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Protectionism.—II.

Considerations on Freetrade and Protectionism.

1. Freetrade and unrestricted commerce are in the interests of peace—of peace, the foundation and corner stone of this christian era. Protection is the product of narrow-mindedness, and a remnant of the old feeling of envy or hate to the stranger.

2. Protection, it has been said, gives an amount of independence to a people when it causes them to supply to some extent their own wants. Yet they lose money meanwhile; while dependence is some security for peace.

3. It may be thought that the increased cost of protected articles is of small moment practically, because vast sums of money are everywhere spent unproductively, in sensuality and in obedience to the page 90 passions. But it is the office of the priest and religion to teach morals, and how to command the passions. To the economist belongs the truth that labour is productive of utilities, and that such production should be as great as possible, and that freedom is the great element in the question. It is indeed an insult to man to declare it necessary that he should be stript of the fruits of his labour, lest he destroy himself with them, and that the more he commands the forces of nature, the less likely he is to be benefitted by them. Further, we have always the poor with us, in spite of the waste of productions.

4. But in perhaps every country there abounds, chiefly in towns, a class of people suited only for light labour; should not benevolence cause certain manufactures to be protected if necessary, to give them employment? Should not the happiness of man be regarded, as well as the wealth of nations? But it may be remembered that what is economically wrong is seldom either morally or politically right; that to settle in this disguised way a burden on the strong and on those willing to work, is self-evidently a doubtful proceeding; that there is nothing which confronts the socialist so much as the natural indolence of man, and that it is more than probable that the greater part of the supposed necessity for employing light labour, arises not from want of page 91 strength of body, but from want of strength of will; that the remedy proposed will be but temporary, for England, though eminent in labour of this sort, is also eminent in pauperism.

5. In a society of protected industry and where the people may be said to live on one another, such a society is more liable to be affected by disasters than under freetrade. For if any trouble affect but one industry, it must very immediately concern and affect the whole society. All being alike burdened, no one can step forward to assist; but with freetrade and a richer community, an industry may decay and its workmen still find room on the world's arena. The wider the field of enterprise, the higher the hope.

6. In Laing's Tour in Sweden, there is a fine example of the benefits of freetrade^*; and in Prof. Paijkull's Travels in Iceland, the direful effects of monopoly and restricted trade are set forth.^†

7. Freetrade leads to simplicity in life and legislation. In these present times society seems about to be smothered within its own folds. We have laws maritime, military, civil, and ecclesiastical, preposterous manners and etiquette, and the hordes of unproductive labourers which arise; in consequence much of the industrial product of the world is lost page 92 to civilisation. It has been said that at least 20 per cent, of the sum of indirect taxation is lost in the cost of collection.

8. When protection is once established in a country, it is most difficult to get rid of. Capital expended on the faith of its continuing, and vested interests are soon existent, which give their influence in its favour, with at least a show of justice.

9. Protection in one country leads to protection in others. If one country, by a protective duty, throws a number of men out of employment in a particular industry in another to give work to its own people in it, that other tries by a similar course to do the same to it in some other industry for which it is indebted to it

10. Mill, I think, made a mistake when he wrote that a government might aid a new industry at its introduction by a protective duty. Enterprising capitalists abound in every country, and these are all that are required in the matter which may well be left to them. If the capitalist does not of his own accord undertake it, it must be that such industry is not so remunerative as others.

11. A glance at the map of the world shews that but the coasts of continents and smaller islands are generally inhabited. Protection in these countries page 93 tends to keep the people in them, and-to keep them there in poverty. Other causes, no doubt, and which are passing away, have been also in this case active, but protection opposes their passing away. The whole earth, under God, belongs to man, to civilised man, and its pastoral and agricultural resources cannot be used by him unless he goes within their reach and labours there

Population, through free trade, will swing towards those parts of the earth which offer health and wealth in the greatest abundance and with the least expenditure of care and labour.—It will befriend the Temperate Zones—the poorer regions of the earth if they do not decline will not advance Will not men then run too much to and fro on the earth, forgetful of their parents, their God, and religion? Not necessarily, we say. At least there is no hope for it, for their residence at home under a knowledge of better things elsewhere would be equally demoralising.

