Translator’s Appendix

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.

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.

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:

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.

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.

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.