Chapter CXXXVII: Section III: The Free-Trade School

From what has been said, we may understand why the so-called free-trade school, with its atomistic over-valuation of the individual and the moment, rejects all those measures of the industrial protective system.[A3-3-1] As such measures really injure the oppressed portions of the people more than they help the favored classes, their introduction, it is said, uniformly depends on this, that single classes of producers understand their private interests better than others, and are better organized than other producers and especially better than consumers, to take care of their interests.[A3-3-2] Adam Smith approves import hindrances for the purpose of artificially promoting an industry only in two cases:

A. When military safety demands it. Hence he calls the English navigation act, that great prohibitive and protective law intended to advance the merchant marine, the wisest perhaps of all English commercial regulations, although he clearly saw that it compelled England to sell her own commodities cheaper and buy foreign commodities dearer.[A3-3-3]

B. When the import duty is no more than sufficient to balance the tax imposed on the corresponding home product. Smith rightly remarks that a universally heavier taxation by the home country, but which affected all branches of its production equally, operated like diminished natural fertility, and hence does not make any equalizing tax for foreign trade necessary.

The person who has only a modest opinion of the power of his own reason, and therefore a just one of the reason of other men and other times, will not believe that a system like the industrial protective system which the greatest theorizers and practitioners favored for centuries, and which governed all highly developed countries in certain periods of their national life, proceeded entirely from error and deception. It really served, in its own time, a great and regularly occurring want; and the error consisted only in this, that, partly through improper generalization by doctrinarians and partly by the avarice of the privileged classes and the inertia of statesmen, the conditioned and transitory was looked upon as something absolute.[A3-3-4]

[Footnote A3-3-1: _P. de la Court_, in his freedom of trade,
has in view not the interest of consumers--and least of all
of the whole world--but the interest of the commercial
class. Compare Tüb. Ztschr., 1862, p. 273. Similarly,
_Child_, Discourse of Trade, 1690; whereas _D. North_,
Discourses upon Trade (1690), may be called a free-trader in
the sense in which the expression is used to-day. No nation
has yet grown rich by state-measures; but peace, thrift and
freedom, and nothing else, procure wealth. (Postscr.)
_Davenant_ also zealously opposes the craving of a people to
produce everything themselves, to want only to sell, etc. He
considered very few laws on commerce a sign of a flourishing
condition of trade. (Works, I, 99, 104 ff.; V, 379 ff., 387
seq.) _Fénélon's_ antipathy for import and export duties in
Telémaque, a part of his general opposition to the _siècle
de Louis XIV_. The view of the Physiocrates (_La police du
commerce interiéur et extérieur la plus sure, la plus
exacte, la plus profitable à la nation et à l'état consiste
dans la pleine liberté de la concurrence_: _Quesnay_,
Maximes générales, No. 25) is directly connected with their
deepest fundamental notions of _produit net_ and _impôt
unique_. _Turgot_ vindicates the interests of workmen
against protective duties, for whom no compensation is
possible, where one industry gains by its being favored in
the same way that it loses when another is favored. (Sur la
Marque de Fer, I, p. 376 ff., Daire.) "Those who cry so
loudly for protective duties are partly thoughtless persons
who wish to avoid the consequences of bad speculations, and
in part shrewd persons who would like to earn during the
first years a rate of profit higher than that usual in the
country." (_Rossi._) _Bastiat_ ridicules the advocates of a
protective tariff by the petition of the lamplighters, lamp
manufacturers, etc., that to advance their industry, and
indirectly almost all others, the mighty foreign competition
of the sun might be removed from all houses. (Sophismes
écon., ch. 7.) To him, the protective system is precisely
the system of want; freedom of trade, the system of
superabundance. Political economy would have fulfilled its
practical calling, if, by means of universal freedom of
trade, it had done away with all that is left of that system
which excludes foreign commodities because they are cheap,
that is, because they include _une grande proportion
d'utilité gratuite_. (Harmonies, p. 174, 306.) _Cobden's_
pet expression: "Free trade, the international law of the
Almighty!" (Polit. Writings, II, 110.) _K. S. Zachariä_
calls the protective system a step introductory to communism
(Staatsw. Abh., 100), because it nearly always leads to
over-population and _List's_ system, a politico-economical
absurdity. (Vierzig Bücher vom Staate, VII, pp. 23, 92.)]

[Footnote A3-3-2: Among the many frequently wonderful
speeches by which persons engaged in industry are wont to
support their motion for protective duties, etc., the
following are particularly characteristic. The long struggle
of English manufactures against the East Indian Company,
since the later portion of the seventeenth century. Compare
_Pollexfen_, England and East India inconsistent in their
Manufactures (1697), against which _Davenant_, at the
solicitation of the company, wrote his Essay on the E. I.
Trade (1697). Prohibition of East Indian commodities, 11 and
12 Will. III., ch. 10. The struggle did not stop until the
middle of the eighteenth century, when India was outflanked
by English machines. When Pitt, in 1785, labored for the
abolition of the tariff-barriers against Ireland, English
manufacturers, and among others Robert Peel, declared that
they would be forced in consequence to transfer a part of
their manufactories to Ireland! (_McCulloch_, Literature of
Political Economy, p. 55.) _Say_ tells of a proposition made
by the hat-makers of Marseilles to prohibit foreign straw
hats (1. c).]

[Footnote A3-3-3: W. of N., IV, ch. 2. According to _Roger
Coke_, England's Improvement (1675), ship-building in
England became dearer in a few years by about one-third, on
account of the navigation act; and the wages of sailors
advanced to such an extent that England lost its Russian and
Greenland trade almost entirely, and the Dutch obtained the
control of it. This _J. Child_, Discourse of Trade, admits,
but still calls the navigation act the _magna charta
maritima_. Similarly, _Davenant_, Works, I, 397. Here the
relation of the cost to the immediate product can as little
decide as it can against the exercise of troops or the
construction of forts. _Adam Smith_ allows the same reasons
to apply to export premiums for sail-cloth and gunpowder
(IV, ch. 5). Recently, however, _Bülau_
(Staatswirthschaftlehre, 339; Staat und Industrie, 220
seq.;) has argued against all these exceptions of Adam
Smith.]

[Footnote A3-3-4: _Schleiermacher_ (Christ. Sitte, 476)
calls the polemics which can see nothing but error in a
refuted theory, immoral.]