PROTECTION. By protection in the restricted sense is meant the use by the Government of special forms of regulation or restraint, particularly import duties and analogous fiscal expe dients, in order to encourage or to maintain essential industries which are endangered by foreign competition. What industries are essential must be determined by the requirements of public policy. Protection is one phase of national policy, and its ulti mate object is national security. The free trade theory assumed that every man knew his own interest better than anyone else did; that everyone would follow his own interest rather than the in terest of anybody else, and thirdly that the interest of the individ ual coincided with the interest of the community. On these assumptions rested the whole doctrine of laisser faire (q.v.), that economic movements should be left to follow what was called their natural course under free competition. Society was an aggregate of individuals assumed to be equal to one another in the competitive struggle, and all individuals consciously or un consciously pursued their own interests. Protection on the other hand involved a different conception. There was the interest of the individual, the interest of trade, and the interest of the com monwealth. The last was the most important. On the free trade theory the government should not interfere by tariff or other regu lations in order to foster trades which did not make their own way in the competitive struggle, or to direct existing trades into chan nels in which they did not flow under purely individualist con ditions. In so far as such attempts were successful they involved loss to the whole body.
The country practising free trade was realising "natural" con ditions; tariffs or other regulations which interfered with such conditions, were artificial, imposing obstacles in the way of free movement associated with the "natural" state. Protection was therefore prejudicial to the realization of the greatest prosperity. A reversion to protection as a policy involves not merely the sporadic use of tariffs in order to safeguard particular industries, but a conception of the State, its constitution, its functions and its ultimate aims, different from the underlying conceptions of the free traders. To the free trader wealth is the end in view ; to the protectionist wealth is the means. The real end governing the policy of protection may not be economic at all in the narrow sense, but may be national or imperial solidarity and power, though undoubtedly a protectionist holds that while the free trade policy may lead to the greater wealth of individuals, the protec tionist policy properly administered, will bring about a balance of economic activities, involving a higher maximum of efficiency to the community as a whole and a more equitable distribution be tween the economic groups.
If agricultural enterprise under free competition and free trade cannot be made to pay, the free trader would abandon it and concentrate on those industrial lines of activity which under such conditions are at the time more profitable. The protectionist on the other hand would argue that this is a shortsighted view. In the first place agriculture is necessary to the State for its security, the maintenance of a healthy population and many other purposes not directly and immediately economic. But more than
that, the protectionist would say that it is absurd from the eco nomic point of view for a country to sacrifice its agriculture, for agriculture is the guarantee of a large home market for the country's manufactures, and the large and expanding home mar ket is the best security for the successful exportation of manu factures. Given the home market, continuous running of the manufactories and the proportionate reduction of the burden of standing charges, cheapens cost of production and makes possible easier entry into markets abroad and a higher remuneration for the workers at home. The free trader would say that if an in dustry does not pay its way under a policy of free importation, it is better that the capital employed in that industry should be invested in some other branch of economic activity which is remunerative ; that the artificial maintenance of such an indus try by the imposition of protective tariffs is an economic loss to the community. The protectionist would point out that the capital of such a depressed industry cannot be transferred to another in dustry, that capital is in the concrete form of factories and work shops and machines and many other forms which cannot be realised if the industry has fallen. It may indeed be desirable in certain circumstances to abandon it, but such a question cannot be decided without weighing carefully the number of persons em ployed, the possibility of their finding employment in other in dustries, the place of the industry in the national life, its relation to other industries in the scale of production, the possibility of obtaining its products in a suitable manner from other sources, its bearing on national security, and many other considerations of the highest importance. The free trader would not use tariffs or other artificial means for establishing in a country a new industry not hitherto practised. If such an industry were not likely to develop as the result of the unaided efforts of individuals, the free trader would not use government aid to promote it. The protectionist would consider the resources available in the form of raw mate rials, the possibility of acquiring the necessary skilled labour, the available organising ability, the demand for the products of such an industry at home and the accessibility of markets, and if the prospects were favourable would not hesitate to impose a defi nitely protective tariff with the intention to encourage the industry in view, even though for a few years it might involve higher prices to consumers at home, and he would do that all the more readily if there was plenty of capital for investment in the country for which he was responsible. Doctrinaire views on the question of protection have greatly declined in recent years, especially as a result of the World War. There are very few people who have influence in public affairs at the present time who would not be prepared to admit important exceptions to the free trade view and be willing to adopt a protectionist policy in particular cases, especially in regard to industries which are essential for the national security.