The Online Library of Liberty

A project of Liberty Fund, Inc.

• Translator's Preface to First Edition.
• Introductory Essay, By J. Shield Nicholson
• Memoir.3
• Some Extracts From the Author's Preface to the First Edition.
• First Book: the History
• Chapter I: The Italians.
• Chapter II: The Hansards.
• Chapter III: The Netherlanders.
• Chapter IV: The English.
• Chapter V: The Spaniards and Portuguese.
• Chapter VI: The French.
• Chapter VII: The Germans.
• Chapter VIII: The Russians.
• Chapter IX: The North Americans.
• Chapter X: The Teachings of History.
• Second Book: the Theory
• Chapter XI: Political and Cosmopolitical Economy.
• Chapter XII: The Theory of the Powers of Production and the Theory of Values.
• Chapter XIII: The National Division of Commercial Operations and the Confederation of the National Productive Forces.
• Chapter XIV: Private Economy and National Economy.
• Chapter XV: Nationality and the Economy of the Nation.
• Chapter XVI: Popular and State Financial Administration, Political and National Economy.
• Chapter XVII: The Manufacturing Power and the Personal, Social, and Political Productive Powers of the Nation.
• Chapter XVIII: The Manufacturing Power and the Natural Productive Powers of the Nation.
• Chapter XIX: The Manufacturing Power and the Instrumental Powers (material Capital) of the Nation.
• Chapter XX: The Manufacturing Power and the Agricultural Interest.
• Chapter XXI: The Manufacturing Power and Commerce.
• Chapter XXII: The Manufacturing Power and Navigation, Naval Power and Colonisation.
• Chapter XXIII: The Manufacturing Power and the Instruments of Circulation.
• Chapter XXIV: The Manufacturing Power and the Principle of Stability and Continuity of Work.
• Chapter XXV: The Manufacturing Power and the Inducement to Production and Consumption.
• Chapter XXVI: Customs Duties As a Chief Means of Establishing and Protecting the Internal Manufacturing Power.
• Chapter XXVII: The Customs System and the Popular School.
• Third Book: the Systems
• Chapter XXVIII: The National Economists of Italy.
• Chapter XXIX: The Industrial System (falsely Termed By the School 'the Mercantile System').
• Chapter XXX: The Physiocratic Or Agricultural System.
• Chapter XXXI: The System of Values of Exchange (falsely Termed By the School, the 'industrial' System)—adam Smith.
• Chapter XXXII: The System of Values of Exchange (continued)—jean Baptiste Say and His School.
• Fourth Book: the Politics
• Chapter XXXIII: The Insular Supremacy and the Continental Powers—north America and France.
• Chapter XXXIV: The Insular Supremacy and the German Commercial Union.
• Chapter XXXV: Continental Politics.
• Chapter XXXVI: The Commercial Policy of the German Zollverein.
• Appendices Appendix A.
• Appendix B.
• Appendix C.
• Appendix D.

Chapter XXXVI

THE COMMERCIAL POLICY OF THE GERMAN ZOLLVEREIN.

IF any nation whatever is qualified for the establishment of a national manufacturing power, it is Germany; by the high rank which she maintains in science and art, in literature and education, in public administration and in institutions of public utility; by her morality and religious character, her industry and domestic economy; by her perseverance and steadfastness in business occupations; as also by her spirit of invention, by the number and vigour of her population; by the extent and nature of her territory, and especially by her highly advanced agriculture, and her physical, social, and mental resources.

If any nation whatever has a right to anticipate rich results from a protective system adapted to her circumstances, for the progress of her home manufactures, for the increase of her foreign trade and her navigation, for the perfecting of her internal means of transport, for the prosperity of her agriculture, as also for the maintenance of her independence and the increase of her power abroad, it is Germany.

Yes, we venture to assert, that on the development of the German protective system depend the existence, the independence, and the future of the German nationality. Only in the soil of general prosperity does the national spirit strike its roots, produce fine blossoms and rich fruits; only from the unity of material interests does mental power arise, and only from both of these national power. But of what value are all our endeavours, whether we are rulers or subjects, nobles or simple citizens, learned men, soldiers, or civilians, manufacturers, agriculturists, or merchants, without nationality and without guarantees for the continuance of our nationality?

