The Reciprocity Craze/Chapter 5
- A Quarterly Reviewer, July, 1881.
- Sir Edward Sullivan, Bart., Nineteenth Century, August, 1881.
Under the head of "Imports and Exports" I have given a few extracts from two of the latest Protectionist utterances. I here take the opportunity of making a few comments on some of the facts relied on, and the conclusions drawn, in these two diatribes against Free Trade.
Let the reader turn to p. 7, supra; let him note the figures there given in a little calculation of three lines, and let him attentively consider the deductions which the Quarterly Reviewer draws from them, and the idea which he would give us of Sir Robert Peel's possible "dreams." First, as to his figures. What can be the writer's qualifications for discoursing on British Trade? He does not seem to know or comprehend the meaning of "re-exports of foreign and colonial produce." If he did, he would not have made the egregious blunder of leaving out this item, which amounts to 63 millions. He makes out that the excess of our imports last year was 187 millions, but as he has taken no account of commodities merely passing through our ports, he overstates this excess by 63 millions! Next, as to what Sir Robert Peel would have thought of a state of affairs which does not exist. If Sir Robert had lived in our day, and were as ignorant as this writer is, he might express alarm as this writer does, at the magnitude of our import trade. But Sir Robert had some acquaintance with the subject, and would not have been oblivious, or regardless, as this writer is, of the fact that Great Britain does more than half the world's ocean carrying trade, and that she has interest to receive on her foreign investments besides other trifles of this sort; and that before she need do any bargaining as to her exports or imports, she has to receive from creation, by way of interest on loans, &c., and for work and labour done, in money, or in kind, considerably over 100 millions of pounds sterling a year! No wonder a writer in The Times money article cites this blunder as "a measure of the intelligence of the new reciprocitarians."
Now for an instance of "hopeless muddle." In p. 291 of his article, the Quarterly Reviewer makes a kind of effort to explain how poor indebted England discharges this (according to him and his school) annually increasing adverse balance of trade. He says:—"We have about 2,000 millions invested in American and other foreign bonds, and with this we are paying for a large part of the difference between our imports and our exports. We are constantly told that gold is disappearing, and we know that instead of being an importer of the precious metal we are now obliged to export it. The theorists who uphold the wonderful dogma just referred to are lost in wonder over the 'drain of gold,' and are always asking some one to tell them what becomes of it. It goes towards the payment of our debts—that is the heart of the mystery. But this explanation does not satisfy the economists, and we find them, in despite of all evidence and reason, clinging hard and fast to an exploded delusion of an effete school, concocted during a period essentially different in all respects from the present." These are strong words. Let us look at them a little closer. He says we are paying our debts by selling our American and other foreign bonds. Indeed! If so, when did the process commence? There is not a single year, for the last twenty years, in which our imports have not exceeded our exports by at least 50 millions, the amount of the excess in the aggregate being something like 1,500 millions. And yet, at the end of this period, which comprises more than half the Free Trade epoch, and during which the country is said to have been getting rapidly impoverished, he makes out that we have in our strong box 2,000 millions of the world's obligations! What can be this writer's idea of "evidence and reason?" Both flatly contradict him. How did we get these 2,000 millions of bonds? We must have got at least half of them during the last twenty years. But during this time we had imported on balance over 100 millions of bullion! How can we be getting in goods, bonds, and bullion from the rest of the world, owing nobody anything, and at one and the same time be impoverishing ourselves? But, he makes some obscure reference to a "drain of gold." Coupling this with his idea of our paying away our American and other bonds, I think I can pluck out what he calls "the heart of the mystery." It is matter of common knowledge that from 1877 to 1879, three years, European harvests were deficient and American harvests plentiful. The harvest of Europe in 1879 was about the worst ever known. This state of things was good for the United States, and bad for Europe. The demand for corn was enormous; and as the United States had it to sell, they were enabled to turn it into money, and with the proceeds to do two most important things. They had outstanding a debt on which they were paying 5 and 6 per cent., and they were suffering under an inconvertible currency. During the nine years 1871—9 they had exported on balance £76,084,000 in gold. Trade and commerce from 1873 to 1877 were extremely depressed, more depressed than with us; but in a moment all was changed. By means of the vast supplies of grain they exported and sold to Europe, they were enabled to pay off a considerable portion of their debt, to reduce the interest on the remainder, and to establish their currency on a metallic basis. The process adopted was to call in their bonds; and to buy gold in the markets of the world, as Italy, for a similar object, is now doing. Some of these bonds were held by us, some by other nations; we paid for them when we bought them years before, and we got money or money's worth when we parted with them. As to the gold, some gold went away—not more than we could easily spare, seeing that with an increased volume of business money remains at from 2 to 2½ per cent. In 1880-1 the United States imported on balance £18,500,000 in gold; but while Free Trading England exported it to the extent of two to three millions Protectionist France exported six or seven millions. I attach no importance to this fact, however, I only use it as an argumentum ad hominem; for gold, like everything else, is a commodity, and tends to go where it is most wanted, and can be paid for. All that happened amounted to this, that America, by the extraordinary coincidence of her possessing three abundant harvests, while Europe suffered under three deficient ones, was enabled to pay off some of her debt, to reduce the interest on the remainder, and to put her currency on a metallic basis. All this should have been within the ken of a writer who lays claim to "a mind capable of comprehending facts," and who sets himself up as an instructor on the Free Trade question. But, all is ignored, and we are made to carry away a dim sort of idea that, in order to pay our way under our Free Trade system, we are selling our bonds, and are being drained of our gold; a state of things which only exists in the minds of such writers as this Quarterly Reviewer.