12. Another consideration may perhaps be urged in favour of protection, which arises from the economical condition of under-populated countries. It may be thus expressed. A nation advanced in civilisation, whose morals are not deficient, uses its surplus wealth in the cultivation of the finer arts. It page 94 may spend its time in repose and idleness or indolence. Utilitarianism involves within it indolence or a very high Christian work. Take the case, however, of the Australian Colonies. Physical difficulties, chiefly distance from the seats of population and competition, prevent them from extracting with their capital and labour the resources of the soil. With the present means of international transport it may be observed that agriculture must be depressed in every country without towns, and a large part of its produce is necessarily wasted. While with the natural liking of mankind for farming and for the country, the tendency to over-produce is inextinguishable. It may thus happen that a class of population will grow up, living in a state of rude plenty indeed, but manifestly compelled to indolence. Their powers of production are but partly developed. If they produce more than the state of their country requires, it must be either thrown away or exchanged for articles of taste at a heavy sacrifice. People in our day of education and increased knowledge and sensibilities may become demoralised by one kind of employment. It is therefore not clear but that protection on manufactured utilities would not to some extent be a remedy. A consuming population would exist which would refresh and put a more civilised face on such a society. Activity in agriculture would widen its spheres, and page 95 the former torpidity would be drawn from the coasts to the interior, and in time from there also. In pastoral countries, which produce wealth so easily by merely stocking them, capital is more abundant, so that labour is the only element wanting to production, Hence a further inducement to protection. The agriculturalist would require of course to pay more for his purchases; but then he would be rescued from inaction, while much on his farm otherwise lost would be utilised.

Yet, as against all this, it is to be observed that immense improvements in the means of transport have been and are daily being made. In Britain there is great sameness in the prices of commodities in every part of it. The day will doubtless come when knowledge will be powerful enough to do for the world what it has already done for Britain. The market for land, labour, capital and products may become essentially one. In such a case there would be no need for protection on the reason last stated. There is no doubt but that the world's surplus wealth would be sufficent for the porpose. The state owns the railways in many countries, and this is a move in the direction alluded to. If railways can be thus nationalised there seems no impossibility in their becoming, as well as other means of transport, internationalised. The accumulations of futurity page 96 should be directed to improving the means of transport. How humane it would be were the world to carry everything and everybody for nothing.

These and many other schemes where it would be necessary to concentrate the common force, are retarded by the difficulty hitherto met with in devising an equal and just system of direct taxation.

But direct taxation, it is said, is an impossibility, and hence come customs duties, and in effect Protection. There is inherent in all men a love of individuality. Each wishes himself a star and distinct unit in the firmament of fame. Everyone talks of his house as his castle, and hates the tax gatherers. Yet it is doubtful if these thoughts and feelings should be encouraged so greatly in the circumstances. When a country lies under a heavy debt, owing money in all directions, within and without its borders; when the necessity of protecting at least life and property is evident and has been acknowledged through all time, it rather savours of immorality to refuse to pay down direct what is clearly and necessarily due. Round-about indirect taxation seems a poor unmanly kind of thing, well enough for a nation of shallow, narrow-minded people, but irreconcilable with notions of discretion, fortitude, or intellect. Yet so it is. During the late American page 97 war a call for men was responded to, but a call for money directly was never even attempted to be made.

13. "Salus populi suprema lex," says the maxim; and doubtless if it can be shown that in the event of a war breaking out in which a given country may or may not be engaged, it would suffer heavily by the want of certain commodities, then protection is allowable. Factories of war material may be established, and on a similar principle Adam Smith defended the navigation laws.

(a) The rapid diffusion of correct ideas in political economy which is going on in every country at present—and perhaps more rapidly abroad than in Britain, from tills being the only free field for the public mind to expatiate in—shows the beneficial power of a periodical press, conducted by enlightened men.

The harvest in Norway having failed almost entirely In consequence of early frost in autumn, government gave orders as a precautionary measure, for the purchase of a considerable quantity of grain in the Baltic ports for the relief of the distressed districts. Twenty years ago this would have been considered, in the most enlightened countries of Europe, as a wise and beneficial measure; and the parental care of government would have been landed by all classes. The British Government, in 1812, took similar measures for alleviating the scarcity and high price of grain; and even In this year, although government took no part in the measure, the charitable feelings of the British public attempted to remedy the local scarcity and high price of meal in the highlands and islands of Scotland, where the grain crops had likewise failed, by furnishing grain at a cheap rate, by subscription, to the distressed districts. In Norway there was but one opinion about the policy of this measure of Its government—that it was the surest way to starve the people, as neither foreign nor native merchants could venture to send corn to a market in which government was ready with a stock to undersell them, and disappoint their speculations. The common sense of a people, so nearly equal in circumstances that 110 class is wealthy enough to feed another class, either from page 98 the taxes or from charitable contributions, came at once to the Just conclusion, that the interference of government with the natural course of demand and supply would only aggravate the scarcity; and this opinion was so loudly and generally expressed, that government had to withdraw the measure, as far as possible, and sit down with a lesson in policital economy from the voice of the nation. It is the first time perhaps that such a measure adopted by a government, instead of thanks and praises, met, even from the most ignorant, with disapprobation. It shows the spread of intelligence in political economy.

