of protection is to diminish imports, never to diminish exports. On the contrary, the protectionist habit is to regard exports with favor, and to consider the country which exports most and imports least as doing the most profitable trade. When exports exceed imports there is said to be a favorable balance of trade. When imports exceed exports there is said to be an unfavorable balance of trade. In accordance with this idea all protectionist countries afford every facility for sending things away and fine men for bringing things in.
Chapter 9 — Exports and Imports
If the things which we thus try to send away and prevent coming in were pests and vermin — things of which all men want as little as possible — this policy would conform to reason. But the things of which exports and imports consist are not things that nature forces on us against our will, and that we have to struggle to rid ourselves of; but things that nature gives only in return for labor, things for which men make exertions and undergo privations. Him who has or can command much of these things we call rich; him who has little we call poor; and when we say that a country increases in wealth we mean that the amount of these things which it contains increases faster than its population. What, then, is more repugnant to reason than the notion that the way to increase the wealth of a country is to promote the sending of such things away and to prevent the bringing of them in? Could there be a queerer inversion of ideas? Should we not think even a dog had lost his senses that snapped and snarled when given a bone, and wagged his tail when a bone was taken from him?
If foreigners will bring us goods cheaper than we can make them ourselves, we shall be the gainers. The more we get in imports as compared with what we have to give in exports, the better the trade for us. And since foreigners are not liberal enough to give us their productions, but will only let us have them in return for our own productions, how can they ruin our industry? The only way they could ruin our industry would be by bringing us for nothing all we want, so as to save us the necessity for work. If this were possible, ought it seem very dreadful?
Exports and imports, so far as they are induced by trade, are correlative. Each is the cause and complement of the other, and to impose any restrictions on the one is necessarily to lessen the other. And so far from its being the mark of a profitable commerce that the value of a nation's exports exceeds her imports, the reverse of this is true.
In a profitable international trade the value of imports will always exceed the value of the exports that pay for them, just as in a profitable trading voyage the return cargo must exceed in value the cargo carried out. This is possible to all the nations that are parties to commerce, for in a normal trade commodities are carried from places where they are relatively cheap to places where they are relatively dear, and their value is thus increased by the transportation, so that a cargo arrived at its destination has a higher value than on leaving the port of its exportation. But on the theory that a trade is profitable only when exports exceed imports, the only way for all countries to trade profitably with one another would be to carry commodities from places where they are relatively dear to places where they are relatively cheap. An international trade made up of such transactions as the importation of manufactured ice from the West Indies to England, and the exportation of hothouse fruits from England to the West Indies, would enable all countries to export much larger values than they imported. On the same theory the more ships sunk at sea the better for the commercial world. To have all the ships that left each country sunk before they could reach any other country would, upon protectionist principles, be the quickest means of enriching the whole world, since all countries could then enjoy the maximum of exports with the minimum of imports.
It must, however, be borne in mind that all exporting and importing are not the exchanging of products. This, however, is a fact which puts in still stronger light, if that be possible, the absurdity of the notion that an excess of exports over imports shows increasing wealth. 'When Rome was mistress of the world, Sicily, Spain, Africa, Egypt, and Britain exported to Italy far more than they imported from Italy. But so far from this excess of their exports over their imports indicating their enrichment, it indicated their impoverishment. It meant that the wealth produced in the provinces was being drained to Rome in taxes and tribute and rent, for which no return was made. The tribute exacted by Germany from France in 1871 caused a large excess of French exports over imports. So in India the "home charges" of an alien government and the remittances of alien officials secure a permanent excess of exports over imports. And so for many years the exports from Ireland largely exceeded the imports into Ireland, owing to the rent drain of absentee landlords. The Irish landlords who lived abroad did not directly draw produce for their rent, nor yet did they draw money. Irish cattle, hogs, sheep, butter, linen and other productions were exported as if in the regular course of trade, but their proceeds, instead of coming back to Ireland as imports, were, through the medium of bank and mercantile exchanges, placed to the credit of the absent landlords, and used up by them.
In the commerce which goes on between the United States and Europe there are also other elements than the exchange of productions. The sums borrowed of Europe by the sale of railway and other bonds, the sums paid by Europeans for land in the United States or invested in industrial enterprises there, capital brought by emigrants, what is spent by Europeans traveling there, and some small amounts of the nature of gifts, legacies, and successions tend to swell the imports or reduce the exports of the United States.
