3. The expense of a patent in Spain is stated in the report to be respectively 2000, 1200 and 1000 reals. If these are reals of vellon, in which accounts are usually kept at Madrid, the above sums are correct; but if they are reals of plate, the above sums ought to be nearly doubled.
4. In the year 1824 the law against workmen going abroad, as well as the laws preventing them from combining, were repealed, after the fullest enquiry by a Committee of the House of Commons. In 1825 an attempt to re-enact some of the most objectionable was made, but it failed.
Chapter 34
On the Exportation of Machinery
437. A few years only have elapsed, since our workmen were not merely prohibited by Act of Parliament from transporting themselves to countries in which their industry would produce for them higher wages, but were forbidden to export the greater part of the machinery which they were employed to manufacture at home. The reason assigned for this prohibition was, the apprehension that foreigners might avail themselves of our improved machinery, and thus compete with our manufacturers. It was, in fact, a sacrifice of the interests of one class of persons, the makers of machinery, for the imagined benefit of another class, those who use it. Now, independently of the impolicy of interfering, without necessity, between these two classes, it may be observed, that the first class, or the makers of machinery, are, as a body, far more intelligent than those who only use it; and though, at present, they are not nearly so numerous, yet, when the removal of the prohibition which cramps their ingenuity shall have had time to operate, there appears good reason to believe, that their number will be greatly increased, and may, in time, even surpass that of those who use machinery.
438. The advocates of these prohibitions in England seem to rely greatly upon the possibility of preventing the knowledge of new contrivances from being conveyed to other countries; and they take much too limited a view of the possible, and even probable, improvements in mechanics.
439. For the purpose of examining this question, let us consider the case of two manufacturers of the same article, one situated in a country in which labour is very cheap, the machinery bad, and the modes of transport slow and expensive; the other engaged in manufacturing in a country in which the price of labour is very high, the machinery excellent, and the means of transport expeditious and economical. Let them both send their produce to the same market, and let each receive such a price as shall give to him the profit ordinarily produced by capital in his own country. It is almost certain that in such circumstances the first improvement in machinery will occur in the country which is most advanced in civilization; because, even admitting that the ingenuity to contrive were the same in the two countries, the means of execution are very different. The effect of improved machinery in the rich country will be perceived in the common market, by a small fall in the price of the manufactured article. This will be the first intimation to the manufacturer of the poor country, who will endeavour to meet the diminution in the selling price of his article by increased industry and economy in his factory, but he will soon find that this remedy is temporary, and that the market-price continues to fall. He will thus be induced to examine the rival fabric, in order to detect, from its structure, any improved mode of making it. If, as would most usually happen, he should be unsuccessful in this attempt, he must endeavour to contrive improvements in his own machinery, or to acquire information respecting those which have been made in the factories of the richer country. Perhaps after an ineffectual attempt to obtain by letters the information he requires, he sets out to visit in person the factories of his competitors. To a foreigner and rival manufacturer such establishments are not easily accessible, and the more recent the improvements, the less likely he will be to gain access to them. His next step, therefore, will be to obtain the knowledge he is in search of from the workmen employed in using or making the machines. Without drawings, or an examination of the machines themselves, this process will be slow and tedious; and he will be liable, after all, to be deceived by artful and designing workmen, and be exposed to many chances of failure. But suppose he returns to his own country with perfect drawings and instructions, he must then begin to construct his improved machines: and these he cannot execute either so cheaply or so well as his rivals in the richer countries. But after the lapse of some time, we shall suppose the machines thus laboriously improved, to be at last completed, and in working order.
440. Let us now consider what will have occurred to the manufacturer in the rich country. He will, in the first instance, have realized a profit by supplying the home market, at the usual price, with an article which it costs him less to produce; he will then reduce the price both in the home and foreign market, in order to produce a more extended sale. It is in this stage that the manufacturer in the poor country first feels the effect of the competition; and if we suppose only two or three years to elapse between the first application of the new improvement in the rich country, and the commencement of its employment in the poor country, yet will the manufacturer who contrived the improvement (even supposing that during the whole of this time he has made only one step) have realized so large a portion of the outlay which it required, that he can afford to make a much greater reduction in the price of his produce, and thus to render the gains of his rivals quite inferior to his own.
441. It is contended that by admitting the exportation of machinery, foreign manufacturers will be supplied with machines equal to our own. The first answer which presents itself to this argument is supplied by almost the whole of the present volume; That in order to succeed in a manufacture, it is necessary not merely to possess good machinery, but that the domestic economy of the factory should be most carefully regulated.
The truth, as well as the importance of this principle, is so well established in the Report of a Committee of the House of Commons 'On the Export of Tools and Machinery', that I shall avail myself of the opinions and evidence there stated, before I offer any observations of my own: