What Is Free Trade? / An Adaptation of Frederic Bastiat's "Sophismes Éconimiques" Designed for the American Reader

I have so far taken my examples from human inventions, but will now go on to speak of natural advantages.

In every article of production, nature and man must concur. But the portion of nature is always gratuitous. Only so much of the usefulness of an article as is the result of human labor becomes the object of mutual exchange, and consequently of remuneration. The remuneration varies much, no doubt, in proportion to the intensity of the labor, of the skill, which it requires, of its being à-propos to the demand of the day, of the need which exists for it, of the momentary absence of competition, &c. But it is not the less true in principle, that the assistance received from natural laws, which belongs to all, counts for nothing in the price.

We do not pay for the air we breathe, although so useful to us, that we could not live two minutes without it. We do not pay for it, because nature furnishes it without the intervention of man's labor. But if we wish to separate one of the gases which compose it for instance, to fill a balloon, we must take some [time and] labor; or if another takes it for us, we must give him an equivalent in something which will have cost us the trouble of production. From which we see that the exchange is between efforts, [time and] labor. It is certainly not for hydrogen gas that I pay, for this is everywhere at my disposal, but for the work that it has been necessary to accomplish in order to disengage it; work which I have been spared, and which I must refund. If I am told that there are other things to pay for, as expense, materials, apparatus, I answer, that still in these things it is the work that I pay for. The price of the coal employed is only the representation of the [time and] labor necessary to dig and transport it.

We do not pay for the light of the sun, because nature alone gives it to us. But we pay for the light of gas, tallow, oil, wax, because here is labor to be remunerated;—and remark, that it is so entirely [time and] labor and not utility to which remuneration is proportioned, that it may well happen that one of these means of lighting, while it may be much more effective than another, may still cost less. To cause this, it is only necessary that less [time and] human labor should be required to furnish it.

When the water-boat comes to supply my ship, were I to pay in proportion to the absolute utility of the water, my whole fortune would not be sufficient. But I pay only for the trouble taken. If more is required, I can get another boat to furnish it, or finally go and get it myself. The water itself is not the subject of the bargain, but the labor required to obtain the water. This point of view is so important, and the consequences that I am going to draw from it so clear, as regards the freedom of international exchanges, that I will still elucidate my idea by a few more examples.

The alimentary substance contained in potatoes does not cost us very dear, because a great deal of it is attainable with little work. We pay more for wheat, because, to produce it, Nature requires more labor from man. It is evident that if Nature did for the latter what she does for the former, their prices would tend to the same level. It is impossible that the producer of wheat should permanently gain more than the producer of potatoes. The law of competition cannot allow it.

Again, if by a happy miracle the fertility of all arable lands were to be increased, it would not be the agriculturist, but the consumer, who would profit by this phenomenon; for the result of it would be abundance and cheapness. There would be less labor incorporated into an acre of grain, and the agriculturist would be therefore obliged to exchange it for less labor incorporated into some other article. If, on the contrary, the fertility of the soil were suddenly to deteriorate, the share of nature in production would be less, that of labor greater, and the result would be higher prices.

I am right then in saying that it is in consumption, in mankind, that at length all political phenomena find their solution. As long as we fail to follow their effects to this point, and look only at immediate effects, which act but upon individual men or classes of men as producers, we know nothing more of political economy than the quack does of medicine, when instead of following the effects of a prescription in its action upon the whole system, he satisfies himself with knowing how it affects the palate and the throat.

The tropical regions are very favorable to the production of sugar and coffee; that is to say, Nature does most of the business and leaves but little for labor to accomplish. But who reaps the advantage of this liberality of Nature? Not these regions, for they are forced by competition to receive remuneration simply for their labor. It is mankind who is the gainer; for the result of this liberality is cheapness, and cheapness belongs to the world.

Here in the temperate zone, we find coal and iron ore on the surface of the soil; we have but to stoop and take them. At first, I grant, the immediate inhabitants profit by this fortunate circumstance. But soon comes competition, and the price of coal and iron falls, until this gift of nature becomes gratuitous to all, and human labor is only paid according to the general rate of profits.

Thus, natural advantages, like improvements in the process of production, are, or have, a constant tendency to become, under the law of competition, the common and gratuitous patrimony of consumers, of society, of mankind. Countries, therefore, which do not enjoy these advantages, must gain by commerce with those which do; because the exchanges of commerce are between labor and labor, subtraction being made of all the natural advantages which are combined with these labors; and it is evidently the most favored countries which can incorporate into a given labor the largest proportion of these natural advantages. Their produce representing less labor, receives less recompense; in other words, is cheaper. If then all the liberality of Nature results in cheapness, it is evidently not the producing, but the consuming country, which profits by her benefits.

Hence we may see the enormous absurdity of the consuming country, which rejects produce precisely because it is cheap. It is as though we should say: "We will have nothing of that which Nature gives you. You ask of us an effort equal to two, in order to furnish ourselves with produce only attainable at home by an effort equal to four. You can do it because with you Nature does half the work. But we will have nothing to do with it; we will wait till your climate, becoming more inclement, forces you to ask of us a labor equal to four, and then we can treat with you upon an equal footing!"

A is a favored country; B is maltreated by Nature. Mutual traffic then is advantageous to both, but principally to B, because the exchange is not between utility and utility, but between value and value. Now A furnishes a greater utility in a similar value, because the utility of any article includes at once what Nature and what labor have done; whereas the value of it only corresponds to the portion accomplished by labor. B then makes an entirely advantageous bargain; for by simply paying the producer from A for his labor, it receives in return not only the results of that labor, but in addition there is thrown in whatever may have accrued from the superior bounty of Nature.

We will lay down the general rule.

