The National System of Political Economy
by Friedrich List
translated by Sampson S. Lloyd, 1885

First Book: The History

Chapter 1

The Italians

    At the revival of civilisation in Europe, no county was in so
favourable a position as Italy in respect to commerce and industry.
Barbarism had not been able entirely to eradicate the culture and
civilisation of ancient Rome. A genial climate and a fertile soil,
notwithstanding an unskilful system of cultivation, yielded
abundant nourishment for a numerous population. The most necessary
arts and industries remained as little destroyed as the municipal
institutions of ancient Rome. Prosperous coast fisheries served
everywhere as nurseries for seamen, and navigation along Italy's
extensive sea-coasts abundantly compensated her lack of internal
means of transport. Her proximity to Greece, Asia Minor, and Egypt,
and her maritime intercourse with them, secured for Italy special
advantages in the trade with the East which had previously, though
not extensively, been carried on through Russia with the countries
of the North. By means of this commercial intercourse Italy
necessarily acquired those branches of knowledge and those arts and
manufactures which Greece had preserved from the civilisation of
ancient times. 
    From the period of the emancipation of the Italian cities by
Otho the Great, they gave evidence of what history was testified
alike in earlier and later times, namely, that freedom and industry
are inseparable companions, even although not unfrequently the one
has come into existence before the other. If commerce and industry
are flourishing anywhere, one may be certain that there freedom is
nigh at hand: if anywhere Freedom was unfolded her banner, it is as
certain that sooner or later industry will there establish herself;
for nothing is more natural than that when man has acquired
material or mental wealth he should strive to obtain guarantees for
the transmission of his acquisitions to his successors, or that
when he has acquired freedom, he should devote all his energies to
improve his physical and intellectual condition.
    For the first time since the downfall of the free states of
antiquity was the spectacle again presented to the world by the
cities of Italy of free and rich communities. Cities and
territories reciprocally rose to a state of prosperity and received
a powerful impulse in that direction from the Crusades. The
transport of the Crusaders and their baggage and material of war
not only benefited Italy's navigation, it afforded also inducements
and opportunities for the conclusion of advantageous commercial
relations with the East for the introduction of new industries,
inventions, and plants, and for acquaintance with new enjoyments.
On the other hand, the oppressions of feudal lordship were weakened
and diminished in manifold ways, owing to the same cause, tending
to the greater freedom of the cities and of the cultivation of the
soil.
    Next after Venice and Genoa, Florence became especially
conspicuous for her manufactures and her monetary exchange
business. Already, in the twelfth and thirteenth centuries, her
silk and woollen manufactures were very flourishing; the guilds of
those trades took part in the government, and under their influence
the Republic was constituted. The woollen manufacture alone
employed 200 manufactories, which produced annually 80,000 pieces
of cloth, the raw material for which was imported from Spain. In
addition to these, raw cloth to the amount of 300,000 gold gulden
was imported annually from Spain, France, Belgium, and Germany,
which, after being finished at Florence, was exported to the
Levant. Florence conducted the banking business of the whole of
Italy, and contained eighty banking establishments.(1*) The annual
revenue of her Government amounted to 300,000 gold gulden (fifteen
million francs of our present money), considerably more than the
revenue of the kingdoms of Naples and Aragon at that period, and
more than that of Great Britain and Ireland under Queen
Elizabeth.(2*)
    We thus see Italy in the twelfth and thirteenth centuries
possessing all the elements of national economical prosperity, and
in respect of both commerce and industry far in advance of all
other nations. Her agriculture and her manufactures served as
patterns and as motives for emulation to other countries. Her roads
and canals were the best in Europe. The civilised world is indebted
to her for banking institutions, the mariner's compass, improved
naval architecture, the system of exchanges, and a host of the most
useful commercial customs and commercial laws, as well as for a
great part of its municipal and governmental institutions. Her
commercial, marine, and naval power were by far the most important
in the southern seas. She was in possession of the trade of the
world; for, with the exception of the unimportant portion of it
carried on over the northern seas, that trade was confined to the
Mediterranean and the Black Sea. She supplied all nations with
manufactures, with articles of luxury, and with tropical products,
and was supplied by them with raw materials. One thing alone was
wanting to Italy to enable her to become what England has become in
our days, and because that one thing was wanting to her, every
other element of prosperity passed away from her; she lacked
national union and the power which springs from it. The cities and
ruling powers of Italy did not act as members of one body, but made
war on and ravaged one another like independent powers and states.
While these wars raged externally, each commonwealth was
successively overthrown by the internal conflicts between
democracy, aristocracy, and autocracy. These conflicts, so
destructive to national prosperity, were stimulated and increased
by foreign powers and their invasions, and by the power of the
priesthood at home and its pernicious influence, whereby the
separate Italian communities were arrayed against one another in
two hostile factions.
    How Italy thus destroyed herself may be best learned from the
history of her maritime states. We first see Amalfi great and
powerful (from the eighth to the eleventh century).(3*) Her ships
covered the seas, and all the coin which passed current in Italy
and the Levant was that of Amalfi. She possessed the most practical
code of maritime laws, and those laws were in force in every port
of the Mediterranean. In the twelfth century her naval power was
destroyed by Pisa, Pisa in her turn fell under the attacks of
Genoa, and Genoa herself, after a conflict of a hundred years, was
compelled to succumb to Venice.
    The fall of Venice herself appears to have indirectly resulted
from this narrow-minded policy. To a league of Italian naval powers
it could not have been a difficult task, not merely to maintain and
uphold the preponderance of Italy in Greece, Asia Minor, the
Archipelago, and Egypt, but continually to extend and strengthen
it; or to curb the progress of the Turks on land and repress their
piracies at sea, while contesting with the Portuguese the passage
round the Cape of Good Hope.
    As matters actually stood, however, Venice was not merely left
to her own resources, she found herself crippled by the external
attacks of her sister states and of the neighbonring European
powers.
    It could not have proved a difficult task to a well-organised
league of Italian military powers to defend the independence of
Italy against the aggression of the great monarchies. The attempt
to form such a league was actually made in 1526, but then not until
the moment of actual danger and only for temporary defence. The
lukewarmness and treachery of the leaders and members of this
league were the cause of the subsequent subjugation of Milan and
the fall of the Tuscan Republic. From that period must be dated the
downfall of the industry and commerce of Italy.(4*)
    In her earlier as well as in her later history Venice aimed at
being a nation for herself alone. So long as she had to deal only
with petty Italian powers or with decrepid Greece, she had no
difficulty in maintaining a supremacy in manufactures and commerce
through the countries bordering on the Mediterranean and Black
Seas. As soon, however, as united and vigorous nations appeared on
the political stage, it became manifest at once that Venice was
merely a city and her aristocracy only a municipal one. It is true
that she had conquered several islands and even extensive
provinces, but she ruled over them only as conquered territory, and
hence (according to the testimony of all historians) each conquest
increased her weakness instead of her power 
    At the same period the spirit within the Republic by which she
had grown great gradually died away. The power and prosperity of
Venice -- the work of a patriotic and heroic aristocracy which had
sprung from an energetic and liberty-loving democracy-maintained
itself and increased so long as the freedom of democratic energy
lent it support, and that energy was guided by the patriotism, the
wisdom, and the heroic spirit of the aristocracy. But in proportion
as the aristocracy became a despotic oligarchy, destructive of the
freedom and energies of the people, the roots of power and
prosperity died away, notwithstanding that their branches and
leading stem appeared still to flourish for some time longer.'(5*)
    A nation which has fallen into slavery,' says Montesquieu,(6*)
'strives rather to retain what it possesses than to acquire more;
a free nation, on the contrary, strives rather to acquire than to
retain.' To this very true observation he might have added -- and
because anyone strives only to retain without acquiring he must
come to grief, for every nation which makes no forward progress
sinks lower and lower, and must ultimately fall. Far from striving
to extend their commerce and to make new discoveries, the Venetians
never even conceived the idea of deriving benefit from the
discoveries made by other nations. That they could be excluded from
the trade with the East Indies by the discovery of the new
commercial route thither, never occurred to them until they
actually experienced it. What all the rest of the world perceived
they would not believe; and when they began to find out the
injurious results of the altered state of things, they strove to
maintain the old commercial route instead of seeking to participate
in the benefits of the new one; they endeavoured to maintain by
petty intrigues what could only be won by making wise use of the
altered circumstances by the spirit of enterprise and by hardihood.
And when they at length had lost what they had possessed, and the
wealth of the East and West indies was pouted into Cadiz and Lisbon
instead of into their own ports, like simpletons or spendthrifts
they turned their attention to alchemy.(7*)
    In the times when the Republic grew and flourished, to be
inscribed in the Golden Book was regarded as a reward for
distinguished exertions in commerce, in industry, or in the civil
or military service of the State. On that condition this honour was
open to foreigners; for example, to the most distinguished of the
silk manufacturers who had immigrated from Florence.(8*) But that
book was closed when men began to regard places of honour and State
salaries as the family inheritance of the patrician class. At a
later period, when men recognised the necessity of giving new life
to the impoverished and enfeebled aristocracy, the book was
reopened. But the chief title to inscription in it was no longer,
as in former times, to have rendered services to the State, but the
possession of wealth and noble birth. At length the honour of being
inscribed in the Golden Book was so little esteemed, that it
remained open for a century with scarcely any additional names.
    If we inquire of History what were the causes of the downfall
of this Republic and of its commerce, she replies that they
principally consisted in the folly, neglect, and cowardice of a
worn-out aristocracy, and in the apathy of a people who had sunk
into slavery. The commerce and manufactures of Venice must have
declined, even if the new route round the Cape of Good Hope had
never been discovered.
    The cause of it, as of the fall of all the other Italian
republics, is to be found in the absence of national unity, in the
domination of foreign powers, in priestly rule at home, and in the
rise of other greater, more powerful, and more united nationalities
in Europe.
    If we carefully consider the commercial policy of Venice, we
see at a glance that that of modern commercial and manufacturing
nations is but a copy of that of Venice, only on an enlarged (i.e.
a national) scale. By navigation laws and customs duties in each
case native vessels and native manufactures were protected against
those of foreigners, and the maxim thus early held good that it was
sound policy to import raw materials from other states and to
export to them manufactured goods.(9*)
    It has been recently asserted in defence of the principle of
absolute and unconditional free trade, that her protective policy
was the cause of the downfall of Venice. That assertion comprises
a little truth with a great deal of error if we investigate the
history of Venice with an unprejudiced eye, we find that in her
case, as in that of the great kingdoms at a later period, freedom
of international trade as well as restrictions on it have been
beneficial or prejudicial to the power and prosperity of the State
at different epochs. Unrestricted freedom of trade was beneficial
to the Republic in the first years of her existence; for how
otherwise could she have raised herself from a mere fishing village
to a commercial power? But a protective policy was also beneficial
to her when she had arrived at a certain stage of power and wealth,
for by means of it she attained to manufacturing and commercial
supremacy. Protection first became injurious to her when her
manufacturing and commercial power had reached that supremacy,
because by it all competition with other nations became absolutely
excluded, and thus indolence was encouraged. Therefore, not the
introduction of a protective policy, but perseverance in
maintaining it after the reasons for its introduction had passed
away, was really injurious to Venice.
    Hence the argument to which we have adverted has this great
fault, that it takes no account of the rise of great nations under
hereditary monarchy. Venice, although mistress of some provinces
and islands, yet being all the time merely one Italian city, stood
in competition, at the period of her rise to a manufacturing and
commercial power, merely with other Italian cities; and her
prohibitory commercial policy could benefit her so long only as
whole nations with united power did not enter into competition with
her. But as soon as that took place, she could only have maintained
her supremacy by placing herself at the head of a united Italy and
by embracing in her commercial system the whole Italian nation. No
commercial policy was ever clever enough to maintain continuously
the commercial supremacy of a single city over united nations.
    From the example of Venice (so far as it may be adduced against
a protective commercial policy at the present time) neither more
nor less can be inferred than this -- that a single city or a small
state cannot establish and maintain such a policy successfully in
competition with great states and kingdoms; also that any power
which by means of a protective policy has attained a position of
manufacturing and commercial supremacy, can (after she has attained
it) revert with advantage to the policy of free trade.
    In the argument before adverted to, as in every other when
international freedom of trade is the subject of discussion, we
meet with a misconception which has been the parent of much error,
occasioned by the misuse of the term 'freedom.' Freedom of trade is
spoken of in the same terms as religious freedom and municipal
freedom. Hence the friends and advocates of freedom feel themselves
especially bound to defend freedom in all its forms. And thus the
term 'free trade' has become popular without drawing the necessary
distinction between freedom of internal trade within the State and
freedom of trade between separate nations, notwithstanding that
these two in their nature and operation are as distinct as the
heaven is from the earth. For while restrictions on the internal
trade of a state are compatible in only very few cases with the
liberty of individual citizens, in the case of international trade
the highest degree of individual liberty may consist with a high
degree of protective policy. Indeed, it is even possible that the
greatest freedom of international trade may result in national
servitude, as we hope hereafter to show from the case of Poland. In
respect to this Montesquieu says truly, 'Commerce is never
subjected to greater restrictions than in free nations, and never
subjected to less ones than in those under despotic
government.'(10*)

NOTES:

1. De l'Ecluse, Florence et ses Vicissitudes, pp. 23, 26, 32, 163,
213.

2. Pechio, Histoire de l'Economie Politique en Italie.

3. Amalfi contained at the period of her prosperity 50,000
inhabitants. Flavio Guio, the inventor of the mariner's compass,
was a citizen of Amalfi. It was the sack of Amalfi by the Pisans
(1135 or 1137) that that ancient book was discovered which later on
became so injurious to the freedom and energies of Germany -- the
Pandects.

4. Hence Charles V was the destroyer of commerce and industry in
Italy, as he was also in the Netherlands and in Spain. He was the
introducer of nobility by patent, and of the idea that it was
disgraceful for the nobility to carry on commerce or manufactures
-- an idea which had the most destructive influence on the national
industry. Before his time the contrary idea prevailed; the Medici
continued to be engaged in commerce long after they had become
sovereign rulers.

5. "Quand les nobles, au lien de verser leur sang pour la patrie,
au lieu d'illustrer l'etat par des victoires et de l'agrandir par
des conquetes, n'eurent plus qu'a jouir des honneurs et a se
partager des impots on dut se demander pourquoi il y avait huit ou
neuf cents habitants de Venice qui se disaient proprietaries de
toute la Republique." (Daru, Histoire de Venise, vol. iv. ch.
xviii.)

6. Esprit des Lois, p. 192.

7. A mere charlatan, Marco Brasadino, who professed to have the art
of making gold, was welcomed by the Venetian aristocracy as a
saviour. (Daru, Histoire de Venise, vol. iii. ch. xix.)

8. Venice, as Holland and England subsequently did, made use of
every opportunity of attracting to herself manufacturing industry
and capital from foreign states. Also a considerable number of silk
manufacturers emigrated to Venice from Luces, where already in the
thirteenth century the manufacturer of velvets and brocades was
very flourishing, in consequence of the oppression of the Lucchese
tyrant Castruccio Castracani. (Sandu, Histoire de Venise, vol. i.
pp. 247-256.)