(b) A more approximate cause of the country's decadence may certainly be attributed to the misfortunes which those terrible volcanic eruptions, and the sickness and distress they entailed, brought upon the country; but above all, to the oppressive system of commerce, under which the country groaned at the same time. The history of Iceland's commerce is, therefore, one of the most sorrowful, and at the time most Instructive chapters In the history of the country.

When Iceland was united to Norway in 1262—1264, it was provided in the Act of Union which was then drawn up, that the king should guarantee the country an annual supply of six ship-loads of goods, a provision which was naturally considered to be to the advantage of the country, as It originated from the Icelanders themselves; but from tills fact, at a later period, the kings of Norway came to look on the Icelandic trade as their own peculiar property. After the union this state of things was altered; for the kings of the union had other things to think about. They accordingly relinquished this privilege, and left the trade with Iceland to the Hanseatic towns and the Copenhagen burghers. At that period, however, the limits of the Inland and foreign trade were not so strictly defined as at a later date. In 1602 the Icelandic trade was let by the Danish Government to a company of merchants In Copenhagan for a certain sum of money. This state of things continued up to 1787, whereby the company got the exclusive right of trading In the Island, while the Icelanders themselves were by the same means entirely shut out from foreign markets. In order thoroughly to understand the great importance of such an arrangement, It should be borne in mind that Iceland is only a cattle-producing country, which has to import all its corn-stuffs and other produce from foreign countries. Its exports are principally fish and wool. When, partly to enrich the Danish exchequer, partly to benefit the Danish merchants, a system of monopoly was Introduced Into Iceland by the government, the result was that many of the necessary articles of consumption which the country absolutely stood In need of, unless, indeed, its inhabitants were to perish from starvation or eke out a miserable existence, were considerably raised In value. This method of attracting revenue to the Crown, and of heaping page 99 up all the profits in the hands of a few by the establishment of a commercial monopoly, corresponds to an income derived from Imposts, and a consequent rise in prices; though the first method of reaching the same goal is more convenient where one has to do with a remote region.

And what was the immediate consequence of that chain with which free trade was fettered by the ordinances of 1602 V Naturally this: that the prices on Imported goods rose, so much so that in three consecutive years they amounted to three or four times their original value, whilst the prices of fish fell. The effect such a state of things must needs exercise on the developement of a poor country Is easy enough to comprehend. Its small income became still less; its industries, such as its fisheries and its rearing of cattle, dwindled away; poverty increased, and the population diminished in proportion. In one district of the country alone no less than 800 persons died from starvation In the three years succeeding the introduction of monopoly in trade; while in the whole country it is computed that no less than 9000 persons perished—In other words, a sixth part of the whole population. These terrible consequences of a trade monopoly might have been foreseen, for when the country previously to this had only been able to produce a sufficiency for the frugal wants of the inhabitants, it is only natural to suppose that it would be a matter of the greatest difficulty, if not actually Impossible, for them to exist when the prices of all articles of Import were raised to an artificial height; and the consequence was, that the poorest died from starvation, which is, perhaps, the very extremest consequence at which a prohibitory system can possibly arrive.

Meanwhile the Danish Government, without paying attention to such matters, continued to proceed in the line of conduct it had marked out for itself, and drew the chains even tighter still instead of relaxing them. In a proclamation of 1684 it was strictly enacted that the natives should not trade amongst themselves nor with foreigners, but that all traffic should pass through the mercantile company in Copenhagen; that on no conditions should they trade with others, "neither on land, on sea, in the harbours, in the fjords, or in any other place whatsoever;" and that they should not sell the fish from their boats when out fashing, under pain of the severest punishments.

