say the British Colonies and Possessions only send one-fifth of the animal food supply; in meal as in corn the share coming from each country varies from year to year.
Canada has 4,264,000 cattle, of which a million are cows; but the United Kingdom supplies 11,376,600 cattle; and while Canada has 2,500,000 sheep, the United Kingdom has 30,000,000; Canada has 1,779,000 pigs, the United Kingdom 3,639,000. Canada cannot, therefore, feed Great Britain. And the same results are found in the other Colonies. Australia has 8,000,000 cattle less than the United Kingdom and the 73,700,000 sheep are only 140 per cent. to 100 in the United Kingdom. No preferential tariffs could so extend their production of wheat and meat as to enable them adequately to feed the United Kingdom. The tariff would have to be so high as to be prohibitive, and even so could not succeed; neither Canada nor Australia could, as soon as it was issued, produce the 80,000,000 men and the corresponding capital which form the productive power of the United States.
The Price of Meat.
Protectionists have a mania for unifying and generalising. To hear them speak one would think there was so much meat in the world that its price must keep falling.
There is no constant fall in price. The price of fresh meat is limited by that of imported frozen meats.
The Free Breakfast Table.
This was Mr. Gladstone’s ideal forty years ago, and except for tea it has been attained in England. The 3d. per cwt. duty on corn and the sugar duty were retrograde steps, but the latter was paid by the Anglophobes on the Continent, thanks to their bounties.
Mr. Chamberlain wants to tax the bread, butter, milk, and cold meat on the breakfast table, but he has not dared to touch bacon or ham, or to force an Englishman to get his fresh eggs from the Antipodes.
The Meat Ration.
The Reports of the Committee appointed in 1900 to inquire into the production and consumption of meat and milk in the United Kingdom by the Royal Statistical Society, give the following results, estimated on the five years ending May 31, 1903:—
If the inhabitants of the British Isles had to live on home-grown meat they would only have 67 lbs. per annum per head: imported meat brings the ration up to 121·77 lbs. To arrive at the ration of the French soldier, the population must be diminished or the ration increased by a quarter, which would give 135·34 lbs.; though this is superior to the diet of the French people by some 33 lbs., it still falls more than 83 lbs. below the standard, which is 218 lbs.
The consumption per head of certain classes is given:—
And those who do not eat meat do not make up the deficiency by milk or dairy produce per head per year:—
The duties on meat and dairy produce tend to reduce still further the already insufficient nourishment of three-quarters of the English population.
Back to the Land.
Mr. Chamberlain talked at first of the necessity of drawing closer together the bonds between the United Kingdom and the Colonies, but the projected taxes on foreign agricultural products were instantly hailed by Lord Harris and Mr. Brassey as protection to English agriculture. But do protective duties remove agriculture from the danger of crises? There were high duties in 1821, 1822, 1833, 1836, and 1837, when the House of Commons nominated the Commission to inquire into agricultural depression, and in France the groans of the landowners have been louder than ever since they have been given a monopoly of their countrymen’s food supply.
Mr. Chamberlain regards duties on food as likely to lead to a return to a country life. Are the workmen to be reduced to such wretchedness in the towns that they will be forced to migrate to the country? What will they do when they get there? Is that ideal to be the misery which Lord Rosebery has described as existing in the country under Protection? It shows a singular ignorance of history to suppose that the 25,054,000 people out of the population of 32,526,000 in England and Wales, and the 3,120,000 out of the population of 4,472,000 in Scotland who live in the towns can be transported to the country. It is equally mistaken to suppose that agriculture as an occupation has been abandoned. While all the textile professions only employ 1 in 17 of the active population, and the cotton trade only 1 in 30, agriculture employs 1 in 7.
Profit of the Few at the Expense of the Many.
As in France, a tax on food falling on the majority could be of advantage only to the great landowners in England. This is proved by the Returns as to the number and size of agricultural holdings in England instituted by Mr. Craigie. Leaving out of account the small holdings of one acre and less, the following table has been drawn up:—
Thus the holdings of between 1 and 20 acres represent half the total number of holders, but only some 6 per cent. of the acreage. Those of 100 acres and above, on the other hand, represent less than 20 per cent. of the number of holders, but 70 per cent. of the acreage. Fifty-two per cent. of the small holdings of 1 to 5 acres are grass: the proportion of pasturage relative to land under cultivation is 2 acres to 1. Above 100 acres the proportion is reversed, and in the holdings of between 500 and 1,000 acres cultivated land is 58 per cent of the whole.
Thus a duty on wheat and other cereals would fall on the many for the profit of a very few great landowners—it would be an argument in favour of land nationalisation. Lord Harris’s partisanship of Mr. Chamberlain’s programme was very imprudent.
Taking the division of the population into classes:
Under the term “unoccupied” are comprised retired officials, pensioners, people living on their incomes, and all whose profession is not specified. For all these people cheapness in the cost of living is important, except the very small number who could hope to increase the return of their land. Duties on food would injure 66·3 per cent., or two-thirds of the population. There remains the agricultural population. Even they, as was shown by Messrs. Ritchie and Balfour in their arguments for the repeal of the duty of 3d. per hundredweight on wheat, many of them need cheap wheat and meal to feed their cattle, many, being mere labourers, need cheap food for their own consumption.
