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The only things which stand in the way of international cooperation in the creation of wealth are ignorance, self-interest and passion. Ignorance is a great, although not the greatest, cause. Many people never realize that the creation of wealth is being restricted on every side. They see that under protection some trades increase their output and sales; they do not reflect that even this increase is illusory, since it is effected by a disproportionate concentration of the national resources on those objects, and by their diversion from other appropriate employments.
The second reason, the greatest, is private interest. Some individuals (indeed, a great number, although never the majority of a people) can make large profits (whether in wages or dividends) if their particular trades are sheltered behind a high tariff wall. Everybody likes to be sure when he makes an article that he can. sell it, and sell it at a large profit. The easiest way to secure this is to eliminate competition so that your output commands the market whatever your price and whether you produce efficiently or not. To say that protection enables industry to produce more is just nonsense. But the self-interest of the few, because the few are organized in powerful groups, triumphs over the interest of the many, and forces every government, aided by the general ignorance, to restrict trade by protective barriers.
When there is much competition on the world market, and when there is an important home market which can be charged with the costs, the usual device for supporting the home producer is to raise the price of his products on the home market, and sell an export surplus at a lower price on the world market. This is what is usually called " dumping.' To make such dumping possible, the home market must generally be protected against foreign competition by means of adequate import duties. The home market may be controlled by some private combine which can carry out the dumping policy, or the State can establish such control over the home markets as makes it possible to keep up the home prices at what is thought to be a remunerative level, while selling the surplus abroad at reduced prices. It is well known that such State action is actually being planned at the present time on a great scale, and it is by no means too early to discuss the probable consequences of a more general spread of such government action. Dumping usually calls forth measures of retaliation, mostly in the form of differential protective tariffs against the dumping country. This is already bad enough if the dumping is arranged by private combines; if the State itself is engaged in such a policy, the situation may become extremely awkward. Less dangerous, but nevertheless easily leading to friction, are other means frequently used for a dumping-like policy, such as the
post-war schemes for export credits by aid of public money, subsidies to export shipping, differential railway tariffs for exports-not to speak of direct export bounties, such as those which have played such an unfortunate part in the history of the sugar industry.
The third reason for the international restriction of trade is passion. No country in the long run can be rich if all its neighbours are poor; yet national passion, the egotism of peoples, makes them callous to the misery of their neighbours, even at the expense of their own prosperity. Many peoples actually appear ardently to desire that the neighbouring peoples shall not be prosperous. They erect high tariff walls and sit down behind them, proud of their liberty to make themselves poor.
Other regulations besides high tariffs restrict the production and flow of wealth. The mobility of labour, brain-power and capital is stopped or made difficult by countless regulations. The greatest ingenuity is expended upon destroying mobility. Vast armies of bureaucrats are maintained in writing out visas or refusals of visas, in compiling dossiers of the birth-certificates, marriage letters, employment testimonials and other documents belonging to anybody who wishes to move for a short or long period from one State to another. Taxes are imposed to prevent the foreigner from taking root anywhere; licences are required to sell this, to buy that; stock exchanges are arbitrarily closed or opened; bank balances are inspected-almost every conceivable device, short of open plunder and extortion, is employed to prevent a foreigner from using his intelligence, energy and accumulated capital in the creation of fresh wealth on every side, control, restriction, licensing, embargo.
Yet, as may be read in the "History of Europe in the Nineteenth Century," by Messrs. Grant and Temperley, European peoples have in the past made many experiments in unrestricted trade and have always benefitted by those experiments. The Germans, who had once as many tariff-walls as there are German States, succeeded, by means of a long series of negotiations between 1820 and 1866, in constructing a Zollverein, or unrestricted trade-area, which included all the German-speaking countries except Austria. Once the Zollverein was made, no German ever thought of unmaking it. In the whole vast area from the Niemen to the Rhine and the Moselle, the benefits of the unrestricted exchange of goods were appreciated and under
stood. No revolutions, no national animosities have induced the Germans to go back to the old restrictive system.
Italy, who in 1789 had at least nine separate tariff systems, gradually, in the course of the nineteenth century, eliminated all tariff barriers. To-day, no Italian ever thinks of erecting a tariffwall between Piedmont and Lombardy because the heavy industries of Turin are competing with those of Milan.
In France, towards the end of the eighteenth century, Turgot secured the abolition of the tariff walls which then separated the different provinces from each other. To-day, no Frenchman ever suggests that these walls should be re-erected because the textiles of Normandy are competing severely with the textiles of Alsace : Frenchmen prefer that the wealth of the whole country should be increased.