Of course, by prohibiting a people from conveying the produce of their country to foreign lands, the art of navigation was rendered an Impossibility among them; the more so especially as it could not possibly answer their purpose to fit out decked boats in order to participate in the fisheries, when the prices which the mercantile company put on the fish were so very low. Fishing therefore, was confined to open boats, which naturally could not keep out at sea for any length of time—scarcely over the twenty-four hours—and thereby the page 100 danger was considerably increased, while the profits derived were proportionately diminished. Iceland still suffers from the disastrous effects which this system of monopoly left behind It; the natives have still to row from fifteen to thirty miles out to sea in their open boats, and thus lose a great deal of time, while in stormy weather they cannot put out at all, though they know that off the coasts the sea teems with myriads of fish. Neither has the prohibition that all fish caught off the Icelandic coast should first pass through the hands of the Danish company before entering into the world's markets, been attained. For when the Frenchmen—who are the greatest consumers, as France is a Roman Catholic country, where large quantities of fish are eaten during the fasts—wore prevented from buying directly from the Icelanders, who could have supplied them at a much cheaper rate than It would have cost them to catch them themselves, they began, as above stated, to equip vessels and send them out to those far northern waters. Ably and substantially supported, by their government, the French companies have made a very good thing of it. In the year 1864, the value of the fish taken by them amounted to no less than sixteen millions of francs, while the entire exports of Iceland in the same year, scarcely reached one-and-a-half million of francs.

By the commercial regulations of 1684, the price of all imported goods rose still higher, so that It was doubled over and over again. The commercial companies paid on an average a yearly sum of 45,000 rix-dollars to the Danish Crown.

In the eighteenth century Iceland was a great sufferer from the terrible consequences which those fearful volcanic eruptions entailed; and as her powers of resistance were completely paralysed by the oppressive system of trade, this century proved a most disastrous one to the people. In 1762, a malignant epidemic broke out among the sheep; and about 280,000, or nearly half the whole number of sheep in the country, were slaughtered in this and the years immediately succeeding. In 1783, 11,000 cows died of hunger and pestilence, and 27,000 horses—that is, the greater portion of all the horses in the country, and a large proportion of the cows—and 186,000 sheep. In consequence of this the population diminished in a very marked way. Up to that time a diminution rather than an increase of imputation had taken place. Formerly it had amounted to 50,000 persons, sometimes slightly exceeding this number, at others falling under it; which was an unnatural state of things, as the country was at peace and ought therefore to have been able to reap the fruits which peace entails. In 1783, however, the population of Iceland amounted in round numbers to 48,000 persons; in 1784-5 it sank to 39,000, which number was again diminished by the deaths of 9,000 persons from starvation. In the succeeding year the population was again diminished by 1200 persons.

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In consequents of this unhappy state of things, the Danish Government conceived the idea of removing the inhabitants away from the country, as the means of subsistence there were wanting. As a preliminary step, however, a commission was appointed to enquire into the causes of the retrogressive condition of the country; and it arrived at the conclusion that these causes must not be sought for in the country itself, but that they were rather due to the pernicious course pursued by government, and especially to the heavy pressure under which free traffic and the producing powers of the country in general laboured. In consequence of this, and owing to the great disasters which had overtaken the country, the commercial bonds were relaxed by two succeeding enactments in 1786 and 1787.

But trade was yet far from being free. The harbours were only open to Danish subjects, and these were not even permitted to take their vessels to Iceland without first touching at some Danish port. Neither might any native Icelander trade except he was in partnership with Danish merchants. Foreigners, too, were prohibited from putting into an Icelandic port, except in wise of distress, and even. in such cases they had to leave as soon as possible. But even tills limited concession of competition could not but bear good fruits. After the lapse of two years, the products of the country had increased manifold in value; the prices of fish especially rose in a remarkable degree. A "skippund" of fish which, in 1776, cost 7 rdl. 16 sk., in 1792 amounted to 24 to 30 rdl., or to about four times as much as formerly, In the days of the monopoly it had fetched from 30 to 40 rdl. in the markets of the world, while in Iceland it was not worth more than 7 rdl.

The number of cattle, too, increased in a remarkable degree after the commercial fetters had been relaxed; while the population, which had receded rather than multiplied during the whole century, was increased in the years 1788-1800 by 8,500 persons. The number of sailing vessels, which during the days of the monopoly had amounted to about thirty, now rose rapidly. In 1788, there were fifty-five, and in 1790, sixty-eight.