Fiscal Reform and the Colonial Market.
If, however, Mr. Chamberlain did get a tax imposed for the benefit of the great landowners in the United Kingdom, Canada, and Australia, it must be an effective tax, and what could be the effect of one of 2s. a quarter on wheat and 5 per cent. on meat and dairy produce? The advantage which wheat might derive from Protection must not be calculated upon the whole harvest, but only on that on the market. The annual average of wheat put on the market in the United Kingdom between 1900 and 1904 was 2,400,000 quarters; multiplied by 2s. that gives £240,000. During the same period the average acreage sown with wheat was 1,600,000 acres. If the tariff produced the maximum advantage for the English landowners and farmers they would reap a profit of 3s. per acre. Allowing 3 quarters of wheat for 2 of flour in reckoning breadstuffs or foodstuffs, the average importation over the five years 1900-1904 from the British Colonies and Possessions has been 5,700,000 quarters, representing at 2s. a quarter a yield of £570,000. From abroad the average import of 17,300,000 quarters, representing £1,730,000. Thus the English consumer would have to pay:—
And of this sum the Treasury would receive £1,730,000, or 72 per cent., the farmers and cultivators 9 per cent., and the Colonial farmers 19 per cent. But does Mr. Chamberlain expect to revive English agriculture with £240,000? And does he think £570,000 enough to cement the dissolving unity of the Empire? Imperialism is cheap at that. True he adds a 5 per cent. duty on meat.
According to the Annual Statement for 1904 the average annual total import of meat is—
In this total pork, ham, &c., is included, amounting to £1,900,000 from abroad, and from the Colonies £30,000. Subtracting, then, £1,900,000 from £38,700,000, since Mr. Chamberlain exempts pork, &c., 5 per cent. on an importation, in round numbers of £37,000,000, will bring in £1,850,000 to the Treasury.
In the home market 662,000 tons of beef at 52s. per cwt.—the price in 1904—work out at £34,500,000, and 313,000 tons of mutton at an average price of 65s. per cwt. at £20,000,000.
If the 5 per cent. duty produced its full effect the English landowners would gain £2,725,000, while the Colonial owners touched £500,000. Moreover, Canada sends us four million pounds’ worth of cheese, one million of butter; Australia and New Zealand two millions of butter—a total of seven millions, which at 5 per cent. would give £350,000. Then the result of Mr. Chamberlain’s magnificent scheme would be:—
The total revenue of the Colonies is valued:—
Mr. Chamberlain’s Imperialism, then, would add a bonus of £1,400,000 to this purchasing power of 1,200 millions; to add one guinea for every £1,000 of revenue of the British Colonies and Possessions. This guinea is to rivet the Colonies to the Mother Country and enlarge the Colonial market for our manufactures: a grand result from so small a cause!
Such a disproportion between promises and reality makes one marvel at the ignorance of the creator of the programme and the simplicity of those who support it.
Profits to English Landowners.
Wheat and meat have been dealt with; dairy produce remains: it is estimated in Mr. R. H. Rew’s Report at 168,000 tons of cheese at an average price of 8d. per lb., 160,500 tons of butter at 1s. per lb., and 620,000,000 gallons of milk at 31/2d. per quart or 1s. 2d. per gallon. Then—
This being the value of the total production at 5 per cent. it would give £3,250,000. But part of this produce is consumed at home; a third is a low estimate for this. Allowing for it the yield of the duties, and the measure of their advantage to the home products would be:—
In 1902-1903 the gross income from agriculture in the United Kingdom was £85,000,000. Consequently if Mr. Chamberlain’s programme produced its maximum effect it would add 5·64 per cent. to this income. The tax on food would bring in more to the British landowner than to the Colonies, and thus the magnificent Imperial policy would be no more than a cloak for unscrupulous agrarianism. Even so, however, it could not attain its ends, since Protection, like reduction, only succeeds where it is considerable.
1. The basis of Mr. Chamberlain’s Fiscal Reform was a Customs duty on foreign wheat, meat, and dairy produce.
2. This duty was to raise the price of home and Colonial wheat, meat, and dairy produce by the full amount of the tax.
3. The profits resulting from it to the British Colonies and Possessions by increasing their purchasing power would increase their market for our manufactures.
4. In return for this preferential treatment the Colonies were to grant favourable tariffs for English manufactures.
5. While at the same time the taxes on wheat, meat, and dairy produce were to revive English agriculture and attract part of the urban population back to the land.
6. To obtain this result Fiscal Reform imposed a tax on all English consumers of bread, meat, and milk for the benefit of 98,000 estates of more than 100 acres, representing 70 per cent. of the arable land of the country, and for the benefit of the Colonial landowners.
7. In only daring to propose a 2s. duty per quarter on wheat and 5 per cent. on meat and dairy produce, Mr. Chamberlain himself nullified the promised results.
MR. CHAMBERLAIN AND IMPERIAL UNITY
I. Proportion of foreign and Colonial trade—II. Exports—III. Colonial markets for national labour—IV. Canadian experience—V. Mr. Chamberlain’s offer to Canada—VI. Mr. Chamberlain’s offer to Australia.