Meanwhile, however, the German protective system only accomplishes its object in a very imperfect manner, so long as Germany does not spin for herself the cotton and linen yarn which she requires; so long as she does not directly import from tropical countries the colonial produce which she requires, and pay for it with goods of her own manufacture; so long as she does not carry on this trade with her own ships; so long as she has no means of protecting her own flag; so long as she possesses no perfect system of transport by river, canal, or railway; so long as the German Zollverein does not include all German maritime territories and also Holland and Belgium. We have treated these subjects circumstantially in various places in this book, and it is only necessary for us here to recapitulate what we have already thus treated.

If we import raw cotton from Egypt, Brazil, and North America, we in that case pay for it in our own manufactured goods; if, on the other hand, we import cotton yarn from England, we have to pay the value of it in raw materials and articles of food which we could more advantageously work up or consume ourselves, or else we must pay for it in specie which we have acquired elsewhere, and with which we could more advantageously purchase foreign raw materials to work up for ourselves, or colonial produce for our own consumption.

In the same way the introduction of spinning linen yarn by machinery offers us the means not only of increasing our home consumption of linen, and of perfecting our agriculture, but also of enormously increasing our trade with tropical countries.

For the two above-named branches of industry, as well as for the manufacture of woollens, we are as favourably circumstanced as any other nation, by an amount of water power hitherto not utilised, by cheap necessaries of life, and by low wages. What we lack is simply and solely a guarantee for our capitalists and artisans by which they may be protected against loss of capital and want of work. A moderate protective duty of about twenty-five per cent. during the next five years, which could be maintained for a few years at that rate and then be lowered to fifteen to twenty per cent., ought completely to accomplish this object. Every argument which is adduced by the supporters of the theory of values against such a measure, has been refuted by us. On the other hand, we may add a further argument in favour of that measure, that these great branches of industry especially offer us the means for establishing extensive machine manufactories and for the development of a race of competent technical instructors and practical foremen.

In the trade in colonial produce Germany, as France and England have done, has to follow the principle—that in respect to the purchase of the colonial produce which we require, we should give a preference to those tropical countries which purchase manufactured goods from us; or, in short, that we should buy from those who buy from us. That is the case in reference to our trade with the West Indies and to North and South America.

But it is not yet the case in reference to our trade with Holland, which country supplies us with enormous quantities of her colonial produce, but only takes in return disproportionately small quantities of our manufactured goods.

At the same time Holland is naturally directed to the market of Germany for the disposal of the greater part of her colonial produce, inasmuch as England and France derive their supplies of such produce for the most part from their own colonies and from subject countries (where they exclusively possess the market for manufactured goods), and hence they only import small quantities of Dutch colonial produce.

Holland has no important manufacturing industry of her own, but, on the other hand, has a great productive industry in her colonies, which has recently greatly increased and may yet be immeasurably further increased. But Holland desires of Germany that which is unfair, and acts contrary to her own interests if rightly understood, inasmuch as she desires to dispose of the greater part of her colonial produce to Germany, while she desires to supply her requirements of manufactured goods from any quarter she likes best. This is, for Holland, an only apparently beneficial and a short-sighted policy; for if Holland would give preferential advantages to German manufactured goods both in the mother country and in her colonies, the demand in Germany for Dutch colonial produce would increase in the same proportion in which the sale of German manufactured goods to Holland and her colonies increased, or, in other words, Germany would be able to purchase so much the more colonial produce in proportion as she sold more manufactured goods to Holland; Holland would be able to dispose of so much more colonial produce to Germany as she purchased from Germany manufactured goods. This reciprocal exchange operation is, at present, rendered impracticable by Holland if she sells her colonial produce to Germany while she purchases her requirements in manufactured goods from England, because England (no matter how much of manufactured goods she sells to Holland) will always supply the greater part of her own requirements of colonial produce from her own colonies, or from the countries which are subject to her.

