THE FEDERAL SYSTEM OF POLITICAL ECONOMY.*
AN interesting issue is raised by the sub-title of Mr. Hillier's book, The Commonweal. It assumes that there is a political economy for a State, or a federation of States, as distinct from
one that is addressed to the individual trader :-
"Free Trade," says the author, " is, as a rule, a privilege to the consumer. Protection is in certain cases a privilege to the producer. To balance conflicting interests, to determine equitably the allotment of these privileges so as to obtain the nr23:imum of advantage to the well-being of the State should be one of the chief arts of Political Economy." (p. vi.) With all respect, we must say that there seems to be here some confusion as to what is the province of political economy.
The problem propounded is one for political philosophy and statecraft rather than for political economy, or, as we should prefer to call it, economics. Economics, as we understand it, is concerned with exchange, and exchange is an expedient universally adopted by civilised mankind for the satisfaction
of their wants, and, as M. Guyot reminds us in a pamphlet, lies Prajugis Lconomiques, noticed in the Spectator of March 5th, exchange takes place between individuals and not between nations. Economics has formulated certain general proposi-
tions, such as that exchange and the subdivision of labour lead to an economy of effort ; it does not pretend, however, to wield any categoric imperative in favour of adopting the line of least effort regardless of all other considerations. There remains the question raised, and very properly raised, by those who wish to make practical use of the generalisations so reached,—viz., what considerations, if any, can be brought forward to induce men to forgo the privilege of free and unimpeded exchange P Admittedly there is an appeal to ethics and to national sentiment. As far as the ethical aspect of the question is concerned, we find it difficult to get away from the simple proposition that it is inequitable to put a tax on one set of people in order to put a profit into the pockets of another set. The advocates of Protection, therefore, are for the most part silent on this head, and the appeal is more usually made to national or federal sentiment. Mill's familiar admission is quoted that infant industries may be, and, by an easy transition, ought to be, protected. We bare never admitted the necessity of this concession ; but accepting it for the sake of argument, we have still to judge each case on its merits. The citizens of the United States and of Germany have been persuaded by the doctrines taught by Alexander Hamilton and by List that it was wise for them to abandon the privilege of unimpeded Free Exchange, and to sacrifice, to some extent, the economy of effort ; but it is important to notice that in both of these instances the loss occasioned by the restriction of foreign trade was more than balanced by the vast Free- trade area created by the abolition of internal tariffs. This opening of a great internal market, it should never be for- gotten, was part, and the principal part, of the policy of
• (1) The Commonweal: a Study of the Federal System of Political Economy. By Alfred P. Hillier, B.A., M.D. London: Longman and Co. [4s. 6d. net.] —(2) Economic and Fiscal Facts and Fallacies. By Sir Guilford Molesworth, H.C.I.E. Same publishers. [3s. Cd. not.]—(3) Britain for the Briton. By Sir William Earnshaw Cooper, C.I.E. London : Smith, Elder, and Co. [lOs. 6d. net.] federation. Given the vast open market of the United States and the German Empire, commercial expansion was bound to follow. The point which our Protectionist friends seem to miss is that this certainty of progress, now an accomplished fact, was the result not of Protection but of Free-trade. It is a mistake to regard Hamilton and List as mere Pro- tectionists. Their main contention was for Free-trade within the ample boundaries of their respective countries.
The case of England is entirely different. She has no infant industries, and, as far as the influence of the Mother- country extends, has set up no barriers against internal trade. The Colonies, influenced by the plausible, but, as we believe, fallacious, arguments of the federal school, adhere to Pro- tection, and are opposed to Free-trade within the Empire. This policy once entered on cannot easily be reversed. The British Colonies have many of them conceived the idea of being self-sufficing territories, and show no disposition to form part of an open British market. The appeal, therefore, which is made to England to deprive herself of the privilege of Free Exchange seems to us entirely inconclusive.
The argument can be carried a step further, and we shall be told that, apart from any question of federation, it is to the interest of the Mother-country to abandon Free Exchange in order to become self-sufficing. The counsel comes too late; we cannot now go back to a condition of things in which England could produce all her own food. Sir Guilford Molesworth in Britain for the Briton (p. 78) quotes, apparently with approval, a commendation of the Protective policy of France, for otherwise "it would speedily be reduced to an agricultural nation, and therefore a poor nation, as all must be that depend exclusively on agriculture." Is it argued that Great Britain should retrace her steps, and by means of Protection become an agricultural, and therefore a poor, country P This is the advice which we might gather from Sir William Cooper's impassioned advocacy of a return to the land in Economic and Fiscal Facts and Fallacies,—a panacea which he seems to think relevant in a discussion as to skilled labourers temporarily thrown out of employment by reason of the ending of the South African War. Here, again, we have the epigrammatic M. Guyot to help us, and to point out that the French vine-growers are not mithiifty citizens, because, though they could grow wheat at a profit, they prefer to cultivate vines, and to buy their wheat elsewhere as freely as the Protective tariff of their country will allow. Similarly, it may be that England might pursue a more intensive system of agriculture, and make a profit ; but it would be a questionable policy to carry out the suggestion by withdrawing labour, and the capital which employs it, from skilled and more profitable industries. This, we submit, would be the result of Protection. By impoverish- ing our foreign suppliers, it would deprive some of our own skilled workmen of their market, and they might be obliged to give up a formerly profitable pursuit for one that was less profitable ; just as M. Guyot suggests that the French Pro- tective duties may induce some cultivators to grow wheat instead of the naturally more profitable vine.
The alleged surplus of unemployed men, if candidly con- sidered, has no relevance to this discussion. We cannot here embark on this difficult and thorny question, but we may express our conviction that it is more Free-trade and not Protection that is required for an amelioration of the con- dition of the unemployed. Protection means a smaller volume of trade, and consequently less, not more, employ- ment. Excessive taxation and the purchasing-power thereby withdrawn from the market are a clear contravention of the principle of Free Exchange and an undoubted cause of un- employment. The jealousy of Parliament toward industrial enterprise has of late years largely reduced the number of Bills for industrial undertakings. Socialistic legislation has produced a feeling of insecurity which prevents enterprise in this country. The Trade-Unionist attitude towards the employment of the less efficient workers, of whom the un- employed largely consist, at lower than the full Trade-Union wages is also a cause of unemployment. All these combine to produce a condition of things that amounts to a restraint of trade and a loss of purchasing-power, and go far to explain the phenomenon of unemployment. We want no additional obstacles placed in the way of Exchange; on the contrary, we want some relaxation of those which are pressing heavily on the industry of the country.
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