And now for another passage of his, p. 289:—"Again, if we look at the United States where Mr. Bright has so often told us to look, we shall find that their exports for the year ending June, 1881, exceeded their imports by £54,000,000. This ought to mean that the Americans are getting poorer, if they are not actually approaching bankruptcy; but they by no means regard it in that light. They like Mr. Bright's praises of their country, at the expense of his own, but they will not have his teaching at any price, and consequently they will go on exporting more than they import as long as good fortune enables them to do so. Then there is France, she also should have been sinking deeper and deeper in the slough of despond, for in her case also the exports exceed the imports."
This statement about France is astounding! It is absolutely contrary to fact. In 1880 France, according to the returns, imported in excess 63 millions; in 1879, 57 millions; and in 1878, 43 millions. France is now, and has been for the last five years, an importer on balance, and her annual excess imports are rapidly mounting.
Very severe things might be said of such a blunder as this, but I pass on to his notions about the United States excess of exports, which, by the way, was not 54 millions but 52 millions, for the year ending in June last. His notion that the wealth of the United States, and the virtues of protection, are proved by this excess of exports is one worthy of the Neo-Protectionist school, and "a measure of their intelligence." Is our Quarterly Reviewer ignorant, or is he oblivious, of the fact that the United States are largely indebted to Europe, and have to pay a large annual tribute to Europe, in money, or in kind, by way of interest on that debt; and that they have scarcely any ocean-carrying trade? Is he ignorant, or oblivious, of the fact that thousands of absentees, and travellers, who come over here from the States, have to remit to Europe, in one shape or other, the expenses which they incur? Let us endeavour roughly to estimate what these three items amount to. 1. Indebtedness.—Let us say the States owe Europe 500 millions; 5 per cent on this makes 25 millions a year for them to pay annually. 2. Shipping.—Owing to blessed Protection—poor one-sided Free Trading England does most of this business for them. They had not a single ocean grain-ship floating last year, and they carried only 17½ per cent. of their foreign commerce. Their export and import trade amounted to 309 millions. Let us suppose for a moment that on 82½ per cent. of this they paid 5 per cent. for freight; this would make 12¾ millions more to pay. Then there is the item of passenger fares across the Atlantic, to and fro. Let us say half a million for this. 3. What shall we put down for the 10,000 absentees, and travellers, who flock to Europe every year, and some of whom are among the richest men in the world? Shall we say an average of £300? This would give us 3 millions more. There may be other items for works of art, jewellery, &c., but of them I will take no account, so we will now sum up.
|United States Annual Foreign Indebtedness, interest payable abroad||£25,000,000|
|Ocean shipping charges||12,750,000|
|Absentees and travellers||3,000,000|
So that before the States can commence to talk about exchanging a dollar's worth of their own products for a dollar's worth of foreign products, they have to pay over to Europe, in money or in kind, no less a sum than 40 millions sterling!
No wonder their exports exceed their imports! What ignorance, what folly, does it not betray, therefore, to build up an argument in favour of Protection, and against Free Trade, on the bare figures which appear in trade returns! In the next chapter the reader will find the true deductions which may be drawn from them.
Now for Sir Edward Sullivan in the Nineteenth Century. On page 8, supra, will be found two passages from his article, "Isolated Free Trade," to which I would again refer the reader. They, and some further extracts which I shall make, betray the fatuous ignorance concerning "imports and exports," which is the characteristic of the whole school of Neo-Protectionists. They all have the same notions about "foreigners flooding our markets with cheap and often nasty manufactured goods;" the same idea of "Free Trade increasing the balance of trade against us till it has reached the alarming figure of £136,000,000;" the same notion that we are "drawing upon our capital and our accumulated wealth."
