The Empire and the century/The Maintenance of Empire

The Empire and the century
The Maintenance of Empire: A Study of the Economic Basis of Political Power by J. L. Garvin


THE MAINTENANCE OF EMPIRE:

A Study in the Economics of Power

By J. L. GARVIN


'Lords and Commons of England, consider what Nation it is whereof ye are and whereof ye are the governors: a Nation not slow and dull, but of a quick, ingenious, and piercing spirit, acute to invent, subtle and sinewy to discourse, not beneath the reach of any point the highest that human capacity can soar to.…—Milton's Areopagitica,
'Le Revenu c'est l'État.'


I.

Will the Empire which is celebrating one centenary of Trafalgar survive for the next? It is a searching question, and, despite the narcotic optimism which is the fashion of the hour, national instinct recognises that the answer is no foregone affirmative. In the opinion of nearly all foreign observers, and of some sincere thinkers of our own, the British political system represents an extent and magnificence of dominion beyond the natural, and unlikely to be permanent To consider what it embraces and implies is to restate those commonplaces of our politics daily repeated which remain above the grasp of imagination. It comprises a fourth part of the habitable globe and almost a third of the estimated numbers of mankind. Its existence implies even more than this, for it depends upon the control of all the sea communications of the world and the possession of a naval superiority, as generations of continental critics have reminded us, which is nothing less than the dream of universal monarchy realized on one element. Were that Empire not already in being it would be impossible, under present conditions of international policy, for any conceivable Power to create it.

We acquired what we have when the whole energies of one insular people alone were free to concentrate upon the 'sea-affair' and to overbear the partial and irregular energies directed towards the same object by a single rival—France. France was distracted and exhausted on land by her secular conflict with the German races; and when accounted for at sea, all political danger and commercial opposition in the colonial world was at an end. The Continent was convulsed by religious, dynastic, revolutionary, and national conflicts in every alternate generation from the Thirty Years' War to Sedan, and incapable of full commercial development before the introduction of steam and the invention of railways. In Europe at that time all real maritime rivalry was extinguished, and no strong economic competition could arise. And beyond Europe existed neither one nor other. America was unploughed and Asia dormant. We settled at will, annexed to our liking, and were everywhere unassailable. These conditions alone enabled an island people pre-eminent in vigour but not in numbers to engross so large a portion of the territory and trade of the world. But England in turn did more than all other countries together to change the conditions under which her dominion and commerce were impregnable. Whether that fact will rank among the moral triumphs or the supreme ironies of history the future will record. We invented machine-industry and steam-communication; the Stockton and Darlington Railway was the 'short model' of the trans-Siberian; before the War of Independence, and indirectly even afterwards, our sea-power sheltered, as our later economic policy nourished, the growth of the United States; British capital went far to provide both hemispheres with the modern apparatus of production and transport; we were the original creators of that technical spirit of Western civilization which has resulted in the awakening of Japan.

Whether an Empire which could only have reached its present extent under political and commercial conditions that have passed away can be maintained under the conditions now prevailing—this is the large question of our national policy. That question governs more or less every other domestic and external issue. It raises a problem admitted at the outset to be at least equal in magnitude and difficulty to any task ever yet presented to constructive statesmanship. Opinion, even amongst ourselves, is not unanimous in believing that a solution can be found. Foreign judgment, until recently, was almost wholly adverse, nor is this scepticism altogether prompted by hostility to the ideal of British Federation. Let us state the main elements of the problems in moderate terms.

The difficulties most usually dwelt upon are, as a rule, exaggerated. What we may call the mechanical difficulty—distance between the Mother Country and the greatest of her Colonies and possessions—remains considerable, but it is the least serious impediment. Objections as to the infinitely heterogeneous character of the races of the Empire are rather abstract than substantial. Practically that aspect of the problem, confused as it appears at first glance, narrows down to the large and complex, but after all limited and definite, business of reconciling the interests of the Mother Country with those of the three great self-governing colonial groups and of India. To extend any arrangement effected between these main portions of the Empire to the various minor portions would be an interesting but secondary and perfectly manageable question. The real difficulties, then, which must be surmounted if the Empire is to be consolidated and held, are questions of man-power and money-power, questions of defence and trade. The more thoughtfully the subject is examined upon this side, the more clearly will it appear, in the present writer's judgment, that the economic factor in its reaction upon every other factor of the Imperial problem must prove decisive.


II.

The security of the King's dominions would be best based upon the power of a white population, proportionate in numbers, vigour, and cohesion to the vast territories which the British democracies in the Mother Country and the Colonies control. That surest of all guarantees is obviously lacking. Although we hold a quarter of the world, we are not more numerous than Americans or Germans, and we cannot safely believe we are more efficient. At the present moment, the white populations of the three great countries competing for trade and sea-power compare as follows: the Unites States, about 78,000,000[1]; that of Germany, nearly 61,000,000; and that of the British Empire, not more than 54,000,000. These are remarkable figures as they stand. To any thoughtful mind they must appear disquieting figures. But they by no means express the whole force of the case.

The colossal burthen of British sea-power rests exclusively upon the shoulders of the British democracy at home. Sea-power has become fundamentally a question of finance in an epoch when Germans, Americans and Japanese can build and manage battleships as well as ourselves (for we can base no policy upon presuming the contrary). Every witness competent to speak for colonial opinion agrees that without a radical alteration of our economic policy we can never hope to secure an Imperial Federation for defence purposes. Canada and Australia will not contribute to a naval expenditure which, for all the purposes of war and peace, would give precisely the same protection to food-supplies and raw material from the United States and Argentina as to those from the Dominion and the Commonwealth. War is an occasional episode in the life of nations. Commerce is its constant element. At present Canada gains nothing from the navy that is not gained also by a competitive agricultural country like Argentina, developing by the use of the British market almost equally fast. If the Colonies are to enter into a fast partnership with regard to the navy, they will require a commercial as well as a strategical inducement. Thus the finance of sea-power under the existing fiscal system—and the probable bearing upon Imperial defence of an alteration of that system will be considered later—must continue to be supported by the population of the Mother Country only. English trade, still taxed through the National Debt for the past struggles by which the Empire was won, as well as for the fleet which retains it, enjoys—apart from the preference movement as already applied—no advantage in the Colonies and India that American and German trade does not enjoy. This is a case of special taxation without special advantage where the most austere of the classical economists might consistently have supported a policy of preferential tariffs as a practical measure.

Meanwhile, however, we must consider the conditions not as they may be or ought to be, but as they are. For all vital purposes of the competition for trade and sea-power we have but a population of 43,000,000 in the Mother Country, as compared with one of 61,000,000 in Germany and about 83,000,000 in the United States. But the Kaiser's subjects increase more than twice as fast as ours; the population under the American flag grows more than three times as rapidly. The stream of emigration flows towards the Republic in broadening rather than diminishing volume, and even in Germany the rate of acceleration in numbers is increasing. In a dozen years from now—how swiftly such a period passes in politics we know—the United States will have a population of 100,000,000; that of the German Empire will be over 70,000,000 (no conceivable emigration or reduction of the birth-rate will much abate that figure); and the population of these islands cannot be expected to exceed at the outside 48,000,000. It is already late in the day for any attempt to redress the balance, and we do not realize how decisively the scales are turning against us. President Roosevelt and Congress are spending upon the fleet with both hands. Germany's National Debt is but a fraction of ours,[2] and her army costs no more; the increase in her wealth and productive power more than keeps pace with the growth of her population; and every augmentation of her resources will now go to strengthen the navy. It is a perfectly fair and well-reasoned calculation on the part of Americans and Germans alike, that when the former, in another ten or twelve years, have 100,000,000 of inhabitants and the latter over 70,000,000 (against only 48,000,000 or less in the British Islands), an overshadowing preponderance in numbers and industrial strength will enable each of these Powers, however comparing with each other, to support a larger navy than we shall be able to afford. Our sea-supremacy, and inevitably with it our present Imperial position, would pass away before the end of another generation under conditions of peace and by the natural operation of economic and social forces.[3] Unless the Mother Country and the Colonies can unite their energies at no distant period and help each other to develop their resources, there is unfortunately little likelihood of any flaw being found in this argument Sir Michael Hicks-Beach, speaking as an orthodox economist, and with unrivalled authority as an ex-Chancellor of the Exchequer, has recently warned us that it will be absolutely impossible for the Mother Country to sustain alone the future burthen of Imperial defence. The opinion of observers like Mr. Leonard Courtney, that 'our supremacy must pass away,' is determined by the same considerations. The general disbelief of foreign observers in the permanence of the British Empire rests upon like reasons. They still agree with Turgot that 'Colonies are fruits which cling till they ripen'; and anticipate in our case, after the dropping of the fruit, the decay of the tree. Even a not unfriendly observer like the German economist. Professor Fuchs, of Freiburg, whose exceedingly far-sighted book[4] anticipated many of the commercial arguments for fiscal reform so far back as 1898, writes in the special preface to the recent English translation of his work: 'The statesman of whom I spoke twelve years ago seems to have come at last. The ftiture must show whether it is not already too late.' It is a pregnant reflection when we remember the immense extent of relative ground we have lost in the intervening period.

It will be objected at once that numbers are not everything. They are not everything. But they are much, and, other things being equal, they are decisive. There has never been a greater example of moral force than that given by Japan in the late war. But our allies needed also the whole of their local superiority in material force upon both elements. They realized as well as Napoleon the value of the 'big battalions,' and as well as Nelson that 'only numbers can annihilate.'

Those who find sufficient encouragement in the reflection that numbers are not everything are usually influenced by mistaken impressions of the successful struggle of this country against the power of Napoleon. Then we had only half the population of France. But we at that time owed to machine industry (multiplying our numbers for economic purposes) an unparalleled productive force. We paid to raise against France the allied armies of the rest of Europe, and Napoleon was in the long run beaten by numbers, nor could have been beaten otherwise. Again, while Europe was passing through the political revolution, we were passing through the industrial revolution. With a monopoly of machine-power and a monopoly of the sea, wealth and trade were increased faster in this country than in all the rest of the world put together. As an island we can have no similar compensation in the future. In the United States and Germany money-power now increases as man-power increases.


III.

Leaving aside every issue of economic controversy for the moment, and pursuing our investigation into the state of the facts, let us endeavour to acquire at the outset a clear view of the commercial progress of Great Britain and its principal competitors. For this purpose I have constructed from the official statistical publications of the countries concerned[5] a table exhibiting the comparative exports of the United Kingdom, Germany, France, and the United States during the last twenty-five years. The figures are arranged in accordance with the wishes expressed by Free Traders at the opening of the fiscal controversy. No single year is taken as a point of departure. To avoid all disputes as to the significance of 1872 and the exceptional character, as it is contended, of the inflation and reaction following the Franco-German War, the seventies are altogether excluded. No attempt is made—for the present—to go below the surface of the totals, to distinguish coal from manufacture, or to examine the morphology of the trade. New ships are included, and the figures are made up in quinquennial averages. Every concession being made that Free Trade statisticians can demand, the result appears as follows:[6]

Comparative Exports of the Four Principal Commercial Countries during the last Quarter of a Century, 1880-1904.
Average,
1880-84.
Average,
1885-89.
Average,
1890-94.
Average,
1896-99.
Average,
1900-04.
Increase,
Per Cent.
Mill. £. Mill. £. Mill. £. Mill. £. Mill. £.
England 234⋅3 226⋅2 234⋅4 239⋅6 239⋅2 23
Germany 155⋅4 153⋅5 155⋅1 184⋅4 239⋅6 54
France 138⋅3 132⋅3 136⋅8 144⋅3 168⋅8 22
United States  165⋅4 146⋅2 184⋅7 212⋅6 292⋅8 76

We shall have to make further reference to this table; but it is at least clear, when the figures are arranged for Free Traders with scrupulous fairness in a light the most favourable to their case, that the exports of all our principal and protected competitors are increasing even more rapidly than their population increases. France has an almost stationary population, but, even upon the surface of the figures, her exports show a vitality equal to ours. When we remember that the British returns for the last quinquennium include new ships, not previously reckoned, it becomes obvious that our rate of growth is the lowest in the list.

The detailed statistics for the last lustrum only are instructive, and will perhaps satisfy Mr. Chamberlain's opponents that the most recent movements of British commerce are not so much in their favour as they suppose:


Exports of the Four Principal Commercial Countries during the last Five Years, 1900-1904.
1900. 1901. 1902. 1903. 1904. Increase
Per Cent.
1900 over 1900.
Mill. £. Mill. £. Mill. £. Mill. £. Mill. £.
United Kingdom  291⋅2 280⋅0 283⋅4 290⋅8 300⋅7  3
Germany 230⋅6 221⋅6 233⋅9 260⋅7 261⋅2 13
France 164⋅3 160⋅6 170⋅1 170⋅1 179⋅0  9
United States 286⋅6 304⋅3 282⋅4 290⋅0 299⋅0  4


It will be shown more and more clearly as the present examination progresses that the latest statistics of international trade do not in the least impair the solidity of Mr. Chamberlain's foundation arguments. Since the movement in favour of Imperial union upon a commercial basis was launched two years ago, Germany, for example, has been gaining upon us more rapidly than before. German exports for 1904 were actually larger than British exports were in any year up to 1899! We hear of her augmented efforts to ruin herself by Protection, of her dear food and her meat famines, her socialism and her militarism. Eppuir si muove. In the close race for commercial supremacy her shadow already falls before us and lengthens as we run. And Germany, let us remember, keeps her agriculture intact, and improves with every year the yield of her soil. When we remember the degree to which the latest British returns are swollen by the temporary circumstances of the cotton boom (where the rise of values represents no real extension of trade), it will already appear probable that this country, should the processes revealed by the above table be continued, will be reduced to the third place as an exporting Power before the present generation is out. We must, in any case, become gradually weaker and weaker by comparison in man-power and money-power.

'Power' is a purely relative conception. Upon that simple and fundamental truth Mr. Chamberlain has from the first based his position. Since the Birmingham speech of May 15, 1908, nothing has occurred which impairs the force of his contentions.

