In 1878—exactly a generation after Mr. Cobden's triumph —a period of commercial depression reached its depth. Crowds of in dustrial workers were unemployed in the cities. The old prosperity of British agriculture was broken and the rural population began rapidly to diminish. From that moment through another quarter of a century of trade fluctua tions, the truth of the free import theory was questioned by an increasing number of English thinkers. Popular distrust, however, preceded scientific opposition. The ((National Fair Trade League) was started in July 1881 and carried on for more than a decade a formidable political agitation, stimulated by some able controversial literature and a vigorous weekly paper. This protectionist movement, how ever, failed to find a great leader and died out in the early nineties. Its only chance of suc cess lay in converting one of the great political parties. The Conservative rank and file were generally predisposed to protection. The Con servative leaders patronized the Fair Trade movement while the Liberals were in power, and stifled it when they had obtained office themselves. Nevertheless, other influences con tinued almost imperceptibly to dissolve Free Trade conviction throughout the country. The British Trade Consular Reports became a serial narrative of the advance of protectionist competition, American and German, in markets where British manufactured exports had re cently been supreme. The immense progress of the United States and the new German Empire showed at last that free imports, or half-free trade, was not a certain recipe, as suredly not the sole recipe, for commercial success, and that protection was not necessarily a prevention of progress. There was a gen eral mood of profound anxiety as to the posi tion and prospects of British commerce and a Widespread scepticism as to the theoretical truth of Free Trade and the practical advan tage of free imports.
All the previous scepticism and mistrust which had existed upon the question of Free Trade were crystallized in 1903 when Mr. Chamberlain created the new fiscal reform movenzint. His Birmingham speech on May 15 in that year was one of the dominating events of English politics. In the limits of this article it is impossible to trace the history of his agitation. The result has been noticed. There has been a small schism of .very dis tinguished persons. But the Unionist (or ((Con servative or ((Imperialist))) party is committed to some form of tariff policy. The Liberal Irish Nationalist-Independent Labor. Coalition is not morally solid against the tariff. Eng, laud has ceased as a whole to be a Free nation though still containing a great free trade party whose parliamentary predominance rests upon a-comparatively slight majority of popular votes.
We now pass from the history to the theory of the movement. Free Traders say: (a) that tariffs restrict trade. The reply is that exports and imports alike are increasing in every considerable protectionist country. Ger many's break with the Cobdenite system in 1879—America's adoption of what Englishmen call McKinleyism — have been followed not by commercial restriction, but a greater ex pansion of production, foreign exchanges, employment, population and wealth than has taken place in Great Britain during the par, allel period. No Free Trade writers grapple with the fact—few ever notice the fact— that the fundamental principle of a scientific tariff is the free importation of raw material, side by side with the taxation of foreign coin. petitive manufacture. The tariff idea aims at restricting the least advantageous kind of im ports in order to develop the most profitable kind. So far from implying restricted trade, it means, when competently adjusted, the largest voltune of the best exchanges. (b) That imports must be balanced by that goods received must be paid for by goods returned—and that as all international ex* change will arrange itself in an ideal manner, if you let it alone, the State aught not to in terfere with it. The reply to these statements
is that they are to a large extent altogether inaccurate and for the rest are superficial half truths of a singularly deceptive character. Im ports may or may not be completely paid for by exports (including shipping freights and foreign investments). The account may be cancelled by the transfer of securities. An excess of imports may remain as invested capi tal, the interest only being returned and the complete ((balancing)) being indefinitely de. ferred. England, for instance, formerly sent a steady excess of imports into the United States. The excess remained for the most part as British capital invested in America. Amer ica ceasing to be a debtor nation has cancelled a good deal of that British capital by the ex cess of her own exports in recent years. Thus while imports and exports may appear to bal ance more or less all the time, according to the conventional Free Trade theory, a move ment may be gradually going on under the surface which actually reverses the position of the two countries concerned; and transfers the commanding advantage of economic relations from one country to another. Again, no Free Trader asserts that like is paid for by like— that the import of foreign manufacture pro duces an equivalent export of home manu facture. A country which formerly exported raw produce in exchange for finished manufac ture may rise in the social scale and export in its turn finished goods to pay for crude material. So far as the maxim tells upon the practical controversy, it tells both ways. Imports and exports do not balance better under free im ports than under the tariff. America pays for her imports with her exports and has a prob able margin to spare! America entrenches her own trade in its position and makes it as diffi cult as possible for foreign competition to dis place it. The English system makes it as easy as possible for foreign manufacture to displace home industry. Under Free Trade the products of certain industries may pay for the com petitive imports which are steadily weakening other industries. To sum up, the tendency of isolated free imports is to undermine the na tional defensive position in trade after trade. America and Germany under the tariff are making new conquests in trade after trade. .Where organization becomes necessary,* said Brunel, °lass-see faire becomes impossible? The British tariff movement, however, laid more stress upon its constructive principles than upon its replies to the sophistry of Cob denite syllogisms. It was maintained that the tariff under British conditions would mean the maximum increase and the best distribution of wealth. An isolated free import system implies the narrowest and least secure market. A competitive import only enters by displacing the home supply against which it had competed. There is a gain to some home consumers but a loss to some producers. The nominally coun terbalancing export follows at the second re move, though meanwhile a net injury to the productive power of the importing country may have been inflicted. Home capital may have been sterilized; home labor displaced. Under the present conditions free imports actually restrict British industry to the smallest market and secure foreign competition in the possession of the largest market. America has free sale within her own market and ours, among 143, 000,000 of people; Germany has free sale in her own territory and equally in the United Kingdom—a similar double-market of over 100,000,000 of people. England has no free sale for her goods outside her own home market of 45,000,000 of inhabitants, and does not re serve any advantage to herself even upon her own soil. The conditions are not equal; the inequality means a steady discount upon British national prosperity.