II.
Imports and Exports.

"Pons Asinorum."

The fact that year after year the money value of our imports vastly exceeds the money value of our exports, and that this excess tends to increase is, to many minds, not only a page 7 puzzle, but a rock of offence, and a cause of alarm. To those, however, who are acquainted with the facts and circumstances which cause this excess, nothing can seem more absurd than the feeling which has been aroused, and the conclusions which have been drawn. The absurdity will be made abundantly clear as we proceed.

But, I must here warn the reader that he will have to master what I have to say under this head, for it constitutes the "Pons Asinorum" of the Free Trade question. It he passes this "pons," he will find himself among the Free Traders on the other side. If not, he must be numbered among the Neo-Protectionists, who seem to be utterly unable to pass over it. This is what they cannot get over:—They point to the Board of Trade returns for 1880, which show that we imported £411,000,000 worth of commodities, and exported only £286,000,000 worth; and this they call a balance of trade against us of £125,000,000; and from this fact they draw such deductions as these : that this balance is a loss to the country; that John Bull buys £411,000,000 of goods from the foreigner, and sells him only £286,000,000 worth; that, consequently, the foreigner has the best of the trade; that he is draining away all John Bull's wealth; that the latter is getting poorer and poorer; that if the system goes on it must end in his ruin; and that this is the outcome of the one-sided Free Trade now existing. And then they give vent in their agony to such cries as "Protection to Native Industry," "Reciprocity or Retaliation." Here are some of their utterances:—

This excess, according to the writers we have quoted, represents the sum by which we have grown more wealthy in 1880 than we were in 1879. Is it possible that any one with a mind capable of comprehending facts and their meaning can really believe it?"

Ib. p. 288.—To buy more than we sell, and to make that not a mere accident of our trade but its permanent condition—the end above all others to be sought for and desired—this, according to the economists is a most excellent thing for the country. Practical men who look at such matters from a strictly-business point of view, come to a different conclusion. They hold that we cannot persevere in this system without plunging the country into disaster.

. . . As one authority (Mr. Shaw-Lefevre, M.P., 27th June, 1878) puts it, 'the magnitude of our import trade, so far from being a matter for alarm, is evidence of the greatness of our resources and the stability of our position.' This is one of the most blundering and most mischievous of the delusions which have helped to blind a portion of the people to the true state of their affairs."

Sir Edward Sullivan, Bart., Nineteenth Century, August, 1881. p. 171.—" It [Isolated Free Trade] has enabled foreigners to flood our markets with cheap, and often nasty manufactured goods." "It has increased the balance of trade against us, till it has reached the alarming figure of £136,000,000." P. 176.—" In the face of these facts we are warranted in again asking our economic philosophers how we are to continue to find money to purchase foreign food. The food question is at the bottom of our com-mercial troubles; we are buying food from abroad faster than we are making money to pay for it. But of course this cannot last. Until the immense and increasing excess of imports over exports, is considerably diminished, there can be no return of general prosperity. We may for a time draw upon our capital and our accumulated wealth, but for how long? If we cannot get as much for our goods as we are compelled to pay for foreign food, the deluge must be at hand."

Nothing can be more clear and distinct than the issues page 9 which these statements raise. I shall at once address myself to them, merely remarking, in passing, that under the head of "Two Neo-Protectionists," I shall have to make further reference to the articles from which I have quoted.

The first thing that strikes one regarding these utterances is this—that the bare fact of our imports being larger than our exports is held by these writers to constitute in itself a great and growing evil. According to them it is a self-evident proposition, the mere propounding of which ought to carry conviction to every mind. And on this idea their whole argument seems to be based. They leave out of account everything but the bare fact that our imports exceed our exports! They leave out of account such matters as the following:—Our shipping receipts, insurance, interest, merchants' profits, and, last not least, the income we derive from our foreign investments! Let us try to make a rough estimate of these "unconsidered trifles."

As regards shipping, we possessed in 1880 56 per cent, of the world's ocean carrying power; assuming that the average of freight is about 10 per cent, ad valorem, and our combined export and import trade is about 700 millions, our receipts under this head may be put down at 40 million; but to this must be added the receipts for our inter-foreign and inter-colonial trade, and the receipts from passenger traffic. I do not think 45 millions a high figure to set down as our total shipping receipts. Mulhall, in his "Balance Sheet of the World," p. 44, puts them down at £51,920,000.

Then comes insurance. An average of ½ per cent, on our total trade gives £3,500,000.

Next comes interest. If we take the moderate sum of 100 millions as employed in our foreign trade, 5 per cent, gives us 5 millions.

Next come merchants' profits. Say 2½ per cent, on the 700 millions: this gives us 17½ millions.

Lastly, take foreign investments. The Economist, of March 5th last, quoting from the "Bankers' Magazine," puts these down as yielding over 55 million per annum.

What is the total of these items?

Which means simply this—that before England has to exchange a pound's worth of her own products for a pound's worth of foreign products, she has to receive annually, in some shape or other, over 100 million pounds from the foreigner!