Finally, if anything were required to fortify this exposition of the case, it will be found in the important, though incomplete, evidence of the two volumes known as the Inquiry Blue-books. Of such increase as has been shown in the total value of British exports dining the last quarter of a century, much more than half must be set down to the vast development of our coal shipments. But England must stand or fall as a manufacturing nation. How is it with us in that vital matter? From the statistics contained in the Inquiry Blue-books (completed by the later returns of the countries concerned), I have compiled a separate table showing once more by quinquennial averages the comparative progress of this country and its protected competitors in the export of manufactures only:

Manufactured Goods.—Comparative Exports of the Four Principal Commercial Countries during the last Quarter of A Century, 1880-1904.
Average,
1880-84.
Average,
1885-89.
Average,
1890-94.
Average,
1896-99.
Average,
1900-04.
Increase,
1880–1904.
Absolute Relative
Mill. £. Mill. £. Mill. £. Mill. £. Mill. £. Mill. £. Per
Cent.
England 206⋅4 196⋅9 199⋅0 199⋅5 225⋅3 18⋅9  9
Germany  92⋅8  99⋅6 100⋅2 114⋅8 149⋅9 57⋅1  61
France  73⋅1  69⋅9  73⋅6  79⋅5  94⋅5 21⋅4  29
United States   25⋅9  28⋅7  34⋅2  55⋅0  87⋅8 61⋅9 239

Here, with respect to the most vital department of our trade, we have an unmistakable picture of decline in our international position. We are beaten absolutely and relatively alike. We are beaten by every one of our protected competitors. France beats us.

What is the reason? We have our Colonies, where our traditional pre-eminence, as we shall see, is not yet forfeited—where the same language, similar tastes, and a common Imperial citizenship still help to retain for us the advantage we nowhere else enjoy. We have the richness of our coal deposits and their unique proximity to the factory and the wharf. We have still a geographical position more favourable than that of any of our competitors with regard to the world's markets as a whole. We have our unapproached facilities for shipbuilding and shipping.

Nor are we told why we are beaten when we inquire into the question of our relative industrial efficiency. Every improvement in technical education must be valuable, but it is certain that on the whole we do not fail for want of skill. In the greatest of our trades, the Lancashire cotton operative does twice the work of the German cotton operative in a given time, and does it better; while British ships, British locomotives, British machinery generally, can still hold their own for workmanship. Our wares are more usually reproached for superfluous excellence, by comparison with some cheaper and poorer foreign product, than for intrinsic inferiority.

But why are we beaten? We have an altogether unmatched combination of natural resources, acquired skill, accumulated capital, and commercial connections. We have also had, throughout the whole of the generation in which our rivals have made the greatest comparative strides, the celebrated possession of cheap food. But, as a manufacturing country, we are not only outstripped in extent and rate of progress by the United States and Germany. We do not quite hold our own even by comparison with France—which works on imported coal, which has a stationary population, with conscription in its severest form, and a national debt half as large again as ours, which in the eyes of our orthodox economists is loaded with every fiscal disadvantage the human imagination can conceive.

One conclusion emerges clearly from this preliminary study. It is that Protection is no preventive of progress, and that a policy of tariffs may be accompanied by competitive success. The money-power of France is marvellously sustained under the commercial policy she has pursued with little swerving for two centuries and a half since the time of Colbert. Germany and America absorb into their industrial system year by year a number of new workers twice and three times as large as we can find employment for. These States, therefore, gain upon us in man-power and money-power alike; in fighting-power and budget-power; and, in strict consequence, sea-power itself must ultimately be shared between them, unless we can call in the Colonies to redress the balance, and can maintain as an Empire what as an island we should lose.


IV.

Military and naval federation with the Colonies, even if we could secure it, would not people our territories or extend our trade. Protection was adopted in the United States and Germany as a doctrine of development. It has been brilliantly successful for that purpose in both instances. Our competitors have unquestionably made the most of their opportunities; of ours we as unquestionably have made the least. What the British Empire needs in its turn is a policy of practical development meant to develop as well as to unite the human and financial forces of the Mother Country and her Colonies. If we succeed in that end we shall maintain the Empire; if not, it will be impossible to maintain it; and the economic issue is the primary, the vital factor of the whole problem. 'Commercial union,' says Sir Wilfrid Laurier, 'must precede political and military union, and we cannot wait for ever. But Sir Michael Hicks-Beach points out, what no one else has yet attempted to deny, that it will become absolutely impossible for us to sustain alone the burthen of Imperial Defence, and that unless we can obtain the financial cooperation of the Colonies, 'our Imperial power must go.' The Colonies are willing to approach the question on the commercial side, they are not willing to approach it on any other; and since they will not federate with us upon Free Trade terms, we must federate with them while yet we have the opportunity on other than Free Trade terms. We have no alternative. A definite union of interests in this respect may be safely trusted to develop subsequently, and of itself, the necessary financial and, in Captain Mahan's sense, 'military' organization for the protection of those interests. Preference, as the biologists say, will prove to be the true 'growing spot' of Imperial Federation.

We have no alternative. Persistence in a policy of free imports is not, as a matter of fact, whatever may be desired, a practicable course. That would mean, as will be shown in more detail in subsequent pages, the further closing of markets against us throughout the world. It would mean that the competitive power of the protected countries would be further promoted by free access to our market, while our manufacturing position would be further weakened by more effectual exclusion from theirs. It would mean their more rapid attainment of supremacy in man-power and money-power. It would mean that the example of our European rivals would be imitated elsewhere. What may still be called the neutral markets, like Japan and Argentina, would model their commercial policy upon that of the United States and Germany. Above all, it would mean in the Colonies the rise of McKinleyism pure and simple, and the gradual development of a definitely separatist ideal, with the rejection by the Mother Country of the only condition upon which a closer union with the Colonies is possible.

Nor is there any reason why Free Traders in principle should not be supporters in practice of constructive Imperialism in the only possible economic shape. It is of the first importance to make this clear. It is still generally assumed that Adam Smith and Cobden must be accepted or rejected together. No opinion could be more profoundly or more demonstrably mistaken. The question of the maintenance of the Empire is a politico-economic problem which, if it is to be usefully treated, must be regarded neither from the point of view of the ordinary party-political controversialist, nor from that of the doctrinaire economist of any school. No rigidly pedantic theories of any kind will help us in dealing with the most complex and plastic political organism the world has yet known. the English spirit of compromise, which has contrived to steer a clear course between the falsehood of extremes in every other relation of life, has never yet found its economic expression. To arrive at this expression we have not to abjure the teachings of Adam Smith: we have only to return to them. We have not to reject Cobden and Adam Smith together. We have strictly to choose between them.

Cobden believed and hoped that Free Trade would be the dissolvent of Empire. He conceived that it was as much to the interest of this country to develop the United States as to develop Canada or Australia. Expecting and approving the dissolution of the Empire, anticipating the universal prevalence of free exchange and the end of war, he was logically a Free Trade extremist in theory and practice. Adam Smith's position was quite opposite. Desiring, like all good men, the political and the economic millennium, his far more circumspect and penetrating mind made him differ from Cobden in thinking neither form of the millennium to be attainable. He did not overlook the supreme significance of national identity. Believing absolute Free Trade to be a perfect policy for an ideal world, he did not hold it to be a practicable policy in the real world. Unlike Cobden, he desired the British Empire not to be dissolved, but to be strengthened and perpetuated, and did not believe that absolute Free Trade was the right means to that end. He desired, on the one hand, Imperial Federation; he thought, on the other hand, that the Navigation Laws were the sinews of sea-power, the necessary economic nexus of the Empire, 'the wisest of all the commercial regulations of England,' and he advocated the continuance of those laws as the concrete foundation of our economic policy.

In other words, the position held by the father of Free Trade as an economic theorist was one thing, but quite another his position as a political thinker and robust citizen—far from regarding, with Cobden, British power as a bad fact and the British Empire as a wicked acquisition. Advocating the closer union of the Empire and the maintenance of the Navigation Laws, the greatest of Free Traders was for all concrete purposes in favour of a federated Empire upon a protectionist basis. The course of events is compelling us once more to stand where he did. Mr. Chamberlain has not repudiated the politico-economic ideas of Adam Smith; he has returned to them.


V.

At this point it is our business to examine in more detail and as fairly as may be the position of British trade under the present policy, and the prospect before us should that policy remain unchanged. For this purpose it will be well to follow the simple classification suggested by the Inquiry Blue-books, and to divide the markets of the world into three groups: (1) The chief protected countries, (2) the neutral countries, and (8) British Colonies and possessions. We shall see what has happened in the first group, and we shall also see that history must repeat itself in the other two, unless the country resorts, without undue delay, to a radical alteration of its fiscal system.

Free imports have permitted the most rapid and complete closing of the continental markets, where our trade in manufactures is declining; they must facilitate and encourage the closing of the neutral markets, where our trade is still increasing; and must lead to the loss of the colonial markets, which a generation ago were the least, as they are now the most, valuable of the three great groups, and where alone we have the opportunity of making our position secure for as long as there is any need to look. Had Cobdenism been less blindly followed and Adam Smith better studied, we should long since have had preferential arrangements with the Colonies. No Free Trade thinker, on the other hand, can deny that free imports in this country have enabled hostile tariffs abroad to develop with impunity. Free imports have been of the greatest practical disadvantage in the foreign and colonial spheres alike. An Imperial tariff would improve our position in all of them.

We proceed to obtain a more definite view of the cooperative movements of trade in the three great groups of markets. Adopting the classification of the Inquiry Blue-book, we find that the Board of Trade includes in the first group the following ten countries: Russia, Germany, Holland, Belgium, France, Spain, Portugal, Italy, Austria-Hungary, and the United States. The second group includes all other foreign countries—called with more or less accuracy the neutral markets. The third group includes British Colonies and possessions only. As the basis of further analysis let us now take the following table, constructed from the 'Statistical Abstracts' and the 'Annual Statements.'

Total Value of Exports to Protected, Neutral, and Colonial Markets, 1880-1904, in Quinquennial Averages.
Period. To
Principal
Protected
Countries.
To other
Foreign
and Neutral
Countries.
Total
to all
Foreign
Countries.
To
British
Possesions.
Total
Exports.
Mill. £. Mill. £. Mill. £. Mill. £. Mill. £.
1880-1884  99⋅6 53⋅9 153⋅6  80⋅3 234⋅3
1885-1889  92⋅0 54⋅9 146⋅9  79⋅3 226⋅2
1890-1894  95⋅0 60⋅8 155⋅8  78⋅6 234⋅4
[7] 1895-1899 94⋅7 61⋅9 155⋅6  81⋅1 237⋅7
1900-1904 103⋅4 74⋅0 177⋅4 105⋅3 282⋅7
Increase,
1880-1904,
in Mill. £.
 3⋅3 20⋅1 23⋅9  24⋅5  48⋅4

This table shows much, but by no means enough. It proves, indeed, that the increase in Imperial trade is greater than the increase with all foreign markets put together. It suggests that the growth of British exports to the principal protected countries has been insignificant, even when we take these exports as a whole, and do not inquire into their character. But in the period of twenty-five years covered by the table our coal exports to these markets have increased, as a matter of fact, by 200 per cent., while our manufacturing exports have shown a heavy decline. This result will be most clearly shown as follows:


{Exports to Principal Protected Markets (distinguishing Coal).
1880-1884 compared with 1900-1904.
Total Exports. Coal. All other Exports.&
Million £. Million £. Million £.
1880-1884   99·6  5·9 93·7
1900-1904 108·4  16·0 87·4
 +3·8 +10·1 −6·3

The point may be clinched by putting together two sets of figures compiled by the Board of Trade officials, appearing in the second of the famous Blue-books. In column A the compilers deduct not only coal, but all other articles not wholly or mainly manufactured.

A. Exports of Articles wholly or mainly manufactured in the United Kingdom to the principal Protected Foreign Countries, 1870-1904. B. Imports of Foreign Manufactores into the United Kingdom, 1870-1904.
Million £. Million £.
1870   80⋅7   52⋅5 
1880 81⋅9   76⋅4 
1890 87⋅2   89⋅9 
1900 80⋅3  128⋅3 
1904 72⋅1[8] 135⋅2[8]

It is a contrast for thought. To all the chief continental countries and the United States we are exporting products of British manufacture to a less amount than we did more than a generation ago. Their exports of finished articles to us have risen by leaps and bounds. In 1880 we still retained our leadership. The character of the exchange has so altered that while the value of our manufactured exports to the first group of countries has absolutely decreased, they send us nearly twice as much as they sent us then—and nearly twice as much as we send them now. In relation to the first group of markets our commercial supremacy has totally disappeared already. It will not, presumably, be denied by any orthodox economist that hostile tariffs have driven down our trade in manufacture in the principal protected countries. It will not be denied that free imports have enormously increased the influx of foreign manufacture from these same countries. This process seriously weakens ourselves and sensibly strengthens our rivals—so much will be admitted—and must, therefore, reduce our relative competitive vigour.

The average mind does not readily grasp the meaning of very large figures. But let us look again, with a little exertion of the imagination, at the enormous totals concerned, and endeavour to realize the political as well as the economic significance of the contrast given.

What does it mean? It means that the trade taken away from us by hostile tariffs means profit taken away and employment taken away. It means a positive loss in man-power and money-power. Simultaneously the continual and huge increase in the business of manufacturing for our market directly enables our competitors to maintain a larger industrial population—to make still stronger, therefore, the home market they monopolize; to accumulate capital at a faster rate; to raise a greater revenue; to build more formidable navies. Our own policy has nourished the agricultural prosperity of the United States and the manufacturing power superimposed upon it. Our own policy has stimulated the manufacturing, maritime, and naval development of Germany. Foreign tariffs touch our financial resources and our ability to support population, wherever they touch our trade, and they hurt us politically—ours is the only country in which it would be necessary to emphasize the fact—wherever they hurt us economically. They directly attack the very sinews of Empire. Free import without reciprocity strengthens the fibre of the competitive Powers in every element, human and financial, of their political as well as of their economic strength. This is why the problems of our commercial dealings with foreign countries and the Colonies respectively are not separate, but one. We cannot part the retaliation issue from the preference issue. Hostile tariffs on the one, free imports on the other, acting together, the former to diminish British manufacturing trade, the latter to increase foreign manufacturing trade, cut at the root of our relative power and work against the maintenance of Empire.