Traffic is an exchange of values; and as value is reduced by competition to the simple representation of labor, traffic is the exchange of equal labors. Whatever Nature has done towards the production of the articles exchanged, is given on both sides gratuitously; from whence it necessarily follows, that the most advantageous commerce is transacted with those countries which are the least favored by Nature.

The theory of which I have attempted in this chapter to trace the outlines, deserves a much greater elaboration. But perhaps the attentive reader will have perceived in it the fruitful seed which is destined in its future growth to smother Protectionism, at once with the various other isms whose object is to exclude the law of Competition from the government of the world. Competition, no doubt, considering man as producer, must often interfere with his individual and immediate interests. But if we consider the great object of all labor, the universal good, in a word, Consumption, we cannot fail to find that Competition is to the moral world what the law of equilibrium is to the material one. It is the foundation of true gratification, of true Liberty and Equality, of the equality of comforts and condition, so much sought after in our day; and if so many sincere reformers, so many earnest friends to public right, seek to reach their end by commercial legislation, it is only because they do not yet understand commercial freedom.

CHAPTER V.

I have said more than once, that I am opposing only the theory of the protectionists, with the hope of discovering the source of their errors. Were I disposed to enter into controversy with them, I would say: Why direct your tariffs principally against England, a country more overloaded with taxes than any in the world? Have I not a right to look upon your argument as a mere pretext? But I am not of the number of those who believe that prohibitionists are guided by interest, and not by conviction. The doctrine of Protection is too popular not to be sincere. If the majority could believe in freedom, we would be free. Without doubt it is individual interest which weighs us down with tariffs; but it acts upon conviction. "The will (said Pascal) is one of the principal organs of belief." But belief does not the less exist because it is rooted in the will and in the secret inspirations of egotism.

We will return to the Sophism drawn from internal taxes.

The government may make either a good or a bad use of taxes; it makes a good use of them when it renders to the public services equivalent to the value received from them; it makes a bad use of them when it expends this value, giving nothing in return. To say in the first case that they place the country which pays them in more disadvantageous conditions for production, than the country which is free from them, is a Sophism. We pay, it is true, so many millions for the administration of justice, and the maintenance of order, but we have justice and order; we have the security which they give, the time which they save for us; and it is most probable that production is neither more easy nor more active among nations, where (if there be such) each individual takes the administration of justice into his own hands. We pay, I grant, many millions for roads, bridges, ports, steamships; but we have these steamships, these ports, bridges, and roads; and unless we maintain that it is a losing business to establish them, we cannot say that they place us in a position inferior to that of nations who have, it is true, no budget of public works, but who likewise have no public works. And here we see why (even while we accuse taxes of being a cause of industrial inferiority) we direct our tariffs precisely against those nations which are the most taxed. It is because these taxes, well used, far from injuring, have ameliorated the conditions of production to these nations. Thus we again arrive at the conclusion that the protectionist Sophisms not only wander from, but are the contrary—the very antithesis—of truth.

As to unproductive taxes, suppress them if you can; but surely it is a most singular idea to suppose, that their evil effect is to be neutralized by the addition of individual taxes to public taxes. Many thanks for the compensation! The State, you say, has taxed us too much; surely this is no reason that we should tax each other!

A protective duty is a tax directed against foreign produce, but which returns, let us keep in mind, upon the national consumer. Is it not then a singular argument to say to him, "Because the taxes are heavy, we will raise prices higher for you; and because the State takes a part of your revenue, we will give another portion of it to benefit a monopoly?"

But let us examine more closely this Sophism so accredited among our legislators; although, strange to say, it is precisely those who keep up the unproductive taxes (according to our present hypothesis) who attribute to them afterwards our supposed inferiority, and seek to re-establish the equilibrium by further taxes and new clogs.

It appears to me to be evident that protection, without any change in its nature and effects, might have taken the form of a direct tax, raised by the State, and distributed as a premium to privileged industry.

Let us admit that foreign iron could be sold in our market at $16, but not lower; and American iron at not lower than $24.

In this hypothesis there are two ways in which the State can secure the national market to the home producer.

The first, is to put upon foreign iron a duty of $10. This, it is evident, would exclude it, because it could no longer be sold at less than $26; $16 for the indemnifying price, $10 for the tax; and at this price it must be driven from the market by American iron, which we have supposed to cost $24. In this case the buyer, the consumer, will have paid all the expenses of the protection given.

The second means would be to lay upon the public an Internal Revenue tax of $10, and to give it as a premium to the iron manufacturer. The effect would in either case be equally a protective measure. Foreign iron would, according to both systems, be alike excluded; for our iron manufacturer could sell at $14, what, with the $10 premium, would thus bring him in $24. While the price of sale being $14, foreign iron could not obtain a market at $16.

In these two systems the principle is the same; the effect is the same. There is but this single difference; in the first case the expense of protection is paid by a part, in the second by the whole of the community. I frankly confess my preference for the second system, which I regard as more just, more economical, and more legal. More just, because, if society wishes to give bounties to some of its members, the whole community ought to contribute; more economical, because it would banish many difficulties, and save the expenses of collection; more legal, because the public would see clearly into the operation, and know what was required of it.

But if the protective system had taken this form, would it not have been laughable enough to hear it said: "We pay heavy taxes for the army, the navy, the judiciary, the public works, the debt, &c. These amount to more than 200 millions. It would therefore be desirable that the State should take another 200 millions to relieve the poor iron manufacturers."

This, it must certainly be perceived, by an attentive investigation, is the result of the Sophism in question. In vain, gentlemen, are all your efforts; you cannot give money to one without taking it from another. If you are absolutely determined to exhaust the funds of the taxable community, well; but, at least, do not mock them; do not tell them, "We take from you again, in order to compensate you for what we have already taken."