Outside Europe the grandest instance of the undisputed benefits accruing from the creation of a great area of unrestricted trade is the American Union. Here there are forty-five States, each of which is as large as a European State, each capable, by means of the sort of wasteful effort that European States employ, of being what is called self-sufficing. Nobody ever proposes to amend the American constitution in order that Arizona may exclude motor-cars made in Michigan, although the "unfair" competition of the factories of Detroit prevents the people of Arizona from employing themselves in manufacturing cars.
By what inscrutable dispensation of Providence is it that the beneficent results of unrestricted trade upon the creation and distribution of wealth stop at national or governmental frontiers? Can anyone for a moment contend that, if it is economically sound for people to trade without restriction from the Niemen to the Rhine, it is economically pernicious for them to trade without restriction from the Niemen to the Seine, the Loire, or the Garonne ?
When an unrestricted trade-area has been broken up owing to the erection of national frontiers, the effect has everywhere been recognised as economically deplorable. Before the war the territories of the Hapsburg Monarchy formed a great area of unimpeded trade which made for the material well-being of some fifty-two million people within its borders, in addition to all the other peoples outside its borders who derived benefit from its prosperity. When the Hapsburg Monarchy collapsed and was
divided among the "Succession States," each of these States at once erected high tariff walls, and the inhabitants of some of them for a time literally starved. These new States, in order to vindicate their political independence, felt it to be necessary to show economic independence. The outward signs of economic independence were described by Dr. Redlich, once Austrian Minister of Finance, in explaining why the Succession States had not reconstructed an economic Danubian federation :
The simplest answer would be furnished by a journey from Vienna to the capitals of the Successor-States. The regime of passports, the difficulties and costs of getting the prescribed visas for the journey each way, the endless delays at the frontier-stations, and the searching scrutiny of baggage and persons, would form a very instructive first lesson for any student intent on examining such a plan of federation. The second lesson would be given by an experience of the different money-systems of which all the Successor-States boast, the difficulties of changing money and the losses caused thereby, the prohibitive measures strictly regulating imports and exports, and the whole elaborate system of state-control of all money remittances sent abroad.* Such was a description of the obstacles to trade maintained by the Succession States after the peace treaties. This condition of affairs has not very materially changed in the last few years, although to a small extent and very slowly the pressure of want and the efforts of a few clear-sighted public men like Dr. Benes have brought about some mitigation of those regulations through commercial treaties. Yet as lately as August of this year, at the General League Conference on Communications and Transit, a delegate circulated photographic copies of a consignment note bearing twenty-eight seals, each seal representing hours of work. It was not, he said, an exceptional case.†
Who are they who feel the necessity of such blind assertions of economic independence? In the first place they are the industrialists or landowners who, swayed by a conception of their own particular interest, demand protection each for his own industry. But by themselves they would not be enough. They are aided by the hypertrophied sentiment of nationalism. This sentiment is the disease of the modern middle classes. The aristocracies and the masses are not, and never have been, intensely
*Redlich," The Problem of the Austrian Republic "in the Quarterly Review for July, 1920; p. 217.
+The Times, August 24, 1927.
national. High life is always international. The Hapsburg nobles, whether Polish, German, Magyar or Czech, served in the Hapsburg army or bureaucracy with an easy loyalty. The European working-man shifts his domicile without much compunction if he is permitted to do so and if he can find work and good wages by so doing. It is the bourgeoisie, the intellectuals, and the smaller nobility (these are really bourgeois) who are the intense nationals. It is they, the apostles of national egotism, who break up the wholesome aggregations of associated peoples and territories; it is they, the teachers of a prejudiced history, who indoctrinate their pupils with contempt and hatred of neighbouring peoples; it is they, the priesthood of a worn-out mercantilism, who preach the dogma of a "national economy and lead their followers along the road of poverty.
International restrictions upon trade are simply so many means by which each State of Europe blockades itself. In war-time, people resist a blockade by every means in their power, because its evils are obvious. But in peace-time, under the guise of Protection, each people devotes a large part of its time and energy to blockading itself, to keeping out the goods that it needs, to examining, searching, confiscating goods in process of transit, and to imposing upon all the healthful activities of industry the blight of an inquisitorial army of officials employed to enforce restrictions almost as oppressive as those that Europe groaned under during the Continental System of Napoleon. The Continental System, as it stands out in M. Heckscher's ruthless analysis, was the first great blockade of the European States by themselves. The modern European tariffs constitute the second.
There are only two kinds of peoples, it would seem, who have both the insight and the courage to stand forth against this vicious system of self-blockade and trade restriction: they are the ministers for foreign affairs and the bankers. The professors of economics are mostly dumb. They know that trade restriction, under whatever name, breeds poverty; but they have long given up the effort to persuade the politicians. Of the industrialists, each one takes the narrow view of what benefits his own trade or industry. Only the bankers and general merchants, the commission agents of the world's commerce, are bound by the nature of their trade to regard the totality of the wealth of their country, not the wealth of this or that section. For this reason all bankers