Hence the interests of Germany require that she should either demand from Holland a differential duty in favour of Germany's manufacturing production, by which the latter can secure to herself the exclusive market for manufactured goods in Holland and her colonies, or, in case of refusal, that Germany should impose a differential duty on the import of colonial produce in favour of the produce of Central and South America and of the free markets of the West Indies.

The above-named policy would constitute the most effective means of inducing Holland to join the German Zollverein.

As matters now stand, Germany has no reason for sacrificing her own manufactories of beetroot sugar to the trade with Holland; for only in case Germany can pay for her requirements of this article by means of her own manufactured goods, is it more to her advantage to supply that requirement by an exchange trade with tropical countries, than by producing it herself at home.

Hence the attention of Germany should be at once chiefly directed to the extension of her trade with Northern, Central, and South America, and with the free markets of the West Indies. In connection with that, the following measures, in addition to that above adverted to, appear desirable: the establishment of a regular service of steamships between the German seaports and the principal ports of those countries, the promotion of emigration thither, the confirmation and extension of friendly relations between them and the Zollverein, and especially the promotion of the civilisation of those countries.

Recent experience has abundantly taught us how enormously commerce on a large scale is promoted by a regular service of steamships. France and Belgium are already treading in the footsteps of England in this respect, as they well perceive that every nation which is behindhand in this more perfect means of transport must retrograde in her foreign trade. The German seaports also have already recognised this; already one public company has been completely formed in Bremen for building two or three steam vessels for the trade with the United States. This, however, is clearly an insufficient provision. The commercial interests of Germany require not only a regular service of steam vessels with North America, especially with New York, Boston, Charleston, and New Orleans, but also with Cuba, San Domingo, and Central and South America. Germany ought to be behind no other nation in respect to these latter lines of steam navigation. It must certainly not be ignored that the means which are required for these objects will be too great for the spirit of enterprise, and perhaps also for the power of the German seaports, and it seems to us they can only be carried into effect by means of liberal subsidies on the part of the states of the Zollverein. The prospect of such subsidies as well as of differential duties in favour of German shipping, ought at once to constitute a strong motive for these seaports to become included in the Commercial Union. When one considers how greatly the exports of manufactured goods and the imports of colonial produce, and consequently also the customs revenue, of the states of the Zollverein would be increased by such a measure, one cannot doubt that even a considerable expenditure for this object must appear as only a reproductive investment of capital from which rich returns are to be expected.

Through the increase of the means of intercourse of Germany with the above-named countries, the emigration of Germans to those countries and their settlement there as citizens would be no less promoted; and by that means the foundation would be laid for future increase of commerce with them. For this object the states of the Zollverein ought to establish everywhere consulates and diplomatic agencies, by means of which the settlement and undertakings of German citizens could be promoted, and especially to assist those states in every practicable way in giving stability to their governments and improving their degree of civilisation.

We do not share in the least the opinion of those who think that the tropical countries of America offer less advantages to German colonisation than those of temperate climate in North America. However great, as we have openly confessed, is our attachment for the last-named country, and however little we are able or desire to deny that an individual German emigrant who possesses a little capital has greater hope of permanently making his fortune in Western North America, we must nevertheless here express our opinion that emigration to Central and South America, if it were well led and undertaken on a large scale, offers in a national point of view much greater advantages for Germany than emigration to North America. What good is it if the emigrants to North America become ever so prosperous? In their personal relation they are lost for ever to the German nationality, and also from their material production Germany can expect only unimportant fruits. It is a pure delusion if people think that the German language can be maintained by the Germans who live in the interior of the United States, or that after a time it may be possible to establish entire German states there. We once ourselves entertained this illusion, but after ten years' observation in the country itself, on the spot, we have entirely given it up. It lies in the very spirit of every nationality, and above all in that of the United States, to assimilate itself in language, literature, administration, and legislation; and it is good that that is so. However many Germans may now be living in North America, yet certainly not one of them is living there whose great-grandchildren will not greatly prefer the English language to the German, and that for the very natural reason that the former is the language of the educated people, of the literature, the legislation, the administration, the courts of justice, and the trade and commerce of the country. The same thing can and will happen to the Germans in North America as happened to the Huguenots in Germany and the French in Louisiana. They naturally must and will be amalgamated with the predominant population: some a little sooner, others a little later, according as they dwell more or less together with fellow-countrymen.