It would be a too tedious undertaking to endeavor to point out all the fallacies of this Sophism. I will therefore limit myself to the consideration of it in three points.

You argue that the United States are overburdened with taxes, and deduce thence the conclusion that it is necessary to protect such and such an article of produce. But protection does not relieve us from the payment of these taxes. If, then, individuals devoting themselves to any one object of industry, should advance this demand: "We, from our participation in the payment of taxes, have our expenses of production increased, and therefore ask for a protective duty which shall raise our price of sale:" what is this but a demand on their part to be allowed to free themselves from the burden of the tax, by laying it on the rest of the community? Their object is to balance, by the increased price of their produce, the amount which they pay in taxes. Now, as the whole amount of these taxes must enter into the Treasury, and the increase of price must be paid by society, it follows that (where this protective duty is imposed) society has to bear, not only the general tax, but also that for the protection of the article in question. But, it is answered, let everything be protected. Firstly, this is impossible; and, again, were it possible, how could such a system give relief? I will pay for you, you will pay for me; but not the less still there remains the tax to be paid.

Thus you are the dupes of an illusion. You determine to raise taxes for the support of an army, a navy, judges, roads, &c. Afterwards you seek to disburden from its portion of the tax, first one article of industry, then another, then a third; always adding to the burden of the mass of society. You thus only create interminable complications. If you can prove that the increase of price resulting from protection, falls upon the foreign producer, I grant something specious in your argument. But if it be true that the American people paid the tax before the passing of the protective duty, and afterwards that it has paid not only the tax but the protective duty also, truly I do not perceive wherein it has profited.

But I go much further, and maintain that the more oppressive our taxes are, the more anxiously ought we to open our ports and frontiers to foreign nations, less burdened than ourselves. And why? In order that we may share with them, as much as possible, the burden which we bear. Is it not an incontestable maxim in political economy, that taxes must, in the end, fall upon the consumer? The greater then our commerce, the greater the portion which will be reimbursed to us, of taxes incorporated in the produce which we will have sold to foreign consumers; whilst we on our part will have made to them only a lesser reimbursement, because (according to our hypothesis) their produce is less taxed than ours.

CHAPTER VI.

It is constantly alleged in opposition to our principles, that they are good only in theory. But, gentlemen, do you believe that merchants' books are good in practice? It does appear to me, if there is anything which can have a practical authority, when the object is to prove profit and loss, that this must be commercial accounts. We cannot suppose that all the merchants of the world, for centuries back, should have so little understood their own affairs, as to have kept their books in such a manner as to represent gains as losses, and losses as gains. Truly it would be easier to believe that our legislators are bad political economists. A merchant, one of my friends, having had two business transactions, with very different results, I have been curious to compare on this subject the accounts of the counter with those of the custom-house, interpreted by our legislators.

Mr. T dispatched from New Orleans a vessel freighted for France with cotton valued at $200,000. Such was the amount entered at the custom-house. The cargo, on its arrival at Havre, had paid ten per cent. expenses, and was liable to thirty per cent. duties, which raised its value to $280,000. It was sold at twenty per cent. profit on its original value, which equalled $40,000, and the price of sale was $320,000, which the consignee converted into merchandise, principally Parisian goods. These goods, again, had to pay for transportation to the sea-board, insurance, commissions, &c., ten per cent.; so that when the return cargo arrived at New Orleans, its value had risen to $352,000, and it was thus entered at the custom-house. Finally, Mr. T realized again on this return cargo twenty per cent. profits, amounting to $70,400. The goods thus sold for the sum of $422,400.

If our legislators require it, I will send them an extract from the books of Mr. T. They will there see, credited to the account of profit and loss, that is to say, set down as gained, two sums; the one of $40,000, the other of $70,400, and Mr. T feels perfectly certain that, as regards these, there is no mistake in his accounts.

Now what conclusion do our Congressmen draw from the sums entered into the custom-house, in this operation? They thence learn that the United States have exported $200,000, and imported $352,000; from whence they conclude "that she has spent, dissipated, the profits of her previous savings; that she is impoverishing herself and progressing to her ruin; and that she has squandered on a foreign nation $152,000 of her capital."

Some time after this transaction, Mr. T dispatched another vessel, again freighted with national produce, to the amount of $200,000. But the vessel foundered in leaving the port, and Mr. T had only further to inscribe upon his books two little items, thus worded:

"Sundries due to X, $200,000, for purchase of divers articles dispatched by vessel N."

"Profit and loss due, to sundries, $200,000, for final and total loss of cargo."

In the meantime the custom-house inscribed $200,000 upon its list of exportations, and as there can of course be nothing to balance this entry on the list of importations, it hence follows that our enlightened members of Congress must see in this wreck a clear profit to the United States of $200,000.

We may draw hence yet another conclusion, viz.: that according to the Balance of Trade theory, the United States has an exceedingly simple manner of constantly doubling her capital. It is only necessary, to accomplish this, that she should, after entering into the custom-house her articles for exportation, cause them to be thrown into the sea. By this course, her exportations can speedily be made to equal her capital; importations will be nothing, and our gain will be, all which the ocean will have swallowed up.

You are joking, the protectionists will reply. You know that it is impossible that we should utter such absurdities. Nevertheless, I answer, you do utter them, and what is more, you give them life, you exercise them practically upon your fellow-citizens, as much, at least, as is in your power to do.