Proportion of Foreign and Colonial Trade.
Mr. Chamberlain’s main argument for the preferential tariffs, “without which the unity of the Empire cannot be maintained,” was that, “while our commerce with our Colonies is increasing,” that with foreign nations is decreasing,” not seeing that this argument really tells the other way, for if it is developing normally, to develop it artificially is superfluous. As a matter of fact its development is normal and continuous, and its proportion to our trade with foreign nations remains about the same. The sudden increase in our colonial exports in the last period is to be accounted for by the South African war.
Looking at the import and export statistics, we find:—
England only imports from the Colonies a fifth of what she needs. To tax foreign imports in the interests of the Colonies would be to tax four-fifths of her consumption for the advantage of one-fifth. Mr. Chamberlain and his satellites talk about the “Empire feeding itself,” but they take good care not to show how it is to be done in practice. Mr. Chamberlain has given up taxes on raw materials; again and again he says his moderate taxes on wheat, meat, and dairy produce are to be paid by the foreigner. The policy is to say you want to do something but refuse to employ the necessary means to that end, since they might cause some trouble and provoke some discontent. If Mr. Chamberlain really believed that his programme was necessary he would have used the means which Calvin and all real reformers have employed, and of which Voltaire says, “No one succeeds now by proposing anything easy; the hardest master is the most followed.”
He ought to have said to the Lancashire manufacturers and operatives, “To make the Empire self-sufficing you must sacrifice the £1,858,000,000 worth of cotton coming from abroad and be content with the £96,000,000 that came from our colonies and possessions”; to the House of Commons, “To make the Empire self-sufficing, every man, woman, and child in England must reduce his consumption of meat 60 per cent., and of wheat 70 per cent. I ask you to order ‘Imperial Fasting.’”
Mr. Chamberlain proposes to sacrifice two-thirds of our exports for the sake of the other third. Speaking at the Constitutional Club, he said: “I am told that we risk the loss of a market of 300,000,000 foreigners for the sake of one of 10,000,000 of our fellow-countrymen; to that I reply, is it not more worth while to cultivate a trade with 10,000,000 of your fellow-countrymen, who take £10 per head of our products, than the foreigners, who only take a few shillings per head?”
If the 12,000,000 white inhabitants of the self-governing Colonies each took £10, that would give £120,000,000. The following are the figures for our exports to the Colonies:—
This is a good example of the sort of exaggeration in which Mr. Chamberlain habitually indulges. The Colonies have never taken £10 per head of our products; in 1904 they took a little over £4 per head, i.e., 60 per cent., less.
Mr. Chamberlain would penalise the 42,000,000 inhabitants of the United Kingdom for sake of 12,000,000 in the Colonies.
Mr. Chamberlain talks about the German Zollverein, but what is it? The establishment of Free Trade between countries formerly separated by Customs duties. When Mr. Chamberlain talks of a British Customs Union, he is either knowingly or unknowingly using a word which does not apply, since, as he knows, none of the self-governing Colonies would give up the tariffs established with the express purpose of protecting their products against British imports.
He declares that the export of manufactures to foreign countries has declined, while that to the Colonies has increased. The following table from the 1903 Memorandum of the Board of Trade gives the variations in the export of manufactured goods (not including ships):—
As a matter of fact, comparing 1890 and 1902 there is a diminution in our exports to foreign countries. In 1900 there was a decline of £7,000,000, and in 1902 of £18,000,000. This £18,000,000 was exactly balanced by increased exports to the self-governing Colonies. Foreign countries take 58 per cent., Colonies 42 per cent; consequently the foreign market is still 16 per cent. greater than the colonial. The Report of the Imperial Tariff Committee on the Cotton Industry shows that of £73,300,000 in 1903 and £84,000,000 in 1904, the self-governing Colonies took—
i.e., 4·80 per cent. and 5·40 per cent.—a modest share.
India remains. All Protectionists have repeated that India, able to produce raw cotton and obtain a supply of cheap labour, would not only buy no more cottons from England, but would invade Lancashire with Indian cotton goods. Not at all.
In 1904 it imported 400 per cent. more cotton than all the self-governing Colonies put together.
India, not being a self-governing colony, has no say in Mr. Chamberlain’s Colonial Conference. England might justifiably feel a certain anxiety if there were no development of her Colonial exports, but such is not the case. The people of the self-governing Colonies are growing in numbers and in wealth; of English origin, their tastes and customs recommend English goods to them; it is useless to try to substitute political intervention for the normal economic development of the relations between the Colonies and the Mother Country.
What means has Mr. Chamberlain discovered for the increase of the colonial market?
National Labour and the Colonial Market.
In exchange for duties on foreign food the Colonies are to give preferential treatment to English manufactures. Mr. Chamberlain at once assumes that the Colonies, which now take £26,000,000 worth of goods from France and Germany, will not take a pennyworth in future, but confine themselves to English goods. He then goes to the British workman and says, “According to the Board of Trade wages represent half our exports. I give you £13,000,000 in wages; at 30s. a week that means employment for 166,000 men.” This calculation is based upon two fallacious suppositions. Mr. Chamberlain assumes that his policy will not close the more valuable markets, and that England can supply the colonies with the goods they now get from France and Germany.