9. Sismondi, Histoire des Republiques Italiennes, Pt. I, p. 285.

10. Esprit des Lois, livre xx. ch. xii.

Chapter 2

The Hansards


    The spirit of industry, commerce, and liberty having attained
full influence in Italy, crossed the Alps, permeated Germany, and
erected for itself a new throne on the shores of the northern seas,
the Emperor Henry I, the father of the liberator of the Italian
municipalities, promoted the founding of new cities and the
enlargement of older ones which were already partly established on
the sites of the ancient Roman colonies and partly in the imperial
domains.
    Like the kings of France and England at a later period, he and
his successors regarded the cities as the strongest counterpoise to
the aristocracy, as the richest source of revenue to the State, as
a new basis for national defence. By means of their commercial
relations with the cities of Italy, their competition with Italian
industry, and their free institutions, these cities soon attained
to a high degree of prosperity and civilisation. Life in common
fellow-citizenship created a spirit of progress in the arts and in
manufacture, as well as zeal to achieve distinction by wealth and
by enterprise; while, on the other hand, the acquisition of
material wealth stimulated exertions to acquire culture and
improvement in their political condition.
    Strong through the power of youthful freedom and of flourishing
industry, but exposed to the attacks of robbers by land and sea,
the maritime towns of Northern Germany soon felt the necessity of
a closer mutual union for protection and defence. With this object
Hamburg and Lübeck formed a league in 1241, which before the close
of that century embraced all the cities of any importance on the
coasts of the Baltic and North Seas, or on the banks of the Oder,
the Elbe, the Weser, and the Rhine (eighty-five in all). This
confederation adopted the title of the 'Hansa,' which in the Low
German dialect signifies a league.
    Promptly comprehending what advantages the industry of
individuals might derive from a union of their forces, the Hansa
lost no time in developing and establishing a commercial policy
which resulted in a degree of commercial prosperity previously
unexampled. Perceiving that whatever power desires to create and
maintain an extensive maritime commerce, must possess the means of
defending it, they created a powerful navy; being further convinced
that the naval power of any country is strong or weak in proportion
to the extent of its mercantile marine and its sea fisheries, they
enacted a law that Hanseatic goods should be conveyed only on board
Hanseatic vessels, and established extensive sea fisheries. The
English navigation laws were copied from those of the Hanseatic
League, just as the latter were an imitation of those of
Venice.(1*)
    England in that respect only followed the example of those who
were her forerunners in acquiring supremacy at sea. Yet the
proposal to enact a navigation Act in the time of the Long
Parliament was then treated as a novel one. Adam Smith appears in
his comment on this Act(2*) not to have known, or to have refrained
from stating, that already for centuries before that time and on
various occasions the attempt had been made to introduce similar
restrictions. A proposal to that effect made by Parliament in 1461
was rejected by Henry VI, and a similar one made by James I,
rejected by Parliament;(3*) indeed, long before these two proposals
(viz. in 1381) such restrictions had been actually imposed by
Richard II, though they soon proved inoperative and passed into
oblivion. The nation was evidently not then ripe for such
legislation. Navigation laws, like other measures for protecting
native industry, are so rooted in the very nature of those nations
who feel themselves fitted for future industrial and commercial
greatness, that the United States of North America before they had
fully won their independence had already at the instance of James
Madison introduced restrictions on foreign shipping, and
undoubtedly with not less great results (as will be seen in a
future chapter) than England had derived from them a hundred and
fifty years before.
    The northern princes, impressed with the benefits which trade
with the Hansards promised to yield to them -- inasmuch as it gave
them the means not only of disposing of the surplus products of
their own territories, and of obtaining in exchange much better
manufactured articles than were produced at home, but also of
enriching their treasuries by means of import and export
duties,(4*) and of diverting to habits of industry their subjects
who were addicted to idleness, turbulence, and riot -- considered
it as a piece of good fortune whenever the Hansards established
factories on their territory, and endeavoured to induce them to do
so by wanting them privileges and favours of every kind. The kings
of England were conspicuous above all other sovereigns in this
respect.
    The trade of England (says Hume) was formerly entirely in the
hands of foreigners, but especially of the 'Easterlings'(5*) whom
Henry III constituted a corporation, to whom he granted privileges,
and whom he freed from restrictions and import duties to which
other foreign merchants were liable. The English at that time were
so inexperienced in commerce that from the time of Edward II the
Hansards, under the title of 'Merchants of the Steelyard',
monopolised the entire foreign trade of the kingdom. And as they
conducted it exclusively in their own ships, the shipping interest
of England was in a very pitiable condition.(6*)
    Some German merchants, viz. those of Cologne, after they had
for a long time maintained commercial intercourse with England, at
length established in London, in the year 1250, at the invitation
of the King, the factory which became so celebrated under the name
of 'The Steelyard' an institution which at first was so influential
in promoting culture and industry in England, but afterwards
excited so much national jealousy, and which for 375 years, until
its ultimate dissolution, was the cause of such warm and
long-continued conflicts.
    England formerly stood in similar relations with the Hanseatic
League to those in which Poland afterwards stood with the Dutch,
and Germany with the English; she supplied them with wool, tin,
hides, butter, and other mineral and agricultural products, and
received manufactured articles in exchange. The Hansards conveyed
the raw products which they obtained from England and the northern
states to their establishment at Bruges (founded in 1252), and
exchanged them there for Belgian cloths and other manufactures, and
for Oriental products and manufactures which came from Italy, which
latter they carried back to all the countries bordering on the
northern seas.
    A third factory of theirs, at Novgorod in Russia (established
in 1272), supplied them with furs, flax, hemp, and other raw
products in exchange for manufactures. A fourth factory, at Bergen
in Norway (also founded in 1272), was occupied principally with
fisheries and trade in train oil and fish products.(7*)
    The experience of all nations in all times teaches us that
nations, so long as they remain in a state of barbarism, derive
enormous benefit from free and unrestricted trade, by which they
can dispose of the products of the chase and those of their
pastures, forests, and agriculture -- in short, raw products of
every kind; obtaining in exchange better clothing materials,
machines, and utensils, as well as the precious metals -- the great
medium of exchange and hence that at first they regard free trade
with approval. But experience also shows that those very nations,
the farther advances that they make for themselves in culture and
in industry, regard such a system of trade with a less favourable
eye, and that at last they come to regard it as injurious and as a
hindrance to their further progress. Such was the case with the
trade between England and the Hansards. A century had scarcely
elapsed from the foundation of the factory of the 'Steelyard' when
Edward III conceived the opinion that a nation might do something
more useful and beneficial than to export raw wool and import
woollen cloth. He therefore endeavoured to attract Flemish weavers
into England by granting them all kinds of privileges; and as soon
as a considerable number of them had got to work, he issued a
prohibition against wearing any articles made of foreign cloth.(8*)
    The wise measures of this king were seconded in the most
marvellous manner by the foolish policy pursued by the rulers of
other countries -- a coincidence which has not unfrequently to be
noted in commercial history. If the earlier rulers of Flanders and
Brabant did everything in their power to raise their native
industry to a flourishing condition, the later ones did everything
that was calculated to make the commercial and manufacturing
classes discontented and to incite them to emigration.(9*)
    In the year 1413 the English woollen industry had already made
such progress that Hume could write respecting that period, 'Great
jealousy prevailed at this time against foreign merchants, and a
number of restrictions were imposed on their trade, as, for
instance, that they were required to lay out in the purchase of
goods produced in England the whole value which they realized from
articles which they imported into it.(10*)
    Under Edward IV this jealousy of foreign traders rose to such
a pitch that the importation of foreign cloth, and of many other
articles, was absolutely prohibited.(11*)
    Notwithstanding that the king was afterwards compelled by the
Hansards to remove this prohibition, and to reinstate them in their
ancient privileges, the English woollen manufacture appears to have
been greatly promoted by it, as is noted by Hume in treating of the
reign of Henry VII, who came to the throne half a century later
than Edward IV.
    'The progress made in industry and the arts imposed limits, in
a much more effective way than the rigour of laws could do, to the
pernicious habit of the nobility of maintaining a great number of
servants. Instead of vying with one another in the number and
valour of their retainers, the nobility were animated by another
kind of rivalry more in accordance with the spirit of civilisation,
inasmuch as they now sought to excel one another in the beauty of
their houses, the elegance of their equipages, and the costliness
of their furniture. As the people could no longer loiter about in
pernicious idleness, in the service of their chieftains and
patrons, they became compelled, by learning some kind of handiwork,
to make themselves useful to the community. Laws were again enacted
to prevent the export of the precious metals, both coined and
uncoined; but as these were well known to be inoperative, the
obligation was again imposed on foreign merchants to lay out the
whole proceeds of goods imported by them, in articles of English
manufacture.'(12*)
    In the time of Henry VIII the prices of all articles of food
had considerably risen, owing to the great number of foreign
manufacturers in London; a sure sign of the great benefit which the
home agricultural industry derived from the development of home
manufacturing industry.
    The king, however, totally misjudging the causes and the
operation of this phenomenon, gave ear to the unjust complaints of
the English against the foreign manufacturers, whom the former
perceived to have always excelled themselves in skill, industry,
and frugality. An order of the Privy Council decreed the expulsion
of 15,000 Belgian artificers, 'because they had made all provisions
dearer, and had exposed the nation to the risk of a famine.' In
order to strike at the root of this evil, laws were enacted to
limit personal expenditure, to regulate the style of dress, the
prices of provisions, and the rate of wages. This policy naturally
was warmly approved by the Hansards, who acted towards this king in
the same spirit of good-will which they had previously Displayed
towards all those former kings of England whose policy had favoured
their interests, and which in our days the English display towards
the kings of Portugal -- they placed their ships of war at his
disposition. During this king's whole reign the trade of the
Hansards with England was very active. They possessed both ships
and capital, and knew, not less cleverly than the English do in our
days, how to acquire influence over peoples and governments who did
not thoroughly understand their own interests. Only their arguments
rested on quite a different basis from those of the trade
monopolists of our day. The Hansards based their claim to supply
all countries with manufactures on actual treaties and on
immemorial possession of the trade, whilst the English in our day
base a similar claim on a mere theory, which has for its author one
of their own Custom-house officials. The latter demand in the name
of a pretended science, what the former claimed in the name of
actual treaties and of justice.
    In the reign of Edward VI the Privy Council sought for and
found pretexts for abolishing the privileges of the 'Merchants of
the Steelyard.' The Hansards made strong protests against this
innovation. But the Privy Council persevered in its determination,
and the step was soon followed by the most beneficial results to
the nation. The English merchants possessed great advantages over
the foreign ones, on account of their position as dwellers in the
country, in the purchase of cloths, wool, and other articles,
advantages which up to that time they had not so clearly perceived
as to induce them to venture into competition with such a wealthy
company. But from the time when all foreign merchants were
subjected to the same commercial restrictions, the English were
stimulated to enterprise, and the spirit of enterprise was diffused
over the whole kingdom.(13*)
    After the Hansards had continued for some years to be entirely
excluded from a market which they had for three centuries
previously possessed as exclusively as England in our days
possesses the markets of Germany and the United States, they were
reinstated by Queen Mary in all their ancient privileges owing to
representations made by the German Emperor.(14*) But their joy was
this time of short duration. Being earnestly Desirous not merely of
maintaining these privileges, but of increasing them, they made
strong complaints at the beginning of the reign of Elizabeth of the
treatment to which they had been subjected under Edward VI and
Mary. Elizabeth prudently replied that 'she had no power to alter
anything, but she would willingly protect them still in the
possession of those privileges and immunities which they then
possessed.' This reply, however, did not satisfy them at all. Some
time afterwards their trade was further suspended, to the great
advantage of the English merchants, who now had an opportunity of
showing of what they were capable; they gained control over the
entire export trade of their own country, and their efforts were
crowned with complete success. They divided themselves into
'staplers and merchant adventurers,' the former carrying on
business in some one place, the latter seeking their fortune in
foreign cities and states with cloth and other English
manufactures. This excited the jealousy of the Hansards so greatly,
that they left no means untried to draw down on the English traders
the ill opinion of other nations. At length, on August 1, 1597,
they gained an imperial edict, by which all trade within the German
Empire was forbidden to English merchants The Queen replied (on
January 13, 1598) by proclamation, in consequence of which she
sought reprisals by seizing sixty Hanseatic vessels which were
engaged in contraband trade with Spain. In taking this step she had
at first only intended, by restoring the vessels, to bring about a
better understanding with the Hansards. But when she was informed
that a general Hanseatic assembly was being held in the city of
Lübeck in order to concert measures for harassing the export trade
of England, she caused all these vessels with their cargoes to be
confiscated, and then released two of them, which she sent to
Lübeck with the message that she felt the greatest contempt for the
Hanseatic League and all their proceedings and measures.(15*)
    Thus Elizabeth acted towards these merchants, who had lent
their ships to her father and to so many English kings to fight
their battles; who had been courted by all the potentates of
Europe; who had treated the kings of Denmark and Sweden as their
vassals for centuries, and invited them into their territories and
expelled them as they pleased; who had colonised and civilised all
the southeastern coasts of the Baltic, and freed all seas from
piracy; who not very long before had, with sword in hand, compelled
a king of England to recognise their privileges; to whom on more
than one occasion English kings had given their crowns in pledge
for loans; and who had once carried their cruelty and insolence
towards England so far as to drown a hundred English fishermen
because they had ventured to approach their fishing grounds. The
Hansards, indeed, still possessed sufficient power to have avenged
this conduct of the queen of England; but their ancient courage,
their mighty spirit of enterprise, the power inspired by freedom
and by co-operation, had passed from them. They dwindled gradually
into powerlessness until at length, in 1630, their League was
formally dissolved, after they had supplicated every court in
Europe for import privileges, and had everywhere been repulsed with
scorn.
    Many external causes, besides the internal ones which we have
to mention hereafter, contributed to their fall. Denmark and Sweden
sought to avenge themselves for the position of dependence in which
they had been so long held by the League, and placed all possible
obstructions in the way of its commerce. The czars of Russia had
conferred privileges on an English company. The order of Teutonic
knights, who had for centuries been the allies as well as
(originally) the children of the League, declined and was
dissolved. The Dutch and the English drove them out of all markets,
and supplanted them in every court. Finally, the discovery of the
route to the East indies by the Cape of Good Hope, operated most
seriously to their disadvantage.
    These leaguers, who during the period of their might and
prosperity had scarcely deemed an alliance with the German Empire
as worthy of consideration, now in their time of need betook
themselves to the German Reichstag and represented to that body
that the English exported annually 200,000 pieces of cloth, of
which a great proportion went to Germany, and that the only means
whereby the League could regain its ancient privileges in England,
was to prohibit the import of English cloth into Germany. According
to Anderson, a decree of the Reichstag to that effect was seriously
contemplated, if not actually drawn up, but that author asserts
that Gilpin, the English ambassador to the Reichstag, contrived to
prevent its being passed. A hundred and fifty years after the
formal dissolution of the Hanseatic League, so completely had all
memory of its former greatness disappeared in the Hanseatic cities
that Justus Möser asserts (in some passage in his works) that when
he visited those cities, and narrated to their merchants the power
and greatness which their predecessors had enjoyed, they would
scarcely believe him. Hamburg, formerly the terror of pirates in
every sea, and renowned throughout Christendom for the services
which she had rendered to civilisation in suppressing sea-robbers,
had sunk so low that she had to purchase safety for her vessels by
paying an annual tribute to the pirates of Algiers. Afterwards,
when the dominion of the seas had passed into the hands of the
Dutch another policy became prevalent in reference to piracy. When
the Hanseatic League were supreme at sea, the pirate was considered
as the enemy of the civilised world, and extirpated wherever that
was possible. The Dutch, on the contrary, regarded the corsairs of
Barbary as useful partisans, by whose means the marine commerce of
other nations could be destroyed in times of peace, to the
advantage of the Dutch. Anderson avails himself of the quotation of
an observation of De Witt in favour of this policy to make the
laconic comment, 'Fas est et ab hoste doceri', a piece of advice
which, in spite of its brevity, his countrymen comprehended and
followed so well that the English, to the disgrace of Christianity,
tolerated even until our days the abominable doings of the
sea-robbers on the North African coasts, until the French performed
the great service to civilisation of extirpating them.(16*)
    The commerce of these Hanseatic cities was not a national one;
it was neither based on the equal preponderance and perfect
development of internal powers of production, nor sustained by
adequate political power. The bonds which held together the members
of the League were too lax, the striving among them for predominant
power and for separate interests (or, as the Swiss or the Americans
would say, the cantonal spirit, the spirit of separate state right)
was too predominant, and superseded Hanseatic patriotism, which
alone could have caused the general common weal of the League to be
considered before the private interests of individual cities. Hence
arose jealousies, and not unfrequently treachery. Thus Cologne
turned to her own private advantage the hostility of England
towards the League, and Hamburg sought to utilise for her own
advantage a quarrel which arose between Denmark and Lübeck.
    The Hanseatic cities did not base their commerce on the
production and consumption, the agriculture or the manufactures, of
the land to which their merchants belonged. They had neglected to
favour in any way the agricultural industry of their own
fatherland, while that of foreign lands was greatly stimulated by
their commerce. They found it more convenient to purchase
manufactured goods in Belgium, than to establish manufactories in
their own country. They encouraged and promoted the agriculture of
Poland, the sheep-farming of England, the iron industry of Sweden,
and the manufactures of Belgium. They acted for centuries on the
maxim which the theoretical economists of our day commend to all
nations for adoption -- they 'bought only in the cheapest market.'
But when the nations from whom they bought, and those to whom they
sold, excluded them from their markets, neither their own native
agriculture nor their own manufacturing industry was sufficiently
developed to furnish employment for their surplus commercial
capital. it consequently flowed over into Holland and England, and
thus went to increase the industry, the wealth, and the power of
their enemies; a striking proof that mere private industry when
left to follow its own course does not always promote the
prosperity and the power of nations. In their exclusive efforts to
gain material wealth, these cities had utterly neglected the
promotion of their political interests. During the period of their
power, they appeared no longer to belong at all to the German
Empire. It flattered these selfish, proud citizens, within their
circumscribed territories, to find themselves courted by emperors,
kings, and princes, and to act the part of sovereigns of the seas.
How easy would it have been for them during the period of their
maritime supremacy, in combination with the cities of North
Germany, to have founded a powerful Lower House as a counterpoise
to the aristocracy of the empire, and by means of the imperial
power to have thus brought about national unity -- to have united
under one nationality the whole sea-coast from Dunkirk to Riga --
and by these means to have won and maintained for the German nation
supremacy in manufactures, commerce, and maritime power. But in
fact, when the sceptre of the seas fell from their grasp, they had
not sufficient influence left to induce the German Reichstag to
regard their commerce as a matter of national concern. On the
contrary, the German aristocracy did all in their power thoroughly
to oppress these humbled citizens. Their inland cities fell
gradually under the absolute dominion of the various princes, and
hence their maritime ones were deprived of their inland
connections.
    All these faults had been avoided by England. Her merchant
shipping and her foreign commerce rested on the solid basis of her
native agriculture and native industry; her internal trade
developed itself in just proportion to her foreign trade, and
individual freedom grew up without prejudice to national unity or
to national power: in her case the interests of the Crown, the
aristocracy, and the people became consolidated and united in the
happiest manner.
    If these historical facts are duly considered, can anyone
possibly maintain that the English could ever have so widely
extended their manufacturing power, acquired such an immeasurably
great commerce, or attained such overwhelming naval power, save by
means of the commercial policy which they adopted and pursued? No;
the assertion that the English have attained to their present
commercial eminence and power, not by means of their commercial
policy, but in spite of it, appears to us to be one of the greatest
falsehoods promulgated in the present century.
    Had the English left everything to itself -- 'Laissé faire et
laissé aller,' as the popular economical school recommends -- the
merchants of the Steelyard would be still carrying on their trade
in London, the Belgians would be still manufacturing cloth for the
English, England would have still continued to be the sheep-farm of
the Hansards, just as Portugal became the vineyard of England, and
has remained so till our days, owing to the stratagem of a cunning
diplomatist. Indeed, it is more than probable that without her
commercial policy Eng1and would never have attained to such a large
measure of municipal and individual freedom as she now possesses,
for such freedom is the daughter of industry and of wealth.
    In view of such historical considerations, how has it happened
that Adam Smith has never attempted to follow the history of the
industrial and commercial rivalry between the Hanseatic League and
England from its origin until its close? Yet some passages in his
work show clearly that he was not unacquainted with the causes of
the fall of the League and its results. 'A merchant,' he says, 'is
not necessarily the citizen of any particular country. It is in a
great measure indifferent to him from what place he carries on his
trade; and a very trifling disgust will make him remove his
capital, and together with it all the industry which it supports,
from one country to another. No part of it can be said to belong to
any particular country till it has been spread, as it were, over
the face of that country, either in buildings or in the lasting
improvement of lands. No vestige now remains of the great wealth
said to have been possessed by the greater part of the Hanse Towns
except in the obscure histories of the thirteenth and fourteenth
centuries. it is even uncertain where some of them were situated,
or to what towns in Europe the Latin names given to some of them
belong.'(17*)
    How strange that Adam Smith, having such a clear insight into
the secondary causes of the downfall of the Hanseatic League, did
not feel himself compelled to examine into its primary causes! For
this purpose it would not have been at all necessary to have
ascertained the sites where the fallen cities had stood, or to
which cities belonged the Latin names in the obscure chronicles. He
need not even have consulted those chronicles at all. His own
countrymen, Anderson, Macpherson, King, and Hume could have
afforded him the necessary explanation.
    How, therefore, and for what reason could such a profound
inquirer permit himself to abstain from an investigation at once so
interesting and so fruitful in results? We can see no other reason
than this -- that it would have led to conclusions which would have
tended but little to support his principle of absolute free trade.
He would infallibly have been confronted with the fact that after
free commercial intercourse with the Hansards had raised English
agriculture from a state of barbarism, the protective commercial
policy adopted by the English nation at the expense of the
Hansards, the Belgians, and the Dutch helped England to attain to
manufacturing supremacy, and that from the latter, aided by her
Navigation Acts, arose her commercial supremacy.
    These facts, it would appear, Adam Smith was not willing to
know or to acknowledge; for indeed they belong to the category of
those inconvenient facts of which J.B. Say observes that they would
have proved very adverse to his system.

NOTES:

1. Anderson, Origins of Commerce, pt. I, p. 46.

2. Wealth of Nations, Book IV, ch. ii.

3. Hume, History of England, Part IV, ch. xxi.

4. The revenues of the kings of England were derived at that time
more from export duties than from import duties. Freedom of export
and duties on imports (viz. of manufactures) betoken at once an
advanced state of industry and an enlightened State administration.
The governments and countries of the North stood at about the same
stage of culture and statemanship as the Sublime Porte does in our
day. The Sultan has, notably, only recently concluded commercial
treaties, by which he engages not to tax exports of raw materials
and manufactures higher than fourteen per cent but imports not
higher than five per cent. And there accordingly that system of
finance which professes to regard revenue as its chief object
continues in full operation. Those statesmen and public writers who
follow or advocate that system ought to betake themselves to
Turkey; there they might really stand at the head of the times.

5. The Hansards were formerly termed 'Easterlings' or Eastern
merchants, in England, in contradistinction to those of the West,
or the Belgians and Dutch. From this term is derived 'sterling' or
'pound sterling', an abbreviation of the word 'Easterlings' because
formerly all the coin in circulation in England was that of the
Hanseatic League.

6. Hume, History of England, ch. xxxv.

7. M. I. Sartorius, Geschichte der Hansa.

8. II Edward III, cap. 5.

9. Rymer's Foedera, p. 496. De Witte, Interest of Holland, p. 45.

10. Hume, History of England, chap. xxv.

11. Edward IV, cap. iv. The preamble to this Act is so
characteristic that we cannot refrain from quoting it verbatim.
    'Whereas to the said Parliament, by the artificers men and
women inhabitant and resident in the city of London and in other
cities, towns, boroughs and villages within this realm and Wales,
it has been piteously shewed and complained, how that all they in
general and every of them he greatly impoverished and much injured
and prejudiced of their worldly increase and living, by the great
multitude of divers chaffers and wares pertaining to their
mysteries and occupations, being fully wrought and ready made to
sale, as well by the hand of strangers being the king's enemies as
others, brought into this realm and Wales from beyond the sea, as
well by merchant strangers as denizens or other persons, whereof
the greatest part is deceitful and nothing worth in regard of any
man's occupation or profits, by occasion whereof the said
artificers cannot live by their mysteries and occupations, as they
used to do in times past, but divers of them -- as well
householders as hirelings and other servants and apprentices -- in
great number be at this day unoccupied, and do hardly live, in
great idleness, poverty and ruin, whereby many inconveniences have
grown before this time, and hereafter more are like to come (which
God defend), if due remedy be not in their behalf provided.'

12. Hume, chap. xxvi.

13. Hume, chap. xxxv; also Sir J. Hayward, Life and Reign of Edward
VI.

14. Hume, chap. xxxvii; Heylyn.

15. Campbell's Lives of the Admirals, vol. i, p. 386.

16. Our author would appear to have forgotten, or else unfairly
ignored, the exploits of the British fleet under Lord Exmouth.

