effect on the commerce and industries of the United Kingdom than the earlier Act of Union, which had joined England and Scotland as Great Britain. French Commercial union with Ireland was, after all, only an extension of the principles of the treaty of 1707. The commercial treaty of 1786 with France definitely threw over the principles which had controlled commercial policy for more than a century, and had received their most notable illustration with the rejection of the French commercial treaty proposed by the Tories in 1713. According to the old doctrine, whatever was good for France was necessarily bad for Great Britain. According to the new doctrine, enlightened self-interest rejoices in a neighbour's prosperity as a means to its own advancement. The more France prospered, the more she would buy British goods; and it would be Britain's own fault if a treaty which helped to enrich France did not enrich Britain still more. The mere transfer of bullion was of no importance, since wealth is not to be identified with treasure, and a sufficiency of it as a commodity is automatically ensured. If the country wants goods more than gold, it will barter gold for goods; if it wants gold more than goods, it will barter goods for gold. Pitt's commercial treaty with France met with general acceptance, though it was hotly enough attacked in the opposite political camp, on the basis of the traditional principles; and subsequent events provided a curious commentary on Fox's fervent condemnation of the proposal on the ground that France was the natural and immemorial foe of Britain. As a matter of fact, the mutual reduction of tariffs was rapidly increasing the French demand for British goods and developing our market in France, when commercial amenities were cut short by the outbreak of war. The commercial treaty, in fact, marked a definite severance from the old mercantile theory, although the country had as yet by no means accepted in their entirety the principles propounded by Adam Smith. Attacks on it. France was still a monarchy when the treaty was made; and when she became a republic, she reverted to doctrines of protection, since French merchants and manufacturers were complaining of the competition of British Renewed goods. The French Republic was at war with Hostilities. Great Britain within a few months; and the root principle of war is to destroy the adversary's power of resistance. If, in peace, our neighbour's prosperity is to be viewed not merely with equanimity but as a matter of congratulation for ourselves, still, when war breaks out, it is of the first importance to deprive the opponent of the sinews of war. French and British set themselves each to destroy the commerce of the other, and soon after the war began, Holland was joined with France in antagonism to Britain, and as the object of her hostility. Commercially, Britain suffered less than her opponents; her trade was reduced, but theirs was reduced very much more. Her merchantmen ran grave risks, but the Dutch and French merchantmen were almost driven off the seas. For sea-borne produce of all sorts they Neutrals became very largely dependent upon neutral at Sea. shipping; and Great Britain insisted on her own rigorous interpretations of international law as affecting neutral shipping in time of war. That is to say, broadly speaking, she sought to reduce to a minimum the services which neutrals could render to a belligerent power-thereby ensuring at least the latent hostility of the neutrals, with whose trade she interfered. A practical effect injurious to these islands was the consequent check on British trade with the Baltic, which at that time was the main source of food supply from outside. Hence arose the necessity for increasing the domestic supply so as to render the country self-sufficing, and the continuous process of bringing new and inferior land under cultivation, land which would not pay for tillage when foreign supplies became available and the foreign producer could compete in the English market. The Peace of Amiens in 1802 for the time being suspended the Continental War. Meanwhile, the productive capacity of the iron and textile trades in England had been immensely increased. The stability of trade suffered from the sudden of the War. inflation brought on by the peace, and its equally sudden cessation when war was again declared fifteen months Second Stage afterwards. Until 1806 matters went on very much as they had done between 1793 and 1802; but at the close of 1805, Napoleon's supremacy on the Continent was established by Austerlitz, whereas British maritime supremacy was consummated by the victory of Trafalgar. It was at this stage that Napoleon resolved to crush the nation which stood in the way of his most far-reaching ambitions, by completely ruining her commerce. Britain gave him his excuse by an exercise of what she claimed as her maritime rights. She declared a blockade of the entire northern coastline, which was under French control from Brest to the river Elbe. Napoleon, having just brought Prussia under his heel by the victories of Jena and