Canada has given England preferential treatment. What has been the result?
On July 1, 1898, a tariff giving 25 per cent. preference to English goods was issued, and on July 1, 1900, one granting 33 per cent.
These figures show that the influence of preferential tariffs has been rather to increase Canadian exports to England than English exports to Canada; the former having risen 70 per cent, from 1890-1894 to 1898-1902, whereas the latter have only increased 43 per cent. A glorious result, the Protectionist may say, but his enthusiasm becomes wholly unreasonable when we compare Canada’s imports from Great Britain and the United States in million dollars:—
Between 1896 and 1904 for these two countries, Canada’s principal importers have risen 156 per cent. for United States, 84 per cent. United Kingdom.
At the Colonial Conference in 1902 Mr. Chamberlain said, “The results have been a deception.” And they have grown worse. The reasons are clearly given in a Board of Trade Memorandum. The United States enjoy geographical advantages which no preferential tariff can abolish, and in spite of the tariff Canadian policy, remaining Protectionist, taxes manufactures more heavily than raw materials. England sends manufactures to Canada, and the duties on them are still above the average duty on the goods imported from the United States. In 1903 manufactures ready for consumption brought in 24·3 per cent., “luxuries” 53·56 per cent., most of which came from England. In 1903 the average duty on English imports was 17 per cent., while that on American imports was only some 121/2 per cent. The preferential tariff produced the usual recrimination. Canadian manufacturers, pretending to be penalised by English competition, got an Act passed, June 20, 1904, which specified that the minimum tariff on cloth and woollen goods should be at least 30 per cent., and that on ropes at least 20 per cent. In 1904 a special tax on commercial travellers was specially aimed against the English ones. Is all this a preparation for Free Trade within the Empire?
Benefits offered to Canada.
The Canadian Customs returns put down to England’s account all that is sent there; the English figures only count what comes in, and the difference is considerable. According to Canadian returns, it sent in 1904 £4,714,000 worth of wheat; the English returns reduce the total to £3,787,000. The English figures for Canadian imports in 1904 are—
Foodstuffs are 72 per cent. of Canada’s imports to us.
The import of wheat has been 1,550,000 quarters. Admitting that the 2s. a quarter duty on foreign wheat produced its full effect, there would be £155,000 to hand over to Canada. Mr. Chamberlain has never stated what the precise tax on wheat would be, but he has said it would give “a substantial preference to the miller,” i.e., the English miller. He has never explained how the Canadian miller was to benefit. But taking the assessment to be the same as in the case of wheat, and allowing 3 qrs. of grain equal to 2 of flour, we have 642,000 qrs. at 2s., i.e., £64,200. The 5 per cent. tax on meat if it had its full effect would work out and dairy produce for Canada. In a word, to give a great extension to the trade between Canada and the Mother Country, and to tighten the bond of sympathy which results from common interests, Mr. Chamberlain generously offers to its six million inhabitants £739,000, or 2s. 8d. per head, per year. “Think Imperially,” cried Mr. Chamberlain: and the grandeur of his conception is proved by his declaration that the Empire would fall in ruins if the inhabitants of the United Kingdom did not offer the Canadians this monthly dole of 10 farthings a head!
Benefits offered to Australia.
What were the 4,000,000 inhabitants of Australia to receive? According to the Board of Trade, in 1904 Australia exported £23,300,000 to the United Kingdom, as follow:—
The average imports of corn and butter are much lower.
and New Zealand (1904)—
This gives £275,000: at a maximum Australia and New Zealand would receive £700,000. The population of Australia and New Zealand is 5,000,000 in round numbers: this would allow them 2s. 9d. a year per head, or 11 farthings a month. Mr. Chamberlain has told us often enough that the English consumer would only have to pay “farthings” in return for the benefit to the Colonies: he might also have pointed out that the present to the Colonies could only be calculated in farthings—10 a month to Canadians, 11 a month to Australians!
ARGUMENTS FOR FISCAL REFORM
I. The Argument from authority—II. Cobden’s optimism—III. Free Trade, Free Imports—IV. Mr. Chamberlain and the Frankfort Treaty—V. Balfourian Retaliation—VI. Against French Automobiles—VII. Imports and home industry—VIII. English workmen and Protection—IX. Dumping—X. The drain of gold—XI. Living on our capital—XII. London.
The Argument from Authority.