17. Smith, Wealth of Nations, Book III, ch. iv.


Chapter 3

The Netherlanders

    In respect to temperament and manners, to the origin and
language of their inhabitants, no less than to their political
connection and geographical position, Holland, Flanders, and
Brabant constituted portions of the German Empire. The more
frequent visits of Charlemagne and his residence in the vicinity of
these countries must have exercised a much more powerful influence
on their civilisation than on that of more distant German
territories. Furthermore, Flanders and Brabant were specially
favoured by nature as respects agriculture and manufactures, as
Holland was as respects cattle-farming and commerce.
    Nowhere in Germany was internal trade so powerfully aided by
extensive and excellent sea and river navigation as in these
maritime states. The beneficial effects of these means of water
transport on the improvement of agriculture and on the growth of
the towns must in these countries, even at an early period, have
led to the removal of impediments which hindered their progress and
to the construction of artificial canals. The prosperity of
Flanders was especially promoted by the circumstance that her
ruling Counts recognised the value of public security, of good
roads, manufactures, and flourishing cities before all other German
potentates, Favoured by the nature of their territory, they devoted
themselves with zeal to the extirpation of the robber knights and
of wild beasts. Active commercial intercourse between the cities
and the country, the extension of cattle-farming, especially of
sheep, and of the culture of flax and hemp, naturally followed; and
wherever the raw material is abundantly produced, and security of
property and of intercourse is maintained, labour and skill for
working up that material will soon be found. Meanwhile the Counts
of Flanders did not wait until chance should furnish them with
woollen weavers, for history informs us that they imported such
artificers from foreign countries.
    Supported by the reciprocal trade of the Hanseatic League and
of Rolland, Flanders soon rose by her woollen manufactures to be
the central point of the commerce of the North, just as Venice by
her industry and her shipping had become the centre of the commerce
of the South. The merchant shipping, and reciprocal trade of the
Hanseatic League and the Dutch, together with the manufacturing
trade of Flanders, constituted one great whole, a real national
industry. A policy of commercial restriction could not in their
case be deemed necessary, because as yet no competition had arisen
against the manufacturing supremacy of Flanders. That under such
circumstances manufacturing industry thrives best under free trade,
the Counts of Flanders understood without having read Adam Smith.
Quite in the spirit of the present popular theory, Count Robert
III, when the King of England requested him to exclude the Scotch
from the Flemish markets, replied, 'Flanders has always considered
herself a free market for all nations, and it does not consist with
her interests to depart from that principle.'
    After Flanders had continued for centuries to be the chief
manufacturing country, and Bruges the chief market, of Northern
Europe, their manufactures and commerce passed over to the
neighbouring province of Brabant, because the Counts of Flanders
would not continue to grant them those concessions to which in the
period of their great prosperity they had laid claim. Antwerp then
became the principal seat of commerce, and Louvain the chief
manufacturing city of Northern Europe. In consequence of this
change of circumstances, the agriculture of Brabant soon rose to a
high state of prosperity. The change in early times from payment of
imposts in kind to their payment in money, and, above all, the
limitation of the feudal system, also tended especially to its
advantage.
    In the meantime the Dutch, who appeared more and more upon the
scene, with united power, as rivals to the Hanseatic League, laid
the foundation of their future power at sea. Nature had conferred
benefits on this small nation both by her frowns and smiles. Their
perpetual contests with the inroads of the sea necessarily
developed in them a spirit of enterprise, industry, and thrift,
while the land which they had reclaimed and protected by such
indescribable exertions must have seemed to them a property to
which too much care could not be devoted. Restricted by Nature
herself to the pursuits of navigation, of fisheries, and the
production of meat, cheese, and butter, the Dutch were compelled to
supply their requirements of grain, timber, fuel, and clothing
materials by their marine carrying trade, their exports of dairy
produce, and their fisheries.
    Those were the principal causes why the Hansards were at a
later period gradually excluded by the Dutch from the trade with
the north-eastern countries. The Dutch required to import far
greater quantities of agricultural produce and of timber than did
the Hansards, who were chiefly supplied with these articles by the
territories immediately adjoining their cities. And, further, the
vicinity to Holland of the Belgian manufacturing districts, and of
the Rhine with its extensive, fertile, and vine-clad banks, and its
stream navigable up to the mountains of Switzerland, constituted
great advantages for the Dutch.
    It may be considered as an axiom that the commerce and
prosperity of countries on the sea coast is dependent on the
greater or less magnitude of the river territories with which they
have communication by water.(1*) If we look at the map of Italy, we
shall find in the great extent and fertility of the valley of the
Po the natural reason why the commerce of Venice so greatly
surpassed that of Genoa or of Pisa. The trade of Holland has its
chief sources in the territories watered by the Rhine and its
tributary streams, and in the same proportion as these territories
were much richer and more fertile than those watered by the Elbe
and the Weser must the commerce of Holland exceed that of the Hanse
Towns. To the advantages above named was added another fortunate
incident -- the invention by Peter Böckels of the best mode of
salting herrings. The best mode of catching and of 'böckelling'
these fish (the latter term derived from the inventor) remained for
a long period a secret known only to the Dutch, by which they knew
how to prepare their herrings with a peculiar excellence surpassing
those of all other persons engaged in sea fishery, and secured for
themselves a preference in the markets as well as better
prices.(2*) Anderson alleges that after the lapse of centuries from
the date of these inventions in Holland, the English and Scotch
fishermen, notwithstanding their enjoyment of a considerable bounty
on export, could not find purchasers for their herrings in foreign
markets, eves at much lower prices, in competition with the Dutch.
If we bear in mind how great was the consumption of sea fish in all
countries before the Reformation, we can well give credit to the
fact that at a time when the Hanseatic shipping trade had already
begun to decline, the Dutch found occasion for building 2,000 new
vessels annually.
    From the period when all the Belgian and Batavian provinces
were united under the dominion of the House of Burgundy, these
countries partly acquired the great benefit of national unity, a
circumstance which must not be left out of sight in connection with
Holland's success in maritime trade in competition with the cities
of Northern Germany. Under the Emperor Charles V the United
Netherlands constituted a mass of power and capacity which would
have insured to their imperial ruler supremacy over the world, both
by land and at sea, far more effectually than all the gold mines on
earth and all the papal favours and bulls could have done, had he
only comprehended the nature of those powers and known how to
direct and to make use of them.
    Had Charles V cast away from him the crown of Spain as a man
casts away a burdensome stone which threatens to drag him down a
precipice, how different would have been the destiny of the Dutch
and the German peoples! As Ruler of the United Netherlands, as
Emperor of Germany, and as Head of the Reformation, Charles
possessed all the requisite means, both material and intellectual,
for establishing the mightiest industrial and commercial empire,
the greatest military and naval power which had ever existed -- a
maritime power which would have united under one flag all the
shipping from Dunkirk as far as Riga.
    The conception of but one idea, the exercise of but one man's
will, were all that were seeded to have raised Germany to the
position of the wealthiest and mightiest empire in the world, to
have extended her manufacturing and commercial supremacy over every
quarter of the globe, and probably to have maintained it thus for
many centuries.
    Charles V and his morose son followed the exactly opposite
policy. Placing themselves at the head of the fanatical party, they
made it their chief object to hispanicise the Netherlands. The
result of that policy is matter of history. The northern Dutch
provinces, strong by means of the element over which they were
supreme, conquered their independence. In the southern provinces
industry, the arts, and commerce, perished under the hand of the
executioner, save only where they managed to escape that fate by
emigrating to other countries. Amsterdam became the central point
of the world's commerce instead of Antwerp. The cities of Holland,
which already at an earlier period, in consequence of the
disturbances in Brabant, had attracted a great number of Belgian
woollen weavers, had now not room enough to afford refuge to all
the Belgian fugitives, of whom a great number were consequently
compelled to emigrate to England and to Saxony.
    The struggle for liberty begot in Holland an heroic spirit at
sea, to which nothing appeared too difficult or too adventurous,
while on the contrary the spirit of fanaticism enfeebled the very
nerves of Spain. Holland enriched herself principally by
privateering against Spain, especially by the capture of the
Spanish treasure fleets. By that means she carried on an enormous
contraband trade with the Peninsula and with Belgium. After the
union of Portugal with Spain, Holland became possessed of the most
important Portuguese colonies in the East indies, and acquired a
part of Brazil. Up to the first half of the seventeenth century the
Dutch surpassed the English in respect of manufactures and of
colonial possessions, of commerce and of navigation, as greatly as
in our times the English have surpassed the French in these
respects. But with the English Revolution a mighty change developed
itself. The spirit of freedom had become only a citizen spirit in
Holland. As in all mere mercantile aristocracies, all went on well
for a time; so long as the preservation of life and limbs and of
property, and mere material advantages, were the objects clearly in
view, they showed themselves capable of great deeds. But
statesmanship of a more profound character was beyond their ken.
They did not perceive that the supremacy which they had won, could
only be maintained if it were based on a great nationality and
supported by a mighty national spirit. On the other hand, those
states which had developed their nationality on a large scale by
means of monarchy, but which were yet behindhand in respect of
commerce and industry, became animated by a sentiment of shame that
so small a country as Holland should act the part of master over
them in manufactures and commerce, in fisheries, and naval power.
In England this sentiment was accompanied by all the energy of the
new-born Republic. The Navigation Laws were the challenge glove
which the rising supremacy of England cast into the face of the
reigning supremacy of Holland. And when the conflict came, it
became evident that the English nationality was of far larger
calibre than that of the Dutch. The result could not remain
doubtful.
    The example of England was followed by France. Colbert had
estimated that the entire marine transport trade employed about
20,000 vessels, of which 16,000 were owned by the Dutch -- a number
altogether out of proportion for so small a nation. In consequence
of the succession of the Bourbons to the Spanish throne, France was
enabled to extend her trade over the Peninsula (to the great
disadvantage of the Dutch), and equally so in the Levant.
Simultaneously the protection by France of her native manufactures,
navigation, and fisheries, made immense inroads on the industry and
commerce of Holland.
    England had gained from Holland the greater part of the trade
of the latter with the northern European states, her contraband
trade with Spain and the Spanish colonies, and the greater part of
her trade with the East and West Indies, and of her fisheries. But
the most serious blow was inflicted on her by the Methuen Treaty of
1703. From that the commerce of Holland with Portugal, the
Portuguese colonies, and the East indies, received a deadly wound.
    When Holland thus commenced to lose so large a portion of her
foreign trade, the same result took place which had previously been
experienced by the Hanseatic cities and by Venice : the material
and mental capital which could now find no employment in Holland,
was diverted by emigration or in the shape of loans to those
countries which had acquired the supremacy from Holland which she
had previously possessed.
    If Holland in union with Belgium, with the Rhenish districts,
and with North Germany, had constituted one national territory, it
would have been difficult for England and France to have weakened
her naval power, her foreign commerce, and her internal industry by
wars and by commercial policy, as they succeeded in doing. A nation
such as that would have been, could have placed in competition with
the commercial systems of other nations a commercial system of her
own. And if owing to the development of the manufactures of those
other nations her industry suffered some injury, her own internal
resources, aided by founding colonies abroad, would have abundantly
made good that loss. Holland suffered decline because she, a mere
strip of sea coast, inhabited by a small population of German
fishermen, sailors, merchants, and dairy farmers, endeavoured to
constitute herself a national power, while she considered and acted
towards the inland territory at her back (of which she properly
formed a part) as a foreign land.
    The example of Holland, like that of Belgium, of the Hanseatic
cities, and of the italian republics, teaches us that mere private
industry does not suffice to maintain the commerce, industry, and
wealth of entire states and nations, if the public circumstances
under which it is carried on are unfavourable to it; and further,
that the greater part of the productive powers of individuals are
derived from the political constitution of the government and from
the power of the nation. The agricultural industry of Belgium
became flourishing again under Austrian rule. When united to France
her manufacturing industry rose again to its ancient immense
extent. Holland by herself was never in a position to establish and
maintain an independent commercial system of her own in competition
with great nations. But when by means of her union with Belgium
after the general peace (in 1815) her internal resources,
population, and national territory were increased to such an extent
that she could rank herself among the great nationalities, and
became possessed in herself of a great mass and variety of
productive powers, we see the protective system established also in
the Netherlands, and under its influence agriculture, manufactures,
and commerce make a remarkable advance. This union has now been
again dissolved (owing to causes which lie outside the scope and
purpose of our present work), and thus the protective system in
Holland has been deprived of the basis on which it rested, while in
Belgium it is still maintained.
    Holland is now maintained by her colonies and by her transport
trade with Germany. But the next great naval war may easily deprive
her of the former; and the more the German Zollverein attains to a
clear perception of its interests, and to the exercise of its
powers, the more clearly will it recognize the necessity of
including Holland within the Zollverein.

NOTES:

1. The construction of good roads, and still more of railways,
which has taken place in quite recent times, has materially
modified this axiom.

2. It has been recently stated that the excellence of the Dutch
herrings is attributable not only to the superior methods above
named, but also to the casks in which they are 'böckelled' and
exported being constructed of oak.