While we have kept an unconditionally open market for all comers, the tariffs against our own trade have risen with impunity. Under the same circumstances they will continue to rise. Foreign producers enjoy a system of privilege in their home market and equality in ours which enables them to make the best of both worlds; only a very credulous mind can expect them to abandon, and of their own initiative, a position by which their manufactured exports to us must continue to flourish, while ours to them must continue to decline. We have lately reached another well-marked stage in this process. The continental treaties pivoting on the new German tariff come into operation next year. They will put up a higher wall round the Central European markets, containing four-fifths of the population of the Continent; and, in spite of the nominal equality supposed to be secured by the 'most favoured nation' clause, we shall find that as British trade was unrepresented in the negotiations it will be hardest hit in the result. We cannot doubt that much of our improved trade with Germany this year means an anticipation by importers in that country of the inevitable consequences of the tariff. Our European trade in British manufacture is, in short (this has been shown beyond any possibility of challenge), a withering branch, and the increased continental duties to be enforced from 1906 will hasten decay.

Mr. Cobden's dogma offers no prospect in that direction. The change on our part to an active commercial policy might even yet do much. Just as throughout the Continent tariffs are the only check upon tariffs, a British tariff— threatening the penalty of exclusion from the greatest consuming centre in the world—would be the most powerful of all restraining and reducing influences.

We shall never get Free Trade, or anything approaching Free Trade. The continental Powers cannot sacrifice their agriculture. France, for instance, is governed by an agricultural majority; and, in spite of the devoted efforts of the foremost German Free Trader, Professor Lujo Brentano, to prove that Germany might safely trust her national fate to street-bred armies, the Kaiser's Government have reasons overwhelming in their view—reasons dynastic, military, naval, social—for believing that the maintenance of a large rural population parallel with the swarming industrial growth of the towns is the vital interest of the State. In America, even the recent Reciprocity Congress at Chicago began by declaring its undiminished adherence to Protection as the basis of national life. The meeting then declared in favour of a maximum and minimum tariff on the German plan. To countries with which the Republic might have any commercial quarrels, duties amounting to prohibition might be applied. 'Most favoured nations' would enjoy the benefit of the minimum scale; but that scale would in any case, it was unanimously agreed, be higher than any tariff existing in Western Europe; and so prominent a member of President Roosevelt's administration as Mr. Shaw, Secretary to the Treasury, would make the existing Dingley tariff the 'minimum' which the 'most favoured nations' are to enjoy under the soothing name of Reciprocity!

Nothing will give us back our old hold upon the principal protected markets. Our competitors can concede us no such drastic abatement of duties as would justify us—even if purely Imperial interests allowed it — in giving absolutely free import to manufactured articles from countries which would continue to discriminate more or less severely against British goods. But, like Clara Middleton, we have 'a dreadful power.' Out of a total export last year of £261,000,000, Germany sent no less than £50,000,000 to our market, or nearly one-fifth of the whole. France sent us £51,000,000 out of £179,000,000, or much more than a quarter of the whole. The United States, out of an entire export of £299,000,000, sent us £112,000,000, or considerably over a third of the whole. These are great interests, and the countries concerned cannot lightly jeopardize them. Let us remember that in the whole world there is no substitute for this market. To the 'most favoured nations ' we should offer in return for appreciable concessions far better terms than they will concede to us or enjoy elsewhere. To other nations we should apply a sharp penal tariff, to be kept in reserve for purely retaliating and negotiating purposes. There can be no reasonable doubt that we should secure in this way somewhat fairer conditions of entry into the principal protected markets than we can hope to obtain in any other manner.

But this is Zukunftsmusik. The new continental treaties are concluded for a term of twelve years. A Radical Government is in all probability about to obtain office in this country. Under these circumstances free imports will be continued for a further period—'the last phase'—and our finished exports to the first group of countries[9] will continue to decline, while all classes of their trade will make further progress in the open island. In 'man-power' and 'money-power' our position by so much will be comparatively weakened, while their relative strength will be simultaneously enhanced. Casting about for means to maintain our commercial supremacy, it is clear that we have no prospect in the * principal protected countries/ and must look elsewhere.


VI.

We turn, then, to the next question, Whether it may be possible to find a firm basis for the maintenance of our commercial and Imperial position in our trade with the other foreign countries?—those which are classed by the Board of Trade, not in all cases correctly, as 'neutral' markets. In the year which has seen the close of the Far Eastern war—under circumstances emphasizing as nothing previously had done the new position of Imperialist America in matters affecting the policy and commerce of the world, and especially of that portion of it to which we are now about to direct our attention—we stand in relation to the neutral markets where we stood in 1870 in relation to the chief European markets. We shall be fortunate if the experience of a generation in the latter forewarns us and forearms us for the conditions we shall have to encounter during the coming generation in the former.

Under Group B are included the Scandinavian countries, the markets of the Near East, including the Turkish Empire; those of the Middle East, including Egypt; those of the Far East, including China and Japan; those of Mexico and Central America, and those of South America, including Argentina. The rest are negligible. In each of these geographical divisions there are one or two dominating countries (so far as British interests are concerned), like Turkey, Egypt, China and Japan, and Argentina. Our future in these countries will obviously determine our future in the re^ons to which they belong. The subject, therefore, is less complex than would at first sight appear, and lends itself to an extremely interesting and significant investigation. Repeating figures we have already glanced at, let us exhibit the not inconsiderable progress of British trade during the last quarter of a century in these markets as a whole.

Total Exports to Neutral Markets during the last Quarter of a Century (1880-1904).[10]
Million £
(Quinquennial Average).
1880-1884 58⋅9
1886-1889 54⋅9
1890-1894 60⋅8
[11] 1896-1899 61⋅9
1900-1904 74⋅0
 Increase, 1880-1904 in million £ 20⋅1

Even these figures do not mean all that they suggest on the surface. By far the largest part of the increase, it will be observed, has occurred during the last decade only. It will be sufficient, therefore, and much simpler, to take for analysis the result of the two quinquennial periods 1895-1899 and 1900-1904. In the first place, it is to be noticed that a large proportion of our exports to the neutral markets consist not merely of coal, but of coal sent to bunker British vessels abroad. In the last few years a 50 per cent, larger quantity has been shipped for that purpose than in the previous period. This, of course, does not mean gain in our manufacturing trade with the neutral markets. Secondly, Group B is a great Lancashire interest; and another important proportion of the increase in the 1900-1904 average over the 1895-1899 average is accounted for by the temporary circumstances of the cotton boom and the higher price of cotton. Thirdly, if the returns are dissected—the assertion is made with confidence, though the statistical proof is omitted here, to avoid encumbering the argument with detail—the largest percentage increase will be found to have occurred in our dealings with 'the Portuguese Colonies,' which in its turn is mainly accounted for by the fact that 'the Portuguese Colonies' include Delagoa Bay. The next largest proportional increase is presented by our trade to Egypt, which is as much an Imperial asset as our trade to India. In short, the whole rise of value shown by our exports to all the neutral markets in the quinquennium 1900-1904, as compared with 1895-1899, will be found to be about £12,000,000 sterling, and fully half that sum is derived from bunker coal, from the nominally foreign but really Imperial trade to Delagoa Bay and Egypt, and from the inflated prices of cotton. Let us, however, exclude coal only, and we have the following summary:


British Exports to Neutral Markets (excluding Coal).
1895-1899 compared with 1900-1904.
Mill. £.
1.  Average 1895-1899 54·9
  „   1900-1904 64·2
 Increase 9·3
2. Details of the increase in the various geographical divisions of the neutral markets:
  Far East (China, Japan, East Indies) 2·7
  Egypt
  Argentina 1·8
  Scandinavia (Sweden, Norway, Denmark) 1·0
  Near East, Middle East, and North African markets (other than Egypt) 1·2
  Portuguese Colonies 0·8
  Mexico and Central America 0·6
  Miscellaneous 0·1
+10·0
3. Deduct decrease in South American markets generally, apart from Argentina 0·7
9·3

Can we build our commercial security upon our relations with any of these markets? Let us see. In Egypt we are for all practical purposes in possession. The special progress we make in that country is entirely due to our special political position. Were the representative of any other European Power in Lord Cromer's place, the commercial returns would show a much less encouraging result. As regards Portuguese East Africa, the question is entirely one of the development of the Transvaal. Our commerce towards both markets ought to be reckoned with Imperial trade, augmenting by another £10,000,000 our total exports to Imperial markets.

Examining, then, the genuinely foreign markets of the second group, let us now secure the plainest view of the distribution of our trade to neutral countries by looking at the ensuing table:

British Exports to the Neutral Foreign Markets.—Annual Average during 1900-1904.
All Exports. Coal and Ships. Other Exports.
Million £. Million £. Million £.
1.  Scandinavia 11·6 4·1  7·5
2. Near East, etc.:
 Turkish Empire  6·2 0·3  5·9
 Morocco, Arabia and Persia 1·0  1·0
 Smaller Balkan States 2·8 0·6  2·2
Total   10·0 0·9  9·1
3. Far East:
 Japan  6·5 1·3  5·2
 China  7·0 0·1  6·9
 Siam  0·3  0·3
 Dutch East Indies  2·8  2·8
 Philippine Islands  1·0  1·0
Total   17·6 1·4 16·2
4. South and Central America (except Argentina) 17·0 1·9 15·1
5. Argentina  7·7 0·8  6·9
6. French, German, Spanish, and Portuguese Colonies and Congo  4·4 1·4  3·0


The Scandinavian Countries.—With this tableau before us, let us take the enumerated divisions in their order. It is difficult to understand upon what principle the Scandinavian countries are classed by the Board of Trade as neutral markets. If we open the second of the Inquiry Blue-books, and turn to the valuable table calculating the various degrees of severity with which foreign duties press on British goods, we find that the Swedish tariff is practically as high as the German. Denmark is generally discussed by orthodox writers in this country as though it were a Free Trade State. As a matter of fact, its duties against the principal manufactures of the United Kingdom amount on the average to 18 per cent, ad valorem; a rate, therefore, nearly twice as high as the 10 per cent, general tariff which Mr. Chamberlain has suggested for this country. But Norwegian shipping flourishes, we are told, because Norway, at least, is practically a Cobdenite nation. Nothing of the kind. Norway also has a scale of duties higher than Mr. Chamberlain proposes (an average 12 per cent ad valorem upon manufactured imports), and her tariff is equivalent in nominal severity to that of Belgium, though less effective as her internal competitive power is less developed.

On the whole, it is clear that our prospects in this direction are not good. Germany's geographical position helps her in dealing with these markets, and she is extending her grasp upon them, while our commerce thither in the last few years has shown the same symptoms of arrest as in all protected Europe. Germany exports twice as much as we do to Denmark (despite the immense advantage of our free imports to the agricultural produce of the latter country); she sends a far larger amount of manufactured goods to Sweden; and she already runs us rather better than neck and neck in Norway. We see, therefore, that the Scandinavian countries in the first place are not neutral, but are protected countries; and that, so far as their markets may remain open to foreign goods (though recent political developments are more likely to tighten than relax the Protectionist policy of the two peninsular States), Germany has a strong geographical advantage in dealing with them. We can only hope for an improvement in this direction upon one condition. With a tariff in this country enabling us to make reciprocity treaties, we should secure better terms of entry into the Scandinavian countries than Germany enjoys, for the simple reason that we should on our side be giving them incomparably better terms than Germany could offer. The case of Sweden, Norway, and Denmark is an admirable example of the fantastic pedantry of a system which prevents our obtaining any commercial concessions whatever in return for the unique privileges we concede.

The Near East, Middle East, Morocco.—We turn next to the equally important group of States, including the little Balkan countries, the Sultan's dominions, and the 'Mohammedan belt' (except Egypt), stretching from the Straits of Gibraltar to the Persian Gulf. Upon political and economic grounds alike it must appear that there is scant scope for British progress in this direction, and that we cannot obtain there what we are now compelled to seek throughout the world—security. Italian competition, now entering actively into the field, enjoys in the Mediterranean the same geographical advantage that Germany enjoys in the Baltic. German and Austrian commerce prevails more and more in the Balkans. Our trade with the Turkish Empire, as a whole, has been stationary or shrinking, while that of Germany has doubled since the Kaiser's accession and the policy of friendship with Stamboul. While the open door is nominally maintained, the success of the Wilhelmstrasse in securing commercial concessions from the Porte for railways, harbour works, and armaments is equivalent to a preferential position for our chief continental competitors throughout the Sultan's dominions. Above all, we have to remember that the whole of this region must undergo sooner or later profound political changes. Whether these changes will be to the advantage of Russia, of Austria-Hungary as now existing, or of a 'Greater Germany,' we cannot tell. The alteration may occur, for all commercial purposes, without any formal alteration in the present lines of the map, by an extension of the German Zollverein principle to the Austrian Empire, the Balkan Peninsula, and Asia Minor. This is not merely a Pan-German dream entertained exclusively by Imperialist politicians. Even the Socialist deputies to the Reichstag would be as much in favour of it as are the German capitalists and professors—a fact which will be fully grasped by readers of the remarkable article contributed by the well-known economic writer, Herr Richard Calwer, to a recent number of the Sozialistische Monatshefte.

Morocco is included in the group of markets we are now discussing, and though the open door may be nominally secured there for a period, we concede to France in that country (and for undoubtedly good reasons) a position equal to that which we occupy in Egypt. France will either obtain the 'concessions'—that is, the trade—by enforcing the joint treaty, or Germany will obtain them by thwarting it. In any case, if we continue barely to hold our own throughout this region we shall be fortunate. We cannot expect extension or count upon security.

VII.