But lest even Mr. T's books may not be deemed of sufficient weight to counterbalance the convictions of the Horace Greeley school of prohibition, I shall proceed to furnish a table exhibiting various classes of commercial transactions, embracing most of the classes usually effected by importing and exporting houses, all of which may result in undoubted profits to the parties engaged in them, and to the country at large, and yet which, as they appear in the annual Commerce and Navigation Reports issued by the government, would be made to prove by Mr. Greeley that the result has in each case been a loss to the country. The sums are all stated in gold:

A, represents one hundred merchants, who shipped to London beef, boots and shoes, butter, cheese, cotton, hams and bacon, flour, Indian corn, lard, lumber, machinery, oils, pork, staves, tallow, tobacco and cigars, worth in New York, in the aggregate, ten millions of dollars, gold, but worth in London plus the cost of transportation, &c., eleven millions of dollars, gold, in bond. After being sold in London, the proceeds (eleven millions) were invested in British goods, worth eleven millions in London, but worth twelve millions in bond in New York, and plus the cost of transportation, &c. After having these goods sold in New York, a net profit of two millions was the result of the whole transaction, a profit both to the merchants and the country; yet, according to the Commerce and Navigation Returns, the exports were ten millions, and the imports eleven millions (valued at the foreign place of production as the law directs), showing, according to Mr. Greeley's solitary point of view, a loss to the country of one million.

B, owned a gold mine in Nevada, and had no capital with which to develop it. He proceeded to France, sold his mine to C for a million, which he invested in French muslin-de-laines, buttons, and glassware, worth a million in France, but worth $1,100,000 in Philadelphia, ex duty and plus transportation, &c. These sold, B netted an undoubted profit of $100,000, besides getting rid of his mine; but, according to the Commerce and Navigation Returns, the exports were nothing, and the imports $1,000,000; showing, according to Mr. Greeley's solitary point of view, a loss to the country of $1,000,000.

C, the French owner of the Nevada mine, had a million more with which to develop it. Hearing that French cloths and gloves had a good sale in Boston, he invested his million in these goods, sailed for Boston with them, sold them there in bond and plus exportation, for $1,100,000, which he at once invested in machinery, labor, &c., destined for Nevada. So far, C made a profit of $100,000, and had $2,100,000 invested in an American gold mine; but, according to the Commerce and Navigation Returns, the exports were nothing, and the imports $1,000,000; according to Mr. Greeley's solitary point of view, a loss to the country of $ 1,000,000.

D, had a rich uncle in Rio Janeiro who died and left him a million. D ordered this sum to be invested in hides and shipped to him at Boston. These hides were worth a million in Rio, but $1,100,000 in Natick, ex duty and plus transportation. Upon selling them D was clearly worth $1,100,000; yet, according to the Commerce and Navigation Reports, as there had been no exports, but simply $1,000,000 of imports, the transaction, from Mr. Greeley's solitary point of view, seemed a loss to the country of $1,000,000.

E, in 1850, shipped to Cuba, wagons, carts, agricultural implements, pianos and billiard-tables, worth $1,000,000 in Baltimore, but $1,100,000 in Havana, ex duty and plus transportation. These he sold, and invested the proceeds in cigars worth $1,100,000 in Havana, but in Russia, ex duty and plus transportation, $1,210,000. Disposing of these in turn, and investing the proceeds in Russian iron worth $1,210,000 in Russia, but $1,331,000 in Venezuela, ex duty and plus transportation, he shipped the iron to Venezuela, where he realized on it, investing the proceeds this time in South American products worth in Spain $1,464,100. He sold these products in Spain, bought olive oil with the proceeds, shipped the same to Australia, where it was worth, ex duty and plus charges, $1,610,510, which sum he realized in gold, which he carried to New York in 1853. On the latter transaction he makes no profit, but barely clears his charges. Yet on the whole he has made a net gain of $610,510; but, according to the Commerce and Navigation Reports, the exports have been $1,000,000 and the imports $1,610,510, showing, from Mr. Greeley's solitary point of view, a loss to the country of $610,510. Nay more, for Mr. Greeley balances his trade accounts each year by itself, and as E's outward shipment was made in 1850 and his importation in 1853, the country, according to H.G., lost in 1853, by over importation, $1,610,500. Yet not to be hard on H.G., and to be perfectly honest in our accounts, we will only set down a loss to the country from his point of view of $610,510.

F, owned the 4,000 ton ship Great Republic, which cost him $160,000. Finding her too large for profitable employment, and hearing that large vessels were in demand in England as troop transports to the Crimea, he sent her out in ballast and sold her in Southampton for $200,000 cash. With this sum he went to Geneva, where he invested it in Swiss watches worth $200,000 in Geneva, but $210,000 in New Orleans, ex duty and plus transportation. To New Orleans he accordingly shipped the watches, and they were sold. By these transactions he not only got rid of his elephant, but both he and the country clearly gained $50,000. Yet according to Mr. Greeley's single eye the country suffered to the extent of $200,000, for in the exports appeared nothing, but among the imports $200,000 worth of foreign gewgaws, only fit to keep time with.

G, (an actual transaction) shipped by the Great Eastern on her last voyage from New York, lard and other merchandise, worth in New York $600,000, the fact of which, in the hurry of business, he failed to report to the Custom House, and it therefore did not appear in the exports. This lard was carried to England, where it found no sale, and was reshipped to New York. G only escaped being charged duty on it when it arrived, by swearing that it had been originally shipped from here in good faith; yet it was entered as an import (free of duty), and showed, according to Mr. Greeley's one eye, that the country was on the road to ruin $600,000 worth.

