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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.

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Mercantilism and

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 Protection. 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

thing like a national disaster, and that its prosperity was a proper object for the State to secure. Difficulties might indeed arise when it happened that the interests of

two important trades were antagonistic. The of Interests. wool-growers wanted the best market they could get, and objected to any interference with their export trade. The wool-workers, on the other hand, wanted their raw material cheapened, and demanded high tariffs on the export of wool so as to keep English wool in England, and bring it on to the market at low price. The actual result was State interference to restrict the wool-growing trade in the interest of the woolworkers. But practically it was only in cases like this, where trade interests collided, that the claim of any individual trade to protection could very well be repudiated.

The doctrines of Adam Smith, however, began to impress themselves upon the commercial community. Everybody wanted raw materials and food to be cheapened Progress of except the people who lived by the production the New View. of raw materials and food. Commerce was no longer hampered by the doctrine of the balance of trade and the fear of exchanging treasure for goods. And much of the new manufacture being practically in no danger from foreign competition, the manufacturers, having nothing to gain by protection, were comparatively ready to adopt free trade doctrines, even though they might not recognise any direct personal advantage to themselves as accruing from free trade; for it is mere human nature to be convinced that the State policy most obviously advantageous to ourselves is also the best for the community at large.

The war was calculated in every way to develop commercial barriers; to cause commercial questions between Britain and other powers to be approached by both parties Consequences in a certain spirit of mutual hostility. It had of the War. entirely broken up that attempt to look upon commerce as a source of mutual benefit which had been formulated in Pitt's French treaty of 1786. The attitude of Great Britain on maritime questions, however necessary as a feature of war

policy, had been exceedingly irritating to every one else; and Britain had like reasons for being irritated with every one else in her turn. And when the war was brought to a successful conclusion, the circumstances were still unfavourable to commercial development. Britain was ready to provide goods to any extent for an expanded market, but the European States were too completely exhausted to be able to buy largely; a state of things which emphasised the new doctrine that our neighbour's welfare is the condition of our own prosperity, as opposed to the ancient doctrine that our neighbour's loss is our own gain and our neighbour's gain is our own loss. The fluctuations of trade during the war had their counterpart in the years which followed Waterloo, in over-production for a market which did not exist and collapse following on inflation. But at the same time it was apparent that our continental neighbours were reaping no advantages from the conditions which continued to be so disquieting to ourselves.

The first movement, then, towards a free trade policy after the war came neither from professors nor from politicians, Petitions for but from the commercial community itself. In Free Trade. 1820 both the London merchants and the Edinburgh Chamber of Commerce presented petitions in favour of limiting the restrictions on commerce to taxation for purposes of revenue. The position taken up was one very much in advance, not of what had appeared desirable to Adam Smith and the theorists, but of what had appeared practicable to the statesmen who were in sympathy with their theories. The petitions marked the conversion of a solid body of trained commercial opinion to the doctrine of Laissez Faire, the doctrine that the State does more harm than good to commerce by interfering for its regulation. The State must raise revenue. To raise a revenue it must impose taxes; but it should impose them with a single eye to the revenue, so as to obtain the maximum amount with the minimum of interference. The petitions were expressly based on principles admittedly opposed to those on which

every government in Europe was acting, for every government in Europe was trying to regain the prosperity of its own people by shutting out foreign competition.

The petitions took the point of view of the consumer, who desires to buy in the cheapest market, and therefore from those who can produce the best goods at the The least cost. Remove the restrictions which create Consumer's Interest. artificial prices, and every country will be impelled

to produce that which it can produce best, and to exchange that product for those things which other countries can produce better. The protective system, in the countries where it is in vogue, diverts production from its most efficient channels into others which are less efficient, and artificially compels the consumer to pay high prices. Imports do not diminish home production in general. They diminish, indeed, the home production of the goods which are imported, but it follows that they must increase the production of other goods to be exchanged for them. The energy expended on the form of production less suitable to the country becomes, in consequence, devoted to the forms of production for which it is better adapted. These principles, the petitioners claimed, were not only obviously true when applied internationally, just as they had been proved to be true when applied to internal trade; they would hold good even if other countries refused to act upon them. The exclusion of cheap goods is a positive injury, which is none the less to be avoided because. our own goods are excluded from foreign markets. It is probable even that restrictions should not be maintained, even with the object of obtaining concessions as the price of their withdrawal. Checks on imports, in short, should be imposed only for purposes of revenue, since at present it does not appear that the revenue could dispense with them altogether.

This practically unqualified assertion of free trade principles was virtually endorsed by a Royal Commission appointed to deal with the question. A sudden and complete change of the entire fiscal system would throw the whole machinery of com

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