The Online Library of Liberty

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• Preface
• The Comedy of Protection
• Book I: Fluctuations In the French Customs Tariff
• Chapter I: Colbertism and Its Effects
• Chapter II: From 1791 to 1814
• Chapter III: The Revenge of the ÉmigrÉs
• Chapter IV: The “feudatories” of the July Government
• Chapter V: Universal Suffrage—rampant Protectionism
• Chapter VI: Cobden and the 1860 Treaty
• Chapter VII: Submission of the Republicans to the Fiscal Policy of Their Adversaries
• Chapter VIII: Results of the 1860 Treaties
• Chapter IX: Economic Reaction of 1881
• Chapter X: Bargain Between Landlords and Manufacturers
• Chapter XI: Tariff Freedom
• Chapter XII: Breach In the Minimum Tariff
• Chapter XIII: Socialism and Dear Bread
• Chapter XIV: Deception
• Chapter XV: The Panacea of Bimetallism
• Chapter XVI: Underselling In Wines
• Chapter XVII: Tariff War Between France and Italy
• Chapter XVIII: Bounties to the Merchant Service
• Chapter XIX: Sugar Bounties
• Chapter XX: Import Bonds
• Chapter XXI: Temporary Admissions
• Chapter XXII: Foreign Trade Between 1860 and 1903—france and England
• Chapter XXIII: Thiers’ Agricultural Forecasts
• Chapter XXIV: Definite Results of the 1860 Treaty
• Chapter XXV: Reaction and the Protectionist Fever
• Book II: Protected and Restricted Industries
• Chapter I: The Postulates of Protection
• Chapter II: Relative Importance of Different Industries
• Chapter III: The Principal Group of Industries In France
• Chapter IV: The Textile Industries
• Chapter V: The Metal Trades
• Chapter VI: Skin and Leather Trade
• Chapter VII: Conclusion
• Book III: Bread and Meat In France
• Chapter I: Claims of the French Landed Proprietors
• Chapter II: Physiological Determination of the Standard Ration
• Chapter III: Bread In France
• Chapter IV: Protection and the Price of Bread
• Chapter V: Meat In France
• Chapter VI: Food In France, According to the Labour Bureau
• Chapter VII: French Agriculture and the Incidence of the Customs—deficiency In Production
• Book IV: The Protectionist Oligarchy
• Chapter I
• Book V: The Work of Death
• Chapter I: Food and Effort
• Chapter II: Nutrition and Evolution
• Chapter III: Nourishment and Mortality
• Chapter IV: Justice and Charity
• Book VI: Mr. Chamberlain’s Programme
• Chapter I: The Protectionist Tradition In England
• Chapter II: Mr. Chamberlain’s Programme
• Chapter III: Mr. Chamberlain’s Statements and the Customs House Returns
• Chapter IV: Export of Manufactures
• Chapter V: Food
• Chapter VI: Mr. Chamberlain and Imperial Unity
• Chapter VII: Arguments For Fiscal Reform
• Chapter VIII: Reasons For Mr. Chamberlain’s Defeat
• Book VII: Protection In the United States
• Chapter I: The American Tariff
• Chapter II: Protectionist Arguments
• Chapter III: Protection and Industrial Advance
• Chapter IV: The Burden of Protection
• Chapter V: Assessment of the Tariff
• Chapter VI: American Trade
• Chapter VII: Conclusions
• Book VIII: German National Economy
• Chapter I: National Political Economy
• Chapter II: Two Contradictory Fiscal Systems
• Chapter III: German Foreign Trade
• Chapter IV: Export Bounties and Cartels
• Chapter V: France and the New Tariff
• Chapter VI: Conclusions
• Book IX: Customs Statistics—the Balance of Trade, and the Balance of Indebtedness
• Chapter I: Customs Statistics
• Chapter II: The Balance of Trade and the Balance of Indebtedness
• Book X: MÉline’s Confession
• Chapter I: Conception—dramatising By M. MÉline
• Book XI: Protectionist Postulates and Economic Realities
• Chapter I: Protectionist Postulates
• Chapter II: Economic Realities
• Book XII: My Immediate Programme
• Chapter I: A Simple Programme
• Chapter II: Taxes On Extra European Goods Imported From a European Country
• Chapter III: The Export of Wines
• Chapter IV: Conditions of Export

CHAPTER IV

EXPORT BOUNTIES AND CARTELS

Up to September 1, 1903, there was a bounty on the export of sugar, and alcohol has still a bounty of 81/2d. per gallon. Other bounties were granted by Cartels, associations of producers which marshalled industry under the benevolent eye of the Government, on the military system of the “flogging corporal.” Raffalovich’s recent work on “Trusts and Cartels” gives the truly wonderful results of this system. In 1891 the mine and metal Cartels agreed to give bounties on exportation in order to clear the home market, the amount of the bounty being calculated with reference to the distance of the factory from the frontier; those factories which wished to share in the benefits had to submit their books to the distributing official. In 1901 the mines of the Ruhr were over-productive; the theoretical reduction of output which was 15 per cent. in October, was carried to 20 per cent. It was found necessary to stimulate export, and the Syndicate raised the margin reserved for covering losses on export from 3 per cent. in 1900 to 6 per cent. in 1901-2. The bounty paid by the mines producing more than this specified tonnage and the indemnity allowed to those producing less was raised from 6d. to 1s. Cartels could increase home consumption by lowering prices, but that was not their aim; they reserved all their favours for the foreigner: the price of blast furnace coke was only lowered from 17s. to 15s. a ton, and that of coke from 10s. to 9s. 6d. a ton, although the sales in 1901 were 13 per cent. lower than those in 1900. The coke sold at home at 15s. was sold by the Cartel in France, Luxembourg, and Belgium at 12s. 6d., and a contract has been produced referring to a sale to a factory in Bohemia at 11s.