All the old Protectionist lumber has reappeared, decked out with tinsel and coats of fresh paint to make it look new. When Mr. Chamberlain and his friends can find a single phrase in the books of independent economists which seems to support their views, they quote it with alacrity, and invoke “the eminent authorities” whom they usually treat with profound contempt. They rely on the old scholastic method, which cut short all questions with two lines from Aristotle. Mr. Chamberlain has perfected the “argument from authority” he has invented an anonymous authority. In his speech of October 6, 1903, he declared that “one of the highest authorities of this country” had told him that “the incidence of a tax depends upon the proportion between the free production and the tax production—in this case the free production being the home production and the production of the Colonies, the taxed productions the production of the Colonies. “This gentleman” is of opinion that if, for instance, the foreigner supplies, as he does in the case of meat, two-ninths of the production, the consumer only pays two-ninths of the tax. If he supplies, as he does in the case of wheat, something like three-fourths of the consumption, then the consumer pays three-fourths of the tax. If, as in dairy produce, he supplies half of the production, then the consumer pays half the tax. I do not know who this “high authority” is who persists in remaining anonymous, nor do I know if Mr. Chamberlain has accurately expressed his views; but anyhow he has not explained how there can be two market prices for the same goods, one price for foreign wheat and one for that grown at home and in the Colonies. If this were the incidence of the tax, preferential tariffs would be of no avail, since they would not raise the price of home or colonial products. Mr. Chamberlain wisely adds, “This is a theory like any other. . . . ” It is not a theory like any other: it is at variance with all known facts.
In January, 1841, Cobden had committed the crime of saying at Manchester, “Europe has been corrupted by the detestable example of England. I believe that if you abolish the Corn Law and establish Free Trade, in five years’ time there will not be a Customs tariff which has not been changed after our example.”
Cobden was mistaken in the date, but not in the effect produced by English policy. If England had not adopted Free Trade the 1860 treaties would never have been signed: they abolished prohibitions which have never been re-established, and lowered duties which have never since been raised to their former height. Mr. Chamberlain blames Cobden and the Free Traders for the non-adoption of Free Trade by other nations, and for the economic reaction since 1879; and demands that England should give it up to punish Cobden and the Free Traders for the fact that all foreign nations have not seen its advantages. Since other nations are loaded with duties which increase the expenditure of effort necessary to everything they produce, Mr. Chamberlain endeavours to induce his countrymen to renounce economy of effort: since other nations have set their Customs system in opposition to that progress in science, industry, commerce, banking which has continuously operated to lower the price of goods and facilitate exchange, to keep down frontiers and Customs tariffs by lowering prices (for example, in the case of chemicals): therefore forsooth England is to give up a fiscal system suited to the processes of industrial evolution.
Free Trade and Free Imports.
“I am a Free Trader,” said Mr. Chamberlain at the beginning of his campaign. “I am as much of a Free Trader as any one, but we have not got Free Trade; we have only Free Imports.”
He forgets that no one buys to please the seller, be he a fellow-countryman or a stranger, but always to please himself. When a Government puts an obstacle between him and the seller, it forces him to make an effort proportionate to the obstacle to get what he wants. Of course the obstacle inconveniences the seller, and since his desire to sell is greater than the buyer’s desire to buy, his inconvenience is the greater; but the buyer is forced to have recourse to things which are not exactly what he wants, and which, if the tax is prohibitive, cost him more; he has to pay more dearly for all taxed goods, and consequently his purchasing power is diminished by every rise in duties.
Free Imports enable the Englishman to buy what he wants at the lowest price. When other buyers present themselves at a disadvantage because of the uncertainty and burdensomeness of the Customs policy of their respective countries, they find that the English, safe in the freedom of their goods, have already supplied themselves. Since Free Trade makes the British Isles a free port, prices are fixed in its markets, and its merchants profit thereby.
Mr. Chamberlain and the Frankfort Treaty.
To justify the establishment of Customs tariff which should permit tariff wars, Mr. Vince, the General Secretary of the Imperial Tariff Commission, declared, “There is going to be a revision of the commercial treaty between France and Germany, and the French negotiators are bent on acquiring a German market for French silks and wines.”
Mr. Chamberlain as well as Mr. Vince represents France as negotiating with Germany for concessions on wines. They both forget that Art. XI. of the Frankfort Treaty assures to both nations most favoured nation treatment; and were there any question of a revision it would not turn upon wines.
Mr. Balfour has loaded Mr. Chamberlain with flowers, but never accepted his programme. One point alone he has accepted and worked out—retaliation. “We are unarmed,” said Mr. Balfour. As a matter of fact nothing prevented Sir Michael Hicks-Beach from using countervailing duties to ensure the success of the Brussels Convention, which proves that the Ministry is not unarmed. But, on the other hand, would Parliament ever grant a general mandate for the use of retaliatory measures?
In the Economic Notes on Insular Free Trade, which Mr. Balfour addressed to his colleagues in the Ministry, published in September, 1903, apparently logical deductions are put together with consummate skill; but it is all really a mere card-house.
In regard to France, Mr. Balfour is mistaken on a matter of fact. He estimates that English imports pay on an average 30 per cent.: here he is confusing the maximum and minimum tariffs. In return for her policy of the open door England receives most favoured nation treatment; and in 1902, the year which Mr. Balfour takes as the basis of his calculations, our exports to France were assessed by the English Customs House at £15,587,000, and by the French at £22,680,000—the duty amounted to 9 per cent. on the English and less than 61/2 per cent. on the French assessment.