Chapter 4

The English


    In our account of the Hanseatic League we have shown how in
England agriculture and sheep farming have been promoted by foreign
trade; how at a subsequent period, through the immigration of
foreign artificers, fleeing from persecution in their native land,
and also owing to the fostering measures adopted by the British
Government, the English woollen manufacturing industry had
gradually attained to a flourishing condition; and how, as a direct
consequence of that progress in manufacturing industry, as well as
of the wise and energetic measures adopted by Queen Elizabeth, all
the foreign trade which formerly had been monopolised by foreigners
had been successfully diverted into the hands of the merchants at
home.
    before we continue our exposition of the development of English
national economy from the point where we left off in Chapter 2, we
venture here to make a few remarks as to the origin of British
industry.
    The source and origin of England's industrial and commercial
greatness must be traced mainly to the breeding of sheep and to the
woollen manufacture.
    before the first appearance of the Hansards on British soil the
agriculture of England was unskilful and her sheep farming of
little importance. There was a scarcity of winter fodder for the
cattle, consequently a large proportion had to be slaughtered in
autumn, and hence both stock and manure were alike deficient. Just
as in all uncultivated territories -- as formerly in Germany, and
in the uncleared districts, of America up to the present time --
hog breeding furnished the principal supply of meat, and that for
obvious reasons. The pigs needed little care -- foraged for
themselves, and found a plentiful supply of food on the waste lands
and in the forests; and by keeping only a moderate number of
breeding sows through the winter, one was sure in the following
spring of possessing considerable herds.
    but with the growth of foreign trade hog breeding diminished,
sheep farming assumed larger proportions, and agriculture and the
breeding of horned cattle rapidly improved.
    Hume, in his 'History of England,'(1*) gives a very interesting
account of the condition of English agriculture at the beginning of
the fourteenth century:
    'In the year 1327 Lord Spencer counted upon 63 estates in his
possession, 28,000 sheep, 1,000 oxen, 1,200 cows, 560 horses, and
2,000 hogs: giving a proportion of 450 sheep, 35 head of cattle, 9
horses, and 22 hogs to each estate.'
    From this statement we may perceive how greatly, even in those
early days, the number of sheep in England exceeded that of all the
other domestic animals put together. The great advantages derived
by the English aristocracy from the business of sheep farming gave
them an interest in industry and in improved methods of agriculture
even at that early period, when noblemen in most Continental states
knew no better mode of utilising the greater part of their
possessions than by preserving large herds of deer, and when they
knew no more honourable occupation than harassing the neighbouring
cities and their trade by hostilities of various kinds.
    And at this period, as has been the case in Hungary more
recently, the flocks so greatly increased that many estates could
boast of the possession of from 10,000 to 24,000 sheep. Under these
circumstances it necessarily followed that, under the protection
afforded by the measures introduced by Queen Elizabeth, the woollen
manufacture, which had already progressed very considerably in the
days of former English rulers, should rapidly reach a very high
degree of prosperity.(2*)
    In the petition of the Hansards to the Imperial Diet, mentioned
in Chapter II, which prayed for the enactment of retaliatory
measures, England's export of cloth was estimated at 200,000
pieces; while in the days of James I the total value of English
cloths exported had already reached the prodigious amount of two
million pounds sterling, while in the year 1354 the total money
value of the wool exported had amounted only to 277,000 l., and
that of all other articles of export to no more than 16,400 l. Down
to the reign of the last-named monarch the great bulk of the cloth
manufactured in England used to be exported to belgium in the rough
state and was there dyed and dressed; but owing to the measures of
protection and encouragement introduced under James I and Charles
I the art of dressing cloth in England attained so high a pitch of
perfection that thenceforward the importation of the finer
descriptions of cloth nearly ceased, while only dyed and finely
dressed cloths were exported.
    In order fully to appreciate the importance of these results of
the English commercial policy, it must be here observed that, prior
to the great development of the linen, cotton, silk, and iron
manufactures in recent times, the manufacture of cloth constituted
by far the largest proportion of the medium of exchange in the
trade with all European nations, particularly with the northern
kingdoms, as well as in the commercial intercourse with the Levant
and the East and West Indies. To what a great extent this was the
case we may infer from the undoubted fact that as far back as the
days of James I the export of woollen manufactures represented
nine-tenths of all the English exports put together.(3*)
    This branch of manufacture enabled England to drive the
Hanseatic League out of the markets of Russia, Sweden, Norway, and
Denmark, and to acquire for herself the best part of the profits
attaching to the trade with the Levant and the East and West
Indies. It was this industry that stimulated that of coal mining,
which again gave rise to an extensive coasting trade and the
fisheries, both which, as constituting the basis of naval power,
rendered possible the passing of the famous Navigation Laws which
really laid the foundation of England's maritime supremacy. It was
round the woollen industry of England that all other branches of
manufacture grew up as round a common parent stem; and it thus
constitutes the foundation of England's greatness in industry,
commerce, and naval power.
    At the same time the other branches of English manufacture were
in no way neglected.
    Already under the reign of Elizabeth the importation of metal
and leather goods, and of a great many other manufactured articles,
had been prohibited, while the immigration of German miners and
metal workers was encouraged. Formerly ships had been bought of the
Hansards or were ordered to be built in the baltic ports. But she
contrived, by restrictions on the one hand and encouragements on
the other, to promote shipbuilding at home.
    The timber required for the purpose was brought to England from
the baltic ports, whereby again a great impetus was given to the
British export trade to those regions.
    The herring fishery had been learned from the Dutch, whale
fishing from the dwellers on the shores of the Bay of Biscay; and
both these fisheries were now stimulated by means of bounties.
James I more particularly took a lively interest in the
encouragement of shipbuilding and of fisheries. Though we may smile
at his unceasing exhortations to his people to eat fish, yet we
must do him the justice to say that he very clearly perceived on
what the future greatness of England depended. The immigration into
England, moreover, of the Protestant artificers who had been driven
from Belgium and France by Philip II and Louis XIV gave to England
an incalculable increase of industrial skill and manufacturing
capital. To these men England owes her manufactures of fine woollen
cloth, her progress in the arts of making hats, linen, glass,
paper, silk, clocks and watches, as well as a part of her metal
manufacture; branches of industry which she knew how speedily to
increase by means of prohibition and high duties.
    The island kingdom borrowed from every country of the Continent
its skill in special branches of industry, and planted them on
English soil, under the protection of her customs system. Venice
had to yield (amongst other trades in articles of luxury) the art
of glass manufacture, while Persia had to give up the art of carpet
weaving and dyeing.
    Once possessed of any one branch of industry, England bestowed
upon it sedulous care and attention, for centuries treating it as
a young tree which requires support and care. Whoever is not yet
convinced that by means of diligence, skill, and economy, every
branch of industry must become profitable in time -- that in any
nation already advanced in agriculture and civilisation, by means
of moderate protection, its infant manufactures, however defective
and dear their productions at first may be, can by practice,
experience, and internal competition readily attain ability to
equal in every respect the older productions of their foreign
competitors; whoever is ignorant that the success of one particular
branch of industry depends on that of several other branches, or to
what a high degree a nation can develop its productive powers, if
she takes care that each successive generation shall continue the
work of industry where former generations have left it; let him
first study the history of English industry before he ventures to
frame theoretical systems, or to give counsel to practical
statesmen to whose hands is given the power of promoting the weal
or the woe of nations.
    Under George I English statesmen had long ago clearly perceived
the grounds on which the greatness of the nation depends. At the
opening of Parliament in 1721, the King is made to say by the
Ministry, that 'it is evident that nothing so much contributes to
promote the public well-being as the exportation of manufactured
goods and the importation of foreign raw material.(4*)
    This for centuries had been the ruling maxim of English
commercial policy, as formerly it had been that of the commercial
policy of the Venetian Republic. It is in force at this day (1841)
just as it was in the days of Elizabeth. The fruits it has borne
lie revealed to the eyes of the whole world. The theorists have
since contended that England has attained to wealth and power not
by means of, but in spite of, her commercial policy. As well might
they argue that trees have grown to vigour and fruitfulness, not by
means of, but in spite of, the props and fences with which they had
been supported when they were first planted.
    Nor does English history supply less conclusive evidence of the
intimate connection subsisting between a nation's general political
policy and political economy. Clearly the rise and growth of
manufactures in England, with the increase of population resulting
from it, tended to create an active demand for salt fish and for
coals, which led to a great increase of the mercantile marine
devoted to fisheries and the coasting trade. Both the fisheries and
the coasting trade were previously in the hands of the Dutch.
Stimulated by high customs duties and by bounties, the English now
directed their own energies to the fishery trade, and by the
Navigation Laws they secured chiefly to British sailors not only
the transport of sea-borne coal, but the whole of the carrying
trade by sea. The consequent increase in England's mercantile
marine led to a proportionate augmentation of her naval power,
which enabled the English to bid defiance to the Dutch fleet.
Shortly after the passing of the Navigation Laws, a naval war broke
out between England and Holland, whereby the trade of the Dutch
with countries beyond the English Channel suffered almost total
suspension, while their shipping in the North Sea and the Baltic
was almost annihilated by English privateers. Hume estimates the
number of Dutch vessels which thus fell into the hands of English
cruisers at 1,600, while Davenant, in his 'Report on the Public
Revenue,' assures us that in the course of the twenty-eight years
next following the passing of the English Navigation Laws, the
English shipping trade had increased to double its previous
extent.(5*)
    Amongst the more important results of the Navigation Laws, the
following deserve special mention, viz.:
    1. The expansion of the English trade with all the northern
kingdoms, with Germany and Belgium (export of manufactures and
import of raw material), from which, according to Anderson's
account, up to the year 1603 the English had been almost entirely
shut out by the Dutch.
    2. An immense extension of the contraband trade with Spain and
Portugal, and their West Indian colonies.
    3. A great increase of England's herring and whale fisheries,
which the Dutch had previously almost entirely monopolised.
    4. The conquest of the most important English colony in the
West Indies -- Jamaica -- in 1655; and with that, the command of
the West Indian sugar trade.
    5. The conclusion of the Methuen Treaty (1703) with Portugal,
of which we have fully treated in the chapters devoted to Spain and
Portugal in this work. By the operation of this treaty the Dutch
and the Germans were entirely excluded from the important trade
with Portugal and her colonies: Portugal sank into complete
political dependence upon England, while England acquired the
means, through the gold and silver earned in her trade with
Portugal, of extending enormously her own commercial intercourse
with China and the East Indies, and thereby subsequently of laying
the foundation for her great Indian empire, and dispossessing the
Dutch from their most important trading stations.
    The two results last enumerated stand in intimate connection
one with the other. And the skill is especially noteworthy with
which England contrived to make these two countries -- Portugal and
India -- the instruments of her own future greatness. Spain and
Portugal had in the main little to dispose of besides the precious
metals, while the requirements of the East, with the exception of
cloths, consisted chiefly of the precious metals. So far everything
suited most admirably. But the East had principally only cotton and
silk manufactures to offer in exchange, and that did not fit in
with the principle of the English Ministry before referred to,
namely, to export manufactured articles and import raw materials.
How, then, did they act under the circumstances? Did they rest
content with the profits accruing from the trade in cloths with
Portugal and in cotton and silk manufactures with India? By no
means. The English Ministers saw farther than that.
    Had they sanctioned the free importation into England of Indian
cotton and silk goods, the English cotton and silk manufactories
must of necessity soon come to a stand. India had not only the
advantage of cheaper labour and raw material, but also the
experience, the skill, and the practice of centuries. The effect of
these advantages could not fail to tell under a system of free
competition.
    But England was unwilling to found settlements in Asia in order
to become subservient to Asia in manufacturing industry. She strove
for commercial supremacy, and felt that of two countries
maintaining free trade between one another, that one would be
supreme which sold manufactured goods, while that one would be
subservient which could only sell agricultural produce. In her
North American colonies England had already acted on those
principles in disallowing the manufacture in those colonies of even
a single horseshoe nail, and, still more, that no horseshoe nails
made there should be imported into England. How could it be
expected of her that she would give up her own market for
manufactures, the basis of her future greatness, to a people so
numerous, so thrifty, so experienced and perfect in the old systems
of manufacture as the Hindoos?
    Accordingly, England prohibited the import of the goods dealt
in by her own factories, the Indian cotton and silk fabrics.(6*)
The prohibition was complete and peremptory. Not so much as a
thread of them would England permit to be used. She would have none
of these beautiful and cheap fabrics, but preferred to consume her
own inferior and more costly stuffs. She was, however, quite
willing to supply the Continental nations with the far finer
fabrics of India at lower prices, and willingly yielded to them all
the benefit of that cheapness; she herself would have none of it.
    Was England a fool in so acting? Most assuredly, according to
the theories of Adam Smith and J. B. Say the Theory of Values. For,
according to them, England should have bought what she required
where she could buy them cheapest and best: it was an act of folly
to manufacture for herself goods at a greater cost than she could
buy them at elsewhere, and at the same time give away that
advantage to the Continent.
    The case is quite the contrary, according to our theory, which
we term the Theory of the Powers of Production, and which the
English Ministry, without having examined the foundation on which
it rests, yet practically adopted when enforcing their maxim of
importing produce and exporting fabrics.
    The English Ministers cared not for the acquisition of
low-priced and perishable articles of manufacture, but for that of
a more costly but enduring manufacturing power.
    They have attained their object in a brilliant degree. At this
day England produces seventy million pounds' worth of cotton and
silk goods, and supplies all Europe, the entire world, India itself
included, with British manufactures. Her home production exceeds by
fifty or a hundred times the value of her former trade in Indian
manufactured goods.
    What would it have profited her had she been buying for a
century the cheap goods of Indian manufacture?
    And what have they gained who purchased those goods so cheaply
of her? The English have gained power, incalculable power, while
the others have gained the reverse of power.
    That in the face of results like these, historically attested
upon unimpeachable evidence, Adam Smith should have expressed so
warped a judgment upon the Navigation Laws, can only be accounted
for upon the same principle on which we shall in another chapter
explain this celebrated author's fallacious conclusions respecting
commercial restrictions. These facts stood in the way of his pet
notion of unrestricted free trade. It was therefore necessary for
him to obviate the objection that could be adduced against his
principle from the effects of the Navigation Laws, by drawing a
distinction between their political objects and their economical
objects. He maintained that, although the Navigation Laws had been
politically necessary and beneficial, yet that they were
economically prejudicial and injurious. How little this distinction
can be justified by the nature of things or by experience, we trust
to make apparent in the course of this treatise.
    J. B. Say, though he might have known better from the
experience of North America, here too, as in every instance where
the principles of free trade and protection clash, goes still
farther than his predecessor. Say reckons up what the cost of a
sailor to the French nation is, owing to the fishery bounties, in
order to show how wasteful and unremunerative these bounties are.
    The subject of restrictions upon navigation constitutes a
formidable stumbling-block in the path of the advocates of
unrestricted free trade, which they are only too glad to pass over
in silence, especially if they are members of the mercantile
community in seaport towns.
    The truth of the matter is this. Restrictions on navigation are
governed by the same law as restrictions upon any other kind of
trade. Freedom of navigation and the carrying trade conducted by
foreigners are serviceable and welcome to communities in the early
stages of their civilisation, so long as their agriculture and
manufactures still remain undeveloped. Owing to want of capital and
of experienced seamen, they are willing to abandon navigation and
foreign trade to other nations. Later on, however, when they have
developed their producing power to a certain point and acquired
skill in shipbuilding and navigation, then they will desire to
extend their foreign trade, to carry it on in their own ships, and
become a naval power themselves. Gradually their own mercantile
marine grows to such a degree that they feel themselves in a
position to exclude the foreigner and to conduct their trade to the
most distant places by means of their own vessels. Then the time
has come when, by means of restrictions on navigation, a nation can
successfully exclude the more wealthy, more experienced, and more
powerful foreigner from participation in the profits of that
business. When the highest degree of progress in navigation and
maritime power has been reached, a new era will set in, no doubt;
and such was that stage of advancement which Dr Priestley had in
his mind when he wrote 'that the time may come when it may be as
politic to repeal this Act as it was to make it.'(7*)
    Then it is that, by means of treaties of navigation based upon
equality of rights, a nation can, on the one hand, secure undoubted
advantages as against less civilised nations, who will thus be
debarred from introducing restrictions on navigation in their own
special behalf; while, on the other hand, it will thereby preserve
its own seafaring population from sloth, and spur them on to keep
pace with other countries in shipbuilding and in the art of
navigation. While engaged in her struggle for supremacy, Venice was
doubtless greatly indebted to her policy of restrictions on
navigation; but as soon as she had acquired supremacy in trade,
manufactures, and navigation, it was folly to retain them. For
owing to them she was left behind in the race, both as respects
shipbuilding, navigation, and seamanship of her sailors, with other
maritime and commercial nations which were advancing in her
footsteps. Thus England by her policy increased her naval power,
and by means of her naval power enlarged the range of her
manufacturing and commercial powers, and again, by the latter,
there accrued to her fresh accessions of maritime strength and of
colonial possessions. Adam Smith, when he maintains that the
Navigation Laws have not been beneficial to England in commercial
respects, admits that, in any case, these laws have increased her
power. And power is more important than wealth. That is indeed the
fact. Power is more important than wealth. And why? Simply because
national power is a dynamic force by which new productive resources
are opened out, and because the forces of production are the tree
on which wealth grows, and because the tree which bears the fruit
is of greater value than the fruit itself. Power is of more
importance than wealth because a nation, by means of power, is
enabled not only to open up new productive sources, but to maintain
itself in possession of former and of recently acquired wealth, and
because the reverse of power -- namely, feebleness -- leads to the
relinquishment of all that we possess, not of acquired wealth
alone, but of our powers of production, of our civilisation, of our
freedom, nay, even of our national independence, into the hands of
those who surpass us in might, as is abundantly attested by the
history of the Italian republics, of the Hanseatic League, of the
Belgians, the Dutch, the Spaniards, and the Portuguese.
    But how came it that, unmindful of this law of alternating
action and reaction between political power, the forces of
production and wealth, Adam Smith could venture to contend that the
Methuen Treaty and the Act of Navigation had not been beneficial to
England from a commercial point of view? We have shown how England
by the policy which she pursued acquired power, and by her
political power gained productive power, and by her productive
power gained wealth. Let us now see further how, as a result of
this policy, power has been added to power, and productive forces
to productive forces.
    England has got into her possession the keys of every sea, and
placed a sentry over every nation: over the Germans, Heligoland;
over the French, Guernsey and Jersey; over the inhabitants of North
America, Nova Scotia and the Bermudas; over Central America, the
island of Jamaica; over all countries bordering on the
Mediterranean, Gibraltar, Malta, and the Ionian Islands. She
possesses every important strategical position on both the routes
to India with the exception of the Isthmus of Suez, which she is
striving to acquire; she dominates the Mediterranean by means of
Gibraltar, the Red Sea by Aden, and the Persian Gulf by Bushire and
Karrack. She needs only the further acquisition of the Dardanelles,
the Sound, and the Isthmuses of Suez and Panama, in order to be
able to open and close at her pleasure every sea and every maritime
highway. Her navy alone surpasses the combined maritime forces of
all other countries, if not in number of vessels, at any rate in
fighting strength.
    Her manufacturing capacity excels in importance that of all
other nations. And although her cloth manufactures have increased
more than tenfold (to forty-four and a half millions) since the
days of James I, we find the yield of another branch of industry,
which was established only in the course of the last century,
namely, the manufacture of cotton, amounting to a much larger sum,
fifty-two and a half millions.(8*)
    Not content with that, England is now attempting to raise her
linen manufacture, which has been long in a backward state as
compared with that of other countries, to a similar position,
possibly to a higher one than that of the two above-named branches
of industry: it now amounts to fifteen and a half millions
sterling. In the fourteenth century, England was still so poor in
iron that she thought it necessary to prohibit the exportation of
this indispensable metal; she now, in the nineteenth century,
manufactures more iron and steel wares than all the other nations
on earth (namely, thirty-one millions' worth), while she produces
thirty-four millions in value of coal and other minerals. These two
sums exceed by over sevenfold the value of the entire gold and
silver production of all other nations, which amount to about two
hundred and twenty million francs, or nine millions sterling.
    At this day she produces more silk goods than all the Italian
republics produced in the Middle Ages together, namely, thirteen
and a half million pounds. Industries which at the time of Henry
VIII and Elizabeth scarcely deserved classification, now yield
enormous sums; as, for instance, the glass, china, and stoneware
manufactures, representing eleven millions; the copper and brass
manufactures, four and a half millions; the manufactures of paper,
books, colours, and furniture, fourteen millions.
    England produces, moreover, sixteen millions' worth of leather
goods, besides ten millions' worth of unenumerated articles. The
manufacture of beer and spirituous liquors in England alone greatly
exceeds in value the aggregate of national production in the days
of James I, namely, forty-seven millions sterling.
    The entire manufacturing production of the United Kingdom at
the present time, is estimated to amount to two hundred and
fifty-nine and a half millions sterling.
    As a consequence, and mainly as a consequence, of this gigantic
manufacturing production, the productive power of agriculture has
been enabled to yield a total value exceeding twice that sum (five
hundred and thirty-nine millions sterling).
    It is true that for this increase in her power, and in her
productive capacity, England is not indebted solely to her
commercial restrictions, her Navigation Laws, or her commercial
treaties, but in a large measure also to her conquests in science
and in the arts.
    But how comes it, that in these days one million of English
operatives can perform the work of hundreds of millions? It comes
from the great demand for manufactured goods which by her wise and
energetic policy she has known how to create in foreign lands, and
especially in her colonies; from the wise and powerful protection
extended to her home industries; from the great rewards which by
means of her patent laws she has offered to every new discovery;
and from the extraordinary facilities for her inland transport
afforded by public roads, canals, and railways.
    England has shown the world how powerful is the effect of
facilities of transport in increasing the powers of production, and
thereby increasing the wealth, the population, and the political
power of a nation. She has shown us what a free, industrious, and
well-governed community can do in this respect within the brief
space of half a century, even in the midst of foreign wars. That
which the Italian republics had previously accomplished in these
respects was mere child's play. It is estimated that as much as a
hundred and eighteen millions sterling have been expended in
England upon these mighty instruments of the nation's productive
power.
    England, however, only commenced and carried out these works
when her manufacturing power began to grow strong. Since then, it
has become evident to all observers that that nation only whose
manufacturing power begins to develop itself upon an extensive
scale is able to accomplish such works; that only in a nation which
develops concurrently its internal manufacturing and agricultural
resources will such costly engines of trade repay their cost; and
that in such a nation only will they properly fulfil their purpose.
    It must be admitted, too, that the enormous producing capacity
and the great wealth of England are not the effect solely of
national power and individual love of gain. The people's innate
love of liberty and of justice, the energy, the religious and moral
character of the people, have a share in it. The constitution of
the country, its institutions, the wisdom and power of the
Government and of the aristocracy, have a share in it. The
geographical position, the fortunes of the country, nay, even good
luck, have a share in it.
    It is not easy to say whether the material forces exert a
greater influence over the moral forces, or whether the moral
outweigh the material in their operation; whether the social forces
act upon the individual forces the more powerfully, or whether the
latter upon the former. This much is certain, however, namely, that
between the two there subsists an interchanging sequence of action
and reaction, with the result that the increase of one set of
forces promotes the increase of the other, and that the
enfeeblement of the one ever involves the enfeeblement of the
other.
    Those who seek for the fundamental causes of England's rise and
progress in the blending of Anglo-Saxon with the Norman blood,
should first cast a glance at the condition of the country before
the reign of Edward III. Where were then the diligence and the
habits of thrift of the nation? Those again who would look for them
in the constitutional liberties enjoyed by the people will do well
to consider how Henry VIII and Elizabeth treated their Parliaments.
Wherein did England's constitutional freedom consist under the
Tudors? At that period the cities of Germany and Italy enjoyed a
much greater amount of individual freedom than the English did.
    Only one jewel out of the treasure-house of freedom was
preserved by the Anglo-Saxon-Norman race -- before other peoples of
Germanic origin; and that was the germ from which all the English
ideas of freedom and justice have sprung -- the right of trial by
jury.
    While in Italy the Pandects were being unearthed, and the
exhumed remains (no doubt of departed greatness and wisdom in their
day) were spreading the pestilence of the Codes amongst Continental
nations, we find the English Barons declaring they would not hear
of any change in the law of the land. What a store of intellectual
force did they not thereby secure for the generations to come! How
much did this intellectual force subsequently influence the forces
of material production!
    How greatly did the early banishment of the Latin language from
social and literary circles, from the State departments, and the
courts of law in England, influence the development of the nation,
its legislation, law administration, literature, and industry! What
has been the effect upon Germany of the long retention of the Latin
in conjunction with foreign Codes, and what has been its effect in
Hungary to the present day? What an effect have the invention of
gunpowder, the art of printing, the Reformation, the discovery of
the new routes to India and of America, had on the growth of
English liberties, of English civilisation, and of English
industry? Compare with this their effect upon Germany and France.
In Germany -- discord in the Empire, in the provinces, even within
the walls of cities; miserable controversies, barbarism in
literature, in the administration of the State and of the law;
civil war, persecutions, expatriation, foreign invasion,
depopulation, desolation; the ruin of cities, the decay of
industry, agriculture, and trade, of freedom and civic
institutions; supremacy of the great nobles; decay of the imperial
power, and of nationality; severance of the fairest provinces from
the Empire. In France -- subjugation of the cities and of the
nobles in the interest of despotism; alliance with the priesthood
against intellectual freedom, but at the same time national unity
and power; conquest with its gain and its curse, but, as against
that, downfall of freedom and of industry. In England -- the rise
of cities, progress in agriculture, commerce, and manufactures;
subjection of the aristocracy to the law of the land, and hence a
preponderating participation by the nobility in the work of
legislation, in the administration of the State and of the law, as
also in the advantages of industry; development of resources at
home, and of political power abroad; internal peace; influence over
all less advanced communities; limitation of the powers of the
Crown, but gain by the Crown in royal revenues, in splendour and
stability. Altogether, a higher degree of well-being, civilisation,
and freedom at home, and preponderating might abroad.
    But who can say how much of these happy results is attributable
to the English national spirit and to the constitution; how much to
England's geographical position and circumstances in the past; or
again, how much to chance, to destiny, to fortune?
    Let Charles V and Henry VIII change places, and, in consequence
of a villanous divorce trial, it is conceivable (the reader will
understand why we say 'conceivable') that Germany and the
Netherlands might have become what England and Spain have become.
Place in the position of Elizabeth, a weak woman allying herself to
a Philip II, and how would it have fared with the power, the
civilisation, and the liberties of Great Britain?
    If the force of national character will alone account for
everything in this mighty revolution, must not then the greatest
share of its beneficial results have accrued to the nation from
which it sprang, namely, to Germany? Instead of that, it is just
the German nation which reaped nothing save trouble and weakness
from this movement in the direction of progress.
    In no European kingdom is the institution of an aristocracy
more judiciously designed than in England for securing to the
nobility, in their relation to the Crown and the commonalty,
individual independence, dignity, and stability; to give them a
Parliamentary training and position; to direct their energies to
patriotic and national aims; to induce them to attract to their own
body the élite of the commonalty, to include in their ranks every
commoner who earns distinction, whether by mental gifts,
exceptional wealth, or great achievements; and, on the other hand,
to cast back again amongst the commons the surplus progeny of
aristocratic descent, thus leading to the amalgamation of the
nobility and the commonalty in future generations. By this process
the nobility is ever receiving from the Commons fresh accessions of
civic and patriotic energy, of science, learning, intellectual and
material resources, while it is ever restoring to the people a
portion of the culture and of the spirit of independence peculiarly
its own, leaving its own children to trust to their own resources,
and supplying the commonalty with incentives to renewed exertion.
In the case of the English lord, however large may be the number of
his descendants, only one can hold the title at a time. The other
members of the family are commoners, who gain a livelihood either
in one of the learned professions, or in the Civil Service, in
commerce, industry, or agriculture. The story goes that some time
ago one of the first dukes in England conceived the idea of
inviting all the blood relations of his house to a banquet, but he
was fain to abandon the design because their name was legion,
notwithstanding that the family pedigree had not reached farther
back than for a few centuries. It would require a whole volume to
show the effect of this institution upon the spirit of enterprise,
the colonisation, the might and the liberties, and especially upon
the forces of production of this nation.(9*)
    The geographical position of England, too, has exercised an
immense influence upon the independent development of the nation.
England in its relation to the continent of Europe has ever been a
world by itself; and was always exempt from the effects of the
rivalries, the prejudices, the selfishness, the passions, and the
disasters of her Continental neighbours. To this isolated condition
she is mainly indebted for the independent and unalloyed growth of
her political constitution, for the undisturbed consummation of the
Reformation, and for the secularisation of ecclesiastical property
which has proved so beneficial to her industries. To the same cause
she is also indebted for that continuous peace, which, with the
exception of the period of the civil war, she has enjoyed for a
series of centuries, and which enabled her to dispense with
standing armies, while facilitating the early introduction of a
consistent customs system.
    By reason of her insular position, England not only enjoyed
immunity from territorial wars, but she also derived immense
advantages for her manufacturing supremacy from the Continental
wars. Land wars and devastations of territory inflict manifold
injury upon the manufactures at the seat of hostilities; directly,
by interfering with the farmer's work and destroying the crops,
which deprives the tiller of the soil of the means wherewithal to
purchase manufactured goods, and to produce raw material and food
for the manufacturer; indirectly, by often destroying the
manufactories, or at any rate ruining them, because hostilities
interfere with the importation of raw material and with the
exportation of goods, and because it becomes a difficult matter to
procure capital and labour just at the very time when the masters
have to bear extraordinary imposts and heavy taxation; and lastly
the injurious effects continue to operate even after the cessation
of the war, because both capital and individual effort are ever
attracted towards agricultural work and diverted from manufactures,
precisely in that proportion in which the war may have injured the
farmers and their crops, and thereby opened up a more directly
profitable field for the employment of capital and of labour than
the manufacturing industries would then afford. While in Germany
this condition of things recurred twice in every hundred years, and
caused German manufactures to retrograde, those of England made
uninterrupted progress. English manufacturers, as opposed to their
Continental competitors, enjoyed a double and treble advantage
whenever England, by fitting out fleets and armies, by subsidies,
or by both these means combined, proceeded to take an active part
in foreign wars.
    We cannot agree with the defenders of unproductive expenditure,
namely, of that incurred by wars and the maintenance of large
armies, nor with those who insist upon the positively beneficial
character of a public debt; but neither do we believe that the
dominant school are in the right when they contend that all
consumption which is not directly reproductive -- for instance,
that of war -- is absolutely injurious without qualification. The
equipment of armies, wars, and the debts contracted for these
purposes, may, as the example of England teaches, under certain
circumstances, very greatly conduce to the increase of the
productive powers of a nation. Strictly speaking, material wealth
may have been consumed unproductively, but this consumption may,
nevertheless, stimulate manufacturers to extraordinary exertions,
and lead to new discoveries and improvements, especially to an
increase of productive powers. This productive power then becomes
a permanent acquisition; it will increase more and more, while the
expense of the war is incurred only once for all.(10*) And thus it
may come to pass, under favouring conditions such as have occurred
in England, that a nation has gained immeasurably more than it has
lost from that very kind of expenditure which theorists hold to be
unproductive. That such was really the case with England, may be
shown by figures. For in the course of the war, that country had
acquired in the cotton manufacture alone a power of production
which yields annually a much larger return in value than the amount
which the nation has to find to defray the interest upon the
increased national debt, not to mention the vast development of all
other branches of industry, and the additions to her colonial
wealth.
    Most conspicuous was the advantage accruing to the English
manufacturing interest during the Continental wars, when England
maintained army corps on the Continent or paid subsidies. The whole
expenditure on these was sent, in the shape of English
manufactures, to the seat of war, where these imports then
materially contributed to crush the already sorely suffering
foreign manufacturers, and permanently to acquire the market of the
foreign country for English manufacturing industry. It operated
precisely like an export bounty instituted for the benefit of
British and for the injury of foreign manufacturers.(11*)
    In this way, the industry of the Continental nations has ever
suffered more from the English as allies, than from the English as
enemies. In support of this statement we need refer only to the
Seven Years' War, and to the wars against the French Republic and
Empire.
    Great, however, as have been the advantages heretofore
mentioned, they have been greatly surpassed in their effect by
those which England derived from immigrations attracted by her
political, religious, and geographical conditions.
    As far back as the twelfth century political circumstances
induced Flemish woollen weavers to emigrate to Wales. Not many
centuries later exiled Italians came over to London to carry on
business as money changers and bankers. That from Flanders and
Brabant entire bodies of manufacturers thronged to England at
various periods, we have shown in Chapter II. From Spain and
Portugal came persecuted Jews; from the Hanse Towns, and from
Venice in her decline, merchants who brought with them their ships,
their knowledge of business, their capital, and their spirit of
enterprise. Still more important were the immigrations of capital
and of manufacturers in consequence of the Reformation and the
religious persecutions in Spain, Portugal, France, Belgium,
Germany, and Italy; as also of merchants and manufacturers from
Holland in consequence of the stagnation of trade and industry in
that country occasioned by the Act of Navigation and the Methuen
Treaty. Every political movement, every war upon the Continent,
brought England vast accessions of fresh capital and talents, so
long as she possessed the privileges of freedom, the right of
asylum, internal tranquillity and peace, the protection of the law,
and general well-being. So more recently did the French Revolution
and the wars of the Empire; and so did the political commotions,
the revolutionary and reactionary movements and the wars in Spain,
in Mexico, and in South America. By means of her Patent Laws,
England long monopolised the inventive genius of every nation. It
is no more than fair that England, now that she has attained the
culminating point of her industrial growth and progress, should
restore again to the nations of Continental Europe a portion of
those productive forces which she originally derived from them.

NOTES:

1. Hume, vol. ii, p. 143.

2. No doubt the decrees prohibiting the export of wool, not to
mention the restrictions placed on the trade in wool in markets
near the coast, were vexations and unfair; yet at the same time the
operated beneficially in the promotion of English industry, and in
the suppression of that of the Flemings.

3. Hume (in 1603). Macpherson, Histoire du Commerce (in 1651).

4. See Ustaritz, Théorie du Commerce, ch. xxviii. Thus we see
George I did not want to export goods and import nothing but specie
in return, which is stated as the fundamental principle of the
so-called 'mercantile system', and which in any case would be
absurd. What he desired was to export manufactures and import raw
material.

5. Hume, vol. v. p. 39.

6. Anderson for the year 1721.

7. Priestley, Lectures on History and General Policy, Pt. II, p.
289.

8. These and the following figures relating to English statistics
are taken from a paper written by McQueen, the celebrated English
statistician, and appearing in the July number of Tait's Edinburgh
Magazine for the year 1839. Possibly they may be somewhat
exaggerated for the moment. But even if so, it is more than
probable that the figures as stated will be reached within the
present decade.

9. Before his lamented death, the gifted author of this remark, in
his Letters on England, read the nobles of his native country a
lesson in this respect which they would do well to lay to heart.

10. England's national debt would not be so great an evil as it now
appears to us, if England's aristocracy would concede that this
burden should be borne by the class who were benefited by the cost
of wars, namely, by the rich. McQueen estimates the capitalised
value of property in the three kingdoms at 4,000 million pounds
sterling, and Martin estimates the capital invested in the colonies
at about 2,600 millions sterling. Hence we see that one-ninth part
of Englishmen's private property would suffice to cover the entire
national debt. Nothing could be more just than such an
appropriation, or at least than the payment of the interest on the
national debt out of the proceeds of an income tax. The English
aristocracy, however, deem it more convenient to provide for this
charge by the imposition of taxes upon articles of consumption, by
which the existence of the working classes is embittered beyond the
point of endurance.

