Front Page Titles (by Subject) CHAPTER II: THE BALANCE OF TRADE AND THE BALANCE OF INDEBTEDNESS - The Comedy of Protection
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CHAPTER II: THE BALANCE OF TRADE AND THE BALANCE OF INDEBTEDNESS - Yves Guyot, The Comedy of Protection 
The Comedy of Protection, trans. M.A. Hamilton (London: Hodder and Stoughton, 1906).
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THE BALANCE OF TRADE AND THE BALANCE OF INDEBTEDNESS
Definition of the Economic Balance.
When imports exceed exports, M. Edmond Théry at once cries out, Deficit! In every country, not excepting England, Protectionists base their arguments on the Balance of Trade: they see nothing unnatural in the fact that the balance is always favourable to Haiti, Peru, Spain, Greece; always unfavourable to England, France, and Germany. It is true, indeed, that it is still favourable to the United States, but that will change when they have fewer debts in Europe.
At the meeting of the International Statistical Institute held in London papers on the Economic Balance were communicated by M. E. de Foville and M. Ignaz Gruber, permanent secretary to the Austrian Finance Department. Both repudiated the Balance of Commerce, and although there were present distinguished German officials, believers in List’s National Economy, and English followers of Chamberlain, not one of them dared to maintain that the Balance of Trade was in itself sufficient criterion of the economic position of any country.
To define the Balance of Indebtedness, the Economic Balance, one must begin by eliminating. It must not be confounded with the wealth of the country: only that part of capital must be taken into account which is used in economic relations with nations in general or certain specified nations; it is found by analysing the gains and losses resulting from the coming into or going out of a country of four classes: (1) Men; (2) merchandise; (3) mineral wealth; (4) incomes and credit. In a work on the Foreign Exchanges, published in 1863, Mr. Goschen stated that the debts of one country to another were the first and most important factor in the determination of the movement of the Exchanges. A German, Adolf Sætbeer, celebrated for his investigation into the prices of precious metals, replaced the name “Balance of Trade” by that of “Balance of Payments,” which M. Ignaz Gruber has defined in the following terms: “The arithmetical representation in terms of money of the total of one nation’s economic relations to others in a given period, and the different debit and credit transactions between them, is the determination of the balance.” One could put it more simply: The Economic Balance of a given country at a given time comprises all the payments and promises to pay made or received by it.
The Government of Austria-Hungary has undertaken the task of determining its Balance of Indebtedness: from the table drawn up as a result of the inquiry made under the direction of M. Ignaz Gruber, it is clear that in the case of every nation credit is the excess of her imports, debit the excess of her exports, and the more a country has to pay in interest and on loans contracted by the Government or the individual citizens, the more does the Balance of Indebtedness send its exports up and its imports down. In considering the Economic Balance of any nation its assets consist of the excess of its imports of goods and precious metals, the interest on invested capital (incomes) at home and abroad, and the whole of its credit; and this definition explains once more why rich countries have an excess of imports and poor or heavily indebted countries an excess of exports. Contrary to the old theory of the Balance of Trade, it is proved that an excess of imported goods is an element on the credit side of the Balance of Indebtedness. It verifies the demonstration made by J. B. Say and Frederic Bastiat: “Excess of exports when a ship is wrecked; excess of imports when it returns after a profitable voyage.”
I demand that the Finance Minister in every country undertake a task similar to that performed by Austria-Hungary.