A Modern Zoroastrian

by S. Laing

It is evident there must be some real cause for such a universal phenomenon. In countries like France and Russia we may attribute it to economical ignorance and the influence of cliques of manufacturers and selfish interests; but the people of Germany, and still more of the United States, Canada, and Australia, are as intelligent as ourselves, and quite as shrewd in seeing where those interests really lie. They are fettered by no traditional prejudices, and their political instincts rather lie towards freedom and against the creation of anything like an aristocracy of wealthy manufacturers. And yet, after years of free discussion, they have become more and more hardened in their protectionist heresies.

What does this prove? That there are two sides to the shield, and not, as we fancied in our English insularity, only one.

Free trade is undoubtedly the best, or rather the only possible, policy for a country like England, with thirty millions of inhabitants, producing food for less than half the number, and depending on foreign trade for the supplies necessary to keep the other half alive. It is the best policy also for a country which, owing to its mineral resources, its accessibility by sea to markets, its accumulated capital, and the inherited qualities, physical and moral, of its working population, has unrivalled advantages for cheap production. Nor can any dispassionate observer dispute that in England, which is such a country, free trade has worked well. It has not worked miracles, it has not introduced an industrial millennium, the poor are still with us, and it has not saved us from our share of commercial depressions. But, on the whole, national wealth has greatly increased, and, what is more important, national well-being has increased with it, the mass of the population, and especially the working classes, get better wages, work shorter hours, and are better fed, better clothed, and better educated than they were forty years ago.

This is one side of the shield, and it is really a golden and not an illusory one. But look at the other side. Take the case of a country where totally opposite conditions prevail: where there is no surplus population, unlimited land, limited capital, labour scarce and dear, and no possibility of competing in the foreign or even in the home market with the manufactures which, with free trade, would be poured in by countries like England, in prior possession of all the elements of cheap production. It is by no means so clear that protection, to enable native industries to take root and grow, may not in such cases be the wisest policy.

Take as a simple illustration the case of an Australian colony imposing an import duty on foreign boots and shoes. There is not a doubt that this is practically taxing the immense majority of colonists who wear and do not make these articles. But, on the other hand, it makes the colony a possible field for emigration for all the shoemakers of Europe, and shoemaking a trade to which any Australian with a large family can bring up one of his sons. Looking at it from the strict point of view of the most rigid political economist, the maximum production of wealth, which is the better policy? The production of wealth, we must recollect, depends on labour, and productive labour depends on the labourer finding his tools—that is, employment at which he can work. A labourer who cannot find work at living wages is worse than a zero: he is a negative quantity as far as the accumulation of wealth is concerned. On the other hand, every workman who finds work, even if it may not be of the ideally best description, is a wealth-producing machine. What he spends on himself and his family gives employment to other workmen, and the work must be poor indeed if the produce of a year’s labour is not more than the cost of a year’s subsistence. The surplus adds to the national capital, and thus capital and population go on increasing in geometrical progression. The first problem, therefore, for a new or a backward country is to find ‘a fair day’s wages for a fair day’s work,’ for as many hands as possible. The problem of making that employment the most productive possible is a secondary one, which will solve itself in each case rather by actual practice than by abstract theory.

This much, however, is pretty clear, that in order to secure the maximum of employment it must be varied. All are not fit for agricultural work, and, even if they were, if the conditions of soil and climate favour large estates and sheep or cattle runs rather than small farms, a large amount of capital may provide work for only a small number of labourers. On social and moral grounds, also, apart from dry considerations of political economy, progress intelligence and a higher standard of life are more likely to be found with large cities, manufactures, and a variety of industrial occupations than with a dead level of a few millionaires and a few shepherds, or of a few landlords and a dense population of poor peasants. If protection is the price which must be paid to render such a larger life possible, it may be sound policy to pay it, and the result seems to show that neither it nor free trade is inconsistent with rapid progress, while, on the other hand, neither of them affords an absolute immunity from the evils that dog the footsteps of progress, and from the periods of reaction and depression which accompany vicissitudes of trade.

