tected capital has the larger field of operations. Its output must tend to expand by comparison with our own, and the relative cost of production to decrease. If an establishment doubles its output, the second half can be sold much lower than was the first half, without any diminution of the rate of profit. This is what gives Protected capital the "killing power" which it is able to bring to bear upon the British capital exposed by free imports to its operations. Secure of the higher rate of home profit, which he enjoys under Protection, the foreign manufacturer can come into the British market and sell his surplus below the minimum margin of profit for the British manufacturer, and even below the British cost of production, without loss upon his average out-turn, and, perhaps, without positive loss upon the surplus itself. The field of the home manufacturer, smaller to begin with, is still further restricted. As he is borne back at home by the foreign imports of finished goods, which increase by thirty millions a decade, his power to compete abroad is simultaneously injured. The home manufacturer is therefore liable to be destroyed. His capital is insecure, while the capital of his rivals is guaranteed by Tariffs against him. In short we have cheap consumption and still we are undersold. This, as has been said, is a theory. How does it compare with the fact? Take the following picture of arrested development, steady decline, or insignificant increase, in respect of nearly all our staple manufactured exports, for the maximum years of trade.

During this period of stagnation in our total exports, despite the increased trade with the Colonies, our population has grown by seventeen per cent. Even France, with her stationary population, her higher Tariff, her enormous National Debt, and a normal peace taxation, equal to our recent war taxation, has shown a

larger increase in manufactured exports. But the pendant of the record may be given in the figures for some of our staple imports of foreign goods:

Our larger industries are holding their own with difficulty our smaller are being crushed and the growth of new ones is prevented. We see where the losses are, but no one shows us where the gains are. New industries have arisen upon a large scale in the United States and Germany. Hardly any new industry has been founded here for twenty years. Under these circumstances free imports not only mean a check upon the accumulation of capital, they involve a heavy national waste. Free Traders talk with strange levity of the destruction of industries in this country. They speak as though capital were as mobile as water, and when turned from one channel would flow naturally into another without any diminution of volume. In relation to modern conditions, there could be no falser view. It is a work of almost insuperable difficulty to create new employments under free imports in competition with the same employments directed by Protected capital. When we are beaten now in a line of business, the money and experience it represented are not diverted to other purposes without loss. They are depreciated or lost. The point is illustrated by the following paragraph in a recent number of the Iron and Coal Trades Review:

'Probably Mr. Isaac Butler, of the Panteg and Elba Steel Works, voiced the general sentiment of the trade when he declared at the Meeting of the Newport (Mon.) Harbour Commission that 'English firms would not go on spending huge sums of money in bringing their works up to date when they knew their chances were, they would have to succumb to the foreigner. We believe that Mr. Butler is one of a number of British steel-making firms which, although possessing all the equipment needed to produce steel, have yet found it cheaper to use imported blooms and billets than to use their own, not necessarily because they cannot produce as cheaply as the Germans, but because the Germans are able, by the aid of their tariff, to sell under cost in British markets."

But if these ideas represent, as it is certain they do, a wide

spread feeling among British manufacturers, it must be obvious that the case is clinched, quite apart from any opinions that Free Traders may hold. What matters is the opinion of capital. Free Traders may be convinced that the new arguments for Protection are as fallacious as the old, and that the abstract wisdom of free imports, having in view all the conditions of this country, is as indispensable under present circumstances as under former. But in this matter, at least, the question is not what controversialists think. The question for the country is how capital feels. To say that British manufacturers have lost their old nerve and insight does not mend the matter, and whatever may have happened to the insight of British capital, the whole future of our trade, and, indirectly, the whole future of the Empire, depends upon the recovery of its nerve and enterprise. National industry by comparison with that of America and Germany, requires to be re-engined. When the machine is modernised at heavy expenditure, it will still require to be driven for all it is worth, if we are to hold our own either in policy or commerce. The renewed energy and creative power of capital are demanded. We may call up these spirits from the vasty deep, but they will not come merely because we call them. Confidence, as we know, is a shrinking plant. Modern nations, in which the confidence and initiative of capital works at higher pressure, must prevail over nations in which capital is becoming hesitant and discouraged. If the competitive spirit is weakened under free imports, competitive ability is, as a matter of fact, impaired, quite apart from any opinion which may be held by the Cobden Club that there is nothing in the facts which ought to justify the feeling. It is certain that the adoption of a Tariff upon manufactured imports would be followed by the most confident and resolute development of British enterprise that has been known for thirty years. Americans would sink their money in this country in the best way, and instead of sending us their finished goods, would found establishments. There is no foreign trade in the world that it is possible for us to secure comparable in value with even half the amount of the hundred millions sterling of foreign manufactures that are now annually imported into this country. In spite of the rapidity with which the increase of capital in America and Germany has gained upon us in the last decade, we must still possess by far the largest resources of accumulated wealth in the world. We lack nothing but the spirit of confidence and enterprise necessary for its efficient employment. That spirit has declined since free imports in this country, combined with hostile Tariffs abroad, were found to throw all the advantages into the hands of foreign competition.