11. See Appendix A.


Chapter 5

The Spaniards and Portuguese

    Whilst the English were busied for centuries in raising the
structure of their national prosperity upon the most solid
foundations, the Spaniards and the Portuguese made a fortune
rapidly by means of their discoveries and attained to great wealth
in a very short space of time. But it was only the wealth of a
spendthrift who had won the first prize in a lottery, whereas the
wealth of the English may be likened to the fortune accumulated by
the diligent and saving head of a family. The former may for a time
appear more to be envied than the latter on account of his lavish
expenditure and luxury; but wealth in his case is only a means for
prodigality and momentary enjoyment, whereas the latter will regard
wealth chiefly as a means of laying a foundation for the moral and
material well-being of his latest posterity.
    The Spaniards possessed flocks of well-bred sheep at so early
a period that Henry I of England was moved to prohibit the
importation of Spanish wool in 1172, and that as far back as the
tenth and eleventh centuries Italian woollen manufacturers used to
import the greater portion of their wool supplies from Spain. Two
hundred years before that time the dwellers on the shores of the
Bay of Biscay had already distinguished themselves in the
manufacture of iron, in navigation, and in fisheries. They were the
first to carry on the whale fishery, and even in the year 1619 they
still so far excelled the English in that business that they were
asked to send fishermen to England to instruct the English in this
particular branch of the fishing trade.(1*)
    Already in the tenth century, under Abdulrahman III (912 to
950), the Moors had established in the fertile plains around
Valencia extensive plantations of cotton, sugar, and rice, and
carried on silk cultivation. Cordova, Seville, and Granada
contained at the time of the Moors important cotton and silk
manufactories.(2*) Valencia, Segovia, Toledo, and several other
cities in Castile were celebrated for their woollen manufactures.
Seville alone at an early period of history contained as many as
16,000 looms, while the woollen manufactories of Segovia in the
year 1552 were employing 13,000 operatives. Other branches of
industry, notably the manufacture of arms and of paper, had become
developed on a similar scale. In Colbert's day the French were
still in the habit of procuring supplies of cloth from Spain.(3*)
The Spanish seaport towns were the seat of an extensive trade and
of important fisheries, and up to the time of Philip II Spain
possessed a most powerful navy. In a word, Spain possessed all the
elements of greatness and prosperity, when bigotry, in alliance
with despotism, set to work to stifle the high spirit of the
nation. The first commencement of this work of darkness was the
expulsion of the Jews, and its crowning act the expulsion of the
Moors, whereby two millions of the most industrious and well-to-do
inhabitants were driven out of Spain with their capital.
    While the Inquisition was thus occupied in driving native
industry into exile, it at the same time effectually prevented
foreign manufacturers from settling down in the country. The
discovery of America and of the route round the Cape only increased
the wealth of both kingdoms after a specious and ephemeral fashion
-- indeed, by these events a death-blow was first given to their
national industry and to their power. For then, instead of
exchanging the produce of the East and West Indies against home
manufactures, as the Dutch and the English subsequently did, the
Spaniards and Portuguese purchased manufactured goods from foreign
nations with the gold and the silver which they had wrung from
their colonies.(4*) They transformed their useful and industrious
citizens into slave-dealers and colonial tyrants: thus they
promoted the industry; the trade, and the maritime power of the
Dutch and English, in whom they raised up rivals who soon grew
strong enough to destroy their fleets and rob them of the sources
of their wealth. In vain the kings of Spain enacted laws against
the exportation of specie and the importation of manufactured
goods. The spirit of enterprise, industry, and commerce can only
strike root in the soil of religious and political liberty; gold
and silver will only abide where industry knows how to attract and
employ them.
    Portugal, however, under the auspices of an enlightened and
powerful minister, did make an attempt to develop her manufacturing
industry, the first results of which strike us with astonishment.
That country like Spain, had possessed from time immemorial fine
flocks of sheep. Strabo tells us that a fine breed of sheep had
been introduced into Portugal from Asia, the cost of which amounted
to one talent per head. When the Count of Ereceira became minister
in 1681, he conceived the design of establishing cloth
manufactories, and of thus working up the native raw material in
order to supply the mother country and the colonies with
home-manufactured goods. With that view cloth workers were invited
from England, and so speedily did the native cloth manufactories
flourish in consequence of the protection secured to them, that
three years later (in 1684) it became practicable to prohibit the
importation of foreign cloths. From that period Portugal supplied
herself and her colonies with native goods manufactured of
home-grown raw material, and prospered exceedingly in so doing for
a period of nineteen years, as attested by the evidence of English
writers themselves.(5*)
    It is true that even in those days the English gave proof of
that ability which at subsequent times they have managed to bring
to perfection. In order to evade the tariff restrictions of
Portugal, they manufactured woollen fabrics, which slightly
differed from cloth though serving the same purpose, and imported
these into Portugal under the designation of woollen serges and
woollen druggets. This trick of trade was, however, soon detected
and rendered innocuous by a decree prohibiting the importation of
such goods.(6*) The success of these measures is all the more
remarkable because the country, not a very great while before, had
been drained of a large amount of capital, which had found its way
abroad owing to the expulsion of the Jews, and was suffering
especially from all the evils of bigotry, of bad government, and of
a feudal aristocracy, which ground down popular liberties and
agriculture.(7*)
    In the year 1703, after the death of Count Ereceira, however,
the famous British ambassador Paul Methuen succeeded in persuading
the Portuguese Government that Portugal would be immensely
benefited if England were to permit the importation of Portuguese
wines at a duty one-third less than the duty levied upon wines of
other countries, in consideration of Portugal admitting English
cloths at the same rate of import duty (viz. twenty-three per
cent.) which had been charged upon such goods prior to the year
1684. It seems as though on the part of the King the hope of an
increase in his customs revenue, and on the part of the nobility
the hope of an increased income from rents, supplied the chief
motives for the conclusion of that commercial treaty in which the
Queen of England (Anne) styles the King of Portugal 'her oldest
friend and ally' -- on much the same principle as the Roman Senate
was formerly wont to apply such designations to those rulers who
had the misfortune to be brought into closer relations with that
assembly.
    Directly after the conclusion of this treaty, Portugal was
deluged with English manufactures, and the first result of this
inundation was the sudden and complete ruin of the Portuguese
manufactories -- a result which had its perfect counterparts in the
subsequent so-called Eden treaty with France and in the abrogation
of the Continental system in Germany.
    According to Anderson's testimony, the English, even in those
days, had become such adepts in the art of understating the value
of their goods in their custom-house bills of entry, that in effect
they paid no more than half the duty chargeable on them by the
tariff.(8*)
    'After the repeal of the prohibition,' says 'The British
Merchant,' 'we managed to carry away so much of their silver
currency that there remained but very little for their necessary
occasions; thereupon we attacked their gold.'(9*) This trade the
English continued down to very recent times. They exported all the
precious metals which the Portuguese had obtained from their
colonies, and sent a large portion of them to the East Indies and
to China, where, as we saw in Chapter IV, they exchanged them for
goods which they disposed of on the continent of Europe against raw
materials. The yearly exports of England to Portugal exceed the
imports from that country by the amount of one million sterling.
This favourable balance of trade lowered the rate of exchange to
the extent of fifteen per cent to the disadvantage of Portugal.
'The balance of trade is more favourable to us in our dealings with
Portugal than it is with any other country,' says the author of
'The British Merchant' in his dedication to Sir Paul Methuen, the
son of the famous minister, 'and our imports of specie from that
country have risen to the sum of one and a half millions sterling,
whereas formerly they amounted only to 300,000 l.'(10*)
    All the merchants and political economists, as well as all the
statesmen of England, have ever since eulogised this treaty as the
masterpiece of English commercial policy. Anderson himself, who had
a clear insight enough into all matters affecting English
commercial policy and who in his way always treats of them with
great candour call's it 'an extremely fair and advantageous
treaty;' nor could he forbear the naïve exclamation, 'May it endure
for ever and ever!'(11*)
    For Adam Smith alone it was reserved to set up a theory
directly opposed to this unanimous verdict, and to maintain that
the Methuen Treaty had in no respect proved a special boon to
British commerce. Now, if anything will suffice to show the blind
reverence with which public opinion has accepted the (partly very
paradoxical) views of this celebrated man, surely it is the fact
that the particular opinion above mentioned has hitherto been left
unrefuted.
    In the sixth chapter of his fourth book Adam Smith says, that
inasmuch as under the Methuen Treaty the wines of Portugal were
admitted upon paying only two-thirds of the duty which was paid on
those of other nations, a decided advantage was conceded to the
Portuguese; whereas the English, being bound to pay quite as high
a duty in Portugal on their exports of cloth as any other nation,
had, therefore, no special privilege granted to them by the
Portuguese. But had not the Portuguese been previously importing a
large proportion of the foreign goods which they required from
France, Holland, Germany, and Belgium? Did not the English
thenceforth exclusively command the Portuguese market for a
manufactured product, the raw material for which they possessed in
their own country? Had they not discovered a method of reducing the
Portuguese customs duty by one-half? Did not the course of exchange
give the English consumer of Portuguese wines a profit of fifteen
per cent? Did not the consumption of French and German wines in
England almost entirely cease? Did not the Portuguese gold and
silver supply the English with the means of bringing vast
quantities of goods from India and of deluging the continent of
Europe with them? Were not the Portuguese cloth manufactories
totally ruined, to the advantage of the English? Did not all the
Portuguese colonies, especially the rich one of Brazil, by this
means become practically English colonies? Certainly this treaty
conferred a privilege upon Portugal, but only in name; whereas it
conferred a privilege upon the English in its actual operation and
effects. A like tendency underlies all subsequent treaties of
commerce negotiated by the English. By profession they were always
cosmopolites and philanthropists, while in their aims and
endeavours they were always monopolists.
    According to Adam Smith's second argument, the English gained
no particular advantages from this treaty, because they were to a
great extent obliged to send away to other countries the money
which they received from the Portuguese for their cloth, and with
it to purchase goods there; whereas it would have been far more
profitable for them to make a direct exchange of their cloths
against such commodities as they might need, and thus by one
exchange accomplish that which by means of the trade with Portugal
they could only effect by two exchanges. Really, but for the very
high opinion which we entertain of the character and the acumen of
this celebrated savant, we should in the face of this argument be
driven to despair either of his candour or of his clearness of
perception. To avoid doing either, nothing is left for us but to
bewail the weakness of human nature, to which Adam Smith has paid
a rich tribute in the shape of these paradoxical, almost laughable,
arguments among other instances; being evidently dazzled by the
splendour of the task, so noble in itself, of pleading a
justification for absolute freedom of trade.
    In the argument just named there is no more sound sense or
logic than in the proposition that a baker, because he sells bread
to his customers for money, and with that money buys flour from the
miller, does an unprofitable trade, because if he had exchanged his
bread directly for flour, he would have effected his purpose by a
single act of exchange instead of by two such acts. It needs surely
no great amount of sagacity to answer such an allegation by hinting
that the miller might possibly not want so much bread as the baker
could supply him with, that the miller might perhaps understand and
undertake baking himself, and that, therefore, the baker's business
could not go on at all without these two acts of exchange. Such in
effect were the commercial conditions of Portugal and England at
the date of the treaty. Portugal received gold and silver from
South America in exchange for manufactured goods which she then
exported to those regions; but too indolent or too shiftless to
manufacture these goods herself, she bought them of the English in
exchange for the precious metals. The latter employed the precious
metals, in so far as they did not require them for the circulation
at home, in exportation to India or China, and bought goods there
which they sold again on the European continent, whence they
brought home agricultural produce, raw material, or precious metals
once again.
    We now ask, in the name of common sense, who would have
purchased of the English all those cloths which they exported to
Portugal, if the Portuguese had chosen either to make them at home
or procure them from other countries? The English could not in that
case have sold them to Portugal, and to other nations they were
already selling as much as those nations would take. Consequently
the English would have manufactured so much less cloth than they
had been disposing of to the Portuguese; they would have exported
so much less specie to India than they had obtained from Portugal.
They would have brought to Europe and sold on the Continent just
that much less of East Indian merchandise, and consequently would
have taken home with them that much less of raw material.
    Quite as untenable is Adam Smith's third argument that, if
Portuguese money had not flowed in upon them, the English might
have supplied their requirements of this article in other ways.
Portugal, he conceived, must in any case have exported her
superfluous store of precious metals, and these would have reached
England through some other channel. We here assume that the
Portuguese had manufactured their cloths for themselves, had
themselves exported their superfluous stock of precious metals to
India and China, and had purchased the return cargoes in other
countries; and we take leave to ask the question whether under
these circumstances the English would have seen much of Portuguese
money? It would have been just the same if Portugal had concluded
a Methuen Treaty with Holland or France. In both these cases, no
doubt, some little of the money would have gone over to England,
but only so much as she could have acquired by the sale of her raw
wool. In short, but for the Methuen Treaty, the manufactures, the
trade, and the shipping of the English could never have reached
such a degree of expansion as they have attained to.
    But whatever be the estimate formed of the effects of the
Methuen Treaty as respects England, this much at least appears to
be made out, that, in respect to Portugal, they have in no way been
such as to tempt other nations to deliver over their home markets
for manufactured goods to English competition, for the sake of
facilitating the exportation of agricultural produce. Agriculture
and trade, commerce and navigation, instead of improving from the
intercourse with England, went on sinking lower and lower in
Portugal. In vain did Pombal strive to raise them, English
competition frustrated all his efforts. At the same time it must
not be forgotten that in a country like Portugal, where the whole
social conditions are opposed to progress in agriculture, industry,
and commerce, commercial policy can effect but very little.
Nevertheless, the little which Pombal did effect proves how much
can be done for the benefit of industry by a government which is
anxious to promote its interests, if only the internal hindrances
which the social condition of a country presents can first be
removed.
    The same experience was made in Spain in the reigns of Philip
V and his two immediate successors. Inadequate as was the
protection extended to home industries under the Bourbons, and
great as was the lack of energy in fully enforcing the customs
laws, yet the remarkable animation which pervaded every branch of
industry and every district of the country as the result of
transplanting the commercial policy of Colbert from France to Spain
was unmistakable.(12*) The statements of Ustaritz and Ulloa(13*) in
regard to these results under the then prevailing circumstances are
astonishing. For at that time were found everywhere only the most
wretched mule-tracks, nowhere any well-kept inns, nowhere any
bridges, canals, or river navigation, every province was closed
against the rest of Spain by an internal customs cordon, at every
city gate a royal toll was demanded, highway robbery and mendicancy
were pursued as regular professions, the contraband trade was in
the most flourishing condition, and the most grinding system of
taxation existed; these and such as these the above named writers
adduce as the causes of the decay of industry and agriculture. The
causes of these evils -- fanaticism, the greed and the vices of the
clergy, the privileges of the nobles, the despotism of the
Government, the want of enlightenment and freedom amongst the
people -- Ustaritz and Ulloa dare not denounce.
    A worthy counterpart to the Methuen Treaty with Portugal is the
Assiento Treaty of 1713 with Spain, under which power was granted
to the English to introduce each year a certain number of African
negroes into Spanish America, and to visit the harbour of
Portobello with one ship once a year, whereby an opportunity was
afforded them of smuggling immense quantities of goods into these
countries.
    We thus find that in all treaties of commerce concluded by the
English, there is a tendency to extend the sale of their
manufactures throughout all the countries with whom they negotiate,
by offering them apparent advantages in respect of agricultural
produce and raw materials. Everywhere their efforts are directed to
ruining the native manufacturing power of those countries by means
of cheaper goods and long credits. If they cannot obtain low
tariffs, then they devote their exertions to defrauding the
custom-houses, and to organising a wholesale system of contraband
trade. The former device, as we have seen, succeeded in Portugal,
the latter in Spain. The collection of import dues upon the ad
valorem principle has stood them in good stead in this matter, for
which reason of late they have taken so much pains to represent the
principle of paying duty by weight -- as introduced by Prussia --
as being injudicious.

NOTES:

1. Anderson, vol. i. p. 127, vol. ii. p. 350.

2. M. G. Simon, Recueil d'Observations sur l'Angleterre. Mémoires
et Considérations sur le Commerce et les Finances d'Espagne.
Ustaritz, Théorie et Pratique du Commerce.

3. Chaptal, De l'Industrie Française, vol. ii. p. 245.

4. The chief export trade of the Portuguese from Central and
Southern America consisted of the precious metals. From 1748 to
1753, the exports amounted to 18 millions of piastres. See
Humboldt's Essai Politique sur le Royaume de la Nouvelle Espagne,
vol. ii. p. 652. The goods trade with those regions, as well as
with the West Indies, first assumed important proportions, by the
introduction of the sugar, coffee, and cotton planting.

5. British Merchant, vol. iii. p. 69.

6. Ibid. p. 71.

7. Ibid. p. 76.

8. Anderson, vol. iii. p. 67.

9. British Merchant, vol. iii. p. 267.

10. Ibid. vol. iii. pp. 15, 20, 33, 38, 110, 253, 254.

11. Anderson for the year 1703.

12. Macpherson, Annals of Commerce for the years 1771 and 1774. The
obstacles thrown in the way of the importation of foreign goods
greatly promoted the development of Spanish manufactures. Before
that time Spain had been obtaining nineteen-twentieths of her
supplies of manufactured goods from England. -- Brougham, Inquiry
into the Colonial Policy of the European Powers, Part I. p. 421.

13. Ustaritz, Théorie du Commerce. Ulloa, Rétablissement des
Manufactures d'Espagne.


Chapter 6

The French

    France, too, inherited many a remnant of Roman Civilisation. On
the irruption of the German Franks, who loved nothing but the
chase, and changed many districts again into forests and waste
which had been long under cultivation, almost everything was lost
again. To the monasteries, however, which subsequently became such
a great hindrance to civilisation, France, like all other European
countries, is indebted for most of her progress in agriculture
during the Middle Ages. The inmates of religious houses kept up no
feuds like the nobles, nor harassed their vassals with calls to
military service, while their lands and cattle were less exposed to
rapine and extermination. The clergy loved good living, were averse
to quarrels, and sought to gain reputation and respect by
supporting the necessitous. Hence the old adage 'It is good to
dwell under the crosier.' The Crusades, the institution of civic
communities and of guilds by Louis IX (Saint Louis), and the
proximity of Italy and Flanders, had considerable effect at an
early period in developing industry in France. Already in the
fourteenth century, Normandy and Brittany supplied woollen and
linen cloths for home consumption and for export to England. At
this period also the export trade in wines and salt, chiefly
through the agency of Hanseatic middlemen, had become important.
    By the influence of Francis I the silk manufacture was
introduced into the South of France. Henry IV favoured this
industry, as well as the manufacture of glass, linen, and woollens;
Richelieu and Mazarin favoured the silk manufactories, the velvet
and woollen manufactures of Rouen and Sedan, as well as the
fisheries and navigation.
    On no country did the discovery of America produce more
favourable effects than upon France. From Western France quantities
of corn were sent to Spain. Many peasants migrated every year from
the Pyrenean districts to the north-east of Spain in search of
work. Great quantities of wine and salt were exported to the
Spanish Netherlands, while the silks, the velvets, as also
especially the articles of luxury of French manufacture, were sold
in considerable quantities in the Netherlands, England, Spain, and
Portugal. Owing to this cause a great deal of Spanish gold and
silver got into circulation in France at an early period.
    But the palmy days of French industry first commenced with
Colbert.
    At the time of Mazarin's death, neither manufacturing industry,
commerce, navigation, nor the fisheries had attained to importance,
while the financial condition of the country was at its worst.
    Colbert had the courage to grapple single-handed with an
undertaking which England could only br ing to a successful issue
by the persevering efforts of three centuries, and at the cost of
two revolutions. From all countries he obtained the most skilful
workmen, bought up trade secrets, and procured better machinery and
tools. By a general and efficient tariff he secured the home
markets for native industry. By abolishing, or by limiting as much
as possible, the provincial customs collections, by the
construction of highways and canals, he promoted internal traffic.
These measures benefited agriculture even more than manufacturing
industry because the number of consumers was thereby doubled and
trebled, and the producers were brought into easy and cheap
communication with the consumers. He further promoted the interests
of agriculture by lowering the amounts of direct imposts levied
upon landed property, by mitigating the severity of the stringent
measures previously adopted in collecting the revenue, by
equalising the incidence of taxation, and lastly by introducing
measures for the reduction of the rate of interest. He prohibited
the exportation of corn only in times of scarcity and high prices.
To the extension of the foreign trade and the promotion of
fisheries he devoted special attention. He re-established the trade
with the Levant, enlarged that with the colonies, and opened up a
trade with the North. Into all branches of the administration he
introduced the most stringent economy and perfect order. At his
death France possessed 50,000 looms engaged in the manufacture of
woollens; she produced annually silk manufactures to the value of
50 millions of francs. The State revenues had increased by 28
millions of francs. The kingdom was in possession of flourishing
fisheries, of an extensive mercantile marine, and a powerful
navy.(1*)
    A century later, the economists have sharply censured Colbert,
and maintained that this statesman had been anxious to promote the
interests of manufactures at the expense of agriculture: a reproach
which proves nothing more than that these authorities were
themselves incapable of appreciating the nature of manufacturing
industry.(2*)
    If, however, Colbert was in error in opposing periodical
obstacles to the exportation of raw materials, yet by fostering the
growth and progress of native industries he so greatly increased
the demand for agricultural produce that he gave the agricultural
interest tenfold compensation for any injury which he caused to it
by the above-named obstacles. If, contrary to the dictates of
enlightened statesmanship, he prescribed new processes of
manufacture, and compelled the manufacturers by penal enactments to
adopt them, it should be borne in mind that these processes were
the best and the most profitable known in his day, and that he had
to deal with a people which, sunk into the utmost apathy by reason
of a long despotic rule, resisted every innovation even though it
was an improvement.
    The reproach, however, that France had lost a large portion of
her native industry through Colbert's protective system, could be
levelled against Colbert only by that school which utterly ignored
the revocation of the Edict of Nantes with its disastrous
consequences. In consequence of these deplorable measures, in the
course of three years after Colbert's death half a million of the
most industrious, skilful, and thriving inhabitants of France were
banished; who, consequently, to the double injury of France which
they had enriched, transplanted their industry and their capital to
Switzerland, to every Protestant country in Germany, especially to
Prussia, as also to Holland and England. Thus the intrigues of a
bigoted courtesan ruined in three years the able and gifted work of
a whole generation, and cast France back again into its previous
state of apathy; while England, under the aegis of her
Constitution, and invigorated by a Revolution which called forth
all the energies of the nation, was prosecuting with increasing
ardour and without intermission the work commenced by Elizabeth and
her predecessors.
    The melancholy condition to which the industry and the finances
of France had been reduced by a long course of misgovernment, and
the spectacle of the great prosperity of England, aroused the
emulation of French statesmen shortly before the French Revolution.
Infatuated with the hollow theory of the economists, they looked
for a remedy, in opposition to Colbert's policy, in the
establishment of free trade. It was thought that the prosperity of
the country could be restored at one blow if a better market were
provided for French wines and brandies in England, at the cost of
permitting the importation of English manufactures upon easy terms
(a twelve per cent duty). England, delighted at the proposal,
willingly granted to the French a second edition of the Methuen
Treaty, in the shape of the so-called Eden Treaty of 1786; a copy
which was soon followed by results not less ruinous than those
produced by the Portuguese original.
    The English, accustomed to the strong wines of the Peninsula,
did not increase their consumption to the extent which had been
expected, whilst the French perceived with horror that all they had
to offer the English were simply fashions and fancy articles, the
total value of which was insignificant : whereas the English
manufacturers, in all articles of prime necessity, the total amount
of which was enormous, could greatly surpass the French
manufacturers in cheapness of prices, as well as in quality of
their goods, and in granting of credit. When, after a brief
competition, the French manufacturers were brought to the brink of
ruin, while French wine-growers had gained but little, then the
French Government sought to arrest the progress of this ruin by
terminating the treaty, but only acquired the conviction that it is
much easier to ruin flourishing manufactories in a few years than
to revive ruined manufactories in a whole generation. English
competition had engendered a taste for English goods in France, the
consequence of which was an extensive and long-continued contraband
trade which it was difficult to suppress. Meanwhile it was not so
difficult for the English, after the termination of the treaty, to
accustom their palates again to the wines of the Peninsula.
    Notwithstanding that the commotions of the Revolution and the
incessant wars of Napoleon could not have been favourable to the
prosperity of French industry notwithstanding that the French lost
during this period most of their maritime trade and all their
colonies, yet French manufactories, solely from their exclusive
possession of their home markets, and from the abrogation of feudal
restrictions, attained during the Empire to a higher degree of
prosperity than they had ever enjoyed under the preceding ancien
régime. The same effects were noticeable in Germany and in all
countries over which the Continental blockade extended.
    Napoleon said in his trenchant style, that under the existing
circumstances of the world any State which adopted the principle of
free trade must come to the ground. In these words he uttered more
political wisdom in reference to the commercial policy of France
than all contemporary political economists in all their writings.
We cannot but wonder at the sagacity with which this great genius,
without any previous study of the systems of political economy,
comprehended the nature and importance of manufacturing power. Well
was it for him and for France that he had not studied these
systems. 'Formerly,' said Napoleon, 'there was but one description
of property, the possession of land; but a new property has now
risen up, namely, industry.' Napoleon saw, and in this way clearly
enunciated, what contemporary economists did not see, or did not
clearly enunciate, namely, that a nation which combines in itself
the power of manufactures with that of agriculture is an
immeasurably more perfect and more wealthy nation than a purely
agricultural one. What Napoleon did to found and promote the
industrial education of France, to improve the country's credit, to
introduce and set going new inventions and improved processes, and
to perfect the means of internal communication in France, it is not
necessary to dwell upon in detail, for these things are still too
well remembered. But what, perhaps, does call for special notice in
this connection, is the biassed and unfair judgment passed upon
this enlightened and powerful ruler by contemporary theorists.
    With the fall of Napoleon, English competition, which had been
till then restricted to a contraband trade, recovered its footing
on the continents of Europe and America. Now for the first time the
English were heard to condemn protection and to eulogise Adam
Smith's doctrine of free trade, a doctrine which heretofore those
practical islanders considered as suited only to an ideal state of
Utopian perfection. But an impartial, critical observer might
easily discern the entire aBsence of mere sentimental motives of
philanthropy in this conversion, for only when increased facilities
for the exportation of English goods to the continents of Europe
and America were in question were cosmopolitan arguments resorted
to; but so soon as the question turned upon the free importation of
corn, or whether foreign goods might be allowed to compete at all
with British manufactures in the English market, in that case quite
different principles were appealed to.(3*) Unhappily, it was said,
the long continuance in England of a policy contrary to natural
principles had created an artificial state of things, which could
not Be interfered with suddenly without incurring the risk of
dangerous and mischievous consequences. It was not to be attempted
without the greatest caution and prudence. It was England's
misfortune, not her fault. All the more gratifying ought it to be
for the nations of the European and American continents, that their
happy lot and condition left them quite free to partake without
delay of the blessings of free trade.
    In France, although her ancient dynasty reascended the throne
under the protection of the banner of England, or at any rate by
the influence of English gold, the above arguments did not obtain
currency for very long. England's free trade wrought such havoc
amongst the manufacturing industries which had prospered and grown
strong under the Continental blockade system, that a prohibitive
régime was speedily resorted to, under the protecting aegis of
which, according to Dupin's testimony,(4*) the producing power of
French manufactories was doubled between the years 1815 and 1827.