Still less dependence can be placed on an active intercourse between Germany and the German emigrants to the west of North America. The first settler is always compelled by necessity to make for himself the greater part of his articles of clothing and utensils; and these customs, which originated from mere necessity, continue for the most part to the second and third generation. Hence it is that North America itself is a country which makes powerful efforts in manufacturing industry, and will continually strive more and more to gain possession of her home market for manufactured goods, for her own industry.

On the other hand, we would on that account by no means maintain that the American market for manufactured goods is not a very important one, and well worthy of regard, especially for Germany. On the contrary, we are of opinion that for many articles of luxury and for manufactured articles which are easy of transport, and in which the wages of labour constitute a chief element of the price, that market is one of the most important, and must from year to year, as respects the articles above named, become more important for Germany. What we contend is only this, that those Germans who emigrate to the west of North America give no important assistance in increasing the demand for German manufactured goods, and that in reference to that object emigration to Central and South America requires and deserves very much more direct encouragement.

The above-mentioned countries, including Texas, are for the most part adapted for raising colonial produce. They can and will never make great progress in manufacturing industry. Here there is an entirely new and rich market for manufactured goods to acquire; whoever has here established firm commercial relations, may remain in possession of them for all future time. These countries, without sufficient moral power of their own to raise themselves to a higher grade of civilisation, to introduce well-ordered systems of government, and to endue them with stability, will more and more come to the conviction that they must be aided from outside, namely, by immigration. In these quarters the English and French are hated on account of their arrogance, and owing to jealousy for national independence—the Germans for the opposite reasons are liked. Hence the states of the Zollverein ought to devote the closest attention to these countries.

A vigorous German consular and diplomatic system ought to be established in these quarters, the branches of which should enter into correspondence with one another. Young explorers should be encouraged to travel through these countries and make impartial reports upon them. Young merchants should be encouraged to inspect them—young medical men to go and practise there. Companies should be founded and supported by actual share subscription, and taken under special protection, which companies should be formed in the German seaports in order to buy large tracts of land in those countries and to settle them with German colonists—companies for commerce and navigation, whose object should be to open new markets in those countries for German manufactures and to establish lines of steamships—mining companies, whose object should be to devote German knowledge and industry to winning the great mineral wealth of those countries. In every possible way the Zollverein ought to endeavour to gain the good-will of the population and also of the governments of those countries, and especially to promote by that means public security, means of communication, and public order; indeed, one ought not to hesitate, in case one could by that means put the governments of those countries under obligation to us, also to assist them by sending an important auxiliary corps.

A similar policy ought to be followed in reference to the East—to European Turkey and the Lower Danubian territories. Germany has an immeasurable interest that security and order should be firmly established in those countries, and in no direction so much as in this is the emigration of Germans so easy for individuals to accomplish, or so advantageous for the nation. A man dwelling by the Upper Danube could transport himself to Moldavia and Wallachia, to Servia, or also to the south-western shores of the Black Sea, for one-fifth part of the expenditure of money and time which are requisite for his emigration to the shores of Lake Erie. What attracts him to the latter more than to the former is, the greater degree of liberty, security, and order which prevails in the latter. But under the existing circumstances of Turkey it ought not to be impossible to the German states, in alliance with Austria, to exercise such an influence on the improvement of the public condition of those countries, that the German colonist should no longer feel himself repelled from them, especially if the governments themselves would found companies for colonisation, take part in them themselves, and grant them continually their special protection.