Auerstadt, came forward as the champion of European liberties against the tyrant of the seas,' and issued the Berlin The Berlin and Milan Decree. The British Isles were declared to be in Decrees. a state of blockade; all property and merchandise of British subjects and all British manufactures were pronounced to be lawful prize. Britain responded with the Orders in Council, forbidding the trade of neutral vessels between French ports or their trading to any hostile port, without first touching at a British port and paying the customs imposed by the British authorities. Napoleon retorted with the Milan Decree, which declared that any vessel submitting to the British regulations was thereby rendered lawful prize. In short, a desperate duel was entered upon, Napoleon endeavouring by every possible means to shut British goods out of the Continent altogether, while the British replied by claiming to prohibit the carriage of sea-borne goods except in her own ships or those of powers which were prepared to defy Napoleon's decrees. The duel demonstrated the strength of the position which Britain had already achieved. She was able to make her programme practically secure, whereas Napoleon's 'Continental System' broke down. The Continent could not do without British goods. Napoleon might strive to block every entry, but there was always a leak. Moreover, sheer need of British goods compelled him to issue licences for their admission, and a very great deal more of them The Duel forced their way in than the licences authorised. of Exclusion. In Holland, his own brother refused to carry out the decrees, and was deposed. The Tsar of Russia deserted the system, and Napoleon endeavoured to bring him to book by the Moscow expedition, with disastrous results. In fact, the British Empire held a virtual monopoly of oceanic commerce and of the new manufactures; she could prevent any one else by force from challenging the one monopoly, and no one else was possessed of the means to challenge the other. The Continental System meant that Europe had a diminished supply, at greatly increased cost, of goods of which her peoples stood in absolute need, and they had to get them from the British and to pay Britain's price. The final effect of the whole contest was to make both the British monopolies more difficult to challenge than ever. Napoleon's policy had emphatically failed in its object, was infinitely injurious to the Continent at large, and was ultimately turned to his own ruin, since it provided the motive for the Moscow expedition. Moreover, it confirmed the relative superiority, commercial and industrial, of Britain. Nevertheless, Britain suffered severely. It was much as if she had won a great victory at the cost of an enormous list of casualties. And she had suffered not only by Napoleon's own policy, but by her own methods of reprisal. These had created a bitter hostility to her, which was only made less disastrous because it was exceeded by the hostility to Napoleon himself, aroused by the oppressiveness of his Continental System. It actually did involve this country in a war with the United States: the grievances of neutrals have always remained a factor militating against friendly relations with other maritime powers, and it is questionable whether, in the long-run, extreme insistence on British claims did not have injurious effects which counterbalanced the advantages for the sake of which they were asserted. S Mercantilism and Protection. CHAPTER XXIII COMMERCIAL LAISSEZ FAIRE NEITHER Walpole nor Pitt had interfered with the protectionist practice which had grown out of the mercantile theory. Adam Smith, as an economist, repudiated protectionist principles, but declared in effect that it was vain to hope for free trade, because the strength of the interests which profited, or thought they profited, by protection, was too strong to permit of its abolition. Free trade was the logical consummation of the economic policy of both statesmen; but neither had in general been able to get beyond the stage of reducing tariffs on imports to a point which excited no alarm in protected trades. Protection and mercantilism were not essentially bound up together, except so far as protection might seem necessary for the maintenance or development of some kind of trade which was specifically a necessity for the existence of the empire. The Navigation Acts were created and maintained in theory, not for the sake of the shippers, but to preserve maritime supremacy and to injure a maritime rival. The importation of corn from abroad was taxed, and its export from home was encouraged by bounties, or on occasion prohibited, not in order to swell the purses of landowners or to save them from depletion, but in theory to maintain a sturdy rural population and a supply of home-grown corn sufficient to meet the needs of all the inhabitants of these islands. Nevertheless, pure protectionism followed inevitably from mercantilism as a practical result. Every trade could put in a claim not exactly that its existence was essential to the national welfare, but that its collapse would be some |