The New Far East.—Passing to the far more momentous issue of our commercial prospects in the Far East, we approach a problem of which the future is still veiled in a mist. No man living can pretend at the present moment to dogmatize upon it, but it is sufficiently certain that the results of the Asiatic renaissance—though for some period to come we may appear to reap our profit from it—cannot be permanently to the advantage of British trade. The rise of Japan in the Far East, regarded as a purely economic phenomenon, cannot be more favourable to our interests in that sphere than the commercial rise of Germany has been upon the Continent. The nation which is happily our ally in arms must be our rival in trade, the most formidable of all competitors in the East Asiatic market, and eventually elsewhere. Henceforth the Japanese are bound to concentrate every effort upon the work of economic expansion, and the coming generation must make as vast a difference in their industrial position as the generation since Sedan has made in that of United Germany.

Japan's object in the commercial struggle, as in the military, is to achieve supremacy within her sphere. Her aim—and from her own point of view her just and necessary aim—is not to promote European or American trade, but to displace it. And her object in the first case must be not to develop too rapidly the independent and potentially competitive energies of China, but to strengthen her own power and to obtain the same commercial predominance in the Middle Kingdom which we formerly possessed upon the European Continent There is every reason to expect that the awakening of China will be gradual and probably slow. The complete transformation of that market will hardly occur before Japan has placed herself in a position to supply it. The vision of a vast export of cotton, machinery, and 'buckwheat cakes'—to recall one expression of that sanguine enthusiasm in which Americans no longer indulge—flowing from all the centres of Western commerce through the 'open door,' is extravagant, perhaps altogether delusive. The tolerable certainty, on the other hand, is that Japan will increase her proportion of Far Eastern trade faster than that trade as a whole develops. The 'open door' is there indeed, but even 'open doors' are sometimes blocked by that portion of the crowd which is in front. Our allies are so near the open door that their geographical proximity is as great a factor in their favour as would be tariff discrimination in the interest of any other and more remote country.

There is even yet little conception of the thorough and systematic boldness of Japan's preparations for commercial conquest. We are about to see what the world has never seen before—economic competition organized by the State with the same weapons of national revenue and universal training which the Western nations, less logically, have hitherto wielded in full efficiency for the sole purposes of war. Japan is about to create industries just as she creates battleships. She is about to purchase and construct the economic apparatus of a great Power, just as she acquired the fighting apparatus of a great Power. She did the latter part of the work in a single generation; she will do the former part within another generation; and she has not the slightest intention of leaving her economic future to chance and circumstance, and to what are called, in the language of Horatio's philosophy, 'the slow processes of natural growth.' The war has lifted Japan into the saddle, and she means to ride.' She proposes to train bankers, engineers, mechanicians, factory managers and mining experts, exactly as she has trained soldiers and seamen. And while she must not obstruct the foreign trade passing through the 'open door,' she can and will secure the same comparative advantage by subsidizing her own.

What we have at stake in the Far East in respect of the cotton trade we know; Japan's activity as a competitor in that field we are beginning to know. Woollen goods are an important part of our total trade to the Far East. The Japanese are convinced that they have all the climatic and other conditions requisite for that manufacture; they believe that no country is better fitted than their own to excel in the woollen manufacture. 'We import the raw material of this manufacture,' says Count Okuma, 'to the value of 10,000,000 yen. For the future we should be able to procure our raw wool from Manchuria, and to create there in return a rich market for the finished article.' It is said—upon good authority—that the Japanese Government proposes to invest several millions in the purchase of industrial machinery. This, if we can rid ourselves of Western habits of thought, will appear a proceeding as natural and efficient as the investment of money in ironclads after the Chinese War. The ships were most needed then; the machines are most needed now. Let us be certain that they will be placed in competent hands and well utilized.

The case of Formosa is an interesting object-lesson. That island has been admirably developed. Japan levies no import duties against foreign trade. But she does levy taxes upon exports to foreign countries, and, as a result, Formosan exports flow through the free channel to Japan. Imports flow back by the same route; and the result of the awakening of Formosa—a very proper result in an island which is part of the Japanese Empire—is that foreign trade is stationary or dwindling, while Japanese commerce grows with the most striking rapidity, and is now more valuable than the exchanges of Formosa with all other countries together.

The strengthening of the industrial efficiency of our allies rather than of the consuming power of China is what it would be wisest to prepare for in the near future. Japanese competition will trench deeper into the present margin of trade, and the opportunities are hardly likely to widen faster than Japanese ability to take increasing advantage of them. China herself, anciently partial to walls, may not prove averse from McKinleyism, and in the long run she must become the most self-sufficing of nations. Less than half a century has witnessed the vast change from the agricultural America of Cobden's time to the industrial United States of to-day. It is not impossible that as great an economic revolution may be effected in the new Far East within as short a period. British industry may profit for a time by supplying the apparatus of later competition. But Japan, we repeat, after her war of existence, stands where Germany did after 1870. The one Power must make her commercial career as the other has made it. It is most reasonable to expect that results in the Far East will repeat our experience upon the Continent—that British trade in manufacture will be arrested at a certain point, and will have increasing difficulty thereafter in holding its ground.

VIII.

Commerce and the Monroe Doctrine.—To complete the survey, we turn to the next and last great sphere of our neutral trade. We now export to all the States of Central and South America more than twenty millions annually. With Argentina, by far the most valuable single market of the group, we have, as will be explained, special relations, and we shall reserve them for separate consideration. The dominating fact with which we shall have to reckon in all the remainder of this region is that the United States will assuredly concentrate the chief force of its commercial energy and financial research upon the business of securing the mastery of these markets. Americans are perceiving after the war that their future in the Far East is unlikely to be all they hoped. They will return with the more vigour and singleness of purpose to the original idea of achieving commercial supremacy in South America—the 'prolongation of our own continent.'

From the three volumes containing the 'Report and Evidence of the Merchant Marine Commission'[12] one fact pre-eminently emerges. It is the conviction of witnesses and Commissioners alike that the United States only needs to establish subsidized lines of steamers down both coasts of the double continent to secure the bulk of the trade of South and Central America. At present American passengers almost entirely, and American goods to a large extent, have to follow what is called the 'triangular' route: they go to Europe—to Liverpool or Hamburg—and thence to the South American ports. 'The great need of South America,' declared one witness, 'is agricultural machinery; yet every American reaper and every American harvester must first be dumped on the Liverpool docks before it can reach the South American consumer.'[13] It is little less certain, in the present writer's opinion, that the subsidized American steamship lines will be established than that the Panama Canal will be built.

That America's commercial future lies chiefly in her own hemisphere few thinking minds can doubt. Her commercial predominance in that region must extend with her political. Let us firmly grasp this point. America is much in advance of Mr. Chamberlain and the supporters of Imperial preference in this country. The fixed policy of the United States endeavours to establish preferential relations wherever they can be arranged. Let us see what has already happened. In Cuba the preferential rebate upon imports from the United States ranges from 20 to 40 per cent. Washington has just blocked the proposed Anglo-Cuban treaty upon the significant ground that it might in the future act in such a way as to prevent the conclusion of another Cuban-American treaty providing for reciprocal shipping privileges.[14] There is a measure now before the Congress of Havana—and the point is well worthy of Lord Curzon's attention—to kill the rice-trade from India in the interest of the rice-growers in Louisiana and Texas. 'The present duty on rice,' says the latest report of the British Minister at Havana, is 1 dollar 20 cents per 100 kilos, the preference to American rice being 40 per cent., or 48 cents per 100 kilos.[15] The proposal now under discussion is to increase the duty to 2 dollars 75 cents (an increase of nearly 180 per cent.), which would raise the preference on American rice to 1 dollar 10 cents per 100 kilos, 'enabling it,' adds the report mildly, 'to compete on very favourable terms.' It may be well to mention here, as throwing a suggestive sidelight on the working of preference in colonial interests, that a special reduction of duty by America on Cuban tobacco has created a new trade in a cheaper article, and 'the result has been an increase of exportation to the United States of 16,000,000 cigars.' In the Philippines we have aleady, to begin with, an export tax upon hemp.

More significant still is the fact that the Republic already has a preferential treaty in operation with at least one independent South American nation—Brazil. The coffee-trade of that country being dependent upon the United States, it has no effective choice in the matter. The Brazilian Government granted last year a special tariff reduction of 20 per cent, on certain articles imported from the United States. To extend reciprocal relations upon this model is the evident effort of American commercial policy. With what results can only be shown in the future. But it is certain that the commercial struggle with the United States in South America, which is now in its day of small things, is about to develop in earnest. Indeed, our trade with this group of markets—with the exception of Argentina—seems already to have reached a period of stagnation, if not of decline (1895-1899 average, minus coal, £15,200,000; 1900-1904 average, minus coal, £15,100,000).

Argentina: the Relation of Trade to Power.—In this survey Argentina, as we have said, stands apart. It is a developing country. Our recent commercial relations with her have been of a very encouraging character, and her present economic connection with us is next to that of a British self-governing colony—exception being made of the fact that German trade to Buenos Ayres is increasing faster than our own. The United States, which taxes raw wool as well as wheat, is perhaps more embarrassed in its dealings with the Argentine than with any other country, and American trade accordingly exhibits but feeble progress. Our own dealings with Argentina during the last quinquennium may usefully be shown as follows:

British Imports from Argentina. British Exports to Argentina.
Million £. Million £.
1900 13·1 1900  7·1
1901 12·4 1901  6·8
1902 14·0 1902  6·9
1903 19·1 1903  8·0
1904 23·0 1904 10·8

—figures which closely resemble those of our trade with Canada during the same period.[16] They are, however,


British Wheat Imports, 1904.
From Foreign Countries. From British Possessions.
Million Cwt. Million Cwt.
Russia 23·5 India 25·5
Argentina 21·4 Canada  6·2
United States  7·1 Australia 10·3
Other foreign countries  3·4 Other countries  0·4
Total 66·4 Total 42·4

less favourable; and it is vital to the argument to draw a close comparison between the two cases.

We give every advantage to Argentina that we extend to the Dominion. But Canada gives us a preference and Argentina does not. British goods entering the latter market pay duty at the ad valorem rate of 28 per cent. (the most severe rate levied in any neutral market), while in Canada, under the preferential tariff, the same goods pay at the rate of 17 per cent. only. The distinction is trenchant. Pursue the comparison further. Argentine wool enters our ports upon the same terms as Australian, and Argentine wheat upon the same terms as Canadian. But here comes the direct bearing of our trade relations upon the problem of Empire. In the Boer War the Dominion and the Commonwealth gave us of their manhood and means; and everything we had ever done to develop their national life—and how little we had done: no more than for any foreign country with which we had a similar cash nexus—came back to us. Their man-power was our man-power; their money-power was our money-power. But Argentina, though an excellent market, was a foreign country, no more prepared than any other alien nation, to spill either blood or treasure in our cause. More still. Argentine wheat in our ports is free; in the German ports it is, or is about to be, taxed to the tune of 11s. a quarter. But German trade competes with us in Argentina on a precisely equal footing, and progresses, on the whole, more rapidly than ours.

Our Argentine trade, therefore, is an absolute asset, and special arrangements might be made under any alteration of our fiscal policy for a reciprocity with that Republic, which would secure our position in its market. But under present circumstances even that trade does not conduce to the maintenance of our relative power, nor, therefore, to the maintenance of Empire. The Canadian preferential tariff, on the contrary, means preferential employment for British workers against German workers; preferential profit for British capital as against foreign capital; it works directly, so far as it operates, to the relative increase of the trade and revenue, the man-power, money-power, and sea-power of these islands, and makes no less for the security of our commerce than for the strength and permanence of the King's dominions.

IX.

This point goes to the root of the matter. It brings us at once to the crux of Imperial economics and to the political argument under which the whole theory of Free Trade breaks down. We come, in other words, to that vital question of the relation between population, commerce, and power which no Free Trade writer since Adam Smith has fairly faced.

Adam Smith himself, as we have already shown, had a strong national spirit, an invigorating sanity, and a scorn of pedantries which helped him to get over the difficulty. Where he clearly saw that his theories would clash with Imperial interests he held, without hesitation, that economic methods should subserve political ends. Universal Free Trade, remaining now as remote from realization as when the 'Wealth of Nations' was published, he rightly believed to be Utopian, like the dream of a universal religion or a universal language. A few years after the appearance of his masterpiece, England, following the loss of her American Colonies, was attacked by the greatest naval coalition ever formed. She fought in that crisis not only for the remains of her Empire, but for life; and Rodney's victory on April 12, 1782, saved her from destruction and made Trafalgar possible. In the sphere where the facts before his eyes convinced him that political interests demanded maritime protection, the father of Free Trade declared, without hesitation, that economic dogma must go to the wall. The Dutch had lost their naval supremacy, but they still kept the lead in the carrying trade outside the pale of our Navigation Laws. The cause of immediate cheapness—a quite different cause from that of continuous economic progress—would have been solved by declaring Free Trade in shipping and allowing British tonnage to be partially displaced by Dutch. That would have been, for the moment, a sound stroke of pure economy, but it would have been fatal in politics, and in the long run fatal in economics also. Here was a case where displacement from one particular trade could have been followed by no economic compensation whatever. That mercantile ascendancy should remain in our hands was, as it still is, the condition of our existence. The Navigation Laws secured the power of the nation, and no naval officer was stricter than Nelson in enforcing them; they were the nerves of Empire; they led through the sacrifice of immediate cheapness to an unparalleled development of national wealth; and in drawing into the hands of this country the undivided sovereignty of the sea, they were—with the possible exception of American Protection—the most powerful economic instrument ever applied to political purposes.

We have now to face the problem in a larger shape. Sea-power has become a highly specialized form of force, far less intimately connected than in Nelson's days with the merchant marine, and depending more generally upon the financial and constructive resources—the taxable and technical capacity—of the whole nation behind it. The United States, for instance, has, by comparison, no merchant marine, yet the enormous estimates her internal wealth enables her to vote must make her, at least, the second naval Power in the world. German commercial tonnage is only one-fifth of ours, but her naval budget is already nearly a third as large. Even if the Navigation Laws could be revived in all their old stringency—and this is an impossible supposition—they would be a minor factor in the wider economic struggles now determining the ability of great maritime States to equip fleets and to support the financial strain of modern war. We have half the merchant shipping of the world. In that respect we have reached our maximum, and our percentage is now beginning to show a faint and slow, but unmistakable tendency to recede. But under Protection our chief commercial competitors abroad have developed a financial and technical capacity which enables them for the first time to challenge our naval supremacy in earnest. It is perfectly conceivable that we might retain our present proportion of the world's mercantile tonnage and might, nevertheless, lose our naval supremacy through the eventual ability of some other Power or combination of Powers, increasing more rapidly in population, commerce, and wealth, to create larger fleets than we could afford to sustain.