Stripping Mr. Balfour’s arguments of their somewhat pedantic dogmatism, they amount to this: Other countries shut their door; let us shut ours, so that the others may be forced to knock at it if they want to get in their goods. It is the policy of the shut against the open door. This sort of tit for tat is hardly the policy one would expect from a philosopher like Mr. Balfour; one can understand it coming from a manufacturer who, according to Mr. Balfour, sees his goods kept out by 130 per cent. duties in Russia, 72 per cent. in the United States, 32 per cent. in Austria, 27 per cent. in Italy, 25 per cent. in Germany, 16 per cent. in Canada, 13 per cent. in Belgium. But this manufacturer, before he can sell any of his products, is a consumer of plant and raw material, and, through his workmen, of goods, and his consumption is in proportion to the importance of his factory. Every turnstile at the frontier raises the price of the goods which he needs, either directly or indirectly, and consequently his cost of production. Since dearness either restricts or closes the market, to punish other countries for not opening the door to his goods he begins by himself diminishing their sale.
Supposing that England were to try this policy against the United States, what class of goods would be chosen for the experiment: the 117 million dollars’ worth of cotton imported in 1902; the 86 million dollars’ worth of corn and meal; the 120 million dollars’ worth of live stock; the 22 million dollars’ worth of petrol; the 11 million dollars’ worth of copper, or the 16 million dollars’ worth of leather? Mr. Balfour has always declared a tax on food to be out of the question. He must, therefore, intend to obtain a reduction of duties by attacking manufacturers—the 2 million dollars’ worth of boots and shoes!
Tariff wars are most dangerous to the nations with the most highly developed trade and shipping. England can best preserve “the product of the areas valid for export” by leaving the door open: the shut door prevents going out as much as coming in, and the open door if it allows coming in also allows going out. Commercial activity is not encouraged by the methods of the gaol.
Against French Automobiles.
It is strange to hear an English Prime Minister speaking like Colbert and M. Méline: “I had rather give my money to our own workmen than to strangers.” Partisans of Fiscal Reform are neither more nor less than Colbertists!
In 1903, soon after the publication of Mr. Chamberlain’s manifesto, a prominent Protectionist said to me in a tone of conviction—
“Our yearly import of automobiles from France is more than £4,000,000.”
“To begin with, your facts are incorrect. Last year the import was only £225,000.”
“This year it is higher.”
As a matter of fact the import for 1903 was £1,995,000, and for 1904 £2,636,000. At the time of our conversation my interlocutor could not have been acquainted with the second total, and even if he had his statement exaggerated it by more than 40 per cent. I mention this as an example of the methods employed by the leaders of the Fiscal Reform party, even to their own supporters. This gentleman had been given the figure; he repeated it in good faith without troubling to verify it.
“Anyhow it does not matter,” I said. “You complain of the importation of automobiles. Well make them yourselves.”
“We can’t make them unless we are protected.”
“That’s to say your automobiles would be more expensive and not so good as those you buy from France. Then it is to your interest to buy them in France.”
“Oh, I should go on buying mine from France. But what does it matter paying a little more for them? It will give employment to our workers.”
“Not on your purchases, since you go on buying them in France!”
“That’s true. But with the help of Protection our workmen would learn to make them just as well, and then they would get work.”
“But without the help of Protection they can get the steel, wood, and leather needed for construction cheaper than in France, and you pay less for your coal. Then England has a real protection, which Protection would take away: Customs tariffs, far from increasing would remove her advantages. How do you imagine they are going to give your workmen a skill which they do not now possess?”
“Our mechanics are as good as the French.”
“Then they could make as good automobiles as the French workmen.”
“No doubt English workmen are capable of constructing the machinery of a motor car as well as the French. If they do not do so, as you say, Free Trade is not the cause of that, it is because English builders, engineers, and manufacturers have not yet taken up the industry.”
“Yes, and why? Because they are not protected. If they were protected, they would have felt safe in sinking capital in it.”
“That is not why the automobile industry has not developed in England: in reality it is not an industry yet, but a sport. Look how fast different makes appear and disappear: at no one time are 500 cars turned out of the same type, with the same cylinders, pins, and interchangeable parts. There is a perpetual change. I know amateurs who buy a new one every year. They want the latest, which has won a prize at some race or other. French roads are the best in the world for record-breaking. When automobilism becomes an industry, turning out every year numbers of cars of the same unvarying pattern, then England will have in this, as every other industry, the advantages of Free Trade. But do you think that the motor car was invented in France, thanks to Protection? That that has developed its construction? On the contrary, it has hindered it by hindering the supply of raw materials; and thus it makes the selling price higher.”
“Well, we import your cars; it would be better if we made our own.”
“Do you imagine that Mr. Chamberlain’s 10 per cent. duty will effect that? If it produced its full effect, it would raise 10 per cent. the price of iron, steel, and all raw materials: the price of the car would be higher and the number of buyers smaller. What a strange idea it is to pay duties as a way of extending your market! It is the markets and not the duties which give employment. Wages are only advanced by employers: they are paid by the consumers; and the dearer they pay the lower is their purchasing power.
Imports and Home Industry.