In the meantime it is clear that settlements of this kind could only have a specially beneficial effect on the industry of the states of the Zollverein, if no obstacles were placed in the way of the exchange of German manufactured goods for the agricultural produce of the colonists, and if that exchange was promoted by cheap and rapid means of communication. Hence it is to the interest of the states of the Zollverein, that Austria should facilitate as much as possible the through traffic on the Danube, and that steam navigation on the Danube should be roused to vigorous activity—consequently that it should at the outset be actually subsidised by the Governments.

Especially, nothing is so desirable as that the Zollverein and Austria at a later period, after the industry of the Zollverein states has been better developed and has been placed in a position of greater equality to that of Austria, should make, by means of a treaty, reciprocal concessions in respect to their manufactured products.

After the conclusion of such a treaty, Austria would have an equal interest with the states of the Zollverein in making the Turkish provinces available for the benefit of their manufacturing industry and of their foreign commerce.

In anticipation of the inclusion in the Zollverein of the German seaports and Holland, it would be desirable that Prussia should now make a commencement by the adoption of a German commercial flag, and by laying the foundation for a future German fleet, and that she should try whether and how German colonies can be founded in Australia, New Zealand, or in or on other islands of Australasia.

The means for such attempts and commencements, and for the undertakings and subventions which we have previously recommended as desirable, must be acquired in the same way in which England and France have acquired the means of supporting their foreign commerce and their colonisation and of maintaining their powerful fleets, namely, by imposing duties on the imports of colonial produce. United action, order, and energy could be infused into these measures of the Zollverein, if the Zollverein states would assign the direction of them in respect to the North and transmarine affairs to Prussia, and in respect to the Danube and Oriental affairs to Bavaria. An addition of ten per cent. to the present import duties on manufactures and colonial produce would at present place one million and a half per annum at the disposal of the Zollverein. And as it may be expected with certainty, as a result of the continual increase in the export of manufactured goods, that in the course of time consumption of colonial produce in the states of the Zollverein will increase to double and treble its present amount, and consequently their customs revenue will increase in like proportion, sufficient provision will be made for satisfying the requirements above mentioned, if the states of the Zollverein establish the principle that over and above the addition of ten per cent. a part also of all future increase in import duties should be placed at the disposal of the Prussian Government to be expended for these objects.

As regards the establishment of a German transport system, and especially of a German system of railways, we beg to refer to a work of our own which specially treats of that subject. This great enterprise will pay for itself, and all that is required of the Governments can be expressed in one word, and that is—ENERGY.

APPENDICES
APPENDIX A.

LIST'S allegation as to this effect of the pecuniary subsidies granted by England to her allies on the Continent would appear to have some foundation in fact: any capital transferred by one country to another (other than by a mere transfer of existing securities between wealthy States) must in the long run be effected chiefly in commodities. It is probable that the large loans made by English capitalists to foreign States (notably from 1850 to 1870) resulted in temporary extra demand for British products, which helped to cause the increase of our prosperity 'by leaps and bounds.' So far they may have operated as 'bounties' to British producers, in the manner in which List maintains that the subsidies did. But the subsidies being absolute gifts for services in war, and the subsequent loans to repudiating or bankrupt States being practically (although involuntary) gifts, produced no interest return in future years. The English nation has paid heavily (in the increase to the national debt) for any temporary benefit afforded to English manufacturers by the 'bounties' of which List complains. And English holders of foreign State bonds have paid no less heavily for the temporary 'leaps and bounds' by which British manufacturing industry may have advanced in more recent times, owing to the loans.—TRANSLATOR.

APPENDIX B.

THE following instances (among others) in which the State has, with general assent of the public, interfered with the liberty of individuals in respect to their separate action, are adduced by the late Mr. Justice Byles.

The State provides defences against external aggression.

It conducts treaties with foreign nations.

It preserves internal peace and order.

It is the corner-stone of family ties, family duties, family affection, family education, by regulating and enforcing the marriage contract.

It institutes and protects property.

It regulates the transmission of property.

It enforces the repair of highways by the several districts through which they pass, or by those who use them.

It obliges each county to make and repair its own bridges.

It maintains ports and harbours.

It surveys and lights the sea coasts of the realm.

It coins money, and prohibits interference with this monopoly.

It regulates the issue of promissory notes payable to bearer.