Success in merchant shipping will no longer suffice unless we can keep pace with our greatest competitors in the growth of population and of total productive power. What the Navigation Laws did in Adam Smith's days only the policy of Imperial preference as applied to the Colonies—in addition to fiscal reciprocity as applied to foreign nations—can enable us to do now. If Sir Michael Hicks-Beach is correct in his opinion, that a small island with no continental hinterland cannot hold its own—in spite of its unique enjoyment of free imports—against countries which succeed under other economic methods in supporting a far larger number of inhabitants, it follows that we must seek to obtain the cooperation of the Colonies by the necessary change in the existing system of fiscal separatism.

For even if we could secure the assistance of the Colonies as they stand (which would mean the imperfect and scattered federation of some 54,000,000 of white people in the British Empire against the complete and compact federation of over 60,000,000 of inhabitants in Germany and over 80,000,000 in the United States), it would not be enough. The inadequacy appears on the face of the figures. We have still time to make up the ground we have lost, but the problem so long neglected when far simpler of solution has become a question of the first urgency. We have not only to federate with the Colonies. We have to develop the future strength of that federation to the utmost by directing British emigration and attracting foreign emigration to the lands under the British flag, and filling up the empty places of the Empire as the United States peopled the Far West.

This is where the Free Trade theory at its best gives neither help nor light to constructive statesmanship. Free Trade, we are told, means equal benefits—an equal development of power, wealth, and population on both sides. Where one of the sides is foreign, the doctrine of economic equality means clearly a doctrine of political checkmate. In war this means that each country, so far as material forces can decide, has an equal chance of destroying the other. An exchange, for instance, which meant an equal development of German wealth and strength on one side, and of British man-power and money-power upon the other, would obviously add nothing to the security of this country. But a transaction with the Colonies means the double development—the development which is British on both sides. The Empire, as Adam Smith would say, gets both the benefits. The fate of the British Empire is a matter of comparative indifference to the farmer in the United States or Argentina. But every man employed in raising a quarter of wheat on colonial soil, instead of on foreign soil, will be a man who can fight, a man who can pay. He is a civic as well as an economic asset.

Adam Smith failed to do justice to a profound idea when he said that a home transaction, from a purely economic standpoint, is twice as valuable to a country as a foreign transaction. In pure economics that is unquestionably an overstatement; and, nevertheless, the instinct of that sagacious mind was far better than the formula. A transaction in Imperial trade, and, above all, with our white Colonies, gives undoubtedly at least twice the political strength derived from a transaction in foreign trade. For in war with a foreign State, that part of the reciprocating mechanism of Free Trade ceases to act at once, but all the reciprocating mechanism under the same flag goes on working, and in all probability at still higher pressure. If we have used our consuming power to increase the number of settlers under the flag, rather than to support population under other flags, the British man beyond the seas will be a man of the Empire, like the man at home.

We see at once that, though trade with Canada, let us say, and with Argentina might be of nominally equal worth on the cash-reckoning of the orthodox economist, there is no comparison in the political value of the two. With the one we establish a cash nexus; with the other we have the cash nexus also, and, behind that, the nexus of nerve and sinew, 'the tendrils strong as flesh and blood,' binding us to the heritors of the glory that is ours, to the sharers of all the hopes we cherish, to the men who will have to be counted before the flag goes down. 'We have brothers there.' We have only not enough of them. The main end of policy, aiming to establish the only basis broad and firm enough for the British Empire to rest upon, is to see British settlers spreading where was none before. Their hand-clasp will be the 'sordid bond.' It would be difficult to characterize the imbecility of that phrase. Citizens of the same State, unless that State is in decay, are promoting each other's interests every day of their fives. They take the national sentiment for granted, but they know that the worth of it depends upon a mutually helpful activity. As walking is a series of little falls, the progress of national prosperity in any country means the continued inter-weaving of an infinity of 'sordid little bonds.' If the phrase had any meaning, it would be a strong argument for low wages. Imperial trade promotes the growth of British population and power upon both sides of the exchange; our foreign trade promotes it only upon one; the former—transactions being nominally equal—is twice the political value of the latter. And upon the decision with which we grasp and the vigour with which we apply this principle the future of the British Empire depends. We have now to examine in this light the present situation and further possibilities of British trade in the third sphere of our commerce, and to show that the parallel increase of home production and colonial population under preferential arrangements now forms the only possible solution of our politico-economic problem.

X.

It is essential that the reader's mind should have at this point a perfectly distinct impression that, as regards foreign trade pure and simple, British supremacy is not a thing in jeopardy, but a thing which has already disappeared. The leading nation in foreign trade is Germany, and without our Colonies we should be at the present moment a bad second. In 1904, exceptionally favourable to our returns owing to the inflated values of cotton, British exports to the chief protected and the neutral countries taken together amounted to £188,800,000. German exports to the same countries were £201,000,000, and, in addition, our chief continental competitor exported to the British Empire (Mother Country, Colonies, and dependencies together) to the enormous value of £68,000,000. Both facts give most furiously to think; the second fact particularly showing the immense degree to which German ability to rival us in financial power and to threaten our position at sea depends upon the preservation of present fiscal conditions throughout the British Empire. Le revenu c'est l'État; and we may safely add to that celebrated maxim: Commerce means revenue.

Free Traders must admit that the Power which, on the whole, is bound to become our chief naval competitor between the present and the next Trafalgar Centenary could hardly enjoy more favourable conditions for the growth of her trade and revenue than those with which we present her. The facilities enjoyed by Germany in this country under free imports promote her power to build battleships. Our disabilities in the German market in checking our trade injure our finance, and decrease our power to build battleships.

But while fiscal reform would indirectly strengthen our naval power by enabling us to obtain reciprocity from foreign countries, it is in the highest degree improbable that our lost supremacy in purely foreign trade can be under any circumstances regained. In a world of closing markets, where our commerce, as has been shown in detail, must arrive sooner or later in the neutral markets at the point of arrested development long ago reached in the protected markets, the only part of our trade which we can make relatively secure is our trade under the flag. Preference with the Colonies offers the only guarantee for the progress of our commerce and power. Those who say that preference is impossible mean nothing, unless they mean also that the preservation of the British Empire is impossible. 'You have an opportunity; you will never have it again.'

As showing how the vitality of our exports has been nourished by Imperial markets during the last decade, let us first recall the figures given upon a previous page, and presenting a general view of the movement of our outward commerce during the last quarter of a century:


Total British Exports, 1880-1904, in Quinquennial Averages.
1880-1884. 1886-1889. 1890-1894. 1896-1899. 1900-1904.
Million £. Million £. Million £. Million £. Million £.
284·3 226·2 234·4 239·6 289·2


Almost the whole increase has been gained in the last five years only. Yes; but let us see how the various markets have contributed to that increase. The following table (from the 'Annual Statements') proves instructive:


Where British Trade has increased, 1895-1904.
A. Exports to Chief Protected Countries.
1895. 1896. 1897. 1898. 1899.
Mill. £. Mill. £. Mill. £. Mill. £. Mill. £.
Total exports  96·4  92·0  92·8  89·1 106·0
Coal and ships  9·5  9·5  10·5  11·0  16·8
  Net  86·9  82·5  82·3  78·1  89·2
Quinquennial net total : 419·0 mill. £.  Average : 83·8 mill. £.
1900. 1901. 1902. 1903. 1904.
Mill. £. Mill. £. Mill. £. Mill. £. Mill. £.
Total exports 119·5 100·7 103·5 104·7 102·7
Coal and ships  28·6  20·9  18·8  17·0  15·8
  Net  90·9  79·8  84·7  87·7  86·9
Quinquennial net total: 480·0 mill. £.  Average : 860 mill. £.

Increase in annual average—Absolute: 2·2 mill. £.  Relative: 2¾ per cent.

B. Exports to Neutral Markets.
1895. 1896. 1897. 1898. 1899.
Mill. £. Mill. £. Mill. £. Mill. £. Mill. £.
Total exports  59·0  63·8  60·0  59·9  70·8
Coal and ships  5·6  5·7  6·0  7·0  14·4
Net 53·5 58·1 54·0 52·9 65·9
Quinquennial net total: 274·4 mill. £.  Average: 54·9 mill. £.
1900. 1901. 1902. 1903. 1904.
Mill. £. Mill. £. Mill. £. Mill. £. Mill. £.
Total exports  77·1  74·5  70·4  74·6  85·9
Coal and ships  16·6  14·6  10·6  10·4  10·4
Net  61·6  69·9  59·8  64·2  75·6
Quinquennial net total: 321 mill. £.  Average: 64·2 mill. £.

Increase in annual average—Absolute: 9·3 mill. £.  Relative: 17 per cent.

C. Exports to British Possessions.
1895. 1896. 1897. 1898. 1899.
Mill. £. Mill. £. Mill. £. Mill. £. Mill. £.
Total exports  70·0  84·1  80·7  83·4  87·6
Coal and ships  68·4  82·6  79·8  81·8  85·5
Net  1·6  1·5  1·4  1·6  2·1
Quinquennial net total: 397·6 mill. £  Average: 79·6 mill. £.
1900. 1901. 1902. 1903. 1904.
Mill. £. Mill. £. Mill. £. Mill. £. Mill. £.
Total exports  94·4 104·9 109·1 111·1 111·9
Coal and ships  3·8  2·7  3·4  2·9  3·5
Net  90·6 102·2 105·7 108·2 108·4
Quinquennial net total: 515·1 mill. £, Average: 103·0 mill. £.

Increase in annual average — Absolute: 24·5 mill. £. Relative: 31 per cent.

We deduct new ships because we must, since they were not shown in the returns until 1899, and to include them would vitiate all comparisons. We deduct coal because it is equally necessary, if we are to arrive at any clear conception of the movement of our manufactured exports. We see that the growth of our commerce with the Colonies has been much greater relatively and absolutely than the progress in all foreign markets put together. Were it not for our predominance in trade under the flag, Germany would nave shot up by now very nearly to our stature.

If this point needed any further demonstration, the conclusive argument would be found in what is undoubtedly the most significant set of statistics given in either volume of the Inquiry Blue-books.[17] The next table shows the export of articles wholly or mainly manufactured (excluding ships) in certain years since 1870. It is to be regretted that the Board of Trade officials, in an investigation of so much importance, have not worked out the results in quinquennial averages for the whole or part of the period. But as the figures stand, there can be no mistake about their significance.


Exports of British Manufacture only, shown at Intervals of Decades from 1870 to 1904.
To Principal Protected Countries. To Neutral Countries. Total to Foreign Countries. To British Possessions. General Total.
Mill. £ Mill. £ Mill. £ Mill. £ Mill. £
1870   80·7 55·5 136·2 44·9 181·1
1880 81·9 47·4 129·8 67·6 196·9
1890 87·2 60·8 147·5 78·3 225·8
1900 80·3 58·8 139·1 81·1 220·2
1904 72·1 70·0 142·1 97·2 239·3


We need not squander comment upon as plain a tale as statistics can tell. We see that British manufacture in protected markets is a wilting plant, which shows every sign of dying down to the root. Had the price of cotton been normal last year, our whole export of manufacture to foreign markets throughout the world would have been rather less than was the same trade thirty-five years ago. Even with inflated cotton values we see that the increase in our whole export of manufactured articles to foreign countries since 1870 has only been £6,000,000 sterling, or under 5 per cent. The parallel increase in our finished exports to the Colonies has been over £50,000,000, or 116 per cent. Were it not for this one fact, Germany would at this moment be within easy reach of the first place as an industrial Power manufacturing for export.

In the face of these figures no rational argument can be held with Free Traders who deny that our position and prospects in the world's trade now depend upon the retention and improvement of our position in Imperial markets. Any Free Trade economist, however, who admits that fact may be very safely challenged to show whether there is any conceivable alternative to Mr. Chamberlain's policy. There is, in truth, none.

XI.

For let us see what will happen if we lose our present position in the colonial trade, and what, on the other hand, may reasonably be expected if the preferential policy is adopted. The present writer has repeatedly declared that the alternative to a preferential system of commerce with the Colonies will be the rise of a system of colonial McKinleyism against the Mother Country and foreign States indifferently. In that deplorable habit of 'crabbing the Colonies ' which Free Traders have formed since Mr. Chamberlain launched his great agitation, they have failed to do justice to the extent of the advantages we have enjoyed in Imperial trade up to the present point. It is sometimes assumed that the average colonial tariff is as severe as the average foreign tariff. There is no comparison between the two. We do not enjoy Free Trade with the Colonies; but the conditions of intercourse are not so far removed from that ideal as many suppose. Take, for instance, the following remarkable comparison from the second Inquiry Blue-book (p. 292):

Estimated Average 'ad valorem' Equivalent of the Import Duties levied by the Undetermined Foreign Countries and British Possessions on the Principal Manufactures exported from the United Kingdom.
Foreign Tariffs. Colonial Tariffs.
Per Cent Per Cent
Russia 131  Canada (preferential tariff)  17
Spain  76  New Zealand (preferential)  9
United States  71  Australia  6
Austria-Hungary  35  South Africa (preferential)  6
France  34  India  3
Argentine Republic  28
Italy  27
Germany  25
Sweden  23
Greece  19
Denmark  18
Roumania  14
Belgium  13
Norway  12
Japan  9
Turkey  8
Switzerland  7
China  6
Holland  3


All our Colonies, except Canada, give us better treatment than we receive from any great civilized State, and Canada gives us better treatment than we get from Argentina or Denmark. By these special facilities the Colonies give indirect assistance to our commerce, revenue, and fleet. They make, as it were, an invisible contribution to the maintenance of Empire. But unless a preferential system prevails, the process of strangulation will eventually be felt in the Colonies themselves. They are free. They will put up their tariffs as the European countries have done and as the neutral countries are beginning to do, unless we can give them some sufficient inducement to act otherwise. It is a matter of life and death to British commerce that some means should be found to preserve for the manufactures of the Mother Country a preferential passage through the barriers of Inter-imperial Protection. Mr. Chamberlain's most bitter opponent would hardly deny, it may be supposed, that since Free Trade throughout the Empire is not attainable, the main aim of the fiscal movement—keeping itself within the bounds of possibility, reckoning step by step with the concrete, and losing sight of no single interest as it goes—is to establish throughout the Empire the freest trade attainable.