H, lived in Brownsville, Texas, where he had a lot of arms and gunpowder, worth $100,000. The Mexicans levied a very high import duty on these articles, and they consequently bore a very high price in Matamoras, just opposite, being worth in the market of that town no less than $250,000. He accordingly conceived the idea of smuggling them into Mexican territory, and, with the connivance of the Mexican officials, (what rascals these foreign custom-house officials are, to be sure!) actually succeeded in doing so, and thus realized the very handsome profit of $150,000 in gold. The entire proceeds he invested in Mexican indigo and cochineal, worth in Mexico $250,000, and in Boston $275,000, in bond, plus charges. Of course, no export entry was furnished to the customs collector at Brownsville; but Mr. Greeley fastened his one eye on the indigo and cochineal, when it arrived in Boston, and made up his mind that the country had lost $250,000. As for H, he has invested $100,000 in more gunpowder and arms, and starts for Brownsville next week, to try his luck again. With the other $175,000 he has a notion of buying out the New York Tribune, and setting it right on free trade, and other matters of the sort.

I, and his friends owned a fine fleet of merchantmen when the war broke out. The aggregate burden of the vessels was nearly a million of tons, and they were worth $40 a ton. When the rebel cruisers commenced their operations, there were no United States cruisers prepared to capture them, because our best vessels were on blockade service. This being the case, insurance on American merchantmen rose very high—so high that I and his friends were reluctantly compelled to sell their vessels in Great Britain and elsewhere, and convert them into cash. They brought $40,000,000, and this sum was invested in merchandise, which netted a profit of ten per cent. to I and his friends. They thus gained $4,000,000 by these transactions. The entire proceeds, $44,000,000, they then lent to the government with which to carry on its war of existence with the Southern insurgents. Profitable as these transactions clearly were to I and his friends, and to the government, Mr. Greeley, nevertheless, only sees the import of $40,000,000 worth of foreign extravagances, and consequently wants the tariff on iron increased in order to make water run up hill.

J, had $2,000,000 in five-twenty bonds, which cost him $1,400,000 gold. As the market price in New York was only 70 gold, while it was 72¼ in London, he conceived the inhuman idea of selling them in the latter place. The cost of sending them there, including insurance, &c., made them net him but 72, but at this price he gained a profit of $40,000. With his capital now augmented to $1,440,000 he bought rags in Italy, which he sold in New York for $1,584,000, ex duty and plus transportation, a clear profit of $184,000 from the start. No export appearing in the Commerce and Navigation Returns, and nothing but the rags meeting his unital gaze, Mr. Greeley at once posted his national ledger with a loss of $1,440,000, the cost of the rags in Italy.

K, was, and is still (for these are actual transactions taken from his account books), an exchange broker, doing business in New York. He buys notes on the banks of England, Ireland, Scotland, France and Canada—indeed, foreign banknotes of all kinds—for which he usually pays about ninety per cent. of their face value. By the end of last year he had invested $200,000 in these notes brought here by travellers. He then inclosed them in letters, and sent them to their proper destinations to be redeemed. Redeemed they were in due time, and the proceeds remitted in gold. In this business he earned the neat profit of $22,222, and the country was that much richer thereby. But Mr. Greeley, who only looked at the import of K's gold remittance, declared the country $22,222 worse off than before, and dares us to "come on" with the figures.

L, and some fifty thousand other skedaddlers ran off to Canada when the war broke out, for fear they might be drafted. Together with the colored folks who fled there, and the many travellers who went there from time to time, they carried with them most of our silver half-dollars, quarters, dimes, half-dimes, and three-cent pieces. These amounted to $25,000,000, which the skedaddlers, the colored folks, and the travellers, as with returning peace they slowly straggled back into the country, invested in Canadian knick-knacks, which they disposed of in the United States. The incoming goods were duly entered at our frontier custom-houses, but the outgoing silver was not. Mr. Greeley, unaware of this fact, detects an over-importation of $25,000,000, and is waiting to be elected to Congress in order to legislate the matter right.

M, (an actual transaction) had $1,000,000 in Illinois Central Railroad bonds, for which he desired to obtain $1,000,000 worth of iron rails to repair the road with. Not being able to effect the transaction in the United States, he sent the bonds to Germany, where they were sold, and the proceeds invested in English railroad iron, worth $1,000,000 in Glasgow, but $1,100,000 in Chicago, ex duty, and plus transportation. By this transaction M, besides effecting the desired exchange, netted a profit of $100,000. Yet, according to the Commerce and Navigation Reports, and Mr. Greeley's one eye, as there had been no exports and $1,000,000 of imports, the country was a sufferer by the latter sum.

N, was a body of incorporators who owned a tract of land lying in the bend of a river. Standing in need of water power for manufacturing purposes, they resolved to cut a canal across the bend. As this would essentially benefit the navigation of the river, the State agreed to guaranty their bonds for a loan of money to the extent of $1,000,000. Finding no purchaser for these bonds in the United States, they remitted them to Europe, and there sold them at par. With the proceeds they purchased army blankets for the Boston market, on which they realized ten per cent. net profit. These sold, the avails were invested in barrows, spades, water-wheels, wages, &c., and in good time the canal was cut and the manufactory set a-going. Profitable as this thing was to N, Mr. Greeley's single-barrelled telescope sees in it only a loss to the country of $1,000,000.

O, represents the Illinois Central, Union Pacific, and other western railroads, owning grants of land along their respective roads, to sell which to actual settlers they open agencies in London, Havre, Antwerp, and other European cities. The emigrants who buy these lands pay for them in Europe, and set sail for America with their title-deeds in their pockets, and their axes on their shoulders, ready for a conquest over forest and prairie. The agents of the Illinois Central Railroad (see report of the Company), who have sold 1,664,422 acres, say at an average of ten dollars per acre, invested the proceeds, $16,644,220, in iron rails for the road, worth that sum in England, but ten per cent. more in Illinois, less duty and plus transportation. The road has thus not only netted a profit of $1,664,422 on the transaction, but sold their wild lands to actual settlers, who will soon convert them into productive farms. But Mr. Greeley, upon seeing an import of $16,644,220 of iron rails, declares the thing must be stopped or the country will perish.