This progress seemed to the Danish Government to be too rapid; or more properly shaking, private interest interfered, and the priviledges that had been granted were again to a certain extent withdrawn. The people were permitted to trade only at certain ports. Direct trade from vessels was greatly circumscribed; and the captains of trading vessels were forbidden to remain more than a month ashore, and not to run into more than one of the authorised ports in the course of the summer. The effect of this enactment was that the yearly arrival of vessels diminished In 1793 to forty-nine, and in 1794 to thirty-nine. In the following year a petition was forwarded to the government, praying for an page 102 extended liberty of trade, but received In reply the answer that such a concession would act injuriously to the interests of the country. Foreign vessels were thus excluded, and no goods might be conveyed from any foreign place to the country directly without first passing through one of the Danish ports Consequently at the outbreak of the war, in 1807, between Denmark and England, the Icelanders were put to great straits as the Danes were afraid to send any vessels to the country on account of the English cruisers. But by the intervention of some persons, the English Government gave permission to Danish vessels to visit Iceland unmolested, subject to certain conditions.

In the following decennium sundry changes certainly took place; for instance, in 1816 foreigners were first permitted to trade on land, though subjected to the heavy duty of 50 rdl. for every ton burden—a duty which no ship could endure.

In 1836 this impost was considerably reduced, and other privileges were granted, until finally, in 1854. a complete system of free trade was introduced. No duties whatsoever are demanded now, and only a trifling tonnage duty. The material and intellectual resources of the country have since then developed in a remarkable degree, in direct proportion to the freedom that has been granted to its commerce. The imputation, which in the eighteenth century up to the year 1787 had not advanced a step, has now gradually reached up to 68,000 souls. From the year 1800 it rose at the rate of 50 per cent. The exports, too, have increased in like proportion. The average of the exports of tallow for nine years in the seventeenth and eighteenth centuries amounted only to 114,000 lbs per annum, of late this article has been steadily rising, while In 1855 the exports of tallow amounted to 933,000 lbs. In 1784 and the preceding years 2000 lbs of eider-down were generally exported; in 1855 the exports amounted to 4000 lbs. In the eighteenth century the export of feathers amounted to 4500 lbs for one year only and this is the highest sum it reached, namely, in 1753, while in others it sank to some hundreds. Since the beginning of the present century the export of feathers has been steadily on the rise; in 1855 it reached 25,000 lbs. The greatest advance, however, appears in fish and wool. During the last few years of the monopoly about 8,000 "skippund" of fish were annually exported; in 1855 the exports amounted to 24,000, or to three times the former quantity. During the latter half of the last century the exports of wool occasionally sank so low as to some thousand pounds. In 1734 the exports were 107,000 lbs; in 1743, 84,000 lbs; in 1764, 39,000 lbs; but in 1806 they rose to 260,000 lbs; in 1840 to 940,000 lbs; and in 1855 to 1,600,000 lbs. The export of woollen manufactured goods has, however, diminished though in a much smaller proportion.

These brilliant results appear to still greater advantage when compared page 103 with the prices which obtained hi former days and at the present time, both as regards imports and exports. We have already alluded to the article of fish. The price of wool, moreover, steadily rose: in the years from 1840 to 1849 white wool on an average, fetched 21 sk. (5¼d.) the pound; from 1850 to 1859 the average was 30 sk. (7½d.). In the last few years a further improvement has again taken place, owing, no doubt, in a great measure, to the scanty supply of cotton in the great markets of Europe. In 1864, wool fetched 3 marks C sk. (15d.) the pound. The propitious circumstances resulting from free trade have shown themselves in a most advantageous manner; and although Iceland has been visited during the last decennium by years of severity and distress, still she has not only not had to experience those dreadful horrors, famine and starvation, which the disastrous times of the last century produced, but no check of any importance has been given to her advancement. The development of her commerce is best to be seen from a glance at the number of vessels which visit Iceland at the present day, in comparison with the 11 amber that visited her in former days. From 1856 to 1863 the average number of vessels amounted to 134, with a burden of 6164 tons; in 1800 to 1807 the tonnage amounted to 2401, from 57 ships; while from 1848 to 1855 the relative proportions were 120 ships, with a burden of 4785 tons.

It is natural, therefore, that the people value very highly the advantages which free trade has conferred upon them, while the merchants themselves have not, on the whole, been losers. Of course the few large mercantile houses which in former days usurped the entire trade of Iceland, and which, consequently, amassed a large amount of wealth, have been compelled to give way to competition; but, in their stead, opportunities have been afforded to numbers of small merchants, who were formerly entirely excluded from the markets. The result of free trade, therefore, has been to divide the prize among a larger number of individuals, which, though of course productive of no little grumbling among the few who have made their fortunes in the Icelandic trade, has yet opened up sources of profit to the many who were formerly shut out from it. Moreover, the producing powers of the country, and with these her exports, have considerably increased, as will be seen from the statistics quoted above, and an impulse been given to her commerce In general. The advantages of the new system are, therefore, mutual.