There could be no permanent trade between two countries if the one had everything to give and the other nothing to offer. Suppose that for a few months we purchased heavily abroad and at the same time suspended both our exports of goods and those "invisible exports" which consist of services rendered through the shipping trade and in other ways to the foreigner. What, in that case, would be the result? Manifestly that Mr. Seddon's nightmare would become true, and an enormous stream of bullion or golden sovereigns would issue from the country in payment of these purchases. But, simultaneously, and in consequence of this export of gold, prices would fall in England and rise abroad, until it again became profitable for the foreigner to purchase goods in England equivalent in value to the goods we were purchasing from him. We can see the process everywhere in operation. If a nation temporarily overpurchases, that is, buys more from the foreigner than it is able to pay for in goods and services, the shipments of bullion which then become necessary operate automatically to check the home trade and by lowering prices to bring them to the level at which it becomes profitable to the foreigner to become a customer. The outward expression of this is the rise in the bank rate, which at once checks the outflow of gold and has an adverse effect upon home trade. These monetary movements, which some people find so mysterious, are merely the mechanical ways of equalising the conditions between the various parties engaged in barter, and of putting a temporary check on trade when one side has bought in goods or services more than it can pay for in goods or services. The fear of over-buying, by which we mean buying from the foreigner more than is the equivalent of our exports, added to what is due to us on freights, investments, etc., need not oppress us in the least. If there were any ground for it, we should instantly be warned by the shipments of gold, and these, again, would operate automatically to check our imprudence. That we do not overbuy is proved by the fact that on the balance we import rather more bullion and specie than we export.

Now, this brief summary of the conditions of foreign trade is no economic pedantry, but the everyday working hypothesis on which it is conducted by those who take part in it. It looks to many of us a matter-of-fact account of business transactions; and since no alternative has ever been suggested by any of the disputants in this controversy, we see not the slightest reason to depart from it. But obviously it cannot be reconciled with any of the leading assumptions and conclusions in "Calchas's" articles. If it is true, then it is irrational to yield to this panic about the foreigner driving us back in the home markets and

to treat him as a nefarious conspirator when he is paying us our just dues and "dumping" his dividends into our banks in the only way which is open to him under the conditions of normal and healthy trade. So long as this hypothesis stands, a considerable part of the avowed aims and objects of the Protectionist Party are simply meaningless. If foreign trade is a process of exchange, then it is folly to get into a panic about money leaving the country," or to speak as if we should do better if our customers were poorer or if they refrained from sending us the goods by which alone they can pay us for the goods we send them and the vast services which in other ways we render them. A Protectionist is fully entitled, if he chooses, to say that foreign trade is a bad thing, or foreign investments undesirable, or the shipping trade an unworthy occupation; but he cannot without absurdity say in one breath that all these are good and desirable things, and in the next breath denounce the imports which alone make them profitable and possible. To speak, therefore, as Calchas does, of the field of the home manufacturer being restricted and of his power to compete abroad being injured, because the imports rise without pause or check, is equivalent to saying, first, that the foreigner requires no payment from us, and second, that we should be wealthier and stronger in competition if we forbore to ask payment for our goods and services from our foreign customer. Until "Calchas" or other Protectionists can supply us with a new theory of trade, a large part of his and their argument will continue to involve one or other or both of these absurdities. Foreign trade is avowedly their ideal, but it is a foreign trade consisting of exports without imports. We are to "dump," but never to be dumped upon "-perpetually to give, but seldom or never to receive. Foreign or any other trade conducted on these principles would of course become rapidly bankrupt.

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Here let me briefly glance at certain assumptions and admissions which "Calchas" desires to fasten on to Free Traders. The Free Trader does not admit that the protective system favours capital. What he not only admits, but asserts, is that Protection is good for some capitalists at the expense of the great mass, both of consumers and capitalists. The same argument is true of labour in the aggregate as of capital in the aggregate. Thus it might very well be that, if the boot trade were protected, five pairs of boots might be turned out at Northampton for every four that are now made there. But if, as is certain to be the case, the protective system depressed the export trade as a whole, the labour now engaged in it would have to find employment in the boot or some other protected trade, and there would be at least five

men to do the work which is now divided between four. The expectation that wages will rise or employment be more regular is, so far as this factor is concerned, wholly unreasonable. In Germany, where, as we are told, the ideal protective system is in force, in spite of the fact that the latest and most scientific methods of manufacture are applied, and the workman is both skilful and highly trained, the wages are yet considerably lower, the hours of labour considerably longer, and the cost for an equal standard of living considerably higher than in England.

*

Thus far I have given reasons for thinking that, even if British trade were in a state of stagnation and decline, the protectionist remedy would only increase the disease. We now approach the statistical part of the case by which "Calchas" seeks to prove that we are in this plight. The vendors of our patent medicine are not content with the ordinary form of advertisement. They will have it, not only that their remedy is better than all others, but that their patient is desperately and mortally ill, and that his last chance of recovery is to summon them to his bedside. If the pious vows and private prayers of certain politicians could deflect that rising curve of exports which has seemed to indicate a continuance of prosperity during the first half of this year, we suspect it would dip sharply from this time forth until it reached the point at which it would furnish Mr. Chamberlain with an effective argument.