NOTES:

1. 'Eloge de Jean Baptiste Colbert, par Necker' (1773) (OEuvres
Completes, vol. xv.).

2. See Quesnay's paper entitled, 'Physiocratie, ou du Gouvernement
le plus avantageux au Genre Humain (1768),' Note 5, 'sur la maxime
viii,' wherein Quesnay contradicts and condemns Colbert in two
brief pages, whereas Necker devoted a hundred pages to the
exposition of Colbert's system and of what he accomplished. It is
hard to say whether we are to wonder most at the ignorance of
Quesnay on matters of industry, history, and finance, or at the
presumption with which he passes judgment upon such a man as
Colbert without adducing grounds for it. Add to that, that this
ignorant dreamer was not even candid enough to mention the
expulsion of the Huguenots; nay, that he was not ashamed to allege,
contrary to all truth, that Colbert had restricted the trade in
corn between province and province by vexatious police ordinances.

3. A highly accomplished American orator, Mr Baldwin, Chief Justice
of the United States, when referring to the Canning-Huskisson
system of free trade, shrewdly remarked, that, like most English
productions, it had been manufactured not so much for home
consumption as for exportation.
    Shall we laugh most or weep when we call to mind the rapture of
enthusiasm with which the Liberals in France and Germany, more
particularly the cosmopolitan theorists of the philanthropic
school, and notably Mons. J. B. Say, hailed the announcement of the
Canning-Huskisson system? So great was their jubilation, that one
might have thought the millennium had come. But let us see what Mr
Canning's own biographer says about this minister's views on the
subject of free trade.
    'Mr Canning was perfectly convinced of the truth of the
abstract principle, that commerce is sure to flourish most when
wholly unfettered; but since such had not been the opinion either
of our ancestors or of surrounding nations, and since in
consequence restraints had been imposed upon all commercial
transactions, a state of things had grown up to which the unguarded
application of the abstract principle, however true it was in
theory, might have been somewhat mischievous in practice.' (The
Political Life of Mr Canning, by Stapleton, p. 3.) In the year
1828, these same tactics of the English had again assumed a
prominence so marked that Mr Hume, the Liberal member of
Parliament, felt no hesitation in stigmatising them in the House as
the strangling of Continental industries.

4. Forces productives de la France.

Chapter 7

The Germans

    In the chapter on the Hanseatic League we saw how; next in
order to Italy, Germany had flourished, through extensive commerce,
long before the other European states. We have now to continue the
industrial history of that nation, after first taking a rapid
survey of its earliest industrial circumstances and their
development.
    In ancient Germania, the greater part of the land was devoted
to pasturage and parks for game. The insignificant and primitive
agriculture was abandoned to serfs and to women. The sole
occupation of the freemen was warfare and the chase; and that is
the origin of all the German nobility.
    The German nobles firmly adhered to this system throughout the
Middle Ages, oppressing agriculturists and opposing manufacturing
industry, while quite blind to the benefits which must accrued to
them, as the lords of the soil, from the prosperity of both.
    Indeed, so deeply rooted has the passion for their hereditary
favourite occupation ever continued with the German nobles, that
even in the our days, long after they have been enriched by the
ploughshare and shuttle, they still dream in legislative the about
the preservation of game and the game laws, as though the wolf and
the sheep, the bear and the bee, could dwell in peace side by side;
as though landed property could be devoted at one and the same time
to gardening, timber growing, and scientific farming, and to the
preservation of wild boars, deer, and hares.
    German husbandry long remained in a barbarous condition,
notwithstanding that the influence of towns and monasteries on the
districts in their immediate vicinity could not be ignored.
    Towns sprang up in the ancient Roman colonies, at the seats of
the temporal and ecclesiastical princes and lords, near
monasteries, and, where favoured by the Emperor, to a certain
extent within their domains and inclosures, also on sites where the
fisheries, combined with facilities for land and water transport,
offered inducements to them. They flourished in most cases only by
supplying the local requirements, and by the foreign transport
trade. An extensive system of native industry capable Of supplying
an export trade could only have grown up by means of extensive
sheep farming and extensive cultivation of flax. But flax
cultivation implies a high standard of agriculture, while extensive
sheep farming needs protection against wolves and robbers. Such
protection could not be maintained amid the perpetual feuds of the
nobles and princes between themselves and against the towns. Cattle
pastures served always as the principal field for robbery; while
the total extermination of beasts of prey was out of the question
with those vast tracts of forest which the nobility so carefully
preserved for their indulgence in the chase. The scanty number of
cattle, the insecurity of life and property, the entire lack of
capital and of freedom on the part of the cultivators of the soil,
or of any interest in agriculture on the part of those who owned
it, necessarily tended to keep agriculture, and with it the
prosperity of the towns, in a very low state.
    If these circumstances are duly considered, it is easy to
understand the reason why Flanders and Brabant under totally
opposite conditions attained at so early a period to a high degree
of liberty and prosperity.
    Notwithstanding these impediments, the German cities on the
Baltic and the German Ocean flourished, owing to the fisheries, to
navigation, and the foreign trade at sea; in Southern Germany and
at the foot of the Alps, owing to the influence of Italy, Greece,
and the transport trade by land; on the Rhine, the Elbe, and the
Danube, by means of viticulture and the wine trade, owing to the
exceptional fertility of the soil and the facilities of water
communication, which in the Middle Ages was of still greater
importance than even in our days, because of the wretched condition
of the roads and the general state of insecurity.
    This diversity of origin will explain the diversity
characterising the several confederations of German cities, such as
the Hanseatic, the Rhenish, the Swabian, the Dutch, and the
Helvetic.
    Though they continued powerful for a time owing to the spirit
of youthful freedom which pervaded them, yet these leagues lacked
the internal guarantee of stability, the principle of unity, the
cement. Separated from each other by the estates of the nobility,
by the serfdom of the population of the country, their union was
doomed sooner or later to break down, owing to the gradual increase
and enrichment of the agricultural population, among whom, through
the power of the princes, the principle of unity was maintained.
The cities, inasmuch as they tended to promote the prosperity of
agriculture, by so doing necessarily were working at their own
effacement, unless they contrived to incorporate the agricultural
classes or the nobility as members of their unions. For the
accomplishment of that object, however, they lacked the requisite
higher political instincts and knowledge. Their political vision
seldom extended beyond their own city walls.
    Two only of these confederations, Switzerland and the Seven
United Provinces, actually carried out this incorporation, and that
not as the result of reflection, but because they were compelled to
it, and favoured by circumstances, and for that reason those
confederations still exist. The Swiss Confederation is nothing but
a conglomerate of German imperial cities, established and cemented
together by the free populations occupying the intervening tracts
of country.
    The remaining leagues of German cities were ruined owing to
their contempt for the rural population, and from their absurd
burgher arrogance, which delighted in keeping that population in
subjection, rather than in raising them to their own level.
    These cities could only have attained unity by means of an
hereditary royal authority. But this authority in Germany lay in
the hands of the princes, who, in order to avert restraints upon
their own arbitrary rule, and to keep both the cities and the minor
nobles in subjection, were interested in resisting the
establishment of an hereditary empire.
    Hence the persevering adherence to the idea of the Imperial
Roman Empire amongst German kings. Only at the head of armies were
the emperors rulers; only when they went to war were they able to
bring together princes and cities under their banner. Hence their
protection of civic liberty in Germany, and their hostility to it
and persecution of it in Italy.
    The expeditions to Rome not only weakened more and more the
kingly power in Germany, they weakened those very dynasties through
which, within the Empire, in the heart of the nation, a
consolidated power might have grown up. But with the extinction of
the House of Hohenstaufen the nucleus of consolidated power was
broken up into a thousand fragments.
    The sense of the impossibility of consolidating the heart of
the nation impelled the House of Hapsburg, originally so weak and
poor, to utilise the nation's vigour in founding a consolidated
hereditary monarchy on the south-eastern frontier of the German
Empire, by subjugating alien races, a policy which in the northeast
was imitated by the Margraves of Brandenburg. Thus in the
south-east and north-east there arose hereditary sovereignties
founded upon the dominion over alien races, while in the two
western corners of the land two republics grew into existence which
continually separated themselves more and more from the parent
nation; and within, in the nation's heart, disintegration,
impotence, and dissolution continually progressed. The misfortunes
of the German nation were completed by the inventions of gunpowder
and of the art of printing, the revival of the Roman law, the
Reformation, and lastly the discovery of America and of the new
route to India.
    The intellectual, social, and economic revolution which we have
described produced divisions and disruption between the constituent
members of the Empire, disunion between the princes, disunion
between the cities, disunion even between the various guilds of
individual cities, and between neighbours of every rank. The
energies of the nation were now diverted from the pursuit of
industry, agriculture, trade, and navigation; from the acquisition
of colonies, the amelioration of internal institutions, in fact
from every kind of substantial improvement, the people contended
about dogmas and the heritage of the Church.
    At the same time came the decline of the Hanseatic League and
of Venice, and with it the decline of Germany's wholesale trade,
and of the power and liberties of the German cities both in the
north and in the south.
    Then came the Thirty Years' War with its devastations of all
territories and cities. Holland and Switzerland seceded, while the
fairest provinces of the Empire were conquered by France. Whereas
formerly single cities, such as Strasburg, Nürnberg, Augsburg, had
surpassed in power entire electorates, they now sank into utter
impotence in consequence of the introduction of standing armies.
    If before this revolution the cities and the royal power had
been more consolidated -- if a king exclusively belonging to the
German nation had obtained a complete mastery of the Reformation,
and had carried it out in the interests of the unity, power, and
freedom of the nation -- how very differently would the
agriculture, industry, and trade of the Germans have been
developed. By the side of considerations such as these, how
pitiable and unpractical seems that theory of political economy
which would have us refer the material welfare of nations solely to
the production of individuals, wholly losing sight of the fact that
the producing power of all individuals is to a great extent
determined by the social and political circumstances of the nation.
The introduction of the Roman law weakened no nation so much as the
German. The unspeakable confusion which it brought into the legal
status and relations of private individuals, was not the worst of
its bad effects. More mischievous was it by far, in that it created
a caste of learned men and jurists differing from the people in
spirit and language, which treated the people as a class unlearned
in the law, as minors, which denied the authority of all sound
human understanding, which everywhere set up secrecy in the room of
publicity, which, living in the most abject dependence and living
upon arbitrary power, everywhere advocated it and defended its
interests, everywhere gnawed at the roots of liberty. Thus we see
even to the beginning of the eighteenth century in Germany,
barbarism in literature and language, barbarism in legislation,
State administration and administration of justice; barbarism in
agriculture, decline of industry and of all trade upon a large
scale, want of unity and of force in national cohesion;
powerlessness and weakness on all hands in dealing with foreign
nations.
    One thing only the Germans had preserved; that was their
aboriginal character, their love of industry, order, thrift, and
moderation, their perseverance and endurance in research and in
business, their honest striving after improvement, and a
considerable natural measure of morality, prudence, and
circumspection.
    This character both the rulers and the ruled had in common.
After the almost total decay of nationality and the restoration of
tranquillity, people began in some individual isolated circles to
introduce order, improvement, and progress. Nowhere was witnessed
more zeal in cherishing education, manners, religion, art, and
science; nowhere was absolute power exercised with greater
moderation or with more advantage to general enlightenment, order,
and morality, to the reform of abuses and the advancement of the
common welfare.
    The foundation for the revival of German nationality was
undoubtedly laid by the Governments them selves, by their
conscientious devotion of the proceeds of the secularised Church
lands to the uses of education and instruction, of art and science,
of morality and objects of public utility. By these measures light
made its way into the State administration and the administration
of justice, into education and literature, into agriculture,
industry, and commerce, and above all amongst the masses. Thus
Germany developed herself in a totally different way from all other
nations. Elsewhere high mental culture rather grew out of the
evolution of the material powers of production, whilst in Germany
the growth of material powers of production was the outcome chiefly
of an antecedent intellectual development. Hence at the present day
the whole culture of the Germans is theoretical. Hence also those
many unpractical and odd traits in the German character which other
nations notice in us.
    For the moment the Germans are in the position of an individual
who, having been formerly deprived of the use of his limbs, first
learned theoretically the arts of standing and walking, of eating
and drinking, of laughing and weeping, and then only proceeded to
put them in practice. Hence comes the German predilection for
philosophic systems and cosmopolitan dreams. The intellect, which
was not allowed to stir in the affairs of this world, strove to
exercise itself in the realms of speculation. Hence, too, we find
that nowhere has the doctrine of Adam Smith and of his disciples
obtained a larger following than in Germany; nowhere else have
people more thoroughly believed in the cosmopolitan magnanimity of
Messrs Canning and Huskisson.
    For the first progress in manufactures Germany is indebted to
the revocation of the Edict of Nantes and to the numerous refugees
who by that insane measure were driven to emigrate to almost every
part of Germany, and established everywhere manufactures of wool,
silk, jewellery, hats, glass, china, gloves, and industries of
every kind.
    The first Government measures for the promotion of manufactures
in Germany were introduced by Austria and Prussia; in Austria under
Charles VI and Maria Theresa, but even more under Joseph II.
Austria had formerly suffered enormously from the banishment of the
Protestants, her most industrious citizens; nor can it be exactly
affirmed that she distinguished herself in the immediate sequel by
promoting enlightenment and mental culture. Afterwards, in
consequence of a protective tariff, improved sheep farming, better
roads, and other encouragements, industry made considerable strides
even under Maria Theresa.
    More energetically still was this work pushed forward under
Joseph II and with immensely greater success. At first, indeed, the
results could not be called important, because the Emperor,
according to his wont, was too precipitate in these as in all his
other schemes of reform, and Austria, in relation to other states,
still occupied too backward a position. Here as elsewhere it became
evident that one might get 'too much of a good thing' at once, and
that protective duties, in order to work beneficially and not as a
disturbing element upon an existing state of things, must not be
made too high at the commencement. But the longer that system
continued, the more clearly was its wisdom demonstrated. To that
tariff Austria is indebted for her present prosperous industries
and the flourishing condition of her agriculture.
    The industry of Prussia had suffered more than that of any
other country from the devastations of the Thirty Years' War. Her
most important industry, the manufacture of cloth in the Margravate
of Brandenburg, was almost entirely annihilated. The majority of
cloth workers had migrated to Saxony, while English imports at the
time held every competition in check. To the advantage of Prussia
now came the revocation of the Edict of Nantes and the persecution
of the Protestants in the Palatinate and in Salzburg. The great
Elector saw at a glance what Elizabeth before him had so clearly
understood. In consequence of the measures devised by him a great
number of the fugitives directed their steps to Prussia, fertilised
the agricultural industry of the land, established a large number
of manufactures, and cultivated science and art. All his successors
followed in his footsteps, none with more zeal than the great King
-- greater by his policy in times of peace than by his successes in
war. Space is wanting to treat at length of the countless measures
whereby Frederick II attracted to his dominions large numbers of
foreign agriculturists, brought tracts of waste land into
cultivation, and established the cultivation of meadows, of cattle
fodder, vegetables, potatoes, and tobacco, improved sheep farming,
cattle breeding, horse breeding, the use of mineral manures, &c.,
by which means he created capital and credit for the benefit of the
agricultural classes. Still more than by these direct measures he
promoted indirectly the interests of agriculture by means of those
branches of manufacture which, in consequence of the customs tariff
and the improved means of transport which he established, as well
as the establishment of a bank, made greater advances in Prussia
than in any other German state, notwithstanding that that country's
geographical position, and its division into several provinces
separated from one another, were much less favourable for the
success of such measures, and that the disadvantages of a customs
cordon, namely, the damaging effects of a contraband trade, must be
felt more acutely there than in great states whose territories are
compact and well protected by boundaries of seas, rivers, and
chains of mountains.
    At the same time we are nowise anxious, under cover of this
eulogy, to defend the faults of the system, such as, for example,
the restrictions laid upon the exportation of raw material. Still,
that in despite of these faults the national industry was
considerably advanced by it, no enlightened and impartial historian
would venture to dispute.
    To every unprejudiced mind, unclouded by false theories, it
must be clear that Prussia gained her title to rank amongst the
European powers not so much by her conquests as by her wise policy
in promoting the interests of agriculture, industry, and trade, and
by her progress in literature and science; and all this was the
work of one great genius alone.
    And yet the Crown was not yet supported by the energy of free
institutions, but simply by an administrative system, well ordered
and conscientious, but unquestionably trammelled by the dead
mechanical routine of a hierarchical bureaucracy.
    Meanwhile all the rest of Germany had for centuries been under
the influence of free trade -- that is to say, the whole world was
free to export manufactured products into Germany, while no one
consented to admit German manufactured goods into other countries.
This rule had its exceptions, but only a few. It cannot, however,
be asserted that the predictions and the promises of the school
about the great benefits of free trade have been verified by the
experience of this country, for everywhere the movement was rather
retrograde than progressive. Cities like Augsburg, Nürnberg,
Mayence, Cologne, &c., numbered no more than a third or a fourth
part of their former population, and wars were often wished for
merely for the sake of getting rid of a valueless surplus of
produce.
    The wars came in the train of the French Revolution, and with
them English subsidies together with increased English competition.
Hence a new downward tendency in manufactures coupled with an
increase in agricultural prosperity, which, however, was only
apparent and transitory.
    Next followed Napoleon's Continental Blockade, an event which
marked an era in the history of both German and French industry,
notwithstanding that Mons. J. B. Say, Adam Smith's most famous
pupil, denounced it as a calamity. Whatever theorists, and notably
the English, may urge against it, this much is clearly made out --
and all who are conversant with German industry must attest it, for
there is abundant evidence of the fact in all statistical writings
of that day -- that, as a result of this blockade, German
manufactures of all and every kind for the first time began to make
an important advance;(1*) that then only did the improved breeding
of sheep (which had been commenced some time before) become general
and successful; that then only was activity displayed in improving
the means of transport. It is true, on the other hand, that Germany
lost the greater part of her former export trade, especially in
linens. Yet the gain was considerably greater than the loss,
particularly for the Prussian and Austrian manufacturing
establishments, which had previously gained a start over all other
manufactories in the German states.
    But with the return of peace the English manufacturers again
entered into a fearful competition with the German; for during the
reciprocal blockade, in consequence of new inventions and a great
and almost exclusive export trade to foreign lands, the
manufactories of the island had far outstripped that of Germany;
and for this reason, as well as because of their large acquired
capital, the former were first in a position to sell at much lower
prices, to offer much superior articles, and to give much longer
credit than the latter, which had still to battle with the
difficulties of a first beginning. Consequently general ruin
followed and loud wailings amongst the latter, especially in the
lower Rhenish provinces, in those regions which, having formerly
belonged to France, were now excluded from the French market.
Besides, the Prussian customs tariff had undergone many changes in
the direction of absolute free trade, and no longer afforded any
sufficient protection against English competition. At the same time
the Prussian bureaucracy long strove against the country's cry for
help. They had become too strongly imbued with Adam Smith's theory
at the universities to discern the want of the times with
sufficient promptness. There even still existed political
economists in Prussia who harboured the bold design of reviving the
long-exploded 'physiocratic' system. Meanwhile the nature of things
here too proved a mightier force than the power of theories. The
cry of distress raised by the manufacturers, hailing as it did from
districts still yearning after their former state of connection
with France, whose sympathies it was necessary to conciliate, could
not be safely disregarded too long. More and more the opinion
spread at the time that the English Government were favouring in an
unprecedented manner a scheme for glutting the markets on the
Continent with manufactured goods in order to stifle the
Continental manufactures in the cradle. This idea has been
ridiculed, but it was natural enough that it should prevail, first,
because this glutting really took place in such a manner as though
it had been deliberately planned; and, secondly, because a
celebrated member of Parliament, Mr Henry Brougham (afterwards Lord
Brougham), had openly said, in 1815, 'that it was well worth while
to incur a loss on the exportation of English manufactures in order
to stifle in the cradle the foreign manufactures.'(2*) This idea of
this lord, since so renowned as a philanthropist, cosmopolist, and
Liberal, was repeated ten years later almost in the same words by
Mr Hume, a member of Parliament not less distinguished for
liberalism, when he expressed a wish that 'Continental manufactures
might be nipped in the bud.'
    At length the prayer of the Prussian manufacturers found a
hearing -- late enough, indeed, as must be admitted when one
considers how painful it is to be wrestling with death year after
year -- but at last their cry was heard to real good purpose. The
Prussian customs tariff of 1818 answered, for the time in which it
was established, all the requirements of Prussian industry, without
in any way overdoing the principle of protection or unduly
interfering with the country's beneficial intercourse with foreign
countries. Its scale of duties was much lower than those of the
English and French customs systems, and necessarily so; for in this
case there was no question of a gradual transition from a
prohibitive to a protective system, but of a change from free trade
(so called) to a protective system. Another great advantage of this
tariff, considered as a whole, was that the duties were mostly
levied according to the weight of goods and not according to their
value. By this means not only were smuggling and too low valuations
obviated, but also the great object was gained, that articles of
general consumption, which every country can most easily
manufacture for itself, and the manufacture of which, because of
their great total money value, is the most important of any for the
country, were burdened with the highest import duty, while the
protective duty fell lower and lower in proportion to the fineness
and costliness of the goods, also as the difficulty of making such
articles at home increased, and also as both the inducements and
the facilities for smuggling increased.
    But this mode of charging the duty upon the weight would of
course, for very obvious reasons, affect the trade with the
neighbouring German states much more injuriously than the trade
with foreign nations. The second-rate and smaller German states had
now to bear, in addition to their exclusion from the Austrian,
French, and English markets, almost total exclusion from that of
Prussia, which hit them all the harder, since many of them were
either totally or in great part hemmed in by Prussian provinces.
    Just in proportion as these measures pacified the Prussian
manufacturers, was the loudness of the outcry against them on the
part of the manufacturers of the other German states. Add to that,
that Austria had shortly before imposed restrictions on the
importation of German goods into Italy, notably of the linens of
Upper Swabia. Restricted on all sides in their export trade to
small strips of territory, and further being separated from one
another by smaller internal lines of customs duties, the
manufacturers of these countries were well-nigh in despair.
    It was this state of urgent necessity which led to the
formation of that private union of five to six thousand German
manufacturers and merchants, which was founded in the year 1819 at
the spring fair held in Frankfort-on-the-Main, with the object of
abolishing all the separate tariffs of the various German states,
and on the other hand of establishing a common trade and
custom-house system for the whole of Germany.
    This union was formally organised. Its articles of association
were submitted to the Diet, and to all the rulers and governments
of the German states for approval. In every German town a local
correspondent was appointed; each German state had its provincial
correspondent. All the members and correspondents bound themselves
to promote the objects of the union to the best of their ability.
The city of Nürnberg was selected as the head-quarters of the
union, and authorised to appoint a central committee, which should
direct the business of the union, under the advice of an assessor,
for which office the author of this book was selected. In a weekly
journal of the union, bearing the title of 'Organ des deutschen
Handels- und Fabrikantenstandes,'(3*) the transactions and measures
of the central committee were made known, and ideas, proposals,
treatises, and statistical papers relating to the objects of the
union were published. Each year at the spring fair in Frankfort a
general meeting of the union was held, at which the central
committee gave an account of its stewardship.
    After this union had presented a petition to the German Diet
showing the need and expediency of the measures proposed by their
organisation, the central committee at Nürnberg commenced
operations. Deputations were sent to every German Court, and
finally one to the Congress of Plenipotentiaries held at Vienna in
1820. At this congress so much at least was gained, that several of
the second-class and smaller German states agreed to hold a
separate congress on the subject at Darmstadt. The effect of the
deliberations of this last-named congress was, first, to bring
about a union between Würtemberg and Bavaria; secondly, a union of
some of the German states and Prussia; then a union between the
middle German states; lastly, and chiefly in consequence of the
exertions of Freiherr von Cotta to fuse the above-named three
unions into a general customs confederation, so that at this
present time, with the exception of Austria, the two Mecklenburgs,
Hanover, and the Hanse Towns, the whole of Germany is associated in
a single customs union, which has abolished the separate customs
lines amongst its members, and has established a uniform tariff in
common against the foreigner, the revenue derived from which is
distributed pro rata amongst the several states according to their
populations.
    The tariff of this union is substantially the same as that
established by Prussia in 1818; that is to say, it is a moderate
protectionist tariff.
    In consequence of this unification of customs, the industry,
trade, and agriculture of the German states forming the union have
already made enormous strides.