The choice is not between fiscal reform and the status quo, but between an extended preferential system and something far worse than the status quo. That is the fact to be faced, and Mr. Cobden's disciples have never yet faced it. Let us observe the actual working of preference during the seven complete years in which it has been in operation. England and Germany are at a tolerably equal geographical disadvantage in competing with the United States upon the other side of the Atlantic. We have the following comparisons:

British and German Exports to Canada under the Preferential System, 1898-1904.
British Exports. German Exports.
Million £. Million £.
1898       5·8  1898      1·2
1899  7·0  1899 1·2
1900  7·6  1900 1·0
1901  7·8  1901 1·8
1902 10·8  1902 1·9
1903 11·1  1903 1·8
1904 10·6  1904 1·2

German trade remains where it was when preference in Canada was first adopted; British has doubled. Canada is the only market in the world where German trade during the last few years has lost relative ground. Nothing, we should have thought, but the sheer mania for 'crabbing the Colonies' could dispute the force of this contrast or disparage the Dominion for considerably swelling, by the evident action of preference, these recent Board of Trade returns in which Free Traders so eminently rejoice. Of the economic potency of preference as a general principle there could be no more forcible suggestion. No one, however, supposes that the Colonies will permanently concede privilege to the Mother Country in their markets without some reciprocity in ours. Preference means relative advantage under the British flag for British as against foreign producers. Free Trade in this market for colonists and aliens indifferently is not preference: it gives no more advantage to Australians and Canadians who fought in the War than to Argentine citizens who, as far as we are concerned, are simply political bystanders, or to Russian mujiks, who might be mobilized against us.

If we give exactly the same support to the Argentine Republic as we do to the Australian Commonwealth, upon what intelligible principle do we expect that Australia shall make special sacrifices to help us? For sentiment? Armaments are not created nor wars waged for sentiment. Were the Colonies prepared to tax themselves for Imperial purposes, to fight under the Imperial flag, for reasons no more urgent than those of sentiment, they would not be patriotic, but insane. Do we expect the Colonies, then, to combine with us for the joint defence of equally vital interests—for the maintenance of the whole vast maritime Commonwealth in whose undiminished and increasing power resides the sole security of its confederate nationalities and fiefs? The Colonies may well question whether we possess even now, when our relative naval strength has unquestionably reached its maximum, a more powerful fleet than the protection of our insular existence demands. If the King possessed not one inch of territory overseas, we should still have to remain the leading naval nation, or cease to be an independent Power.

Whether the British Empire stands or falls, Canada, Australia, the West Indies, perhaps South Africa, could insure the safety of a subordinate existence by entering the American Union, and making their preferential trade arrangements with the United States upon the Cuban model. This Country, her day of glory gone, might be taken into the same system on terms. In such an Anglo-American conception of Imperial destiny painlessly extinguished by Republican patronage, some excellent Free Traders profess to find a comforting reassurance. Do they leave a veil of vague optimism floating across the background of their reflections, or do they think the question through? Their solution means the death of the English idea. The American idea is potent, but it is not the English idea. The two things are as different as was Shakespeare's London from Modern Chicago. Slav and Italian emigration is pouring into the United States a tide of alien blood, diluting more and more the original spirit of that society. Nelson's name means less to the Great Republic than does the name of Admiral Dewey, and the centenary of Trafalgar is not so moving as the anniversary of Manila Bay:

'It is not to be thought of that the Flood
Of British freedom, which to the open sea
Of the world's praise from dark antiquity
Hath flowed "with pomp of waters unwithstood,"
Should perish, and to evil and to good
Be lost for ever.'

The life of the English idea depends upon the maintenance in separate identity and power of the Imperial Commonwealth under the Crown. Sentiment and interest in the case of nations we can no more separate than soul from substance in a living body. If we wish the Colonies to desire with sufficient intensity this future, and no other, we must give them a far more direct and tangible interest in the support of the fleet and the preservation of the whole fabric of Empire than they now possess. And if we believe with Sir Michael Hicks-Beach—as the overwhelming majority of Englishmen, whether as yet fiscal reformers or not, do believe—that the continued safety and greatness of our Imperial existence depends upon securing the cooperation of the Colonies, the refusal to make a special use of our present economic power for the purpose of developing population in Canada, Australia, New Zealand, and the Transvaal, rather than in the United States and Argentina, can form no part of any intelligible system of politics.

XII.

That preference would actually develop the Colonies is a point not susceptible of dispute. Mr. Chamberlain's opponents concede that point by each of the mutually-destructive arguments they advance against shifting the food-taxation which we have always had, and cannot dispense with, from tea and sugar to wheat and meat. They admit (1) that the Colonies would be developed when they declare that it would raise the price of agricultural produce, since in that case emigration would flock to the Colonies to share the benefit, and also when they declare (2) that preference would complete the ruin of the farmer by flooding the home market with an increased supply of still cheaper corn. For, again, the Colonies could only cheapen supply to that degree by enlarging their agricultural population.

Let us repeat once more that there is no substitute for this market. Foreign growers attempting to find compensation elsewhere for the operation of preference in this country would still find themselves confronted in every other important consuming centre in the world by agrarian tariffs many times as high as any duties that Mr. Chamberlain suggests or democracy would ever tolerate. Foreign countries now sending us our food supplies would either have to sell cheaper or to reduce production. That they would be gradually eliminated as the productive power of the Colonies expanded there can be little doubt. The following figures, showing the change in the origin of our wheat supplies during the last few years, have a force of their own:

Wheat Imports into the United Kingdom from Foreign Countries and British Possessions, 1900-1905.
  From Foreign Countries.
From British Possessions.
Million
Cwt.
Percentage
of Total.
Million
Cwt.
Percentage
of Total.
1900 58.5 84 10.2 16
1901 52.9 76 16.9 24
1902 58.3 72 22.7 28
1903 60.2 68 27.9 32
1904 55.4 57 42.4 43



That the Colonies and the Punjaub together are capable of furnishing our entire wheat-supply there is no doubt. As little that they could send us all the meat that we now purchase from the foreigner, to the tune of nearly £20,000,000 annually. As little that our tropical possessions could produce all the cotton now imported from foreign countries (including Egypt), to the amount of more than £40,000,000 annually.

And the people who grow the raw cotton are the people who wear the cotton manufacture. When Lancashire draws the crude staple from the United States, the successors of Alexander Hamilton take excellent care that Lancashire does not send back the finished goods. But when we develop within the Empire a field for the raw growth, we develop simultaneously a new market for the manufacture, and set up the reciprocal mechanism of exchange that Cobden intended and McKinleyism prevents. It is not, indeed, proposed (as it might be were Lancashire sufficiently far-sighted and bold in its commercial thinking) to put a preferential duty upon cotton as the most efficacious means of developing the British cultivation. But in confining ourselves to the food supplies upon which Mr. Chamberlain and his supporters have definitely proposed that preference shall operate, it may be said without exaggeration that if the great self-governing Colonies were now engaged in supplying the vast bulk of our imported grain and meat, they would possess double their present white population. Preference would turn the flow of agricultural emigrants—the stream of human irrigation—towards the uncultivated tracts of the Empire. If combined as it must be with adequate support of enterprises like that of the British Cotton Growing Association, it would enhance the value of every tropical dependency we possess. These neutral markets within the Empire would of course remain neutral and become continually richer, increasing their capacity to consume finished articles parallel with their ability to supply raw produce.

Our commercial competitors would still enjoy fairer treatment in our market than we have had for many years in their markets. Our predominance in maritime trade would be secure for as long as there is need to calculate. And with commercial security would come political security. Preference would so accelerate the filling up of the Colonies that within half a lifetime we might expect their combined population to equal that of the Mother Country. Their national self-consciousness would be intensified with their growth. None of them under the modern conditions of Weltpolitik would be strong enough to stand alone.

Linked with the Mother Country and with each other in an Imperial Sea League, financed in every portion of the Empire by a small taxation of imports, as Mr. Hofmeyr suggested at the first Jubilee Conference, their position would be once for all unassailable. The unpeopled parts of the King's dominions will be to the twentieth century what the Far West of the United States was to the nineteenth, and the relative political and financial strength of the Britannic Commonwealth could only increase with time. Upon some similar basis alone is the permanence of the Empire thinkable. For Colonies, in Turgot's phrase, are no longer to be regarded as fruits which cling till they ripen. The Asiatic renaissance; the Russia of a generation hence, counting well-nigh two hundred millions of people; the United States, which is tolerably certain of reckoning a hundred million inhabitants within a dozen years—not to speak of that possible pan-German Empire which would nearly double the strength and numbers of existing Germany—these influences will bring into play the economic, military, and naval power of such vast organisms all over the globe that we may lay down a new maxim as a fundamental truth of future politics—henceforth separatism must reduce security.

XIII.

The age of separatism is over, because the organization of the world proceeds. The great races are rapidly plotting out their definite boundaries. The possibilities of conquest will become more and more strictly limited; the equipoise of human forces more stable; the margin for dispute narrower; the prospect more distinct of an Areopagus of all civilization 'striking a universal peace through sea and land.' The break-up of the British Empire would overturn the existing equilibrium throughout the globe and plunge the world in war upon the greatest question of redistribution known to history. The final consolidation of the British Empire would be by far the greatest step ever taken towards the ultimate integration of mankind. Only imaginations prone, in Lord Beaconsfield's words, 'to make themselves miserable in the anticipation of evils that never happen,' can sincerely suppose that definite arrangements between the Mother Country, the Colonies, and India for mutual economic support as a means to political security would result in antagonism rather than cohesion.

Upon such a contention all organization should develop friction in multiplying points of contact—all order should mean disorder. It is the very argument of anarchy. Nor is the cause of 'freedom' at stake in the attempt to marshal a voluntary combination of free communities for the more certain defence of their freedom, and for the maintenance of that dominion only won by the triumph in arms of a people nourished upon national liberty over forces that were then less free. Phrases must be scrutinized as well as repeated. We cannot assume without reflection that there is more inherent virtue in the adjective of 'free' imports than in the adjective of 'free' love. To assert that the abstract idea of unrealized 'Free Trade' is identified with our concrete system of fettered exchange is the abuse of words. To protest that fiscal separatism between the Mother Country and her colleagues is indispensable to their political agreement is the last abuse of paradox.

XIV.

The real argument against preference is of another character. It does not deny that the Colonies would benefit, but asserts that they would enjoy the sole benefit, that our general trade connections would be impaired, and that the English working classes would be unduly burthened. Let us briefly examine these contentions, and attempt clear answers to them.

1. That the Colonies would be developed at our expense, the Mother Country enjoying no reciprocal advantage.

To make this assertion is to confess that one has not studied the Inquiry Blue-books. Let us repeat some of the figures.

Estimated 'ad valorem' Equivalent of the Import Duties levied by the under-mentioned Foreign Countries and British Possessions on the Principal Manufactures exported from the United Kingdom.
Foreign Tariffs.      Per
Cent.
Colonial Tariffs.      Per
Cent.
Russia 131 Canada 17
United States 73 New Zealand 9
France 34 Australia 6
Argentina 28 South Africa 6
Germany 25 India 3

Examine that list. Remember that, with immense territories and thin population, making the collection of direct taxation disproportionately expensive and difficult, the Colonies must depend in the main upon import duties for their revenue. It will then appear that the Mother Country could not expect better tariff treatment than she gets. Nor does all the burthen even of these low rates fall upon us. So far as the Colonies have not yet got competing manufactures of their own—for they are still largely without them, and it will take a very long time to establish them—the colonists themselves pay the tax. The tariff does not fall on British goods at all. But, in any case, compare the 17 per cent. rate in Canada with the 73 per cent. rate in the United States. Compare the Australian and South African 6 per cent. with the Russian 131 per cent., or the Argentine 28 per cent. We keep India to the 3 per cent. by force, and by force alone, and we give her no equivalent, but tax her tea exactly as we do Chinese. In India the very name of Free Trade, as Lord George Hamilton has admitted and every Anglo-Indian knows, 'is loathed' accordingly, and that condition of things, if unaltered, will eventually prove the greatest danger to our dominion.[18]

In short, it must appear that to give wheat, meat, and wool from Russia, the United States, and Argentina the same treatment that we extend to Canada, Australia, and South Africa in return for their much more favourable treatment of our manufactures is a singularly inverted idea of reciprocity. By the tariff conditions obvious upon the face of the figures, every development of population and cultivation in the self-governing Colonies must be from fivefold to tenfold and twentyfold more favourable to the expansion of British trade than any similar extension of population and cultivation outside the flag. Preference, even upon the present basis of colonial tariffs, or upon anything like that basis, could not benefit colonial production without benefiting to an equivalent extent the return trade of the Mother Country. But it is said that colonial manufacturing interests demand more protection against the Mother Country. It is true that this movement exists; equally true that only preference can restrain it, by increasing the agricultural vote, which in new countries is always for relatively low tariffs; absolutely true that without the restraining influence of preference the process of tightening the tariff in all the great Colonies must become nothing less than fatal to British trade.