The panegyrists of the German Cartels would lead one to suppose that they worked in perfect harmony without the slightest friction; as a matter of fact, some of the Cartels tyrannised over those which used their raw materials. In 1899, for example, the Rehmschied canal builders bought sheet-iron at the Essen dock for 200s. per ton, which was sold to a Dutch timber-yard for 180s., and the Manchester cutlers got their iron cheaper than those in Solingen. The Rheinish-Westphalian Cartel sold iron at home for 95s. which they sold abroad for 80s., and 72s. in September, 1902. The English and Belgian rolling mills fixed their selling price in relation to the lowest cost at which they could get German iron; and the German rolling mills, which exported 60 per cent. of their output, had to sell abroad at this price, although they paid 18 and 20 per cent. more for their raw materials. A Cartel which sells semi-manufactured goods with a bounty to foreigners is robbing the industry of its own country of these goods, and especially in giving labour in proportion to the degree of finish of the product. Far from protecting “national labour,” Cartels give work to foreign workmen.

Here is a striking example of the different phases through which a Cartel may pass: In 1900 the Paper Syndicate raised the price of paper 33 per cent.; this rise naturally produced its normal effect—increased output, creation of new works, installation of new machinery. The competition of factories outside the Syndicate compelled it to lower its output to 45 per cent. The members submitted to this reduction only on condition that it applied solely to the qualities of paper included in their agreement, and then devoted all their energy to the production of the other qualities, the result being over-production. To clear the home market the Syndicate forced exportation; paper was offered abroad at 10 to 15 per cent. reduction; the Hamburg wholesale dealers paid 2d. or 21/4d. for goods that cost the home consumer 21/2d. or 23/4d. Since some of these consumers were manufacturers of paper goods, exporting half their output, their position with regard to foreign competitors was one of marked inferiority.

In September, 1904, the Association for the Defence of Steel Consumers protested against the action of the Syndicate in selling them couplings at 5s. 6d. and plates at 4s. above the selling price in England, and demanded the reduction of the price of partly manufactured steel to 5s. As ground for their refusal the Syndicate alleged the 15s. bounty.

The export bounties made it possible to throw partly-manufactured goods on the foreign market much below the German selling price. Many of these products of German origin, for example coke and iron, enable England to compete with Germany in the market for finished goods, not only abroad but in Germany itself. Hotbed German industries count on getting rid of their surpluses in foreign markets, and are therefore dependent on them. List’s system of national economy subordinates German industry to the foreigner, and gives him presents.

To listen to the admirers of the Cartel system one would imagine that a Cartel has only to establish itself to kill all competition. It has been shown above that it provokes it, and it does so in another way also.

The metal factories wanted to shake off the tyranny of the Mining Cartel: those who were able worked their own mines, and the output from the non-Syndicate mines grew steadily—11,900,000 tons in 1899, it was 12,600,000 in 1900 and 13,100,000 in 1901. Meanwhile, the factories that were subject to the Cartel found themselves at a disadvantage compared to those which provided their own raw material. The heads of the Cartel had, of course, taken care to repeat that they must be distinguished from a Trust, that they would not destroy moderate or small producer; of course the exact reverse is the case. In the Ruhr basin the Coal Syndicate had one competitor, the State coal mines. It carried the subordination of the metal industry to such a pitch that a high-power furnace could only be worked in conjunction with its own coal mine. Having crushed a combined steel factory and rolling mill, they established the principle that every establishment must contain in itself blast furnace and steel manufactory. This is the effect of the trust tyranny, confusing industry instead of specialising it according to the law of the division of labour. Thus, out of nineteen independent businesses at Rote Erde coal mines—blast furnaces and iron mines—sixteen have been absorbed by three companies, Gelsenkirchen, Schalke, and Aachener Hutten.

M. Gothein, a member of the Reichstag, and the Commission on Cartels, declares that the great combinations have crushed the little firms—for example, the rolling mills, which received no benefit from Protection. And yet, he said, no country is capable of producing such cheap coal as Germany. Protection, therefore, does not assure the success of its mining industry, but it does create that industrial oligarchy which ruins the small and middling manufacturer.

According to M. Oppenheimer, English Consul at Stuttgart, “the Syndicate’s price policy is in the interest of capitalists producing their own partly-manufactured goods and owning their own mines and blast furnaces, since, producing his material at a reasonable cost, he can compete favourably in his output of finished goods with those who have to go to the Syndicate for their raw material.” The ideal of all Protectionists is to fix prices; it is one of the objects of the Cartels; but the price of different mineral products shows that they have not been more successful in attaining this than any other of their objects.

The Syndicate thus failed either to fix prices or keep them to the high standard of 1890.

Protectionists and Socialists agree in denouncing the middleman; the Stuttgart Chamber of Commerce, in its Memorandum on Cartels, recognises the value of his services as a buffer between producer and consumer; Cartels try to suppress him or restrain his liberty of action with regard to the price, quantity, and quality of goods. In times of crisis, which the example of Germany proves that they stimulate rather than prevent, Cartels delay the recovery of the market and the re-establishment of equilibrium of supply and demand.

Mr. Chamberlain threatened a downfall for English industry like that of the Campanile in Venice—an inapplicable comparison, for while the fabric of English trade, without Cartels or export bounties, stands firm in a position which can be gauged by the market returns, that of Germany shows cracks, at times like the crisis of 1902-1903, which foreshadow a fate like that of the Campanile for an artificial trade, not resting upon solid foundations, but founded upon piles.