Speaking at Newcastle, October 20, 1903, Mr. Chamberlain said, “In thirty years the total imports of manufactures, which could just as well be made in this country, has increased eighty-six millions, and the total exports have decreased six millions. We have lost ninety-two millions, the balance; that is to say, ninety-two millions of trade that we might have done here has gone to the foreigner. The Board of Trade tells you that you may take one-half of the exports as representing wages. We, therefore, have lost £46,000,000 a year in wages during the thirty years; that would give employment to nearly 600,000 men at 30s. per week, continuous employment that would give a fair subsistence for these men and their families amounting to three million persons.”
I have reproduced this clap-trap argument in full. Mr. Chamberlain might have completed it by saying, “Machinery takes work away from men, women, and children: down with machinery!” All Mr. Chamberlain’s arguments against foreign imports are equally valid against machinery.
If increased exports had destroyed home industry, wages would have gone down since 1860; but they have risen. The demand for labour has been greater than the supply.
If increased imports had taken work from British workmen, they would have exported themselves. The annual emigration to British possessions between 1854-1860 was, on an average, 134,000, or 48 per 10,000 inhabitants; for 1895-1899, 55,000, or 13 per 10,000; between 1901-1903 it rose to 106,000, or 21 per 10,000.
If increased exports had diminished the demand for labour, pauperism would have increased. Excluding casual paupers, the number of adult able-bodied paupers was—
Opposition of the Working Classes to Protection.
The question of Fiscal Policy was discussed in September, 1903, at the Trades Union Congress at Leicester. A resolution strongly condemning the Chamberlain programme was introduced by Mr. Sexton, of Liverpool, on behalf of the National Dock Labourers, supported by Mr. Holmes, of Cardiff, representing the Railway Servants, and Mr. Michaels, of London, for the Cabdrivers’ Association. This condemnation was not confined to the representatives of the powerful Trades Unions of the Dock Labourers and Railwaymen. The adhesion to the Conservative programme of Mr. Macdonald, the secretary of the London Trades Union Council, gave a momentary encouragement to the Protectionists, which was freely exploited by the Birmingham Tariff Committee. He did not appear at Leicester to defend his views, and they were violently attacked by several speakers, notably by Mr. Harvey, of the Miners’ Federation. With the exception of Mr. Mosses, of Leeds, and one or two other timid speakers, who professed themselves in favour of an inquiry, there was a general recognition of the benefits of Free Trade. Where, but from protected countries, do the poor foreigners come who carry on the sweating system? In what Protectionist country is the workman’s condition as good as in England? In the days of dear bread, wages were 50 per cent. below their present standard, and the price of food has gone down 30 per cent. A national protest against Preferential Tariffs was signed by 960 of the most prominent Trades Union and Co-operative representatives. Twelve out of the thirteen Labour M.P.’s had signed it. The signatures of the officials of the Co-operative Societies represented 2,022,000 members, with a capital of £26,600,000, and a working capital in 1902 of £55,319,000. At the 1905 Trades Union Congress the question was again raised, and the Chamberlain programme thrown out by 1,256,000 to 26,000.
Some of the Board of Trade tables have not been of a sort to attract the English workmen to Mr. Chamberlain’s side.
This table shows that wages have risen more rapidly in England than in the United States, though less rapidly than in Germany. The respective rates of wages are as follows:—
Thus German wages are more than a third lower in the towns and 43 per cent. in the capital. The English workman knows that, thanks to Free Trade, he can get manufactured goods and food at the lowest prices. He sees no reason for giving up Free Trade, he had rather go to his Co-operative Society.
When Mr. Chamberlain has once got hold of an argument he sticks to it, however often it has been refuted. At St. Helens on June 3, 1905, he waxed enthusiastic over the condition of the cotton operatives in protected countries, and expressed the hope of seeing English workers similarly placed. Almost the next day the Report of the Tariff Commission on cotton declared “That in these countries the conditions of labour are poor and the wages low.” And they count on the lowness of their wages to enable them to compete with England. Inquiries made in connection with the Chamberlain programme have confirmed the following axioms:—
Wages are high in proportion to the cheapness of raw materials. Their rise is conditioned by efficiency of plant and cheapness of transport.
Free Trade is the policy of cheapness, and therefore of high wages, since on the same selling price they can rise to the full extent of the share that would have been taken by Protection.1
The Memorandum has attempted to ascertain the share of export trade in wages. Wages may be estimated as between 40 and 60, say 50 per cent. in exported manufactures, of which the annual average for 1900-4 was £232,000,000—i.e., £116,000,000 in wages; 10 per cent. may be added for repair, secondary labour, &c.; in round numbers wages may be counted as £120,000,000 to £130,000,000. According to the inquiries the total wages of industry in the United Kingdom may be estimated at between £700,000,000 and £750,000,000; consequently wages of the export trade are less than 20 per cent., or a fifth of the whole, and Mr. Chamberlain is thus attempting to upset the whole of English trade to increase, perhaps by a tenth, a fifth of the total wages. It is always the same, this wonderful system of sacrificing the majority to the minority, risking the normal conditions of industry for hazardous advantages.
Dumping is the Chamberlainists’ favourite argument. The slang term is used to describe the export by a protected industry of goods at or below cost price, which it sells at a much higher price in the home market. Dumping has been employed by the German cartels, but, as Raffalovich has shown in his book on Trusts, Cartels, and Syndicates, at a severe cost to their countrymen. It was said that when the great American trusts found their home markets restricted they would inundate Europe with their products; but this has not been the case. When the United States Steel Corporation became depressed, it did not invade England.