It provides a uniform system of weights and measures, and proscribes the use of any other.

It assumes the distribution of intelligence by post.

By the patent and copyright laws it gives bounties on the exertion of the inventive faculties, in the shape of a monopoly for a limited period.

By requiring a public specification, explanatory of every patented discovery or invention, it takes care that the secret shall not be hidden from the public or die with the inventor.

It imposes a bridle on the acquisition of property by corporate bodies.

It protects the public health by the prohibition of nuisances of thousands of kinds, and by making provision for their removal.

By the quarantine laws it prevents the importation of contagious diseases.

It provides for the cleanliness of towns.

It regulates the fares of hackney carriages and controls the drivers.

It forbids inoculation for the small-pox, and artificially promotes vaccination.

It assumes the distribution of insolvents' estates.

It provides for the maintenance of the poor.

It forbids perpetuities by avoiding all attempts to tie up property beyond a life or lives in being and twenty-one years afterwards.

Though it tolerates all religions, it does not leave the virtue and happiness of the multitude without the support and direction of an established faith and worship.

In the above cases Government interferes on behalf of the public. But there are others in which it does so to protect the helplessness or inexperience of individuals. Thus:

It shields infants by avoiding their contracts and protecting their persons and property;

And married women;

And persons of unsound mind;

And in many ways the helpless labouring poor.

It forbids the truck system.

It regulates the employment of women and children in mines and factories.

It controls pawnbrokers—grinding the tooth of usury, and securing facilities for redemption.

It prohibits and punishes, as we have seen, the use of unjust weights and measures;

And the sale of unwholesome provisions;

And the adulteration of coffee, tobacco, snuff, beer, tea, cocoa, chocolate, and pepper.

To guard against fraud, it directs the form and manner in which wills shall be executed.

If a man gives a money bond with a penalty if the money is not repaid at a day prefixed, the State forbids the penalty to be enforced.

A purchaser of gold or silver articles cannot tell whether they are real gold and silver or not, or how much of the weight is precious metal, and how much is alloy. The State steps in to his assistance, and requires the assay mark of a public officer.

A man buys a pocket of hops. He cannot always open it to see whether it is of the growth alleged or of uniform quality. The State interferes and makes it penal to mark or pack falsely.

An attorney sends in his bill. The client cannot tell whether the charges are usual and fair. The State intervenes and provides a public officer who is empowered, not only to correct, but also to punish overcharges.

The State compels the professional education of medical men and attorneys.

The above are but some instances of the mode in which nearly all governments have found it for the advantage of the community to interpose.

What is the interposition of Government?

Simply the concentrated action of the wisdom and power of the whole society on a given point; a mutual agreement by all, that certain things shall be done or not done for the general benefit.—'Sophisms of Free Trade examined,' by a Barrister (the late Mr. Justice Byles), 1870.

APPENDIX C.

THAT List should reject the idea of protective duties on corn and agricultural produce as being in any degree beneficial to a country like Germany, is easy to understand. Her agriculture at the time when he wrote (1841) not only amply provided for the wants of her population, but yielded then, and had yielded for a long previous period, a large and steady surplus for export to other countries. No other European nation could profitably export such produce to her, while the high rates of freight then prevalent and the non-existence of ocean steam transport rendered such export to her from more distant countries impossible.

Whether, as a mere question of policy, the free importation of agricultural produce be approved or not, his contention, thus laid down by him as a sort of universal axiom, but apparently based on the circumstances of his own country and time, can scarcely be deemed consistent with some other arguments on which his general theory of national economy is based. Nor can it be deemed (of itself) conclusive as a solution of the question which is presented to Great Britain at the present time, viz. whether, under circumstances in which the necessary result of a policy of unrestricted importation of agricultural produce is to throw a large portion of the land of the nation out of cultivation, to deprive those who cultivated it of their accustomed employment, and to render the nation dependent for the major part of its food on foreign supplies, the nation's best interests are most effectually promoted by such a policy, or by one of such moderate protection of native agriculture as may retain in cultivation the national land, and greatly lessen the nation's dependence for its food on foreign importation. His contention leads rather to the inference that what may be good for one nation may be undesirable for another which exists under very different conditions, and still more to show that what may be beneficial to a people at one stage of their national history may be injurious at another time—an opinion which the present German Government appears to sanction by its recent reversion to a protectionist policy as respects the import of agricultural produce.