Even if colonial rates upon our manufactures became rather less favourable than now, they would remain far more favourable than they otherwise could be. This at least will be admitted, by anyone who knows the Colonies, to be as certain as a result in mathematics. Yes, but preference, by its very meaning—relative advantage—will bring another factor into play. Whatever the absolute rates in the Colonies may be, we shall always enjoy under them a relative advantage over our foreign competitors. The higher they are, the greater will be the extent of our advantage over all foreign competitors. Instance the working of the American preferential tariff with Cuba. The duty against Indian rice is that of the general tariff, 1 dollar 20 cents per 100 kilos, with a preference of 40 per cent. upon that rate in favour of Louisiana and Texas rice-growers. Their advantage, therefore, over Indian competitors is 48 cents per 100 kilos. But to make the preference more effective it is proposed to more than double the general rate. Rice from the United States will pay more than double what it does now, but still 40 per cent. less than Indian rice, so that the absolute advantage per 100 kilos over the British product will be raised from 48 cents to 1 dollar 10 cents, and America, though paying heavier duties than before, will get the whole trade. We could hardly have a more opportune illustration of the effective working of 'relative advantage,' no matter what the absolute rate may be.

With a fixed percentage of deduction in our favour, the higher the Colonies made their general tariffs the more decisive would be our advantage in their markets against foreign goods. This would act as an automatic compensation for every new development of colonial manufacture. What is meant may be still more clearly explained. Even the most highly protected States have still a large import of foreign manufactured goods. As their primary industries arise their wealth increases, and import continues—supplying social luxuries by the more refined forms of foreign manufacture, and more complex economic needs by the machinery of more advanced production. Finished imports never perish under Protection, they only change their character; and if in the United States, the French, and the German and other markets we had a preference over all other outside competitors, our now declining trade with what the Inquiry Blue-books call 'the chief protected countries' would be greater than ever. It does not so much matter, if preference prevails, what the Colonies do with their general tariffs. We hope they will keep them low. But so long as we enjoy a substantial relative advantage over all foreign competitors—'preference' pure and simple—our trade with the colonial markets must remain secure and progressive.

XV.

2. That preference to the Colonies would injure our foreign trade connections.

How? Has American Protection injured its foreign trade, which is expanding in all directions? Is it not the fact that the exports of France under the Méline tariff have been advancing, in spite of her stationary population, at a more rapid rate than our own? And has not Germany increased her export of manufactured goods by 50 per cent. in the last twenty years? Is there any protected country to be named in the world whose foreign trade under the tariff is receding? Is Japan declining under the low average tariff which is almost exactly what Mr. Chamberlain proposes? If he proposed twice that rate our foreign competitors would still have the benefit of milder treatment in our market than they experience from each other.

They would still have no substitute for this market, and they would still be bound to give us 'most favoured nation' treatment in return for the same. Imperial preference would not injure our general trade connections. A judicious national tariff, with a low scale for all who gave us reciprocity and a high scale for those who refused it, would improve our foreign connections by reducing somewhat the present level of hostile duties.


XVI.

3. That preference would entail disproportionate burthens upon the working-classes of the Mother Country.

This proposition, like most of the fundamental questions of politics, resolves itself into a battle of belief. The rival prophets cannot argue; they can only disbelieve each other. All great legislation is adopted or rejected in advance of the results that refute or justify. Proposers claim that results will be beneficial, opponents that they must be mischievous. The working out of events is commonly somewhat different from the anticipations of either. In the present case we are not wholly without scientific light, and we have additional suggestions that would carry, on the whole, conclusive weight with a jury.

It has been shown that colonial preference cannot benefit the Colonies without increasing the demand for British goods and for the British labour embodied in them. To the consequent improvement of exchange and enlargement of output, wages as well as profits must respond. But it is further contended that a general and serious rise in prices must swallow up any benefit of that kind. Let us consider. We have already had the proof that a shilling tax upon all wheat imports did not raise the price of bread. That a two-shilling tax upon little more than half those imports would raise the cost of the quartern loaf at all is in the highest degree improbable. Production in the Colonies would be stimulated, and the amount of foreign wheat available for export to this country would have nowhere else to go, the tariff against it being fivefold as high in all other wheat-consuming markets of consequence. The food-supply could not be restricted, and might be sensibly increased. No competent economist will declare that under these circumstances any rise of price whatever is certain. No competent economist will say that the rise could be in the worst case serious or more perceptible than those trivial fluctuations due to varying harvests and freight-rates which are of constant occurrence. In the end, the colonial producer, having a constant relative advantage, would drive all alien competitors well-nigh out of the market. But this adjustment would be gradual, and need have no particular effect upon prices. Reference to p. 122 will show that the process of substituting Imperial wheat for foreign wheat is actually taking place now without exerting any particular effect upon prices. In 1900 the Colonies and India supplied no more than a sixth of our food-supply. Last year they supplied nearly half. But the cry of dear loaves, though heard from political platforms, was not otherwise audible.

We can only gain by a preference which will accelerate this process—securing colonial produce in the Mother Country and British manufacture in the Colonies. The orthodox importers, who may perhaps be called so without offence, have already half surrendered the position which it was originally thought might be defended by sangars of dear loaves. Lord Rosebery and Lord Ripon do not now expect little loaves to occur under preference. They warn the farmer that the cheapness of wheat under preference will accomplish his ruin. When casuistry becomes so flexible, honest minds will agree that, although the effect of a two-shilling duty upon that moiety of our food-supplies coming from foreign sources may be an interesting speculation, nobody can seriously expect that the loaf in the worst event, so far as the working classes are concerned, will be smaller by any visible fraction of an ounce.

A much graver matter is the possibility that the stimulation of colonial production might further injure the position of agriculture in this country, and reduce still more the diminished numbers of our agricultural population. For such a result nothing could really compensate, and it must at any cost be prevented. For this purpose it would be better, in the present writer's conviction, to reimpose the registration duty of one shilling upon every quarter of wheat imported, whether from the Colonies or elsewhere. Above that limit colonial corn should be free, and the duty upon foreign bread-stuffs might well be made three shillings. There would be no objection from the Colonies. They do not care what absolute rates we fix. They wish to retain their liberty in that respect, and to leave us ours. They desire nothing but the relative advantage in our market over foreign agriculture that they are ready and eager to concede to us in their market over foreign manufacture. They cannot give us absolute Free Trade, and do not expect it in return. They understand our wish to encourage what remains of home agriculture, and they will respect us for doing it. The advantage of restoring the registration duty on all imported wheat, abating all duty over and above in favour of the Colonies, is that it would enable fiscal reform to give home agriculture the definite guarantee it has a right to expect, would secure a permanent revenue, and, it may be useful to add, would cause less soreness in the United States than a preference solely discriminating between Colonial and foreign produce. The probable cheapening, and not the dearness, of the loaf is the real problem raised by preference as hitherto proposed.

XVII.

The Duke of Devonshire, though head of the Free Food League, was a member of the Cabinet which imposed a shilling tax on all wheat imports, and expects the working classes to be injured not so much by any increase in the cost of food as by the higher price of manufactured articles under a 10 per cent. tariff. To this it may be directly replied: That at least half the value of all manufactured goods is represented by the remuneration of labour; that wages in this country follow prices; that the strength of the trades union organizations makes it quite certain that employers will be compelled to divide fairly with their workmen any larger profits which increased command of the home market may give them; that the power of the trusts established in America upon the basis of a practically prohibitory 70 per cent. tariff cannot be repeated in any way in this country under an average 10 per cent. tariff, checking foreign competition, but by no means high enough to exclude it; and, finally, that the control of the Legislature by the people in this country is direct and absolute to a degree unknown in America; and an abuse of the tariff by capital would mean an end of the tariff, which, when adopted, will only be retained if democracy finds by actual experiment that it prospers better than it did before. And all the argument of orthodox importers enormously exaggerates the nature of the change which Mr. Chamberlain actually proposes. The economic difference between simple free imports and an average 10 per cent. tariff is less in degree than the difference between that scale and the average German rates of duty upon foreign manufactures. Mr. Chamberlain's policy would be nearer free imports than to any important continental system of Protection, and in this respect it promises well as representing the final application to practical economics of that distinctive spirit of constructive compromise in which all the greatest measures of English statesmanship have been achieved.

XVIII.

There is no alternative in trade. There is none in policy. Under the present system the relative decay of our commerce must begin at no very distant date to sap the foundations of our power. We shall remain without means to negotiate for reciprocity with our foreign competitors, or to check the steady decline of our trade in the protected markets of Europe and the United States. We shall be helpless to prevent the repetition of that injury in neutral markets, like those of the Far East and South America. In any case the natural development of increased competition from the United States and Japan, possessing geographical advantages and political facilities we cannot equal, must arrest our progress in those regions, as we have seen it arrested during the passing generation upon the European Continent.

The Colonies will join one and all in the world-wide process of closing markets. Instead of possibly tighter tariffs with considerable compensation under preference, we shall have even higher barriers, without any compensation in the shape of preferential scaling-ladders. Secure of free imports in this country under all circumstances, the Colonies would simply be encouraged towards McKinleyism by the system of unconditional free imports, which to all outside the island means Protection with impunity. German and American competition will extend its inroads into the home and colonial markets alike, and British industry, unable to threaten foreign rivalry at the base in any way, will continue to show less vitality in enterprise under the fatal sense of being upon the defensive at all points. Free imports can only end in reducing an island with a comparatively small population, and without a hinterland, to the same position as if it had never founded a colony or possessed one acre of Imperial territory oversea. Our population must become stationary like that of France, and then it must decline, as it depends for its present state of numbers and prosperity upon the exterior trade, which might be diminished indefinitely with lapse of time, and is not adjusted, like the population of France, to the inexhaustible productiveness of the soil.

There can be no political substitute for the unifying influence of preference. In Germany the Zollverein had to precede the Kriegsverein and the restoration of the Reich. In the American Colonies, after the War of Independence, the genius of Alexander Hamilton used the tariff as a means of evoking order out of chaos, and moulding the jarring fragments of a broken Empire into a new nation. 'Whatever we may think of it now,' said Daniel Webster in a celebrated passage, 'the Constitution was the child of pressing commercial necessity.' Every attempt to bring the revolted Colonies into harmony for other purposes had failed, and Webster continues, in words which have an extraordinary aptness to the case of the Mother Country and her Colonies to-day:


'The exigency of the case, called for a new movement, for a more direct and powerful attempt to bring the good sense and patriotism of the country into action upon the crisis. A solemn assembly was therefore proposed—a general convention of delegates from all the States. And now, sir, what was the exigency? What was this crisis? Look at the resolution itself. There is not an idea in it but trade. Commerce, commerce, is the beginning and end of it.'


The passage is an almost startling tribute to the political efficacy of 'sordid bonds.' Similarly, in the British Empire preference must precede federation. Its case appears, at a superficial view, more complex and unpromising than that of the thirteen Colonies, but is in reality less so. We have, for all practical purposes, but six great units to coordinate. Let Britain, Canada, Australia, New Zealand, the South African Colonies, and India frame an agreement upon the principle of relative advantage in Imperial markets for all the members of the group as against foreign competition, and the work is done. A task of its nature difficult and delicate indeed, but, with the predisposition to agreement, manageable. The Colonies will assuredly not enter at first into a Kriegsverein. They are not represented at Westminster or in the Cabinet, they have no voice in British foreign policy, and they will make no agreement to give definite military or financial support for purposes over which they have no control. And if, on the other hand, representation means taxation, as it must, the Colonies at present are not ready for federation upon that basis. They are under no compelling sense of necessity. We of the Mother Country believe in the overwhelming advantage of naval centralization. The Colonies believe that even greater importance attaches to the principle of preferential commerce as a means of strengthening the financial basis of sea-power. If we cannot come to an understanding with them upon the economic question—which in its ultimate bearing upon Imperial finance is the problem underlying every other— they cannot come any nearer to us upon the naval question.

But if the imperfect Zollverein of a preferential system is once formed, it is certain that the defensive strength of the Empire will be augmented by an imperfect Kriegsverein. The enthusiasm of the Colonies may easily be aroused on behalf of Australian and Canadian navies. The principle is in theory vicious, and would be in practice wholly bad, were the question one of the faulty distribution of a given force. But if it means a positive and considerable increase of naval force beyond what the Empire as a whole would otherwise possess, the gain will be real, and ultimately very great, though still less, from an Imperial point of view, than if the Colonies were willing to put the funds required for the development of their navies at the disposal of the British Admiralty. With the new pride and interest which distinctively Canadian and Australian squadrons would awaken, the Dominion and the Commonwealth would pay more money and build more ships than under any other conditions. A small tax might be levied for purely naval purposes upon all imports throughout the Empire. Though the distribution of its forces would not be the best, the Empire would dispose of more ships, and of more money for ships, than under any other circumstances. The necessity for consultation between the Mother Country and her maritime Colonies upon questions of naval development and strategy would arise; foreign policy would have to be discussed in that connection; and an Imperial Council of Trade and Defence would inevitably emerge. But preferential commerce for the purpose of accelerating the growth of the Colonies and strengthening the foundations of our own national finance and trade-supremacy is the primary essential. Preference, in a word, is the point from which all further evolution must unfold. Repeating the expressive biological term, it is the 'growing spot' of Imperial federation.

XIX.

Le revenu c'est l'État. That maxim has been ignored in one vital respect by the framers of our commercial policy. Modern British statesmanship seems to have overlooked the fact that such a problem as that of relative power exists, and that the most important changes in relative power occur most usually in peace through the operation of economic causes. The bearing of this reflection upon free imports and the fixture of national finance is profound. It is not paradoxical, but simply true, to say that, within the British Empire, the people of the British islands are the only class of mankind who do not enjoy commercial equality. Home enterprise may be as efficiently repressed by domestic taxation as by tariffs abroad. The classical economists agreed that the former factor should be taken into account in considering whether absolutely open ports should be conceded. A merchant must allow for his taxes. Compared with his competitor abroad, he does not get the same benefit from nominally equal profits unless he is as lightly taxed. A foreign rival less severely burthened than is the British taxpayer may be enabled by that fact to undersell the latter in his own market.