On the other hand, not only does the United States pay in exports to Europe for its imports from Brazil, India, and such countries, but interest on bonds and other obligations, profits on capital invested there, rent for American land owned abroad, remittances from immigrants to relatives at home, property passing by will or inheritance to people abroad, payments for ocean transportation formerly carried on by its own vessels but now carried on by foreign vessels, the sums spent by American tourists who every year visit Europe, and by the increasing number of rich Americans who live in Europe, all contribute to swell its exports and reduce its imports.
The annual balance against the United States on these accounts is already very large and is steadily growing larger. Were it to prevent importation absolutely it should still have to export largely in order to pay rents, to meet interest, and to provide for the increasing number of rich Americans who travel or reside abroad. But the fact that exports must now thus exceed imports instead of being what protectionists take it for, an evidence of increasing prosperity, is simply the evidence of a drain upon national wealth like that which has so impoverished Ireland.
But this drain is not to be stopped by tariffs. It proceeds from a deeper cause than any tariff can touch, and is but part of a general drift. The internal commerce of the United States also involves the flow from country to city, and from West to East, of commodities for which there is no return. The large mine owners, ranch owners, land speculators, and many of the large farmers, live in the great cities. The small farmers have had in large part to buy their farms on mortgage of men who live in cities to the east of them; the bonds of the national, state, county, and municipal governments are largely so held, as are the stocks and bonds of railway and other companies — the result being that the country has to send to the cities, the West to the East, more than is returned. This flow is increasing, and, no matter what be the tariff legislation, must continue steadily to increase, for it springs from the most fundamental of our social adjustments, that which makes land private property. As the land in Illinois or Iowa, or Oregon or New Mexico owned by a resident of New York or Boston increases in value, people who live in those States must send more and more of their produce to the New Yorker or Bostonian. They may work hard, but grow relatively poorer; he may not work at all, but grow relatively richer, so that when they need capital for building railroads or any other purpose, they must borrow and pay interest, while he can lend and get interest. The tendency of the time is thus to the ownership of the whole country by residents of cities, and it makes no difference to the people of the country districts whether those cities are in America or Europe.
To assume, as protectionists do, that economy must necessarily result from bringing producer and consumer together in point of space, is to assume that things can be produced as well in one place as in another, and that difficulties in exchange are to be measured solely by distance. The truth is, that commodities can often be produced in one place with so much greater facility than in another that it involves a less expenditure of labor to bring them long distances than to produce them on the spot, while two points a hundred miles apart may be commercially nearer each other than two points ten miles apart. To bring the producer to the consumer in point of distance, is, if it increases the cost of production, not economy but waste.
But this is not to deny that trade as it is carried on today does involve much unnecessary transportation, and that producer and consumer are in many cases needlessly separated. American protectionists are right when they point to the wholesale exportation of the elements of fertility of their soil, in the great stream of breadstuffs and meats which pour across the Atlantic, as reckless profligacy, and English protectionists are right when they deplore the waste involved in English importations of food while English fields are going out of cultivation. Both are right in saying that one country ought not to be made a "draw farm" for another, and that a true economy of the powers of nature would bring factory and field closer together. But they are wrong in attributing these evils to freedom of trade, or in supposing that the remedy lies in protection. That tariffs are powerless to remedy these evils may be seen in the fact that this exhausting exportation goes on in spite of our high protective tariff, and that internal trade exhibits the same features. Everywhere that modern civilization extends, and with greatest rapidity where its influences are most strongly felt, population and wealth are concentrating in huge towns and an exhausting commerce flows from country to city. But this ominous tendency is not natural, and does not arise from too much freedom; it is unnatural, and arises from restrictions. It may be clearly traced to monopolies, of which the monopoly of material opportunities is the first and most important. In a word, the Roman system of land ownership, which in our modern civilization has displaced that of our Celtic and Teutonic ancestors, is producing the same effect that it did in the Roman world the engorgement of the centers and the impoverishment of the extremities. While London and New York grow faster than Rome ever did, English fields are passing out of cultivation as did the fields of Latium, and in Iowa and Dakota goes on the exhausting culture that impoverished the provinces of Africa. The same disease which rotted the old civilization is exhibiting its symptoms in the new. That disease cannot be cured by protective tariffs.