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2. The cause which checks the growth of our manufactures by making competition unequal.
And lest they should be still zealous of meeting some of the difficulties which remain with protectionists, we would ask them, what the cause was which interfered with the assumed stimulating influence of free trade between 1845 and 1850? Do they think that it was fettered in its action by the fixed duty for three years (1846-49)? Or was it because there was not gold enough in the world to raise prices and stimulate industry? With reference to this inquiry we would particularly call their attention to the state of the export trade in 1849-50, when the duty on corn for all practical purposes no longer existed,1 with its state in 1850-51. The difference is considerable. How do they explain it ?2
1 It was reduced to a nominal duty of a shilling a quarter.
2 The increase in the amount of gold in circulation was associated with a rise in the money value of commodities. It is easy to perceive that when the circulation of money is largely increased, its distribution, provided it can be employed with profit, reaches all the various labour markets. It creates a demand, which reacts upon the employment of capital.
DEMAND IS "NORMAL" OR "ARTIFICIAL" ACCORDING TO THE NATURE OF THE CIRCUMSTANCES INFLUENCING IT.
"In such a year, there was a stringent Corn Law passed for the protection of agriculture. From that time, agriculture slumbered in England; and it was not until, by the aid of the Anti-Corn-Law League, the Corn Law was utterly abolished, that agriculture sprang up to the full vigour of existence in England, to become what it now is, like her manufactures, unrivalled in the world."—Richard Cobden (p. 115).
COMPARISON OP RESULTS OF SHUTTLE-DISCOVERT WITH THOSE OF RAILWAY DEVELOPMENT—INTERACTION OF CAUSE AND EFFECT IN ECONOMICAL PHENOMENA — THE PUBLIC DID NOT GET ITS DUE SHARE IN THE ISSUE OF THE IMPROPER CURRENCY (BEFORE 1846) —DID LABOUR DERIVE ITS PROPER SHARE FROM THE COMBINED OPERATION OF THE RAILWAY, THE GOLD DISCOVERIES, AND FREE TRADE ? — SURROUNDING CONDITIONS OF OUR ISOLATED FREETRADE POLICY MODIFIED BY OTHER NATIONS—PROOF THAT FREETRADE DEMAND WAS "ARTIFICIAL "—DIFFERENT VIEWS RESPECTING THE FRENCH TREATY—COBDEN APPEALS FROM THE PEOPLES OF THE WORLD TO THEIR RULERS.
§ 17. Stable forces in operation to extend our trade other than the insecure free-trade principle.—Had the influence of the railway system operated alone, as one of the means of increasing the circulatory activity of the trade markets, and therefore tending to raise the produce of these markets, some such a state of things would have ensued as follows, according to the ideal free-trade interpretation of economical phenomena.
You suppose that all demand is not sufficiently satisfied when the cost of transit materially influenced the price of commodities. It is easy to perceive that when the conveyance of goods is carried on with difficulty, a force is in action, (1) to restrain the production of goods, and (2) to raise their price. For the purchase of goods is thus limited to a small section of the community, able to afford the price of a contracted market. But expand that market, and what happens? The presumption is that the supplies are now greater than the former demand. A consequence which leads to a reduction in price. Thus, for the same amount, the original purchasers can get more of the goods they want: and obviously the reduction in price brings the articles within the sphere of all those whose inferior means permit of their buying at a lower rate. The reaction of the lower price, originally induced by facilitating transit, is seen in the increased demand for goods. And supplies continue, till they become more or less equal to the demand.1
Now this increased production is carried on at the expense of the labour interests concerned in it. When steam was introduced, the amount of labour displaced was very considerable. The profits thus accruing to the manufacturer became greater. For although he sold at a smaller price, it must be remembered that he produced, under the new conditions, ever so much more than at first, and that the cost of production diminished.1
1 The free-trade doctrine is that supply is equal to demand. This is obviously an ideal assertion. In practice, at no time is supply equal to demand or demand equal to supply. The proof of this is shown in the fact that when but a limited amount of any commodity is produced, the price of it tends continually to increase, from competition amongst buyers. The glutting of the markets also proves its falsity in practice.
But the railway is the means whereby the manufacturer is enabled to increase the production of his goods, by bringing the consumer into a nearer relation with him. It is a fact in economics that exchanges tend to increase, the nearer you are brought into communication with the source of production. The railway, therefore, absorbs a certain proportion of the price of the commodities. It is smaller than the original cost of transit, but it becomes of greater amount as the volume of goods conveyed increases. By the introduction of the railway system, labour was thrown out of employment. That labour, however, was absorbed in the promotion of the very instrument which sent it into disuse.
But in the increased production which befalls the manufacturer, whence is he to derive the increment of labour necessary to that end? From all the unoccupied labour of the land. According as that is small or great in amount will be its influence on the advancement of wages. So long as there is a demand for labour, wages must tend to rise. They will rise when its supply falls short of the demand for it. There was thus in operation a force which tended (1) to increase the productive powers of the country, and (2) to raise the wages of labour. Such a force enabled the manufacturer not only to sell more of his goods at home at a smaller price, and with greater profit to himself, but it also assisted him in his endeavour to maintain a sound supremacy over foreign and neutral markets. Just as he could afford to sell at a lower price in the home markets, so could he reduce prices in external markets, and thereby compete more favourably with his foreign rivals.
1 Regarding the rapacity of manufacture, it cannot be denied that cheapening bread tended to reduce wages. This reduction was counteracted by a demand for labour, induced by steam. But this counteracting influence was withdrawn when the agricultural labourers thrown out of employment increased the supply above the demand for labour.
What more, then, we are tempted to consider, could the manufacturer desire? He had an enlarged sphere of operation, and he possessed a certain means of maintaining his hold upon that sphere.1 That is to say, "certain" in so far as the nature of his surrounding conditions warrants the use of this attribute.
Was it possible, under the new condition of facilitating transit, for him to sell his goods cheaper at home, and to acquire a larger market abroad? Could both these desirable consummations have been effected under the influence of protection? We have but to go back to the introduction of the shuttle and the new methods of cotton-printing, to observe the effect of an increased production on the prosperity of the community at large. The beneficial results of these discoveries
1 It was said, we think by Lord Melbourne, that the Government had nothing more to give after the repeal of the Corn Laws. It seems a pity that the agitation for free trade should have preceded the development of the railway system. But, the agitation once begun, for the leaders to preserve their dignity they had to go on with it. The question arises whether the influence of the railway upon the development of trade was properly considered by the free-traders. If so, then it is very clear that the manufacturers were cognisant of the fact that they had a double force working for them—one immediate, the other remote.