P, is Sir Morton Peto and other European capitalists, who, believing that eight per cent., the average rate of interest in the United States, is better than three per cent., the average rate in England, invest $10,000,000 of capital in American enterprises. This capital is sent hither in the form of merchandise, to stock our railroads, farms, factories, etc., and is so much clear benefit to the country; but to Mr. Greeley's solitary vision it is only a curse.

Q, and his friends are cozy old-fashioned merchants in Boston city, who own one hundred and seventy-nine vessels (see Consular Reports, 1865), which trade between foreign ports and away from the United States altogether. These vessels have an aggregate burden of one million tons, are worth forty dollars, gold, per ton, and earn a net profit per annum of ten per cent. on their cost. Although in this kind of carrying trade we are wofully behind other nations, yet it yields, in twelve years (the average age of the vessels engaged in it), the neat little profit of $48,000,000, which is invested by Q in tea, coffee, and sugar, and imported into the United States at a net profit of ten per cent. Although an unquestionable gain to Q and the country at large of $52,800,000, Mr. Greeley, with his contracted views, only regards it as a dead loss on the import side of our Commerce and Navigation Returns.

R, was a bank which had a defaulting cashier, who ran away in 1857 with $500,000 of its funds. (Sch*yl*r carried off a million of New Haven Railroad bonds). These funds were recovered and converted into gold, which was shipped to the United States. According to Mr. Greeley, who could find no record of exports to counterbalance it, the same was a dead loss to the country.

S, and his friends own 76,990 tons of whaling ships (see Commerce and Navigation Reports, 1866), worth $40 per ton, gold, or $3,079,600. These ships are sent annually to the Arctic regions and earn for S and his friends ten per cent., or $307,960 net profit each year. Five years' profits, consisting of whale oil, bone, etc., which, after an active and profitable trade at the Sandwich Islands, they returned with this year, were valued at $1,655,659, and were duly entered among the imports, furnishing to Mr. Greeley an indubitable proof that the country was losing money in this business, and that the attention of Congress should at once be directed toward supplying a proper remedy.

T, was a South American refugee, who brought with him a million of dollars in gold doubloons. After living here for many years, by which time, through foreign trading, his capital had doubled, he invested the entire avails in United States bonds, as a last and striking evidence of his faith in our institutions, and departed to his native country, there to rest his bones. This man clearly prospered, and so did the country in which he settled, and on whose national faith he lent all his fortune. Yet Mr. Greeley concludes the whole thing to have been a bad job for us, and harps upon another over-importation of $1,000,000.

U, is a gallant Yankee sea-captain, who picks up an abandoned vessel at sea laden with a valuable cargo of teas, and bravely tows her into port, receiving $200,000 of the proceeds of the sale of her cargo as salvage for his skill and intrepidity. From Mr. Greeley's point of view U is a traitor to his country, and suffering a merited poverty for over-importing. But U drives his carriage about town, and has his own opinion of Mr. Greeley's views.

V, having a debt of $300,000 due to him by a merchant in Alexandria, requests him to invest the same in Arabian horses, as fancy stock to improve American breeds. The horses arrive in good order, and on being sold, yield V a net profit of $30,000, besides enriching our native breeds of these useful animals. Mr. Greeley still holds out, and jots the whole transaction down as an additional evidence of national decadence.

Tabular Expose.

Official Returns of these Transactions as they would appear per
Commerce and Navigation Reports.—Sums all stated in gold.

W, X, Y, Z, represent 43,628,427,835,109 other commercial transactions, in all of which the parties to them and the countries in which they live make money, but which, regarded from Mr. Greeley's solitary point of view, should be stopped at once by appropriate legislation.

These various transactions, it will be perceived, have netted to the individuals engaged in them a clear profit of $66,391,813, while the country has added to its immediate stock of wealth not only this sum, but $58,344,220 over, viz: $124,736,033; while, according to the Balance of Trade chimera, which simply weighs the custom-house reports of the value of the exports with that of the imports (and their values in their respective countries of production, too), this commerce has been a loss to the country of $163,622,611—$11,000,000: $152,622,611.

So much for theory when confronted with practice.

The truth is, that the theory of the Balance of Trade should be precisely reversed. The profits accruing to the nation from any foreign commerce should be calculated by the overplus of the importation above the exportation. This overplus, after the deduction of expenses, is the real gain. Here we have the true theory, and it is one which leads directly to freedom in trade. I now, gentlemen, abandon you this theory, as I have done all those of the preceding chapters. Do with it as you please, exaggerate it as you will; it has nothing to fear. Push it to the furthest extreme; imagine, if it so please you, that foreign nations should inundate us with useful produce of every description, and ask nothing in return; that our importations should be infinite, and our exportations nothing. Imagine all this, and still I defy you to prove that we will be the poorer in consequence.

CHAPTER VII.

"We are subjected to the intolerable competition of a FOREIGN RIVAL, who enjoys, it would seem, such superior facilities for the production of light, that he is enabled to inundate our national market at so exceedingly reduced a price, that, the moment he makes his appearance, he draws off all custom from us; and thus an important branch of American industry, with all its innumerable ramifications, is suddenly reduced to a state of complete stagnation. This rival, who is no other than the sun, carries on so bitter a war against us, that we have every reason to believe that he has been excited to this course by our perfidious cousins, the Britishers. (Good diplomacy this, for the present time!) In this belief we are confirmed by the fact that in all his transactions with their befogged island, he is much more moderate and careful than with us.