NOTES:

1. The system must necessarily have affected France in a different
manner than Germany, because Germany was mostly shut out from the
French markets, while the German markets were all open to the
French manufacturer.

2. Report of the Committee of Commerce and Manufactures to the
House of Representatives of the Congress of the United States, Feb.
13, 1816.

3. Organ of the German Commercial and Manufacturing Interests.


Chapter 8

The Russians

    Russia owes her first progress in civilisation and industry to
her intercourse with Greece, to the trade of the Hanseatic Towns
with Novgorod and (after the destruction of that town by Ivan
Wassiljewitsch) to the trade which arose with the English and
Dutch, in consequence of the discovery of the water communication
with the coasts of the White Sea.
    But the great increase of her industry, and especially of her
civilisation, dates from the reign of Peter the Great. The history
of Russia during the last hundred and forty years offers a most
striking proof of the great influence of national unity and
political circumstances on the economic welfare of a nation.
    To the imperial power which established and maintained this
union of innumerable Barbaric hordes, Russia owes the foundations
of her manufactures, her vast progress in agriculture and
population, the facilities offered to her interior traffic by the
construction of canals and roads, a very large foreign trade, and
her standing as a commercial power.
    Russia's independent system of trade dates, however, only from
the year 1821.
    Under Catherine II. trade and manufactures had certainly made
some progress, on account of the privileges she offered to foreign
artisans and manufacturers; but the culture of the nation was still
too imperfect to allow of its getting beyond the first stages in
the manufacture of iron, glass, linen, &c., and especially in those
branches of industry in which the country was specially favoured by
its agricultural and mineral wealth.
    Besides this, further progress in manufactures would not, at
that time, have been conducive to the economic interests of the
nation. If foreign countries had taken in payment the provisions,
raw material, and rude manufactures which Russia was able to
furnish if, further, no wars and exterior events had intervened,
Russia by means of intercourse with nations more advanced than
herself would have been much more prosperous, and her culture in
general would in consequence of this intercourse have made greater
progress than under the manufacturing system. But wars and the
Continental blockade, and the commercial regulations of foreign
nations, compelled her to seek prosperity in other ways than by the
export of raw materials and the import of manufactures. In
consequence of these, the previous commercial relations of Russia
by sea were disturbed. Her overland trade with the western
continent could not make up for these losses; and she found it
necessary, therefore, to work up her raw materials herself. After
the establishiment of the general peace, a desire arose to return
to the old system. The Government, and even the Emperor, were
inclined to favour free trade. In Russia, the writings of Herr
Storch enjoyed as high a reputation as those of Mons Say in
Germany. People were not alarmed by the first shocks which the home
manufactories, which had arisen during the Continental Blockade,
suffered owing to English competition. The theorists maintained
that if these shocks could only be endured once for all, the
blessings of free trade would follow. And indeed the circumstances
of the commercial world at the time were uncommonly favourable to
this transition. The failure of crops in Western Europe caused a
great export of agricultural produce, by which Russia for a long
time gained ample means to balance her large importation of
manufactured goods.
    But when this extraordinary demand for Russian agricultural
produce had ceased, when, on the other hand, England had imposed
restrictions on the import of corn for the benefit of her
aristocracy, and on that of foreign timber for the benefit of
Canada, the ruin of Russia's home manufactories and the excessive
import of foreign manufactures made itself doubly felt. Although
people had formerly, with Herr Storch, considered the balance of
trade as a chimera, to believe in the existence of which was, for
a reasonable and enlightened man, no less outrageous and ridiculous
than the belief in witchcraft in the seventeenth century had been,
it was now seen with alarm that there must be something of the
nature of a balance of trade as between independent nations. The
most enlightened and discerning statesman of Russia, Count
Nesselrode, did not hesitate to confess to this belief. He declared
in an official circular of 1821: 'Russia finds herself compelled by
circumstances to take up an independent system of trade; the
products of the empire have found no foreign market, the home
manufactures are ruined or on the point of being so, all the ready
money of the country flows towards foreign lands, and the most
substantial trading firms are nearly ruined.' The beneficial
effects of the Russian protective system contributed no less than
the injurious consequences of the re-establishment of free trade
had done to bring into discredit the principles and assertions of
the theorists. Foreign capital, talent, and labour flowed into the
country from all civilised lands, especially from England and
Germany, in order to share in the advantages offered by the home
manufactories.
    The nobility imitated the policy of the Empire at large. As
they could obtain no foreign market for their produce, they
attempted to solve the problem inversely by bringing the market
into proximity with the produce -- they established manufactories
on their estates. In consequence of the demand for fine wool
produced by the newly created woollen manufactories, the breed of
sheep was rapidly improved. Foreign trade increased, instead of
declining, particularly that with China, Persia, and other
neighbouring countries of Asia. The commercial crises entirely
ceased, and one need only read the latest reports of the Russian
Minister of Commerce to be convinced that Russia owes a large
measure of prosperity to this system, and that she is increasing
her national wealth and power by enormous strides.
    It is foolish for Germans to try to make little of this
progress and to complain of the injury which it has caused to the
north-eastern provinces of Germany. Each nation, like each
individual, has its own interests nearest at heart. Russia is not
called upon to care for the welfare of Germany; Germany must care
for Germany, and Russia for Russia. It would be much better,
instead of complaining, instead of hoping and waiting and expecting
the Messiah of a future free trade, to throw the cosmopolitan
system into the fire and take a lesson from the example of Russia.
    That England should look with jealousy on this commercial
policy of Russia is very natural. By its means Russia has
emancipated herself from England, and has qualified herself to
enter into competition with her in Asia. Even if England
manufactures more cheaply, this advantage will in the trade with
Central Asia be outweighed by the proximity of the Russian Empire
and by its political influence. Although Russia may still be, in
comparison with Europe, but a slightly civilised country, yet, as
compared with Asia, she is a civilised one.
    Meantime, it cannot be denied that the want of civilisation and
political institutions will greatly hinder Russia in her further
industrial and commercial progress, especially if the Imperial
Government does not succeed in harmonising her political conditions
with the requirements of industry, by the introduction of efficient
municipal and provincial constitutions, by the gradual limitation
and final abolition of serfdom, by the formation of an educated
middle class and a free peasant class, and by the completion of
means of internal transport and of communication with Central Asia.
These are the conquests to which Russia is called in the present
century, and on them depends her further progress in agriculture
and industry, in trade, navigation and naval power. But in order to
render reforms of this kind possible and practicable, the Russian
aristocracy must first learn to feel that their own material
interests will be most promoted by them.

Chapter 9

The North Americans

    After our historical examination of the commercial policy of
the European nations, with the exception of those from which there
is nothing of importance to be learnt, we will cast a glance beyond
the Atlantic Ocean at a people of colonists which has been raising
itself almost before our eyes from the condition of entire
dependence on the mother country, and of separation into a number
of colonial provinces having no kind of political union between
themselves, to that of a united, well-organised, free, powerful,
industrious, rich, and independent nation, which will perhaps in
the time of our grandchildren exalt itself to the rank of the first
naval and commercial power in the world. The history of the trade
and industry of North America is more instructive for our subject
than any other can be, Because here the course of development
proceeds rapidly, the periods of free trade and protection follow
closely on each other, their consequences stand out clearly and
sharply defined, and the whole machinery of national industry and
State administration moves exposed before the eyes of the
spectator.
    The North American colonies were kept, in respect of trade and
industry, in such complete thraldom by the mother country, that no
sort of manufacture was permitted to them beyond domestic
manufacture and the ordinary handicrafts. So late as the year 1750
a hat manufactory in the State of Massachusetts created so great
sensation and jealousy in Parliament, that it declared all kinds of
manufactories to be 'common nuisances,' not excepting iron works,
notwithstanding that the country possessed in the greatest
abundance all the requisite materials for the manufacture of iron.
Even more recently, namely, in 1770, the great Chatham, made uneasy
by the first manufacturing attempts of the New Englanders, declared
that the colonies should not be permitted to manufacture so much as
a horseshoe nail.
    To Adam Smith belongs the merit of having first pointed out the
injustice of this policy.
    The monopoly of all manufacturing industry by the mother
country was one of the chief causes of the American Revolution; the
tea duty merely afforded an opportunity for its outbreak.
    Freed from restrictions, in possession of all material and
intellectual resources for manufacturing work, and separated from
that nation from which they had previously been supplied with
manufactured goods, and to which they had been selling their
produce, and thus thrown with all their wants upon their own
resources: manufactures of every kind in the North American free
states received a mighty stimulus during the war of revolution,
which in its turn had the effect of benefiting agriculture to such
an extent that, notwithstanding the burdens and the devastation
consequent upon the then recent war, the value of land and the rate
of wages in these states everywhere rose immensely but as, after
the peace of Paris, the faulty constitution of the free states made
the introduction of a united commercial system impossible, and
consequently English manufactured goods again obtained free
admission, competition with which the newly established American
manufactories had not strength enough to bear, the prosperity which
had arisen during the war vanished much more quickly than it had
grown up. An orator in Congress said afterwards of this crisis: 'We
did buy, according to the advice of modem theorists, where we could
buy cheapest, and our markets were flooded with foreign goods;
English goods sold cheaper in our seaport towns than in Liverpool
or London. Our manufacturers were being ruined; our merchants, even
those who thought to enrich themselves by importation, became
bankrupt; and all these causes together were so detrimental to
agriculture, that landed property became very generally worthless,
and consequently bankruptcy became general even among our
landowners.'
    This condition of things was by no means temporary; it lasted
from the peace of Paris until the establishment of the federal
constitution, and contributed more than any other circumstance to
bring about a more intimate union between the free states and to
impel them to give to Congress full powers for the maintenance of
a united commercial policy. Congress was inundated with petitions
from all the states -- New York and South Carolina not excepted --
in favour of protective measures for internal industry; and
Washington, on the day of his inauguration, wore a suit of
home-manufactured cloth, 'in order,' said a contemporary New York
journal, 'in the simple and impressive manner so peculiar to this
great man, to give to all his successors in office and to all
future legislators a memorable lesson upon the way in which the
welfare of this country is to be promoted.' Although the first
American tariff (1789) levied only light duties on the importation
of the most important manufactured articles, it yet worked so
beneficially from the very first years of its introduction that
Washington in his 'Message' in 1791 was able to congratulate the
nation on the flourishing condition of its manufactures,
agriculture, and trade.
    The inadequacy of this protection was, however, soon apparent;
for the effect of the slight import duties was easily overcome by
English manufacturers, who had the advantage of improved methods of
production. Congress did certainly raise the duty on the most
important manufactured articles to fifteen per cent, but this was
not till the year 1804, when it was compelled, owing to deficient
customs receipts, to raise more revenue, and long after the inland
manufacturers had exhausted every argument in favour of having more
protection, while the interests opposed to them were equally
strenuous upon the advantages of free trade and the injurious
effects of high import duties.
    In striking contrast with the slight progress which had, on the
whole, been made by the manufacturers of the country, stood the
improved condition of its navigation, which since the year 1789,
upon the motion of James Madison, had received effectual
protection. From a tonnage of 200,000 in 1789 their mercantile
marine had increased in 1801 to more than 1,000,000 tons. Under the
protection of the tariff of 1804, the manufacturing interest of the
United States could just barely maintain itself against the English
manufactories, which were continually being improved, and had
attained a colossal magnitude, and it would doubtless have had to
succumb entirely to English competition, had it not been for the
help of the embargo and declaration of war of 1812. In consequence
of these events, just as at the time of the War of Independence,
the American manufactories received such an extraordinary impetus
that they not only sufficed for the home demand, but soon began to
export as well. According to a report of the Committee on Trade and
Manufactures to Congress in 1815, 100,000 hands were employed in
the woollen and cotton manufactures alone, whose yearly production
amounted to the value of more than sixty million dollars. As in the
days of the War of Independence, and as a necessary consequence of
the increase in manufacturing power, there occurred a rapid rise in
all prices, not only of produce and in wages, but also of landed
property, and hence universal prosperity amongst landowners,
labourers, and all engaged in internal trade.
    After the peace of Ghent, Congress, warned by the experience of
1786, decreed that for the first year the previous duties should be
doubled, and during this period the country continued to prosper.
Coerced, however, by powerful private interests which were opposed
to those of the manufacturers, and persuaded by the arguments of
theorists, it resolved in the year 1816 to make a considerable
reduction in the import duties, whereupon the same effects of
external competition reappeared which had been experienced from
1786 to 1789, viz. ruin of manufactories, unsaleability of produce,
fall in the value of property and general calamity among
landowners. After the country had for a second time enjoyed in war
time the blessings of peace, it suffered, for a second time,
greater evils through peace than the most devastating war could
have brought upon it. It was only in the year 1824, after the
effects of the English corn laws had been made manifest to the full
extent of their unwise tendency thus compelling the agricultural
interest of the central, northern, and western states to make
common cause with the manufacturing interest, that a somewhat
higher tariff was passed in Congress, which, however, as Mr
Huskisson immediately brought forward counteracting measures with
the view of paralysing the effects of this tariff on English
competition, soon proved insufficient, and had to be supplemented
by the tariff of 1828, carried through Congress after a violent
struggle.
    Recently published official statistics(1*) of Massachusetts
give a tolerable idea of the start taken by the manufactures of the
United States, especially in the central and northern states of the
Union, in consequence of the protective system, and in spite of the
subsequent modification of the tariff of 1828. In the year 1837,
there were in this State (Massachusetts) 282 cotton mills and
565,031 spindles in operation, employing 4,997 male and 14,757
female hands; 37,275,917 pounds of cotton were worked up, and
126,000,000 yards of textile fabrics manufactured, of the value of
13,056,659 dollars, produced by a capital of 14,369,719 dollars.
    In the woollen manufacture there were 192 mills, 501 machines,
and 3,612 male and 3,485 female operatives employed, who worked up
10,858,988 pounds of wool, and produced 11,313,426 yards of cloth,
of the value of 10,399,807 dollars on a working capital of
5,770,750 dollars.
    16,689,877 pairs of shoes and boots were manufactured (large
quantities of shoes being exported to the western states), to the
value of 14,642,520 dollars.
    The other branches of manufacture stood in relative proportion
to the above.
    The combined value of the manufactures of the State (deducting
shipbuilding) amounted to over 86 million dollars, with a working
capital of about 60 million dollars.
    The number of operatives (men) was 117,352; and the total
number of inhabitants of the State (in 1837) was 701,331.
    Misery, brutality, and crime are unknown among the
manufacturing population here. On the contrary, among the numerous
male and female factory workers the strictest morality,
cleanliness, and neatness in dress, exist; libraries are
established to furnish them with useful and instructive books; the
work is not exhausting, the food nourishing and good. Most of the
women save a dowry for themselves.(2*)
    This last is evidently the effect of the cheap prices of the
common necessaries of life, light taxation, and an equitable
customs tariff. Let England repeal the restrictions on the import
of agricultural produce, decrease the existing taxes on consumption
by one-half or two-thirds, cover the loss by an income tax, and her
factory workers will be put into the same position.
    No nation has been so misconstrued and so misjudged as respects
its future destiny and its national economy as the United States of
North America, by theorists as well as by practical men. Adam Smith
and J. B. Say had laid it down that the United States were, 'like
Poland,' destined for agriculture. This comparison was not very
flattering for the union of some dozen of new, aspiring, youthful
republics, and the prospect thus held out to them for the future
not very encouraging. The above-mentioned theorists had
demonstrated that Nature herself had singled out the people of the
United States exclusively for agriculture, so long as the richest
arable land was to be had in their country for a mere trifle. Great
was the commendation which had been bestowed upon them for so
willingly acquiescing in Nature's ordinances, and thus supplying
theorists with a beautiful example of the splendid working of the
principle of free trade. The school, however, soon had to
experience the mortification of losing this cogent proof of the
correctness and applicability of their theories in practice, and
had to endure the spectacle of the United States seeking their
nation's welfare in a direction exactly opposed to that of absolute
freedom of trade.
    As this youthful nation had previously been the very apple of
the eye of the schoolmen, so she now became the object of the
heaviest condemnation on the part of the theorists of every nation
in Europe. It was said to be a proof of the slight progress of the
New World in political knowledge, that while the European nations
were striving with the most honest zeal to render universal free
trade possible, while England and France especially were actually
engaged in endeavouring to make important advances towards this
great philanthropic object, the United States of North America were
seeking to promote their national prosperity by a return to that
long-exploded mercantile system which had been clearly refuted by
theory. A country like the United States, in which such measureless
tracts of fruitful land still remained uncultivated and where wages
ruled so high, could not utilise its material wealth and increase
of population to better purpose than in agriculture; and when this
should have reached complete development, then manufactures would
arise in the natural course of events without artificial forcing.
But by an artificial development of manufactures the United States
would injure not only the countries which had long before enjoyed
civilisation, but themselves most of all.
    With the Americans, however, sound common sense, and the
instinct of what was necessary for the nation, were more potent
than a belief in theoretical propositions. The arguments of the
theorists were thoroughly investigated, and strong doubts
entertained of the infallibility of a doctrine which its own
disciples were not willing to put in practice.
    To the argument concerning the still uncultivated tracts of
fruitful land, it was answered that tracts of such land in the
populous, well-cultivated states of the Union which were ripe for
manufacturing industry, were as rare as in Great Britain; that the
surplus population of those states would have to migrate at great
expense to the west, in order to bring tracts of land of that
description into cultivation, thus not only annually causing the
eastern states large losses in material and intellectual resources,
but also, inasmuch as such emigration would transform customers
into competitors, the value of landed property and agricultural
produce would thereby be lessened. It could not be to the advantage
of the Union that all waste land belonging to it should be
cultivated up to the Pacific Ocean before either the population,
the civilisation, or the military power of the old states had been
fully developed. On the contrary, the cultivation of distant virgin
lands could confer no benefit on the eastern states unless they
themselves devoted their attention to manufacturing, and could
exchange their manufactures against the produce of the west. People
went still further: Was not England, it was asked, in much the same
position? Had not England also under her dominion vast tracts of
fertile land still uncultivated in Canada, in Australia, and in
other quarters of the world? Was it not almost as easy for England
to transplant her surplus population to those countries as for the
North Americans to transplant theirs from the shores of the
Atlantic to the banks of the Missouri? If so, what occasion had
England not only continuously to protect her home manufactures, but
to strive to extend them more and more?
    The argument of the school, that with a high rate of wages in
agriculture, manufactures could not succeed by the natural course
of things, but only by being forced like hothouse plants, was found
to be partially well-founded; that is to say, it was applicable
only to those manufactured goods which, being small in bulk and
weight as compared to their value, are produced principally by hand
labour, but was not applicable to goods the price of which is less
influenced by the rate of wages, and as to which the disadvantage
of higher wages can be neutralised by the use of machinery, by
water power as yet unused, by cheap raw materials and food, by
abundance of cheap fuel and building materials, by light taxation
and increased efficiency of labour.
    Besides, the Americans had long ago learnt from experience that
agriculture cannot rise to a high state of prosperity unless the
exchange of agricultural produce for manufactures is guaranteed for
all future time; but that, when the agriculturist lives in America
and the manufacturer in England, that exchange is not unfrequently
interrupted by wars, commercial crises, or foreign tariffs, and
that consequently, if the national well-being is to rest on a
secure foundation, 'the manufacturer,' to use Jefferson's words,
'must come and settle down in close proximity to the
agriculturist.'
    At length the Americans came to realise the truth that it
behoves a great nation not exclusively to set its heart upon the
enjoyment of proximate material advantages; that civilisation and
power -- more important and desirable possessions than mere
material wealth, as Adam Smith himself allows -- can only be
secured and retained by the creation of a manufacturing power of
its own; that a country which feels qualified to take and to
maintain its place amongst the powerful and civilised nations of
the earth must not shrink from any sacrifice in order to secure
such possessions for itself; and that at that time the Atlantic
states were clearly the region marked out for such possessions.
    It was on the shores of the Atlantic that European settlers and
European civilisation first set a firm foot. Here, at the first,
were populous, wealthy, and civilised states created; here was the
cradle and seat of their sea fisheries, coasting trade, and naval
power; here their independence was won and their union founded.
Through these states on the coast the foreign trade of the Union is
carried on; through them it is connected with the civilised world;
through them it acquires the surplus population, material, capital,
and mental powers of Europe; upon the civilisation, power, and
wealth of these sea-board states depend the future civilisation,
power, wealth, and independence of the whole nation and its future
influence over less civilised communities. Suppose that the
population of these Atlantic states decreased instead of growing
larger, that their fisheries, coasting trade, shipping engaged in
foreign trade and foreign trade itself, and, above all, their
general prosperity, were to fall off or remain stationary instead
of progressing, then we should see the resources of civilisation of
the whole nation, the guarantees for its independence and external
power, diminish too in the same degree. It is even conceivable
that, were the whole territory of the United States laid under
cultivation from sea to sea, covered with agricultural states, and
densely populated in the interior, the nation itself might
nevertheless be left in a low grade as respects civilisation,
independence, foreign power, and foreign trade. There are certainly
many nationalities who are in such a position and whose shipping
and naval power are nil, though possessing a numerous inland
population!
    If a power existed that cherished the project of keeping down
the rise of the American people and bringing them under subjection
to itself industrially, commercially, or politically, it could only
succeed in its aim by trying to depopulate the Atlantic states of
the Union and driving all increase of population, capital, and
intellectual power into the interior. By that means it would not
only check the further growth of the nation's naval power, but
might also indulge the hope of getting possession in time of the
principal defensive strategical positions on the Atlantic coast and
at the mouths of the rivers. The means to this end would not be
difficult to imagine; it would only be necessary to hinder the
development of manufacturing power in the Atlantic states and to
insure the acceptance of the principle of absolute freedom of
foreign trade in America. If the Atlantic states do not become
manufacturers, they will not only be unable to keep up their
present degree of civilisation, but they must sink, and sink in
every respect. Without manufactures how are the towns along the
Atlantic coast to prosper? Not by the forwarding of inland produce
to Europe and of English manufactured goods to the interior, for a
very few thousand people would be sufficient to transact this
business. How are the fisheries to prosper? The majority of the
population who have moved inland prefer fresh meat and fresh-water
fish to salted; they require no train oil, or at least but a small
quantity. How is the coasting trade along the Atlantic sea-board to
thrive? As the largest portion of the coast states are peopled by
cultivators of land who produce for themselves all the provisions,
building materials, fuel, &c. which they require, there is nothing
along the coast to sustain a transport trade. How are foreign trade
and shipping to distant places to increase? The country has nothing
to offer but what less cultivated nations possess in
superabundance, and those manufacturing nations to which it sends
its produce encourage their own shipping. How can a naval power
arise when fisheries, the coasting trade, ocean navigation, and
foreign trade decay? How are the Atlantic states to protect them
selves against foreign attacks without a naval power? How is
agriculture even to thrive in these states, when by means of
canals, railways, &c. the produce of the much more fertile and
cheaper tracts of land in the west which require no manure, can be
carried to the east much more cheaply than it could be there
produced upon soil exhausted long ago? How under such circumstances
can civilisation thrive and population increase in the eastern
states, when it is clear that under free trade with England all
increase of population and of agricultural capital must flow to the
west? The present state of Virginia gives but a faint idea of the
condition into which the Atlantic states would be thrown by the
absence of manufactures in the east; for Virginia, like all the
southern states on the Atlantic coast, at present takes a
profitable share in providing the Atlantic states with agricultural
produce.
    All these things bear quite a different complexion, owing to
the existence of a flourishing manufacturing power in the Atlantic
states. Now population, capital, technical skill and intellectual
power, flow into them from all European countries; now the demand
for the manufactured products of the Atlantic states increases
simultaneously with their consumption of the raw materials supplied
by the west. Now the population of these states, their wealth, and
the number and extent of their towns increase in equal proportion
with the cultivation of the western virgin lands; now, on account
of the larger population, and the consequently increased demand for
meat, butter, cheese, milk, garden produce, oleaginous seeds,
fruit, &c., their own agriculture is increasing; now the sea
fisheries are flourishing in consequence of the larger demand for
salted fish and train oil; now quantities of provisions, building
materials, coal, &c. are being conveyed along the coast to furnish
the wants of the manufacturing population; now the manufacturing
population produce a large quantity of commodities for export to
all the nations of the earth, from whence result profitable return
freights; now the nation's naval power increases by means of the
coasting trade, the fisheries, and navigation to distant lands, and
with it the guarantee of national independence and influence over
other nations, particularly over those of South America; now
science and art, civilisation and literature, are improving in the
eastern states, whence they are being diffused amongst the western
states.
    These were the circumstances which induced the United States to
lay restrictions upon the importation of foreign manufactured
goods, and to protect their native manufactures. With what amount
of success this has been done, we have shown in the preceding
pages. That without such a policy a manufacturing power could never
have been maintained successfully in the Atlantic states, we may
learn from their own experience and from the industrial history of
other nations.
    The frequently recurring commercial crises in America have been
very often attributed to these restrictions on importation of
foreign goods, but without reasonable grounds. The earlier as well
as the later experience of North America shows, on the contrary,
that such crises have never been more frequent and destructive than
when commercial intercourse with England was least subject to
restrictions. Commercial crises amongst agricultural nations, who
procure their supplies of manufactured goods from foreign markets,
arise from the disproportion between imports and exports.
Manufacturing nations richer in capital than agricultural states,
and ever anxious to increase the quantity of their exports, deliver
their goods on credit and encourage consumption. In fact, they make
advances upon the coming harvest. But if the harvest turn out so
poor that its value falls greatly below that of the goods
previously consumed; or if the harvest prove so rich that the
supply of produce meets with no adequate demand and falls in price;
while at the same time the markets still continue to be overstocked
with foreign goods -- then a commercial crisis will occur by reason
of the disproportion existing between the means of payment and the
quantity of goods previously consumed, as also by reason of the
disproportion between supply and demand in the markets for produce
and manufactured goods. The operations of foreign and native banks
may increase and promote such a crisis, but they cannot create it.
In a future chapter we shall endeavour more closely to elucidatc
this subject.