In the meantime, we have the astonishing spectacle of our greatest imperialist engaged upon the apparently congenial task of "crabbing" the Empire and "crabbing" British trade-if one may speak thus familiarly of great men. They positively gloat over the morbid symptoms which they imagine themselves to have discovered. They ransack the past for figures which may by comparison make the present appear gloomy, and they studiously ignore or suppress the intervening years which might make it appear cheerful. They eschew the averages by which the student of trade statistics endeavours to equalise the fluctuations from year to year and give none of the ordinarily accepted explanations of abnormal years. They make no allowance for the enormous differences in the purchasing power of gold in the different years that they compare, but assume that industry must have been stagnant in the interval if the values in gold remain the same, and that it must have declined if the values in gold have fallen. Statistics so arbitrary, so haphazard, and so disingenuous are quite useless for any scientific purpose; but since those which "Calchas uses are clearly regarded as the choicest weapons in Mr. Chamberlain's armoury, and since they are re

peated over and over again in the Birmingham literature, they are worth rather careful attention. To go through them in detail is impossible within the space of a magazine article, but their leading characteristics may be briefly noted. First, it will be seen that "Calchas" almost invariably in his comparisons starts from the year 1872. Why is that? "Calchas," we suppose, will answer that it is natural to take a period of thirty years, and that, since the last figures available are those for 1902, he is bound to begin with 1872. But it so happens that the year 1872 was an altogether abnormal one for British exports, which advanced temporarily in that year by £56,000,000, and rapidly fell back to their normal level afterwards. Sir Alfred Bateman, to whose "admirable memorandum" our Protectionists so often refer, is careful to explain, as they do not, the exceptional conditions of this year. "The figures of the United Kingdom," he tells us, "were largely swollen by such exceptional circumstances as the war between France and Germany, the payment of the French indemnity to Germany, and the boom in our iron and coal trades at a time when railway construction abroad was brisk. These and other causes all contributed to unusually high prices." The best corrective is to supply the figures for the years 1869-75:

Therefore, if the year 1872 is to be taken as the starting-point it should be carefully explained that it was governed by quite exceptional causes, which vitiate the comparison between it and other years. But if due allowance is made for that fact, and if the figures are given in full instead of by fits and starts, or if they are grouped in quinquennial averages as they should be, a wholly different moral emerges from that which "Calchas" desires to draw from his tables (pp. 21 and 22 of July number). Trade did not go up by leaps and bounds until the year 1872, and then suddenly become stagnant or decline till 1902. It continued to increase during the whole period; and if we measure exports by volume as well as value, the growth of the output has much more than kept pace with the growth of the population. These facts we will set out more clearly a little later. Next, it will be seen that Calchas" invariably omits coal from his figures of British exports, apparently on the ground that Mr. Chamberlain, as some of his supporters have explained, considers the exportation of "an

exhaustible product of the earth" to be unprofitable and even improper. But the omission at once involves us in all manner of absurdities. Coal is used in the manufacture of every finished article that we send abroad. It takes two tons of coal to produce a ton of pig-iron. We can therefore send no manufactured article abroad without "denuding ourselves of the exhaustible product." The same argument would apply to all the minerals which we and other countries export, and if our figures are to be made to look worse by deducting £28,000,000, more or less, of exported coal, corresponding deductions should at least be made from the foreign statistics which are brought into comparison. The exclusion of new ships is necessary, since they were only entered in the official statistics for the first time in 1899, but this, also, it should be remembered, is more unfavourable to Great Britain than to her competitors. Taking these various factors together, we shall find that, if coal is included, as it ought to be, and if, at the same time, the figures are taken consecutively, and not started arbitrarily at 1872, most of "Calchas's" tables altogether fail to support the requisite tale of woe.

But now we pass to the very heart of the argument. We have tables put before us to show that British exports have been stationary or declining with foreign countries, while they have advanced rapidly and continuously with the Colonies. The reader will be able to judge better of the alleged decline and stagnation hereafter, but let us accept that part of it provisionally. What is the inference? Here we are in a complete fog. At one moment "Calchas" treats it as the most alarming of all the morbid symptoms; at the next he is vehemently arguing that it is a consummation so devoutly to be wished and so essential to the salvation of British commerce that the whole fiscal system must be upset to secure it. We are accordingly bound to suppose that the diversion of British industrial energy from the foreigner to the Colonial is a bad thing when it follows in the natural order of events, and only becomes a good thing when it is specially brought about by the intervention of Mr. Chamberlain.

We pass now to another argument which is arrived at by rearrangements of the same figures. It is that the stagnation or decline of our exports is a manifestation of our trade with Protected countries, which is altogether absent from our trade in neutral markets. To prove this "Calchas" gives (p. 24, July number) a table of figures of trade in the Asiatic, African, and South American markets, about which he is, in comparison with his usual despondency, quite unaccountably cheerful. For though the total exports only rise from £47,000,000 in 1872 to £50,800,000 in the last year, he describes this as "slow but real progress,"