The Principles of Political Economy

Henry Sidgwick

Book III

Chapter V


§1. The question of Free Trade,---in the special sense in which the term is opposed to import duties for the Protection of native industry---occupies at the present time a very peculiar and isolated position, whether we regard it from a practical or from a theoretical point of view. As a question of policy, its position is peculiar in this: that freedom of international trade is the only important part of the aims of the great 18th century movement against governmental restraint and regulation, in industrial matters, which has not been generally realized in the countries that occupy the front rank in industrial civilization. The old system under which, in its intensest form, the manufacturer could not select at will the place at which to establish himself, nor the seasons for his work, nor work for all customers, nor use the processes and materials which he found fittest for his purposes, nor give his products the form that suited his customers best,---all this has passed away so completely that we find it almost difficult to credit the historian's account of it. Within each modern civilized community, freedom of transit and residence, freedom in choice of a calling, freedom in the management of property and business---except so far as considerations of health come in---are now generally established: not indeed with absolute completeness---as we have already observed---but to an extent that constitutes a substantial victory for the system of natural liberty. But though the triumph of the new Political Economy of the 18th century has been so striking as regards the internal conditions of industry and trade, its failure to persuade the civilized world to remove similarly barriers to international trade has been no less decided: not merely has universal free trade not yet arrived, but the most enthusiastic follower of Cobden can hardly persuade himself that the world is at present moving in that direction. Taking the world of West-European and American civilization as a whole, it is difficult to deny that the common sense of this civilized world has pronounced in favour of Protection.

Still, it may be said, this is not a matter in which much deference is due to common sense when opposed to the clear demonstrations of science. On a question of mathematics we do not make Common Sense the court of appeal: and, in the view of ``orthodox Free-traders'' the proof of the universal expediency of Free Trade is held to be as evident and cogent as a mathematical demonstration. ``When I was asked'', says Sir T. Farrer, ``to write something in defence of Free Trade, it seemed to me as if I had been asked to prove Euclid'': and this utterance fairly represents the sentiments of the majority of educated Englishmen who regard themselves as competent to pronounce on economic questions. But such a statement strikingly illustrates the isolated position, at the present time, of Free Trade regarded from a theoretical point of view. For only a few fanatics would now use similar language in discussing any other particular application of the general doctrine of laisser faire: yet surely if the universal mischievousness, to the nations imposing them, of international barriers to trade is to be demonstrated like a conclusion of Euclid, it can only be by a method equally applicable to all cases of governmental interference for production. If we still held with the Physiocrats that the self-interest of individuals would always direct them to the industrial activities most conducive to the wealth and well-being of the community of which they are members,---then, doubtless, the universal expediency of Free Trade might be simply demonstrated by mere deduction from this sweeping proposition. I conceive, however, that this old belief in the harmony of the interest of each industrial class with the interest of the whole community has lost its hold on the mind of our age: and that the need of governmental interference to promote production is admitted by economists generally in several at least of the cases discussed in the last chapter. And, if so, it appears to me that the foundation on which the old short and simple confutations of Protection were once logically erected has now been knocked away: and that the fashion which still lingers of treating the Protectionist as a fool who cannot see---if he is not a knave who will not see---what is as plain as a proof of Euclid, is really an illogical survival of a mere fragment of what was once a coherent doctrine.

I do not mean to say that the broad general argument for industrial liberty has lost its force,---I have already expressed strongly the opposite opinion---: but I think that in the natural development of economic theory it has come to be recognised as merely a first approximation to the truth, and its necessary theoretical limitations and exceptions have come to be more clearly distinguished, classified, and systematized. And from the theoretical point of view thus attained, consistency (I think) requires us to meet the drift of the civilized world towards Protection by something more relevant than an obstinate repetition of an essentially antiquated mode of refutation. Practically I am myself decidedly opposed to this drift of popular opinion and governmental policy:---herein differing somewhat from several German writers by whom my general theoretical view of Free Trade has been anticipated, and from whom it has been largely derived. I agree, indeed, with these writers in holding, as a conclusion of abstract economic theory, that Protection, in certain cases and within certain limits, would probably be advantageous to the protecting country,---and even, perhaps, to the world---if only it could be strictly confined to these cases and kept within these limits: but I am nevertheless strongly of opinion that it is practically best for a Government to adhere to the broad rule of `taxation for revenue only'---at any rate in a free community where habits of commercial enterprise are fully developed. My ground for this opinion is that I do not think we can reasonably expect our actual Governments to be wise and strong enough to keep their protective interference within due limits; owing to the great difficulty and delicacy of the task of constructing a system of import duties with the double aim of raising revenue equitably and protecting native industry usefully, and the pressure that is certain to be put upon the Government to extend its application of the principle of protection if it is once introduced. I think therefore that the gain that protection might bring in particular cases is always likely to be more than counterbalanced by the general bad effects of encouraging producers and traders to look to Government for aid in industrial crises and dangers, instead of relying on their own foresight, ingenuity and energy; especially since the wisest protection in any one country would tend in various ways to encourage unwise protection elsewhere.

Here, however, we are primarily called upon to consider how far abstract economic theory recognises cases in which---taken by themselves---protective duties may be expedient: and I think it clear that the sweeping answer which orthodox free-traders give to this question is not justified. I grant that the permanent stoppage of a channel of trade which free competition would open, could not tend to increase the wealth of the industrial society formed by the aggregate of nations whose trade is thus restricted---supposing such nations to be composed of ``economic men''. But I do not think that this universal negative can be established in the case of temporary protection, even if considered from a cosmopolitan point of view: still less if it be considered solely with reference to the interests of a particular nation.

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