NOTES:

1. Statistical Table of Massachusetts for the Year ending April 1,
1837, by J. P. Bigelow, Secretary of the Commonwealth (Boston,
1838). No American state but Massachusetts possesses similar
statistical abstracts. We owe those here referred to, to Governor
Everett, distinguished alike as a scholar, an author, and a
statesman.

2. The American papers of July 1839 report that in the
manufacturing town of Lowell alone there are over a hundred
workwomen who have each over a thousand dollars deposited to their
credit in the savings bank.


Chapter 10

The Teachings of History

    Everywhere and at all times has the well-being of the nation
been in equal proportion to the intelligence, morality, and
industry of its citizens; according to these, wealth has accrued or
been diminished; but industry and thrift, invention and enterprise,
on the part of individuals, have never as yet accomplished aught of
importance where they were not sustained by municipal liberty, by
suitable public institutions and laws, by the State administration
and foreign policy, but above all by the unity and power, of the
nation.
    History everywhere shows us a powerful process of reciprocal
action between the social and the individual powers and conditions.
In the Italian and the Hanseatic cities, in Holland and England, in
France and America, we find the powers of production, and
consequently the wealth of individuals, growing in proportion to
the liberties enjoyed, to the degree of perfection of political and
social institutions, while these, on the other hand, derive
material and stimulus for their further improvement from the
increase of the material wealth and of the productive power of
individuals.
    The real rise of the industry and power of England dates only
from the days of the actual foundation of England's national
freedom, while the industry and power of Venice, of the Hanse
Towns, of the Spanish and Portuguese, decayed concurrently with
their loss of freedom. However industrious, thrifty, inventive, and
intelligent, individual citizens might be, they could not make up
for the lack of free institutions. History also teaches that
individuals derive the greater part of their productive powers from
the social institutions and conditions under which they are placed.
    The influence of liberty, intelligence, and enlightenment over
the power, and therefore over the productive capacity and wealth of
a nation, is exemplified in no respect so clearly as in navigation.
Of all industrial pursuits, navigation most demands energy,
personal courage, enterprise, and endurance; qualifications that
can only flourish in an atmosphere of freedom. In no other calling
do ignorance, superstition, and prejudice, indolence, cowardice,
effeminacy, and weakness produce such disastrous consequences;
nowhere else is a sense of self-reliance so indispensable. Hence
history cannot point to a single example of an enslaved people
taking a prominent part in navigation. The Hindoos, the Chinese,
and the Japanese have ever strictly confined their efforts to canal
and river navigation and the coasting trade. In ancient Egypt
maritime navigation was held in abhorrence, probably because
priests and rulers dreaded lest by means of it the spirit of
freedom and independence should be encouraged. The freest and most
enlightened states of ancient Greece were also the most powerful at
sea; their naval power ceased with their freedom, and however much
history may narrate of the victories of the kings of Macedonia on
land, she is silent as to their victories at sea.
    When were the Romans powerful at sea, and when is nothing more
heard of their fleets? When did Italy lay down the law in the
Mediterranean, and since when has her very coasting trade fallen
into the hands of foreigners? Upon the Spanish navy the Inquisition
had passed sentence of death long ere the English and the Dutch
fleets had executed the decree. With the coming into power of the
mercantile oligarchies in the Hanse Towns, power and the spirit of
enterprise took leave of the Hanseatic League.
    Of the Spanish Netherlands only the maritime provinces achieved
their freedom, whereas those held in subjection by the Inquisition
had even to submit to the closing of their rivers. The English
fleet, victorious over the Dutch in the Channel, now took
possession of the dominion of the seas, which the spirit of freedom
had assigned to England long before; and yet Holland, down to our
own days, has retained a large proportion of her mercantile marine,
whereas that of the Spaniards and the Portuguese is almost
annihilated. In vain were the efforts of a great individual
minister now and then under the despotic kings of France to create
a fleet, for it invariably went again to ruin.
    But how is it that at the present day we witness the growing
strength of French navigation and naval power? Hardly had the
independence of the United States of North America come to life,
when we find the Americans contending with renown against the giant
fleets of the mother country. But what is the position of the
Central and South American nations? So long as their flags wave not
over every sea, but little dependence can be placed upon the
effectiveness of their republican forms of government. Contrast
these with Texas, a territory that has scarcely attained to
political life, and yet already claims its share in the realm of
Neptune.
    But navigation is merely one part of the industrial power of a
nation -- a part which can flourish and attain to importance only
in conjunction with all the other complementary parts. Everywhere
and at all times we see navigation, inland and foreign trade, and
even agriculture itself, flourish only where manufactures have
reached a high state of prosperity. But if freedom be an
indispensable condition for the prosperity of navigation, how much
wore must it be so for the prosperity of the manufacturing power,
for the growth of the entire producing power of a nation? History
contains no record of a rich, commercial, and industrial community
that was not at the same time in the enjoyment of freedom.
    Manufactures everywhere first brought into operation improved
weans of transport, improved river navigation, improved highways,
steam navigation and railways, which constitute the fundamental
elements of improved systems of agriculture and of civilisation.
    History teaches that arts and trades migrated from city to
city, from one country to another. Persecuted and oppressed at
home, they took refuge in cities and in countries where freedom,
protection, and support were assured to them. In this way they
migrated from Greece and Asia to Italy; from Italy to Germany,
Flanders, and Brabant; and from thence to Holland and England.
Everywhere it was want of sense and despotism that drove them away,
and the spirit of freedom that attracted them. But for the folly of
the Continental governments, England would have had difficulty in
attaining supremacy in industry. But does it appear more consistent
with wisdom for us in Germany to wait patiently until other nations
are impolitic enough to drive out their industries and thus compel
them to seek a refuge with us, or that we should, without waiting
for such contingencies, invite them by proffered advantages to
settle down amongst us?
    It is true that experience teaches that the wind bears the seed
from one region to another, and that thus waste moorlands have been
transformed into dense forests; but would it on that account be
wise policy for the forester to wait until the wind in the course
of ages effects this transformation?
    Is it unwise on his part if by sowing and planting he seeks to
attain the same object within a few decades? History tells us that
whole nations have successfully accomplished that which we see the
forester do? Single free cities, or small republics and
confederations of such cities and states, limited in territorial
possessions, of small population and insignificant military power,
but fortified by the energy of youthful freedom and favoured by
geographical position as well as by fortunate circumstances and
opportunities, flourished by means of manufactures and commerce
long before the great monarchies; and by free commercial
intercourse with the latter, by which they exported to them
manufactured goods and imported raw produce in exchange, raised
themselves to a high degree of wealth and power. Thus did Venice,
the Hanse Towns the Belgians and the Dutch.
    Nor was this system of free trade less profitable at first to
the great monarchies themselves, with whom these smaller
communities had commercial intercourse. For, having regard to the
wealth of their natural resources and to their undeveloped social
condition the free importation of foreign manufactured goods and
the exportation of native produce presented the surest and most
effectual means of developing their own powers of production, of
instilling habits of industry into their subjects who were addicted
to idleness and turbulence, of inducing their landowners and nobles
to feel an interest in industry, of arousing the dormant spirit of
enterprise amongst their merchants, and especially of raising their
own civilisation, industry, and power.
    These effects were learned generally by Great Britain from the
trade and manufacturing industry of the Italians, the Hansards, the
Belgians, and the Dutch. But having attained to a certain grade of
development by means of free trade, the great monarchies perceived
that the highest degree of civilisation, power, and wealth can only
be attained by a combination of manufactures and commerce with
agriculture. They perceived that their newly established native
manufactures could never hope to succeed in free competition with
the old and long established manufactures of foreigners; that their
native fisheries and native mercantile marine, the foundations of
their naval power, could never make successful progress without
special privileges; and that the spirit of enterprise of their
native merchants would always be kept down by the overwhelming
reserves of capital, the greater experience and sagacity of the
foreigners. Hence they sought, by a system of restrictions,
privileges, and encouragements, to transplant on to their native
soil the wealth, the talents, and the spirit of enterprise of the
foreigners. This policy was pursued with greater or lesser, with
speedier or more tardy success, just in proportion as the measures
adopted were more or less judiciously adapted to the object in
view, and applied and pursued with more or less energy and
perseverance.
    England, above all other nations, has adopted this policy.
Often interrupted in its execution from the want of intelligence
and self-restraint on the part of her rulers, or owing to internal
commotions and foreign wars, it first assumed the character of a
settled and practically efficient policy under Edward VI,
Elizabeth, and the revolutionary period. For how could the measures
of Edward III work satisfactorily when it was not till under Henry
VI that the law permitted the carriage of corn from one English
county to another, or the shipment of it to foreign parts; when
still under Henry VII and Henry VIII all interest on money, even
discount on bills, was held to be usury, and when it was still
thought at the time that trade might be encouraged by fixing by law
at a low figure the price of woollen goods and the rate of wages,
and that the production of corn could be increased by prohibiting
sheep farming on a large scale?
    And how much sooner would England's woollen manufactures and
maritime trade have reached a high standard of prosperity had not
Henry VIII regarded a rise in the prices of corn as an evil; had
he, instead of driving foreign workmen by wholesale from the
kingdom, sought like his predecessors to augment their number by
encouraging their immigration; and had not Henry VII refused his
sanction to the Act of Navigation as proposed by Parliament?
    In France we see native manufactures, free internal
intercourse, foreign trade, fisheries, navigation, and naval power
-- in a word, all the attributes of a great, mighty, and rich
nation (which it had cost England the persevering efforts of
centuries to acquire) -- called into existence by a great genius
within the space of a few years, as it were by a magician's wand;
and afterwards all of them yet more speedily annihilated by the
iron hand of fanaticism and despotism.
    We see the principle of free trade contending in vain under
unfavourable conditions against restriction powerfully enforced;
the Hanseatic League is ruined, while Holland sinks under the blows
of England and France.
    That a restrictive commercial policy can be operative for good
only so far as it is supported by the progressive civilisation and
free institutions of a nation, we learn from the decay of Venice,
Spain, and Portugal, from the relapse of France in consequence of
the revocation of the Edict of Nantes, and from the history of
England, in which country liberty kept pace at all times with the
advance of industry, trade, and national wealth.
    That, on the contrary, a highly advanced state of civilisation,
with or without free institutions, unless supported by a suitable
system of commercial policy, will prove but a poor guarantee for a
nation's economic progress, may be learnt on the one hand from the
history of the North American free states, and on the other from
the experience of Germany.
    Modern Germany, lacking a system of vigorous and united
commercial policy, exposed in her home markets to competition with
a foreign manufacturing power in every way superior to her own,
while excluded at the same time from foreign markets by arbitrary
and often capricious restrictions, and very far indeed from making
that progress in industry to which her degree of culture entitles
her, cannot even maintain her previously acquired position, and is
made a convenience of (like a colony) by that very nation which
centuries ago was worked upon in like manner by the merchants of
Germany, until at last the German states have resolved to secure
their home markets for their own industry, by the adoption of a
united vigorous system of commercial policy.
    The North American free states, who, more than any other nation
before them, are in a position to benefit by freedom of trade, and
influenced even from the very cradle of their independence by the
doctrines of the cosmopolitan school, are striving more than any
other nation to act on that principle. But owing to wars with Great
Britain, we find that nation twice compelled to manufacture at home
the goods which it previously purchased under free trade from other
countries, and twice, after the conclusion of peace, brought to the
brink of ruin by free competition with foreigners, and thereby
admonished of the fact that under the present conditions of the
world every great nation must seek the guarantees of its continued
prosperity and independence, before all other things, in the
independent and uniform development of its own powers and
resources.
    Thus history shows that restrictions are not so much the
inventions of mere speculative minds, as the natural consequences
of the diversity of interests, and of the strivings of nations
after independence or overpowering ascendency, and thus of national
emulation and wars, and therefore that they cannot be dispensed
with until this conflict of national interests shall cease, in
other words until all nations can be united under one and the same
system of law. Thus the question as to whether, and how, the
various nations can be brought into one united federation, and how
the decisions of law can be invoked in the place of military force
to determine the differences which arise between independent
nations, has to be solved concurrently with the question how
universal free trade can be established in the place of separate
national commercial systems.
    The attempts which have been made by single nations to
introduce freedom of trade in face of a nation which is predominant
in industry, wealth, and power, no less than distinguished for an
exclusive tariff system -- as Portugal did in 1703, France in 1786,
North America in 1786 and 1816, Russia from 1815 till 1821, and as
Germany has done for centuries -- go to show us that in this way
the prosperity of individual nations is sacrificed, without benefit
to mankind in general, solely for the enrichment of the predominant
manufacturing and commercial nation. Switzerland (as we hope to
show in the sequel) constitutes an exception, which proves just as
much as it proves little for or against one or the other system.
    Colbert appears to us not to have been the inventor of that
system which the Italians have named after him; for, as we have
seen, it was fully elaborated by the English long before his time.
Colbert only put in practice what France, if she wished to fulfil
her destinies, was bound to carry out sooner or later. If Colbert
is to be blamed at all, it can only be charged against him that he
attempted to put into force under a despotic government a system
which could subsist only after a fundamental reform of the
political conditions. But against this reproach to Colbert's memory
it may very well be argued that, had his system been continued by
wise princes and sagacious ministers, it would in all probability
have removed by means of reforms all those hindrances which stood
in the way of progress in manufactures, agriculture, and trade, as
well as of national freedom; and France would then have undergone
no revolution, but rather, impelled along the path of development
by the reciprocating influences of industry and freedom, she might
for the last century and a half have been successfully competing
with England in manufactures, in the promotion of her internal
trade, in foreign commerce, and in colonisation, as well as in her
fisheries, her navigation, and her naval power.
    Finally, history teaches us how nations which have been endowed
by Nature with all resources which are requisite for the attainment
of the highest grade of wealth and power, may and must -- without
on that account forfeiting the end in view -- modify their systems
according to the measure of their own progress: in the first stage,
adopting free trade with more advanced nations as a means of
raising themselves from a state of barbarism, and of making
advances in agriculture; in the second stage, promoting the growth
of manufactures, fisheries, navigation, and foreign trade by means
of commercial restrictions; and in the last stage, after reaching
the highest degree of wealth and power, by gradually reverting to
the principle of free trade and of unrestricted competition in the
home as well as in foreign markets, that so their agriculturists,
manufacturers, and merchants may be preserved from indolence, and
stimulated to retain the supremacy which they have acquired. In the
first stage, we see Spain, Portugal, and the Kingdom of Naples; in
the second, Germany and the United States of North America; France
apparently stands close upon the boundary line of the last stage;
but Great Britain alone at the present time has actually reached
it.