And thus bursts the bubble of our adverse balance of trade! The balance, if there be such a thing, seems to be the other way! And it must be the other way.

It is a matter of common knowledge, or ought to be, that year by year, on the whole, the world grows more and more indebted to us. Year by year we have more and more of the world's obligations in our strong box.

The fallacy under which our Neo-Protectionists labour lies in the terms "buying of the foreigner," "selling to the foreigner."

They fancy that our imports are what we "buy" and our exports what we "sell;" and, that as there is an excess of the former there is a balance of trade against us, which, somehow or other, out of our wealth, we have to liquidate, and that this process impoverishes the country.

But, as I have shown, there is no balance to liquidate, so there can be no impoverishment; and so their argument is exploded.

But, let us for a moment look at their supposition in another light. Why should the bare fact of our importing 411 millions of commodities in exchange for 286 millions be held, ipso facto, to involve a loss?

To get in more than one gives out seems, primâ facie, to ordinary minds, the only way of making a profit! It cannot be pretended that Great Britain stood indebted at the end of 1880 for the excess of imports. There can be no doubt that at that period the world was as much, if not more, indebted to her than at the end of 1879.

But 1880 does not stand alone in its excess of imports. The same thing has gone on for the last thirty-five years. page 11 In 1856 the excess was 43 million; in 1880 this figure, with interruptions, had risen to 125 millions. Let me ask, out of what fund have we liquidated all these supposed adverse balances?

Then let me ask, what would our Neo-Protectionists say if the products of our industry were annually exported to the extent of 411 millions, and we received back from the foreigner only 286 million worth in exchange?

Look at the question in yet another light. How can it be otherwise than that our imports should exceed in value our exports? If a merchant export £100 worth of goods, and in exchange for them imports goods worth only £100, he must make a dead loss under the heads of freight, insurance, interest, and profits.

How can it be otherwise?

Let us suppose the goods cost him £100 at Liverpool. He exports them to some foreign country, and, of course, has to pay freight and insurance. Let us say this comes to 10 per cent. On arrival at the foreign market the goods must therefore be worth £110. They must be sold, of course, and let us suppose the proceeds re-invested in goods for importation here. Again comes in the charge for freight, another 10 per cent., which, added to the £110, makes the goods worth £121 on arrival at our ports, independently of interest on the money used, and what the merchant may lay on as profit.

And so the £100 of exports comes back as £121 at least, of imports, and must do so as long as trade is carried on.

And, on this showing, what becomes of complaints founded on the bare fact of our imports exceeding our exports, such as—

That the balance of trade is against us!

That we are being ruined!

That Free Trade is a complete failure!

And now, with reference to this last assertion, let us for a few moments contemplate some of the facts and figures which the records of the last quarter of a century afford us.

I will first take the figures of the years 1870 to 1880, as comprising the latest periods of inflation and depression; page 12 then I will take in the whole period from 1854 to 1880, 1854 being the earliest year for which I possess the statistics. Now, what have we done between 1870 and 1880?

The Board of Trade returns record our

Did we pay away any gold for this excess? Let us see

The returns show that in these years

A result achieved during an unprecedented demand for gold throughout the world, owing to the currency requirements of the United States, Germany, Holland, and other states.

This ought to stagger our Neo-Protectionists; but if not I have yet another factor to bring into our calculation, and that is our foreign loan and investment account.

Having no official records to refer to, I can only make a rough estimate as to the probable balance of our transactions in this respect during the period in question.

In this time probably 500 millions of foreign loans were floated in London; and supposing that we took one-half of these, besides purchasing enormous amounts of United States securities, and investing in all sorts of industrial enterprises abroad, I do not think we should be very far from the mark if we put down the figure at which we have made the world our debtor during these eleven years as 350 millions. How will John Bull's external balance-sheet for these years then stand?

And in the face of these facts we are asked to believe that we are plunging yearly into disaster !

The figures of the last twenty-seven years are still more startling.

The bullion records before me show that from 1860 to 1880 inclusive, we imported, on balance, £83,000,000, or at the rate of about four million a year. I have no figures for previous years, but we may reckon, from common knowledge, that as from 1854 to 1859 gold flowed into this country in greater quantities, and remained here in larger quantities than since, probably eight million a year remained here on balance; so that for the whole twenty-seven years we probably retained £131,000,000 of it.

We will now look at the foreign loan and investment account for this period.

As before stated, we receive by way of interest an annual sum of fifty-five millions.

In the course of these twenty-seven years, therefore, we seem to have got hold of the world's products to the amount page 14 stated for less than nothing; for, besides getting these products, we have actually acquired a vast sum in money, and have also induced every civilised nation on earth to give us I O U's., amounting in the aggregate to at least 600 million sterling! And, with these facts in our possession, we cannot but see that all the talk we hear about "buying more than we sell" and "our adverse balance of trade" is nothing but arrant nonsense; and that it is not the Free Traders, but the Neo-Protectionists, who cherish "blundering and mischievous delusions."