England, say the Protectionists, is the dumping-ground of all nations; but the relative proportion of manufactures to total imports gives them the lie. When the French cotton spinners from the Vosges dumped their cottons in Manchester, they did it to their own loss, and they recognised that a repetition of the process would be their ruin. Mr. Chamberlain and his satellites have all repeated Mr. Byng’s dumping theory, but they have either cited no fact or cited them incorrectly. A typical instance—Mr. Alexander F. Acland Hood, Conservative Whip, said at a Unionist meeting at Wellington, at the end of November, 1903: “One of my friends has done a lot of business in the glass trade. Now in France there is a tariff against him. The State Railways carry glass free from Paris to Calais.”
As a matter of fact the railway from Paris to Calais does not belong to the State, the tariff is 22 francs per metric ton, and the State gives no bounties on the export of glass.
The Drain of Gold and the Balance of Trade.
In 1902, Mr. Seddon, the Australian Prime Minister, made himself famous by the following statement in a speech he made in London: “The excess of your imports costs you yearly 200,000,000 gold sovereigns.”
The facts are so well known that this delightful statement caused an outburst of laughter. Even during the Transvaal War England imported more gold than she exported:—
And yet the old Protectionist shibboleths of beneficent exports and ruinous imports were uttered again. Taking the calculation1 of the Balance of Commerce made by Mr. Robert Barclay, former President of the Manchester Chamber of Commerce, allowing 20 per cent. to cover insurance and freightage on English exports, and subtracting 10 per cent. from imports, we find:—
England gains by imports as well as exports, consequently, far from wanting them to decline, she should desire their advance.
England Living on its Capital.
Protectionists represent England as a young prodigal who spends without counting till he is ruined. As a matter of fact England’s position to foreign nations is quite different: far from being a prodigal, she is an old usurer. England’s revenues from foreign countries have gone on increasing:—
The example of the Argentine Republic, cited by the Financial Reform Almanac, is decisive. Between 1888 and 1890 England invested a large capital in South American railway construction. For five years, between 1886 and 1890, England’s exports to Argentina exceeded her imports, £38,177,000 to £12,628,000. Then the railways began to succeed; the balance changed: from 1891 to 1895 English exports fell to £25,300,000, and imports rose to £28,100,000. Between 1896 and 1901 England had only to draw in profit on the railways; exports rose to £37,114,000, imports to £59,000,000.
If foreign purchases were ruining England and depressing trade returns, the Income Tax schedule would bear traces of it. As a matter of fact it proves the contrary. Taking the most prosperous years:—
“England does not live on its capital, but in part on the interest and profit from capital exported to all parts of the world.”
Position of London.
External trade does not consist solely of goods recorded in the Customs statistics. Mr. Felix Schuster, President of the Union Bank and Vice-President of the Institute of Bankers, has shown with great clearness that Mr. Chamberlain and his friends, in their passion for the unity of the British Empire, forget London, the centre. London is not only the financial centre of the Empire, but of the world. The Chinese merchant who sells tea to Russia or Germany, silk to America or France, sells bills on London to his local bank; and the German merchant who sells his camlet to China does the same. The coffee sent from Brazil to France and Italy, the cotton sent from New Orleans to Poland, the sulphur sent from Sicily to the United States, the agricultural implements sent from the United States to La Plata, are all paid through the City.
Bills on London are the recognised medium of international exchange. The Bank follows trade. Do Mr. Chamberlain and his friends imagine that the means by which they propose to restrict trade will not affect the Bank? If they imagine it, Lombard Street is under no such illusion. Not a single great City banker ranged himself on Mr. Chamberlain’s side at the Guidhall, whereas a few days afterwards Lord Avebury and Lord Hillingdon proposed a vote of thanks to the Duke of Devonshire.
REASONS FOR MR. CHAMBERLAIN’S DEFEAT
1.Mr. Chamberlain invites 42,000,000 of Englishmen to fine themselves for the benefit of the 12,000,000 inhabitants of the self-governing Colonies; and these 12,000,000 do not elect the members of the House of Commons.
2. The Colonies protect themselves against England; Mr. Chamberlain is deceiving himself when he talks of Free Trade within the Empire, for the Colonies will remain Protectionist.
3. The Colonies will never allow the United Kingdom to dictate their Customs policy for them.
4. On its side Parliament will never allow Canada, Australia, and South Africa to dictate the fiscal policy of the United Kingdom.
5. To give any real advantage to the Colonies the duties on food and raw material would have to be heavier than Mr. Chamberlain would dare to propose.
6. If the duties are light, the bounty which he promises to the Colonies “to cement the Empire” is insignificant and of no avail to open Colonial markets for English goods.
7. The City would as soon cast half of English credit into the sea by adopting bimetallism, as consent to run the risk that bills on London should cease to be the international medium of exchange.
Yves Guyot, “L’Économie de l’Effort,” cap. viii.
“Financial Reform Almanac.”