"Our petition is, that it would please your Honorable Body to pass a law whereby shall be directed the shutting up of all windows, dormers, sky-lights, shutters, curtains—in a word, all openings, holes, chinks, and fissures through which the light of the sun is used to penetrate into our dwellings, to the prejudice of the profitable manufactures which we flatter ourselves we have been enabled to bestow upon the country; which country cannot, therefore, without ingratitude, leave us now to struggle unprotected through so unequal a contest.

"We pray your Honorable Body not to mistake our petition for a satire, nor to repulse us without at least hearing the reasons which we have to advance in its favor.

"And first, if, by shutting out as much as possible all access to natural light, you thus create the necessity for artificial light, is there in the United States an industrial pursuit which will not, through some connection with this important object, be benefited by it?

"If more tallow be consumed, there will arise a necessity for an increase of cattle and sheep. Thus artificial meadows must be in greater demand; and meat, wool, leather, and above all, manure, this basis of agricultural riches, must become more abundant.

"If more oil be consumed, it will effect a great impetus to our petroleum trade. Pit-Hole, Tack, and Oil Creek stock will go up exceedingly, and an immense revenue will thereby accrue to the numerous possessors of oil lands, who will be able to pay such a large tax that the national debt can be paid off at once. Besides that, the patent hermetical barrel trade, and numerous other industries connected with the oil trade, will prosper at an unprecedented rate, to the great benefit and glory of the country.

"Navigation would equally profit. Thousands of vessels would soon be employed in the whale fisheries, and thence would arise a navy capable of sustaining the honor of the United States, and of responding to the patriotic sentiments of the undersigned petitioners, candle-merchants, &c.

"But what words can express the magnificence which New York will then exhibit! Cast an eye upon the future, and behold the gildings, the bronzes, the magnificent crystal chandeliers, lamps, lusters, and candelabras, which will glitter in the spacious stores, compared to which the splendor of the present day will appear little and insignificant.

"There is none, not even the poor manufacturer of resin in the midst of his pine forests, nor the miserable miner in his dark dwelling, but who would enjoy an increase of salary and of comforts.

"Gentlemen, if you will be pleased to reflect, you cannot fail to be convinced that there is perhaps not one American, from the opulent stockholder of Pit-Hole, down to the poorest vender of matches, who is not interested in the success of our petition.

"We foresee your objections, gentlemen; but there is not one that you can oppose to us which you will not be obliged to gather from the works of the partisans of free trade. We dare challenge you to pronounce one word against our petition, which is not equally opposed to your own practice and the principle which guides your policy.

"If you tell us that, though we may gain by this protection, the United States will not gain, because the consumer must pay the price of it, we answer you:

"You have no longer any right to cite the interest of the consumer. For whenever this has been found to compete with that of the producer, you have invariably sacrificed the first. You have done this to encourage labor, to increase the demand for labor. The same reason should now induce you to act in the same manner.

"You have yourselves already answered the objection. When you were told: The consumer is interested in the free introduction of iron, coal, corn, wheat, cloths, &c., your answer was: Yes, but the producer is interested in their exclusion. Thus, also, if the consumer is interested in the admission of light, we, the producers, pray for its interdiction.

"You have also said the producer and the consumer are one. If the manufacturer gains by protection, he will cause the agriculturist to gain also; if agriculture prospers, it opens a market for manufactured goods. Thus we, if you confer upon us the monopoly of furnishing light during the day, will as a first consequence buy large quantities of tallow, coal, oil, resin, kerosene, wax, alcohol, silver, iron, bronze, crystal, for the supply of our business; and then we and our numerous contractors having become rich, our consumption will be great, and will become a means of contributing to the comfort and competency of the workers in every branch of national labor.

"Will you say that the light of the sun is a gratuitous gift, and that to repulse gratuitous gifts is to repulse riches under pretence of encouraging the means of obtaining them?

"Take care—you carry the death-blow to your own policy. Remember that hitherto you have always repulsed foreign produce, because it was an approach to a gratuitous gift, and the more in proportion as this approach was more close. You have, in obeying the wishes of other monopolists, acted only from a half-motive; to grant our petition there is a much fuller inducement. To repulse us, precisely for the reason that our case is a more complete one than any which have preceded it, would be to lay down the following equation: + × + = - ; in other words, it would be to accumulate absurdity upon absurdity.

"Labor and Nature concur in different proportions, according to country and climate, in every article of production. The portion of Nature is always gratuitous; that of labor alone regulates the price.

"If a Lisbon orange can be sold at one hundredth the price of a New York one, it is because a natural and gratuitous heat does for the one, what the other only obtains from an artificial and consequently expensive one.

"When, therefore, we purchase a Portuguese orange, we may say that we obtain it 99/100 gratuitously and 1/100 by the right of labor; in other words, at a mere song compared to those of New York.

"Now it is precisely on account of this 99/100 gratuity (excuse the phrase) that you argue in favor of exclusion. How, you say, could national labor sustain the competition of foreign labor, when the first has every thing to do, and the last is rid of nearly all the trouble, the sun taking the rest of the business upon himself? If then the 99/100 gratuity can determine you to check competition, on what principle can the entire gratuity be alleged as a reason for admitting it? You are no logicians if, refusing the 99/100 gratuity as hurtful to human labor, you do not à fortiori, and with double zeal, reject the full gratuity.