The vitality of British enterprise, for which all the other requirements exist, will never be restored to its full strength until foreign producers are placed under the same difficulties in our markets as have paralysed our progress in theirs.

Cobdenism was true in its time, and for its time. We cannot doubt that for the generation following the repeal of the Corn Laws it was a powerful factor in an unparalleled development of national wealth and trade. It was not the sole, nor perhaps, the main factor. The period of its greatest success corresponded with the creation of railways, the rise of steam shipping, and the whole immense acceleration and cheapening of transit by land and sea, in which England led the way. Between 1861 and 1872, when our commerce showed its most marvellous expansion, the appearance of foreign competition was postponed by the civil conflict in America and the Bismarckian wars upon the Continent. But in the generation that has since elapsed, it has become increasingly clear that the advocates of free imports were only right in their view of immediate facts. They were wrong in their reading of history, and wrong in their views of the future. Even at a moment when Friedrich List, in a country of which they took little account, was predicting with extraordinary insight the political and the economic evolution of the world, Cobden and Bright were as false in their idea of that evolution as it was possible for men to be. They misunderstood the permanent forces governing human nature, and the action of the State. They laid down as infallible principles a series of dogmas which the world has disregarded with impunity, and which we in the long run are discovering to be no final recipe for success. We are continuing to buy in the cheapest markets, but we are ceasing to sell in the dearest. They called free imports Free Trade. They would not perceive that there was a human and political value in agriculture, which a wise State might well pay somewhat to preserve in the interests of a sound society. They made the fields deserted, and packed the slums. After sixty years of Free Trade, we are told by Sir Henry Campbell-Bannerman that we must no longer speak of the submerged tenth, but of the submerged third, and we are told by the Duke of Devonshire that we must not tamper with cheap food because of the swarming indigence it has brought into being.

The original Free Traders stripped the Statute Book of every means by which we could have brought pressure to bear for the purpose of promoting their own ideal of free exchange. Their cosmopolitan fervour ignored the strength of the racial tie, which has maintained, in spite of all, the existence of the Empire and the supremacy of our commerce. Apart from coal and the

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Colonies, as we have seen, we should become at once the fourth exporting nation, and should sink to a position not only immeasurably behind the United States and Germany, but considerably behind France. Cheap consumption does not ensure cheap production, where the progressive power of capital is paralysed. Free imports alone would not ensure cheap consumption, either of food or raw material. As America needs more and more of her own wheat for her own industrial millions, prices may rise for corn and cotton alike, and it must be clear from any candid reading of the statistical analysis attempted in this paper, that wages may fall, as profits have fallen. Nothing could be more plainly demonstrated than the inability of British capital under free imports to compete in Europe and America with Protected capital. Mr. Chamberlain's scheme for the rapid agricultural development of the Colonies, whose supplies would always flow into our markets free, may prove in the long run to be the only guarantee even of cheap food, as the expansion of trade under the flag is assuredly the only guarantee of the means of purchase. A separate inquiry may help us to decide whether' a continued refusal on our part to enter into fiscal federation with the Colonies would conduce to the retention of our present overwhelming advantage in Colonial trade, or to the permanence of the Imperial connection.

CALCHAS.