A policy of moderate protection appears to be advocated by those who approve it as a sort of mutual assurance to the industrious producers of the nation against the competition in its own markets of producers who do not belong to the nation. It is further advocated as an impost levied on the foreign producing competitor in the shape of a contribution by him to the revenue of the nation which imposes it, and as the condition on which he is permitted to compete in the markets of the latter nation with the native producers, who are subjected to much taxation to which the foreigner does not otherwise contribute. It is noteworthy that Adam Smith himself expresses approval of protective duties for the latter purpose in case the foreign imported products are believed to be subjected to less taxation than similar home products. ('Wealth of Nations,' Book IV. chapter ii.)

If those views can be deemed sound in their application to manufacturing industry, our author does not appear to have clearly stated the reasons why that industry which, as he admits, is the most important of any, and which employs more capital and population than any other, should not (if its successful prosecution requires it) receive moderate protection as well as manufacturing industry.

Whether, however, the principle of protective duties (either generally or limited in their application to manufacturing industry alone) be admitted or not, two inferences seem to be fairly deducible from the teaching of Adam Smith and not to be disproved by that of List: firstly, that if the home agriculturist is required (in the interest of the nation) to be exposed to free competition by the foreigner in the home market, he is entitled to be relieved from all such taxation, whether local or imperial, as at all specially or disproportionately oppresses him; secondly, that differential duties are justifiable on imports from those nations who impose restrictions on our export to them as compared with imports from those nations who impose no such restrictions.—TRANSLATOR.

APPENDIX D.

THE example of Great Britain during the last few years may be deemed by many to furnish a refutation of List's doctrine on this point. The excess of her recorded imports over her recorded exports has increased from 58,000,000 in 1869 to 121,000,000 in 1883.

The induction of accurate conclusions as to the beneficial or injurious effects of this state of things on the national welfare, and consequently on the general truth or error of List's allegation, is rendered difficult chiefly by two considerations—first, by the circumstance that Great Britain possessed up to a few years ago, and still possesses to a considerable extent, large amounts of capital invested abroad, the dividends or interest on which, if not reinvested there, necessarily tend to increase her total recorded imports. The second is, that we have no statistical returns of British home production or consumption of manufactured goods, and only imperfect ones of her agricultural production. Hence it is impossible accurately to determine to what extent Great Britain's present enormous excess of imports represents merely the annual interest on previously acquired capital, and to what extent, on the other hand, it represents the substitution of the products of foreign labour in her own markets for those of her home industry.

To the extent to which the former of these two elements can be proved to exist, the excess of imports so accounted for is (in the case of England) special and abnormal, and proves nothing adverse to the general truth of List's allegation.

But even if it be correct (and it is difficult to believe that it can be so) that the excess in value of our imports (less carrying profits) is wholly accounted for by earnings on capital invested abroad (which earnings reach us in imported commodities), it would appear that, if the direct effect of such earnings so imported is to supplant and diminish production at home, there is a countervailing national loss, which goes far to neutralise the alleged national benefit of such excess of imports.

Supposing, for instance, that the nation as a whole possesses 1,000,000,000l. sterling invested abroad in various ways realising an annual income of 50,000,000l. sterling, that profit, if not reinvested abroad, no doubt reaches us in imported commodities and permeates through the community; but when such commodities mainly consist of goods or produce which supplant home productions, we are then to a great extent losers.

Were such profit to reach us only in goods which we cannot produce, or in raw materials required for manufactures, it might all be deemed national gain; but when it reaches us in the shape of food or other articles which could be produced at home, and only transfers our custom from native to foreign producers, the gain is questionable even for the present, and (viewed prospectively) would appear to involve absolute danger to the community.—TRANSLATOR.