Here, as in other cases, there are two sides of the shield, and true statesmanship consists in seeing both, and doing the right thing, at the right place, and at the right time. If free trade is, as we believe, ultimately to prevail, it will be an affair of time. The real trial of protection comes when it has stimulated production to a point which gluts the home market and leaves a surplus which must be exported. Exports of articles the cost of which has been artificially raised by protection, cannot compete in the world’s market with the cheaper products of free-trade countries. Vicissitudes therefore of prosperity and depression must tend to become more frequent and more severe, and, if production goes on, a point must be reached where, at whatever cost, it must either be arrested or made capable of competing in the wider market. The United States are probably not far from such a point, and it would have been already reached but for the immense and unexhausted resources of that vast continent. In France the point has apparently been reached, and we find that, with a lower scale of wages than in England, it is becoming more and more difficult every day to maintain that lower scale, and the export trade of its manufactured goods to foreign markets.

Protection, leading to higher wages and profits than can be permanently maintained, and artificially enhancing the cost of living to the working classes, threatens, more and more every day, to introduce strained relations between capital and labour in most countries of Europe.

The relation between capital and labour affords a good instance of the inevitable error of applying hard and fast logical conclusions to the complex and ever-varying problems of actual life. Ricardo and other distinguished writers on political economy have assumed that the two constitute a fundamental antagonistic polarity. Wealth, they say, is the joint product of capital and labour, and, as in the case of a cake which has to be divided between C and L, the more C gets the less is left for L, and vice versâ. The theory sounds plausible: but what says fact? In the most unmistakable manner it pronounces, as the outcome of practical experience, that the profits of capital and the wages of labour rise and fall together. High profits mean high wages, rising profits rising wages, falling profits falling wages. It has been proved so in a thousand instances, and not one can be quoted where the one factor has varied in an inverse, and not in a direct, ratio with the other. It is obvious that there must be some fallacy in Ricardo’s argument. The fallacy is this: he assumes the cake to be of fixed dimensions, whereas in point of fact it varies, sometimes diminishing to zero, or even to a negative quantity, at others expanding to many times its original size. A new gold-field is discovered in a remote country, and forthwith profits rise to cent. per cent., and wages to a pound a day; a bad season and depression of trade overtake an old country, and the gross value of the produce of many a farm is insufficient to cover expenses and depreciation, even if the labourers worked for nothing. The polarity is therefore confined to the limited and temporary case of the division of the profit, where there is a profit, in particular trades and in individual instances. And this is regulated mainly by the accustomed scale of wages and standard of living of the workmen, and their opportunities of finding employment elsewhere if dissatisfied with the terms offered to them. On the whole, it may be said that capital has the best of it on a rising, and wages on a falling, market. A manufacturer or mine-owner’s profit may rise from five to twenty per cent. without quadrupling the rate of wages; but, on the other hand, it may fall from twenty per cent. to five, or even for a time below zero, without a proportionate diminution in the price paid for labour. Capital is, in fact, the great insurer of labour, the flywheel which regulates the motion of the industrial machine. This will be best illustrated by a practical instance. The Brighton Railway Company for several consecutive years paid no dividend, or only a trifling amount, on the shareholders’ capital, but during the whole of this time it gave steady employment at good wages to upwards of ten thousand workmen. The Blaenavon Coal and Iron Company in South Wales was for many years a losing concern, and successive capitalists lost the best part of a million pounds in it, until at length it was reorganised with a small capital and became a fairly prosperous concern. During the whole of this time it gave employment at fair wages to several thousand workmen. Which had the best of it in these two cases, capital or labour, and where would the workmen have been on any communistic or co-operative system? In fact it will be apparent to any one who will study dispassionately the statistics of any line of inquiry, such as the scale of wages, the price of provisions, the accumulations of savings banks and provident societies, &c., for the last twenty years, that the working classes have had the lion’s share of the vast increase which has taken place in the wealth and income of the nation. I am glad that it is so, for it is better, both morally and politically, that the condition of the masses should be improved, and their standard of living raised, than that capital should accumulate too exclusively in large masses.