Follow out this thought. The Trafalgar Centenary reminds us that we are still carrying the immense financial weight of the wars that won the Empire. In the Napoleonic struggle, under Pitt's blindly heroic system of war finance, we pay not only for the defence of our own liberties, but for the freedom of Europe. The subsidies to our allies, though their own interests were more imminently at stake than ours, form part of the heavy heritage which presses upon us. While Napoleon waged his wars without leaving a penny of debt, and Bismarck waged war at a profit, we not only received no indemnity, but we mortaged our resources to put countries like Prussia, Austria, and Russia in a position of increased power. They fought for us, it is true, but they also fought for themselves. We ran into debt to a considerable extent in order to induce them to fight for themselves. We loaded our posterity to spare theirs.

It is only since 1870 that we have been able to appreciate fully the element of celestial irony in that fact. The Iron Chancellor wrung the five milliards from France, and his ruthlessness meant one of the most effective achievements in the whole history of the economic competition of nations. The result of the contrast is as follows: that the service of the British National Debt is £27,000,000 a year; of the German Imperial Debt, little more than one-fifth of that amount, or £5,200,000. We pay £29,400,000 for our army, and Germany supports the first army in the world for less, her military estimates amounting to £28,900,000; while we find nearly £37,000,000 for the navy, Germany provides at present rather less than £12,000,000. But if she had a fleet larger than ours, her total charge for debt and the two services would be many millions less than our present total charge for these items. Let us keep, however, to the comparison between existing facts. For Imperial Debt and armaments we pay £93,300,000; Germany £45,800,000, or less than half our burthen.

In this respect alone a German trades in these islands upon more favourable terms than our own people. They are handicapped by the financial services they rendered him in Nelson's and Napoleon's era, while his tariff, in return, forces the British manufacturer to contribute more or less to the cost of his navy. The contrast can be even more forcibly expressed. For the cost of the struggles which made the Empire the British people must pay out of their profits and earnings £27,000,000 a year to the State. Their German and American competitors enter the home market, the Indian market, and the South African market without paying one farthing towards this burthen, and enter, therefore, not on a free and equal, but on a privileged, footing. We bear, as it were, all the foundation expenses of the markets we keep open for their benefit. We bear all the cost of our own wars, and part of the cost of their wars; for we still pay, generations afterwards, income-tax towards the expense of driving the French out of the United States as well as out of Germany.

This is the aspect in which our fiscal system least resembles sanity. It works most directly to increase the relative power of our competitors. Le revenu c'est l'État. The more we facilitate their trade, the more their revenue is assisted, and as it rises, in the case of Germany, it goes straight into battleships. The more our trade is restricted by foreign tariffs, on the other hand, the more our revenue is injured. Since we must provide for a certain expenditure, by so much as we exempt foreign trade from indirect taxation, by so much do we increase the burthen of direct taxation upon ourselves. Free imports in this market do not mean equality. They act as a continuous discount upon national resources, and under the peculiar conditions of our historic indebtedness they involve a species of discrimination against the British citizen. Preference for the King's subjects throughout the Empire, in the home market no less than in the Colonies, is no less just than desirable. The system of relative advantage in Imperial commerce would enhance our relative power in international politics. The agreement of Mr. Chamberlain's foreign opponents on this point is one of the facts which should decide us in favour of his policy.

The Spectator, for instance, recently recommended[19] its readers to study, as the best refutation of fiscal reform arguments, Dr. Pierre Aubry's comparatively recent book.[20] The present writer has given due attention to a volume worthy of some respect. Stiffly dogmatic in opinion, and far from showing the very widest acquaintance with modern economics and politics, the book is admirably clear from its point of view. But that point of view is purely anti-Imperial. Here is one of Mr. Chamberlain's most intelligent and temperate opponents in Europe, whose treatise is recommended by the principal Free Trade organ in this country. Yet Dr. Aubry admits fully, without reserve, that Mr. Chamberlains policy would succeed in its purposes. It would maintain and develop the political power of the Empire; but that is not to our economic Girondin a proper economic aim. 'Mr. Chamberlain's projects of reform aim at constituting the British Empire into a complete self-sufficing organism, and are consequently in perfect harmony with the prevailing conception of political interests. But the great error lies in thinking that these reforms could have any other result than to preserve political interests or interests of domination.' Dr. Aubry distrusts Imperialism in itself, and thinks its progress would lead to aggression. Owing, apparently, to the increased armaments we should be compelled on this assumption to support, we should suffer economic losses, 'but they would be compensated for by an increase of political power.' The author of 'La Politique Commerciale de l'Angleterre' concedes the political argument of these pages—which have already answered his purely economic contentions—that preference would conduce to the maintenance of Empire. Upon the basis of his plea for the Navigation Laws, Adam Smith himself would be compelled to arrive at the same conclusion as the French Free Trader.[21]

XX.

The orthodox economy has failed in action, and its influence upon practical statesmanship throughout the world has disappeared, precisely because its disciples, while zealous for humanity, have been deficient in the organic sense of national life. They attempted to study the wealth of nations, while ignoring, as Adam Smith never entirely did, the higher laws governing the power of nations. Even from the point of humanitarian—yes, and of purely economic—ideals this was a profound error. Humanity can only be served through strong nations. What we have from the Greek spirit and the Roman mind we derive in the main from the epochs of their political greatness. In later times, Spanish wit and eloquence shone and were extinguished with Spanish supremacy. In thought, art, letters, France achieved in her ages of victory the best she has done. From the Thirty Years War to the period of Bismarck, the force of German intellect marched with German strength in arms. The Elizabethan genius flushed the dawn of England's rise to power; it is not altogether fanciful to think that with Milton the spirit of the New Model touches literature; and with the struggle against Napoleon came another phase of supreme psychological vigour. And Holland, having her Grotius, her Spinoza, and her Rembrandt while she held the sea, produced no men like them afterwards.

'Humanity' is nothing but the individual men and women composing it, and the worth of the aggregate is determined by the value of the units. But the soul of a whole people seems to strengthen or decay with that sense of national vitality and national achievement which—like the electric helix, giving energy to what was before the dead weight of a soft iron bar—raises to a higher power the faculties of its component individuals. 'Humanity' can do nothing for 'humanity,' and races do most for other races by the example they give and the ideals they pursue in the process of their own development.

But, even from the purely economic point of view, the same consideration holds good. All wealth is a result of mind applied to matter. The matter is always there. The factor of human capacity is exceedingly variable. The quickened sense of relative power in a nation acts, and can only act, through its individuals. It means more initiative, more enterprise, more inventiveness, more energy. It constitutes one of the strongest economic forces by which the wealth of nations can be promoted. A sound economic policy will always be directed towards the increase of relative power.

Isolated free imports lend no assistance to that aim, but, on the contrary, defeat it. That they promote the expansion of manufacture and population in foreign countries, and advance all the interests of those countries, no one disputes. That the tariffs of the same countries restrict our own manufacture, and are injurious to all our interests, no one disputes. That free imports and foreign tariffs must therefore work together towards the decrease of our relative power and against the maintenance of Empire is a proposition of which the truth must appear self-evident. Habit may continue to dispute it, reason cannot. It is, indeed, if we look into me matter, the single point upon which the two schools of controversialists are already, without knowing it, in agreement. For Mr. Cobden's disciples and Mr. Chamberlain's supporters are wholly at one in believing free imports to be a blessing to foreign nations—and they are again at one in holding that foreign tariffs are prejudicial to ourselves. But even if our foreign commerce could be carried on under improved conditions, no conceivable extent of success in that sphere could now solve our Imperial problem.

It is not enough to stop the process by which we have helped our competitors to gain upon us. The Empire needs to make up leeway. Trade in which we divide the benefits equally with Germany, Russia, or the United States is only half the political value—transactions being considered as economically equal—of the trade which strengthens the wealth and population of the Empire on both sides of the sea, and works absolutely for the increase of relative power. Citizens of different States associated in commerce may conflict in politics. The benefits they have respectively received in trade may be applied in war to the purpose of destroying each other. This is not the statement of a perverted principle. It is simply the brief and comprehensive description of the frightful realities underlying international life. If England at some future period were to perish at sea in that 'Trafalgar reversed' to which a vigorous portion of the Kaiser's subjects aspires with methodical enthusiasm, the accumulated effect of all the benefits that Germany had ever received in trade with us would directly contribute to our overthrow.

But citizens of the same Empire, even if they compete in commerce, cooperate in politics. Every transaction between them means a double contribution to the common safety. As taxpayers they mutually lighten their burthens as they mutually increase their resources. The State to which they belong gets both the benefits incident to every transaction between them. The British Empire has the opportunity to apply this principle with unprecedented effect. Alone among all States now or formerly existing, it includes nations and possessions upon many sides of the sea. It is capable of creating a predominant ocean traffic within itself. The Mother Country and her great Colonies are one people. The vigour nourished in the new communities under the flag can never under modern conditions be used against us. Our Colonies are no longer 'fruits which cling till they ripen,' but banyan-shoots spreading with repeated root from the parent-trunk to strengthen the system they extend.

British fiscal reformers are the victims of no phrase, the slaves of no dogma. They preach no universal panacea. Their ideals are not projected into the vague. They know no identical solution for the economic problems of all countries and all ages. They are convinced that humanity at large is best served in the long-run by those who best serve their own country. They are content to advocate a policy no less distinct in its limits than splendid in its scope, which seeks to secure the existence and progress of Greater Britain under the conditions of the time in which we live. Fiscal reformers in this country are as free as at any time to condemn the extravagances and absurdities of American Protection and German agrarianism. Seeking to promote the definite interests of the Empire under definite conditions, they would oppose the abuse of the Protectionist idea as they resist now the perverted application of the Free Trade theory. They are prepared to stand against the falsehood of extremes upon the right hand and the left hand. To say that the tariff principle cannot be introduced without being carried ultimately to excess, is like Mr. Lowe's argument that the ten-pound franchise could not become a seven-pound franchise without precipitating the nation into anarchy.

British fiscal reformers believe, on the contrary, that they are about to establish a new economic model, equally free from the abuses of continental agrarianism and American trusts, which will form yet another example of the practical genius of the English people for constructive compromise, and will result in moderating extreme Protection throughout the world. The foundation principle of that policy will be preference—preference in every market under the flag, at home, in the Colonies, and in the dependencies alike, for those members of the Imperial State who bear its burthens, increase its resources, strengthen its defence, and whose morale and organization, whose sufficiency in numbers and efficiency in spirit, can alone perpetuate its existence. The increase of Imperial trade means the simultaneous increase on both sides of the sea of all our political resources for peace and war; relative advantage for all the members of the State in commerce under the flag is the economic condition vital to the interests of relative power; and nothing can secure the maintenance of the British Empire through the generations lying immediately before us but the progress under preference of those new nations of our race whose strength, wealth, numbers, in some ultimate crisis, may double our own.


  1. Excluding negroes, who number another 10,000,000, and ought, perhaps, to be more properly reckoned as an integral part of the productive force of the Republic.
  2. An article in the National Review recently gave the following figures, which seems to stand investigation:
    England. Germany. France. United States.
    Population 43,000,000 61,000,000 39,000,000 83,000,000
    Million £ Million £ Million £ Million £
    Debt charge 27⋅0  5⋅2 48⋅8
     4⋅8 
    28⋅01
    Army 29⋅4 28⋅9 27⋅1   24⋅0
    Navy 36⋅9 11⋅7 12⋅7   24⋅0
    98⋅3 45⋅8 88⋅6   80⋅8
    ^1 Pensions.
  3. Germany is already spending upon her navy as much as we spent in any year up to Queen Victorians first Jubilee; the United States naval estimates are already as large as ours were in any year up to the outbreak of the Boer War.
  4. 'Die Handelspolitik Englands under seiner Kolonien,' von Dr. Carl Johannes Fuchs ('Schriften des Vereins füir Socialpolitik,' Leipzig, 1893).
  5. 'Statistical Abstract for the United Kingdom'; 'Statistisches Jahrbuch für das Deutsch Reich'; 'Statistique Générale de la France' 'Annual Statement of the Trade of the United Kingdom,' 1904; Inquiry Blue-books, Cd. 1761 and 2337.
  6. Note upon the Trade Returns for 1905.—The latest figures would make no material change in these calculations. For the nine months ending September 30, 1905, British exports were no less than £21,000,000 higher than in the previous year. (1) This amount averaged makes little difference to the percentage; (2) the great bulk of the increase this year has been with the neutral markets, especially China and Japan, and affects no argument as to the state of our relations with the chief protected countries.'
  7. Excluding new ships, not returned for previous periods.
  8. 8.0 8.1 Estimated from 'Annual Statement for 1904,' the official Inquiry Blue-book figures for 1902 and 1903 being million £71⋅6 and million £73⋅4 respectively.
  9. France, Belgium, Holland, Germany, Switzerland, Austria, Hungary, Russia, Spain, Portugal, Italy, and the United States.
  10. It is probable that our trade with these countries in the present year will be nearer £90,000,000 than £80,000,000; just as trade to the chief protected countries' went up immensely after the Franco-German War.
  11. Excluding ships, not previously returned.
  12. Washington: Government Printing Office, 3 vols., 1905.
  13. Vol. ii., p. 872.
  14. The Times, September 12, 1905.
  15. Diplomatic and Consular Reports; Cuba, No. 3,484.
  16. Last year Argentina came third on the list of wheat-growing countries shipping to the British market. But we also received 8,000,000 cwt. from the United States, and 2,000,000 cwt. from Canada.
  17. Completed from the Annual Statement of Trade for 1904.
  18. It is in this sense that the Bengal boycott shows the danger-signal to Lancashire.
  19. In a review of 'Compatriot Club Essays.'
  20. 'Étude Critique de la Politique Commerciale de l'Angleterre à l'Égard des ses Colonies,' par Pierre Aubry (Rivière, Toulouse, 1904).
  21. Since these pages were written there has appeared during the last few weeks another noteworthy German study of the Preference Policy—'Chamberlain's Handelspolitik,' von Marie Schwab—with a remarkable preface by Professor Adolf Wagner. The celebrated veteran of German economic science writes: 'the fate of Holland which so many Britons fear will happen to them, though not so soon. As a means of staving off the evil day the Chamberlain plans deserve the support of all Britons. ... The Chamberlain policy keeps power and security no less than welfare in sight, and is thoroughly in Adam Smith's manner.' (Gustav Fischer, Jena).