"Again, when any article, as coal, iron, cheese, or cloth, comes to us from foreign countries with less labor than if we produced it ourselves, the difference in price is a gratuitous gift conferred upon us; and the gift is more or less considerable, according as the difference is greater or less. It is the quarter, the half, or the three-quarters of the value of the produce, in proportion as the foreign merchant requires the three-quarters, the half, or the quarter of the price. It is as complete as possible when the producer offers, as the sun does with light, the whole, in free gift. The question is, and we put it formally, whether you wish for the United States the benefit of gratuitous consumption, or the supposed advantages of laborious production. Choose: but be consistent. And does it not argue the greatest inconsistency to check, as you do, the importation of iron-ware, dry-goods, and other foreign manufactures, merely because, and even in proportion as, their price approaches zero, while at the same time you freely admit, and without limitation, the light of the sun, whose price is during the whole day at zero?"

CHAPTER VIII.

"Certainly," replied the custom-house officer; "do you not see that the United States would be a loser if you were to receive twenty bundles instead of fifteen?"

"I can scarcely understand this," said the laborer.

"Nor can I explain it," said the custom-house officer, "but there is no doubt of the fact; for congressmen, ministers, and editors, all agree that a people is impoverished in proportion as it receives a large compensation for any given quantity of its produce."

The countryman was obliged to conclude his bargain with the Yankee. His daughter received but three-fourths of her present; and these good folks are still puzzling themselves to discover how it can happen that people are ruined by receiving four instead of three; and why they are richer with three dozen bundles of lace instead of four.

CHAPTER IX.

Infallible! and yet this is but a single one of the advantages of my astonishing invention, which requires neither plans nor devices, neither preparatory studies, nor engineers, nor machinists, nor capital, nor stockholders, nor governmental assistance! There is no danger of shipwrecks, of explosions, of shocks of fire, nor of displacement of rails! It can be put into practice without preparation almost any day we think proper!

Finally: and this will, no doubt, recommend it to the public, it will not increase the Budget one cent; but the contrary. It will not augment the number of office-holders, nor the exigencies of State; but the contrary. It will put in hazard the liberty of no one; but on the contrary, it will secure to each a greater freedom.

I have been led to this discovery, not from accident, but from observation, and I will tell you how.

I had this question to determine:

"Why does any article made, for instance, at Montreal, bear an increased price on its arrival at New York?"

It was immediately evident to me that this was the result of obstacles of various kinds existing between Montreal and New York. First, there is distance, which cannot be overcome without trouble and loss of time; and either we must submit to these troubles and losses in our own person, or pay another for bearing them for us. Then come rivers, hills, accidents, heavy and muddy roads. These are so many difficulties to be overcome; in order to do which, causeways are constructed, bridges built, roads cut and paved, railroads established, &c. But all this is costly, and the article transported must bear its portion of the expense. There are robbers, too, on the roads, sometimes, and this necessitates railway guards, a police force, &c.

Now, among these obstacles, there is one which we ourselves have lately placed, and that at no little expense, between Montreal and New York. This consists of men planted along the frontier, armed to the teeth, whose business it is to place difficulties in the way of the transportation of goods from one country to another. These men are called custom-house officers, and their effect is precisely similar to that of rutted and boggy roads. They retard and put obstacles in the way of transportation, thus contributing to the difference which we have remarked between the price of production and that of consumption; to diminish which difference, as much as possible, is the problem which we are seeking to resolve.

Here, then, we have found its solution. Let our tariff be diminished: we will thus have constructed a Northern railway which will cost us nothing. Nay, more, we will be saved great expenses, and will begin, from the first day, to save capital.

Really, I cannot but ask myself, in surprise, how our brains could have admitted so whimsical a piece of folly as to induce us to pay many millions to destroy the natural obstacles interposed between the United States and other nations, only at the same time to pay so many millions more in order to replace them by artificial obstacles, which have exactly the same effect; so that the obstacle removed and the obstacle created, neutralize each other, things go on as before, and the only result of our trouble is a double expense.

An article of Canadian production is worth, at Montreal, twenty dollars, and, from the expenses of transportation, thirty dollars at New York. A similar article of New York manufacture costs forty dollars. What is our course under these circumstances?

First, we impose a duty of at least ten dollars on the Canadian article, so as to raise its price to a level with that of the New York one—the government, withal, paying numerous officials to attend to the levying of this duty. The article thus pays ten dollars for transportation, and ten for the tax.

This done, we say to ourselves: Transportation between Montreal and New York is very dear; let us spend two or three millions in railways, and we will reduce it one-half. Evidently the result of such a course will be to get the Canadian article at New York for thirty-five dollars, viz.:

• 20 dollars—price at Montreal.
• 10    "         duty.
•   5    "         transportation by railway.
• —
• 35 dollars—total, or market price at New York.

Could we not have attained the same end by lowering the tariff to five dollars? We would then have—

• 20 dollars—price at Montreal.
•   5    "         duty.
• 10    "         transportation on the common road.
• —
• 35 dollars—total, or market price at New York.

And this arrangement would have saved us the $2,000,000 spent upon the railway, besides the expense saved in custom-house surveillance, which would of course diminish in proportion as the temptation to smuggling would become less.

But it is answered: The duty is necessary to protect New York industry. So be it; but do not then destroy the effect of it by your railway. For if you persist in your determination to keep the Canadian article on a par with the New York one at forty dollars, you must raise the duty to fifteen dollars, in order to have:—

• 20 dollars—price at Montreal.
• 15   "          protective duty.
•   5   "          transportation by railway.
• —
• 40 dollars—total, at equalized prices.

And I now ask, of what benefit, under these circumstances, is the railway?

Frankly, is it not humiliating to the nineteenth century, that it should be destined to transmit to future ages the example of such puerilities seriously and gravely practised? To be the dupe of another, is bad enough; but to employ all the forms and ceremonies of representation in order to cheat oneself—to doubly cheat oneself, and that too in a mere numerical account—truly this is calculated to lower a little the pride of this enlightened age.