But, there are other choice morsels which I must transcribe verbatim:—"The cloud that threatens the industrial existence of England has been gathering and intensifying for six years. 'Who,' asks Mr. Bright triumphantly, 'dare now propose a return to Protection?' 'Who,' it may be asked in return, 'amongst all the wise and acute and thoughtful men in enlightened Europe and America, dare now propose the adoption of Free Trade?' Not one; absolutely not one. After carefully watching the working of 'isolated' free trade in England for thirty years, they have unanimously, without a dissentient voice, rejected it as belonging to the puerile doctrines and illusions of mankind." "Practical thoughtful men are beginning to compare the prophecies and theories of free trade with the practical results, and they are aghast." "England is the only country in the world that has adopted what is called free trade, and England is the only country in the world that is retrograding in industrial prosperity." "Under protection America is accumulating annually £165,000,000. Under protection France is accumulating annually £75,000,000. Under Free Trade England is accumulating annually £65,000,000. Many experts maintain that since 1875—1876 she was losing money instead of accumulating. Protective America now exports more than she imports. Protective France imports annually £4,000,000 more than she exports. (The balance against her is £40,000,000 in ten years). Free trade England imports annually £130,000,000 more than she exports!"
Very few remarks are necessary on this farrago of reckless assertion and false inference.
It is not true that any cloud threatens the industrial existence of England, or that she is retrograding in industrial prosperity; facts abounding on every side point to the very opposite conclusion.
It is not true that wise, acute, and thoughtful men in Europe and America have unanimously, without a dissentient voice rejected Free Trade. I deny that any single "wise" man has done so, whatever any acute or thoughtful men—they are not necessarily wise—may have done. I deny that any but the merest sciolists are aghast at the practical results of Free Trade, for the simple reason that there is nothing in these results at which to be aghast. While, as to the prophecies which have been made as to the general acceptance of Free Trade by the nations within a certain limited time, it may be conceded that the generous forecasts of its advocates have hitherto been unfulfilled. This, however, does not arise from the falsity of their doctrines, as the Protectionists would have it, but because of the prejudices and ignorance of men— such prejudices and ignorance for instance as these writers display—because of the existence of the self-same spirit which placed Galileo in prison for maintaining that the earth went round the sun; and which consigned Giordano Bruno to the flames for asserting that the world was round.
And now I have to ask Sir Edward Sullivan for his authority for the figures given by him as to the respective annual "accumulations" of America, France, and England, in which England with £65,000,000 is placed at the bottom of the list with the remark that "many experts maintain that since 1875-1876 she was losing money instead of accumulating."
I ask: who is his authority for such a statement?
Mr. Giffen, in one of his "Essays on Finance," 1878, puts down our "accumulations" for 1865—75 as £2,400,000,000, or £240,000,000 annually, and there is no reason for supposing that they have decreased since; the figures given under "One-Sided Free Trade" proving the contrary. there be any "expert" to set against the chief of the Statistical Department of the Board of Trade, I should like to know who he is, and on what factors he bases his calculation.
Then I have to ask him who is his authority for the statement that "Protective France imports annually, £4,000,000 more than she exports;" and that "the balance against her is £40,000,000 in ten years?"
|Imports for Home Consumption||£1,494,713,400|
|Exports of Home Produce||1,387,392,480|
|Excess of Imports||107,320,920|
But, there is last year, 1880, and I find that Mulhall in his "Balance Sheet of the World" puts down France's excess of imports for that year as 63 millions, which brings up the total excess for eleven years to 170 millions! In 1870, however, France exported on balance 3 millions, so that the fact is that France for the last ten years has imported on balance, on the average, 17 millions, not 4 millions! But, to stop here would be to give a very inadequate notion of what France is doing in the way of imports and exports, for I find that
|In 1876 her excess imports were||£16,500,000|
So that France, though Protectionist, is actually, according to our new school of writers, going down hill along with free trading England!
But does it not seem extraordinary that in the face of these figures we should be given to understand that France imports annually only £4,000,000 more than she exports?
At all events, he admits that France imports more than she exports. But, this is in direct contradiction to his fellow in the Quarterly, who, as we have seen, asserts that France exports more than she imports! These two Neo-Protectionists, therefore, are at direct variance with each other on a matter of fact forming the very basis of their argument!
Et cantare pares et respondere parati."
The only thing on which they are agreed is praise of Protection and vilification of Free Trade.
Here I leave them, commending to them Mr. Gladstone's recent advice to Lord Randolph Churchill, to "avoid facts and logic, and stick to rhetoric and declamation."