It may be said, however, that in practice no business-man considers the question of “comparative cost” in making shipments of goods abroad; that all he thinks of is whether the price here, for example, is less than it is in London. And yet the very fact that the prices are less here implies that gold is of high value relatively to the given commodity; while in London, if money is to be sent back in payment, and if prices are high there, that implies that gold is there of less comparative value than commodities, and consequently that gold is the cheapest article to send to the United States. The doctrine, then, is as true of gold, or the precious metals, as it is of other commodities.[264] It may be stated in the following language of Mr. Cairnes: “The proximate condition determining international exchange is the state of comparative prices in the exchanging countries as regards the commodities which form the subject of the trade. But comparative prices within the limits of each country are determined by two distinct principles—within the range of effective industrial competition, by cost of production; outside that range, by reciprocal demand.”[265]
§ 3. The direct benefits of commerce consist in increased Efficiency of the productive powers of the World.
From this exposition we perceive in what consists the benefit of international exchange, or, in other words, foreign commerce. Setting aside its enabling countries to obtain commodities which they could not themselves produce at all, its advantage consists in a more efficient employment of the productive forces of the world. If two countries which traded together attempted, as far as was physically possible, to produce for themselves what they now import from one another, the labor and capital of the two countries [pg 385] would not be so productive, the two together would not obtain from their industry so great a quantity of commodities, as when each employs itself in producing, both for itself and for the other, the things in which its labor is relatively most efficient. The addition thus made to the produce of the two combined constitutes the advantage of the trade. It is possible that one of the two countries may be altogether inferior to the other in productive capacities, and that its labor and capital could be employed to greatest advantage by being removed bodily to the other. The labor and capital which have been sunk in rendering Holland habitable would have produced a much greater return if transported to America or Ireland. The produce of the whole world would be greater, or the labor less, than it is, if everything were produced where there is the greatest absolute facility for its production. But nations do not, at least in modern times, emigrate en masse; and, while the labor and capital of a country remain in the country, they are most beneficially employed in producing, for foreign markets as well as for its own, the things in which it lies under the least disadvantage, if there be none in which it possesses an advantage.
The fundamental ground on which all trade, or all exchange of commodities, rests, is division of labor, or separation of employments. Beyond the ordinary gain from division of labor, arising from increased dexterity, there exist gains arising from the development of “the special capacities or resources possessed by particular individuals or localities.” International exchanges call out chiefly the special advantages offered by particular localities for the prosecution of particular industries.
“The only case, indeed, in which personal aptitudes go for much in the commerce of nations is where the nations concerned occupy different grades in the scale of civilization.... The most striking example which the world has ever seen of a foreign trade determined by the peculiar personal qualities of those engaged in ministering to it is that which was furnished by the Southern States of the American Union previous to the abolition of slavery. The effect of that institution was to give a very distinct industrial character to the laboring population of those States which unfitted them for all but a very limited number of occupations, but gave them a certain special fitness for these. Almost the entire industry of the country was consequently [pg 386] turned to the production of two or three crude commodities, in raising which the industry of slaves was found to be effective; and these were used, through an exchange with foreign countries, as the means of supplying the inhabitants with all other requisites.... In the main, however, it would seem that this cause [personal aptitudes] does not go for very much in international commerce.”[266]
In brief, then, international trade is but an extension of the principle of division of labor; and the gains to increased productiveness, arising from the latter, are exactly the same as those from the former.
§ 4. —Not in a Vent for exports, nor in the gains of Merchants.
According to the doctrine now stated, the only direct advantage of foreign commerce consists in the imports. A country obtains things which it either could not have produced at all, or which it must have produced at a greater expense of capital and labor than the cost of the things which it exports to pay for them. It thus obtains a more ample supply of the commodities it wants, for the same labor and capital; or the same supply, for less labor and capital, leaving the surplus disposable to produce other things. The vulgar theory disregards this benefit and deems the advantage of commerce to reside in the exports: as if not what a country obtains, but what it parts with, by its foreign trade, was supposed to constitute the gain to it. An extended market for its produce—an abundant consumption for its goods—a vent for its surplus—are the phrases by which it has been customary to designate the uses and recommendations of commerce with foreign countries. This notion is intelligible, when we consider that the authors and leaders of opinion on mercantile questions have always hitherto been the selling class. It is in truth a surviving relic of the Mercantile Theory, according to which, money being the only wealth, selling, or, in other words, exchanging goods for money, was (to countries without mines of their own) the only way of growing rich—and importation of goods, that is to say, parting with money, was so much subtracted from the benefit.